Cuts fail to halt £2bn rise in housing benefit costs
Housing benefit costs will rise by nearly £2 billion by 2016 despite government efforts to cut the bill.
The Office for Budget Responsibility yesterday predicted at £1.9 billion surge in benefit costs over the next five years.
The figures show the government will spend £200 million more on housing benefit than expected this year (see table below). The figure will rise to £600 million by 2015/16, bringing the extra expenditure up to £1.9 billion in total by 2016.
The OBR’s Economic and fiscal outlook said: ‘This is mainly due to changes in the population eligible for housing benefit. Recent survey information suggests that the proportion of people likely to be eligible for housing benefit continues to grow and we have reflected this in our assumptions about caseload growth.’
The government has unveiled a range of measures designed to bring down the £21 billion housing benefit bill since it was elected in May 2010. These include capping the amount of benefit that can be claimed for households on local housing allowance, and setting rents at the 30th percentile level in each area rather than the 50th percentile currently used.
Chancellor George Osborne unveiled a package of measures designed to boost the flagging economy in his autumn statement and growth strategy yesterday, which coincided with the OBR’s report.
These included a £30 billion national infrastructure fund, primarily financed through institutional investment, and a £1 billion boost for the regional growth fund.
Housing minister Grant Shapps originally said the regional growth fund would support housing, but when allocations from the first £1.4 billion of the pot were unveiled only one housing scheme was on the list.
The larger infrastructure fund has also been criticised for not doing enough for housing, although the autumn statement document notes that work to improve capacity and performance on the A14 ‘will support proposed housing developments in Northstowe, Waterbeach and Alconbury’.
The government’s plans for the housing sector were set out in the Laying the foundations housing strategy, published the week before the autumn statement. The widely-anticipated measures included a new build mortgage indemnity scheme to help first-time buyers, a revival of the right to buy, and a £400 million fund to boost stalled developments.
The autumn statement does not elaborate on these schemes, although it sets out some of the timetable for investment. An extra £50 million for work to tackle empty homes will be allocated in two £25 million chunks in 2013/14 and 2014/15, while the £400 million Get Britiain building fund will be split into a £310 million allocation in 2012/13, followed by £185 million in 2014/15. The document suggests the extra spending will be recouped in subsequent years, beginning with £50 million in 2014/15.
Extra spending on housing benefit
Source: Office for Budget Responsibility