Welfare Reform Yin & Yang

by Ken Gibb

I want to talk briefly about two contrasting stories from the continuing wacky world of welfare reform. One potentially positive intervention by DWP and also a second story providing evidence from the House of Commons about the growth of workers in receipt of Housing Benefit.

DWP have been in Scotland in listening mode in order to find about what Scottish housing associations do. The story in yesterday’s SFHA e-newsletter tells us that Dunedin Canmore HA met with DWP and Job Centre Plus staff. The key point is that there seems to be genuine consideration that housing associations might play a data-sharing role and also be a ‘trusted verifier’ to identify those vulnerable tenants who need to make alternative arrangements for payment when they go on to Universal Credit. The meeting seemed to positively reflect the need for deeper collaboration at both a strategic and an operational level – and to begin to think seriously about at least one of the difficult consequences of Universal Credit (UC).

This makes sense but needs itself to roll out to the social housing sector as a whole. While it is obviously important not to pass on cost to the sector, there is a shared interest in making the system work and doing the upmost to protect the vulnerable (assuming that term can be defined satisfactorily and consistently). Perhaps the most positive thing in the piece is the sense that DWP actually want to hear from and learn from housing association practice and thinking in Scotland.

On the other hand, as reported yesterday in Inside Housing, House of Commons statistics suggest that, currently, 962,000 housing benefit claimants have a job and that this is up from less than half a million (478,000) in 2009-10. Just have a think about that numerical change. The recovery of the economy and the jobs increases we hear so much about has allowed working poor people reliant on means-tested benefit to double in size. Stagnant or falling real earnings at the lower end of the income distribution, benefit cuts and increased reliance on (higher rent) private renting have combined to create this picture.

We seem to have moved from a policy position that benefit dependence required cuts and sharper incentives to get people into work to a situation, increasingly, where the low wage economy is dependent on benefits to be competitive. This also suggests that for where it really matters, the minimum wage is often insufficient. Many have talked about the existing (pre UC) structure of Housing Benefit creating a form of moral hazard for social landlords and for lenders by de facto guaranteeing rental payments for recipients. Is there now a new moral hazard for low wage employers?

Don’t get me wrong: one of the great advantages of HB is that it is an in-work as well as an out of work benefit – but it is fundamentally a low income benefit and something is not right if the numbers are growing on this scale – although of course we do not know what the levels of HB payments are that working recipients are receiving (it clearly is less on partial benefit).

The welfare reforms were premised on simplifying the system, cutting cost and increasing incentives. Everyone reading this will be well aware of the difficulties the project has faced (some of it self-inflicted). We discussed the lack of evidence and unwarranted assumptions in a previous post. However, it is clear now that the moving parts that shape the effectiveness of such complex reform should include local labour market conditions, competitiveness and behavioural assumptions regarding decisions on both sides of the employment bargain. It is not just about individual housing decisions and benefit tapers.

What this also says to me is that we need much more evidence and knowledge about the duration of in work housing benefit, how it relates to actual wages and rents, as well as a clearer picture about the conditions of supply and demand and the degree of competition in the low wage sectors affected. It may be my ignorance of contemporary labour market research but I am not aware of research that is explicitly bringing these elements together to understand individual and employer decisions. There is of course growing interest in insecure working and zero hours contracts but I don’t know how far this goes into interactions with welfare benefits. Something worth exploring further.