How the coalition is turning the screw on housing benefit claimants

The latest round of welfare cuts will accelerate the rise in homelessness and leave low-income families struggling to find rented accomodation.

Child benefit, tax credits and disability allowance have all been at the heart of the political debate on welfare cuts. Housing benefit hasn’t. Yet people are already feeling the pain of the government’s changes and cuts. The Welfare Benefits Uprating Bill presents the opportunity for another turn of the screw on housing benefit, especially on the people who rent from private landlords.

Local housing allowance (LHA) is the housing benefit for those in private rented accommodation whose low incomes mean they rely on help with housing costs. It is an in-work and an out-of-work benefit paid to over 1.3m people. These are not the Chancellor’s "skivers" lying in all morning behind closed curtains. These are people in low-paid jobs, pensioners, disabled people, single parents, couples with kids and young people estranged from their parents. Almost one in five on housing benefit work, and only around one in eight are on Jobseeker's Allowance.

Housing benefit has always had a link to actual rents due to the huge differences in rates around the country. The government broke this link when it decided to uprate LHA only in line with CPI inflation. Under this new bill, the LHA in each area will only rise by either 1 per cent or the change in the level of the lowest third of rents, whichever is lower. But rents have historically risen faster than inflation, and certainly by more than 1 per cent, so many parts of London and many parts of other UK towns and cities will become no-go, no-live areas for those on the local housing allowance. People will be forced into debt, then out of their homes and out of their local areas.

Crisis, the homelessness charity, found in a recent report that fewer than 1 in 50 properties are now accessible to LHA recipients under 35-years-old because rents are already higher than housing benefit rates and landlords are unwilling to let to those who need it. Shelter have calculated that linking the LHA to CPI inflation will mean one third of the country will become unaffordable for low income families within a decade, and the 1 per cent cap will speed up this social exclusion. It will also accelerate the recent rise in homelessness. Rough sleeping was up 23 per cent last year, the number of people going to their council as homeless is up 22 per cent in the last two years and the end of a private tenancy is now the most common cause for those officially classed as homeless.

The real terms-cut imposed by the 1 per cent cap on local housing allowance from 2014 is just the latest in a long list. In April 2011, the government brought in caps on LHA for each property size, scrapped the rate for a five bedroom house and cut all increases from the median rise in local rents to the lower third. Last year, it froze all LHA rates and raised the age below which LHA support is only available for the costs of shared accommodation from 25 to 35. And this year it is bringing in the "bedroom tax" and capping any rise in LHA at CPI, or 2.2 per cent.

It is hurting but it’s not working. The housing benefit bill is up by £2bn since the general election and the total number of people relying on LHA has risen by 35 per cent. Debate in the Commons yesterday was guillotined by the government, so there was no debate or vote on exempting housing benefit from the 1 per cent cap or on a modest amendment I tabled to require the government to publish an annual report on the relationship between rates of LHA and actual rents, and if these become significantly out of step to reconsider the 1 per cent cap policy.

This is only what the welfare minister, Lord Freud, promised during the debate on CPI-linked uprating in the Welfare Reform Bill in December 2011. He said, “if it then becomes apparent that local allowance rates and rents are out of step, they can be reconsidered" and when pressed by Labour’s Lady Hollis he conceded, "on the basis that the noble Baroness is going to be incredibly helpful to me in all the consequent amendments in the Bill, I will change the word 'can' to 'will'".

It will be for Labour lords to pick up the case again next month. If parliament can’t stop the screw being turned ever-tighter on housing benefit claimants, the least it can do is ensure ministers face the facts about who is hurting most and how badly.

John Healey is the Labour MP for Wentworth and Dearne and the former housing minister

Rough sleeping rose by 23 per cent in 2012. Photograph: Getty Images.

John Healey is the Labour MP for Wentworth and Dearne and was formerly housing minister, local government minister and financial secretary to the Treasury

Photo: Getty
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Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.