The Conservatives must be pinching themselves after 100 days in government. What can possibly go wrong?
For three months they’ve been able to do pretty much as they like. The Liberal Democrats are humiliated, Labour is demoralised and distracted and the opposition that has come from the SNP is a comforting reminder of the Scottish card that won the election. Thanks to all of that, plus expectations formed by inaccurate opinion polls, a government with a tiny majority elected with just over a third of the vote can behave as though it’s won a victory on a par with 1945, 1979 and 1997.
Yet the Tory luck cannot hold for ever. The obvious cloud on the horizon is Europe, with no sign that Brussels will hand David Cameron concessions meaningful enough to sell to his sceptical party ahead of the election. Economically, it’s far easier to start with a recession turn it into a recovery than it is to manage expectations in improving times.
But could the Conservatives turn out to be most immediately vulnerable where they seem strongest: on the ground they’ve staked out since the election to be ‘the real party of working people’? As Cameron put it in an article for the Telegraph on Saturday:
‘On the challenge of delivering an economy that supports working people, it is Conservatives who believe that a free enterprise economy is an ally not an enemy in generating wealth and extending opportunity. By cutting taxes, reforming welfare and increasing minimum wages we are showing we are the real party of working people.’
Originally posted on August 3 on Inside Edge 2, my blog for Inside Housing
Did Genesis choose the wrong book of the bible when it went through its rebranding exercise?
Reading this week’s Inside Housing, and especially the interview with chief executive Neil Hadden, an Exodus out of social housing looks a possibility in the wake of a Budget that signalled that grant will be ‘refocused’ towards home ownership in the Autumn spending review.
Except that this latter-day Moses seems to see a future as a private landlord and developer as the land of milk and honey. He is right to see the Budget as a ‘massive watershed’ and right to see that the government is no longer interested in social, or even ‘affordable’ housing. Rent cuts, the extension of the right to buy, compulsory pay to stay, reform of section 106 to benefit starter homes and possible extension of fixed-term tenancies all shout that message. The spending review only seems set to confirm that the plan is to cannibalise what’s left of affordable housing to boost home ownership. The question is how housing associations should respond.
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.
Originally posted on July 13 on Inside Edge 2, my blog for Inside Housing
It may have important new provisions on housing and planning but the name of the government’s new productivity strategy rather gives the game away.
Described as ‘the second half of the Budget’, Fixing the Foundations was published by the Department for Business Innovation and Skills but includes chapters on housing and planning and welfare that amplify decisions taken in the first half.
But does the name remind you of anything? Go back four years and David Cameron himself was launching a ‘radical and unashamedly ambitious’ housing strategy. The title? Laying the Foundations.
Once they’ve stopped sucking air through their teeth, any builder will tell you that once you’ve laid the foundations and built on top of them, it’s enormously expensive to start to fix them. It’s also a pretty good indication that the foundations were pretty rocky to begin with.
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.
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.