Impacts of Welfare Reform

Two new major studies on the impact of welfare reform have been published by the Joseph Rowntree Foundation in the last day or two. The first, by Steve Wilcox, reviews the first year of the bedroom tax. The second, by Anne Power and colleagues, analyses surveys of social tenants and housing associations in terms of the wider effects wrought by the cumulative effects of benefit reform more broadly. The studies neatly dovetail with work I have been doing in terms of reviewing the impact of the bedroom tax in Scotland and (with my colleagues Sharon Wright, Des McNulty and Nigel Sprigings) an evidence review for the Scottish Government on the wider impacts of housing-related reforms in Scotland.

Steve Wilcox suggests that about 85% of owners and 60% of private tenants under-occupy relative to the bedroom standard but only about 4% of all under-occupiers are working age social tenants. He finds that fewer than the expected numbers were affected by the bedroom tax (500,000 rather than 660,000) and that consequently the savings were less than anticipated by DWP (for 2013-14, £330 million rather than £480 million). This may be because survey estimates used by DWP are not the same as actual records but it took place in a context when the overall numbers of social tenants on HB actually rose (though there was a 5% reduction in working age claimants in all tenures and there may have been some size reclassifications by landlords).

Only 6% of affected tenants moved in the first 6 months after introduction. Instead the vast majority coped by either drawing on savings or other resources, by taking in lodgers or other family members by working (1%)and by seeking transfers or mutual exchanges. Disabled households are particularly hard hit and may account for more than two thirds of households affected by the bedroom tax. Wilcox reports that broadly half of all affected households are in arrears but more time is needed to see whether this will lead to a distinct rise in evictions. Indicative work comparing one bed vacancies with demand for downsizing suggests a mismatch in the region of 4:1 (though this takes account of other calls on smaller properties – suggesting the problem is actually much worse).

In response to these findings, Wilcox suggests a number of ameliorative short run reforms to help the key groups such as the disabled, further work re-classifying the appropriate bedroom standard and longer term proposals to move towards something more like the Local Housing Allowance regime operating in the private rented sector wherein rent structures could be altered to reflect demand for different sizes and types.

Anne Power and colleagues find that social tenants rely heavily on benefits, but that the benefits system is becoming both tougher and tighter, such that tenants are being forced to cut back on food and energy consumption. Apart from reporting increases in poverty, tenants also expect evictions to increase. In response landlords are working harder to intensify preventative solutions and tenancy sustainment measures as well as trying to help people find work-based responses. They conclude that reform may leave tenants more not less dependent on benefits, that landlords will have less capacity to build more stock, and they anticipate rising benefit costs as more are forced to rent privately. In other words, as they put it, ‘a safety net can prevent [more] costly outcomes’.

These two studies reinforce and extend our growing knowledge of what is going on and what is the lived experience of those directly exposed to benefit change and income loss. There was nothing I found inherently surprising about the LSE study but it did provide solid multiple sources telling a coherent and consistent account of the problems that have been primarily thus far examined in local case studies. They raise serious questions about the efficacy of the DWP project, to the extent that it may result on more people relying on benefits (and of course with low wages, this may be for many in-work) and that the corollary of more shifting to private renting may be a higher not a lower housing benefit bill.

This is all consistent with our Scottish work. High proportions of the disabled affected by the bedroom tax, a massive mismatch between the flow of one bed properties and the scale of demand for them (and not just from down-sizers but also from single homeless referrals), the critical role of Discretionary Housing Payments (all the more so in Scotland) and the sense, as Wilcox put it in his report, that for reasons of preferences as well as constraints, people just do not want to or feel they can move and are thus obliged to manage the consequent income reduction they face as best as they can. The other thing that Steve Wilcox confirms is that one should be careful not to  jump to conclusions in an area short on definitive data and one which is dynamic and always changing in terms of, for instance, flows in and out of bedroom tax eligibility or in and out of arrears.

So, the evidence base is growing and these reports confirm and deepen the consensus of the research evaluations and impacts work thus far undertaken.There is really no excuse for apologists or others to present these reforms in any way other than at the very least recognising the serious hardships, fear and unintended consequences they are creating.

