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Beyond belief

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So is it time to celebrate the rise in housing benefit claims by people in work as a reflection of the government’s success in getting people off benefits?

That was the claim made by Iain Duncan Smith at work and pensions questions yesterday as he answered Labour jibes about the soaring numbers of working households now dependent on state help with their rent.

The work and pensions secretary told Labour’s Emma Lewell-Buck:

‘The figure the hon. Lady did not give is that out-of-work housing benefit claims are falling, and that is because people who were claiming it are now going into work. That means that they are earning more money, which means that the likelihood of their being in poverty is far less. I wonder whether the hon. Lady would like to get up sometime and congratulate us on getting more people back to work and spending less on housing benefit as a result.’

And when his Labour shadow Rachel Reeves challenged him about the rise of in-work poverty he told her she should have been listening to that answer:

‘The reality is that the number of people who are out of work and on housing benefit is falling. The number of those who are in work is rising. Under the last Government, we saw a rise in the number of people who were out of work and having to claim housing benefit.’

IDS has previous when it comes to claims that sound vaguely plausible at first only to evaporate under greater scrutiny. How about the way the benefit cap had made people return to work or the way that falling private sector rents showed that the local housing allowance had distorted the market?

And he had plenty more to worry about yesterday, not least the universal credit and when the Treasury will ever sign off on the business case for it. However, this latest claim fits with the narrative of a major speech he made last month in which he argued that a dysfunctional welfare system and social breakdown have been replaced by welfare reform and the dignity of work. As Alex Marsh blogged at the time, the miraculous power of welfare reform seemed to leave no room for under-employed, low pay Britain.

So what do the DWP’s own statistics have to say? As I blogged last month, the first four years of the coalition saw a 63 per cent rise in housing benefit claims by people in employment, from 651,000 in May 2010 to 1.1 million in May 2014. The housing benefit bill for people in employment has risen from £2.9 billion (14 per cent of the total) to £5.1 billion (21 per cent).

The case made by IDS is that this should be seen as good news. As unemployment falls and the number of people in work reaches new records, the system is helping people to move off benefits and into employment by helping them with their housing costs.

However, has there really been a fall in housing benefit claims by people who are not working? The stats show that the number of passported claims by people on the main three out-of-work benefits (income support and income-based job seekers allowance and employment support allowance) has remained steady over the last four years at around 2.2 million.

Far from supporting IDS’s claim that ‘out-of-work housing benefit claims are falling’, they actually show a slight increase of 13,000 since May 2010. The only significant fall (148,000) over the last four years has been in the number of claims from people on pension credit (guaranteed credit).

The overall number of housing benefit claims has fallen slightly in the last year to just under five million but is still higher than the 4.8 million recorded when the coalition took power. Far from spending less on housing benefit, the total bill is still rising, just not by as much as previous forecasts.

However, those are only the headline numbers and the statistics have significant limitations when it comes to determining who is in employment and who is not. The DWP is well aware of these, as this written answer from Steve Webb in June demonstrates.

The figure for in-work housing benefit claims is only for non-passported claims (people who are not on a means-tested benefit) and the numbers refer to benefit units rather than people. An unknown number of couples may both be working so the total number of people in employment is almost certainly higher than the current 1.1 million.

Meanwhile, an unknown number of people with passported claims may also be working or have a partner who is working. The rules for all three of the main out-of-work benefits allow claimants to do some work. For example, to be eligible for JSA you must be available for work, actively seeking work and working on average less than 16 hours a week. And ESA has rules on ‘permitted work’ of up to a certain number of hours or amount per week.

The numbers involved are ‘small’ and ‘insignificant’, according to the DWP, but the point is that it is impossible to say definitively from these statistics how many people on housing benefit are working and how many are not. See this fact check by Full Fact from 2012 for more detail.

It follows that it’s not possible to say categorically that IDS is wrong. He is right, for example, that ‘under Labour, in-work and out-of-work housing benefit claimant numbers increased’. Equally well, he has no definitive basis for his claim either.

However, if the surge in claims by people in employment since 2010 has come from people who were not working before why has the number of housing benefit claims from people on out-of-work benefits remained so stable over the last four years?

When you look at the combination of stagnant and falling earnings and rising rents, it seems far more likely that the stats reflect the growth of ‘poor work’ and pressure on claimants to take anything that is on offer. The lines between unemployment, employment schemes, under-employment and employment are blurring all the time. And housing benefit is taking the strain over the longer term of the rise of the private rented sector and slow decline of social renting.

Don’t take my word for it. Here’s what the independent Office for Budget Responsibility had to say at the time of the Budget in March:

‘The rising proportion of the renting population claiming housing benefit may be related to the weakness of average wage growth relative to rent inflation. This explanation is supported by DWP data, which suggest that almost all the recent rise in the private-rented sector housing benefit caseload has been accounted for by people in employment.’

This latest IDS welfare miracle looks like yet another mirage but that almost certainly won’t stop the man himself believing in it. 

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