Give and take: the spending review and housing benefit

Originally posted on November 17 on Inside Edge 2, my blog for Inside Housing

Two separate reports over the weekend claimed that housing benefit is being targeted by George Osborne for £2bn worth of savings to fix his tax credits debacle.

Iain Duncan Smith famously responded to Osborne’s July Budget ‘triumph’ with a fist-pumping celebration. The triumph soon began to crumble it became clear that the Budget really amounted to a message to work hard, do the right thing – and get screwed. As that realisation dawned, the scene was set for a struggle between the two Cabinet ministers played out in media briefings over an apparent raid on universal credit to pay for mitigation.

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Good cop, bad cop and mad cop

Originally posted on November 13 on Inside Edge 2, my blog for Inside Housing

Inside Housing: ‘Clark promises deregulation package’. FT: ‘Osborne eyes social housing stake sale.’ Daily Mail: ‘Duncan Smith’s great council house giveaway.’

Three rival visions for housing in England from three rival politicians who all think they know best.

Let’s assume some of this is the result of private disputes about budgets (especially between Osborne and IDS) playing out in public. The run-up to any spending review features media briefings designed to promote pet projects or scupper those of others. But this is still different: it’s not pet projects at stake here but potentially the entire future of housing. And the rival visions directly contradict each other.

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The Pay to Stay work tax

Originally posted on October 29 on Inside Edge 2, my blog for Inside Housing

The impact assessment of the Housing Bill reveals two devils buried in the detail of proposals for a compulsory Pay to Stay.

First, the principles. The assessment says ‘the Government believes that those on higher incomes should not be subsidised through social rents’. There are 350,000 social rented tenants with household incomes over £30,000 a year including 40,000 with incomes over £50,000. Higher rents for these High Income Social Tenants (HISTs) are justified by the fact that they ‘benefit from a subsidised rent that could be as much as £3,500 less, on average, compared to equivalent rents in the private sector’. 
Needless to say, neither of these figures is sourced. The government has form when it comes to changing its estimates of high earners (not to mention statistics in general) but:

‘This intervention is designed to remove an unfair subsidy. Households with a sufficiently high income do not require this, as they are able to access market housing.’

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Cuts, caps and goalposts

Originally posted on July 22 on Inside Edge 2, my blog for Inside Housing 

Looking to gauge the effects of the latest benefit cuts on housing? The official impact assessments are at best a starting point.

Documents published for the second reading of the Welfare Reform and Work Bill on Monday evening (available here) do give the Department for Work and Pensions’ (DWP) view on what to expect, but there are several reasons why it is a severely blinkered one.

First, they only cover what is actually in the Bill and many of the main housing benefit changes in the Budget do not require primary legislation.

So there is an impact assessment of the five-year freeze on most working age benefits but it does not include the freeze of the local housing allowance. Similarly, we do not get the DWP view on ending automatic entitlement to housing benefit for 18 to 21-year-olds because that will be done by regulation rather than primary legislation.

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Work hard, do the right thing – and get screwed

How has George Osborne got away with a Budget that will hurt the very people he claims it will help most: hardworking families?

The headlines are all about One Nation, National Living Wage and tax cuts but, as the dust settles, the calculations that have emerged so far make clear that the poorest households are going to suffer significant cuts in income. While a series of cuts such as the lower benefit cap will hit out-of-work households hard, people in work face a series of technical changes to tax credits and benefits that will make many of them substantially worse off.

To give some idea, here are the three main cuts:

  • A four-year freeze in working age benefits saving £4 billion by 2020/21. The Institute for Fiscal Studies estimates that this alone means that 13 million families will lose an average of £260 a year. Of those, 7.4 million are in work and will lose £280 a year. The freeze will also hit child benefit, which David Cameron promised to protect.
  • £6 billion worth of cuts to tax credits (and subsequently universal credit) and associated housing allowances from April 2017. The IFS says new claimants will lose credit entitlement for more than two children, losing the average of £3,670 a year that currently goes to 872,000 families (548,000 in work). On top of that, the family element in credits for the first child will be cut for new claimants and housing allowances associated with both will be cut too. Kate Webb of Shelter calculates that just one change – the removal of the family premium, an allowance of earned income before housing benefit starts to be withdrawn for working families with children – could cost a single mother working 20 hours a week at the new national living wage £11 a week. That’s not much less than the bedroom tax.
  • Cuts to work allowances that mean working households will lose tax credits/universal credit much more quickly than now. At the moment, credits start to be withdrawn once family earnings rise above £6,420. That will fall to just £3,850. This will cost 3 million working families just over £1,000 a year each. Credits will also be withdrawn at a faster rate once they hit that threshold.

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Reconstructing Speenhamland

Where do the Conservatives really stand when it comes to supporting workers on low wages?

Are the Tories the One Nation ‘workers party’, cutting tax, increasing the minimum wage and reforming welfare to make sure that work always pays? Or are they the one that’s set to cut spending on tax credits by £5 billion and cost those same workers up to £1,690 per year?

Ahead of Wednesday’s Budget, the rhetoric and the reality simply do not match. In David Cameron’s ‘speech on opportunity’ in Runcorn last month, he contrasted the ‘right track’ of economic opportunity with the ‘wrong track’ of ‘people capable of work, written off to a lifetime on benefits’ and policies that ‘ignore the causes and simply treat the symptoms of the social and economic problems we face’. Rather than redistributing money through the benefits system we have to tackle the ‘real causes’ of child poverty. And our approach to low pay is complacent:

‘There is what I would call a merry-go-round. People working on the minimum wage having that money taxed by the government and then the government giving them that money back – and more – in welfare. Again, it’s dealing with the symptoms of the problem: topping up low pay rather than extending the drivers of opportunity – helping to create well paid jobs in the first place. So this is the change we need. We need to move from a low wage, high tax, high welfare society to a higher wage, lower tax, lower welfare society.’

Needless to say he did not explain how. The key Conservative policy of increasing the income tax threshold to the level of the minimum wage sounds like it benefits low-paid workers most. In fact, anyone paid below the current threshold of £10,600 a year will receive no benefit at all while most of the gains will go to people on higher earnings. It’s the same story with tax credits and housing benefit, both of which are essential to people who are in work but on low pay. All the tax cuts in the world do little to make up for the cuts in the last parliament and the cuts to come in this. As Gavin Kelly argues, the notion that higher wages will somehow fill the gap is fanciful.

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Enemies of the state

Originally posted on July 5 on Inside Edge 2, my blog for Inside Housing

Bring it on. We are determined take you on. Who do David Cameron and George Osborne have in mind?

If you haven’t seen it yet, you need to read their op-ed in Saturday’s Times on ‘Here’s how to build a homeowning Britain’. They mean England of course. You can read extracts on the Number 10 website but that only gives a flavour of the full article so I’ve posted it here.

Ahead of the Budget, they promise that ‘a shake-up of inheritance tax and crackdown on nimby councils will give young people a foothold on the property ladder’. It is not just an explicitly, distinctively Conservative vision for housing but also a declaration of war against anyone opposed to that vision. Here’s my take on the key points:

‘Having your own place is an important stake in our economy. It’s also one of the best expressions of the aspirational country we want to build, where hard work is rewarded.

‘It’s also about social justice. We don’t want this to be a country where if you’re rich you can buy a home, but if you’re less well off you can’t. We want it to be One Nation, where whoever you are, you can get on in life.’

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