The Secret Cuts: Part Three, The Bedroom Tax

Continuing their series on the Coalition's secret cuts, Alan White and Kate Belgrave find out how the introduction of the "bedroom tax" is affecting people's lives.

This post is about the bedroom tax and the fight against it in different parts of the country. It features tenants who are battling the tax in Merseyside and Manchester. Kate spent several weeks in the north-west talking to people in March before the tax was introduced and then again last week, to see how they’d dealt with it since its April implementation.

It is a tax: cruel and absurd in equal parts, as you’ll see. Forget Iain Duncan Smith’s deceitful claims about “under-occupancy” and “fairness” - this sort of thing: on the Andrew Marr Show in March he said: "We have in social sector housing a very large number of people in houses where they have many more bedrooms than they actually need. Meanwhile, there are a quarter of a million people in overcrowding and a million people on the waiting list trying to get into housing."

As far as Smith was concerned, that justified forcing social housing tenants to pay 14 per cent more a week for one "spare" room, and 25 per cent for two or more – or telling them to downsize into smaller properties (properties that are few and far between: False Economy data from 107 local authorities shows that 86,000 households have been forced to look for one-bedroom homes, of which only 33,000 have become available in the past year). Non-payment rates are very high. In May, the Independent reported a major increase in the number of people applying for discretionary housing payments to help cover rents. So much for Duncan Smith’s big idea.

There’s only one conclusion you can reach here. This is not about savings, or Smith’s peculiar housing redistribution fantasy, or addressing the housing shortage (only building more homes will do that). This is an all-out attack on social housing tenants and on the notion of social housing - the idea that everybody (even people who aren’t well-off) should have decent housing. It’s an assault on a group of people who have been abandoned by mainstream politics. It’s an attack on people who who are castigated for needing any state support at all.

(And in case you’re wondering how IDS lives as he imposes this tax - here’s a video of his weekend place taken during a recent UK Uncut/Disabled People Against Cuts occupation to protest the bedroom tax.)

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You only need five minutes at the Friary centre in West Everton to understand why people who live in social housing here are nervous about the tax and their future as social housing tenants. They are surely sitting on prime real estate. The whole place screams Location. Liverpool city centre is only 20 minutes' walk away. Homes face a very large piece of grass which would easily house swanky cafes. It looks a developer’s dream. The two women who spend the morning talking to the NS - both local social housing tenants - certainly think so. They are clear on the reasons why the Haves would want them out and where the bedroom tax could ultimately land them.

“It's prime land – it's right on top of the city centre,” Ann Roach, community development worker for families on the West Everton community council, says. “The [tax means that] housing associations will end up with all these four-bedroom places, because they were “underoccupied”. Now them kids are getting moved out (because of the tax). The flats will get knocked down and it'll be apartments here and apartments there. People used to come over and say “Wow, it's beautiful where you live” and I'd say, “It won't be for long. It's too nice to be ours.”

Roach and Jill are long-time social housing tenants. They are not quite of state pension age. Jill is affected by the bedroom tax and Roach worries that she’ll have housing problems if she ever loses her job. She does not expect to find another job at her age.

We don’t give Jill’s full name because like many, she’s worried that her housing association (HA) will target her if she makes her opposition to the tax known. It’s easy to see why people have this concern. HAs are pursuing the money hard. At least one Liverpool HA was doorstepping people for the money a mere month after the tax was introduced - and asking for the names of tenants we were speaking to about the tax. That HA was at pains to say it only wanted the names so it could “help” people who were struggling - but tenants don't trust that. Why, as tenants regularly say, would they trust the same organisations that are sending them payment demands?

The other concern people have is that social services will remove children from parents who are found to be struggling due to the extra cost. People say this a lot. “Nobody wants social services butting their noses into people's business, because it's a danger game when a mother hasn't got enough money to feed her kids properly,” Jill says. “She's going to starve herself to make sure her kids are fed. You're hearing about kids being taken away when they shouldn't be.”

Jill has to deal with the bedroom tax herself and she’s finding it difficult. She's older, not in good health and she’s on a disability benefit. Her husband is also unwell. She’s furious that they must pay the bedroom tax on a bedroom “that's seven foot by nine foot - they're calling that a bedroom.” She thinks of her house as “a two-bedroom house with a boxroom as a storage area.”

She and her husband are older people who should be relaxing into later life, not desperately trying to find a few extra quid a week to stay housed. “I had my kids in that house. I've been 28 years in that place.” She adds: “I can see my daughter's front window just out of my back just over that door, so there's a house between us. She can wave to me from her back garden and that's how it should be. That's the old way. That was the way that we were brought up.”

