Posted by: Jules Birch06/10/2010
If anyone believed that the government might change its mind on housing benefit caps, the new £26,000 limit on total benefits is their answer.
Details of the policy announced by George Osborne on Monday are still sketchy and it was barely mentioned in Iain Duncan Smith’s speech to the Conservative conference yesterday.
Hardly surprising since it was barely mentioned in the papers yesterday either as coverage concentrated on the effect of the withdrawal of child benefit from higher rate taxpayers.
What we do know is that total benefits will be capped at the level of the average take-home pay of working households (estimated by the Treasury to be £500 a week or £26,000 a year) from 2013.
That sounds fair – until you consider the detail. The cap will include all income replacement benefits (income support, jobseekers allowance etc), housing benefit, council tax benefit, child benefit and child tax credit and other benefits including carer’s allowance and industrial injury disablement benefit. Claimants of disability living allowance, war widows and working families in receipt of working tax credit will be exempt.
Because it takes no account of variations in housing costs that amounts to another huge cut in housing benefit for anyone in expensive areas with children. In June the government introduced a range of cuts including caps on local housing allowance. What’s less clear is exactly how big the new cut will be.
On the face of it, an unemployed family with three children currently gets around £300 a week in benefits before paying their rent and council tax. That appears to mean that the new £500 a week limit effectively caps their housing benefit at around £180 a week – less than the average rent anywhere in London.
If the first round of housing benefit caps threatened a migration of claimants from inner to outer London, that seems to suggest an exodus of the poor from London and the South East to cheaper parts of the country – an exodus from areas with plenty of work to those with higher unemployment in the name of making work pay.
All this is admittedly before we have much detail of the policy. The fact that it was announced by Osborne and not Duncan Smith might indicate that these are part of the savings demanded by the Treasury to pay for the upfront costs of the new universal credit – and perhaps those will include extra housing help for working families.
The Treasury estimates that it would leave 50,000 families will lose an average of £93 a week. The Chartered Institute of Housing estimates that it will make one in five broad rental market areas in England hard to afford for a family with three children.
That exemption for working families on working tax credit is perhaps an indication of how the government intends to make the universal credit pay for people in work. (It’s worth bearing in mind that a hard-working family earning £26,000 will already be getting child tax credit if they have kids and may be getting some housing benefit too).
However, it also makes things fiendishly complicated for any family that thinks they might be affected by the cap. Work just enough to still qualify for working tax credit and your housing benefit seems to be ok; earn one extra pound and you will suddenly face a massive shortfall on your rent.
Even HM Revenue and Customs got the calculations wrong on hundreds of thousands of working tax credit claims. What hope is there for local authority housing benefit departments and their outsourced contractors?
The £26,000 cap will also add to the knock-on effects for other services like education and social services – with schools closing in some areas and bursting at the seams in others.
And it must surely increase the likelihood of the government – in the name of localism - watering down the homelessness legislation to save local authorities from extra costs.
From Inside edge
Housing commentator Jules Birch puts the latest news in context