Housing Benefit and the Living Standards Crisis
The government claims that the Bedroom Tax and other cuts in Housing Benefit are needed to cope with a system that is “out of control”. In fact, spending on HB didn’t start to go up faster than rents until the recession began – and it’s the stagnant incomes of low paid workers that have been the biggest cause.
The government’s line is that these tough measures had to be brought in to re-establish control. There’s also the constant suggestion that only unemployed people will lose out because they’re the ones who have driven up the HB bill. The Prime Minister reflected this view earlier this year when Alison Seabeck, the MP for Plymouth Moor View tackled him about one of her constituents, who was hit by the Bedroom Tax:
I will happily look at the case that the hon. Lady mentions, but our reforms to housing benefit have a clear principle at their heart. There are many people in private rented accommodation who do not have housing benefit and cannot afford extra bedrooms. We have to get control of housing benefit. We are now spending, as a country, £23 billion on housing benefit, and we have to get that budget under control.
And it’s certainly true that, if you look at the government’s benefit cuts, a lot of them target Housing Benefit: the Bedroom Tax is only the best known. The Benefit Cap, which mainly hits the Housing Benefit of larger families, is the most mean-minded: three quarters of those who lose out are children. And there have been a series of small but painful changes: ending the freeze on non-dependent deductions, various caps on the maximum rate of HB, extending the “shared room” requirement from under-25s to under-35s and moving to uprating the benefit in line with the Consumer Price Index even if rents are actually going up faster.
And it’s certainly true that the Housing Benefit bill has shot up: between 2000/01 and 2011/12, spending on the benefit rose from £11.2 to £22.8 billion. But this isn’t because there’s been a constant rise in the number of people relying on Housing Benefit. If we look at the numbers on HB, this was very steady until the recession hit:
Until the recession, the best match for rising spending on Housing Benefit was the increase in rents (*). In the chart below, private rents, local authority rents and HB expenditure are all indexed to 2000/01, and it’s clear that, again, total spending and the level of rents were in step with each other until the recession:
The government loves to blame this sort of thing on unemployed people, but that doesn’t really wash. The other big change has been in the proportion of Housing Benefit claimants who claim because their wages aren’t enough to pay the rent:
The government has this story wrong: spending on HB was bound to go up because rents have gone up. The caseload went up when the country went in to recession: a sign of the system working as it is supposed to. But one thing that definitely should worry us is the fact that, five years after the crash, wages are still so low that a quarter of the people on HB are in work.
(*) Rents are figures, local authority rents are for UK (table 701), private rents are for England (table 704).