Imagine for a minute that Grant Shapps the Housing Minister has moved on. You are Jim Hacker, the new Housing Minister and your first meeting on day one is to be briefed on the facts of the housing crisis that all sides admit we are undoubtedly in. If you can sort this out you are destined for higher office you think. Yet in these austere straitened times with the benefit system and cost out of control you know it won’t be easy.
Your civil servants put a graph in front of you and inform that private landlords charge and receive £2.7bn per year more in Housing Benefit than social landlords do for the same number of properties (and £3.3bn compared just to council properties). You look up and beckon him to continue. The civil servant continues and a few of his comments cause you to raise your eyebrow, yet each time you beckon him to carry on. He qualifies his previous statement and says he is talking about unregulated private sector landlords (PSLs) who charge the public purse £2.3bn more per year than the regulated private sector landlords charge. These are huge yearly sums you realise and rising each year.
You recall that in June 2010 the Coalition promised in the mini-budget to reduce the Housing Benefit bill from £20bn by ‘nearly £2bn.’ You are also informed this £18bn per year target currently stands at £22.4bn and rising. The DWP you note are expecting claimant numbers to rise 5% in 2013 adding to this.
Your civil servants then turns directly very simple graph (Chart 1 below) and you are told, correctly, that it represents the Coalition plans and that the CLG in whose ministry you sit, has revised its own rent inflation projections it published on 22nd December 2011 with the DWP policy on Housing Benefit that the DWP announced in October 2011 and then again on 6 December 2011. Your civil servants having to admit, without quite admitting it in so many words, that they never knew about the DWP plans, for these are consummate civil servants. It must be the case as there is no other explanation.
Chart 1 – Government Housing Benefit Plans
Do you as the new Housing Minister shake your head or would that show weakness and convey to your civil servants that your predecessor was so incompetent? Perhaps not you think and then you see straight away that the graph means two things.
Firstly, your predecessor and the Coalition plan to bring council rents up to unregulated private rented ones. But aren’t we meant to be reducing the burgeoning benefit bill you think. This shows we are increasing council rent costs to meet private ones and this is not the rent convergence you had previously read a little about or indeed is mentioned in the Coalition Housing Strategy. That convergence is all about getting council house rents up to housing association rents by 2015. This graph shows both council rents and housing association rents converging with private sector rents. Won’t this send the HB bill spiralling? Of course it will you reassure yourself you have got this right you think.
Secondly, you think this can’t be right as you notice that not only is this social to private rent level convergence what the graph shows clearly, it also shows that HB paid for the average council rent will exceed the LHA paid to the average private tenancy by 2029. What the hell was my predecessor doing? Grant always looked so convincing, as though he knew what he was doing, a consummate politician, so much so he’s been promoted to a full cabinet minister. You take a second, look up from the graph which thus far you have had to look at numerous times to believe it. It can’t be true surely. You turn to your civil servants and say:
“Can you please walk me through the data you have to arrive at this graph?”
“Yes, Minister” is the response.
You go to say you feel like Jim Hacker but you resist.
“Please do so” you say.
Sir Humphrey says he will explain this in a number of logical bullet points.
• The starting point is the national average housing benefit in-payment in the latest figures. £76 or so per week for the average social housing property and social housing is the name given to council and housing association properties.
• The current average figure for private rented properties (called Local Housing Allowance or LHA) is £111.69 per week.
• For the sake of completeness Minister we also have a small amount of regulated private tenancies getting HB of £79 per week
“Sorry to interrupt you there, just checking I have got this right” you interject “The unregulated private tenancy gets £111.69 per week and the regulated one gets less at £79 per week?”
“Yes, Minister, that’s correct” Sir Humphrey replies.
“OK, please carry on” you say.
• We at the CLG produced rent inflation plans for council and housing association rents to converge by 2015. This will see council rents rise 41% and HA rents rise by 24% by that time.
• Each year after we anticipate social rents to rise by RPI+0.5% which we assess as being 3.7% per year after 2020 with a range of rates before as we published in December.
• This RPI+0.5% formula has been in place for a number of years now Minister • Originally we planned at the same time to raise private rents (LHA) by RPI+0.5%
• However, DWP unbeknownst to us imposed a LHA rent freeze in 2012/13 and then each year after LHA will rise at CPI which we both forecast to be 2% each year and rents charged by private landlords will rise by 4% per annum
“So this explains the graph” You say
You continue: “The graph shows social and private rent benefit convergence and also that social levels of HB will be higher than private rents. Is that the policy?”
“Policy is for you to decide Minister” is the reply.
“But I thought our policy intention is to reduce the Housing Benefit bill this will add massively to it and spiral out of control?”
“Indeed Minister, but successive governments have had a policy of what has become known as letting ‘HB take the strain’” he says.
“Your predecessor wanted initially to change this having attacked the previous government on that basis. Yet he changed this as the DWP insisted on including HB in the overall benefit cap and as you are probably aware, it is the level of private rents that takes benefit claimants over the cap limit.
Sir Humphrey goes on:
Your predecessor was aware of how successful the strategy of ‘work must always pay more’ and that strategy implies strongly that Housing Benefit and LHA are only claimed by the out of work, when in fact 75% of new claimants since the election are in work. Letting HB take the strain became a most viable option Minister”
You need to say something and can’t let the civil servant continue as if he’s the one in charge!
“I see. But the Housing Benefit bill will continue to rocket.”
He has that knowing civil servant smile on his face but you let him continue..
“Yes Minister, however the overall benefit cap part of Universal Credit will capture more and more benefit claimants and offset a small part of this rise. More importantly, Minister, when the HB bill rises this will be blamed on the feckless and out-of-work and not on you Minister.”
You are slightly cheered by this. You realise that in the way the OBC works it is HB that will be the only benefit to be cut. Unemployment, sickness and disability benefits will stay the same and still be paid at the same national rate. Housing Benefit is the only variable benefit and not really a welfare benefit as it goes to landlords. Furthermore, HB being cut will mean I can say I was responsible for more cuts than my colleagues that is appealing for my future prospects.
“You began by explaining the difference between the unregulated and regulated private properties and landlords and the huge differential in what we pay them in benefit. Now it seems the policy is to bring social rents up to and then exceed private rents. It doesn’t seem to make sense. Surely we are exposed on this issue?” You say.
Sir Humphrey smiles that smile that only civil servants can smile then says:
“That is the policy you inherited Minister but the exposure angle has been covered by you predecessor, a most consummate politician if I may say. Mr Shapps was strongly against regulating the private rented sector as I am sure you are aware and converging social rents up to meet private rent levels takes away calls for such regulation.”
“My predecessor seems to have done well Sir Humphrey” you say.
Maybe Grant did have this all boxed off you think. He did appear to be a consummate politician maybe he really was after all. Lord knows the Housing Minister is a bit of a poisoned chalice and didn’t the last lot have about 9 of them. Your thoughts are interrupted as Sir Humphrey coughs…
“Ahem Minister.” You look up and Sir Humphrey passes you another graph entitled Chart 2.
Oh shit you think as you look at it and you notice he has a few more and that knowing look on his face that you know isn’t good news.
They are for later in the week dear reader as surely “Yes Housing Minister” needs a series and not just a one-off episode!