How can capping welfare benefits result in an INCREASED benefit spend? Joe Public must think a cap has to reduce expenditure and must reduce the benefit bill and convincing them of this simplistic lie is what this coalition rely upon.
Yet IDS and the DWP are selling a known lie and succeeding in selling that known lie too as the electorate is stupid and/or disinterested enough to swallow this hogwash. Why shouldn’t the electorate believe the hogwash as opposition MPs and parties also swallow this known lie hook line and sinker?
The coalition has so far introduced 4 separate policies all aimed at reducing Housing Benefit:
- The Local Housing Allowance (LHA) cap which CAPS the amount of housing benefit a private tenant gets introduced in 2012
- The Shared Accommodation Rate (SAR) which REDUCES the amount of housing benefit to those under 35 and before it was those under 25 who rent privately, introduced in 2012
- The bedroom tax which CUTS the amount of Housing Benefit to the social housing tenant by 14% or 25% – introduced in 2013
- The overall benefit cap (OBC) which (purports to)as its name suggests CAP the overall amount of welfare benefit a claimant receives and does so by cutting Housing Benefit and from 2013.
Individually and collectively these four welfare reform policies aim to reduce Housing Benefit and they all do, at least very superficially. However, in real terms and in actual terms the Housing Benefit bill has increased!
How can this be so? Surely, the CAPS, and CUTS and REDUCTIONS must mean that the overall HB bill must fall and surely as night follows day?
YET the facts prove otherwise and prove otherwise after allowing for inflation and allowing for the reduced numbers able to claim, the Housing Benefit bill has increased as I explain in detail here.
This can only be one or both of two things. It is either that other policies see an increase in Housing Benefit paid such as the misnamed “affordable rent” model in which social rent model housing (ie the normal council or housing association pricing) can increase to up to 80% of the rent charged by private landlords. Yet the official figures disprove this;…….OR
That the 4 policies above have associated added costs which, very conveniently, the coalition is not telling us about.
Associated increased costs with the Welfare Reforms
There are additional costs with these 4 policies which, collectively, mean the Housing Benefit bill has increased over and above inflation yet they are very complex and extremely difficult to get accurate figures for. That said, the FACT, and it is FACT, that the Housing Benefit bill has increased in real terms must mean this is the case.
The LHA caps (1 above) were the first to realise this when they were introduced in January 2012. The taxpayer will not pay more than £400 per week in LHA was the coalition reform in response to many hyperbolic stories of private tenants getting £100,000 per year or £2000 per week in Housing Benefit.
Put a cap in place of £400 per week seemed logical you would think? Yet it was known and stated at the time this was proposed that this would lead to greater cost and it did. Note that 9 months after this was introduced, the government figures revealed 5 families received £2000 per week in Housing Benefit: 5 too many yes but still only 5 across the whole of the UK.
An article in the Guardian in April 2012 a few short months after LHA cap introduction explains. In short a family privately rented a 4 bed house at £450pw. Prior to LHA cap the HB was paid but this was capped at £400 per week. Private landlord evicts as tenants couldn’t pay the £50 per week difference and tenants put up in 2 rooms in a Travelodge at £69 per room per night all paid for out of Housing Benefit. That is £966 per week when before it was £450 per week paid in HB.
Then BBC London did an investigation into Westminster Council paying out £153k per year to families who had been evicted as a result of the LHA cap and they were having to put up in 4 star hotels. In just one London borough we see more £100,000 plus Housing Benefit payments than in the whole of the country before these LHA caps were introduced. I would urge the reader to click on that link and watch the 2 minute or so video which contains actual bills paid out by the council as it is a stark example of the increased costs the 4 welfare reform policies have on the overall HB bill. There are so many more examples of how the welfare reform (sic) policies all increase the overall bill and collectively they lead to the taxpayer paying out MORE in Housing Benefit as a direct result of those policies
The same scenario of families being evicted and then placed in high cost temporary accommodation happens with the bedroom tax albeit taking more time to come to fruition as council and housing association landlords need a court order to evict unlike private landlords. Inside Housing reporting here that evictions due to bedroom tax, and note from council landlords alone, rose 19% last year. Temporary homeless HB costs across the country will typically be 5 times or more the Housing Benefit paid out than when these households were in council properties, typically £400 per week even in low rent areas compared with circa £80 per week before or even £60 per week with the 25% bedroom tax applied – or about 7 times higher per week.
