Q) What do the following worthy narratives and campaigns have in common?
- Increase LHA rates (to reduce LHA shortfalls) – see Shelter here
- Abolish the two child limit (to reduce child poverty) see CPAH here
- Make UC standard allowance cover essentials’ (to reduce poverty) – JRF here
- End or reduce homelessness (to reduce current record levels) – e.g. Crisis here
- Build more social housing (to end the Housing Crisis) – e.g. NHF/CIH here
A) None of them CAN POSSIBLY WORK while the Benefit Cap policy remains!!!
I discuss these worthy aims and explain why they can’t possibly work below. This also means each of these narratives is false and superficial nonsense.
1. Increase LHA rates to reduce LHA shortfalls
This is a chronic non-sequitur. Briefly the overall benefit cap (OBC) policy works by limiting the maximum amount of housing benefit (LHA and UC form) that the benefit household and very-low income household can receive. Very specifically the household cohort of one parent three children (1P3C) is limited to £639 per month as the maximum receivable in LHA and I use this household cohort to illustrate all the above.
Note very well: The 3-bed ‘rate’ of LHA which the 1P3C household qualifies for is for example £1200 per month in Brighton. However the 1P3C benefit household only receives £639pcm in LHA as that is the maximum allowed due to the OBC policy as illustrated below in Table 1. Increasing LHA rates still sees the 1P3C benefit / low-income household receive £639 per month in LHA and the narrative of increase LHA rates to reduce LHA shortfall is a specious one as increasing LHA rates does NOT mean more in LHA is received! This is a non sequitur.
Moreover the rationale in reducing LHA shortfalls is to reduce the arrears to eviction into homelessness pathway which cannot happen as the OBC limits the housing benefit maxima (LHA and UC form) so there is no reduction in any shortfall even if rates increase
2. Abolish the two-child limit (2CL) will take 250,000 children out of poverty?
It won’t and again the OBC policy is the reason why as the extra £270 per month that a benefit household would receive in UC child element for the third child means, as due to the zero sum nature of the OBC it means £270 per month LESS is received in maximum housing benefit. No more benefit income would be received so there cannot by definition be a reduction in however you choose to measure child poverty from abolishing the two child limit.
Table 1 (below) illustrates the LHA and 2CL issues.
3. Make UC standard allowance cover the ‘essentials’
A campaign led by the Joseph Rowntree Foundation (JRF) is demanding that UC standard allowance – the replacement for JSA, Income Support, etc – should cover basic expenditure costs all households face, in their phraseology covering the ‘essentials.’ Very worthy and it has attracted all of the usual suspects backing this notion. Note well this ‘essential’ estimate does NOT include any rent top up and in 2021 two in every three SRS tenants did not receive full housing benefit (64% according to EHS 2020/21) In very short, the JRF estimates are demanding the UC standard allowance for a single person or single parent increases from the £84.86 per week level now to £120 per week. In monthly terms from the current £368.74 to £521.43 per month and this is £152.69 per month more than now.
The SUBSISTENCE element in the Overall Benefit Cap would therefore increase by £152.59 per month which means the maximum housing benefit would reduce by the same £152.59 per month due to the zero sum nature of the policy. The 1P3C household’s housing benefit maximum per month would fall from £639 to £486 per month. No more in overall benefit income is received, and more households would succumb to the arrears evictions into homelessness this plan obviates!
Table 2 the UC essentials (JRF plan)
4. Ending homelessness is possible?
Thus far the proposals that are falsely referred to as solutions in (a) increasing LHA rates, (b) abolishing the 2CL; and (c) raising UC standard allowance to the ‘essential’ level would all result in MORE homeless households being created AND no more in benefit income for any of the affected households. None of these policies and highly specious ‘solutions’ can or will work due and directly because of the overall benefit cap policy remaining. The OBC policy obviates more and more homeless households each year as by design it directly creates ever smaller housing benefit payments each year meeting ever-increasing rents and a systemic increase in housing benefit shortfalls year on year.
5. Just build more bloody social housing will you!?
Building more social housing will solve the Housing Crisis and the Homeless Crisis it is claimed daily. It won’t due to the overall benefit cap policy!
Even if all new social housing built is rented out at the cheapest level called social rent, they will not go to those most in objective housing need, those on benefit or very low incomes, as these cohorts cannot afford due to the OBC policy. As such, they will not be granted SRS tenancies as landlords refuse to accommodate on grounds of affordability.
This year the 1P3C household can receive a maximum of £639 per month in housing benefit and official SRS rent data reveals the 3-bed SRS property in England averages £529 per month. So what am I on about as there is no shortfall at the cheapest social rent level?
FY2324 sees CAP (£1835) – SUBSISTENCE (£1196) = Max £639 residual housing benefit. FY2324 sees max £639pcm housing benefit versus £529 average 3-bed rent = no shortfall
When SUBSISTENCE benefits rise by 6.7% in April 24 and rents by 7.7% – which is the norm – then the FY2425 position will be a housing benefit shortfall position, albeit a small one that increases year on year.
FY2425: CAP (£1835) minus SUBSISTENCE (£1276) = Max housing benefit of £559 per month. FY2425 sees max £559pcm housing benefit versus £570 average 3 bed rent = £11pcm shortfall
In FY2526 using OECD and Bank of England 2.9% CPI projection for September 24 its [£1835 – £1313] max housing benefit of £522pcm versus average 3bed social rent of £592pcm for a £70 per month shortfall on the cheapest SRS 3-bed at social rent level. If CPI returns to its target rate of 2% then the following year its £496 maximum housing benefit versus £610pcm rent for a £115 per month shortfall.
Any housing benefit shortfall means the benefit household has a rent top-up position thus the benefit household uses benefit income set aside for subsistence to keep a roof over their head. If they don’t or can’t make the rent top-up the arrears to eviction into homeless pathway kicks in and quickly.
The illustration above is how the OBC policy has always worked and designed to produce an ever smaller amount of maximum housing benefit payable each year to compete against ever higher rent levels. The OBC assures ever more and ever increasing housing benefit shortfalls year on year and the policy is the greatest direct cause of homelessness and housing poverty.
All of the worthy ‘solutions’ such as increasing LHA rates, removing the two child limit, increasing UC standard allowance and building more social housing simply cannot work while the OBC policy remains. That is not opinion it is simply numeric fact and numbers unlike politicians or lobbyists do not lie.
The devil is always in the detail yet very simple uncomplicated detail of the OBC zero sum equation of CAP minus SUBSISTENCE = MAXIMUM HOUSING BENEFIT is the most basic arithmetic that the usual suspects ignore. These national lobbies and purported ‘experts’ of national repute (JRF, CPAG, Shelter, Crisis, Generation Rent, numerous ‘think tanks’ who do not think) all negligently ignore when asserting specious pronouncements that increasing LHA rates means more in LHA is paid or that paying UC child element for the 3rd child means a reduction in household poverty when it simply does not.
In summary UNLESS the policy called Benefit Cap is abandoned NONE of these worthy ‘solutions’ can possibly work and homeless household numbers and poverty will always increase year on year. Finally factor in that Lord Freud a DWP minister at the time of the policy was introduced admits the policy does NOT save the public purse and is purely political (see here) which government knows means the lack of calls for the Benefit Cap to be abandoned by all of the names and lobbies is …
Speye Joe 