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.
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.
Question of the day: why won’t George Osborne say where he will find another £10 billion of cuts in welfare?
The obvious answer is that he doesn’t want us to find out before the election but there is a more immediate one too: because he can get away with it.
I found myself shouting at the radio twice today as interviewers failed to pin down first Osborne and then financial secretary David Gauke. The £10 billion figure is the so-far unexplained bit of the total £12 billion of welfare cuts Osborne is planning after the election. It matters both in its own right and because it enables him to deflect the Office for Budget Responsibility’s point about ‘rollercoaster’ cuts in public services.