Work & pensions secretary Ian Duncan Smith: the man with the plan. Image: Getty.
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So Iain Duncan Smith is setting housing policy now? God help us all

Five reasons why Iain Duncan Smith's plan to give free houses to those who come off benefits is a terrible policy. 

Oh, Iain Duncan Smith. Is there any other individual, anywhere in politics, who has such a talent for looking thoughtfully at a problem, giving it long consideration, and then coming up with a solution that is quite so catastrophically wrong?

Today the Times splashed on a story outlining the exciting new idea that IDS is pushing to include in this year's Tory manifesto. It would boost home ownership, incentivise people to move from welfare to work, and make working class voters less likely to defect to UKIP. The party’s leadership is said to be smiling on the plan. Here it is in a sentence:

Free council houses for recent benefit claimants.

Yep. From the Times:

Millions of houses would be “given away” to low-paid workers under Tory plans to reward people who come off benefits.

Iain Duncan Smith, the work and pensions secretary, is pushing for a pledge to “gift” tenants their council home after a year in work to be included in the Tory manifesto.

If this doesn't immediately leap out at you as a good idea, that's because it's not. It's awful. How is it awful? Let me count the ways.

 

1) It misunderstands the reason people are out of work.

Let's assume, for the sake of argument, that there are people who don’t claim unemployment benefit because they can’t find a job, but do so instead as an economically rational choice; people who have decided that their time is worth more to them then the wages available. These are the people who might be open to a great big house-shaped bribe to get back into work.

How many of these people do you imagine there are? And can it really be a large enough number to justify the fact that . . .

 

2) It eats yet further into Britain's scarce social housing stock

There are 1.7m people on the waiting list for social housing – people who would like one of these homes but can’t get one.

This policy does nothing for them. No, that’s not fair, it actually makes their situation worse, because it means there will be less social housing available to go round. Well done there.

What’s more . . .

 

3) It loses the taxpayer money

. . . for the very simple reason that, if you give away some sweets, then those are some sweets that you no longer have.

Iain Duncan Smith seems to think the reduction in housing benefit would help a bit to offset the cost of this scheme. And there is talk of a clawback: sell your free house within three years, you’ll pay 35 per cent of the proceeds in tax, that sort of thing. But the policy seems to assume the tax will fall as a proportion of sale price over time, and, anyway, that money won't be available for years. It’s almost certainly a net loss to the state.

Worst of all, a fairly hefty contributor to high house prices is high land prices, which pushes up the price of building replacement housing, too. So that 35 per cent clawback is extremely unlikely to be enough to fund replacement housing. And since the reason we have a housing crisis is that we don’t have enough houses, handing them out as electoral bribes is probably not a very good policy.

That's assuming that the bribery would work of course, which . . 

 

4) It's politically suicidal

. . . it won't. Approximately 17 per cent of households in England and Wales live in social housing; that’s around 4.1m of them. That, in the most optimistic assessment, is the maximum proportion of households who would stand to benefit from this policy.

Now consider how many people would instead be outraged by IDS’s plan. They include those in private rented accommodation, many of whom have been saving for years but can't get on the ladder; anyone sitting on a vast mortgage; and anyone who's drunk the Daily Mail kool-aid, and who now thinks that benefit claimants and social housing residents get a far too cushy time already.

I wouldn't want to hazard a guess of how many people there are on this second list. But since there are 4.2m households in the private rental sector alone, I think we can safely say it's more than on the first list.

Oh, and:

 

5) The government doesn't own many of these homes in the first place

Nearly half of them (1.9m) are instead owned by housing associations. These are charities, whose mission is to provide homes. Many of them have borrowed a fortune to build homes to help them fulfil this mission.

Even assuming that the government can force these charities to hand their assets out to their tenants, many will then be left with enormous holes in their balance sheets. So that will make building the homes Britain needs a whole lot harder, too.

***

Need I go on? This policy is economically, financially, politically and institutionally illiterate, and it'll make the housing crisis worse. So why the enthusiasm from the Tory front bench?

The answer, I suspect, can be found in the other policy currently under consideration: an extension of the right to buy to housing association stock. That also runs headlong into point five above, but it also shows quite how badly the Conservative leadership is still trying to relive the 1980s.

The party wants to increase home ownership, which is lovely of them. But they seem to think that the main the barrier to doing so is an over-mighty social housing sector. Break that, the argument goes, and you get more home owners and more Tories. After all, it worked for Margaret Thatcher.

But it won't work now – because the real reason home ownership rates are falling is rising house prices, and the main force behind that is we are not building enough houses in the places people want to live.

Yet the Tory party remains oblivious to this. Instead, it's shuffling assets around, ignoring the fact its policies will contribute directly to the decline of home ownership, and probably a concomitant decline in the number of potential Tory voters, too.

The Conservatives were once the natural party of government. Today they're a pale Margaret Thatcher tribute act, constitutionally incapable of examining why they can’t get a thumping great majority any more.

And Iain Duncan Smith is setting housing policy. God help us all.

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Daniel Hannan. You can find him on Twitter or Facebook.

Photo: Getty
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Can Philip Hammond save the Conservatives from public anger at their DUP deal?

The Chancellor has the wriggle room to get close to the DUP's spending increase – but emotion matters more than facts in politics.

The magic money tree exists, and it is growing in Northern Ireland. That’s the attack line that Labour will throw at Theresa May in the wake of her £1bn deal with the DUP to keep her party in office.

It’s worth noting that while £1bn is a big deal in terms of Northern Ireland’s budget – just a touch under £10bn in 2016/17 – as far as the total expenditure of the British government goes, it’s peanuts.

The British government spent £778bn last year – we’re talking about spending an amount of money in Northern Ireland over the course of two years that the NHS loses in pen theft over the course of one in England. To match the increase in relative terms, you’d be looking at a £35bn increase in spending.

But, of course, political arguments are about gut instinct rather than actual numbers. The perception that the streets of Antrim are being paved by gold while the public realm in England, Scotland and Wales falls into disrepair is a real danger to the Conservatives.

But the good news for them is that last year Philip Hammond tweaked his targets to give himself greater headroom in case of a Brexit shock. Now the Tories have experienced a shock of a different kind – a Corbyn shock. That shock was partly due to the Labour leader’s good campaign and May’s bad campaign, but it was also powered by anger at cuts to schools and anger among NHS workers at Jeremy Hunt’s stewardship of the NHS. Conservative MPs have already made it clear to May that the party must not go to the country again while defending cuts to school spending.

Hammond can get to slightly under that £35bn and still stick to his targets. That will mean that the DUP still get to rave about their higher-than-average increase, while avoiding another election in which cuts to schools are front-and-centre. But whether that deprives Labour of their “cuts for you, but not for them” attack line is another question entirely. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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