How Osborne disguised the truth about the rising housing benefit bill

Excessive rents and substandard wages are to blame for soaring housing benefit payments, not workshy 'scroungers'.

Rarely has there been a better example of a politician attacking the symptom, rather than the cause, than in the case of George Osborne and housing benefit. Addressing Morrisons workers earlier today, Osborne sought to terrify his audience with tales of families receiving "£100,000 a year" (just five did). It was such cases, he said, that prompted the government to cap housing benefit payments at £400 a week.

We can’t have a system that penalises you for going out to work and wanting to get on. So we’ve put a stop to those staggering payments and put a cap on housing benefit.

We’ve made sure that you can’t get more than £400 of Housing Benefit a week in this country. That’s still a pretty generous amount.

And yet when we did the pressure groups and welfare lobby attacked it as not enough.

They still say that people should get more than £400 a week housing benefit.

They don’t seem to realise that the money to pay these benefits comes from people who work hard, who pay their taxes, and many of whom can’t afford £400 a week in rent.

On one point the Chancellor is right: the housing benefit bill is too high. But what he chose not to tell his audience is that benefit payments have only soared because rents have. The bloated housing benefit bill (which will reach £23.8bn this year, more than a tenth of the welfare budget) is the result of a conscious choice by successive governments to subsidise private landlords, rather than invest in affordable social housing.

The cost of privately renting a home has increased by 37 per cent in the past five years and is set to rise by a further 35 per cent over the next six years. As a result, the number of working people forced to rely on welfare to pay their rent has increased by 417,830 (86 per cent) in the last three years, a figure that is rising at a rate of nearly 10,000 a month. Ninety three per cent of new claims are made by households containing at least one employed adult. By 2015, a total of 1.2 million working people people will only be able to stay in their homes through state subsidy. It is excessive rents and substandard wages that are to blame for the inflated housing benefit budget, not workshy 'scroungers'. Even with the government's cuts, the bill is forecast to rise from £23.8bn this year to £25.9bn in 2017-18. 

But had Osborne chosen to tell his audience this, rather than launching another lazy assault on the welfare system, he might have been forced to explain why the government isn't building more homes. With 390,000 new families formed in 2012 but only 111,250 new homes built, rents have continued to soar as demand has outstripped supply. And as the OBR, among others, has noted, Osborne's new "Help To Buy" scheme is only likely to further drive up prices. But the government's response to the housing crisis too often remains to change the subject. In this case, by displacing public anger onto those who least deserve it: the poor and the vulnerable. 

Members of the public in north London walk past a poster informing of changes to the benefits and tax system that have come into force. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Geoffrey Howe dies, aged 88

Howe was Margaret Thatcher's longest serving Cabinet minister – and the man credited with precipitating her downfall.

The former Conservative chancellor Lord Howe, a key figure in the Thatcher government, has died of a suspected heart attack, his family has said. He was 88.

Geoffrey Howe was the longest-serving member of Margaret Thatcher's Cabinet, playing a key role in both her government and her downfall. Born in Port Talbot in 1926, he began his career as a lawyer, and was first elected to parliament in 1964, but lost his seat just 18 months later.

Returning as MP for Reigate in the Conservative election victory of 1970, he served in the government of Edward Heath, first as Solicitor General for England & Wales, then as a Minister of State for Trade. When Margaret Thatcher became opposition leader in 1975, she named Howe as her shadow chancellor.

He retained this brief when the party returned to government in 1979. In the controversial budget of 1981, he outlined a radical monetarist programme, abandoning then-mainstream economic thinking by attempting to rapidly tackle the deficit at a time of recession and unemployment. Following the 1983 election, he was appointed as foreign secretary, in which post he negotiated the return of Hong Kong to China.

In 1989, Thatcher demoted Howe to the position of leader of the house and deputy prime minister. And on 1 November 1990, following disagreements over Britain's relationship with Europe, he resigned from the Cabinet altogether. 

Twelve days later, in a powerful speech explaining his resignation, he attacked the prime minister's attitude to Brussels, and called on his former colleagues to "consider their own response to the tragic conflict of loyalties with which I have myself wrestled for perhaps too long".

Labour Chancellor Denis Healey once described an attack from Howe as "like being savaged by a dead sheep" - but his resignation speech is widely credited for triggering the process that led to Thatcher's downfall. Nine days later, her premiership was over.

Howe retired from the Commons in 1992, and was made a life peer as Baron Howe of Aberavon. He later said that his resignation speech "was not intended as a challenge, it was intended as a way of summarising the importance of Europe". 

Nonetheless, he added: "I am sure that, without [Thatcher's] resignation, we would not have won the 1992 election... If there had been a Labour government from 1992 onwards, New Labour would never have been born."

Jonn Elledge is the editor of the New Statesman's sister site CityMetric. He is on Twitter, far too much, as @JonnElledge.