The benefits of housing benefit

I feel the same way about housing benefit that Millwall fans feel about their football club, no one likes it and I don’t care.

On the left wing of politics housing benefit is called “‘taxpayers’ subsidies to landlords” while the right talk about how spending on housing benefit is ‘out of control‘.

Despite arguments by some, the fact is that housing benefit is here to stay. Because;

  • It stops people who lose their jobs from being evicted
  • It pays for the rent of people who rely on state pension or disability benefits for income
  • It funds a big chunk of the cost of building new social housing (because housing associations or councils borrow for part of the cost of this housing against future rents, which partly come from housing benefit)

Perhaps most importantly, the reason house benefit is hear to stay is because it accounts for a significant proportion of the income of poorer households.

This chart shows the percentage of poorer people’s income that comes from housing benefit;

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You might say that housing benefit isn’t really income because it goes to the landlord. This doesn’t really make any sense. It’s like saying my wage isn’t really income because it pays for my mortgage. People are getting something for this money.

None of this is to say that the current housing benefit system is perfect. Far from it. Just look at this chart which shows how much, on average, poorer people pay on rent even after housing benefit is taken into account;

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‘Net rent’ (ie rent costs on top of the amount paid for by housing benefit) still accounts for over 10% of the incomes of poorer people.

There are a number of problems with the current housing benefit system, including;

1. Low take up

In 2009 to 2010, the number of people that were entitled to but not claiming Housing Benefit was between 0.75 million and 1.14 million. The total amount of Housing Benefit unclaimed was between £1.85 billion and £3.10 billion.

2. Stigma

In a recent survey, 4 out of 5 landlords said they would not accept tenants who receive housing benefit. This gives even more power to landlords who do have tenants on housing benefit, because they know their tenants are not going to be able to easily shop around.

3. Paid in arrears

Like most benefits, housing benefit is paid in arrears. This can cause problems for tenants, especially if there are any delays or complications, if they can’t afford a deposit or if any other of the number of things that can go wrong with administration of a complex benefit go wrong.

These problems with housing benefit are not being addressed in contemporary political debate because housing benefit is so unloved. Perhaps it’s time to change that, for example by proposing a ‘basic income‘ for all citizens.

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Stigma and stigmatizers

The benefits system is Britain is fundamentally flawed. The way it is designed means it guaranteed that people who claim benefits will be stigmatized. What’s more, we have a political class and media who are doing little if anything to address this problem. Worse, they are, in many cases, actually making it worse.

That is the damning finding of thorough new report from researchers at the University of Kent.

There headline finding is that there is a large stigma attached to claiming benefits in Britain. This has a damaging effect on the wellbeing of people who claim benefits and it also explains some of the “non-take-up of benefits and tax credits”

Why is this the case? The report gives many answers but one of the most powerful is the benefits system is heavily based on the means test and;

“International evidence suggests that countries with benefit systems based on contribution or on citizenship, rather than on a means tested basis, are less likely to see high levels of benefits stigma.“

This may seem counter-intuitive but, as the reports authors point out;

“claimants of most means-tested benefits are consistently seen as less deserving than claimants of more universal benefits… Selectivity by its nature draws attention to the threshold between the ‘needy’ and the rest, whether this ‘needy’ group are themselves to blame for their situation, and whether claimants are appropriately grateful for the money, all of which are de-emphasised for more universal benefits”

This is important because “the UK is a country that relies much more heavily on means-testing and much less heavily on contribution than most other European countries”. What is true for the UK is even more true for the US where “welfare” is used as a term of abuse.

The reports authors conclude, therefore, that “Changing the way that benefits are delivered is perhaps the most obvious place to start trying to reduce stigma.”

What might “changing the way that benefits are delivered” involve? It might include “progressive universalism” where most households get some benefits but certain groups get more than others. It could also involve more sophisticated forms of personalization, where households are given help depending on their individual situation. Perhaps more controversially it could mean introducing a more “contributory” aspect to benefits, for example, giving people a percentage of their previous income for a period of time after they are made unemployed.

Perhaps just as importantly it means changing the culture within the benefits system. This goes deeper than a conversation over whether it is the private or public sector that should be doing the actual benefits assessment. It means changing the system so that claimants do not feel that they are the hapless recipients of generous “gifts” from the state and so that the assessors do not see their primary role being around preventing fraud.

If I had one slight criticism of the report it would be the prominence that it gives to the role of the media in creating stigma.

The report partly originates out of a concern that the media is running more and more inflamatory comments about people who claim benefits and that this is creating a more and more hostile climate. However, the report is far more subtle than that in its exploration of public opinion and the media.

The authors state that “there remains a possibility that people who think benefits claiming is shameful then choose to read stigmatising newspapers (or that newspapers simply respond to the views of their readers)”.

I find this a very hard argument to dispute. Newspapers are private businesses that try and understand what their customers want and then give it to them. This applies just as much to opinion pieces as it does to which news stories are given prominence.

The report contains some experimental research to see what impact the media could have on people’s opinion. On the basis of this approach they conclude that their intervention had a “relatively small” impact (0.05–0.20 points on a 0–10 scale). I am perfectly willing to believe that reading a certain newspaper might give someone a 2% greater chance of thinking there is a stigma associated with claiming benefits.

Is this really such a big deal in the grand scheme of things? Certainly not when you compare it to the fundamentals of public opinion on benefits.

