Duncan Smith has created a ticking social time bomb - and we'll pick up the bill

Pushing the poorest people to borrow money to pay their rent, and far beyond their means, forces our social problems under the carpet.

Last week, in its annual assessment of major government projects, the Cabinet Office sounded a warning to the Department for Work and Pensions over its flagship policies: Universal Credit and the £500 cap on benefits. No wonder; evidence against the policy is mounting up.

In Ashton, Greater Manchester - the only area where the government’s fated Universal Credit welfare system has already been rolled out - personal debt is rising, leaving families in a precarious position as welfare reform kicks in.

New Charter Housing Trust, which manages social housing within the pilot area, reports a 29 per cent rise in the number of people contacting its financial support team in the last year. More worryingly, it also records a 19 per cent rise in the total amount of debt held by tenants contacting them for support. On average, tenants who ask for help come to them owing £8,400.

This is not housing debt; it is not rent arrears. It is consumer debt: credit cards; loans; pay day lending; ‘emergency cash’ provided by high street money shops.

Although the trend for rising debt began before the start of the welfare reform pilot, New Charter says it is on an upward curve.

Meanwhile there has been an explosion in the number of high cost ‘money shop’ lenders opening on our high streets.. Planning changes which came into force this week mean that high street premises can be turned over to payday lenders without a public consultation or a change in planning permissions. As the bad times roll, easy money has never been more widely available to the poorest and most vulnerable people in our society..

When the bedroom tax kicks in and benefits are capped, tenants struggling to make ends meet will prioritise food and rent over other costs, and at any lengths. Despite support from local food banks (Oxfam revealed this week that almost half a million people in the UK are now depending on handouts for survival - most of them working), sometimes the money just doesn’t go far enough.

Tenants who have never missed a rental payment in their life now risk building up arrears - with the threat of eviction from their home - or turning to the proliferation of under-regulated high street and online money to plug the gap. Many, out of pride and desperation, will take the latter route.

Pushing the poorest people to borrow money to pay their rent, and far beyond their means, forces our social problems under the carpet only for the bulge to rise up and burst forth - at great expense to the taxpayer - later.

And so to housing debt. At the end of last month law firm Winckworth Sherwood did a few quick calculations, estimating the rise in arrears after the roll out of welfare reform. It claims Universal Credit will lead to an average increase in arrears of £180 per tenant.

Rent arrears, and the associated threat of eviction, are complex problems for society. Housing associations can only afford to develop much-needed new homes by borrowing against their income streams, historically guaranteed by payment of housing benefit. Now their income is plummeting.

Some social landlords have decided to risk their own balance sheets to protect their residents, finding ways around the ‘bedroom tax’ by reclassifying bedrooms as box rooms or cupboards. Others have made a commitment not to evict over arrears caused by welfare reform.

But not every social housing provider can afford to do this, and private landlords will not be so understanding. Welfare reform will lead to arrears followed by eviction - costly legal procedures in themselves - and finally an exorbitant rescue package including emergency housing, crisis payments and the cost of supporting vulnerable children.

If you think this is a hyperbolic vision of the future, just look to Oxford, where the council’s emergency housing department is already so stretched that it is placing families in a local Travelodge until temporary accommodation can be found.

This is the paradox: tenants will either find a way to cover their rent, or they won’t. And either way we have a ticking social time bomb just waiting to go off, at vast cost to the public purse.

Work is underway to prevent this social meltdown. In Lewisham, the local housing organisation has set up a relationship with the credit union which means as soon as a tenant falls into arrears they are contacted and offered help by the union, before they have time to seek other more expensive financing. Yet these relationships are rare; it’s a postcode lottery.

The lifetime cost of welfare reform won’t be understood for decades, as children made homeless during their education fail to find stability and families now racking up huge personal debts plunge towards a lifetime of poverty and dependency. No doubt Iain Duncan Smith will be praying for a Labour victory by 2015 as the impact of his policies unravel our communities.

Work and Pensions Secretary Iain Duncan Smith arrives to attend the government's weekly cabinet meeting at Number 10 Downing Street. Photograph: Getty Images.

Hannah Fearn is contributing editor of the Guardian local government, housing and public leaders networks

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The 11 things we know after the Brexit plan debate

Labour may just have fallen into a trap. 

On Wednesday, both Labour and Tory MPs filed out of the Commons together to back a motion calling on the Prime Minister to commit to publish the government’s Brexit plan before Article 50 is triggered in March 2017. 

The motion was proposed by Labour, but the government agreed to back it after inserting its own amendment calling on MPs to “respect the wishes of the United Kingdom” and adhere to the original timetable. 

With questions on everything from the customs union to the Northern Irish border, it is clear that the Brexit minister David Davis will have a busy Christmas. Meanwhile, his declared intention to stay schtum about the meat of Brexit negotiations for now means the nation has been hanging off every titbit of news, including a snapped memo reading “have cake and eat it”. 

