A better future

April heralds a number of changes across housing benefits, so it seems timely to reflect on those changes that have already come into effect, and the changes that come in this month.

Before our reforms, housing benefit expenditure doubled to more than £20 billion a year over the past decade. That’s a cost to each British household of almost £900 a year. Clearly, the system needed to change.

So let’s look at the changes that have already been put in place to address that. Two years ago new rules were introduced which set local housing allowance rates at the 30th percentile of local market rates and subject to a cap.

Results so far
We are already seeing the results from this. Since 2010 there has been a 75 per cent drop in the number of claimants receiving the equivalent of £30,000 a year in housing benefit.

These reforms are making a difference to our housing benefit bill and ending the unfairness that resulted in people who receive benefits living in large houses that working families simply can’t afford. Importantly they stop a high housing claim being a barrier for people to move from benefits and into work.

Even after the reforms, housing benefit is still able to meet rents of up to £20,000 a year and initial scare stories that this change would lead to homelessness have proved unfounded. We have worked closely with local authorities - indeed we still are and will continue to do so - to make sure claimants are supported through these changes to the rules, with extra support targeted to vulnerable and disabled people.

Those changes were for housing benefit claimants in the private rented sector. The beginning of this month brought in changes in the rules for benefit claimants renting in the social sector. With almost 2 million households on the waiting list for social housing and more than a quarter-of-a-million households living in overcrowded accommodation in England alone, we clearly need to make a better and fairer use of the housing stock in this sector.

The bedroom tax
Spending housing benefit on spare rooms is not making good use of the housing stock and that’s why on 1 April the rules changed so housing benefit would no longer subsidise spare bedrooms. Tenants with spare bedrooms can either make up the shortfall in their rent - on average £14 a week - or move to more appropriate-sized accommodation.

Again, as with all our reforms, we’ve been working with local authorities and social landlords to ensure that tenants are supported through these changes. Various exemptions and extra support are in place to support vulnerable and disabled people. For example, the under-occupation penalty doesn’t affect pensioners and local authorities can authorise the continued subsidy of a room where a disabled child is unable to share.

The other main changes coming in over April related to housing benefit are the up-rating of benefits by 1 per cent on 8 April for the next three years. For 2013/14 local housing allowance will continue to be up-rated by the rate of inflation to minimise disruption to landlords and tenants and then by 1 per cent for the following two years. This will maintain a downward pressure on rents and reduce growth in housing benefit expenditure.

We’ve had to make this tough decision to ensure the welfare bill is financially sustainable in the future, but have continued to protect the vulnerable by increasing benefits for disabled people in line with inflation.

The benefit cap comes in on 15 April, initially rolled out in four London areas and then nationally in the summer. This limits the amount a family can receive in benefits to the average working wage - £500 a week for couples with children, and £350 a week for households of a single adult with no children. Again, to recognise the extra needs disabled people have, households with someone in receipt of a disability benefit are exempt. Those in receipt of working tax credits will also be exempt, to increase the incentive for people to work as work is the best route out of poverty.

Looking ahead
We are facing tough financial choices now, but it is important we do not lose the opportunity to reform the welfare state to put a system in place that will be with us for the coming decades and that will actively help people to improve their lives.

You’ll notice a few common themes underpinning all our welfare reforms - and this is embodied in universal credit which rolls out in the pathfinder areas in April ahead of its national roll-out in October.

That is our commitment to restore fairness back into the system, put it on a sustainable financial footing and to encourage people into work while making sure vulnerable and disabled people get the help they need.

That, after all, is the original purpose of our welfare state - to enable those who can get into work while ensuring those who need support get it when they need it.

Lord Freud is minister for welfare reform