 

References:

Anne Power, Bert Provan, Eileen Herden and Nicola Serle (2014) The Impact of Welfare Reform on Social Landlords and Tenants. Joseph Rowntree Foundation: York.

Steve Wilcox (2014) Housing Benefit Size Criteria: Impacts for Social Sector Tenants and Options for Reform. Joseph Rowntree Foundation: York.

Both are available at http://jrf.org.uk

Springboards, safety nets and moving goalposts: the reform of welfare post-referendum

The second report of the expert working group on welfare reported this morning to the Scottish Government. In their report they set out a vision of a future welfare system, they propose short and medium term reform priorities and suggest different longer term routes or choices.

What is striking about this report is that it offers an (albeit incomplete) alternative prospectus for social security, work and welfare that presents a very different perspective to that of DWP. It is remarkable that this is the first such detailed joined-up approach that tries to do this in any kind of comprehensive fashion. I think this is its single biggest plus point. It speaks just as much to the UK as it does to Scotland and it also has much to say to a Scotland continuing in the UK as to one that votes for independence. For that reason alone it should have wide readership and act as an important basis for future debate.

The other thing that strikes one is the completely different tone and approach. It is refreshing to see the working group suggest that things do not need to be like they presently are. And if welfare is to be, as they envision it, personalised, fair and simple (themes that they recognise can be in tension with each other), then aspects of the present reform regime have to go:
– reinstate the uprating of benefits and tax credits with CPI;
– roll back the sanctions and conditionality of the present system with a more humane approach to active labour market policies;
– scrap work capability assessments and replace the work programme with new initiatives to help people find and stay in work;
– abolish the bedroom tax;
– uprate the benefits received by carers so they are on a par with JSA;
– shift the universal credit towards a new social security allowance which looks similar but has housing benefit hived off from it; but this would be paid out according to the wishes of the recipient and if there is a carer the cash would go to them; and
– move the public sector over the life of a parliament to a living wage model and phase in the living wage in the private sector by growing the national minimum wages, paid in part by reduced employer national insurance contributions.

In the medium term the working group argues that policy and debate marshalled by a convention and by a commission both focused on the long term development of social security. The priority is argued to be about better support for the disabled. In the long term, there is a debate to be had over the fundamental direction of welfare benefits – either a contributory principle road or one based on a basic citizen’s income.

A number of things strike me and, it should be stressed, they do so prior to any close reading of the report.

First, the key is the future performance of the labour market, the ability to improve labour market conditions at a local level and address in work poverty for, among others, the 400,000 or so Scots earning less than the living wage. I would like to know much more about the policies and the evidence with which one can marshal arguments that decent paid work can remove those hard to reach from poverty and keep them above the waterline.

Second, while there is a pleasing consistent effort throughout to cost and identify benefits from savings, etc. I still worry about the indirect, second round and behavioural evidence. We have learned for instance from the failure of DWP reforms to have the anticipated effects on the private rented sector (e.g. rents did not fall) though in other cases there is evidence that the consequences of the household benefit cap has induced people into work in London. There is a lot that needs to be done about better understanding behaviour by recipients, people at the margin and employers before racing to reform.

Third, affordable housing looms large as a basic issue. The expert working group makes positive noises about longer standard private tenancies and about holding rent increases back to inflation only increases during the life of tenancies (similar to recent UK Labour proposals). They also want more affordable housing supply that allows investment to reduce rents and hence the social security bill (though this is a re-profiling of net public expenditure between capital spend and social security which may or may not cost more depending on how it is designed). Working age social tenants (and landlords) would be helped furthermore by keeping housing benefit separate from their version of rolled-up cash benefits. This also needs to be seen in the context of ending the iniquitous bedroom tax.

Fourth, the social security allowance proposal chimes with my own view that we need to rebalance the cash benefits and specific personal housing subsidies with, to my mind, relatively more resource going to unrestricted cash benefits and a more affordability-targeted tenure-blind housing allowance being the long term goal.

