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.
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.