Housing benefit bombshell has been building up for decades


Why are we being asked to believe it is such a surprise that the number of working people who have to rely on housing benefit has doubled in the last five years – at huge cost to the taxpayer?

It is all part of the “long-term economic plan” that the Conservatives keep mentioning, every chance they get.

That plan is to provide government support to major employers and to private landlords rather than the people who need it.

We know that the Conservatives have spent almost 40 years working to undermine working people, with policies designed to increase financial insecurity among those who have to work for a living. For example, the humbling of the unions ensured that increasingly meagre pay settlements would contribute to an ever-widening gap between the lowest and the highest rates of pay. Huge amounts of wealth have been transferred from the masses to an ever-smaller ‘elite’, guaranteeing their support for the Tories.

Ever-diminishing pay and rising living costs have meant that increasing numbers of people have had to claim benefits, even though they have been in full-time work. Again, this attacks people on low and middle incomes, rather than those who are paid the most; people in the highest tax brackets have been able to take advantage of legal tax avoidance schemes, some of which have been created by the current Chancellor, George Osborne. That has left those on lower pay scales to subsidise housing benefit through the taxes they pay – another drain on their resources.

Depressed rates of pay for those in work have necessitated government action on benefits for the unemployed, in order to justify claims that the Coalition has been “making work pay”. This has meant below-inflation increases in out-of-work benefits that have made them inadequate to cover living costs, forcing the unemployed to face the possibility of losing their homes and possessions to the bailiffs as their debts mount up. In order to avoid this, they find themselves forced to accept work at ridiculously low rates of pay, if they can find it.

This in turn has made it possible for employers to refuse calls for pay increases – anyone making such a request may be told that an unemployed person would happily do their job for even less – and so the wheel turns back to its starting point and the cycle begins all over again.

A consequence of all this is that private landlords benefit from increased inflows of housing benefit into their pockets. The law allows them to increase their rents in line with the going rate, with no reference to tenants’ ability to pay; housing benefit is then used to help tenants achieve that amount, but it is the landlord who benefits from the increase – not the tenant. These are people who are already, by definition, well-off – otherwise they would not have been able to buy the property and make it fit to rent out.

The Conservatives’ “long-term economic plan” is to leech wealth from anybody poorer than them and create a new feudalism, with themselves as lords and everybody else as vassals, only able to make a living under conditions granted by the moneyed few; a modern slave-state.

According to The Independent, the cost to the taxpayer of in-work benefits will be £6 billion by 2018-19, nearly triple the £2.2 billion it cost in 2009-10. LabourList reckons the total cost of in-work poverty by 2019 will be more than double that amount, at £12.9 billion.

The total cost of housing benefit has already almost tripled, from £8.8 billion in 1990 to £24.4 billion now – despite the apparent efforts of Iain Duncan Smith’s Department for Work and Pensions. This is because all their cost-cutting efforts have been about finding ways of denying the benefit to people who deserve it.

Helping people earn enough to obviate the need for housing benefit runs contrary to the “long-term economic plan”, you see.

And what do you think this says about where the benefits of economic growth are going?

The Independent article states that the Department for Work and Pensions has claimed the number of unemployed housing benefit claimants has fallen since 2010, arguing that it is better for people to be employed, paying taxes and contributing towards their rents than to be “languishing” on out-of-work benefits, living on government payouts.

Technically, this may seem like a good argument. The minimum wage for full-time work is £11,700 per year, more than the increased tax threshold introduced by the Coalition government – but this means that, with Income Tax at 20 per cent, a full-time worker would lose one-fifth of everything earned above the £10,000 threshold, passing just £340 on to the government. They are likely to receive more than that in housing benefit. And the level of pay is still a pittance.

Worse still, a drop in the number of unemployed claimants does not mean they have all found jobs. Some will have been pushed off the system by the Bedroom Tax, which has made it impossible for some households to meet their rent commitments.

And there is no guarantee that the extra working people are paying taxes either – they might be self-employed (or claiming to be self-employed – see earlier VP articles on the subject) who are not earning anything like enough money to provide for themselves; they might be on zero-hours contracts – technically in work but on health-endangering wages; they might even be on a government-mandated Workfare scheme, in which case their only pay will be state benefits.

Mark Harper, Minister for Disabled People, claimed that the Coalition government had taken action to get the system under control by capping benefits “so no family can claim more than the average family gets by going out to work and we’ve put an end to unlimited housing benefit”.

He added that Labour voted against the cap, and against a general limit on benefits.

