Friday, 06 March 2015

Doubts by the dozen

From: Inside edge

As peers prepare for the key debate on the household benefit cap the policy is still begging as many questions as answers.

Ministers appear to have won the battle for public opinion over the principle of having a cap with 76 per cent of voters backing the idea in an opinion poll over the weekend.

However, the battle will be over the details. Labour has said it will not vote against the cap itself but will try to amend the Bill so that extra costs do not fall on council tax payers. Several Lib Dem peers including former party leader Lord Ashdown have said they cannot support the cap as proposed. And Lord Best will be prominent among crossbenchers pressing for changes.

Extra fuel for the fire came in a revised impact assessment published by the Department for Work and Pensions (DWP) this morning. This admitted that 75,000 families will be affected – 25,000 more than in the first version published last year. They will lose an average of £83 a week each - £10 less than before. And the government will save more than previously estimated (£330m in 2014/15 rather than £275m).

Other new details are that more than 1,000 families will be affected in each of 17 London boroughs plus Birmingham and that 5,000 families receiving carer’s allowance will be affected.

However, in many other ways, the key doubts about the policy remain the same. Here are my top 12. The first nine are updated versions of questions raised in committee stage debates in the Commons by either Lib Dem or Labour MPs that I blogged about last year. The other three come from previous comments on my blog and subsequent developments. I stand ready to be corrected but I’ve not seen answers to any of these points yet. 

  1. It may not save much money overall. The new estimate is for cost savings of £330m in 2014/15 but Lib Dem MP Jenny Willott claimed last year that the DCLG estimates that it will increase homelessness by 20,000 people, costing £300m in emergency housing. This was subsequently confirmed in the leaked Pickles letter.
  2. It may not increase work incentives. Labour’s Karen Buck and Lib Dem Ian Swales both argued that it will incentivise people to move from high-cost housing areas to lower-cost ones where there are fewer jobs.
  3. It contradicts the aims of the Universal Credit to make it easier into work or work more or less hours without suffering a big drop in income. ‘It creates cliff edges and makes a temporary period of unemployment a catastrophe,’ said Buck last year.
  4. Even if it does incentivise work, many of the families affected are people the state does not expect to work or who are too sick to work.
  5. It could penalise people in work who lose hours and cease to qualify for working tax credit and their exemption from the cap.
  6. It will encourage couples to split up. In the very opposite of a family-friendly policy, a couple’s income will be capped at £500 a week but if they split up into two single households they will each get a maximum of £500 a week if there are children or £350 a week if there are no children.
  7. It will penalise families with children. Willott said it would hit hard-working families who suddenly lost their job and could not pay their rent. Even two-child families in London face losing a third of their housing benefit. It will push more children into poverty just as the universal credit promises to lift them out of it. The new impact assessment says 90,000 families with 200,000 children will be affected
  8. It will have a damaging impact on social tenants and landlords. In the committee stage debates MP said that 70% of the 50,000 families affected will be in social housing (or 35,000). The new impact assessment puts this at 40 per cent of 75,000 (or 30,000). The inevitable rent arrears will threaten homelessness for tenants and damage the finances of landlords.
  9. It contradicts other housing policies like affordable rent - housing associations building homes at up to 80% market rents will find their existing client group will be unable to afford them. There is already anecdotal evidence of associations eliminating larger homes from their schemes.
  10. It threatens to undermine the economics of refuges and other forms of temporary accommodation. Women fleeing domestic violence will not have their rent paid in full and the consequences of refuges closing or becoming too expensive do not bear thinking about.
  11. It raises exactly the same issues as the cut to child benefit for higher rate taxpayers that is reportedly the subject of a rethink in government: cliff edges where people risk losing out above a threshold and incentives to split up and form two separate households.
  12. The ‘fairness’ argument for the cap being set at £26,000 as the take-home pay of the average working household sounds simple – and it seems to be convincing the voters. But it doesn’t include the in-work benefits that those average working households will also receive. And it doesn’t reflect the real world of how high housing costs can turn that into living on 62p a day – as Tim Leunig explains only too well.

