Welfare reform: the real iceberg

As the Welfare Reform Bill wends its way through parliament there’s been a lot of discussion, and indeed acrimonious debate, about many of the proposals that will impact on the level of benefit that numerous categories of claimant will receive in future. That’s right and proper because there are going to be, and already are, a lot of losers. Whether it’s the overall cap on benefit (most likely to affect claimants that live in the South East of England, or those with large families anywhere), or the increasing deductions for non-dependants (where the housing benefit recipient lives with a non-dependant who is working, and who is deemed to be making a contribution to the rent, whether or not they actually are, but that amount is deducted from the claimant’s HB anyway), or the “under-occupation” rules (where someone living in a property deemed larger than that which they need will only receive HB in respect of the size of property they “need” regardless of the rent on their actual property), or the sudden and radical discovery that anyone up to the age of 35 is really a child and can’t possibly need a home of their own – just in the arena of housing benefit alone, thousands of claimants will be worse off, and frequently substantially so. Add to that all the proposals for changes in incapacity benefit, unemployment benefit, and much more besides, it’s not perhaps surprising that this is where all the public disagreements are being played out. It’s certainly the area of political dispute, with Labour joining with vociferous bishops, and a few brave coalition refuseniks, to castigate the government in general and Iain Duncan-Smith in particular.

But in truth, none of these issues will wreak the havoc that will flow from another part of the reform bill – and it’s a part that everyone across the political spectrum agrees with and supports. That is the business of direct payments. At the moment the vast majority of tenants in social housing, be their landlord a housing association or a local authority, never see the housing benefit that pays their rent. It’s paid straight from the benefits system to the landlord concerned. It’s this “invisibility” of the transactions around rent for all tenants on full housing benefit (around 60% for most social landlords, and a lot higher for some in particularly deprived areas) that worries the government. To all intents and purposes for those tenants, argues the government, their housing is free. They don’t pay rent at all. The government believes that this is both an affront to “hard-working families” with mortgages or private landlords to pay and, more profoundly, a powerful incentive to remain on benefit rather than to work. The government believes that this very process is corrupting, removing independence and self-reliance from the lives of millions of citizens to their detriment, and to the detriment of society at large. Not to mention the eye-watering cost, of course. And so the government is proposing to administer a short, sharp shock of realism into these claimants’ cosy and dependent lives. They are forthwith going to join the rest of society in having to budget, to make choices between competing financial liabilities, and to get off their butts and work.

This is a powerful narrative. Who is going to say, “No, we should treat poor people like children, and do all their financial thinking for them. They can’t possibly have the intellectual capacity to deal with such decisions, to trade off paying the rent against the electricity bill, the shopping against a nice holiday in Tenerife. And in any case, they can’t be trusted – if you give them the rent money in their hands, they’ll spend it on drink, drugs or both.” Well, no-one is. Which is why there is no political or moral counter-pressure on this aspect of the government’s proposals.

Yet this seemingly unanswerable moral case for treating benefit claimants with the same respect as anyone else in society brings with it formidable and potentially chaotic consequences. The key plank is that receiving benefit should be just like receiving a wage. And indeed that in many cases benefit is simply a supplement to a wage. As claimants move into part-time work, they will receive some of their money from their employer, and some from the state. As they work more, or in better-paid employment, the supplements will fall seamlessly away. If they move in the opposite direction, benefits will equally seamlessly take up some part at least of the slack. But this can only work if benefits, including housing benefits, are administered centrally, and with access to tax, council tax, and loads of other income and benefit, data. So it’s goodbye to local authority revenue and benefits departments where claimants could go in person, and where staff might actually know them. Of course, such a complex mechanism will need a suitably complex IT system to support it, and indeed one is currently under construction. We needn’t worry about that, because the track record of large-scale IT procurements in the public sector is so wonderful. Look at the NHS patient records system. At the inland revenue system. Look at the new emergency services control centres. See? Oh.

We’re making direct payments to claimants because it’s wrong to treat them like children or, to put it another way, because they should no longer be able to dodge the responsibilities of life. They need to develop budgeting skills like the rest of us. Except that budgeting skills are required in inverse proportion to the amount of money you’ve got to budget with. It is breathtakingly arrogant for millionaire cabinet ministers to cajole the very poorest in society into obtaining budgeting skills that millionaires don’t need; and millionaires have accountants to provide such skills on their behalves anyway.

And for very many housing benefit claimants at the moment, life is already an intolerable struggle. They are having to juggle so many things, and it’s no argument to say that they have brought some of those things on themselves. Many have drug or alcohol problems to contend with. Many are victims of domestic violence. Many have little or no parenting skills because they themselves were never effectively parented. Many have genuine and debilitating health, or mental health, problems. Many struggle with language. Many have never had as much cash as a month’s rent in their hands in their entire lives before. Many haven’t got, and can’t get, bank accounts. Many are already living in fear of loan sharks or pay-day loan exploiters.

But at the moment there is one thing they often don’t have to worry about. Keeping a roof over their heads, and over their children’s heads. Now, in the name of a pious and seemingly so right and reasonable desire to increase their independence, the government proposes to wrest even that small certainty from their lives.


4 thoughts on “Welfare reform: the real iceberg

  1. Housing benefit strikes me as a bit of a crap way of providing social housing, it looks an awful lot like “landlord benefit”. I’d have thought local councils would work much better as a bulk supplier of social housing (either by negotiating better rents on behalf of tenants, or direct provision).

    Benefits do differ from wages, if I don’t work I don’t receive my wage – I have to go do something for a large chunk of my waking hours to receive my wage. This sounds a bit harder line than I intend since I don’t believe there is a natural law that says there is “productive” work for everyone to do so it’s inevitable that we need to provide out-of-work benefits.

    You also have a hang-up about the wealth of cabinet ministers, I see 😉

    • If by “hang-up” you mean that it’s a problem only in my head because of some psychological disturbance of mine, then I don’t think I agree! I’m merely pointing up the irony, if nothing else, of rich people telling poor people about how the latter should be better with money.

      Of course it’s the government, not me, that is saying benefits and wages should be a continuum. As for local authorities being a “bulk supplier of social housing” that’s exactly what all of them used to be, even if only a minority still are. I don’t see how that deals with the “problem” of housing benefit. HB in the private rented sector is I guess what you’re driving at when you talk of “landlord benefit” although payment to landlords stopped in that sector some time ago.

      The problem with having a private rented sector is that private landlords can charge whatever the market will bear. It’s only because we have attacked the supply of public housing that we need a private rented sector for those on low wages or none. It’s a bit pointless to complain that private sector rents are too high if the complainant (in this case the coalition) is committed to an unregulated private housing market. If you want the cake of free enterprise in housing, you have to eat at the price the market demands!

  2. Another ill-thought through top-down tory reorganisation. Thanks for laying it all out so clearly. Particularly agree with your point that budgeting skills are needed in inverse proportion to the money you’ve got. I would also add that in the market-orientated Western capitalist society we live in you have to be incredibly savvy to hang on to that money and spend it in the way you intend. My immediate concern on reading your post is that we will see some or even many housing associations go bust as a consequence of this change in the method of payment.

    • I think the financial stability of housing associations is simultaneously both at serious risk, but ironically also an important moderating factor. So much private money – many billions – is exposed to housing association risk that this (rather than the social misery which ought to be the restraining factor) is the one thing that might prevent the government from simply letting the devil take the hindmost. But we shall see. As social and financial experiments go, this one is either very bold or, more likely, downright foolhardy.

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