4 thoughts on “Benefit cap: with friends like these, the poor don’t need enemies”

  1. Posted 30/01/2012 at 22:11 | Permalink

    Some good points here.

    However, I’d like to point out that perhaps that the solution to/reason for high housing cost is perhaps not quite as one-dimensional as Kristian Niemietz suggests.

    Even with the current green belt/countryside planning laws there seems no fundamental reason why housing should be as expensive as it is. Housing costs exploded due to the credit/asset price boom under the last Labour government (I’m not saying that Tory governments are necessarily much better) as much as it did due to a housing shortage. This really hasn’t fully unwound (yet) because of very low interest rates.

    Secondly, additional housing should not necessarily mean more undeveloped land to build on. London has just half the population density of Paris. I know that some of this is due to the parks that make London generally a much more pleasant city to live in, but it makes little sense to ‘build out’ when the more obvious answer is perhaps to ‘build in/build up’. There would be far more incentive to do this if commuter travel wasn’t subsidised, but I’m still bemused as to why this doesn’t already happen more in London. Can anyone explain?

  2. Posted 30/01/2012 at 22:22 | Permalink

    Let me make three comments. First, a single 40 year old, earning £12,650 does only get a token amount of tax credits, but they ARE able to claim housing benefit. They will get approx £170 a week – and in total they will get just over £9,000 in benefits. Taking into account tax and NI and they have over £20,000 to live on. That is £384 a week. Whether they can live in central London on that amount – where rents are £240 for a cheap one bed is ambiguous, but they certainly get the pick of most of the “nice” suburbs.

    Second, a couple with 3 kids is hit much harder than a single parent by the changes. A single parent with 3 kids will be affected, but not much. One of the problems with the policy is that it gives dad a really big incentive to leave (ideally taking up to three children with him…) That makes no sense.

    Finally, I have strenuously supported changing the planning system.

  3. Posted 31/01/2012 at 11:44 | Permalink

    @HJ: I’m not just referring to the Green Belt, but to buidling restrictions in general, including height restrictions. I’d like to see a planning system in which people observe the cost of blocking development, so that nimbyism becomes expensive for themselves. In that system, people would stop asking themselves “how can I stop development?”, and start asking themselves “what type of developement would I mind least?”. If there was a strong desire to maintain green fields, but less resistance to having views obstructed, then there would be more upward and less outward building. But that remains to be seen, it could also turn out the other way round. The problem is that we cannot find out in the current system. It’s cheap and easy to join a signature campaign, or express a distaste for developemnt in a survey.

    @Tim: Point on HB is well taken, and yes, the cap is an extremely crude instrument. Presumably, a cap expressed in terms of equivalised income rather than face-value income would have enabled larger savings while dispersing the impact more evenly. Plus, the implicit rent subsidy in social housing should have been counted as part of income.
    I know that on planning, we’re on the same page, I enjoyed your paper ‘In My Back Yard’.

  4. Posted 31/01/2012 at 14:03 | Permalink

    The case of a 40 year old single adult earning £12,650 is instructive in terms of the poisonous effect Housing Benefit has on work incentives in high rent areas. If indeed they were renting a one bedroom flat in one of the less cheap parts of London for £240 per week, it would be pretty pointless for them to get a job in the first place (or to seek another low-paid job if they lost their existing one). Using a rough calculation, and including council tax benefit, they would only be around £50 per week better off in work, and this is before travel and other in-work costs. Once travel costs etc. are factored in, they would probably be working for a marginal income of perhaps 50p per hour. No wonder rates of ‘worklessness’ are so high in Hackney and Tower Hamlets.

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