New work and pensions secretary looks to cut £17bn housing benefit bill
Duncan Smith plans benefit overhaul
The new work and pensions secretary is considering radical changes to the way housing benefit is calculated to cut the soaring bill.
A source close to Iain Duncan Smith, the former Conservative leader, said he is interested in pursuing the policies devised by his centre-right think tank, the Centre for Social Justice when reforming housing benefit.
Mr Duncan Smith has appointed the CSJ’s director Philippa Stroud as his special advisor, suggesting he could pick up recommendations made by the think-tank such as streamlining the complex benefits system so that there are only two main benefits. These would be a universal work credit and a universal life credit, which would merge housing benefit and disability living allowance.
The new secretary of state also hinted that he is keen to create more incentives for people on housing benefit to negotiate lower rents, in a previously unpublished part of an interview with Inside Housing conducted just before the election (Inside Housing, 26 March).
At the time, Mr Duncan Smith said: ‘You might lock-in tenants to negotiate some of their rent. Maybe, you know, giving them the incentive of retaining some of the saving they make.’
He added that as far as people living on housing benefit are concerned ‘they don’t really care if the rent is high so the state ends up paying, I think, more than it probably should because there is no personal interest in the house.’
Housing benefit should be withdrawn more slowly than it currently is when people get a job ‘so that people get into the work habit’, he added.
The most pressing concern for the department is cutting the £17 billion housing benefit bill, which is the second largest for the department next to the state pension.
It is understood that Mr Duncan Smith plans to pursue the policy of capping the highest rents in an area, first mooted by his Labour predecessors, or lowering rent payments entirely.
Social landlords are wary of plans to reduce housing benefit rates. A senior housing source said: ‘If you play around with housing benefit rates, then you would have an impact on viability. Lowering the rates payable would mean they would have to break their own rent formula. It would almost be better to go for the capital programme instead if they want to save money. It’s clear that we have been cruising through a golden age for housing that is coming to an abrupt end.’
Private landlords warned that reducing local housing allowance rates would increase homelessness. Vincenzo Rampulla, public affairs officer at the National Landlords’ Association, said: ‘Cutting rates might cause more problems than it solves. It might lead to an increase in homelessness.’
Big Society
The government has confirmed that it will abolish regional housing targets and hand housing and planning decisions to local authorities.
In its Big Society policy paper, launched on Tuesday, the government said it would enact a key Conservative Party manifesto pledge by abolishing regional spatial strategies.
The paper said mutuals, co-operatives and social enterprises should have greater involvement in the provision of public services and public sector employees could form co-ops to bid to provide services.
The paper, which centres on giving people greater control of public services and the state, also proposed reforms of the planning system to give local people a greater say in decisions and save threatened amenities. A source said that was a reference to local housing trusts - another Conservative manifesto pledge.
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Readers' comments (5)
Dave Hollins | 21/05/2010 10:03 am
From previous posts people will be aware I'm not very impressed with Mr Duncan Smith, a man who seems to spend months researching issues only to confirm his previous prejudiced anti-tenant position.
Now he's in charge we're in for endless faux concern for poor people matched by policies that make them even poorer. But the main contradiction in his initial position is that he claims he is going to cut the benefits bill, but his key policies, like withdrawing Housing benefit more slowly when people get a job, would cost a fortune. Capping high rents sounds like a good idea but Labour has been unable to make this work, and the impact in high rent areas like much of London is potentially disastrous.
Your report says he wants to 'lower rent payments entirely'. I don't know what this means but it sounds like tenants are in for a really rough ride.
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Chris Reed | 22/05/2010 7:13 am
there are particular concerns for those of us offering shared supported housing services and short term housing, particularly those set up through the 90's and the 00's for people with long term disabilities, homeless services and women's refuges. Whilst target rents can be achieved in the majority of services, the nature of shared properties and short term lets that offer some communal facilities lends itself to higher service charges that direclty relate to the nature and their purpose. Any blanket changes could have significant impact on vulnerable people and in some cases makes servies unviable. These service were not set up speculatively, but were commissioned by local authority and health services and are part of a strategic framework. We accept that potential there will be provders where there may be room to examin further rent and service levels and perhaps bring some more imaginative approaches, but the vast majority of charges within services for vulnerable people are about covering actual costs, so any blanket capping approach could lead to service closure. This isn't a saving, the local authority will still have a duty to house and support these people. We need to have this debate with the government and they need to see the actual impact on the people housed and consider that a short term saving may lead in the longer term to higher costs of rehousing in a market where demand already outstrips supply.
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Iain Devenney | 23/05/2010 7:09 pm
What makes me laugh is that the Tories want to reduce the payments of Housing Benefit when it was them that scrapped the rent act in favour of the Housing Act 1988 which effectively gave private landlords free reign to charge what they liked.
Now that the horse has not only bolted, but has been turned into glue,they want to shut the stable doors?
All that they will do is increase homelessness and put further pressure on homeless departments in local authorities, who also dont have the housing thanks to the right to buy...another successfull tory policy....Up the ConDems...NOT.
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Bob B | 24/05/2010 0:26 am
It's easy to lower rents, build more council houses. See, so simple.
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Harry Lime | 24/05/2010 9:48 am
Lets not forget some of the "think tanks" that some of their policies came from gave us such great ideas that the north of the country should relocate to the south, yet this sort of talk will inevitably bring about discussion about whether people on HB should be in certain areas of London for example, access a property in Westminster through LHA? They'll only give you enough LHA to get a property in Tower Hamlets. Social engineering and perpetuating areas of deprivation or common sense? I can see both sides of the argument to be honest......
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