Faltering UK economy and impact of spending cuts to drive up claims
Spending cuts blamed for rising benefit bill
Housing bodies have blamed swingeing government spending cuts for adding nearly £2 billion to the cost of housing benefit over the next five years.
Despite plans outlined in the Welfare Reform Bill to reduce benefit expenditure, this week’s forecast from the Office for Budget Responsibility showed the government will have to shell out an extra £1.9 billion to meet the expected increase in housing benefit claimants.
In June 2010 the coalition promised to wipe £1.8 billion off the annual benefits bill, which stood at £22 billion for 2010/11, by the end of the current parliament.
The OBR projections came as chancellor George Osborne delivered his autumn statement to parliament on Tuesday, which revealed poorer than expected growth and increased borrowing as the UK economic recovery looked to be faltering.
‘You could argue that the [public spending] cuts have driven up unemployment and that consequently adds to the welfare bill,’ said Sam Lister, a policy and practice officer at the Chartered Institute of Housing.
The increase in people claiming benefit is also likely to put pressure on social housing and council waiting lists, Mr Lister warned.
Housing charity Shelter claimed more working households were becoming eligible for housing benefit due to a combination of rent increases and wage freezes. A recent Shelter report showed that rent in England rose at 1.5 times the rate of incomes in the 10 years to 2007.
Roger Harding, head of policy and research at Shelter, called on the government to reduce dependency on housing benefit ‘by boosting employment and reducing rents by investing more in affordable housing’.
Jack Dromey, Labour’s shadow housing minister, said: ‘The government is pushing down wages, putting millions out of work and introducing “affordable rents” which the hardest hit will simply not be able to afford.
The chancellor’s autumn statement unveiled a £30 billion infrastructure investment plan, which included £5 billion of public money and £20 billion of investment from pension funds. However, the 500 projects expected to benefit from the fund are unlikely to include housing schemes.
David Orr, chief executive of the National Housing Federation, said the statement ‘largely ignored’ the sector, arguing for an investment of £1 billion.
One announcement hailed as a success for the social housing sector was the extension of a VAT exemption on shared services for not-for-profit organisations to housing associations.
The chancellor’s statement also revealed a shock public sector pay freeze and outlined a review of the planning process.