The day has finally arrived when the overall benefit cap begins, THE most pernicious and ill-thought through of this government’s welfare reforms. The most costly of the reforms as the OBC will increase the welfare spend by a billion or so per year, yes I did say a billion pounds more than it saves.
Some are calling it a national benefit cap which is nonsense. We already have a national benefit cap as dole is £71.70 for a single person wherever they live and all other welfare benefits are set at the same level – a national benefit cap that we have had for decades.
The OVERALL benefit cap, the OBC, includes housing benefit or its private sector variant LHA and that is precisely the problem because the cap will only cut housing benefit and not welfare benefits.
It is one thing to have to reduce spending to live it is quite another to be made homeless as your rent cannot be paid given the average OBC cut is £93 per week according to DWP 2012 figures, or almost 7 times the average bedroom tax cut of £14 per week.
So think of the huge stress and financial risk of the bedroom tax to tenant and landlord which as adorned the papers, the radio and TV and social media since late January and then times that by a factor of seven and you begin to see the point!
The OBC is the elephant in the room and it’s a bloody big elephant too.
We won’t see a huge campaign against if from the political opposition as the coalition has sold this policy as being fair and that the £500 per week cap is the average household income. Yet that is also bollocks too. £500 per week may be the average individual income but it is not the average household income as a working household tends to have more than one earner; the coalition has overtly and knowingly lied on this point and to such an extent that Joe Public believes everyone on benefit gets £500pw free and buckshee from the state!
Joe Public does not realise that £3 of every £5 of welfare spend goes to the pensioner and if they did they would wonder how only cutting benefit for the 16 – 64 year age group can reduce the overall spend as!!
The powerful disability lobby we have seen in the bedroom tax won’t be as vociferous either as receipt of DLA exempts the household from the OBC. One wonders if the disability lobby will support the ‘able-bodied’ in the OBC as they have supported the disability lobby in the bedroom tax? Horrible terminology I agree but a very salient point.
The DWP sent out letters to 88,840 households in three tranches in 2012 and it says the average cut will be £93 per week meaning arrears evictions are a certainty and far higher in number and far quicker in time than bedroom tax arrears. yet the DWP still claim it will ‘only’ affect 56,000 households!
If we set a benchmark of 8 full rent weeks’ arrears as the eviction benchmark we see the OBC will have the average social tenant being 8 weeks in arrears by 26 August 2013. That will be 20 weeks into the financial year and the 25% bedroom tax tenant will only be 5 weeks in arrears if they have not paid a penny of the bedroom tax. After that date the part–payers of rent the OBC will create will come thick and fast as will their eviction for arrears. That is why the OBC will see far higher evictions than the bedroom tax and far quicker too.
The costs to local government who will have full homeless duties and need to accommodate these families in very expensive temporary homeless accommodation which will also see councils like my home city of Liverpool having to use B&B hotels for the first time will be enormous and the major reason why the OBC will cost more than a billion more to the public purse.
Where can these large families then go from this high cost temporary homeless accommodation which is also part of the full homeless duty when these families cannot afford the cheapest rented option?
Who knows and that question is a huge one and still has no answers.
It is especially relevant as DWP estimate that 46% of those caught by the OBC will now live in social housing!
Many mistakenly believe the OBC will only catch the private tenant in high rent areas such as London but they are incredibly naive in believing that.
Sure London has 47% of all those caught by the OBC, yet nationally a couple with 3 children will be evicted by their private landlords wherever they live and by their social landlords if they have 5 children or more and while such families only run into tens of thousands of the 7.6 million renting households that is still tens of thousands of large families and the OBC will likely double the current 53,000 homeless families there are in the UK.
It will also get worse each and every year as rents increase by more than welfare benefit levels or the cap level. This is the systemic flaw I discussed back In April 2012.
The public purse cost will be enormous to pay for this and even more so as these newly created homeless families will have no exit route from high cost temporary homeless provision and so stay there a lot longer.
88,840 families which say on average compose 6 people is over half a million men women and children newly homeless – a city larger than Liverpool!!
The OBC will directly create a homeless city larger than Liverpool! Is that stark enough for you reader?
One wonders why the LGA, the umbrella body for local councils are not shouting about the huge transfer of cost to local councils this will mean, about how councils do not have the money in their homeless or social service budgets or how having to spend on the OBC will see the politically sensitive elderly care being cut back or charged more for and a problem that gets worse year on year.
- Anyone begin to see why DWP gave local councils £65m for benefit cap DHPs and almost 3 times the £25m it gave them for bedroom tax DHPs?
- Anyone still think the OBC has any validity as a policy?
- Anyone still misguided enough to think the bedroom tax is bad in comparison?
