Posted by: Jules Birch07/07/2009
As public spending cuts loom, you’d have thought ministers would be pinching themselves at the thought of a programme that saves more than £2 for every £1 spent.
That is what Supporting People delivers according to work by consultant Capgemini for Communities and Local Government (CLG). Total costs add up to £2.9bn - the £1.6bn cost of providing services plus £600m in housing costs, £400m in social services care and £200m in benefits and related services.
The benefits total £6.3bn, including £5.4bn on residential care, £100m on homelessness, £50m tenancy failure costs, £300m health service costs and £400m crime costs.
That net saving of £3.4bn is even higher than suggested in previous work by the same consultant. Although it makes a few assumptions that will be questioned by some people, it begs the question of why has cut the government cut funding for Supporting People by £200m at an apparent cost of up to £500m and what the effect of removing ring-fencing will be.
It’s an issue that not just relevant to Supporting People. Take last week’s £1.5bn housing package for 30,000 new homes. The government claimed at the time that it would create 45,000 additional jobs over three years.
Brian Green’s Brickonomics blog calculates the Treasury loses £20,000 for each construction worker on the dole in lost taxes and extra benefits, meaning that the creation of 45,000 jobs saves the Treasury £2.7bn (3 x 45,000 x £20,000).
If you think that sounds counter-intuitive you’re right, since he reckons the government exaggerated the impact on jobs. It takes 1.5 people to build a house but it only takes them a year so 30,000 homes actually equates to 15,000 jobs over three years.
Even so, the Treasury still gets back £900m of that initial £1.5bn investment in benefits not paid and taxes paid. And that does not include extra receipts from Corporation Tax and VAT, stamp duty on the homes sold and the multiplier effect of that extra money in the economy.
Whatever you think of the assumptions behind those two sets of calculations, the point is that investment in new homes and housing services at worst delivers savings and benefits elsewhere and at best saves the government money overall.
That’s the message that has to be hammered home again and again ahead of next year’s public spending cuts.
From Inside edge
Housing commentator Jules Birch puts the latest news in context