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.

Photo: Getty Images
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What do Labour's lost voters make of the Labour leadership candidates?

What does Newsnight's focus group make of the Labour leadership candidates?

Tonight on Newsnight, an IpsosMori focus group of former Labour voters talks about the four Labour leadership candidates. What did they make of the four candidates?

On Andy Burnham:

“He’s the old guard, with Yvette Cooper”

“It’s the same message they were trying to portray right up to the election”​

“I thought that he acknowledged the fact that they didn’t say sorry during the time of the election, and how can you expect people to vote for you when you’re not actually acknowledging that you were part of the problem”​

“Strongish leader, and at least he’s acknowledging and saying let’s move on from here as opposed to wishy washy”

“I was surprised how long he’d been in politics if he was talking about Tony Blair years – he doesn’t look old enough”

On Jeremy Corbyn:

"“He’s the older guy with the grey hair who’s got all the policies straight out of the sixties and is a bit of a hippy as well is what he comes across as” 

“I agree with most of what he said, I must admit, but I don’t think as a country we can afford his principles”

“He was just going to be the opposite of Conservatives, but there might be policies on the Conservative side that, y’know, might be good policies”

“I’ve heard in the paper he’s the favourite to win the Labour leadership. Well, if that was him, then I won’t be voting for Labour, put it that way”

“I think he’s a very good politician but he’s unelectable as a Prime Minister”

On Yvette Cooper

“She sounds quite positive doesn’t she – for families and their everyday issues”

“Bedroom tax, working tax credits, mainly mum things as well”

“We had Margaret Thatcher obviously years ago, and then I’ve always thought about it being a man, I wanted a man, thinking they were stronger…  she was very strong and decisive as well”

“She was very clear – more so than the other guy [Burnham]”

“I think she’s trying to play down her economics background to sort of distance herself from her husband… I think she’s dumbing herself down”

On Liz Kendall

“None of it came from the heart”

“She just sounds like someone’s told her to say something, it’s not coming from the heart, she needs passion”

“Rather than saying what she’s going to do, she’s attacking”

“She reminded me of a headteacher when she was standing there, and she was quite boring. She just didn’t seem to have any sort of personality, and you can’t imagine her being a leader of a party”

“With Liz Kendall and Andy Burnham there’s a lot of rhetoric but there doesn’t seem to be a lot of direction behind what they’re saying. There seems to be a lot of words but no action.”

And, finally, a piece of advice for all four candidates, should they win the leadership election:

“Get down on your hands and knees and start praying”

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.