Osborne unveils the National Living Nightmare

Comedian Mark Steel (@mrmarksteel) tweeted earlier:
I’d prefer today if Andy Murray decided the budget, Alastair Cook was playing at Wimbledon, and George Osborne was facing Mitchell Johnson.

Well, a fast bouncer at Osborne feels better for Britain than the other two.

The common features of Osborne’s budgets are that there are a couple of surprises, rabbits out of the hat as the commentators like to call them, and an awful lot of spin around some clever or even stolen phrases (today Living Wage). Oh, I forgot – the other feature is that the poor always get stuffed. Appearing to give with one hand, stealing with the other, the real story is normally hidden in the detail, in un-highlighted lines in the Red Book.

Osborne is the political equivalent of that old saying, ‘the louder he talked of his honour, the faster we counted the spoons’. The more Osborne talks about home ownership, the faster it falls. The more he spouts about aspiration, the fewer the people who can afford to buy. Huge sums are sprayed around the housing economy backing ever more hopeless attempts to countermand the basic fact that house values are so high that buying is unaffordable. It’s a fools errand to constantly back schemes that put prices up and make matters worse.

Just as in 2012, when Osborne ended his drive against the deficit in favour of the drive towards election victory, he has abandoned his deficit target as explained during the election campaign. He plays a curious game with the word ‘afford’. Evidently we simply cannot afford student grants, but we can afford an inheritance tax break for the 5% of estates that will benefit. We can afford to raise the threshold for the higher rate of tax but we can’t afford to pay housing benefit to 18-21 year olds. How can that be?

The word housing appeared frequently in this budget, and throughout the Red Book. There are a lot of detailed housing measures, but they are random and increasingly divorced from any notion of a housing strategy designed to ensure that the people are adequately housed.

Budgets are often described as being ‘like the curate’s egg, good in parts’. So where are the good bits? The restriction on ‘buy to let’ mortgages is probably the most sensible move they have made. Not only is this an increasingly expensive tax break – costing more than twice the total affordable housing budget – but it enables buy-to-letters to out-compete home owners trying to get into the market. He could have gone much further but restricting mortgage relief to the standard rate is a good first step towards redressing the balance of power in the market. It will be saving £665m a year by the end of the Parliament. Raising the ‘rent-a-room’ tax relief is also a good step, and only costs £15m by 2020/21 – it has been frozen for many years and could make a bigger contribution to ensuring that people have somewhere to stay.

The rest of the egg is rotten. Having spent 5 years forcing social housing rents up, now he is forcing them down, by 1% a year, ripping up the so-called ten year rent settlement of CPI+1%, apparently with no consultation and no care for the impact. Unbelievably, Osborne complains that social rents having been going up too fast because evidently there is a ‘ratchet’ of ever higher housing benefit chasing ever higher rents in social housing. It is worth noting that the Government controls all the elements of the ratchet. The ‘saving’ comes to a massive £1.45Bn by 2020/21, but that is money that will be lost to the housing system. David Orr of the NHF says this one measure will cost some 27,000 homes that now won’t be built.

One sour note for the Chancellor is that the Office for Budget Responsibility has warned that their interference in the housing association sector, with the 1% rent cut on top of the right to buy extension, brings them closer to being classified as public sector organisations, which would at a stroke bring £60 bn on to the national debt.

The slow march to the gallows for social housing continues. The Government will review ‘lifetime tenancies’ (there is of course no such thing, what they mean is end security of tenure and impose time limited tenancies). The bureaucratic nightmare of ‘Pay to Stay’ is extended so people earning over £30K (£40K in London) will have to pay market rents. Market rents are of course, not affordable to anyone on those salaries in higher rent areas. The Government says it is wrong for these people to be ‘subsidised through social rents’. Their ignorance knows no bounds. No doubt the plan is that many of those who are threatened by market rents will exercise the right to buy, immediately attracting a subsidy of up to £103K. It’s simple: punish those that want to be tenants, massively reward the same people if they choose to buy the same property. And what’s worse, the money recovered by councils will be returned to the Exchequer for deficit reduction. So much for ring fenced housing revenue accounts, and so much for council house building. Housing associations, for no apparent reason, will keep what they save and be able to invest it. Pay to Stay is estimated to be worth £240 m by 2020/21 – given the difficulties in the scheme, that is a pipe dream.

The worst news is within the benefits system. In addition to the wider issue of the heavily reduced benefits cap, and the freezing of some benefit levels, from 2017 there will be no automatic right to housing support for 18-21 year olds who are out of work. There will be exceptions, supposedly for vulnerable people, but the position of people with children is not even mentioned. The likely outcome, as everyone working in the field knows, will be much higher homelessness.

The restriction to two children within tax credits will also apply to housing benefit from 2017, and the ‘family premium’ will be ended from 2016, so make sure you don’t have a third child. I suppose it’s really a family planning policy.

Private tenants and home owners get to share in the pain (no mention here of private rents going up too fast and causing pressure on housing benefit). Local Housing Allowance levels will be frozen for 4 years, creating an ever wider gap between rent and benefit received. Unemployed home owners who qualify for mortgage interest payments will in future only get a loan (but not to worry, if you get through that, you can pass a more valuable home on without paying inheritance tax).

The huge changes in benefits will hit both those who are unable to work and many of those who are in work but on low incomes. All the changes make it harder for people to meet their housing costs. Like bedroom tax, they will be forced to find cheaper accommodation (where? we ask), to meet the difference from their other income, or to become homeless. It’s an appalling choice. Getting a job is the best way out of poverty, they always say. Well, it’s not.

On second thoughts, perhaps Mitchell Johnson isn’t enough for George Osborne. I think I’d prefer to see him up against Tyson Fury.

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One Response to Osborne unveils the National Living Nightmare

  1. Pingback: Through a glass, darkly | Alex's Archives

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