Labour’s woeful and inept plans to address high private HB costs

Ed Miliband has made today what many have said – mostly before he spoke – as an important speech around welfare, or what he carefully called social security as ‘welfare’ is perhaps the dirtiest word in the political lexicon and a term Labour is seeking to avoid as many suggest the next election will be fought by the Tories stating they are the party for cutting ‘welfare’ and Labour is the party of increasing this hated ‘welfare.’

Housing Benefit has become a huge welfare / social security issue with its cost and how much that takes up of the overall welfare benefit spend.  And yes reader you would be right if thinking this is done so as NOT to talk about the £3 in every £5 of ‘welfare spend’ which goes to the pensioner – Yes the same pensioner exempted from all welfare cuts yet happen to make up over 40% of the electorate.  If you are in any doubt about that see the graph below and add up state pension and pension credit and the 28% of the HB bill that goes to pensioners (itself a further 4% of entire welfare spend) and all the (still) universal benefits such as winter fuel allowance. 

welfarespendgraph

It comes to over 59% or £3 in every £5 but that welfare spend is very much off the political agenda for cuts – and why any politician of whatever party who commits to reducing welfare spend has to cut pensioner benefits – and why no party will ever say they are reducing welfare spend, unless of course they lie about it as IDS and the coalition has done and figures show the welfare spend has actually increased by over £14,000,000,000 per year since they took office in 2010.

[NB – I am not saying above pensioners get too much or they should have benefit levels reduced I am merely pointing out some statistical fact which politicians CONVENIENTLY ignore]

Anyway back to Ed Miliband and looking at what he said about Housing Benefit – the real ‘evil’ welfare benefit now that pensioner benefits can’t be touched with any seriousness (Ed Balls reported denying winter fuel allowance to some ‘rich’ pensioners would only save £100m per year of the £200bn per year bill – about 0.05%!)  This is also why the tenant is being vilified (though of course not the pensioner tenant!)

Here is what Ed M said:

At the moment, we expect individual families to negotiate with their landlords. In these circumstances, it is almost inevitable that tenants end up paying over the odds. And so does the taxpayer, in the housing benefit bill. It’s time to tackle this problem at source. So a Labour government would seek a radical devolution to local authorities.

And Labour councils in Lewisham, Liverpool, Leeds, Manchester, Sheffield and Birmingham have all come to us and said that if they had power to negotiate on behalf of tenants on housing benefit, they could get far greater savings than the individual on their own.

So a Labour government would give councils this power. Bringing the cost of housing benefit down.

So EdM’s great plan is to get local councils to negotiate with private landlords!

The idea presumably is that these councils negotiate with the PRS landlords and reduce the amount of rent and LHA (private version of housing benefit) paid out.  So any future Labour government would simply blame local government or what the Tories now call Localism!!

Aside from the fact that private landlords average only 5 properties each and are not large or institutional investors so this plan couldn’t work in any case, or the costs of meeting after meeting with the huge number of PRS landlords would see the costs of this outweighing any reductions the whole idea is disingenuous as it assumes HB is the same across the country and it isn’t in some very key ways. I look at one of these and the most critical below the private:social landlord split in each LA area.

To explain EdM cites a number of Labour run councils which I put into a table below to explain some very significant facts overlooked.

Local Authority

% of private tenants on LHA

Lewisham

31%

Liverpool

33%

Leeds

30%

Manchester

26%

Sheffield

20%

Birmingham

30

National average

32.95%

Blackpool

73%

Welwyn

14%

UPDATE / NOTE:

To avoid confusion and ambiguity the table above shows the percentage of HB/LHA claimants in each area who are in privately rented accommodation

EG Liverpool has 65,315 HB claimants and of these 21,495 live in the PRS making 32.91%

As you can see a number of these Labour councils have a private and social tenant split close to the national average of 33% to 67% or 1 in 3 housing benefit claims is a private tenant.  Yet in Manchester it is only 1 in 4 and in Sheffield 1 in 5 and these two authorities will have far less bargaining power than Liverpool or Lewisham with the private landlords.

I have included two extremes and we see Blackpool with almost 3 out of every 4 HB claims being from a private tenant and Welwyn with less than 1 in 7.  The issues for all local councils across the country will differ markedly.  Blackpool Council needs the PRS landlord far more than Welwyn Council and is in a 5 times worse bargaining position than Welwyn. 

Beginning to see how local council ‘power’ varies across the country?

Or Liverpool has 65% less bargaining power than Sheffield to use EdM’s examples that either convenient or incompetently does see the huge difference the private to social landlord split makes in each area

Ironically councils negotiating en masse with PRS landlord could see LHA rates rise in places like Blackpool where PRS landlords have a lot more influence than say in Welwyn!  The same would happen in Torbay with over 70% private tenants and would see places like the south coast averaging over 42% private tenants seeing LHA costs rise in such areas and there is no shortage of such areas with West Sussex councils and the South West all averaging over 40% PRS landlords.

In Ed M’s own constituency Doncaster we see 38% being private landlord yet in neighbouring Rotherham it is only 26% and would this see Rotherham have lower LHA rates than Doncaster?  Sure that would make Ed M very popular in his constituency!!

I could go on with so much more on why this is nonsensical and ill thought through but the points are made and if this is Labour’s best efforts at curtailing the burgeoning PRS HB bill then the HB bill is only going to increase further!

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3 thoughts on “Labour’s woeful and inept plans to address high private HB costs

  1. Correct me if I’m wrong, but I thought LHA was calculated by looking at average rent costs for a whole local council’s area – one then looks for a place knowing that is the maximum they will be awarded. To bring LHA down, surely they would need to bring the *entire* private rental market down in each area? Negotiating rent would only possibly help those on the old system (where your benefit was based on what is a “fair” price for that size/condition/location property), who are gradually being moved in to LHA anyway, and those housed by council-employed associations… who already negotiate rent rates. I can’t see how this idea would help anyone!

  2. You know, when you see a graph like that you start to see just how little goes to the “scroungers” and as a percentage of the overall budget any reductions to the unemployed and sick is miniscule in the larger picture… it really is moving the deck chairs while the whole system sinks.

    Also when you think of how little fraud is as a percentage of its respective sub budget, about 0.3% IB: 0.5% DLA, it becomes next to nothing as a percentage of the whole budget; although admittedly a rather large “next to nothing” when expressed purely as a cash sum in isolation.

    It also puts the alleged savings to the HB, of 400million, by punishing circa 660K households and forcing them into destitution for having the temerity of a “spare room” into context… its no more than pissing in the wind in the overall bigger picture… no wonder when ministers speak of the bedroom tax and the benefit cap they use the total welfare figure and then the individual sub budget alleged savings in pure cash terms as the figures are mind blowingly large… but in context are minuscule when expressed as a percentage.

    I also found this by C4 to be rather interesting http://www.channel4.com/news/welfare-bill-out-of-control-labour-reform as it shows that welfare hasn’t really ran out of control despite it having increased over time… and even since the crash its only increased because of the contraction of the economy, as it always does, but if the economy improves (unlikely with Gidiot and Camoron in charge) it will once again drop in percentage terms.

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