That’s a problem here. The Government has moved the goalposts for these people in a sadistic way. These women were housed at a time when the agreement was that you got your home for life as long as you looked after it. Which is what they did. They fought for that housing. Roach brings out pictures of the slums that people once lived in here:.

You can see the crumbling walls and doors, rubbish and masonry strewn across streets, wet washing hanging along damp walls. Local people campaigned for improvements – and won them. “We always had to to fight for everything,” Roach says. “The one thing that I thought was safe for my kids was the fight for these houses. I thought my kids won't have to fight, because I've got somewhere safe for them.”

Which brings us to our next point. This tax targets people who know how to fight for improvements and rights as a community - older people like Roach and Jill, who campaigned for better housing and now work in a community centre that runs bedroom tax surgeries and provides hot meals for people who can’t afford them. Many of the people at the largely tenant-led bedroom tax meetings across Merseyside are middle-aged or older. They've been in the same homes for many years and have so-called “spare” rooms because their circumstances have changed (often their kids have grown up and left). Because they’ve been around for a while, they have networks in their neighbourhoods, contacts and a lot of experience in seeing off threats. You can see exactly why politicians of all stripes would want to target them with a bedroom tax and break them up.

They’re fighting the tax. They’re appealing bedroom sizes and either paying nothing, or paying a small amount off the top of the tax. As housing consultant Joe Halewood says in the video below of a recent Garston-Speke tenants’ meeting: “Housing associations are shitting themselves at the levels of non-payment.” Many people can’t afford to pay. As Halewood also says, pushing housing associations and councils is the only option tenants have. He also makes an interesting point about the devastating impact that the national introduction of the overall benefit cap will have.

John, an unemployed 56-year-old man to whom Kate has been talking for several months, says that has hasn't paid anything yet. He's putting any money he can find aside each week so that he can say he's made an attempt to find the money if and when he’s asked for it. A woman called Sal is in appeal and is paying a small sum off each week. Sean, who has been in his house for 25 years and has two “spare” bedrooms is also in appeal. Edie “didn’t pay anything” for some time and then started paying £10 a week. She has one “spare” room, which she needs because “I have my grandson with me (he’s eight). He was in care and he clings towards me. So he’s there.”

So people fight it. No one else will (these videos by activist and artist Tracey Dunn show Dingle bedroom tax protestors marching on the town hall earlier this year). The Labour party's abject failure to fight the tax and pledge to overturn it is a major topic at meetings and in discussions with tenants. People want no-eviction and no-collection policies, as well they should. “Where are the councillors?” was an angry refrain at tenants’ meetings in March. “I don’t hold out any hopes for the Labour party whatsoever. These are the buggers that introduced the Welfare Reform Act for Christ’s sake,” said Speke tenant Jo during a long interview last week. We asked Liverpool, Salford and Manchester councils for comment on bedroom tax evictions policies. Manchester said: “it is unlikely any council will be able to follow through with an idea of a no-eviction policy.” The others have yet to respond). Unite community organiser Sheila Coleman was clear about the fallout for Labour on its lacklustre response. In this video, she tells tenants that “the value of a union involvement in this is not to go along with it, but to say to people running the unions - stop funding Labour MPs. Stop funding them.”

This is a tenant-led movement. All political groups need to note this.

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In other cases the “one-size-fits-all” nature of the policy is inappropriate to the point of absurdity.

This is a video of Tria Hall, a disabled woman and anti-bedroom tax activist in Manchester who, like other disabled tenants in her new block, was moved into a two-bedroom flat from a one-bedroom flat not long before the tax was implemented. Here, she shows us around her flat.

Tria has Ehlers-Danlos syndrome - a degenerative condition. She was moved into this new adapted flat because the new flat is adapted for someone with a disability. It has a wet room with handrails. Plug sockets and light switches are at wheelchair height.

Tria had to wait for several years for the flat to be built. Kate first met her in her old flat in 2010. It was a freezing place, with ill-fitting doors and windows that let in the winter air. Tria was pleased to move and had looked forward to it – and then, about six months in, found out that the bedroom tax was coming her way. “We never asked for two-bedroom flats. They just moved us in.” In the video you’ll see her explaining why the Government’s “answer” to the problem - take in a lodger - simply won't work for her. Just after we spoke to her, she was awarded a discretionary housing payment.

You find a lot of people who were moved to their flat for a reason. Sometimes, that “reason” was to save the state money. Take Jo. She lives in Speke in a two-bedroom housing association flat. She's been there for about 13 years. She was moved there so she could care for her elderly mother who lives nearby.