The vast majority of people believe that large numbers of people are eligible for benefits and fail to claim them. This is true now and has been consistently true for the last 30 years, regardless of media scare stories.
Similarly, a vast majority of people agree that large numbers of people falsely claim benefits. This number has been steadily creeping up, possibly as a result of media stories, or politicians talking tough, or both. However, the point remains that the vast majority of people have felt this way for the past 30 years.

The report makes some recommendations for how journalists could improve the quality and accuracy of stories about benefits. I would say that these have as much chance of being implemented as I have of being selected as the Republican candidate for the 2016 election.

However, the report should, and I hope will, have a profound influence on how the Labour party thinks about the benefits system.

Two houses, divided

David Cameron has launched the Conservative party’s annual conference with a divisive interview on Andrew Marr’s show. Not only is he coming up with policies that will inevitably increase youth homelessness. He has also, unwittingly, laid a trap for himself, that Labour can now spring.

In that interview Cameron uses the issue of housing to draw a distinction between two types of people. He says;

‘We do need to look at choices we make in this country. Take young people, if you leave school, you go to college, you work hard, you get a job, you don’t have any chance of having housing benefit, living at home with mum and dad often into your 30s. If you take a different path, don’t go to college, sign on, get housing benefit, get a flat, then of course if you get a job you’ll probably lose the housing benefit on the flat. So I think we want to look at the signals we send in welfare and I think we should recognise the welfare cap we put in place, showing that no family should be better off on welfare than in work, that was an extremely powerful and sensible and very popular actually thing to do.’

Hardly one nation stuff!

Still, it’s not hard to see where this strategy comes from. There is less and less public support for benefits as a form of redistribution and the Conservatives have mismanaged the economy to such an extent that they believe they now need to find further cuts to hit their deficit reduction strategy

Putting these two things together means it is almost inevitable that they will want to cut benefits while claiming they are on the side of the hard working majority.

However, there is a big political trap here which Labour could spring on the Tories.

The fact is, that the Tories have very little to offer the ‘striving’ young person that Cameron describes. Wages are not going up, unemployment remains high, there aren’t any new houses being built and mortgages are hard to come by.

The default response of many on the left will be to criticize Cameron’s efforts to take away housing benefit from under 25s, since that would, in all likelihood, mean an increase in youth homelessness. This is of course right and proper.

A second response is also needed though. Labour needs to show that the Tories are actually doing nothing to help hard working people (young or old). Labour needs to contrast the current situation with policies that will increase wages as a share of the economy, build more homes and make it easier to get a mortgage.

This would build on policies that have already been floated such as building new homes using the money from the 4G auction, using QE to boast house building, and so-called ‘pre-distribution’ approaches to raising wages.

Cameron and the Tories’ constant invocation of ‘strivers’ ‘doers’ and so on is in fact, a noose around his neck. If they continue on their current course they will have done little for this group and should expect little gratitude in return. The opportunity for Labour to benefit from this is enormous.

P.S. Jules Birch does an excellent job of pointing out some of the problems with Cameron’s position, not least of all the fact that the benefit cap which he refers to has not yet been put in place.

Means and asset testing

The means test is getting a lot of attention on both sides of the Atlantic.

In the UK, the Liberal Democrats have been suggesting that benefits for pensioners, like the winter fuel allowance, should be means tested and there is  a storm brewing over the introduction of the new ‘Universal Credit’ which some people think is a disaster waiting to happen.

In the US there is a nasty and racially tinged debate about whether or not President Obama has ‘gutted’ the work requirements included in means tested welfare benefits as well as the outrage over Romney’s claim that people who claim the Earned Income Tax Credit are not taking responsibility for their lives.

Means testing is when you ask people how much money they have to help you decide whether or not they qualify for some particular benefit or support. There are many good reasons to be against it.

For example, means testing can be degrading and disempowering for the claimant  it can create perverse incentives like when people deliberately do not save so that they can qualify and it creates a stigma over benefits.

However, it looks like, in some guises or other, the means test is here to stay. Here is a simple proposal for improving it; instead of solely assessing people’s means, the state or charity that is doing the means test should also assess the claimant’s assets and help them make a plan.

In practice this would mean that as well as asking people, for example, what their income is, you would also ask them the following three questions;

  1. What are your goals?
  2. Who do you know that could be useful in achieving these goals?
  3. What skills and experience do you have that could be useful in achieving these goals?

On the basis of these three questions and the traditional means test questions the claimant and the worker could jointly agree a plan and a package of support for this plan.

This might not just be money. In fact, it might be less money that using the means test.

There are several radical implications of this approach.

Firstly, it would mean giving more power and training to the worker doing the assessment. They would need to know about other projects and schemes that are out there (not solely government schemes) and be able to recommend these to the claimant.

Secondly, it would mean changing the terms of the relationship between the claimant and the worker. It would become less transactional and more relational. The worker would actually listen to the claimant and then they would jointly come up with a plan. The worker would probably also have some responsibility for checking on how the plan has progressed and encouraging the claimant.

Thirdly, it would mean the experience being quite different for the claimant. The current system asks claimants to prove that they are in need. This proposal would mean that the claimant would need to prove that they have goals but that they need support to achieve these goals. They wouldn’t feel like a failure but as someone with aspirations and some of the tools needed to achieve these aspirations.

Overall, I think adding three questions about assets and drawing up a plan would significantly improve the means test. This approach could be used in housing allocations, benefits assessments, adult social care assessments and so on and so on.

P.S. I should say that this blogpost was partly inspired by Alex Fox’s excellent post on Joint Strategic Needs and Asset Assessments