Children's clothing is hung out to dry on a residential development in Tower Hamlets. Photograph: Getty Images.
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Osborne's welfare cap is a poverty-producing policy

The UK is far more reliant than other European countries on social security spending to reduce child poverty.

Yesterday the good news for poorer families, today the bad: what the government gives with one hand, it will now take away with the other. Although the news cycle paid them little attention in the childcare melee, low income parents did well from yesterday’s announcement. In the future, they will receive support with 85 per cent of their childcare costs, increasing their work incentives and reducing their costs. But there was a sting in the tail: as the government’s statement made clear, the funds for this change must come out of the existing DWP budget, "in line with the principles of the welfare cap".

The government likes to use high-blown language to gloss the cap, the mechanism through which the Chancellor has today placed a permanent lid on the social security spend. In the Treasury’s view, this strategy is full of virtues – it ensures fiscal probity, improves transparency, and brings us into line with international best practice. But the truth is quite different: the cap is a poverty-producing policy that could set us on course for some of the highest child poverty rates in Europe.

It’s worth looking at the poverty data to understand the full implications of the policy. This shows just what a bad place we start from in the UK with respect to child poverty, with the second highest rates in Europe before tax and transfers are taken into account. Unquestionably, social security has to do a lot more heavy lifting here than it does in other comparable countries.

But this should lead us to an obvious conclusion: that we need to do more about the underlying structural determinants of poverty such as low pay, precarious work, high housing costs and childcare support if we want to reduce the significance of social security as a poverty reduction policy. Instead, simply rationing social security as the Chancellor has done through the "welfare cap" potentially exposes millions more children to the risk of poverty in the UK. But the figures also tell us something else important: that even in those countries with the most propitious starting points, social security remains an essential part of the poverty reduction toolkit.

Yet the coalition has cut almost a fifth from the working age social security budget over the course of this parliament, and it is families with children who have borne the brunt of this retrenchment. Analysis by the Institute for Fiscal Studies "nowcasts" that an additional 300,000 children live in poverty compared to 2010, and a further 150,000 will be impoverished by the end of the parliament. And the primary reason for these increases? Cuts, cuts and yet more cuts.

The cap locks in these cuts for perpetuity and denudes future spending decisions of any ambition. Want to improve work incentives through changes to Universal redit? Sure – but you have to cut elsewhere. Want to ensure people with disabilities can participate fully in society? Yes – but another group will take a hit. Think it’s a good idea to end child poverty? Why not - but others will be impoverished in the process.

The cap closes the system, pitting the needs of the most vulnerable against each other in an endless zero-sum game. Osborne may talk about the race to the top for the country today, but for the poorest, the race to the bottom begins now.

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

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The tale of Battersea power station shows how affordable housing is lost

Initially, the developers promised 636 affordable homes. Now, they have reduced the number to 386. 

It’s the most predictable trick in the big book of property development. A developer signs an agreement with a local council promising to provide a barely acceptable level of barely affordable housing, then slashes these commitments at the first, second and third signs of trouble. It’s happened all over the country, from Hastings to Cumbria. But it happens most often in London, and most recently of all at Battersea power station, the Thames landmark and long-time London ruin which I wrote about in my 2016 book, Up In Smoke: The Failed Dreams of Battersea Power Station. For decades, the power station was one of London’s most popular buildings but now it represents some of the most depressing aspects of the capital’s attempts at regeneration. Almost in shame, the building itself has started to disappear from view behind a curtain of ugly gold-and-glass apartments aimed squarely at the international rich. The Battersea power station development is costing around £9bn. There will be around 4,200 flats, an office for Apple and a new Tube station. But only 386 of the new flats will be considered affordable

What makes the Battersea power station development worse is the developer’s argument for why there are so few affordable homes, which runs something like this. The bottom is falling out of the luxury homes market because too many are being built, which means developers can no longer afford to build the sort of homes that people actually want. It’s yet another sign of the failure of the housing market to provide what is most needed. But it also highlights the delusion of politicians who still seem to believe that property developers are going to provide the answers to one of the most pressing problems in politics.

A Malaysian consortium acquired Battersea power station in 2012. Initially, it promised to build 636 affordable units. This was pretty meagre, but with four developers already having failed to develop the site, it was still enough for Wandsworth council to give planning consent. By the time I wrote Up In Smoke, this had been reduced to 565 units – around 15 per cent of the total number of new flats. Now the developers want to build only 386 affordable homes – around 9 per cent of the final residential offering, which includes expensive flats bought by the likes of Sting and Bear Grylls.

The developers say this is because of escalating costs and the technical challenges of restoring the power station – but it’s also the case that the entire Nine Elms area between Battersea and Vauxhall is experiencing a glut of similar property, which is driving down prices. They want to focus instead on paying for the new Northern Line extension that joins the power station to Kennington. The slashing of affordable housing can be done without need for a new planning application or public consultation by using a “deed of variation”. It also means Mayor Sadiq Khan can’t do much more than write to Wandsworth urging the council to reject the new scheme. There’s little chance of that. Conservative Wandsworth has been committed to a developer-led solution to the power station for three decades and in that time has perfected the art of rolling over, despite several excruciating, and occasionally hilarious, disappointments.

The Battersea power station situation also highlights the sophistry developers will use to excuse any decision. When I interviewed Rob Tincknell, the developer’s chief executive, in 2014, he boasted it was the developer’s commitment to paying for the Northern Line extension (NLE) that was allowing the already limited amount of affordable housing to be built in the first place. Without the NLE, he insisted, they would never be able to build this number of affordable units. “The important point to note is that the NLE project allows the development density in the district of Nine Elms to nearly double,” he said. “Therefore, without the NLE the density at Battersea would be about half and even if there was a higher level of affordable, say 30 per cent, it would be a percentage of a lower figure and therefore the city wouldn’t get any more affordable than they do now.”

Now the argument is reversed. Because the developer has to pay for the transport infrastructure, they can’t afford to build as much affordable housing. Smart hey?

It’s not entirely hopeless. Wandsworth may yet reject the plan, while the developers say they hope to restore the missing 250 units at the end of the build.

But I wouldn’t hold your breath.

This is a version of a blog post which originally appeared here.

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