Having made fundamental
reform of the benefits system a flagship of the coalition's
legislative programme and put deep cuts in benefit spending at the
heart of plans for deficit reduction it may at first sight seem
surprising that the Prime Minister is now talking about further and
more radical reform in the next Parliament.
It isn't really. But, before accepting any argument that further
cuts in housing benefit entitlement is the way to go it is worth
taking a look at how housing benefit spending got to its present
level and alternative options for reducing it.
As David Cameron pointed out, despite everything the government
has done so far, benefits still make up nearly a third of public
spending. No strategy to reduce the deficit can ignore them. Partly
they are so high, of course, because Britain remains in the grip of
recession; the economic projections which underpinned the
coalition's original deficit reduction strategy have turned out to
be hopelessly optimistic.
Tax revenue is lower and out-of-work benefits higher than
expected. If short term deficit reduction remains the government's
objective, more cuts are needed. Benefit spending appeals to many
as a more attractive place to look for them than education or the
Housing costs have always been a bit of an anomaly in the benefits
system, partly because they are too variable to be subsumed under a
general benefit payment but too important to be ignored, and partly
because government has always had two options in relation to help
with rent - pay benefit or intervene directly to influence
For much of the 20th century, private sector rents were limited by
legislation, and council rents were much lower in real terms than
they are today. In the 1970s, for example, the government spent
four times as much subsidising an annual house-building programme
of 100,000 council homes as it did on housing benefits.
The dramatic rise in housing benefit spending over the last thirty
years has been a deliberate creation of government policies aimed
to revive the private rented sector and shift the focus of public
housing subsidy from bricks and mortar to means-tested
Current public spending plans provide £4.5 billion for affordable
housing, but £95 billion for housing benefit. Cuts in housing
benefit spending do not have to be delivered by reducing
entitlement; the alternative remains of looking to influence the
housing costs that households on low incomes face.
Even if reintroduction of rent controls in the private rented
sector is judged unattractive or unworkable, the provision of
additional social housing at sub-market rents - social or
affordable - would help reduce the overall benefits bill to the
extent that it provided opportunities for low-income households who
would otherwise rent privately. These potential savings should be
factored into the calculation of the public sector costs of a new
social housebuilding programme.
In a report published
last week the Institute for Public Policy Research made the
interesting suggestion of devolving the whole system of housing
support to local government, making them responsible for
administering an affordable housing grant which could be allocated
as locally judged best between bricks and mortar and benefits, and
between the social and private sectors. It is an idea worth
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