Wednesday, February 08, 2012
Would rent controls be the worst method of controlling housing benefit aside from all the others?
With its mixture of good ideas and painful ones, the Welfare Reform Bill going through Parliament is causing more anguish among Liberal Democrats than anything since… Well, since the last horrible compromise the Coalition Government came up with. The logic is relentless: Labour wrecked the economy and stiffed us with the bill; government is still spending vastly more than it has coming in; the NHS and benefits dwarf all other government spending; the Coalition is committed to NHS increases; benefits need to be cut. It’s just that that means taking money from the people who, by definition, have least – and with the Coalition also committed to pension increases and (a Lib Dem victory) to increasing benefits with September’s high inflation rate, that narrows mightily the field of possible cuts.
Amid all the pain about how wrong it is to restrict benefits and the echoing question of where else to find the money when there’s simply none left, that old political cliché of ‘thinking the unthinkable’ – usually spoken by the unspeakable – is being trundled out on a daily basis. So, looking at where the soaring costs are in the benefits system, one element stands out as a massive problem for which no-one is proposing any action.
I come, inevitably, to the elephant in the room, and Millennium’s howl of pain which, amongst other points, reiterated his support for a Citizen’s Income – at least the Universal Credit is a small step in the right direction – but noted the biggest problem with it:
“And since I've been saying for AGES that I would support a flat Citizen's Income if only I could make the maths add up – the problem remains the disproportional effect of Housing Benefit in a housing market that is still massively over-inflated, which is why that's proving such a botherer in the current debate about a "cap" on benefits…”If the Coalition Government wants to make really big savings on the welfare bill, arbitrarily finding relatively small groups from whom money can be clawed back (often because they can’t fight back) just isn’t going to do the job. And while I support the Universal Credit as a way of simplifying the benefits system and making work pay, this has its limits when there’s not much work to be had (the government needs to cut benefits more as there’s not enough tax coming in. But there’s not enough work about for being to move off benefits into and pay taxes on. So the government needs to cut benefits more as there’s not enough tax coming in. But…).
Everybody knows there is one big problem in the benefits system, and nobody knows how to tackle it. Which drives me to an unthinkable thought.
Shouldn’t we look at how rent controls might work, a quarter of a century after they were abolished?
And, yes, it’s a bizarre and heretical thought for a free-marketeer in one of the two free-market parties and in coalition with the other one. But there’s a simple answer to the gut-instinct complaint, ‘But that would distort the free market!’ No. It can’t. Because the rented sector reliant on housing benefit isn’t a free market at all. Either you abolish housing benefit and let all the consequences of an untrammelled free market in housing erupt, or recognise that this is a market that is warped out of all recognition by subsidy at the bottom, and that it therefore needs an equivalent pressure downwards.
The obvious solution is a vast new build of social housing, but – though the Coalition Government, incredibly, is building much more than Labour did – to pull that off in a couple of years is both financially and physically impossible. Previous governments have put limits on housing benefit but, blatantly, this hasn’t worked. Whether it’s people having to pay top-ups to their landlords or simply that the problem is too big for controls on the benefits side to handle. Government is still paying out vast sums with no effective control, not going to the people in the greatest need but instead subsidising businesses (some small, some large) in the way that we don’t for any others, yet that endless subsidy distorts and makes unaffordable for many people not just the housing market but the whole of government spending.
Look, the idea of price controls makes me cringe. It summons up ideas of post-War drudgery or Gordon Brown salivating, neither of them attractive images. But with massive cuts needed to government spending, the Coalition is having to do a lot of things that either or both parties don’t want to. So what’s the religious objection to the government setting up trials looking at benefits cuts from the other end of the telescope?
I admit that I don’t much like talking about either housing or benefits policy, either. With housing, in my many years on the Lib Dem Federal Policy Committee, there was no other issue that came up so many times to so little effect, and it was, I’m afraid, boring – not because of the vital issue itself, but because over a decade and a half it became clear that I could pretty much deliver all the speeches on either side, and the summing-up that always failed to come to a conclusion:
- ‘This is a really big issue’;
- ‘It costs lots of money and where do we get it from?’;
- ‘But it’s really important’;
- ‘Yes, Simon, but where do we get the money from?’;
- [Half an hour later] ‘Next business’.
Besides, taking money away from landlords might be more popular than taking it away from people with cancer. Who knows?
Of course any rent controls would take a lot of looking at. I don’t want a return to the monolithic sort running for half the last century, or ones that do little for the poorest but give you the jackpot if you’re renting a penthouse. Even regional setting would be far too crude, and any system would probably have to be restricted to rents paid by housing benefit and to bear down very gradually, year by year, so as not to depress the housing market too far (because that inflated bubble is still holding up what’s left of the economy). And I’m prepared to believe – especially after thirteen years of Gordon Brown – that the amount of micro-managing bureaucracy involved would make it impossible to pay off. So it may well be that, after carefully examining the costs and effects, after feasibility studies and pilot schemes, the government might find that it wouldn’t work.
But I still have to ask the question, and propose that we try those feasibility studies and pilot schemes. Would micro-managing bureaucracy for landlords be worse than micro-managing bureaucracy for people who can’t find work, or who are too ill for it? Because that goes on all the time. Would distorting the housing market with a downwards pressure be so shocking, when governments have for decades distorted it with hundreds of billions of pounds of upwards subsidy? And if you have to do something drastic to make savings in the benefits bill, who is better-placed to bear them?
Note: Good grief. Apparently, this is my six hundredth blog post and, thanks to having fallen much more ill than usual (as usual) in December and still being rather worn down, only my second so far this year – this January was only the second month in six years of blogging that I failed utterly to publish a single word on here. Oops. For those of you interested in such things, last year’s 145,792 (ish) words came in uneven bursts of between 37,715 and 314 a month, but none of them were as poor as zero.
"subsidising businesses (some small, some large) in the way that we don’t for any others"
Aye well, we've started doing it for Tesco etc with workfare now...
Aye well, we've started doing it for Tesco etc with workfare now...
Big problem - if you restrict rent controls to where housing benefit is paid, landlords will chuck out HB tenants in the (many) areas where they can find plenty of private renters.
I can see all sorts of problems with it - but a huge mass of problems with the situation now, too. But I'm not suggesting a rush into one size fits all; why not have some pilots to find out how to get something better?Post a Comment