Since losing the leadership of the Conservative Party, Iain Duncan Smith has become a more interesting character. His Centre for Social Justice has produced genuinely thought-provoking work.
Mr Duncan Smith’s big thing is getting more people into work. We can debate whether that makes sense for some individuals - single mothers with children in school, for example - but pretty much everyone accepts that there are some people who would, in a holistic sense, be better
off in work.
Government policies to achieve this generally involve a carrot and stick approach. We already have in-work benefits, and tax credits that are more generous than the old family credit and family income supplement ever were. The deficit means that Mr Duncan Smith cannot increase the carrots by more than a token amount.
That leaves the stick - forcing people to look for work, and perhaps forcing them to take up work they would rather not do.
Not enough jobs
The Budget makes this real, with a 10 per cent cut in housing benefit for those out of work for a year or more.
This policy will not work, because there are too few jobs to get people into. The Centre for Cities’ latest report, Private sector cities, notes that even in 2006/08 - boom years in the economy - there were places with more than five claimants per vacancy. Add in a lot of people not in work but not meeting the definition of a claimant and the real figure would be much higher.
Since then, of course, the number looking for work has increased and the number of jobs has reduced. The figures are getting worse.
With big public sector cuts on the way, Mr Duncan Smith needs the private sector to provide the jobs. But there is a mismatch between areas with high unemployment and those in which private firms choose to locate. In the 10 years to 2008, less than 10 per cent of net private sector jobs were created in the north or the midlands. The north east and north west each created fewer than 50 net private sector jobs per week in the boom years. They will create even fewer in the years to come.
Despite a decade of hugely active regional policy, the private sector has overwhelmingly declined to move away from the south of England and it is unlikely to make a different decision in the next 10 years. Welfare to work will not work in this context.
The effect on housing
This matters to the social housing sector. Threatened by enough sticks, some people will get work. But it is likely to be short-term or to push someone else out of work. A new minicab driver pretty much displaces an existing minicab driver unless an area is short of minicabs. People will get hurt and those who are hurt end up on social housing waiting lists.
The government is right to tackle housing benefit. It is heading for £20 billion this year, after all. As well as cutting benefits to those out of work for more than a year - which could save a lot of money given the characteristics of housing benefit recipients and the state of the economy - the government has further plans.
First, local housing allowance: there will be an absolute limit to the amount that can be claimed each week - £280 a week for a one-bedroom property, for example. This will have a big effect in inner London but the effect elsewhere will be limited. I cannot afford to live in Chelsea, for example, and it is easy to make the case that I and other taxpayers should not be asked to subsidise others to live there. Chelsea then becomes an enclave of the wealthy, which has its problems, but the country might decide that the cost of ensuring a mix of incomes in Chelsea is just too high at the moment.
But the government is being ‘braver’, as Yes Minister’s Sir Humphrey used to say. It is limiting housing benefit to 30 per cent of local rents, rather than 50 per cent at present. This will save a lot of money but at a real cost - the creation of ghettos, particularly in areas in which there are large numbers of housing benefit recipients.
Housing benefit restrictions also weaken the position of the poor in the housing market, relative to the affluent. Housing benefit restrictions are good news for young couples and those wanting to buy second homes or a pied-a-terre in London, who can now buy the properties landlords were forced to put up for sale, since they could not cover the mortgage from renting them out. But it is bad news for those on low incomes, whose landlord would now rather sell their properties and who might, therefore, end up in more cramped accommodation, including informal arrangements such as ‘sofa surfing’.
In reality, the housing benefit bill is going up, not down. House prices are already rising and rents will soon follow. Mortgage availability is weak and will improve over the next two years. After all, a 90 per cent mortgage is not an unreasonable proposition in an expensive market. When the mortgage market returns to normal, house prices and market rents will rise further - and when they do, the housing benefit bill will increase, perhaps dramatically.
Fewer new homes
The government has compounded the problem by announcing that ‘garden grabbing’ is out, and that means that another source of land for housing has disappeared. In addition, density targets are no more, so each hectare for housing yields fewer homes. Since there are no plans to release more agricultural land in lieu, fewer houses will be built. Fewer houses built means higher prices, which in turn means higher rents and higher housing benefit bills.
There will be no increase in employment, fewer new homes, more people unable to afford to rent or buy a place of their own, more overcrowding for the poorest and bigger benefit bills for taxpayers. Is this social justice?
Tim Leunig is an academic in the department of economic history at the London School of Economics
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Readers' comments (14)
Anonymous | 02/07/2010 10:39 am
Is it social justice to expect the taxpayer to endlessly fund someone who does not take up work "they would rather not do"?
Does the person on benefit not have a social responsibility to contribute to society rather than just take out?
How many people in work are already doing a job they "would rather not do" to pay the bills (and taxes too)?
This is a 2 sided argument that only seems to be being looked at from one side, the "injustice" for those out of work and on benefit, with no thought of those who do work and contribute. If someone can work and there is a job avaiable, then they should take it rather than being allowed to wait for "the perfect job and salary" and expect the workers to pay for it.
