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Housing benefit – more cuts Matthew Warburton - 10/01/2013

piggy_bank_300The Welfare Up-rating Bill passed its Second Reading in the House of Commons on 8 January by 328 votes to 262, and will begin its Commons Committee Stage on 21 January.


The Bill puts into effect the Government's intention, announced in the Autumn Statement, to increase most working-age benefits, including Housing Benefit, by just 1 per cent in 2014/5 and 2015/16. A 1 per cent increase for 2013/14 has already been imposed by the Autumn Statement itself.

What this means is that the "applicable amounts"- the personal allowances and premiums - used in the calculation of housing benefit will be increased by 1 per cent in April rather than the 2.2 per cent increase in the Consumer Price Index that would otherwise have applied.

Not a huge change in the first year, but the cumulative impact over 3 years imposes a significant cut in the real value of benefits, which just happens to coincide with the introduction of Universal Credit and a switch to payment of help with rent direct to the tenant.

Because other working-age benefits are also being limited to a 1 per cent annual increase for the next three years, tenants receiving Universal Credit will have even less to meet living expenses after their housing costs have been met.

Evidence from the Housing Benefit Direct pilots, about which I blogged before Christmas, suggests that direct payments will push up arrears substantially - on average more than doubling them to 8 per cent. The impact could be much greater once these benefit restrictions start to kick in.

For tenants hit by the bedroom tax or the overall benefit cap the cumulative impact will be still more dire. And private tenants will be hit both by restrictions on the applicable amounts and on the maximum rents used in the calculation of Local Housing Allowances.

At present, LHA is subject to local maxima calculated by reference to the bottom 30 per cent of rents on new private sector lettings in the area. This approach will continue for 2013/14, but in the subsequent two years, any increase in rents will be capped at 1 per cent. This can only increase the challenge faced by councils seeking to secure accommodation for homeless families on low incomes in the private sector.

Whatever one thinks of the government's argument that it is fair to restrict the benefits payable to the very poorest in society because many people's wages have increased by less than inflation, it is clear that they either have not considered or do not care much about the impact of their proposals on councils' ability successfully to carry out their housing functions.

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