The Tory-led coalition introduced the Welfare Reform Act with many policies collectively aimed at reducing the Housing Benefit bill by “nearly £2 billion per year by 2014/15”.
The actual HB bill has increased by £2.1 billion above the governments target and so is £4 billion above the ‘inherited’ figure in real terms.
This means that all of the welfare reforms (sic) listed below which all aimed to reduce the HB bill have failed:
- LHA cap
- LHA increase in SAR age from under 25s to under 35s
- LHA freeze in 2012/13 and in 2013/14
- Bedroom Tax
- Benefit Cap
The Chancellor announced a package of Housing Benefit (HB) reforms in his Budget statement on 22 June. Ministers are clear that the overall cost of HB, forecast to be around £20 billion this financial year, must be controlled and reduced. The package of reforms will save nearly £2 billion by 2014/2015
Housing Benefit reforms (1 – 5 above) all aimed at reducing the overall Housing Benefit bill by nearly £2 billion by today in 2014/15.
The House of Commons Library in SN/SG/5699 published in November 2010 gave nominal figures for this estimate of the coalition
As you can see in column 2 we have the government estimates for the HB bill form 2009/10 right up to 2015/16 and these make up the estimated coalition figures – what the government expected to be the overall cost of Housing Benefit. I have put this is one of those simple graphs together with the actual Housing Benefit cost figures below.
As you can clearly see reader the expected HB cost as at the latest figures for August 2014 would be £21.487 billion yet they are £24 bilion or some £2.5 billion more per year than the government said they would be due to the welfare reforms all of which were welfare cuts to Housing Benefit.
So the HB bill is almost £7 million more PER DAY than the government estimated it would be and that really shows the extent of the failure of the welfare reform policies of the bedroom tax, benefit cap and LHA changes.
The welfare reforms to Housing Benefit cost £7 million more PER DAY than expected.
Look at the graph again and note that the gap between budget and actual is getting bigger and this coincides with the increase in reforms as the benefit cap was delayed. So the more reforms that come in the greater the increase in Housing Benefit cost!
The welfare reforms (sic) have all FAILED
To move a bit more in-depth we see today the Institute of Fiscal Studies, the IFS think tank has produced widely circulated figures which say (a) the overall HB bill is £1 billion above the estimate and, (b) this is due to an underestimate of the cost of housing benefit in the private rented sector. Yet both of these are wrong.
As the graph and comment above shows the housing benefit bill is £2.5 billion more than expected not £1 billion – an note too that the LHA freeze brought in and operated in 2012/13 and 2013/14 was not part of the original plans. This was simply an added ‘cut’ to try and bring down the PRS bill and overall housing benefit bill.
Yet just how the IFS can assert and deduce their chronically underestimated £1 billion increase was due to the PRS cost is incredulous. Note the HoC paper above stating how much the cost was expected by the three sectors of council housing, housing association housing and PRS housing.
Here are the budget -v- actual figures at end of March 2014, that is year end.
- Council housing expected £5.396bn – actual £5.876 bn – hence £480m more than expected
- HA Housing expected £7.480 bn – actual £9.515 bn – hence £2,035m more than expected
- PRS Housing expected £8.344bn – actual £9.146 bn – hence £802m more than expected
So the real underestimate and real added cost above expected is the £2.035 billion more in housing benefit cost for housing association tenants which is 27% more than expected. The PRS total is 9.6% more than expected and council housing is 8.9% more than expected.
The overall HB bill is 11.64% more than expected.
Make no mistake the welfare reforms have failed and their failure is growing by the day!