Spending Review: a missed opportunity to help those most in need

Spending Review: a missed opportunity to help those most in need

Today was the chancellor’s opportunity to give stability back to those families hardest hit by the coronavirus (COVID-19) pandemic.

In the House, the warm words of courage and the promises of being proud of the place you call home fell flat once the supplementary papers were released. The papers revealed that housing benefit for private renters would be frozen. If people can’t even pay their rent then they won’t have anywhere at all to call home.

The chancellor did announce £151 million extra funding for local authority homelessness services, which is very welcome as we head into winter. But, this will not end homelessness. People will continue to lose their homes if they don’t  have enough money to pay the rent.

The freeze to housing benefit, and the inaction on the £20 Universal Credit uplift and the benefit cap means that many families will continue to be unable to keep up with their rent. This will lead to arrears, evictions, and homelessness.  

What was announced on housing benefit?

At the start of the pandemic, the government made bold moves to keep people safe in their homes. They restored housing benefit for private renters, or the Local Housing Allowance (LHA), to cover at least the bottom 30% of rents in each rental area. We welcomed this at the time, and it was absolutely the right thing to do.

However, today, the government confirmed that the rates will not continue to reflect the bottom 30% of rents. They will, instead, be severing the link between the LHA rates and rental inflation by just maintaining the rates ‘in cash terms’. In reality, this will mean a cut to many household budgets.

Severing the link between the LHA rates and rents means that the LHA rates will not hold their value against rental inflation. The very same thing happened after 2011. It meant that, by March 2020, the rates were so far behind the cost of renting that they only covered the bottom 30% of rents in 3% of England. In a third of England, they didn’t even cover the bottom 10%.

The result of such poor coverage across the country meant that many families were having to make up shortfalls between the cost of their rent and the LHA, otherwise they wouldn’t have been able to find a suitable home.

For those on low, or no, income, these shortfalls are on average £113 per month. This is  a staggering amount to have to cover from other limited means of income.

Often, this would push people towards skipping meals, borrowing money, or selling possessions just to keep up with rent payments. Ultimately, the inadequacies of the LHA rates were causing people to rack up debt – in many cases, leading to rent arrears and people losing their homes.

With LHA so far out of kilter with local rents, it was almost impossible for low-income households to find anywhere to live. This was leading to growing overcrowding, and to an increase in the level of homelessness, including the numbers of children growing up in temporary accommodation –  now at a shocking 126,000 children across England.

We can’t allow LHA to fall so far behind the true cost of renting ever again. And, with an uncertain economic time ahead, we just do not know what will happen with rental inflation over the next few years.

We don’t know whether we will see rents fall at the bottom, as well as the top of the market. We don’t know if rents will fall in some cities, but increase in areas where people are looking to relocate to. For these areas, this could be a particularly devastating moment to break the link between rents and LHA.

The only way to provide future security and fairness for those renting privately is to ensure the LHA rates continue to match local rents.

As we argued last week, the Spending Review was an opportunity to do this, but the chancellor has missed this open goal.

If it is serious about tackling homelessness, the government must reverse this decision ahead of March next year and keep rents in line with at least the thirtieth percentile.

No mention of the benefit cap

Completely absent from the chancellor’s speech or the supplementary papers was the benefit cap. As we highlighted, the numbers of people being benefit capped could start to rise sharply by the end of this year, yet the government chose not to make any intervention to prevent this.

The current benefit cap limits the maximum amount that an out-of-work household can receive, regardless of its size, to £20,000 a year outside of London and £23,000 inside the capital (a total that is slightly less for single people). That’s well below the cost of living.

It was intended to encourage people to find employment or move to a cheaper home. Both of these options are currently much more difficult as we balance on the precipice of the biggest jobs crisis the country has ever faced.

For households who were working consistently for a year before the pandemic, some may have been exempt from the benefit cap during the first nine months as part of the grace period. For these households, the nine months will be ending next month in December, and they will see their income slashed in the following months.

Currently, households on the benefit cap are losing on average £59 per week – devastating amounts for low-income families to lose, particularly in areas where the cost of housing is high.

The government made the wrong decision here by not scrapping the cap. An urgent intervention is needed to ensure families’ incomes are not eroded in this way. The benefit cap must be lifted immediately.

The government also missed the opportunity to provide financial stability to those on Universal Credit by not committing to keep the £20 uplift for future years.

The chancellor said himself that the economic impact of the pandemic has only just begun. And the Office for Budget Responsibility expects unemployment to rise to a peak of 7.5%, or 2.6 million people, by next year.

The government knows that more people will be turning to Universal Credit than ever before. But, instead of reassuring families that this lifeline will not be whipped away in April next year, they kicked the decision down the line by stating that they would wait to see the ‘economic and health context in the new year’.  

The Joseph Rowntree Foundation’s (JRF) research shows that 16 million people are set to lose £1,040 from their annual budget overnight if this uplift is not made permanent.

This will tip an additional 700,000 more people into poverty and an estimated half a million more into deep poverty (defined by JRF as more than 50% below the poverty line). For those who are already struggling to stay afloat, this cut will create severe hardship.

The longer this decision is kicked down the road, the longer people will have to worry about whether they’ll be able to stay afloat after April next year.

The government must commit to making this £20 per week uplift permanent.

Join us in calling on the government to make sure everyone has a safe home during the pandemic.