Conjuring Cameron’s cap trick

David Cameron has pulled the wool over the media's eyes with his housing benefit cap. The real danger comes from the rest of the £2bn package.

At PMQs this week, David Cameron asked “are we happy to go on paying housing benefit of £30,000, £40,000, £50,000?” and described the cap of £20,000 as the “key change“. The Prime Minister continued this narrow focus today:

“Paying over £20,000 a year for the housing benefit of some families is too high. I do not think taxpayers who pay their taxes will understand why we are being so extravagant.”

This £20,000 cap – one of nine housing benefit reforms announced by the Coalition – is an insignificant part of the coalition’s package. It will affect a small number of people and saves just £65 million (3%) of the £2bn earmarked for housing benefit cuts.

A number of papers and journalists have fallen into Cameron’s trap and devoted their coverage to this measure. For example, the Evening Standard, who are cautious about the reforms, made the following erroneous claim:

“Under the reforms, there would be a £400-a-week cap on housing benefit for a four-bedroom home. It is estimated that this could lead to 82,000 households in the capital having to move, raising fears of a Parisian-style shift of the poor to the periphery.”

The New Statesman make the same mistake: “In London, where rents are significantly higher than in the rest of the country, the £400-a-week cap will force as many as 82,000 families out of the capital – the largest population movement since the Second World War.”

This is wrong and perverts the debate making those who oppose the wider package look out of touch with public opinion. The 82,000 number comes from research by London Councils. They estimate that the entire package will lead to 82,000 families being “at risk of losing their homes“. The main problem is the reduction in Local Housing Allowance falling from the median of local rents to the 30th percentile. Just 17,000 families are affected by the cap.

In July, the National Housing Federation carried out a related study which looked in detail at the 10% cut to housing benefit for the long-term unemployed. They found that, “Brutal cuts in housing benefit … will put more than 200,000 people across Britain at risk of homelessness”. Understanding the problems with the entire package, rather than being blinded by Cameron’s rhetoric, is critical to understanding this debate.

That said, the problems with the Coalition’s approach do not mean that there is no case for reform. Some of the Government’s measures should be supported. A cap on housing benefit itself is a good principle to bring in for future housing benefit recipients. Similarly, increasing the age limit for the shared room rate from 25 to 35 (saving £215m) is a sensible measure and, so long as it’s only a temporary austerity measure, the switch to CPI indexation from 2013-14, which saves £390m, is a reasonable way to reduce the deficit. There is also a case for trying to improve the allocation of properties to family size. Finding a solution to the problem of elderly couples remaining in properties fit for a full-sized family is important. But the Coalition’s arbitrary approach is too much stick and not enough carrot.

But these are sticking plasters to the wider problem of housing shortages in the UK. Over 30 years, public subsidy has moved from bricks and mortar to individuals and, although not an easy task, it is reversing this trend that should be the focus of progressive energy in the years to come.

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