Yes the OBC elephant is fucking enormous, so big we mistake it for the usual grey skies we have in the UK and simply do not see it! It’s time we did.
Above are some, not all, of the basic issues the overall benefit cap throws up. Below I begin to discuss some more and again in outline and all of these matters were covered in inordinate depth throughout 2012 on my blogs and simple search on speye and OBC, There are dozens of them.
The OBC works by taking welfare benefit levels away from the cap leaving a maximum that can be paid in HB or LHA to the tenant. And because we know how much in welfare benefits a household gets depending on the number of parents and number of children these costs are fixed…they are part of the national benefit cap we have had for decades.
For example a couple with 3 children receive £327.05 per week. This means the maximum that can be paid in HB or LHA is £172.95 per week (£500 less £327.05). Yet a couple with 3 children living in a 3 bed private flat in London have a LHA limit and likely payment of £340 per week but will only receive £172.95 and will be evicted as they cannot afford to pay the reduction in LHA of £167.05 per week – about 12 times the bedroom tax reduction.
A couple with 5 children receive £458.47 per week in welfare benefits and so will receive just £41.53 per week in HB. If they live in a 4 bed council house in the lowest cost rent area paying £100 per week in rent will they be able to afford to find £58.47 per week or 4 times the bedroom tax? No of course not.
Some more subtle issues.
(a) How often does a social landlord issue a news release to say their ‘benefit maximisation’ service has seen their tenants gain £1m more in welfare benefits? Often, yet the more welfare benefit the landlord helps the tenant to claim the more likely the tenant will be hit by the OBC!
(b) Following on from that the higher the welfare benefits received the greater the risk of arrears loss the tenant becomes to the landlord. The greater the arrears and higher the eviction level the more money a social landlord will lose…yet social landlord upon social landlord run ‘benefit maximisation’ services for tenants. For how much longer?
(c) Social landlords, like bees around the honey pot, adopted the misnamed “affordable rent” model which sees social rent rise from 50% or less of market rent to 80% of that figure. Yet the greater the rent level the more likely a tenant falls foul of the OBC and of course the higher the arrears loss an greater financial risk to the social landlord. Those social landlords who rushed headlong into “affordable rent” are now much more at risk than those who did not and all because of the OBC.
(d) Now the Housing Minister Mark Prisk said that he expects all new lets to be at this misnamed “affordable rent” figure and disincentivises those landlords who don’t do this! Yet when more and more relets become affordable (sic) rent ones, the social landlord has increased the financial risk of arrears considerably – So much for joined up thinking by government and by social landlords!!
(e) Today the social landlord has to be risk averse in accommodating the large family because of the OBC – large here means 5 children of more in the provinces and 4 r more children in London. Yet with the affordable (sic) rent model becoming more prevalent the same high risk families become those with 4 children in the provinces and 3 children or more in London. When (and not if) social landlords become far more reluctant to accommodate the ‘large’ family where will such families live?
(f) That latter point is a critical one. The PRS will be evicting larger benefit families en masse and council will be seeking to rehouse them as part of their homeless duties in the SRS. Yet this in financial terms is simply a transfer of financial risk from the private rented sector to the social rented sector – a huge bottom line risk for social landlords who themselves will be evicting the slightly larger families and suffering rent loss there. Yet how likely is it that a 2 parent 3 child PRS household is evicted moves into SRS yet then has another child? Or a 2P4C PRS household does the same? The OBC also directly dumps large PRS families on to the social landlord and this creates even more financial risk for the social landlord.
How long before social landlord allocation policies effectively (and informally) ban the larger family which ss what they will have to do for financial reasons. When I have raised that legitimate financial point social landlords typically respond with outrage. The how dare you say we wont house the larger family and it is in our ethos our very core to house ALL vulnerable families, etc etc.
Yes it is now and always has been….bot no longer with the practical financial risks the OBC directly causes!
So just where the hell will the large families live? The only certainty is they need to work even on minimum wage as receipt of tax credits exempts them from the cap. Yet what if they are made redundant or lose the job for any other reason? The moment that happens the social landlord is in deep financial trouble as will the tenant be; financially both will be in the shit in common parlance.
- Yet has anyone read where a social landlord has come out publicly against the OBC?
- Has anyone read that social landlords are stopping their ‘benefit maximisation’ services?
- Has anyone read or heard a social landlord say affordable (sic) rent is moronic and unworkable because of the OBC?
- Has anyone read a council landlord saying the OBC will greatly increase the council’s cost of homelessness?
- Has anyone read that any social landlord has said that they will not be able to afford to house the larger family because of the OBC?
No they haven’t and you begin to see why the OBC is an enormous elephant in the room and why social landlords over focus on the bedroom tax, however too late that has been as well, means they have ignored the OBC and its much greater impact on the social housing model than the bedroom tax.