Blog Post

A long term increase in the benefit bill…

<strong>by Tony Clements</strong>
by Tony Clements

Former policy advisor to Rt Hon John Healey MP during his tenure as Minister of State for Housing and Planning. Executive Director of Place for Ealing Council.

So what would Labour do instead? It’s the standard question to us at the moment and indeed of any opposition.

It’s a difficult one to answer for a lot of reasons. One of those reasons is that whatever you do, you have to graft it on to what the other lot have done during their time in power.

One of the things Labour is likely to face coming into office again in the future is a considerably higher housing benefit bill. Yes, really – despite the caps and restrictions that will do real damage to mixed communities, the CSR paved the way for a rising bill in the long-term. Here’s why:

George Osborne announced two weeks ago that capital funding for ‘social’ or affordable housing would be cut. He says by 50%, in truth it’s more like 75%, but that’s a different issue. So how will the Tories justify their claims that they will build more affordable homes? By increasing ‘social’ rents to 80% of market rents and then allowing housing associations to borrow against these new higher revenue streams to build more homes. OK, well that could stack up. But how will people on the waiting lists be able to afford near market rents? They are often often workers on very low incomes, carers, disabled, workless etc? Well Nick Clegg has the answer here:

“People on low pay on those new rents will be compensated in full through housing benefit.”

So, in a nutshell, it’s a shift in the cost of subsidising housing from up-front capital to build homes to putting more people on higher levels of benefit, so they can afford near-market rents.

They’ve moved the bill from the Department of Communities and Local Government to the Department of Work and Pensions – nifty footwork from Eric Pickles.

That’s great for cutting big capital budgets now in order for the Chancellor to say he’s wiped out the deficit before the next election: it’s rubbish for the taxpayer in the future who has to shoulder the long-term costs. 

It’s like a great big housing PFI: avoid the capital investment up-front, pay more in the long-term.

p.s. I think there’s good reason to think that the benefits system won’t cover these costs ‘in full’ as Nick Clegg says, but that’s for another post.