If at first you don’t succeed

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.

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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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Budget 2014: the next five years

Never mind today and tomorrow: what does the Budget mean for housing over the longer term?

As usual, some of the most revealing information comes not in the speech or the Treasury’s background documents but in the Economic and Fiscal Outlook published by the Office for Budget Responsibility. This time around the detail and the forecasts for the next five years have a lot to say about housing benefit, the welfare cap and the housing market.

Read the rest of this post on Inside Edge, my blog for Inside Housing


Beyond help

It’s hard to remember a more damning select committee report than the one just published on Help to Buy – and it has not even started yet.

You don’t even have to read between the lines of the Treasury committee report on the Budget to detect its doubts about a policy announced by chancellor George Osborne last month. It leaves him with a string of questions about how it will work and a list of concerns about unintended consequences.

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Bedrooms, football and the top rate of tax

This is a tale of two cities. Of one city and two different planets. And of one City and one United.

On Monday a wave of welfare reforms began to hit claimants and tenants across the country. Today the top rate of tax is cut from 50p to 45p on earnings above £150,000. For the connection between the two, in the immortal words of Carlos Tevez:

welcome_to_manchester

The city is home to the richest football team in the English Premier League, Manchester City, and the most successful, Manchester United (give or take the location of Old Trafford). It is also the bedroom tax capital of the UK with more than 14,000 tenants facing an average loss of £624 a year. They have lost a total of £168,000 this week – less than many of the footballers earn in a week on their own – and will lose a total of £8,736,000 this year.

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The black comedy of property taxation

Why is it that so few chancellors ever consider the effect of their decisions on taxation on housing?

The obvious answers are political ones: housing is near the bottom of the list of priorities; no chancellor can afford to alienate the homeowning majority; and any changes to the tax system inevitably create losers as well as winners.

As George Osborne puts the finishing touches to the Budget, speculation continues about several measures that could have a huge impact: a long-overdue clampdown on stamp duty avoidance (Osborne has already committed to this – see my blog for Inside Housing here); extra council tax bands (a distinct possibility); and a mansion tax (advocated by the Lib Dems but supposedly ruled out for now by David Cameron). Yet all of the ideas are about raising revenue for tax cuts elsewhere. There is no suggestion of the more general reform of property taxation that is so badly needed.

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Rubber stamp

So George Osborne will come down ‘like a ton of bricks’ on people who avoid stamp duty by buying homes through offshore companies. What took so long?

The chancellor confirmed in TV interviews over the weekend that the loophole beloved of celebrities, rock stars and the global super-rich will be closed in the Budget on Wednesday.

Read the rest of this post on Inside Edge, my blog for Inside Housing.


Family values

Anyone who has followed the debates about housing benefit cuts and the Welfare Reform Bill will probably have been thinking the same as me during the debates this week about the mansion tax and child benefit.

Surely we heard exactly the same arguments about ‘fairness’ and ‘family’ in all the debates over the last year about welfare reform and housing benefit cuts?

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