Cutting

CutsThere has been much debate here in the UK on the new round of spending cuts that have come into force this month as part of the Coalition’s austerity measures. In particular, the cuts to Housing Benefit and Council Tax Benefit have been the stuff of media frenzy over the past few days as the implications of the changes become apparent.

For those not in the UK who don’t know what’s going on, let me explain it briefly. First, Housing Benefit for socially provided housing is going to be limited to the number of bedrooms that the family is entitled to, not the number it actually has. The rules for social housing are that children under 11 can share a bedroom in pairs and those over 11 but of the same sex can also do so. So, a family with one daughter and one son under 10 are entitled to two bedrooms (one for the parents, one for the kids)  but once one of those kids passes the age barrier then he/she is entitled to their own room. However, if there are two children of the same sex, they can share regardless of the age difference (so technically a 15 year old could share with a 1 year old).

In the past the local authority has paid for the house that a family occupies, but now it will only pay for the legal requirement. This means that if a family has extra bedrooms to their legal entitlement, they will have a reduction in their housing benefit. The cut is 14% if you have one bedroom over your legal entitlement and 25% if you have two or more. On top of this, there is a new cap of £500 per week for all benefits for families with children and £350 per week for individuals. These caps are being rolled out in some London boroughs now and across the country in the autumn.

General Thoughts

So what to make of this? Well first some general principles.

  • As a country we need to accept that we have run out of money. Although some of the current debt burden on the state is a consquence of the banking crisis of 2008, it is undeniable that a huge portion of the systemic debt was run up over the prior decade by a government that borrowed during a time of economic growth and introduced a systemic shortfall that is burdening public finances now. We can now see that prior increases in public spending (and state sector employment) was funded not by economic growth but by debt.
    This needs to be addressed. It is foolish to suggest that spending can continue as before or that cuts do not need to be made to public expenditure, even if tax revenues are increased. We simply have to balance the books because if we don’t our borrowing will become more and more expensive and the spiral of debt that other countries have found themselves in could become our fate. If you think things are bad in the UK, try living in Ireland, Greece or Cyprus.
  • The Government has a moral obligation to look after the poor and disadvantaged and this is what a welfare state is about. Of course, there is an argument to be had over how best to help people. Some think that the solution is to motivate and incentivise people to seek to better themselves (or to penalise them if they won’t). Others may concur but see the call to meet primary needs is more powerful and therefore the first principle should be to fund people to an appropriate level to provide the basics of life.
    Whilst the principle that people should get on their bikes to find work seems sensible, the simple truth is that whilst some people have (or discover that they have) 3o speed racers, others don’t even have metaphorical bone-shakers. Whilst there may be some people who are simply not interested in working when they can live on benefits, others want to work but find no work available for them (or at least not in their locality). Whilst previous Governments have done much to make the labour market more fluid (the breaking of the Closed Shop being one of the most important moves in this regard) it remains that it is not a completely perfect market for a number of reasons good (the minimum wage) and bad (the lack of skills amongst portions of the working age population).
  • There is no correct best Christian response, or at least it is not obvious. Christians fall across the political spectrum and have different emphases and priorities from their reading of Scripture. Whilst I know very few Christians in the UK who would argue that we should remove the covering of the welfare state, beyond that there is disagreement on the way to tackle poverty and disadvantage. For example, how much money should you give to an alcoholic who is unemployed? Should you restrict what benefit payments can be spent on? What obligations (if any) do those on benefit have to the wider community?
  • Notions of supporting redistribution by taxation on Scripture are shallow. Whilst Scripture is clear that Christians are called to compassion and justice, the key paths towards that appear to be charity and “fairness” in the exercise of power. Romans 13 says that Christians should pay their taxes, but that was to a state that used those taxes to maintain law and order, not to supplement income of those in poverty. As for the idea of the Jubilee Year, this was less redistribution and more a sophisticated form of leasehold. There is little evidence the Jubilee ever actually happened, and the economics of it would be interesting to observe in a modern context. Who would own a factory built on someone else’s land? What about the widgets that the factory made? Furthermore, how would you begin such an economic structure in today’s society? If you kept property rights as they are now then you would perpetuate the current rich in their position and make aspiration and economic improvement impossible. On the otherhand, you might want to confiscate all property and share it out equally – but how is that anything less than theft from those who have worked hard? Furthermore, if we knew that next year we would get an equal share of everything, what would be the incentive to work hard?

Specific Thoughts on the Latest Changes

  • The Housing Benefit changes that are being introduced this month were already in place for the private renting market and were introduced by the previous Labour government. Very few people objected at that point and it strikes me as slightly hypocritical for some to complain now about this government doing what the previous government did already for another sector. Perhaps it has less to do with alarm at the proposals and more to do with taking a political side. Red changes good, blue (and yellow) changes bad?
  • The principle that the State should pay to support that which a family needs rather than that which it desires (like an extra bedroom) seems sensible, especially in a time of austerity. However, one wants to ask how this works out in practice. On the plus side “house swap forums” have started to appear in the most unlikely places – there is one in my local supermarket – and this is evidence of the benefit changes having some of the desired effect. The State has introduced an economic factor into the housing market that is causing many social tenants to rationalise their choices as regards living arrangements. Hurrah for the free market!
    At the same time, what happens if the housing supply doesn’t fit the family arrangements of those on Housing Benefit? It’s one thing to suggest that a family with an extra bedroom should downsize, but what if no smaller houses are available? This is certainly the case in some places and that means that some families will be faced with a reduction in Housing Benefit but no means of avoiding this. I’m not sure how this can be counted as just in any way. Of course, the solution might be to move into private renting, but then that housing stock tends to be more expensive then social housing, and increased demands on two and three bedroom houses might lead to increased rents. The perverse effect could be to increase the Housing Benefit cost, not reduce it.
    Of course, families could move out of their locality, but what if that means moving away from where your friends and relatives are and from where you work? That might work for families and individuals that are aspirational, but for many of the more vulnerable in society this is not a (literally) healthy option.
  • It seems to me that these new proposals could work if (and only if) the Government accepted that it cannot impose them arbitrarily. If the Government wants to pay someone less for the home it has happily been supporting for years, it has an obligation to provide that home (or at least to help the family involved find that home) in a reasonable place (i.e. not hundreds of miles away). Social housing has always had a different status from private housing and the notion that the State helps provide proper homes for families to provide generational security and societal stability is in danger of being seriously undermined.

Conclusions

The problems that face our country are myriad and paying the bills is one of them. There are no easy answers and anyone who suggests there are is not being realistic. Government budgets will be slashed and everyone has to accept the consequences. Like it or not, welfare is a major expenditure and there is no way of getting around the simple truth that the benefit bill has to be reduced.

At the same time we are in severe danger of losing the principle of the best of the welfare state which is to not just provide the resources to live on but also to help promote a stable and secure society. There is a possibility that the current proposals may force many to move far away from friends and family (not to mention workplaces) and to undermine the cohesion of the very aspirational communities that the Government is attempting to promote.

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