Monday, April 1, 2013

Bedroom Tax – Is the gain really worth the pain?

It seems that tackling overcrowding and the shortage of social housing are just a smokescreen for using bedroom tax as a way of reducing the welfare budget. If the Government do not have a radical re-think (and quickly), then this is something they could live to regret
The much publicized ‘Bedroom Tax, was introduced on 1st April 2013 under the Welfare Reform Act 2012. The new rules restrict the amount of benefit a claimant can make for each bedroom, if they are renting their home, and is based upon the number of people in the household. A reduction of 14% of the rent is applied for one ‘spare’ bedroom and a higher reduction of 24% of the rent is applied for two or more spare rooms. The ‘under occupancy’ changes mean that housing benefit can only be claimed for one bedroom for each person or couple living as part of the household, with a number of exceptions: Children under 16 of same gender are expected to share; children under 10 are expected to share regardless of gender; a disabled tenant or partner who needs a non resident overnight carer will be allowed an extra bedroom. The Joseph Rowntree Housing Trust, provide the following examples in their Welfare Reform Information Sheet:
Stuart and Isobel live in a four bedroomed property and have three children – Jenny who is 12, Max who is 9 and Alice who is 6. Under the rules, the parents (Stuart and Isobel) would be entitled to Housing Benefit for a three bedroomed property (one room for Stuart and  Isobel, one room for Jenny and just one room for Max and Alice to share). 
Sonia is a single parent and lives in three bedroomed property with two children, Rachel who is 11 and Peter who is 9. Under the rules, Sonia would be entitled to Housing Benefit for a three bedroomed property (one room for Sonia, one room for Rachel and one room for Peter. As Rachel is over 10, she would not be expected to share with Peter).
In July 2012 Minister for Welfare Reform, Lord Freud claimed that bedroom tax will ease overcrowding and help tackle the shortage of social housing. The article makes interesting reading (Extract):
‘The policy is estimated to affect 660,000 households, who will lose £14 a week on average.  Lord Freud said: ‘Nearly a third of working-age social housing tenants on housing benefit are living in accommodation which is too big for their needs, in spite of the fact of severe overcrowding…..We are stopping the practice of the state paying for rooms beyond claimant needs, and that should go in some way to help tackle the social housing shortage that has been blighting too many lives.’  

Sometimes you look at something and wonder what on earth was in the minds of the people who thought it up.  Based upon Lord Freud’s statement above, the government think that bedroom tax is something that will relieve overcrowding and tackle the social housing shortage! Last week I watched an interesting interview on BBC news with a Chief Executive of a North West Housing Association who was being asked about the introduction of Bedroom Tax.  He questioned the government’s motives for its introduction and went onto to say; ‘people’s lives cannot be managed by what appears at the bottom of a column on a spreadsheet’.  This demonstrates well how detached politicians often are when they pay little regard to the reality of their decisions.
It is no secret that the UK welfare bill is haemorrhaging money at an alarming rate and this a particular burden to the treasury.  The government expect annual savings of nearly half a billion pounds as a result of welfare reforms from a current annual cost of £200 billion pounds a year, of which £48 Billion is spent on benefit payments to unemployed and low income claimants (link). Even though we need to significantly reduce benefit payments, the savings made as a result of bedroom tax are a mere drop in the ocean.
Therefore, is the introduction of bedroom tax a way of tackling overcrowding and the social housing shortage as Lord Freud suggests or is it a pitiful attempt to save money?  Well, let’s look at overcrowding.  For this to reduce it would obviously require larger families to live in larger accommodation.  For this to happen it would need those who are 'over occupying' to move into smaller accommodation, thereby freeing up this larger accommodation. The problem with this is that even if over occupiers wanted to move social housing providers do not have a ready made supply of smaller accommodation for them to move into.  Construction output is currently low so we are not building new accommodation in any volume. While supply remains low with high demand, there will be limited new additional social housing to be of any help to the overcrowding problem.  Therefore bedroom tax will have limited to no impact on overcrowding.

Barclay’s, UK Social Housing Sector third quarter review for 2012 (link), identifies that demand for social housing continues to grow with over 1.8 million households in the UK currently on social housing waiting lists. It also makes reference to the fact that the social housing budget was cut by more than 50% in the Comprehensive Spending Review in 2010 which was a key factor in the fall in social housing provider’s new developments.  It seems a little contradictory that Lord Freud suggests that bedroom tax can help to tackle the social housing shortage when he is part of a government that have pulled the rug from under the feet of social housing developers by halving their budget.  Will bedroom tax have any positive impact on the social housing shortage?  I cannot see how, can you?
The conclusion therefore has to be that the introduction of bedroom tax will result in unnecessary hardship for many who are currently on welfare benefits, which is completely disproportionate to the savings/benefits that will be made.  In real terms what is likely to happen is an increase in rent arrears, particularly when housing benefit is paid directly to the tenants when Universal Credit is introduced later this year in October.  This will ultimately result in an increase in evictions and undoubtedly also increase homelessness. 

Chief Executive of the National Housing Federation, David Orr, provides an appropriate conclusion for this article:
“The bedroom tax is an ill-conceived policy which will hurt the most vulnerable people in our society. It will cause financial hardship for hundreds of thousands of families and cause huge upheaval around the country........The government’s assumed savings are questionable and this policy could ultimately cost the taxpayer more in the long term. It takes no account of the fact that there are not enough smaller homes in the social sector available for people who are under-occupying to move into. For them, the only options will be to take the financial hit or to move into a smaller home in the private sector, which could lead to higher housing benefit claims. The real solution to the housing crisis is to build more homes and bring down the cost of housing to reduce the benefits bill”
No-one will really know the true motives of those who came up with the idea of bedroom tax. It seems however that tackling overcrowding and the shortage of social housing are just a smokescreen for reducing the welfare budget. I am sure that if the Government do not have a radical re-think (and quickly), that this is something they could live to regret.

Please feel free to share this article and other articles on this site with friends, family and colleagues who you think would be interested

Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog.

No comments:

Post a Comment