Uncharted Territory

October 27, 2010

The Benefits of Being Ugly

Filed under: Economics, Housing market, Markets, Minimum wage, Public spending, Regulation — Tim Joslin @ 8:19 pm

I’ve just watched today’s Prime Minister’s Questions (PMQs) on iPlayer (warning: programme will probably not remain permanently available), because it’s simply not clear what aspects of the Coalition government’s benefits cuts programme Labour opposes.  It was ugly: the problem is Ed Miliband didn’t stick to the point.  There is a chink in Cameron’s armour, but Miliband missed it.  If he’d thought through his position rather better you feel he could have skewered the bastard.

The point is, if you watch the Guardian’s PMQ clip, Miliband appears to be latching onto the vindictive proposal to reduce Housing Benefit (HB) by 10% after someone has been on Jobseeker’s Allowance (JSA) for a year.

I’d thought Chris Bryant had been off-message when he took on Clegg over the £400/week limit on HB, which could force people out of central London.  Clegg did that old trick of ignoring what was asked and taking offence at the manner, suggesting Bryant had dissed those “ethnically cleansed” around the world.  Bryant said “sociologically cleansed” so Clegg was just being a prick.  I don’t like to use bad language on this blog, but I’m making an exception for the Deputy PM.  Anyway, back to the story.  Unfortunately, in PMQs, Miliband let Cameron talk about the £400/pw limit rather than the 10% reduction.

Labour is defending the indefensible in opposing the £400 limit and should be supporting it.  The 10% cut is a different matter altogether.

It’s depressing to see Labour in complete disarray in the face of the Tory onslaught.  All we’re seeing is uncoordinated rearguard action.  Ed won’t last long if they carry on like this.

The point is there are different motivations for different aspects of the welfare reforms.  Some measures are to restore fairness and others to reduce the overall cost.  There is an element of financial sleight of hand.  But there is also an attempt to punish the unemployed, and that is simply out of order.  Ugly, Cameron, ugly.  With around 1.5m on JSA already and with 500,000 civil service job losses to come, as well as transfers from disability and incapacity benefit, there are bound to be some people who don’t find work within a year.  Sure, some of these will be people who tried less hard than those who found work, but the point is not everyone will find work, even if all applied the highest standard of diligence in looking for a job.

So what are the main changes and their rationale?  Which should Labour oppose?

1. Reassessing disability and incapacity benefit claims

Labour was doing this anyway.  The Tories are not outflanking Labour though are giving the impression of doing so.  To be honest, both parties are cynically preserving votes, since there’s actually no reason why you need more money if you’re disabled.  The benefit should be the same as JSA, unless extra funds are needed to overcome specific disabilities. I caught a Radio 5 phone-in this morning and none of the callers fell into such a category.  RSI (“carpal tunnel syndrome”), chronic migraines and depression are unpleasant conditions, but do not in themselves result in expense.  The point is that paying more money gives people an incentive to label themselves as ill, which is in neither the public nor, arguably, their own interest.

2. Limits on the maximum HB that can be claimed

This depends on the number of bedrooms you’re assessed as needing.  The maximum (for 4 bedrooms) is £400/pw (the other limits are “£340 for a three-bedroom property, £290 for two bedrooms and £250 for a one-bedroom property”).  This is more than many working people can afford, so there is overwhelming public support for the limit for the unemployed.  And the Tories are milking it.

But employed people can also claim HB.  The answer to the case of the caretaker cited by Polly Toynbee is to demand a higher minimum wage in London (see my previous post), not to oppose the HB limits.  As I said, Labour is in disarray.

There are serious questions to be asked, too. And Labour isn’t asking them.  People on high rents are going to run out of money very quickly.  Is the government saying, for example, that if someone is made unemployed and they happen to be renting somewhere for more than the limit they’re entitled to – not difficult in London – or have two bedrooms when they’re only entitled to one, that they have to move immediately, or at least before any savings or redundancy payment run out?  The additional disruption is hardly conducive to rapidly finding new employment, is it?

3. An increase in rents for new social housing tenancies to 80% of the market rate.

Judging by Toynbee’s comments, Labour seems to have missed the point of this.  The idea is to raise money for new-build social housing.  The idea is that providers will be able to borrow against the increased revenue stream.  (Most of the rent at present goes on repairs).  HB will have to be higher to fund the higher rents, so all that’s really happening is the cost of new social housing is being amortised – rather like the much-derided Public Finance Initiative (PFI) Labour used to get hospitals built.

4. Paying HB only for rents up to the 30th percentile for the area rather than the median.

It’s crazy that it was the median in the first place.  Over time, this must simply push up rents in general, since with HB-funded demand, any properties offered up to the median price will be let quickly (so no incentive to mark them down), whereas those marketed at an above-median price might find a tenant before they have to be marked down.  The median will steadily increase even if supply and demand are balanced.  It’s possible even the 30th percentile might not be enough to prevent this effect (since properties private tenants would pay less than the 30th percentile rate for will let to HB tenants at the 30th percentile rate).

5. And then there’s the 10% HB punishment if you don’t find a job in a year.

This makes absolutely no sense to me.  HB is supposed to be a payment in kind.  It’s to pay the rent.  If it’s reduced, then something’s got to give.  And apparently there’s more: I start to appreciate Polly Toynbee’s indignation:

“But that’s not all. The sum paid towards the rent will fall every year, in perpetuity: it will no longer rise as average local rents rise but will be pegged to the consumer price index. If that had happened in the last decade most people would have been priced out: rents rose by 70%, but the CPI only rose 20%.

Now add in something more sinister. Council tax benefit, worth an average £16 a week, is to be cut by 10% and then handed over to each local authority to decide how much benefit to offer: if some councils want to push poor people out, they can pay virtually nothing to their residents.”

This makes no sense.  I can understand the idea that you’ve got no job, the state covers your main outgoings (rent, Council Tax) and gives you £65/wk to manage the rest on.  But £65 seems pretty much a bare minimum for food, heating, clothing and so on.  Playing games beyond this point is simply vindictive.  To see someone of Cameron’s privileged background doing so is, frankly, a rather disgusting sight.

So, Ed, you need to inject some clarity into Labour’s position.   You’re going to have to give up some ground.  Most of what the Coalition is doing makes sense.  But punishing the unemployed doesn’t.

And come up with some alternatives.  A higher minimum wage to increase the incentive to work.  And a higher minimum wage in expensive areas, such as central London than elsewhere.

Most of all, please, please read the blogs and stop defending Housing Benefit of more than £400/wk!

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