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16 October 2015

It’s not just workers that the Conservatives are letting down

David Cameron boasts of keeping his word to pensioners. But the reality is different. 

By Emily Thornberry

First it was the working poor that were made to pay for the latest round of welfare cuts, and now it is disabled widows. The Government’s claim that welfare reform is based on the principle of “fairness” is crumbling pretty fast.

The welfare state, which grew out of post-war solidarity, has for decades been based on the principle that those who pay into the system are entitled to expect that the safety net will be there for them when they fall on hard times.

This is a core British value, but it is one that the Tories undermining further almost every day.

In a little-noticed sleight of hand, the Government pressed forward yesterday with proposals to abolish a means-tested benefit which is as old as the NHS, replacing it with a repayable loan.

Support for Mortgage Interest (SMI) helps people on low incomes avoid having their homes repossessed when, for whatever reason, they lose their main source of income. As the name suggests, it covers the cost of interest repayments but it doesn’t extend to capital. It does not help people to pay off their mortgages, but simply helps them to fend off the mortgage companies and stop their homes being repossessed.  

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It works in a similar way to housing benefit, except that SMI is vastly cheaper. The cost – at around £250,000 per year – represents just 0.002 per cent of the £12 billion which the Tories have said need to be saved from the welfare budget.

What the Tories have said, in the Welfare Reform and Work Bill is that this benefit should be replaced by a loan which the Government will then claw back from peoples’ estates when they die. In other words, it’s a death tax, and it is deeply ironic coming from a Government that has raised the inheritance tax threshold because, in George Osborne’s words:

“Conservatives support the most basic human instinct to provide for your children. And we believe that your home that you’ve worked for and you’ve saved for should belong to you and your family, not the tax man.”

Apparently this doesn’t apply if you’re poor.

Not only is the Government proposing to convert SMI to a loan – so you’ll get a loan with interest to pay off an interest on your loan – but at the same time they want to extend the waiting period before support can be paid from three month to nine. How many mortgage companies will wait that long? As you would expect, all the evidence suggests that this will drive up the number of repossessions. In the end this will cost the Government more as people will be forced into privately rented housing, where they will then have to claim housing benefit at on average three times the cost.

But evidence and expert opinion comes up against a brick wall with this Government. Ministers tell us they “believe” that the change won’t increase homelessness, and expect us to take their word for it.

And when you look who this will effect in practice, it is for the most part disabled people and single women over 60 – most likely widows who will have worked and paid taxes for decades only to find that the system they paid into is no longer there to support them when they need it.

The Government last looked at these proposals almost four years ago, and most of the data we have on its potential harmful effects on poor pensioners comes from the impact assessment that the DWP produced at the time, then buried for four years and then ignored once they’d got the election out of their way.

The Government claims that changes are needed because spending on SMI is “unsustainable”.

This is utter nonsense. Not only does SMI account for a miniscule proportion of the total welfare budget, but spending is actually going down – a trend which the DWP itself expects to continue.

The supposed cost is not the only problem the Tories say that they have with SMI. What the Minister said in committee this week was that “we believe it is wrong for taxpayers who are unable to afford to buy a home of their own are subsidising claimants who own their own homes.”

This seemed like a bizarre statement coming from a Government that has also announced its intention to extend the Right to Buy to tenants of Housing Associations – offering massive discounts to help people purchase their homes at an estimated cost to the taxpayer of £11.6 billion.

Neither is Right to Buy the only way the Government subsidises home ownership with the help of public funds. What about stamp duty relief for first time buyers? Or “Help to Buy” ISAs? Not forgetting higher thresholds for inheritance tax. The list goes on.

Why the Tories are happy to subsidise home ownership for middle class graduates and affluent social tenants, but not for widows on low incomes, is simply beyond me.

And yet, the Government yesterday voted down a Labour amendment that would have exempted pensioners from the switch from benefit to loan – this despite the fact that in the initial debate on this Bill, back in July, DWP minister Priti Patel claimed that the Government was “continuing to ensure that the welfare system will support the elderly, the vulnerable and the disabled by protecting pensioners”. 

And yesterday David Cameron said that the Government was “very proud to have kept all our promises to pensioners”.

It seems those promises don’t apply if the pensioners are poor. 

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