Housing Benefit and the failure of austerity – Why work will always pay more…in welfare!

Where does all the hardworking taxpayers money go?  Just who are the recipients of this taxpayer largesse we now call welfare that we once called social security?

Pensioners receive more than £2 in every £3 of what is labelled as welfare, in fact 68% of all social security spending goes to the pensioner as even IDS admits in a parliamentary written response that I include at the end.

When the politicians, Tory AND Labour, cite the welfare scourge and welfare is unaffordable and it is all the fault of those on welfare (blah, blah, blah) they do not mean the ‘poor pensioner’ who has worked all their lives and by happenstance make up greater than 40% of those who vote and without whose vote no political party can or will ever get elected.

The political sleight of hand when it comes to welfare is that we need to look at the real welfare scroungers such as those on the dole who get less than 2% of the total spent on social security, sorry I apologise welfare!

Yet Job Seekers Allowance or as we used to call it dole accounts for about 2% as its cosy is £4.3 billion per year in 2014/15

However the politicians then add in other arguments such as they also get their rent paid so they truly are the real scroungers, the White Dee’s and other from Benefit Street (or 47 similar poverty porn TV shows) who sit at home behind closed curtains watching Jeremy Kyle on their (taxpayer funded) 52″ flat screen TV’s ….blah, blah, blah.

After the state pension the biggest area of welfare / social security spend in housing benefit at circa £24 billion per year so let’s have a look at that largesse reader

The current breakdown of HB spend

hb receipt Feb 2015

The above is a breakdown of the housing benefit spend taken from the latest official figures for February 2015 as released in May 2015.

Only 8% of the near £24 billion yearly housing benefit spend goes to those unemployed which is course means that 92% of housing benefit goes to those who are pensioners and those who are unable to work such as the sick and disabled and to those who are in work.

Below is the ‘inherited’ housing benefit spend which was of course £3 billion per year lower in cash or actual terms and in real like for like terms the housing benefit bill  increased under the last lot by £440 million per year.  This means the bedroom tax, benefit cap, LHA cap and the increase in the shared accommodation rate age, or SAR cap – the last lots policies of Iain Duncan Smith that all aimed at reducing housing benefit – all collectively increased this bill to the taxpayer.

The austerity policies of bedroom tax benefit cap et al simply have not worked

The bedroom tax, the benefit cap the LHA cap and the SAR cap do not work and do not save a penny, in fact they increase the taxpayer cost which is the direct opposite of their stated intentions.

The IFS think tank puts the additional taxpayer cost at £1 billion per year more though it fails to give any detail as I did three months ago when I posited they cost the taxpayer £440 million per year more.  Yet the key issue is that they do not save a penny and these austerity policies simply do not work as they directly create additional HB cost in other areas and especially in homelessness.  The reduction of the benefit cap will increase this even further and the greater you reduce the benefit cap the greater you INCREASE the taxpayer cost of welfare.

Here is the IFS view:

ifs hb real terms


So just who are receiving the taxpayer largesse of housing benefit?

The inherited HB spend

hb receipt May 2010


Unable to work – When you compare with the current HB spend you see that those unable to work remains at 37% of all HB claimants

Pensioner – the spend has reduced slightly in money terms from 36% to 33% because the age has increased to qualify for state pension age in benefit terms since 2010. So that is easily explainable.

Then we come to the in-work HB spend and the out-of-work HB spend and a significant change is apparent.

In May 2010 they were broadly the same with 12.89% and £2.69 billion per year in housing benefit going to those out of work and 13.42% or £2.80 billion going to those in-work and needing to claim housing benefit.

In Feb 2015 the inherited £2.69 billion spend in cash terms on the unemployed or out-of-work HB spend had reduced to £1.97 billion a significant reduction of almost 27% in cash terms and in real term a very significant 39% fall.

In Feb 2015 the inherited £2.80 billion spend in cash terms on the in-work HB spend increased sharply in cash terms to £5.26 billion and an increase of 88% in cash terms and 79% in real terms.

We now spend 2.7 times more on housing benefit for those in work as we do on housing benefit for the unemployed.

The rise in the in-work HB payment of some £2.5 billion per year is just another consequence of the same work will always pay more mantra of IDS and this is all down to the incompetence of the theory and practice of this mantra and of DWP and JobCentrePlus policy of the last lot and now current lot in that they totally ignored the take up rate of welfare benefits before embarking on their austerity policies.

The claimed mitigations of work a few hours more to pay bedroom tax and the take a 30 hour per week job at NMW to avoid the benefit cap and the massively increased sanctions and indeed the whole basis of the stalled and further stalled Universal Credit all ignore the non take up of welfare benefits before such austerity policies were imposed.

The DWP in June 2011 published the take-up rate of means tested benefits (and by definition the non take up rate) which showed that up to £6.9 billion per year of housing benefit was NOT claimed, as well as £8.34 bn of tax credits and many others.  Part of the housing benefit NON take up was the perception that it was an out-of-work benefit only, it was only the lazy indolent unemployed who could claim it if you will.

So when the austerity policies were introduced one of the ways to persuade those unemployed to take up a low paid job was to do a ‘better off in work’ calculation.  The unemployed person who may well have thought and probably did think taking up any job would mean they would not continue o receive housing benefit was surprised to find they not only still received HB but they also were paid additional welfare through working tax credits.

As a result the work will always pay more mantra fed directly into operational policy of the Job Centres to enable a significant number of those claiming dole to take up employment at the national minimum wage.

Hey presto (a) the unemployed figures reduce,  (b) employers have a steady stream of unemployed people to recruit who (c) were all at the threat of increasing sanctions in any case and (d) as a result a much greater take up of all benefit and tax credits entitled to followed,meaning (e) the overall welfare / social security bill increases.

The DWP last produced take up and non take up rates of benefit and tax credits in 2011 and these were 2009/10 figures (the £6.7bn of HB not taken up and the £8.34 bn of tax credits that went unclaimed etc)  and they have not produced these figures since as that would prove this hypothesis which is the only way to rationally explain the facts.

The austerity policies have seen the seemingly perverse issue of (a) a series of welfare caps has led to an INCREASE in overall spend; (b) the much heralded reduction in unemployment and the claim of there are a record number of people in work and other political hyperbole seeing an INCREASE in the welfare spend.

Now that we see the Labour Party too saying they will be tough and indeed tougher on welfare than the Tories just shows how much the political rhetoric pervades.  The facts, those pesky facts called numbers, all show that the welfare reforms have only succeeded in INCREASING the overall cost to the hardworking taxpayer and prove that austerity has failed and will continue to fail.

As long as the public believe this rhetoric that welfare reform has cut costs which IDS cites at every turn and is knowingly lying at every turn (yet cleverly fails to be drawn on any figures) then

– austerity will continue to cost the hard working taxpayer more in taxes and,

– lead to even more calls to, for example, reduce the overall benefit cap further,

– which will lead to even greater INCREASES in the bill,

– that in turn makes hard working taxpayers bay for more blood and further reductions,

– which in turn…


More than £2 in every £3 of social security spend goes to the pensioner? – Here is IDS in a written answer in parliament admitting that the pensioners receives 68% of the total in £116bn out of £170 bn in 2015/16



[Can you find £12 bn of welfare savings from the mere 32% of welfare spend or £54 billion that goes to working age people? Oh dear let’s move on!]




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