She goes to her mother's house about three times a day: “I’m like the on-site janitor - if the electricity goes off, I’m the one that’s on call...I’ll cook if she wants anything cooking, I’ll push the hoover round, whatever she needs doing.” She has saved the state thousands of pounds in carers’ fees. But now she tells us:  “[The bedroom tax] is how I’m served for doing that...They don’t care where you find [that money]. They don’t care if you’re on the bones of your arse.”

Despite all the work she does for her mother, Jo is disabled herself. She had no idea how she'd manage to pay for that “spare” bedroom out of her small benefit. Her housing association had phoned her and asked if she wanted to take in a lodger, but as in Tria Hall’s case, she had health reasons for not wanting that.

Jo says she was “so desperate” to find money to pay the bedroom tax that she decided to apply to Liverpool City Council for a discretionary housing payment. To her relief, she was awarded one - about £11 a week which is paid directly to her housing association. She thinks that she was awarded that money because she is caring for her mother. That DHP payment will last for just for six months, though, and three of those months have already gone.

In May, officers of Jo’s housing association (accompanied, for dubious reasons, by a Police Community Support Officer), called at her house, and dropped this letter through her letterbox. Digest its implications for a moment.

Kate phoned the housing association - South Liverpool Homes - about this at the time. A spokesman told her the Pay Your Bedroom Tax Now letter-drop merely coincided with a regular community meet-and-greet exercise that SLH calls “Walkabout Wednesdays.” As Kate wrote in May:

That's one interpretation of last week's event. Another interpretation – it's certainly one that went through the minds of our tenant contacts (and our minds, for that matter) -  is that tenants are being doorstepped for this bedroom tax money, a mere month after the tax was introduced.

According to a letter Jo received from the council, she'll have to “make alternative arrangements” to pay her bedroom tax and council tax shortfalls when her DHP runs out, or - “find cheaper accommodation.” Jo is not sure what that means. She assumes that her circumstances won't change in six months. She'll still need to be near her mother, to care for her.

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People also see their houses as homes. As well they might.

This is a picture of the letter that campaigner Maria Brabiner’s mother was sent when she finally secured her council house, into which her family moved in October 1978, when Maria was just 13.

It was a joyous moment. Before then, Maria’s family had lived in squalid conditions - Maria, her mother and brother shared a single, damp room with no electrics in Higher Broughton. Years later, in 2005, Maria gave up her job to become a full-time carer for now-elderly mother. She’d worked all her life and had savings to live on while caring. Maria’s mother died in 2010, so she was able to get back to paid work.

She tells us:

The first I’d heard about [the bedroom tax] was when it got its royal assent about 12 months ago. And it still didn’t sink in - I thought, well I’m bound to get a job. I wasn’t claiming job seekers’ allowance, I was still living off my savings, because the carer’s allowance didn’t pay for National Insurance contributions, so I wasn’t entitled to anything. I thought I’d been out of work for 12 months, but I’d be bound to get a job in another 12 months.

Despite a good history in office work, she’s been unable to find employment. Her savings have gone. All she has left is the house she’s lived in most of her life and the support of the people in her community, many of whom she’s known for decades.

But she’s fighting the tax. She’s been much in the press and organises meetings for people who are affected. Kate attended one of the meetings she organised in Broughton in June. It was a good meeting - but it was telling that the Salford councillors who were invited did not show up. Here are tenants and activists holding up “Wish You Were Here” signs for them:

Attendees were furious - there was much discussion about Labour talking, but not acting - but they were pleased about a triumph that campaigners had the day before. They'd managed to stop an eviction at the Manchester courts by turning up in numbers to protest.

“That's the only way we'll defeat it,” campaigner Ron Senchak told the meeting. Senchak had represented the woman who'd been facing eviction as she wasn't eligible for legal aid. “We have to do it ourselves. We can’t rely on politicians.”

Maria's is one in a sea of similar stories. The Samaritans have been ­training housing workers to cope with tenants left ­suicidal by the Bedroom Tax, after being approached by Riverside Housing Association on Merseyside after a spike in callers at the end of their tethers. Last month, the first suicide was directly connected to the reform, and this month we heard of another attempt.

If it looks like a tax and smells like a tax, it’s a tax and it’s hitting the poorest hardest. People face homelessness all over. Wonder if IDS and the inlaws take lodgers in that nice place of theirs.

Some tenants’ names have been changed or withheld

You can read more articles from Alan White and Kate Belgrave's Secret Cuts series here

Many social housing tenants in Merseyside and Manchester are struggling since the introduction of the bedroom tax. Photograph: Getty Images
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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?