Was the aim of the bedroom tax always to shift debt from the government to benefit claimants?

The bedroom tax might be the clearest example of the coalition punishing the poor for the financial crisis.

The bedroom tax might be the clearest example of the coalition punishing the poor for the financial crisis

It was claimed by the government that the bedroom tax had two aims – to reduce spending on benefits and to help the 300,000 people living in overcrowded accommodation by incentivising those tenants ‘over occupying’ to move to smaller homes.

But the maths didn’t add up.

When the policy was first proposed, critics pointed out that there were not enough homes for the so-called ‘over occupiers’ to move to. There were only 85,000 one bedroom social properties available in England, and 180,000 social tenants “under-occupying” two-bedroom houses. That’s quite a large gap.

Hardly surprising then, that research carried out by the BBC a year after the tax was implemented showed that only 6 per cent of people affected by it have moved home. There are simply not the homes for them to move to.

Despite this, the Conservatives gleefully claimed a victory for the tax, saying that it saved the government the conveniently round figure of a million pounds per day.

As professor Rebecca Tunstall, director of the centre for housing policy at the University of York, told the New Statesman:

“There were two major aims to this policy – one was to encourage people to move, and the other was to save money for the government in housing benefit payments. But those two aims are mutually exclusive.”

The government saves money from the people who have no choice but to stay where they are.

And what happens when people with a low income have that income cut? They go into arrears on their rent.

According to the BBC, this is what’s happened to a third of tenants affected by the tax. The debt has been successfully shifted from the government to benefit claimants.

Could this have been the main aim all along?

Supporters of the bedroom tax certainly focused on the under-occupancy issue. Ian Duncan Smith, for example, pointed out how unfair it was on those who did not have a spare bedroom:

“It is unfair on taxpayers, it is unfair on those in over-crowded accommodation and it is unfair that one group of housing benefit tenants cannot have spare bedrooms and another group are subsidised.”

Yet it’s unlikely that the government did their housing sums wrong and genuinely believed the main outcome of the tax would be people moving home. It seems more likely that focusing on the ‘unfair’ behaviour of benefit claimants suited their rhetoric of vilifying a certain section of the general public.

Without discussing the possibility that an increase in homelessness caused by the tax could result in it saving the government no money at all, how ethical is it for a government to shift debt on to the general public?

There is a faint silver lining to this deplorable tax, however, and that is the creativity it has brought out in campaigners.

In North London, for example, one group of artists are protesting by putting on an exhibition inspired by the bedroom tax, hosted in a bedroom subject to the tax. The 27-year occupier is moving out for a week and will be exhibiting art along with other artists, all inspired by the tax. The exhibition will be free and also show short films on the housing shortage so that local people can visit and learn more about it.

It seems the bedroom tax might be the clearest example of the coalition government punishing the poor for the financial crisis, but there are always ways to fight back.

72 Responses to “Was the aim of the bedroom tax always to shift debt from the government to benefit claimants?”

  1. blarg1987

    Well lets see, private sector pensions are also facing liabilities so yes we are in effect paying more for our goods to underwrite this shortfall.

    You still have not answered my questions though which I will repeat in case you missed them:

    Are you saying that in your system are you saying there would be zero guarantors and zero increases in contributions if the stock market had a problem like it does now?

  2. LB

    No, it wouldn’t have a problem.

    First you don’t have to fund with the stock market. Most pension schemes use what is call liability matching. They buy bonds to match the expected cash flows on the liability side, plus coverage for the defaults on the bonds.

    End result, you have a very high probability of meeting the cash flows. Even if defaults exceed expectation, you are still paying out a very high percentage. You can mitigate this by insisting on holding an excess of assets of liabilities.

    In other words it comes down to cost. You can trade cost against risk. Lower risk higher cost.

    So I’ve answered your question.

    Now back to the state pensions and civil service pension and the question I keep asking you. You aren’t answering it.

    How much does the state owe?

    Then we can move on to asking your question about risk about the state pensions.

  3. John

    That’s only auto-enrolment as it is now; where the employer pays some in, the empoyee pays some in and the government subsidises the employer contribution through the NI tax break.

    First the tax break goes, then the government reduces their contribution because people already have a pension (so everyone has a minimum amount but now it’s the employee who bears part of the burden of funding their own pension) then it’s eliminated completely so the government isn’t involved with pensions at all.

    At least that way they can’t steal it directly (though I’m sure they’ll get money through taxes still)

    I’m also sure, given conservate initiatives in the past, they’d be perfectly happy stealing pensions too. They’ve done worse for this country.

    Sure the poor depend on them. But they can’t get them. Thats why I proposed an alternatve; subsidised care homes. I’m sure there are other alternatives we’ll be seeing in the future.

    Selling debt is simple; the government just did it for student loans. So do that in reverse. Someone offers the government money to take pension provision of their hands. G4S and Atos would probably leap at the chance. Then they have the problem of delivering pensions. Which they will, poorly, inefficiently and as expensively as possible as they will have bought a monopoly industry and can AFFORD to treat us like the docile sheep we sometimes show ourselves to be.

