I have, until now, paid relatively little attention to the government’s proposed benefit cap. I knew it was there as a proposal but made no effort to find out whether I think it’s a good idea or not.
If you’re in the same position, here are a few things to read first:
- Tim Leunig (CentreForum chief economist) in the Guardian arguing against
- The figures behind Tim’s piece
- Mary Ann Sieghart in the Independent arguing in favour
The proposals
The proposals are for the amount of benefits a household can receive to be capped at £26,000 per year. Why £26,000? Because that is the median, after-tax household income in the UK. Being given £26,000 a year is the equivalent of earning £35,000.
The proposals would apply to all those in receipt of benefits apart from two exceptions: those on working tax credits (ie the working low paid) and those on disability living allowance.
Essentially, then, the people who will be affected are those who live in households where no-one works and the household currently receives more than £26,000 in combined benefits.
Is it fair?
It seems to me there are two arguments behind the proposed cap: the practical and the moral.
The practical argument, enunciated by Iain Duncan Smith, the work and pensions secretary, on the radio this morning is that the cap will incentivise work. The argument goes that the current system allows households where no-one works, particularly if they have a number of children, to claim so much in benefits (particularly housing benefit) that they can afford to live in houses in areas where people with the same size of family but where the parents work could never afford.
The cap, it is argued, will force those people to move out of the most expensive areas of the city and into a more affordable area. This, in turn, gives a greater incentive to work because the property to which they have relocated is affordable to them if they were to get a job, whereas the previous home in the expensive area would not have been (therefore disincentivising work).
(Incidentally, it’s probably worth mentioning one of the more interesting things IDS said on the radio earlier which I didn’t know. We keep hearing a lot of talk about how the changes would lead to more ‘homelessness’, but what does that mean? The technical definition of homelessness is, apparently, children sharing a bedroom. Seems rather perverse to me – not least because it means that I’ve just found out that at various points in my childhood I was technically homeless!)
The wider moral argument is that it is simply unfair for unemployed people to receive more in state benefits than the average household does by going out to work. In other words, those who work hard for a relatively low wage should not subsidise those who do not work to live in a nicer house in a nicer area. That’s a simply and fairly compelling argument.
What’s my conclusion? Well, I haven’t decided yet. Fortunately I’m not a member of the House of Lords, so don’t have to vote on the proposals tonight.
So what if you lose your job and live in an area you could afford when you were working? What if you can’t get another job for over a year? It took my husband 10 months of hard slog to find another job in 1994.
You have an incentive to work, an employment record to match it, but there are simply no jobs available. Should your family be penalised by being forced to move away from their schools/support network. Especially when you consider the expense of moving and the idea of having to do that while existing on benefits.
IDS is talking rot when he says nobody will be made homeless. There is a chronic shortage of affordable housing so it may be that a family gets evicted for not being able to pay rent and literally can’t find another house to rent. It’s not like the olden days when there was plenty social housing.
I am, however, perplexed as to why our peers have made an issue of this and not the cuts in benefits to sick and disabled people.
Should the taxpayer in that situation fund that family staying in the house indefinitely? I’m not so sure. Take an extreme example to demonstrate the point – an investment banker, earning £2million per year before the financial crash and living in a rented penthouse flat in central London with two kids and partner. Loses job and can’t find a new one and has no savings. Should the taxpayer pay the tens of thousands of pounds a month for them to continue living in the penthouse? And if so, for how long?
The technical definition of homelessness isn’t children sharing a bedroom, although one factor taken into consideration is whether a household contains children *of different sexes and over a certain age* sharing a bedroom.
One of the govt’s cleverest tricks in this debate is to construct this as a moral argument at all by saying eg. is it fair for hard working families in Sheffield to subsidise workless families to live in Kensingston?
But does that even make sense? That is not a hypothecated transfer that actually exists. It is notional. But it can be used to stoke up indignation.
You might as well say that the rich residents of Kensington pay a higher rate of tax which is then transferred to their neighbours to allow some poorer people to reside in the poorest accommodation available in area. That means they are available to take on the low paying jobs in the service industry that keeps the London economy running, without having to incur crippling commuting costs. As a practical matter the poorer people in Kensington will quite possibly be living in poorer quality accommodation than the family in Sheffield, albeit possibly in a nicer area.
