Housing benefit reform

Author: Inside Housing - Sep 16, 2009

Housing benefit reform may be too complex forthis governmentbut its likely Conservative successors will have no shortage of options if they take power next year.

And proposals launched today by former Tory leader Iain Duncan-Smith’sCentre for Social Justice(CSJ) are even more ambitious. Dynamic Benefits calls for the scrapping of 51 different forms of benefit and tax credit and their replacement with just two.

Universal work credit would go to people out of work or on very low wages and take in benefits like job seeker’s allowance and income support while universal life credit would cover additional living expenses for everyone on low incomes and combine things like housing benefit, council tax benefit and working tax and child tax credits.

In the process, says the CSJ, work incentives would be dramatically improved by reducing the marginal rate of benefit deductions that can be up to 85% at the moment and child poverty would be cut.

And scrapping the current system would reduce what it sees as penalties in the current system faced by people getting married, saving or moving into home ownership - an estimated 1.9m low-earning households with a mortgage would get help with their housing costs.

The report gets an enthusiastic welcome by Tory commentators likeSimon Heffer, who says that David Cameron should put IDS in his first Cabinet with a brief to tackle worklessness and the undeserving poor. Housing reformers may also see it as backing for their ideas for a housing tax credit that is paid regardless of tenure.

The big problem is the cost: £3.6bn. Even though some of that would be clawed back through increased tax and the CSJ says that in the long term the plan would save money, it’s hard to see a government intent on cutting public spending swallowing that one. The long-term problem could be that benefit reform always seems to produce more losers than its architects intend.

And the CSJ plan is competing for attention with ones coming from other think-tanks.Localiscalled for a move to near-market rents for social housing with housing benefit paying up to 85% of housing costs after tax and benefits and the scrapping of capital investment subsidies to pay for it.The Progressive Conservatism project atDemoscalled for social tenants to be able to capitalise their housing benefit to buy a stake in their home.

The safer bet would have to be on a future Tory government finding housing benefit reform just as difficult as all its predecessors but one thing it will not be able to say is that it lacks ideas.

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