The poor could be the losers from Labour's welfare cap

If measures designed to tackle low pay and reduce rents fail to make sufficient progress, the danger is that families will be further impoverished.

Ed Miliband was right in his speech on social security today to suggest that it is neither a decrepit structure, nor an underclass of lazy layabouts, which is the real source of stress in the system. Instead, an analysis acknowledging that it is the broader structural causes of need that are testing the workings of (or at least sympathy for) social security is clearly the right way to go. We all know that in part it is low wages that underpin a large tax credits bill, and rising rents that have to some extent driven up housing benefit in recent years.

Where Miliband went off track, however, was in then echoing coalition rhetoric on expenditure control, and in particular his suggestion that a Labour government would cap ‘structural’ social security spending on a three-year basis. The politics behind this move are clear– talking tough on spending - but does the proposal make good sense in policy terms?

To begin, there is a problem of definition. The distinction between structural as opposed to cyclical social security spending is not as neat as one might like. While unemployment benefits are clearly connected to the rise and fall of the economy, few other working-age benefits are immune from the vagaries of the cycle. It is underemployment alongside low wages that has driven up demand for tax credits, and a rising caseload that, to some degree, explains the growth in cash terms of the housing benefit bill since 2008.

In addition, the structural-cyclical dichotomy is from a decidedly pre-universal credit world. When in and out-of-work benefits, housing benefit and children’s support are rolled up into one from October this year the distinction will be even harder to fathom. While the practicalities of the coalition’s plans for capping annually managed expenditure have already been questioned, it’s hard to see how adding hazy distinctions into the exercise will make it any more workable.

That said, in the last three years the social system has been riddled with caps of one sort or another. While the overall benefit cap has attracted most attention, the coalition has also sought to hem in housing benefit in a number of ways: since April 2011, for example, support to claimants has been restricted to smaller sized properties, to more limited levels of rent, and if single, is cut according to age.

This tangle of new rules is designed to constrain housing benefit expenditure, albeit in an opaque and confusing manner. But has it? A quick look at housing benefit statistics shows that the increase in the average award since April 2011 is actually no different than that observed prior to these changes being introduced, suggesting that rents have not responded as anticipated.

Instead, to date, the squeeze from the various caps has been felt by claimants, not budget lines. Low income families and individuals have had to eke out already meagre budgets to cover shortfalls, make difficult decisions about whether to move and disrupt their and their children’s lives, or go cap (ha) in hand and apply for discretionary housing payments or charitable forms of support.

If Labour, or indeed the coalition, were to limit the overall social security budget, what we would see is this scenario writ large. It would be ordinary families who would bear the risk that programmes designed to tackle low pay, reduce rents, and connect the unemployed more effectively to the labour market fail to make sufficient progress; families whose lives would be constrained in ever-more oppressive ways; and families who would be further impoverished as a result. 

If Labour wants to rein in social security spending they have to do this by reducing need, not by rationing decency. But of course, whether social security expenditure really is out of control, as we are all incessantly told, is an entirely different question

A boy walks through the Heygate Estate in the Walworth area in London. Photograph: Getty Images.

Lindsay Judge is senior policy and research officer for the Child Poverty Action Group.

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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.