    With the pension debt gone, benefits DO become affordable. You agreed that one.

  4. LB

    With the pension debt gone, benefits DO become affordable. You agreed that one.

    =======

    No. The reason is that you’ve made an assumption. You’re assumption is that after saying no state pensions, no civil service pensions to be paid, that those now made destitute won’t increase the welfare bill.

    ==========
    Selling debt is simple; the government just did it for student loans

    ==========

    Ah, you’re wrong. If someone owes you money, you can sell it.

    If you are the one owing the money, you can’t sell it.

    What makes you think you can do the latter? Who is going to pay you 100 pounds to take on the obligation to pay 100 pounds of your debts?

    Flabergasted you could even think that makes sense.

  5. westerby1

    I know the question was not directed at me but just wanted to say I should not have to pay any of it – neither should the vast majority of people, because we did not cause it!

    Imagine the people who caused this as parents, we are their children. We do not know how much money mum and dad have, so if they buy us a nice house,car, clothes, holidays etc we assume they can afford it, whatever they do we assume they have enough money. What has happened is akin to those parents now telling their children “WE have overspent and been careless with the money, YOU will have to do without for the next 10 years until we can pay the debt off, mummy and daddy will just carry on as normal, that’s ok, isn’t it?” When the children complain the parents take one child aside and tell them it is the other child’s fault, they do exactly the same with the other child. Result? Children are so busy fighting with each other they do not notice that mum and dad have got their gladrags on and have gone out partying.

  6. John

    “those now made destitute won’t increase the welfare bill.”

    Oh they would, if no alternative was presented. I did. Twice.

    “Ah, you’re wrong. If someone owes you money, you can sell it.

    If you are the one owing the money, you can’t sell it.”

    Tell that to banks.

    More importantly; pension povision is a business. The government has off-loaded the NHS, Education and Welfare. All, arguably, loss-making by their nature. Why not pensions?

  7. John

    NIce generalisation. Try this one.

    Why do the Right always want to screw people over?

  8. LB

    So John, nice attempt at blaming someone else for the mess.

    Just how much does the state owe for its pensions or is your plan to say to pensioners, bugger off, we’ve spent all the money?

  9. LB

    private sector pensions are also facing liabilities

    ========

    There’s one big difference isn’t there. If a private company was forced to charge 30% on top of prices to cover its pensions mess, what would happen?

    Either a new company would take market share or a company without the mess. That means they can’t screw the customer.

    Not the case with the state is it? More tax, more cuts. Just what the left are complaining about.

  10. LB

    Hi Leon.

  11. LB

    If you are the one owing the money, you can’t sell it.”

    Tell that to banks.

    =========

    The banks have sold loans where they are owed the money.

    If a client can’t pay, the bank can sell the loan.

    If the client can’t pay the client can’t sell the loan and get more money.

    The state owes money. How can the state sell what it owes and make money?

    ============
    More importantly; pension povision is a business. The government has off-loaded the NHS, Education and Welfare.

    ============

    They have in part off loaded the administration. They haven’t offloaded the debt.

    Where’s capita going to find a couple of trillion pounds?

    ============
    All, arguably, loss-making by their nature.

    ============

    Now yes. It’s because the state spent all the contributions. Assets zero. Back to that question that you can’t answer. How much does the state owe? Unless you get that number you can’t conclude anything.

    ============
    Why not pensions?

    ============

    It would be a good plan. The reason goes to what the state offers and what you could have got.

    For a 26.5K a year worker, 40 years ago that was 800 a year. Median wage. Drop all their NI into the FTSE, and grow a fund.

    830K generating 28K a year, with the capital intact. There would have been no pension debt. About 50K per taxpayer of borrowing.

    The state offers no fund. Zero. 5.7K a year state pension, and a 300K share of the debt.

    So yes, offloading the pensions would make the public better off going forward.

    All the state should do is drive down charges. That starts with no Brown taxes on dividends in pensions. (100K off the fund), No stamp duty, 10K. Driving charges down also makes a difference..

    What’s not to like? That sort of sum makes a real difference, and it boosts the economy. Money going into investment creates jobs.

  12. LB

    Sure – I posted the link.

    How about you posting the state and civil service liabilities or do you want a hand with that?

  13. John

    If you want to generalise why can’t i?

  14. John

    “The state owes money. How can the state sell what it owes and make money?”

    By selling the business. As it has done. And will no doubt continue to do.

    “They have in part off loaded the administration. They haven’t offloaded the debt.”

    If they aren’t liable for the debts of the administration (NHS), provision (partly NHS and education) or funding (NHS, education and welfare) then how have they NOT reduced their exposure to the debt? All they need do (and they’re good at this) is show how the part of the debts owed is actually acquired either during the sale, or during the handover period and they can argue the debt away.

    Meanwhile, we’re left with shoddy private provions. Yay.

    “Where’s capita going to find a couple of trillion pounds?”

