Tories criticise Ed Miliband’s ‘vacuous’ housing benefit reforms
As Miliband urges subsidisation of housebuilding rather than rent, experts say his plan will not generate savings for years.
Ed Miliband‘s plans to target the housing benefit bill with a new three-year cap on welfare spending will take many years to have an impact, his policy advisers warned on Thursday. He was also told that local councils currently have very few negotiating levers to use to reduce rents in the private rented sector, as he proposes.
In a speech designed to shift voters’ perceptions of Labour and welfare, Miliband admitted that voters had lost faith in welfare, and added that the previous Labour government had been too slow to make reforms.
The speech was dismissed as vacuous by the Conservatives, but welcomed by most wings of Miliband’s own party.
In his speech, he repeatedly identified housing benefit as ripe for reform. He said: “We cannot afford to pay billions in ever-rising rents when we should be building homes to bring down the bill.”
His aides said even a 5% shift from subsidising rents to subsidising housebuilding could allow the construction of 200,000 homes over four years.
Miliband promised to give local councils powers to negotiate lower rents on behalf of tenants with private-sector landlords. At present, he said, it was almost inevitable that tenants paid over the odds.
As a start, he disclosed that six big Labour city authorities propose to pool their negotiating powers to drive down private-sector rents, reducing the housing benefit bill and creating income to build new houses.
Housing benefit has risen for 15 years, both in and out of recession, partly because of the decline in council housing, changes in tenure, and an increase in working-age people on benefit.
But the proposals on housing benefit came under scrutiny from policymakers and the housing industry .
Miliband has derived many of his ideas from a pamphlet issued by the IPPR thinktank detailing how the bill for rent subsidy has risen at the expense of housebuilding funds. Its author, Graeme Cook, welcomed the proposals as “a start”, but said: “There is no way there will be big savings in the next two or three years from this.”
He pointed out that local councils at present have little leverage over rent levels in the largely dispersed private rented sector, since rents are set in a negotiation between tenant and landlord, with the subsidy for a tenant’s rent determined by national, not local, government. He said he did not see how councils could negotiate bulk-purchase private-sector rents.
Miliband on Thursday spoke about a radical devolution of powers to local authorities, but has so far balked at the IPPR’s main policy proposal for responsibility for housing benefit budgets to be taken from Whitehall and given to local councils.
Labour fears giving individual councils powers to set housing benefit levels, or the distribution between rent subsidy and housebuilding. The imminent integration of housing benefit into universal credit is likely to create additional complications.
But Labour believes that if it can crack the rise in housing benefit, it can unlock much of the argument about welfare. Between 1991-92 and 2008-09, the housing benefit caseload remained almost identical, at around 4.2m, yet expenditure rose from £10.2bn to £18.3bn in real terms (2011-12 prices). Higher spending has been driven by the continued transfer of council housing to housing associations (and so higher rents), the shift in the balance of claimants from pensioners to those of working age (with larger households and so higher average awards), and the greater use of the (more expensive) private rented sector, particularly in London.
Figures suggest that rents in the private rented sector have been rising faster. In May 2011 the average housing benefit award in the private sector was £112 a week, compared to £71 and £80 in the local authority and housing association sectors respectively. In the same financial year private rented sector was responsible 40% of the total housing benefit bill, housing associations 34% and councils houses 25%.
Chancellor George Osborne has said he also plans to give landlords certainty by setting out a ten year plan for social housing in the coalition spending review later this month. He is also planning to give social landlords powers to charge market rents for any tenant earning over £60,000 a year.
Miliband in his speech pointed out in the late 1970s, four-fifths of housing spending went on supply-side grants to support house building, with just a fifth channelled through rent allowances (the precursor to housing benefit). Since then, the proportions has been reversed. Miliband said “the best way to keep social security under control is to tackle those causes of rising spending – worklessness, the cost of housing because we don’t build enough houses in this country, the costs of low pay, subsidising employers who are paying low wages to their employees – all of those ways in which we would take action on the social security bill.”
He insisted these reforms could be achieved without leaving Labour’s values at the door.
He has so far won broad support for his carefully balanced plans from a remarkable spectrum including Frank Field, the former Labour welfare minister and Len McCluskie, the Unite general secretary.
The work and pensions secretary, Iain Duncan Smith, described Labour’s plans as vacuous, and more an excuse than a policy. Nevertheless, Conservatives have been surprised that Miliband has in effect said this week that he will accept all the coalition’s spending cuts unless Labour can find money from elsewhere – and not from borrowing – to pay for them to be reversed.
But Osborne, in the coalition spending review later this month, will set out challenges for Labour both about how tight the welfare cap might be in the future, and about the benefits that would be included in the cap.
Article courtesy of The Guardian
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