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Tim Leunig: The real losers of Cameron's housing benefit plans are the middle aged

Tim Leunig is chief economist at CentreForum, the liberal think tank, and a reader in economic history at LSE.

Screen shot 2012-06-25 at 16.32.06The Conservative Party did not win a majority of the vote or a majority of the seats at the last election. Despite the meltdown of support for the Liberal Democrats, and despite Ed Miliband’s low personal standing, the polls suggest that the Conservatives are not on course to win a majority at the next election. That simply isn’t good enough for a party that is ambitious for power.
Winning power means getting enthusiastic support from some, while not alienating too many others. As Tim Montgomerie has argued, Mrs Thatcher was successful in part because she picked her battles carefully and tolerated some things, such as the NHS, that did not match her ideals.
Cameron’s welfare speech is worth reading in full. It isn’t as brutal as his Mail on Sunday interview suggested yesterday, but it does suggest ending the right of young adults to claim housing benefits, unless they have been abused. Thankfully for young people, that loss of the right to benefits is matched by a new right: the right to live at home until you are 25, whatever your parents think about the idea. Cameron speech may look like an attack on the young, but the real losers are the middle aged.
Telling parents that they have a legal obligation to house their children until they are 25 does not look like a vote-winning strategy to me. The situation gets even murkier if the child gets married, and murkier still if they have children. Cameron does not appear to intend that parents would be obliged to house their son-in-laws and daughter-in-laws, let alone their offspring’s offspring. But he does talk in his speech about making parents financially responsible if their children leave home and claim benefits. I take this to mean that parents will be financially responsible not only for their children, but also for their grandchildren. That is a big ask.

The Prime Minister must also clarify what will happen if a parent refuses to house or pay for housing for their offspring. Some parents may not wish to live with their twenty-something year old children. In some cases the parent may wish to downsize, while in other cases the parent may not believe that their children’s behaviour is acceptable. Other parents will feel that it would be good for their children to move out, and – bluntly – to grow up.
Are such parents to be criminalised, fined, imprisoned? Throwing out a child aged under 16 without making provision for them is a serious offence. The Prime Minister cannot surely be saying that parents would face the same sanctions for refusing to house a 23 year old?
There are bad effects on work incentives as well. In many cases young people claiming housing benefit are in work. Many are living a considerable distance from their families, having followed Norman Tebbit’s famous advice to get on their bikes and look for work. The recession means that many people, particularly those under 25, are in relatively low paid and sometimes part-time work. They have done the right thing, because having a job is the best way to find a better job. But for now the reality is that a minimum wage job necessitates housing benefit, at least for those in job-rich, high housing cost areas. If we tell such people that they cannot claim housing benefit, we deny them the chance to move to areas that offer better employment prospects. That cannot, surely, make any sense?
It is right that a Conservative party should aim to limit welfare spending. The way to get the housing benefit bill down is to build more houses – lots more houses. It doesn’t have to be social housing either: increasing private housing supply by 1% cuts rents by 2%, and housing benefit falls even faster, given the way the tapering system works. That avoids creating a lot of unhappy parents, and a lot of unhappy children, forced to live together in small houses, for far longer than they had ever expected.
This policy risks alienating many people who should be natural Tory voters. It may gain a good headline, but it isn’t a route to a majority.


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