UK

If Keir Starmer wants to cut the benefits bill, he could crack down on service charge abuse

By the Social Housing Action Campaign

Prime Minister Keir Starmer has pledged to crack down on benefit fraud. In order to fulfil this promise, SHAC is urging him to eliminate the blank cheque that landlords are able to write when it comes to Housing Benefit (HB) in respect of service charges.

 Starmer is reported in the Mail on Sunday on government plans: “We will crack down hard on anyone who tries to game the system, to tackle fraud so we can take cash straight from the banks of fraudsters … There will be a zero-tolerance approach to these criminals. My pledge to Mail on Sunday readers is this: I will grip this problem once and for all.”

SHAC asserts that housing associations across the country are ‘gaming the system’ when it comes to the HB collected from its tenants.

Housing Benefit Service Charge Abuse

HB covers payments for both service charges and rents. For some renters, the cost of services such as communal cleaning is included in their rental payments. However, for a proportion of tenants, rents and service charges are billed separately and both can be covered by HB.

Housing associations collect around £1.7 billion in respect of service charges annually. Approximately half of this is paid through HB.

The Housing Benefits Bill

The housing benefits bill is at its highest level since records began, and is pushing overall government spending to record amounts. The distribution of housing spend between benefits and building and maintenance has also changed dramatically.

The UK Housing Review 2024 notes that government spending on housing in 2021/22 was £30.5 billion compared to £22.3 billion in 1975/76 (not adjusted for inflation). However, 88% of this is used to fund housing benefits, with only 12% of government spending used to build or improve homes.

• No-one is scrutinising the legitimacy of service charge demands from landlords in respect of tenants in receipt of HB.

 Scrutinising the service charges for a single resident in a single year involves hours of work, even when the landlord fully cooperates and provides the statement and an invoice pack.

 Akin to an audit, it requires the reconciliation of multiple invoices against statements in the service charge bill, and sometimes checks to identify whether works being invoiced have actually been carried out. It would be impossible for the Department for Work and Pensions (DWP) or staff in local authorities to conduct the scrutiny needed for the hundreds of thousands of service charge payments made through HB annually.

• Service charge accounts are riddled with inaccuracies.

Over the last three years, SHAC has collated evidence to support this assertion. Recent media coverage such as the BBC’s The Leasehold Trap and The True Cost of Leasehold provides further validated case studies and quantitative analysis of this form of financial abuse. The First Tier Tribunal (Property Chamber)  also regularly rules in favour of tenants and residents (shared owners and leaseholders) who claim to have been overcharged by their landlords.

• Inaccuracies have been identified in the service charge accounts of members on mixed-residency estates, where some tenants are paying the charge directly, and others are paying via the benefits system.

Those who are paying directly are incentivised to challenge inaccuracies. By contrast, those whose charges are paid via benefits risk losing those benefits if they alert the DWP to the inaccuracies without the landlord acknowledging and removing overcharged items from their bills. Tenants are therefore left with a shortfall to cover. This makes it impossible for tenants in receipt of Housing Benefit to report inaccuracies even if they become aware of them.

• It is clear that the benefits system is being defrauded by millions of pounds annually through service charge abuse.

This is not an issue that can be addressed by individuals, or simply by cutting HB. This would penalise the victims of service charge abuse rather than the perpetrators. The Prime Minister needs to address the issue at source to prevent the inaccurate service charges. This issue demands a major inquiry into service charge abuse by councils, housing associations and private landlords.

SHAC is a campaign group linking tenants, renters, shared owners, and leaseholders living in homes owned by housing associations, councils, and private landlords. We campaign to improve housing conditions and to reduce the commercialisation of public housing. Web: www.shaction.org

Starmer vows ‘sweeping changes’ to tackle ‘bulging benefits bill’

James Moules  24th November, 2024

Keir Starmer has vowed to implement “sweeping changes” to deal with the “bulging benefits bill blighting our society” in a move that could anger many MPs on the Labour left.

Writing in The Mail on Sunday, the Prime Minister pledged to clamp down on benefit fraud in what he says will be the “biggest overhaul of employment support in memory.”

Work and Pensions Secretary Liz Kendall is expected to announce a major overhaul to the benefits system this week. She told Sky News’ Sunday Morning with Trevor Phillips that people who repeatedly refuse to take up training and work will face benefits sanctions.

It comes as the number of people claiming incapacity benefits is expected to rise over the coming decade in trends partly driven by a growing number of people out of work due to mental health conditions.

Starmer wrote: “In the coming months, Mail on Sunday readers will see even more sweeping changes. Because make no mistake, we will get to grips with the bulging benefits bill blighting our society.

“Don’t get me wrong – we will crack down hard on anyone who tries to game the system, to tackle fraud so we can take cash straight from the banks of fraudsters.

“There will be a zero-tolerance approach to these criminals. My pledge to Mail on Sunday readers is this: I will grip this problem once and for all.”

A benefit clampdown risks angering some MPs on the left of the parliamentary party, many of whom have already shown disgruntlement over the government’s reluctance towards reforms such as a scrapping the two-child benefit cap.