Sunday, 26 April 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. 

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