From Inside Housing

Jules Birch writes on the recently announced ‘benefit cap’

26/03/2014

The debate about the welfare cap seems to be all about the politics. It should be about the contradictions at the heart of the policy too.

The coalition parties and the opposition are all supporting the measure that will place a legal restriction on most welfare spending from 2015/16 so, despite an expected Labour rebellion, it seems more or less certain to go through.

The cap started off as a political trap set by the Conservatives and Labour support reflects a determination not to fall into it.

Judging from his appearance on the Today programme this morning, Iain Duncan Smith seems determined to act as though Labour doesn’t really mean its support. But the example he chose says much about his priorities and the way the cap will operate.

IDS cited Labour’s pledge to repeal what he calls the removal of the spare room subsidy. Only JSA-passported housing benefit will be outside the cap, so his point was that ending the bedroom tax will automatically increase spending within the cap and Labour should have to say what it will cut instead.

The contradictions of such an arbitrary measure begin with the way that pressures on spending caused by an ageing population or unemployment are not capped, while those triggered by housing tenure and disability are not.

Despite government rhetoric about worklessness and ‘out of control’ welfare spending, the cap targets benefits and tax credits for people who are in work or who cannot work.

The basic state pension is not capped but pension credits are. As Chris Goulden of the Joseph Rowntree Foundation points out, that means that the cap will protect the wealthiest claimants not those in the greatest need.

And Evan Davis identified another contradiction on the Today programme this morning: what happens if the cap stops the government from fulfilling its equally legally binding commitment to end child poverty by 2020. IDS fell back on his faith-based formula of ‘I believe we will’ (while trying to move the goalposts on the definition of child poverty in the meantime).

But there are plenty of other contradictions if you focus more closely on housing:

Apart from the misery and debt it’s causing (see today’s latest Real Life Reform report on that), one of the main arguments against the bedroom tax is that it will simply transfer costs from housing benefit elsewhere. The cap actually gives future governments an even greater incentive to do the same thing and ‘save money’ by transferring costs to local authorities, social landlords and the voluntary sector.

When it comes to repealing the bedroom tax, most housing benefit is capped but (as I read it) discretionary housing payments are not. The temptation for Labour could therefore be to rely on the DHP route to fulfilling its pledge despite all the problems inherent in a system that relies on local discretion.

We know that the long-term shift in housing tenure will mean a rising housing benefit bill for private tenant pensioners. While the basic state pension is uncapped, their housing benefit is within the cap.

The cap covers the UK, yet housing policy decisions taken by individual nations will have an impact on it. For example, as the English government forces landlords to build for more expensive affordable rents, and sell off and convert their social rent homes, that will put up rents and the housing benefit bill. That means English decisions on housing could potentially trigger cuts in welfare for Scotland and Wales.

The overall cap level is made up of forecasts of the costs of individual benefits. However, as I blogged last week, when you look at how the Office for Budget Responsibility’s estimates of the cost of housing benefit keep changing with every Budget and Autumn Statement, this does not fill you with confidence.

Exactly how the cap will operate remains to be seen. We know the basics: governments will have to set cap targets five years ahead and come back to parliament for approval if capped spending exceeds them by more than 2 per cent.

However, it could be that a future government will introduce measures such as the living wage or (we hope) greater investment in social housing that will reduce the pressure on benefits spending and make the cap less onerous than it appears.
Equally, as Kate Webb noted last week, coming elections could see parties pledging to reduce the cap without having to spell out any detail of how.

Today’s vote may seem to be all about a cap that offers a clear and easy to understand way to control public spending. But it could turn out to be anything but and the implications could be felt for years to come.

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