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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Why isn't Labour putting forward Corbynite candidates?

Despite his successes as a candidate, the organisational victories have gone the way of Corbyn's opponents. 

The contest changes, but the result remains the same: Jeremy Corbyn’s preferred candidate defeated in a parliamentary selection. Afzhal Khan is Labour’s candidate in the Manchester Gorton by-election and the overwhelming favourite to be the seat’s next MP.

Although Khan, an MEP, was one of  the minority of Labour’s European MPs to dissent from a letter from the European parliamentary Labour party calling for Jeremy Corbyn to go in the summer of 2016, he backed Andy Burnham and Tom Watson in 2015, and it is widely believed, fairly or unfairly, that Khan had, as one local activist put it, “the brains to know which way the wind was blowing” rather than being a pukka Corbynite.

For the leader’s office, it was a double defeat;  their preferred candidate, Sam Wheeler, was kept off the longlist, when the party’s Corbynsceptics allied with the party’s BAME leadership to draw up an all ethnic minority shortlist, and Yasmine Dar, their back-up option, was narrowly defeated by Khan among members in Manchester Gorton.

But even when the leadership has got its preferred candidate to the contest, they have been defeated. That even happened in Copeland, where the shortlist was drawn up by Corbynites and designed to advantage Rachel Holliday, the leader’s office preferred candidate.

Why does the Labour left keep losing? Supporters combination of bad luck and bad decisions for the defeat.

In Oldham West, where Michael Meacher, a committed supporter of Jeremy Corbyn’s, was succeeded by Jim McMahon, who voted for Liz Kendall, McMahon was seen to be so far ahead that they had no credible chance of stopping him. Rosena Allin-Khan was a near-perfect candidate to hold the seat of Tooting: a doctor at the local hospital, the seat’s largest employer, with links to both the Polish and Pakistani communities that make up the seat’s biggest minority blocs.  Gillian Troughton, who won the Copeland selection, is a respected local councillor.

But the leadership has also made bad decisions, some claim.  The failure to get a candidate in Manchester Gorton was particularly egregious, as one trade unionist puts it: “We all knew that Gerald was not going to make it [until 2020], they had a local boy with good connections to the trade unions, that contest should have been theirs for the taking”. Instead, they lost control of the selection panel because Jeremy Corbyn missed an NEC meeting – the NEC is hung at present as the Corbynsceptics sacrificed their majority of one to retain the chair – and with it their best chance of taking the seat.

Others close to the leadership point out that for the first year of Corbyn’s leadership, the leader’s office was more preoccupied with the struggle for survival than it was with getting more of its people in. Decisions in by-elections were taken on the hop and often in a way that led to problems later down the line. It made sense to keep Mo Azam, from the party’s left, off the shortlist in Oldham West when Labour MPs were worried for their own seats and about the Ukip effect if Labour selected a minority candidate. But that enraged the party’s minority politicians and led directly to the all-ethnic-minority shortlist in Manchester Gorton.

They also point out that the party's councillor base, from where many candidates are drawn, is still largely Corbynsceptic, though they hope that this will change in the next round of local government selections. (Councillors must go through a reselection process at every election.)

But the biggest shift has very little to do with the Labour leadership. The big victories for the Labour left in internal battles under Ed Miliband were the result of Unite and the GMB working together. Now they are, for various reasons, at odds and the GMB has proven significantly better at working shortlists and campaigning for its members to become MPs.  That helps Corbynsceptics. “The reason why so many of the unions supported Jeremy the first time,” one senior Corbynite argues, “Is they wanted to move the Labour party a little bit to the left. They didn’t want a socialist transformation of the Labour party. And actually if you look at the people getting selected they are not Corbynites, but they are not Blairites either, and that’s what the unions wanted.”

Regardless of why, it means that, two years into Corbyn’s leadership, the Labour left finds itself smaller in parliament than it was at the beginning.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.