Disabled people pay price for cuts to mortgage relief
MP blames ‘clunking fist of bureaucracy’ for leaving constituent stranded while purpose-built home stands empty
The government is facing pressure to reverse a highly sensitive spending cut that is preventing disabled people from buying a share in their own homes.
Frank Field, Labour’s former welfare reform minister, has condemned the “clunking fist of bureaucracy” for a cut in mortgage interest payments that is stopping some disabled people from moving into modern purpose-built homes.
Field is lobbying Iain Duncan Smith, the work and pensions secretary, to relax the rule, which has left a paralysed constituent marooned in a small bungalow designed for a pensioner.
A new £200,000 purpose-built home, with a lift and a special bathroom attached to the bedroom, is standing empty in Birkenhead after the government halved the amount of interest paid to those on benefits eligible for mortgage relief.
Gavin Skinner, 30, who was left paralysed from the neck down by a car crash seven years ago, has been unable to move into the new house since the government cut the support for mortgage interest (SMI) rate from 6.08% to 3.63%.
SMI is used by people on benefits to pay the interest on their mortgages. Ministers reduced the rate to the average rate published monthly by the Bank of England in October last year on the grounds that rates were at a historic low. The rate was frozen at the higher level of 6.08% in November 2008 as a temporary measure in response to the financial crash.
When average interest rates fell below 6.08% some people enjoyed a surplus on their payments. When the rate was cut to 3.63%, others found their payments falling short of what they actually owed.
Skinner, who breathes with the aid of a ventilator, said: “It is very frustrating. I can’t even decorate where I am living now because we don’t want to use the funds we saved. Where I am living now is really outdated. I have been here five years.”
Field said he understood why mortgage interest payments had to be cut for most benefit recipients, but appealed to Duncan Smith to use his discretion for Skinner and up to 40 others in a similar position.
“Our plea to Iain Duncan Smith is that we are hoping he is not going to let the clunking fist of bureaucracy prevent him from having the flexibility to help schemes like this,” Field said. “Gavin can’t move into the house and there he is in a place which is largely for elderly people. You have a young man, who can’t be looked after properly by his carers there, who is trapped.”
But Lord Freud, who holds Field’s old job in government, announced earlier this month that the government wanted to examine whether it was right that SMI payments, which cost the taxpayer £400m a year, should be provided indefinitely. Freud said: “The current system of SMI payments does not encourage people to get on top of their own finances. It is also not sustainable.”
The new house was built for Skinner under the Hold (home ownership for those with long-term disability) scheme by the Wirral Methodist Housing Association. Under the scheme, the association owns the £200,000 house. It sells a 50% share through a long shared ownership lease of 125 years which is paid by an interest-only mortgage funded under the government’s SMI scheme. The association recovers its costs by charging rent, which is paid through housing benefit.
Under the old system, Skinner would have had to find only £3,000 for solicitors’ fees and other costs of moving, a sum his mother, Sue, secured through fundraising. But now he cannot move into the new house because he calculates he will have to find another £50,000 up front to reduce his mortgage payments to a level he can manage under the lower SMI rate.
Sue Skinner said: “I don’t know what else I can do because I obviously can’t find £50,000. We are just hitting a brick wall now. My poor son is in a tiny bungalow. Gavin can only be hoisted out of bed into his chair in the lounge. He can’t be in any other rooms and he can’t be in the garden because it is on a slope. He is totally paralysed and he is also ventilated so it is not ideal. This is really, really frustrating. Gavin doesn’t get a shower at the moment. He just gets bed-bathed. He is 30 years of age. We can’t have barbecues or go out into the garden. I can’t believe it. We have a gorgeous new house for him and I just can’t do anything about it.”
Alun Hughes, chief executive of the housing association, said: “At a time when the property market is in the doldrums and the chancellor is engaged in its revival with a fiscal stimulus of hundreds of millions of pounds, it seems perverse that he is overlooking a useful tool.
“The additional cost of restoring the previous level of SMI support for potential disabled homeowners at around only £250,000 a year seems, in comparison, a mere drop in the ocean and would not only assist in stimulating the housing market but also meet a worthy social need which most taxpayers would support.
“Hold is good for the resident in terms of greater choice and empowerment. But ironically it also works out cheaper than rental solutions for the taxpayer in the long run. The Department for Work and Pensions are deaf to all my arguments.
“What started out as an unintended consequence has come more and more entrenched political position, as the department try to defend the indefensible. What has happened to Gavin could happen to any one of us and we would all rest easier knowing that the state would protect us better in our vulnerability.”
Field said he could not understand why the government, which says it wants to encourage social entrepreneurs, was discouraging Hughes. “Here is a brilliant example, in Alun Hughes, of a social entrepreneur and yet the scheme literally will be crushed unless [Iain Duncan Smith] says I am going to introduce ministerial flexibility so that schemes like this can go ahead.
“Alun Hughes found ways in which he would be able to build purpose-built accommodation so that they could lead as independent a life as possible given the range of help that was available for people buying their own homes from benefits. Everybody knows it was never meant to help people like Gavin. But that is one of the good things – Alun has shown it could. We want the government to rejoice and say isn’t that brilliant.”
The DWP said 500 of the 540 people who had taken out mortgages under the Hold scheme since 2006 were not affected by the change because their mortgage guarantees to match the SMI rate. The vast majority of claimants (92%) had benefited disproportionately when the rate was frozen at the higher rate of 6.08% in November 2008 because this was higher than the rate charged by their mortgage lender.
A spokesman for the DWP said: “The government is totally committed to supporting disabled people. However, we need to strike a balance between supporting those who receive SMI whilst at the same time being fair to the taxpayer. Those applying for a mortgage under this scheme must – like everyone else – demonstrate that they can meet the financial responsibilities that owning a home brings.”