You are viewing 1 of your 1 free articles
Feeling the pinch
Mark Simmonds is not getting much sympathy after claiming that MPs’ expenses make it ‘intolerable’ to live in London but has he also revealed a deeper truth about our housing system?
The MP for Boston and Skegness resigned as a minister on Monday and will leave parliament at the next election after claiming that he can’t find anywhere to rent in the capital on his £35,000 a year housing allowance.
Simmonds and his family do not exactly sound like they are one of the ‘housing pinched’. These are the 1.6 million households identified in a report by the Resolution Foundation as spending more than 50 per cent of their net household income (after tax and benefits) on their rent or mortgage.
Three things leapt out at me from the report. First, these are the seriously squeezed households, there are 3.9 million who spend more than a third of their disposable income on housing. Second, the numbers would be even higher if interest rates were not at a record low and will be for many people with mortgages once they rise. Third, 990,000 of the ‘housing pinched’ are working households.
The significance of this third point is underlined by figures out this week showing rising employment, falling unemployment but falling average earnings. And, as I blogged on Thursday, this is what lies behind the 63 per cent increase in the number of working households who need housing benefit under the coalition. Iain Duncan Smith claimed this week that his policies are getting people back into work and ending a welfare dependency culture. The truth is rather different.
As the Resoultion Foundation points out:
‘For those “housing pinched” households remaining out of work, entering employment will be the best route to easing housing cost pressures. By contrast, “housing pinched” households who are in work likely represent a more structural challenge.’
So what has any of this got to do with Mark Simmonds? After all, far from feeling the pinch, he earns £89,435 as a minister and pays his wife up to another £25,000 to be his office manager. He already owns a £1.2 million home in his constituency and gets another £35,375 a year housing allowance (£27,875 plus £2,500 for each of his three children) to rent somewhere in London.
As Dawn Foster pointed out earlier this week, there are plenty of homes that he could afford to rent for that (though Brixton and West Norwood will seem like the wrong side of the tracks for a Tory MP) – and that’s without having to dip into any of his salary.
Simmonds himself argues that:
‘If MPs want to get into the business of travelling extensively from Westminster to the outer reaches of London to rent a flat then that’s up to them. But it’s not the lifestyle I want and not the lifestyle I have chosen.’
It seems more than a bit rich for a politician who enthusiastically supports the idea that nobody should get more in benefits than average earnings to complain about getting far more than that in what is effectively housing benefit for MPs.
The bigger point for me though is the system itself. At the height of the expenses scandal, there was outrage that MPs could claim the interest on the mortgage of their second home but then take all of the profit when they sold.
Some of them (including, to his credit, deputy prime minister Nick Clegg) repaid the money. Most (like chancellor George Osborne) seem to have banked it. Simmonds reportedly made more than £500,000 on a house in Putney that he bought for £650,000 in 2001 and then sold for £1.2 million in 2009 with the taxpayer picking up the bill for £2,000 a month in mortgage interest.
The new system introduced in the wake of the expenses scandal will only pay for MPs to rent a second home. It seems a cleaner, more puritanical system but is it really the best one? In the case of Mark Simmonds, it seems to cost half as much again to pay the rent or hotel bill for somewhere he doesn’t want to live as it did to pay his mortgage interest on somewhere he did.
These two inadequate ways of running MPs housing allowances are more than a little reminiscent of the mistakes that have been made in housing policy in general. Where once we gave people mortgage tax relief on a non-existent tax, now we pay billions of pounds in housing benefit to subsidise the property empires of private landlords. And all the while house prices and rents keep escalating: how many London MPs could afford to buy a family home in their constituency on their parliamentary salary plus their £3,760 per year London Area Living Payment?
Why not change the MPs’ expenses system again? The state could pay the mortgage interest rather than the rent on a second home but with the crucial difference that it would also gain a share of the profits when the property is sold. Why not just give them equity loans? If they’re good enough for everyone else under Help to Buy (and do not count as public spending) why not for MPs? It seems crazy to pay more in rent with all the profits going to private landlords. Or why not build them apartments close to parliament in the same way that we build them offices?
Which brings me back to the housing pinched. According to the Resolution Foundation, 830,000 of the working households spending more than 50 per cent of their disposable income on housing have incomes below the national medium. It estimates that they were left with an average income of just £60 a week after paying for their accommodation.
But the housing pinched are just part of a much bigger group of people who are housing squeezed. Housing benefit prevents the problems from getting even worse but only at a current cost of £5.1 billion a year for working households. Perhaps it might just be better to build some more affordable homes? Not to mention homes of all kinds.
Our current system works for landlords and anyone lucky enough to have got on the housing ladder a while ago. From MPs to the working poor, it’s failing just about everyone else.
