Shutting up shop

Posted by: Jules Birch

22/04/2009

Remember shopping around? The Budget has just killed the idea stone dead.

The local housing allowance was meant to usher in a brave new world of choice and personal responsibility. Claimants would get a flat-rate allowance and keep any surplus if their rent was cheaper. This would give them an incentive to shop around to get the best deal from local landlords and help to create a true market where housing benefit would not be paid on unreasonably high rents. 

Shopping around was a key part of a plan for radical reform of housing benefit set out in Gordon Brown’s 2002 Budget. As the scheme was piloted, some tenants in the local housing allowance pathfinder areas did very well out of the plan. But once the allowance was introduced on a national basis the surplus was restricted to £15 a week.

Not any more. Papers published alongside today’s Budget say that the government is reforming the local housing allowance ‘so that it is more equitable and promotes work incentives’. 

From April 2010, households will no longer be able to keep any of the surplus if their allowance is higher than their rent although for those already receiving LHA, this reduction will not apply until the anniversary of their claim. 

‘It is essential that the LHA represents good value for money for the taxpayer and as this measure will only affect surpluses, it will not produce rent shortfalls,’ said the press release.

In a Budget dominated by the search for efficiency savings, LHA surpluses must have seemed a tempting target. Budget documents estimate the move will save £145m in 2010/11.

But more equitable and promote work incentives? Really? Shopping incentives were the whole reason the local housing allowance was introduced in the first place. Where is the personal responsibility and choice for tenants now? 

And where does it leave the other main pillar of the local housing allowance: paying it direct to tenants rather than to landlords. What’s the point now?