Welfare Reform and Work Bill — House of Lords, 2015-12-21
Topic: Housing
Maeve Christina Mary Sherlock (Labour, Centre-left): My Lords, I rise to move Amendment 103A and to speak to Amendment 104AZA, which are in my name and that of my noble friend Lord McKenzie of Luton. In doing so, I remind the Committee of my declared interest as a senior independent director of the Financial Ombudsman Service, in case it proves relevant to the later debate. I will speak at slightly greater length than I have recently because there are some quite complex issues involved and I need answers to questions. I hope the Committee will bear with me At present, owner-occupiers receiving income-related benefits may claim additional help towards their mortgage interest payments in the form of support for mortgage interest, or SMI. The payments are normally made direct to the lender and are intended to ensure that someone who is struggling to pay their mortgage does not end up having their home repossessed, causing misery to them and leading, most likely, to their claiming larger amounts in housing benefits to rent an alternative home. This Bill will end the SMI scheme and empower the Government to create a loan scheme as an alternative, with the loan secured by a charge against the property. I understand that the intention is to have the scheme administered by the DWP, with the recovery run by a third-party organisation which will be able to charge fees to claimants to cover the cost of administering the loan scheme In the impact assessment, the Government argue: "Without the policy change there is an incentive for households to allow the taxpayer to take the burden of their mortgage without taking steps to repay it themselves" The only way to get this benefit is for your income and savings to be so low that you qualify for a means-tested benefit such as income support, jobseeker’s allowance, ESA or pension credit. The idea that people poor enough to qualify for those benefits could pay off their mortgage but are choosing to allow the taxpayer to do it instead seems unlikely. At present, claimants have to wait 13 weeks from first claiming a qualifying benefit before they can apply for SMI. That waiting period is to be extended to 39 weeks, and Amendment 103A seeks to restore the 13-week waiting period. The Minister will doubtless say that it had previously been 39 weeks, under the last Labour Government, but in 2009 the then Government brought it down to 13 weeks as a result of the economic situation Peers may have seen the helpful briefing from the Money Advice Trust, StepChange, the Building Societies Association and the Council of Mortgage Lenders, all of which strongly support this amendment to retain the 13-week period. As they put it: "Lenders and advice agencies alike know from experience that early intervention is the key to resolving financial difficulty" They say that the Bill’s extension of the waiting period to 39 weeks risks making it "significantly more difficult" to resolve mortgage problems. The change would mean that claimants would be well over six months in arrears with their mortgage by the time SMI kicks in. As those organisations point out, two separate pieces of research, commissioned for DWP and DCLG, show the 13-week period has been effective in holding down arrears and repossessions—which, after all, is of course the point of the scheme In its evidence on the Bill in another place, the Council of Mortgage Lenders said: "If the waiting time is extended, as planned, we believe that it will result in more cases of repossession … Extending the waiting time will only cause additional consumer detriment". It points out that interest rates have been so low for so long that probably 2 million borrowers have never experienced a rate rise. It is our view that the market is far from stable and that this is a very bad time to increase the waiting period, especially at the same time as abolishing the grant scheme and moving to a loan option Amendment 104AZA seeks to retain the SMI grant scheme for claimants who are in receipt of pension credit—in other words, our poorest pensioners. This is what I like to call the reverse Salisbury/Addison amendment: we are helping the governing party to fulfil a manifesto commitment which seems temporarily to have slipped its mind. The Conservative manifesto explicitly said that a Tory Government would protect pensioner benefits. Yet almost half of those getting SMI are of pension age and a disproportionately high number of claimants are pensioners. In fact, the impact assessment says that, "SMI claimants are considerably more likely to be over pension age than mortgage payers in general".