How the Lib Dems broke their promise to block new welfare cuts

The party vowed to block further welfare cuts but the seven-day wait for benefits amounts to a £245m cut.

Before the Spending Review, the Lib Dems repeatedly stated that they would accept no further cuts to welfare. Danny Alexander said in February 2013: 

We've got no plans at all to go back to the welfare budget as part of that process [the Spending Review]. What I'm focused on is finding that £10 billion or so from within the spending the government departments do.

I've got no plans to reopen the welfare issue. We agreed significant measures in the autumn and we're legislating for those at the moment. The balance has to be found from departmental budgets. Everyone's got to play their part.

More recently, Nick Clegg said that he was prepared to consider new cuts but only if George Osborne began by removing benefits, such as Winter Fuel Payments and free bus passes, from wealthy pensioners. "I believe that if you’re going to reopen welfare, it’s only fair to work at the top and work down, not start at the bottom and work up," he said

When Osborne and Cameron responded by reaffirming the Tories' 2010 pledge to protect all pensioner benefits, it appeared welfare spending was off the table. The Chancellor had already taken £21.6bn from the mostly poor and would take no more. 

But when he addressed the Commons yesterday, Osborne did announce further benefit cuts - and he started at the bottom. The new seven-day wait before the unemployed can claim benefits will reduce spending by £245m in 2015-16 (and £765m by 2018). Though some may seek to present it as a "reform", it is a cut. The money that claimants lose from having to wait a week for their benefits (which will force thousands more to turn to food banks) will not be backdated; it has gone for good. The introduction of tougher interview requirements is also expected to reduce spending (by £120m in 2015-16), presumably since those who fail to turn up (often with good reason) will be sanctioned.

It's true that Osborne also announced plans to remove Winter Fuel Payments from pensioners who live in hot countries (defined as those with "an average winter temperature higher than the warmest region of the UK") but this hardly qualifies as a significant reduction; it will save just £30m a year. 

Clegg insisted he would only accept new welfare cuts if the majority of savings came from the wealthy, but, once again, it's the poorest who've been hit. 

Danny Alexander and Nick Clegg at last year's Liberal Democrat conference in Brighton. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.