£6.3bn pa extra in HB cost – Bleak House and the autumn statement

The Autumn Statement yesterday by the Chancellor and the Office of Budget Responsibility (OBR) report that accompanies it has been receiving much media attention since lunchtime yesterday.

One of the issues we can comment upon is the woeful ineptitude of the coalition in respect of Housing Benefit costs as the OBR report provides estimates of its costs until and beyond the next election.

The current latest position as at August 2012 is that the HB bill is at £23.57bn.

The OBR forecasts at table 4.22 on page 143 that it will rise by the following:

  • (a) £600m in 2012/13
  • (b) £700m in 2013/14
  • (c) £600m in 2014/15
  • (d) £500m in 2015/16
  • (e) £400m in 2016/17

At April 2012 it stood at £23.34bn so the figure for end of March 2013 will be £23.94bn: At March 2014 it will be £24.64bn: At March 2015 it will be £25.04bn.

At May 2015 (the next election) it will be £25.13bn

(Note: the above figures don’t include the additional £400m per year that LAs spend on HB but don’t get back from central government grant and so we can add another £1.45bn to that total – see 4.169 on page 154 of the OBR report.)

The May 2010 inherited HB position was £20.8bn and in June 2010 the coalition said their welfare reforms would reduce the HB bill by £2bn by the end of the parliament in May 2015.  This gives the (initial) coalition HB target of £18.8bn.

So the first thing we can say is that the HB bill will have risen by £6.33bn per year more than the coalition forecast – and that they have missed their target by a whopping 34%!

It also means the welfare reforms, such as the bedroom tax, overall benefit cap, etc which all reduce HB but not welfare benefits will fail and miserably so.

So why the hell are the ‘welfare reforms’ going ahead?

That’s known as the ‘bloody obvious question!’ It makes no sense (financial, economic or social) to proceed with them.  If they don’t save money, if they don’t improve (the literal meaning of reform) and if they cost the tenant, the benefit claimant, the landlord and the country (taxpayer and public purse) more, just what is the point?

Autumn Statement – other issues

The banning of HB to under 25s failed to materialise – not a shock if you read ny comments on this charade back in April 2012 when first raised or in June 2012 when Cameron raised them again.

The systemic flaw issue became more apparent with limiting the overall benefit cap and welfare benefits to 1% rises while nothing was said about social rent levels which will increase by 3.1% next year and triple the rate that the cap and welfare benefits rise thus making the SF more apparent and in simple terms a 27.4% increase in social rent in real terms.

However, zut alors, quelle surprise or WTF ….the coalition have actually listened and have done something right for once.  Yes that’s not a misprint and Yes they have done something right in taking exempt and supported accommodation out of the overall benefit cap calculations.  Well done but not before time as this is the reason I started blogging in the first place and way back in the summer of 2011 I was saying that refuges and hostels will close in their droves if they were included in the OBC.

Here is what was mentioned in the Autumn Statement:

2.66 Household benefit cap exemption – Housing payments for those in supported exempt accommodation will be disregarded for the purpose of the benefit cap. Funds available for Discretionary Housing Payments will be reduced by £10 million in 2013-14 and 2014-15, and by £5 million in 2015-16 and 2016-17, to fund this measure

Ok so we don’t have any more detail as yet however there appears no ambiguity in the above and this is very welcomed and the right thing to do.  I could make reams of comments on how this shows the coalition was wrong and that they failed to see these consequences and that these real fears appear nowhere in impact assessments for the OBC or in the DWP consultation paper of last year. All would be true and valid but the fact this has changed and vulnerable people will be protected and enabling their access to hostel and refuge far outweighs the political points.

Supported housing can breathe a sigh of relief over this.  General needs social housing cannot aside from the under 25s HB issue which I still maintain will see SAR applied to social housing after next election to the under 35s so as to level the social and private rented playing field. The OBC is the real issue there and one which the chancellor and the coalition ignored and the one which social landlords have most to fear as it will give a much higher risk to arrears than the bedroom tax.  Arrears will rocket, more tenants will be evicted, huge increases in homelessness and its cost will materialise as a result of the welfare reforms which the OBR forecast will see government expenditure on benefits rise from £182bn in 2012/13 to £193bn by the end of this parliament (table 4.22 OBR report).

Like the U-turn on supported rents many more aspects need greater detail.  The additional £400m per year that LAs will spend on HB that they don’t get back for central government has huge consequences.  This is one of the elements of the Pickles letter in which the government knew back in July 2011 that the additional costs such as temporary homeless accommodation would exceed the claimed £270m saving.  £400m is more than £270m yet Osborne, IDS, Freud et all clearly don’t want this known else it wouldn’t be hidden in the OBR report.  Note well this £400m is additional to the temporary housing costs which are reclaimed from DWP!  The real cost of this sees the coalition trying to hide £400m per year of this added cost and also transfers that cost from central to local government….cue even more of the homeless diaspora as high rent areas seek to move all homeless people to Hull!

The pay more to stay proposals are included but little detail and it’s still remains to be seen how accurate the OBR estimates are for HB spend.  Note here that last year they forecast HB would reduce by £300m yet this has become a £700m increase – so only £1bn out!

Every indicator, every estimate, every official release of costs shows that the welfare reforms and the HB bill are rising inexorably.  This coalition doesn’t know what it’s doing when it comes to housing and housing benefit and yesterdays Autumn Statement (exempt accommodation excepted) show that frankly it doesn’t give a damn about social housing as the additional 3200m given to PRS landlords from the Montague report clearly shows (don’t worry most of the commentators missed that one too (see 2.35 of the Autumn Statement)

In summary and with the exception of exempt supported accommodation the Autumn Statement paints a very bleak future for social housing.  It remains to be seen how bleak when we get full detail of pay more to stay and other issues, but it’s definitely bleak housing.


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