And it is a myth that housing benefit only goes to those out of work. A substantial proportion of claimants are in work. And as rents have increased their numbers have increased. Also, you need to think about it dynamically. The Tories have constructed the policy around the stereotype of long term benefit-dependent households. Such households exist, of course, but for most people poverty is dynamic. They move in and out of work, on and off of benefit. Many recent HB claimants are those who have lost their jobs because of the recession. They were yesterday’s hard working families. The Government proposes to penalise many of them further for their misfortune by also rendering them unable to afford their current accommodation.
“Should your family be penalised …” – or should the family next door (with a low wage-earner) be penalised to pay your benefits? Someone has to pay in the end!
“Someone has to pay in the end!”
I agree- but let it be the rich 10 per cent who own 44 per cent of the country’s personal assets; in contrast the poorest half of households own just 9 per cent of the wealth (2009 figures according to the Financial Times).
I would think to make this fair the government should be equally proactive in cutting bankers and other investment tycoons’ huge salaries and bonuses through taxation, this money being used to offset the benefits bill and perhaps then there would be no need to cap benefits.
As for the incentive to work, the government should ensure a real minimum wage that makes benefits unattractive, not cut benefits to make low wages more attractive.
And don’t forget, many of these rich businessmen are actually subsidised by us through working tax credits; force them to pay decent wages and reduce the burden on the tax payer.
But one point you fail to address is, whatever other excuses the government makes for benefit caps, the real reason is ideology- supporting the rich at the expense of the poor. It is what the Tories do, always have done and always will do. Unfortunately, the Labour Party abandoned the poor to follow a similar philosophy, leaving the working class with no effective opposition and nobody to vote for.
“The wider moral argument is that it is simply unfair for unemployed people to receive more in state benefits than the average household does by going out to work. In other words, those who work hard for a relatively low wage should not subsidise those who do not work to live in a nicer house in a nicer area. That’s a simply and fairly compelling argument.”
I think ‘simplistic’ is a better word. Obviously large families are most likely to be affected by this. So the real question is – it unfair for a large family to be receiving more in benefit than an average-sized family would be earning?
Or – to speak in concrete terms – is it unfair for six unemployed mouths to eat more than than three employed mouths do on average? That’s not a proposition I would have expected a Liberal Democrat to agree with in the past. Now they seem to be queueing up to defend it.
From a Rochdale perspective, I assume that this cap will affect only a small number of people in this town. This is a guess, and it would be informative to know estimates of numbers affected in different constituencies.
A likely consequence of this cap is that families will have to move out of rich areas into poorer areas, or into different parts of the country. This seems very reasonable for the long term claimants, but not for short term between jobs claimants. (Caron’s comment). Government will need to put in place a system for moving families out of London and the SE to the rest of the UK.
Morally, I’m all for encouraging the work ethic.
There’s a distinct lack of facts and figures in the debate on this, so it’s very difficult to know who will be most impacted and where they live. However, logic dictates that it will be mainly people in expensive properties in cities, particularly London.
Nick, your investment banker in the example you gave wouldn’t get the full rate for his penthouse anyway – s/he’d get the maximum Local Housing Allowance for the area based on average rents and s/he’d only be allowed the maximum rate for they type of property deemed to be needed, not necessarily the actual size. Eg, if there were two of them living in a 4 bedroomed flat, they’d only get the rate for a one bedroomed flat.
Realistically this cap is going to affect families with children. Taking child benefit into account hugely unfair. Why should 2 professionals earning £44,000, from next year, get Child Benefit and not be taxed on it or anything while a family with much less will have it capped if they are also on working age benefits?
This measure is not going to affect a lot of people, but those it does affect could be in a lot of trouble. If our family has been out of work for a very long time, they are also going to be heavily disadvantaged in the labour market. They could diligently do every single thing asked of them by the job market, but who are employers going to pick – the person with the unblemished 20 year exemplary employment record or someone who has never worked? So, capping their benefits at a time when they are already heavily disadvantaged in the labour market is doubly cruel.