So, with confusion abounding, here is what we know from the Brexit plan debate: 

1. The government will set out a Brexit plan before triggering Article 50

The Brexit minister David Davis said that Parliament will get to hear the government’s “strategic plans” ahead of triggering Article 50, but that this will not include anything that will “jeopardise our negotiating position”. 

While this is something of a victory for the Remain MPs and the Opposition, the devil is in the detail. For example, this could still mean anything from a white paper to a brief description released days before the March deadline.

2. Parliament will get a say on converting EU law into UK law

Davis repeated that the Great Repeal Bill, which scraps the European Communities Act 1972, will be presented to the Commons during the two-year period following Article 50.

He said: “After that there will be a series of consequential legislative measures, some primary, some secondary, and on every measure the House will have a vote and say.”

In other words, MPs will get to debate how existing EU law is converted to UK law. But, crucially, that isn’t the same as getting to debate the trade negotiations. And the crucial trade-off between access to the single market versus freedom of movement is likely to be decided there. 

3. Parliament is almost sure to get a final vote on the Brexit deal

The European Parliament is expected to vote on the final Brexit deal, which means the government accepts it also needs parliamentary approval. Davis said: “It is inconceivable to me that if the European Parliament has a vote, this House does not.”

Davis also pledged to keep MPs as well-informed as MEPs will be.

However, as shadow Brexit secretary Keir Starmer pointed out to The New Statesman, this could still leave MPs facing the choice of passing a Brexit deal they disagree with or plunging into a post-EU abyss. 

4. The government still plans to trigger Article 50 in March

With German and French elections planned for 2017, Labour MP Geraint Davies asked if there was any point triggering Article 50 before the autumn. 

But Davis said there were 15 elections scheduled during the negotiation process, so such kind of delay was “simply not possible”. 

5. Themed debates are a clue to Brexit priorities

One way to get a measure of the government’s priorities is the themed debates it is holding on various areas covered by EU law, including two already held on workers’ rights and transport.  

Davis mentioned themed debates as a key way his department would be held to account. 

It's not exactly disclosure, but it is one step better than relying on a camera man papping advisers as they walk into No.10 with their notes on show. 

6. The immigration policy is likely to focus on unskilled migrants

At the Tory party conference, Theresa May hinted at a draconian immigration policy that had little time for “citizens of the world”, while Davis said the “clear message” from the Brexit vote was “control immigration”.

He struck a softer tone in the debate, saying: “Free movement of people cannot continue as it is now, but this will not mean pulling up the drawbridge.”

The government would try to win “the global battle for talent”, he added. If the government intends to stick to its migration target and, as this suggests, will keep the criteria for skilled immigrants flexible, the main target for a clampdown is clearly unskilled labour.  

7. The government is still trying to stay in the customs union

Pressed about the customs union by Anna Soubry, the outspoken Tory backbencher, Davis said the government is looking at “several options”. This includes Norway, which is in the single market but not the customs union, and Switzerland, which is in neither but has a customs agreement. 

(For what it's worth, the EU describes this as "a series of bilateral agreements where Switzerland has agreed to take on certain aspects of EU legislation in exchange for accessing the EU's single market". It also notes that Swiss exports to the EU are focused on a few sectors, like chemicals, machinery and, yes, watches.)

8. The government wants the status quo on security

Davis said that on security and law enforcement “our aim is to preserve the current relationship as best we can”. 

He said there is a “clear mutual interest in continued co-operation” and signalled a willingness for the UK to pitch in to ensure Europe is secure across borders. 

One of the big tests for this commitment will be if the government opts into Europol legislation which comes into force next year.

9. The Chancellor is wooing industries

Robin Walker, the under-secretary for Brexit, said Philip Hammond and Brexit ministers were meeting organisations in the City, and had also met representatives from the aerospace, energy, farming, chemicals, car manufacturing and tourism industries. 

However, Labour has already attacked the government for playing favourites with its secretive Nissan deal. Brexit ministers have a fine line to walk between diplomacy and what looks like a bribe. 

10. Devolved administrations are causing trouble

A meeting with leaders of Scotland, Wales and Northern Ireland ended badly, with the First Minister of Scotland Nicola Sturgeon publicly declaring it “deeply frustrating”. The Scottish government has since ramped up its attempts to block Brexit in the courts. 

Walker took a more conciliatory tone, saying that the PM was “committed to full engagement with the devolved administrations” and said he undertook the task of “listening to the concerns” of their representatives. 

11. Remain MPs may have just voted for a trap

Those MPs backing Remain were divided on whether to back the debate with the government’s amendment, with the Green co-leader Caroline Lucas calling it “the Tories’ trap”.

She argued that it meant signing up to invoking Article 50 by March, and imposing a “tight timetable” and “arbitrary deadline”, all for a vaguely-worded Brexit plan. In the end, Lucas was one of the Remainers who voted against the motion, along with the SNP. 

George agrees – you can read his analysis of the Brexit trap here

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.