These examples are direct consequences of these four welfare reform policies and have INCREASED the taxpayer cost directly. There are many more examples of how these not only increase the Housing Benefit bill but also the overall public purse bill. In short they also cost local councils more in homelessness cost too AND as the likes of the bedroom tax take their toll and build up arrears over time, both these additional cots will increase further too.
The above are a mere flavour of the increased taxpayer cost and there are many other examples which are complex and difficult to explain. The biggest increase is yet to come for the taxpayer too with the overall benefit cap which is hugely popular with the electorate yet creates much greater cost for the taxpayer.
The OBC encourages work. Specifically it encourages the take up of 30 hours work per week at National Minimum Wage and that creates taxpayer cost. If one member of the family takes up 30 hours per week at NMW they are exempt from the overall benefit cap and again, superficially, an apparent good thing.
However it means such a family pay about £13 per year in income tax, yes not a typo and per year is correct, and they still receive all the same welfare benefits and tax and child credits they did before. In simple terms no reduced benefits paid out and extremely negligible tax collected. The overall benefit cap systemically incentivises the “benefit family” to take up a job of no more than 30 hours per week and on no more than minimum wage. They will still receive full housing benefit and will receive working tax credit that they did not receive before and still keep all of their other welfare benefits and child tax credits too.
So not only does the overall benefit cap NOT reduce Housing Benefit, it also increases ‘benefits’ by additional working tax credits being paid which of course are also paid for by the taxpayer. It also means that employers will only offer NMW jobs as there is a steady flow of those this reform (sic) incentivise to take; the alternative being such families lose out financially.
Any employer is geared to making profit, that without any pejorative comment is their rationale. They will therefore seek more staff being paid NMW and this leads to below inflation wage increases for existing workers with more of them getting more in tax credits as a result and more zero hours contracts and employment instability and of course make the taxpayer pay out more in benefits and tax credits.
Then still to come we have Universal Credit which will increase the overall welfare benefit and tax credit bill massively. UC is a one-stop-shop and by that I mean one assessment and every person will be paid the correct amount of welfare benefits an tax credits they are entitled to. Not a penny more not a penny less and just what everyone is entitled to is the essence of UC.
However, currently and for decades, people do not claim what they are entitled to yet UC changes that as it inherently has 100% ‘take-up’ of all you are entitled to. It also means that benefit fraud is reduced of course – yet let’s look at some official figures.
The coalition say £1.2 billion per year of benefit is paid out in fraud and error. That’s a lot. But in 2012 the DWP released its most current version of how much is NOT claimed and used 2009/2010 figures which revealed that £6.7bn per year of Housing Benefit goes unclaimed, and that £3.1 billion of Pension Credit goes unclaimed making £10 billion of additional cost when UC comes in and far more than the £1.2 billion lost through fraud and error. It also revealed that £8.34 billion of child tax credits and working tax credits is known and admitted by the DWP to go unclaimed – That is over £18 billion per year unclaimed which will see UC pay out £18 billion per year more and the taxpayer have to be taxed £18 billion more each year just to pay for!
When this government says we have CAPPED benefits it does NOT mean benefits are reduced it means the taxpayer has to pay MORE
When this government says we will always make work pay it means that the overall taxpayer bill increases as much more is spent in tax credits than in income tax received
When this government says UC will roll six benefit assessments into one and we will save money it means that the taxpayer will have to pay MORE
When this government says UC will reduce fraud it will, but they conveniently forget to say the taxpayer will have to pay out 20 times MORE in unclaimed benefits
When this government say the welfare reforms of the bedroom tax reduce Housing Benefit, it does superficially, yet sees MORE in housing benefit paid out as I have explained above
When this government do all of this and assume the taxpayer is ignorant of the above and is stupid as CUTS and CAPS must mean the overall bill goes down just as night follows day they rely on the stupid electorate to believe this – and of course the much more stupid opposition MPs who cannot find a way to get across what I have outlined above even if they know and realise this is what CUTS and CAPS actually means for the taxpayer – INCREASED COST!!
In summary I have said all the above before and as long ago as 3 years or more before. So have many others predicted this will happen as it was stating the bloody obvious then just as it states the bloody obvious now when the FACTS prove the above. Of course that won’t stop pretentious idiots calling this counter intuitive or so other similar tag – it is merely stating the bloody obvious and now supported by the facts.
The proof of the pudding is in the eating goes the old adage. True and means the electorate have been fed so much shite by this government they are used to it and believe it.