But this is disingenuous. The Tory/Coalition benefit cap was set at a level more than £5,000 below the income an average family receives – because it didn’t take into account what such a family would get in benefits! It seems likely that level was pegged lower because the Tories realised that a cap at the proper level would mean almost nobody would be disqualified from receiving benefit.

Harper’s claim that the system under the previous Labour administration “saw some people claiming £104,000 a year,” is also disingenuous as it related to a handful of people in specific circumstances. None of them are receiving anything like that amount now, and it is unclear whether this had anything to do with Coalition policies.

Labour, on the other hand, has hit the nail squarely on the head by pointing out that the rise in benefit claims is entirely due to the Tory-led Coalition’s failure to tackle low pay, insecure work and the cost of living crisis – although the opposition party stopped short of actually claiming that this was the plan all along.

The party has said that, if elected into office, it would build more homes and cap rents, easing the excessive demand that has made it possible for landlords to demand more and preventing abuse of the rental market.

Labour would raise the minimum wage and introduce contracts for the living wage – at which an employee earns enough not to need benefits – wherever possible.

Both sides are treating housing benefit like a disease.

The difference is that the Conservatives want to cure it by attacking the victim, while Labour want to attack the cause.

Which would you prefer to have as your doctor?

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  1. Stephen Bee August 6, 2014 at 3:12 am - Reply

    I think its called a long term plan..because they have no fr***in’ idea if its actually gonna work..so they kick it into the long grass whenever challenged..as to your own words mike..yourself and other bloggers really HIT the spot…if only we could get politicians to tell it exactly as you espouse…the world would be a much better place ..x

  2. Mr.Angry August 6, 2014 at 6:25 am - Reply

    Brilliant article Mike, can see it in a different perspective in the way that you have explained it. Makes good reading and some excellent points exposed that tells it how it is. Thank you, Increases my sheer contempt for those pompous idiots.

  3. Adrian August 6, 2014 at 7:27 am - Reply

    Mike, I’m surprised you have got your tax figures so wrong! I thought you were good at checking facts! IMHO that’s a very poor mistake to make.

    If I’m not mistaken in this example, the tax to pay for the year 2013 /2014 would be £340. The first £10,000 earnt is tax free, it is only the amount earnt after that which is charged at 20% (40% and so on for higher earners), therefore on a salary of £11,700, 20% of £1,700 = £340. Leaving the worker with £11,360 after the tax was deducted.

    See this link for the different tax rates depending on how much you earn – https://www.gov.uk/income-tax-rates/income-tax-rates

    Other than that I agree with you on the reason for such a large Housing Benefits bill to the tax payer.

    • Mike Sivier August 6, 2014 at 9:15 am - Reply

      You’re absolutely right. That’s what I get for writing articles at 3 in the morning!
      It’s still a pittance, so I don’t think it works against much of the rest of the article. Thanks for pointing it out, though.

      • Adrian August 6, 2014 at 9:40 am - Reply

        Can you not correct the article? Otherwise it is very misleading and I’m sure you don’t want to be acused of doing that with your figures.

        Of course you are so right, it still is a pittance and I would find it very very hard to live on that wage! That’s why I follow you. I hate to admit it, but I was a Tory voter for far too many years.

        My recent life experiences, your writing and other bloggers have helped me to see things in a totally different light and that is why I think it is very important to get your messages out to expose their lies.

        My biggest question is: Have Labour learnt from their mistakes and will they correct their financial errors, PFI, lax regulation of the financial sector, etc. I do hope so if I am to vote for them in the next election.

        • Mike Sivier August 6, 2014 at 10:20 am - Reply

          I did change the article – that section now points out that the amount of tax paid is less than the amount such a person is likely to receive on Housing Benefit.

        • Mike Sivier August 6, 2014 at 10:20 am - Reply

          Your questions about Labour are also on my mind.

      • Adrian August 6, 2014 at 11:32 am - Reply

        Thank you for your correction.

  4. Paul August 6, 2014 at 8:04 am - Reply

    Apart from the fact that Labour are scared to tackle the issue properly and helped us get in to this situation in their 13 years, I agree that this is a long term plan to help the rich. It is a crime that employers can pay wages that people can’t live on and landlords can charge rents that people can’t afford to pay.

  5. John August 6, 2014 at 11:51 am - Reply

    £6 billion is a lot of money.
    How much have we just spent on a new aircraft carrier which will have no aircraft?

  6. Nigs Cradoc August 6, 2014 at 3:39 pm - Reply

    Very good article Mike, shared on fb – as I do with much of your good work i.e. most of it

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