Ministers do not seem in much of a mood for compromise if Iain Duncan Smith’s interview on Today this morning was anything to go by (the work and pensions secretary managing to redefine homelessness as ‘about children sharing rooms’.)

However, there were also possible hints of transitional help and it will be interesting to hear more this afternoon when peers debate the key amendments seeking to exclude child benefit from the cap and introduce a 26-week grace period.

Peers showed in the second reading debate last September that they are looking for much more from the government. Let’s hope they get at least some of it. 

Readers' comments (3)

  • F451

    Wages have been allowed to fall so far behind the cost of living that people can not afford even basic things such as housing.

    The government response of increasing rents to at least 80%MR, refusing to address supply issues that inflate home costs, and underwriting market rents with benefit is clearly unsustainable. It may continue to deliver the short term returns investors and those who see housing as a commodity demand, but isn't the government supposed to be governing in the national interest?

    Cutting benefits will not increase wages, nor decrease housing costs just as scrapping trade unionism did not add to jub security and fairness. All these measures do is make the life of the averagely waged and the poor even harder, and prevents making work pay.

    Making my neighbour homeless or starving their children will not increase my wages, nor make my housing cheaper. Yet 76% of our nation would vote for this on the basis that the demonisers have said my neighbour is evil and the cause of all ills.

    What else can this dispicable so called leaders ask of the people and have the people support. This is your wake up call Britain, before your slumber allows nightmares to roll across our green and pleasant land.

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  • Joe Halewood

    Some excellent points and I can think of a few more

    13. Point 10 can be added to with SAR extendion to those 34 and under. If you cant move people on you cant move them in. So the SAR reform and OBC impact on both first and second-stage support in hostels and refuges

    14. Overall cap will rise by CPI. Govt plans released in draft impact assessment with RTB consultation expect CPI of 10.2% taking OBC to £551pw by 2015. Currently social housing rent level is 15% of OBC - by 2015 with significanly above rent rises of 41% and 24% in council/HA average social rent will be 18.1% meaning many more social tenants will not have enough left to cover full rent. Impact on arreaars will be massive. Add direct payments to this and situation much worse

    15. The more social landlords ensure tenants get welfare benefits the less left out of cap to pay the rent. that is truly bizarre and perverse and incentivises social landlords NOT to help tenants with welfare benefit take-up!

    16. HB is not a welfare benefit but is included in the cap. IS or JSA or other welfare benefits are the same level UK wide with no London weighting for example. Yet rent levels are massively distorted in London and in effect the OBC penalises tenants for the high private rent levels in London when they are mostly in PSR due to lack of supply of social housing. there. Tenants are being penalised for lack of social housin supply and that is hugely wrong. tenants not responsible for shortage and not responssible for massive PRS rent levels

    17. Rather than regulate PRS rent levels which they could, this coalition is allowing them and expecting them (see DIA rent level plans in RTB) to increase at RPI+0.5 - so 16.7% by 2016 while LHA only rising by CPI or 10.2% by 2015. This means LHA will pay a smaller percentage of rent and so fewer PSLs will take on HB claimants, more homelessness than forecast previously and higher than 40,000 Pickles admits. Hence no savings at all to public purse but actually cost increases.

    Overall tenants especially private tenants are being punished for the lack of social housing supply and any such savings will be more than wiped out by increasing homelessness. Or simply this coalition is directly creating homelessness by this policy

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  • Regarding point 8 - the rent element of the Universal Credit will actually cover full rent in most cases for social housing tenants. Arrears will arise because direct payment will enable people to spend their rent allocation on other household necessaries. So homelessness (due to eviction for rent arrears) would only occur as a consequence of financial mis-management by the tenant. No change.

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