‘short-term between-jobs claimants’ – IDS was very insistent* that such people would NOT be affected in the same way as long-term unemployed.
*though without specific figures/measures
The average salary for a research scientist, with a PhD, and postdoc experience is £36K. The work is all on fixed-term contracts, usually 3 years, so you have to move to where the work is, or commute if you don’t want the upheaval & expense of moving every 3 years.
The proposed benefit cap is equivalent to a salary of £35K .
I wonder why the benefits cap proposals are so very popular?
Incidentally, to avoid the cap, all claimants need do is work 16 hours per week. Having been on Restart & JobClub in the past between contracts I can assure you that there are plenty of people out there who have absolutely no intention of ever coming off benefits if they can avoid it.
Yes, introduce transitional arrangements, but the principle of the cap is right.
In terms of ‘facts’:
The Govt’s own Impact Assessment published this morning (shockingly late in the process as usual) includes the following morsels:
- 52% of those affected with be lone parents, 35% couples
- 56% will be in private renting, 44% in social housing
- 54% will be in Greater London, 7% in Scotland&Wales (Birmingham the only LA outside GrL with more than 1000 cases affected)
- 69% of hhs will have three children or more (220,000 children in total)
Here is a good summary of the concerns:
http://www.insidehousing.co.uk/doubts-by-the-dozen/6520064.blog
Any links to justify IDS’s claim that the technical definition of homelessness is ‘chlidren sharing rooms’. It seems hard to believe, or at least something he’s deliberately being misleading on. I can’t find anything on the internet about it.
IDS clearly says (about 10 mins into the interview) that the definition ‘in government and things like Shelter’ is that children have to share rooms.
The Shelter website offers this:
“Who is legally classed as homeless?
In deciding whether you are homeless, the council has to look at any accommodation you have access to. You should be considered homeless if:
you have no home in the UK or anywhere else in the world
you have no home where you can live together with your immediate family
you can only stay where you are on a very temporary basis
you don’t have permission to live where you are
you have been locked out of home and you aren’t allowed back
you can’t live at home because of violence or abuse or threats of violence or abuse, which are likely to be carried out against you or someone else in your household
it isn’t reasonable for you to stay in your home for any reason (for example, if your home is in very poor condition)
you can’t afford to stay where you are
you live in a vehicle or boat and you have nowhere to put it.”
Nothing there about children sharing rooms!
I believe the cap is the correct path to take and that £26,000 is enough. People who cannot live within there chosen environment should move to a more suitable place.
I couldn’t afford to live in a nice part of London on my wage. I live in the outskirts and I commute to work.
I sometimes worry for the working class. Here we go again, divided by a debate that has two moral viewpoints, brainwashed by government into believing that their viewpoint is right.
What we should be doing is to make employers pay decent wages, not cutting benefits.
Then look at where the benefits are going; to private landlords for outrageous rents. So why can we not have a cap on private rents, thus reducing the benefits bill? Or would that upset the politician’s paymasters?
We have, over the last thirty or so years moved away from the belief that a strong and protective benefits system is essential, and that those that abuse it are a necessary evil if we are to protect the vulnerable to a belief that we must root out the swindlers and if the vulnerable suffer, tough- saves me a pound on tax.
We have become greedy; we have been divided by successive governments using that greed. And divided, we are easily conquered.
We should be one voice saying NO! to unfair, ideological cuts.
Factcheck has looked at IDS’ homelessness guff: http://fullfact.org/factchecks/homeless_overcrowding_children_share_rooms-3262
And it turn out to be nonsense.
On IDS’ claim regarding the technical definition of homeless, see also:
http://blogs.channel4.com/factcheck/factcheck-why-ids-cant-make-guarantees-on-homelessness/9166
“Shelter’s chief executive Campbell Robb was quick to dispute Mr Duncan Smith’s claim that the charity agreed with his definition of homelessness.
He said: “The Secretary of State said that, according to Shelter, families where children share a bedroom would be defined as homeless. This is simply not true. Shelter uses the same definition of homelessness as the government, as set out in the Housing Act 1996, passed by the last Conservative government.””
and also
http://fullfact.org/factchecks/homeless_overcrowding_children_share_rooms-3262
I think IDS was having us on.