Monday, January 23, 2012

A benefit cap: victimising people at taxpayers' expense?

I freely admit that I haven't given an awful lot of attention to the Welfare Reform debate. Odd really, because Ros cast her first ever vote as a rebel against the proposal to punish those in receipt of housing benefit who have a spare bedroom. But nonetheless, it isn't an area of policy that I'm terribly knowledgeable about.

But I do like to think that a proposal should add up. And the benefit cap doesn't seem to do so. As I understand it, the proposal will lead to a direct saving of £270 million from the social welfare budget. So far, so good. But are there consequential effects?

Some of the people impacted, indeed, a lot of them, will be living in private rented accommodation. If housing benefit is reduced, they will probably lose their home unless rents drop in their area across the piece. That seems, to put it politely, somewhat unlikely, given that landlords will not want to reduce their income, and that overheads are likely to increase as interest rates revert to more sustainable long-term levels. If they lose their homes, they aren't intentionally homeless, and their local authority is obliged to house them, which comes with a cost to the local authority. If they have available housing, that cost can be held down but, if temporary rented accommodation is required, that can be quite expensive.

If the senior official in the Department for Communities and Local Government who wrote that the resultant costs would exceed the benefits of the cap is correct, the Government will have achieved something superficially popular and fiscally inept simultaneously. Quite some achievement, might I suggest?

Tim Leunig offers what seems like an entirely sensible alternative, suggesting that you could make equivalent savings by increasing the housing stock by 1.3%. You would create jobs, impose some downward pressure on housing costs across the board, and create an asset which will generate a return, all of which are obviously good.

I'm uncomfortable about the idea of punishing people on the basis of an arbitrarily chosen number. Yes, it is right that we should give people an incentive to seek work, but it can't just be about sticks - carrots need to play a part too. And whilst Liberal Democrats approach it by taking people out of income tax at the bottom end of the income scale, Conservatives appear to prefer making them so impoverished that any job, no matter how poorly paid, and no matter whether or not it allows them to live with dignity.

And so, in the unlikely event that Iain Duncan Smith happens to see these words, I'd be grateful if he put fiscal responsibility ahead of a rather perverse insistence on self-reliance...


Caron said...

I have to say that I understand your arguments entirely.

However, I am a bit mystified by the inconsistency of those of our peers who are prepared to rebel on this issue, yet voted through the cuts in benefits to sick and disabled people.

I'm just wondering why they picked this battle to fight over the other one.

Just because I'd have made a different choice doesn't mean I'm right and they're wrong, but I would really like to find out what was behind Paddy's and others' thinking.

Mark Valladares said...


I suppose, and I emphasise suppose, that the consequential impact on child poverty is pretty obvious to Paddy and others, whereas with last week's vote, some of the arguments were as extreme in one direction as Iain Duncan-Smith's have been in the other. The truth is somewhere between the two.

But, as I see it, the strategy of the Liberal Democrat benches has been to extract as many concessions as possible by using the threat of rebellions but without passing amendments. Concessions can be banked, whereas defeats can, and almost certainly will, be overturned in the Commons.