Fifth, how will this be received by the wider public? How correct are they to say that the Scottish people are more willing to embrace this welcome progressive turn in the direction of welfare benefit policy? What, if anything, does the election of a UKIP MEP tell us that social attitudes survey do not? As I said at the outset the fresh approach on social security outlined by the working group also speaks clearly to the UK reforms of working age benefits and I do hope there is debate over these ideas and principles that goes beyond Scotland and reaches IDS and his team.

Sixth, the working group have suggested that the long term shape of benefits will be the resolution of a struggle between either contributory or non-means tested philosophies. I thought the recent contributions promoting more (modestly) contributory benefits from Demos (Something for Something, June 2013) in part unconvincing – especially proposing to fund it by switching to more private mortgage protection insurance. On the other hand, basic income and negative tax ideas have major funding issues to confront if they are to be adequately provisioned. Many of the basic income proposals being discussed are actually rather modest and do not really scale up to the level that surely they ought to be striving to achieve. But the fact that there might be justifiable scepticism on either side warrants further debate and analysis – perhaps we must start by accepting that the welfare funding required for the good society will cost something in terms of tax or foregone growth but that it is a price well worth paying.

The working group’s report is a useful contribution to the wider welfare reform debate. I am not sure what its impact will be on the referendum, but I hope it will be a positive weapon to shift the often toxic welfare debate in a more positive way that might ultimately matter for those in poverty in or out of work right now across Scotland and the rest of the UK.

Leave our dysfunctional housing market alone!

A week after the European elections it is perhaps not surprising that the news that the EU is critical of the UK’s housing market should be ill-received in some quarters. However, as with all these things, it does makes sense to actually look at what our friends in Brussels have actually said.

They identify that demand and supply side measures have been taken to influence the housing market. But combined with low interest rates, greater willingness to lend and continuing excess demand, house prices continue to rise, especially in overheating London.

In response to this diagnosis, they argue that supply is viewed as a structural imbalance and an area where action to boost supply is deemed to be required. The Commission goes on to argue on the demand side that prices and mortgage debt should be carefully monitored and intervention including adjusting the terms of Help to Buy 2 should be readied for action if required. they also think the financial policy committee of the Bank should be deployed to address these housing market problems via macro-prudential regulatory changes as and when required. They also suggest considering reforms of housing and land taxation and point out oft-rehearsed arguments about weaknesses with the council tax (based on 1991 values, regressive banding and higher burdens on lower valued property).

ONS also published latest official house price levels and rates of house price inflation today. To summarise:
UK £252,000 (annual rise of 8%)
England £263,000 (8.5%)
Wales £164,000 (4.9%)
Scotland £181,000 (0.8%)
Northern Ireland £132,000 (0.3%)
London £459,000 (17%)

With inflation variously measured at 1.8% to 2.5% in April, real house price inflation, highly regionally varied, is back with a vengeance. I heard a Welsh estate agent last week on the radio say that locally house prices were only rising by 6-7% i.e. 4-5% in real terms – nothing to worry about then? The Barker Review, a decade ago, focused on the long term economic cost of real house prices rising by a 2.7% rather than the EU average of 1.1% accumulating over time, let alone the distortions of wider amplitudes or volatile prices.

Reflecting on the European Commission report in the context of the latest house price data, it is hard not to agree with the thrust of what they say – I am sure most housing policy commentators do. We also would probably welcome the Bank’s more activist stance, even if we are not convinced that they can do all the things hoped for them in certain quarters.The means, not the ends, are what are in more doubt. Should we tinker with the council tax or undertake more broad based tax reform along the lines proposed by Mirrlees? And how are we to make this structural shift (on a more permanent basis) to housing supply?

We have discussed these points many times before on this website – at least there is a growing consensus, even from the Eurocrats, the Bank of England, many economists and other policy analysts that rising real house prices are self defeating economically and socially divisive as well. The Coalition Government may well be inching this way too but it is less than 12 months before the general election so lets not hold our breath during the Queen’s Speech.