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Cameron Watt: The under-occupation penalty in the Welfare Reform Bill won't tackle benefit dependency, and could lead to higher spending

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Cameron Watt is Head of Neighbourhoods at the National Housing Federation. Previously he worked for the Centre for Social Justice and at Conservative Central Office. These are his personal views.

Iain Duncan Smith and the Coalition Government are transforming our welfare system for the better. In radically simplifying its impenetrable complexities and ensuring work always pays, Conservatives have made a promising start to getting Britain working in the most challenging of economic circumstances.

As well as making work pay, the Government has to constrain the benefits bill. One proposed measure to try to achieve this is the ‘under-occupation penalty’ for social housing tenants in the Welfare Reform Bill. If implemented, from 2013, 670,000 households in the social sector will have their housing benefit cut by an average of £13 per week - £670 penalty a year - if they are deemed to have a spare bedroom according to DWP’s proposed size criteria. Some families will lose £1,400 a year. Two-thirds of these 670,000 claimants are disabled.

Proponents of the penalty argue that hard-pressed taxpayers shouldn’t be paying for people to live in homes that are too big for them. In theory most efficient use of the nation’s homes would require us all to live in homes of a size that exactly meets our needs. But in reality the profile of our housing stock, across all tenures, means this simply isn’t possible. Over many decades successive governments have abjectly failed to build enough market and social homes, so now there aren’t nearly enough homes of whatever size to go round.

Also, to date, many social landlords have purposefully allocated families to properties with an ‘extra’ bedroom. Often there are very good reasons for this, such as giving families scope to have children without moving home or allowing a child to stay with a divorced parent at weekends, thus maintaining a meaningful relationship. But as a consequence of reasonable allocations policies, a huge proportion of social tenants across the UK will be classed as under-occupying and financially penalised when they can least afford it.

For example, in Northern Ireland, two-thirds of the Housing Executive’s 90,000 tenants will fall foul of the penalty. Like everywhere else, waiting lists for all social homes are long and only 2,000 new social homes are built in Ulster each year. Thus the overwhelming majority of social tenants claiming housing benefit will be unable to downsize to a home whose rent their reduced benefit can cover.

Making up a shortfall of £13 a week or more will force huge members of the poorest households into acute hardship when their incomes have already been hammered, for example through gas price hikes of 18% and regressive tax rises such as 20% VAT. So many families will face unenviable choices including going hungry and turning off their heating in a bid to keep a roof over their heads. David Cameron made the noble pledge that in spite our economic woes, his Government would not seek to balance the budget on the backs of the poor. That pledge must be honoured.

Not only is the under-occupation penalty unjust and unfair, it is also unlikely to save public money. Arrears will sharply increase and so may evictions. Social landlords are still coming to terms with cuts to their capital budget of 63% and have to safeguard the revenue that underpins their viability as social businesses. Therefore local authorities are likely to face a big increase in the number of homeless families whom they have a statutory duty to house, typically in expensive temporary accommodation in the private rented sector. Even if these private homes match each family’s size to DWP’s size criteria, they will usually be much more expensive than the larger ‘under-occupied’ social home the family has vacated. So the taxpayer will lose out.

As an alternative to the current under-occupation penalty in the Welfare Reform Bill, the Government should seriously consider accepting the amendment proposed to the Bill by crossbencher Lord Best, likely to be voted on in the House of Lords next week (most likely 12 or 14 December). This would retain the current definition of under-occupation used by the Department for Communities and Local Government, allowing one additional bedroom to the ‘bedroom standard’. Using this benchmark as the basis for any measures to reduce under-occupation would be fairer and prevent the expensive unintended consequences that the current proposals will inevitably produce.

It’s absolutely crucial that Government continues to prioritise creating a tax and benefits system that expects, demands and clearly rewards work from all who are capable of it. But a decent society must also protect the working and non-working poor who require housing benefit to keep a roof over their families’ heads. Cutting housing benefit through an under-occupation penalty when families have no access to alternative smaller social homes will do nothing to tackle benefit dependency, and necessitate an increase in public spending to deal with the consequences. Ministers should reconsider.


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