    Us, of course. The ones who are receiving the pension. Or perhaps, more pertinently, when we come to actually GET our pension we’ll get a nice letter about how we’ve saved enough for about £10 a week; aren’t they generous.

    “Now yes. It’s because the state spent all the contributions. Assets
    zero. Back to that question that you can’t answer. How much does the state owe? Unless you get that number you can’t conclude anything.”

    We’ve argued this one together twice now. It doesn’t matter. Whatever the number there is. No. Solution.

    I’ll say that again.

    There is no way any government of any nature can pay our pension liability. Not a chance.

    So we’ve GOT to find another way of dealing with this mess. Arguing over whose to blame is pointless and destructive. You can point at the Beveridge Report, Dear old Maggie, Blair, Brown and Cameron, to a lesser extent Major. All dabbled with the Welfare State leading us, sometimes quickly, sometimes slowly, but inevitabely to the place we’re at now.

    THIS is why more OAP’s are working. THIS is why I have an 83 year old client (builder) who CANNOT retire; he literally can’t afford to. That is a vision of the future.

    “What’s not to like? That sort of sum makes a real difference, and it
    boosts the economy. Money going into investment creates jobs.”

    All of this, as applied to pensioners, would be wonderful. So long as it WAS just pensioners. Otherwise that last point? Investment making jobs? That’s happening now. Yet living standards are plummetting, wages are falling and growth is flat-lining as demand is being chocked off.

    Keynes is right; you have to ensure that the benefits of investment benefit ALL of the economy; not just the ones doing the investing.

  15. LB

    Where have I generalised.

    Back to the question you won’t answer. Won’t being the right word because you’ve been asked often enough, and refused at each time of asking.

    How much does the state owe for the pensions?

    I’ll tell you. 7.1 trillion. Add on the other debts, and the state owes 9,000 bn,.

    Each tax payer, on average (it’s a generalisation) owes 300K, going up faster than inflation.

    Given the median wage is 26.5K. you don’t have to be a rocket scientist to see its not going to be paid. Not when each of those earners costs 11.5K a year to maintain in state services.

    So the consequences are that the state won’t pay. Who suffers the most? Those who are owed the most as a percentage of their income, and that’s the poor.

  16. Castilian

    “burden on the state”?

    I thought criminal bankers had enough money to pay their own way? I’m sure they don’t need social security.

  17. Castilian

    “Which bank is responsible for the civil service pensions?”

    The Bank of Gravy Train.

  18. LB

    Ah, but the joke, whilst mildly amusing, avoids the core question.

    There are no banks. No blame can be spread when it comes to the welfare state and pensions.

    Hence the complete absence of the left talking about pension debts. They are shit scared that the electorate will find out.

  19. blarg1987

    So, Local Government pensions do so the above and your moaning about it, also private sector companies who have similar pension problems have done a variety of things, including increasing prices on products, and paying in over a longer period to make up the shortfall.

    I have answered your question in the past so shall repeat it, the answer is it is impossible to tell as the evidence you keep claiming does have a paragraph that states, the data can not be used to claim how much debt there is as there are so many unknown variables that any approximation is meaningless, this is also backed up by full facts.

    The question that we have to ask is have you contacted OBR and ONS and told them your concerns? If so what was there reply, are they changing their figures to match yours or are your figures proven wrong?

  20. John

    “Why is it that the left can’t tell people (or won’t), the horror that is hidden.”

    There is where you generalised

    “Back to the question you won’t answer.”

    I’ve answered the question elsewhere. Three times now. I can repost what I’ve said already if you like

    “So the consequences are that the state won’t pay. Who suffers the most?
    Those who are owed the most as a percentage of their income, and that’s
    the poor.”

    I’ve quoted this bit as a summary. I’m not arguing your figures for two reasons. One, there is no need and the second is it’s as good a starting place as any.

    So. You can’t generate enough taxes through Income Tax as is needed to pay the state debts. Fine. On this both left and right can agree.

    The disagreements happen (at least for me) past this point. I.E; WHY wages are so low, whether to change that (and how) and what OTHER taxes should be levied since I’m FIRMLY in the camp that since it was business who screwed the country, (big) business which has consistently undermined democracy and business which is infringing on our rights of free speech and privacy then it’s business who should foot the bill.

  21. LB

    So how can the LGA report its liabilties?

    How can you report the liabilities for Gilts which include inflation linked gilts?

    How can companies report their liabilities?

    How can every other pension scheme be required to report their liabilities?

    Is FRS17 wrong?

    Why is the state different?

    I can tell you want the answer is. The liabilities are 7.1 trillion, and if people were to know, they would realise the welfare state has defrauded them, and they won’t get.

    That brings the house cards down now, instead of later.

  22. LB

    http://www.taxpayersalliance.com/economics/2014/06/revealed-local-authority-liabilities-hit-180bn.html?utm_source=feedly&utm_reader=feedly&utm_medium=rss&utm_campaign=revealed-local-authority-liabilities-hit-180bn

    Some more evidence for you.

    Britain’s local authorities have long-term liabilities of more than £180bn, saddling future generations with today’s debt burden.

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