Cameron considers a further £25bn in welfare cuts

Such a move would be unfair and unsustainable.

David Cameron barely makes a speech without referring to hardworking people who “do the right thing” and don’t claim benefits. This language implies that claimants are, by default, doing the wrong thing – a convenient position given unprecedented cuts to the welfare budget.

While the government has already indicated an £18bn reduction in welfare spending by 2014, it is being reported that the Prime Minister is looking at plans that would see a further £25bn in cuts.

The proposals have been drawn up in a policy paper for David Cameron and are understood to have come from Steve Hilton, No 10’s outgoing policy chief. Hilton, who has just departed Downing Street to take up an academic post at an American university, has suggested that a further £25bn can be cut. The Work and Pensions Secretary Iain Duncan Smith – who told the Times last month that the government had a duty “to support people in difficulty” – reportedly thinks that this level of extra savings is unfeasible.

Where exactly would these extra savings come from? The suggestions on the table are even further cuts to housing benefit and a tougher system for the universal credit to push people into full-time rather than part-time work.

Let’s take these one by one. The housing benefit cap is already having a devastating effect, in what Boris Johnson termed “social cleansing”. The BBC reported last month that Newham council was trying to evict 500 families to Stoke – 135 miles north – as it could no longer afford to house them in private accommodation. As rents rise unfettered but wages are frozen across the board, 93 per cent of new housing benefit claimants are in employment - doing Cameron’s feted “right thing”. There is no denying that housing benefit has ballooned and rents are too high, and that this is in part due to successive governments choosing to subsidise private landlords rather than build more social housing. But slashing housing benefit without attempting to provide alternatives unfairly penalises tenants. The Chartered Institute of Housing has estimated that 800,000 homes will already be put out of the reach of poor families, and that many may be forced to move to areas where there is less employment (ie. out of big cities), thus compounding the problem. The housing issue is already one of the most radical and inhumane of the governments’ policies; it is difficult to see how further cuts could be sustained or justified.

Secondly, it is all very well to encourage people into full time work, but only if there are full time jobs for people to do. A system which helps people to end benefit dependency is a good thing – but it is disingenuous to pretend that unemployment is a choice. There are 5.7 people for every job vacancy in the UK. You do not need to be a mathematician to understand that you cannot squeeze five people into one job. Most people are unemployed or working part-time because that is their only option.

The fact remains that cuts to welfare are popular with the public. The British Social Attitudes survey in December showed that half of Britons believe that unemployment benefits are too high and discourage people from finding work. The benefit cap – for all its cruelty in practice – was broadly supported. With Liberal Democrats saying there is no way they would support these £25bn extra cuts, and Duncan Smith saying that this level of saving is “absolute nonsense”, let’s hope that Cameron “does the right thing” and throws these plans out.
 

Does David Cameron any idea of how many young people in the UK are looking for employment? Miss Dynamite (5th L) does. October 10, 2011

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.