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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“We can’t do this again”: Labour conference reactions to Jeremy Corbyn’s second victory

Overjoyed members, determined allies and concerned MPs are divided on how to unite.

“I tell you what, I want to know who those 193,229 people are.” This was the reaction of one Labour member a few rows from the front of the stage, following the announcement of Jeremy Corbyn’s victory at the Labour party conference. She was referring to support received by his defeated contender, Owen Smith, who won 38.2 per cent of the vote (to Corbyn’s 61.8 per cent).

But it’s this focus on the leader’s critics – so vehement among many (and there are a lot of them) of his fans – that many politicians, of either side, who were watching his victory speech in the conference hall want to put an end to.

“It’s about unity and bringing us all together – I think that’s what has to come out of this,” says shadow cabinet member and MP for Edmonton Kate Osamor. “It shouldn’t be about the figures, and how many votes, and his percentage, because that will just cause more animosity.”

Osamor, who is supportive of Corbyn’s leadership, is not alone in urging her colleagues who resigned from the shadow cabinet to “remember the door is never shut”.

Shadow minister and member of Labour’s National Executive Committee (NEC) Jon Ashworth – not a Corbyn loyalist, but focusing on making the shadow cabinet work together – shares the sentiment.

Standing pensively in front of the now-empty stage, he tells me he backs shadow cabinet elections (though not for every post) – a change to party rules that has not yet been decided by the NEC. “[It] would be a good way of bringing people back,” he says. “I’ve been involved in discussions behind the scenes this week and I hope we can get some resolution on the issue.”

He adds: “Jeremy’s won, he has to recognise a number of people didn’t vote for him, so we’ve got to unite.”

The former Foreign Secretary Margaret Beckett, another MP on the NEC, is sitting in the audience, looking over some documents. She warns that “it’s impossible to tell” whether those who resigned from Corbyn’s shadow cabinet would be willing to return, and is concerned about talent being wasted.

“We have a lot of excellent people in the party; there are new people now in the shadow cabinet who have had a chance to show their mettle but you need experience as well as ability,” she says.

Beckett, who has urged Corbyn to stand down in the past, hopes “everybody’s listening” to his call for unity, but questions how that will be achieved.

“How much bad blood there is among people who were told that there was plotting [against Corbyn], it’s impossible to tell, but obviously that doesn’t make for a very good atmosphere,” she says. “But Jeremy says we’ll wipe the slate clean, so let’s hope everybody will wipe the slate clean.”

It doesn’t look that way yet. Socialist veteran Dennis Skinner is prowling around the party conference space outside the hall, barking with glee about Corbyn’s defeated foes. “He’s trebled the membership,” he cries. “A figure that Blair, Brown and Prescott could only dream about. On average there’s more than a thousand of them [new members] in every constituency. Right-wing members of the parliamentary Labour party need to get on board!”

A call that may go unheeded, with fervent Corbyn allies and critics alike already straying from the unity message. The shadow justice secretary Richard Burgon is reminding the PLP that, “Jeremy’s won by a bigger margin this time”, and telling journalists after the speech that he is “relaxed” about how the shadow cabinet is recruited (not a rallying cry for shadow cabinet elections).

“If Jeremy wants to hold out an olive branch to the PLP, work with MPs more closely, he has to look very seriously at that [shadow cabinet elections]; it’s gone to the NEC but no decision has been made,” says Louise Ellman, the Liverpool MP and transport committee chair who has been critical of Corbyn’s leadership. “That might not be the only way. I think he has to find a way of working with MPs, because we’re all elected by millions of people – the general public – and he seems to dismiss that.”

“If he sees it [his victory] as an endorsement of how he’s been operating up until now, the problems which led to the election being called will remain,” Ellman warns. “If we’re going to be a credible party of government, we’ve got to reach out to the general electorate. He didn’t say anything about that in his speech, but I hope that perhaps now he might feel more confident to be able to change direction.”

Corbyn may have called for cooperation, but his increased mandate (up from his last stonking victory with 59.5 per cent of the vote) is the starkest illustration yet of the gulf between his popularity in Parliament and among members.

The fact that one attempt at a ceasefire in the party’s civil war – by allowing MPs to vote for some shadow cabinet posts – is in contention suggests this gulf is in danger of increasing.

And then where could the party be this time next year? As Osamor warns: “We should not be looking at our differences, because when we do that, we end up thinking it’s a good thing to spend our summer having another contest. And we can’t. We can’t do this again.”

Anoosh Chakelian is deputy web editor at the New Statesman.