MossAs an east London Councillor is jailed for Benefit Fraud, John Moss, London Assembly candidate for City & East, asks why illegal sub-letting is so easy and why do those who are supposed to be the custodians of taxpayers’ money disregard it so readily.

A Councillor, elected as a Labour candidate but who then defected to Lutfur Rahman’s independent group on Tower Hamlets council, has been sentenced to four months in jail after pleading guilty to fraudulently claiming Housing Benefit.  On 6 February she was sentenced to four months in jail. If she does not appeal, she will automatically be disqualified from her seat on the council.

This is the second time Cllr Shelina Akhtar has been convicted of benefit fraud.  Cllr Akhtar was found guilty on three counts of defrauding the public at Thames Magistrates Court in July 2010 and sentenced to 100 hours community service. She was also made to pay £250 costs.

During her most recent trial, it became clear that Cllr Akhtar had not only claimed Housing Benefit and Council Tax Benefit for the property she rented from the Swan Housing Association, which she had no right to claim, but that she then sub-let the property at a substantial profit. It also emerged during the trial that a further rental payment of £1,000 a month had been paid regularly into Cllr Akhtar’s bank account by the tenant of a second Housing Association property, officially let to Cllr Akhtar’s sister, Hazera. Criminal charges in this case were dropped.

Cllr Peter Golds, Conservative Group Leader at Tower Hamlets has twice written to Sandra Fawcett, the London Director of Swan Housing, Cllr Akhtar’s social landlord, asking her to investigate this matter.  In response to his most recent letter, Cllr Golds received the following bizarre response.

"We are not able to discuss an individual tenant's case with a local councillor without their consent. As you are also aware Shelina Akhtar is a London Borough of Tower Hamlets elected member in the same way as yourself and it would therefore not be appropriate for us to comment on information that is private and confidential to that individual".

Ms Fawcett is responsible for administering social homes which have been funded in part by the taxpayer. Her organisation is being defrauded and vicariously, so is the taxpayer. Yet she hides behind confidentiality and bureaucrat-speak.

In contrast, over in Hammersmith, the Conservative run council is taking this matter much more seriously. By working with credit-referencing agency, Experian, the Council is cross referencing tenancy, temporary accommodation and waiting lists for evidence of the same tenant or co-occupant being resident in another providers' housing. This has identified that one in twenty council homes may be unlawfully sub-let. That is over 800 homes in Hammersmith & Fulham. Across England that would be 170,000 homes.

So what further action could be taken to address this? Fraud investigation and prevention is all well and good, when those in positions of responsibility are willing to take action – unlike Swan Housing – and convicting the perpetrators acts as a deterrent, but why can’t it be stopped all together?

The root cause of the problem is the existence of a “profit rent” – the difference between the “social” rent being paid under the lawful tenancy agreement and the rent which can be achieved by letting illegally at the market rent. In Cllr Akhtar’s case, this is believed to have been over £800 a month or £9,600 a year – tax free as well, because you can bet your last pound this was not declared to the taxman!

The coalition Government is moving, tentatively towards a solution with its new “Affordable Rent” tenure, which will allow Councils and Housing Associations to set rents at up to 80% of market rents. Close enough, probably to make the risk and hassle of illegal sub-letting not worth it. However, this is only being applied to new tenancies so it will be decades before all tenancies are on these rents.

Making this change more rapidly for all properties, by raising all social rents to this level, say over three years, would go a long way towards creating much more of a single rental market with private, Council and Housing Association properties all offered to people at broadly the same rent. Market forces in this now 7m home strong market, would drive standards up and costs down, making housing more affordable. The tenants who needed help could then get it through Housing Benefit, but there would be no profit rent to speak of and this problem would largely go away.