What would a £12bn hole in the safety net look like?

George Osborne today announced that a further £12 billion of welfare cuts will be necessary in the first two years of the next parliament. At face value this seems like yet another attack on the frayed safety net, and one that could have devastating consequences for homelessness if threats to remove housing benefit from under 25s go ahead.

But looking at the scale of cuts necessary to achieve such savings, it’s questionable whether this should be filed under “Credible Economic Announcement” or “Aspirational New Year’s Resolution” – assuming you are the kind of person who thinks kicking-off a political fight on welfare is akin to quitting smoking or learning French.

Housing benefit was the target of more than £2 billion of cuts in the 2010 Emergency Budget and support has been squeezed even further since. Payments for private tenants have been cut to the bone, a move which has seen landlords pull out of the HB sub-market and the loss of private tenancy becoming the leading cause of homelessness for the first time. In fact, in response to the growing affordability crisis in the private rented sector, the Treasury was forced to quietly increase 126 LHA rates in December.

Support for social tenants has also been cut back, with the much criticised bedroom tax withdrawing support from a third of working age tenants on HB. Further – and very significant – savings could be found if the bedroom tax were extended to pensioner households, but given the political reluctance to target pensioners it’s doubtful whether this could be signed-off.

Broadly speaking any low hanging fruit in housing benefit has not just been picked but pruned right back and the private sector side of the system does now appear to be at breaking point. Ordinary families are already increasingly finding that the safety net just isn’t there to support them. Further cuts would have to become increasingly arbitrary or entail complete withdrawal of support from whole groups of people, which would mean wide scale poverty and homelessness.

The housing benefit budget is high not because of continued excess in the system but because so many people – one in five households – now require housing benefit to keep a roof over their head

Attempting to ignore this problem by removing eligibility to whole swathes of the population appears attractive to the Chancellor, who again singled out the withdrawal of housing benefit for under 25s. But even this would only save £1.8 billion a year, and that is assuming zero exemptions. Following ongoing criticism, politicians have conceded that exemptions for “vulnerable” groups would be required, if not a blanket exemption for all households with children. Given that a majority of under 25s claiming housing benefit are parents themselves this would more than halve the savings.

The other specific cut floated by the chancellor saves so little it’s questionable why he mentioned it. Osborne re-announced plans to charge higher rents to the 21,000 higher earning households in social housing, which would produce some additional revenue, but would save nothing at all in housing benefit.

Osborne presented today’s speech as a challenge to those of us who say further welfare cuts aren’t possible – yet isn’t able to sketch out how the £12 billion savings could be achieved. He says there are no easy options; but does the lack of detail mean there are no realistic cuts left that won’t push the system to breaking point, or that the chancellor doesn’t think the public are ready to be fully confronted with the reality of a broken safety net?

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2 Comments
  1. Ordinary families are already increasingly finding that the safety net
    just isn’t there to support them. – Families have to survive. Currently many
    young people and families can’t buy an apartment or flat even if they have good
    job. The answer is rather simply – the prices are too high! You should save for
    a ling time and even then to get mortgage for 15 years (depends on the amount
    of money you are ready to invest and on house price). I think we are lucky to
    have purchased our house, but we saved almost for 6 years and got the mortgage.
    Many people choose the houses that they can’t pay then. We decided that we won’t
    buy a house that can cause us financial problems, and chose the one we could
    afford. By the way, we found it at website! Can you imagine? It was http://edinburgh.localmartuk.com/ . It helped us a lot to make
    the right choice.

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