We need to be practical and try and get away from this ideological idea that we should have have what we want, when we want, how we want, life isnt like that and never will be.
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Brian Capaloff | 02/07/2010 11:52 am
There needs to be research don on these pages on the comments from this person called 'Anonymous'! The similarity of viewpoint from the composite Anonymous contributor is amazing!
And to Mr Leunig - yes, the fears you express here are reminiscent of a Shirley Porteresque City of Westminster. V frightening!
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Chris | 02/07/2010 10:21 pm
The only way IDS plan can work is if the unified business rate is scrapped, allowing local councils to begin economic development again, attracting key sectors into deprived areas. But Osbourne will not allow this as it will return power to the local level, slow the London boom, spread housing affordability, and reduce the pressure on utilities in the south-east. All absolute reasons to scrap the UBR.
Irony anyone.
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kass | 03/07/2010 11:17 pm
If you are on JSA and you are offered work you cannot refuse it without losing benefit. You have also to show that you are looking for work.
Those in work blagging their taxes are for the benefit of unemployed refusing to work either are ignorant of this or are just fascists out to take it out on the unemployed.
Also quite a few calling themselves taxpayers are tax dodgers, who do not pay taxes or the right amount of tax either through creative accounting or by just lying to the Inland Revenue. anonymous 2nd July 10:39 am is one of the latter might well be one of these.
as for the article there is not such thing a social justice (because full social justice is an ideal state or utopia), there is what is called social injustice and IDS's only mission in politics seems to have been making social injustice even more radicalized.
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| 04/07/2010 9:57 am
Anonymous makes some very valid points and it is a usual lefty trick to call anyone who does not agree with them a "fascist". You're sounding a bit like Rick from The Young Ones don't you think Kass? In addition there are indeed tax dodgers and high net worth individuals who understandably to do everything they can to minimise tax liability. Given the profligacy of the last Government it is easy to understand why. However I really don't think that there are any of those with an interest in the social housing sector and who would have a further interest in posting on this forum. Anonymous is probably not a high net worth individual but works for a living and pays tax under PAYE, the most aggressive form of tax collection possible. His comments are entirely reasonable and understandable given this circumstance.
CW's comments about the unified business rate are interesting. The UBR regime here is indeed onerous and raises three times more tax as a % of revenue than any other European country:
www.fsb.org.uk/keeptradelocal/images/fsbbusrateslores.pdf
So much the so-called "competitiveness" of the UK business regime. You're right on this one and scrapping it would be entirely in line with the new "localism" agenda (if indeed there is one).
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kass | 04/07/2010 10:49 am
Ilag, as usual you make little sense, if tax evasion was tackled as it should you and your anonymous sidekick - probably one of those private landlords racketerring in all the private high rents, would realise that there would be so much more money around that we would not even need to be in recession.
But instead of attacking the tax dodgers you support attacks on the unemployed. If that is not fascist I do not know what it is.
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| 04/07/2010 11:51 am
Again, I think it unlikely that "private landlords racketerring in all the private high rents" would bother to post on this forum so yet more judgemental evidence free hogwash from kass. You would know what is genuinely "fascist" if you lived, or knew those who lived, in a fascist State (like say Franco's Spain). You clearly don't so stop using this childish expression to describe completely reasonable comments from others. Kass' world seems to comprise of i) evil housing officers looking to "oppress" their tenants ii) evil working people who resent paying the lions share of their income in taxes and iii) social housing tenants who are all victims of i) and ii). I think life's a little bit more complicated than that don't you?
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kass | 04/07/2010 7:05 pm
Ilag, just to clarify, I was not the first to call you and your sidekicks fascist. If I recall well you were called you even worse, which I don't dare to report.
I am not surprised you keep attacking those who are down and exploited and supporting those who have make a racket out and make a fantastic profit out of social housing.
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Joe Halewood | 04/07/2010 9:23 pm
Oh dear another personal rant deflects the key points of a surprisingly cogent article from Tim Leunig.
Despite his undoubted regard in his field I rarely agree with him but he has this spot on. My only problem is that he chooses to style it in a smart-arse way of a pun on IDSs centre for social justice; rather than hammer his well made points home.
These proposals WONT work
These proposals will INCREASE the HB bill
These proposals WILL DAMAGE THE COUNTRY FOR GENERATIONS
Excuse the capitalisations above but these are the 3 conclusions of this article which regrettablt Tim Leunig argues and states yet fails to hammer home!
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eric noble | 05/07/2010 9:49 pm
hi,
re- ilag.
i am an ex soldier who fought in ww11 and saw at first hand fascists and their mindset. a fascist need not just pick on other races/skin colour etc, but cannot help themselves from victimising weaker and vunerable people and scapegoating them for societys ills. i fought in holland and at the time holland was advancing social housing. i tried to ask nazi prisoners what they thought of this type of housing{ yes i was and still am a socialist}and the answers i got were the same as we hear from bullys of today, words like parasites ,human filth were used.
a fascist in my eyes is someone who cannot help picking on the weakest and those who cannot defend themselves and i think that the mindset of anonymous is that of a fascist an ignorant bigoted bully who has never really grown out of pulling the legs of little spiders.
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