Housing benefits – helping the poor or the rich?

What would people do if the politics was really boring? Maybe something useful. Like playing rugby, sailing, or farming (New Zealand has an exceedingly boring politics).

No such luck here in the UK. About a month ago, one of the hot themes was Coalition government cutting the housing allowances. That is, some people get a benefit from state to support them in the place they rent. This is going to be (if Dave Cameron has his way) cut down to max 400 per week (for five bed house). The new maximum for 2 bed – 290 per week doesn’t get you much in London.

On one hand we have here our Daily Mail readers, brandishing the examples of unemployed who live in 2,000 per week Kensington flats, courtesy of hard pressed UK taxpayers.

On the other hand, we have a variety of people, including the inestimable Boris Johnson, who suspect that what Dave would really like to do is to give Daily Mail readers Kalashnikovs, send them for quick field trip to Kosovo to learn about ethnic cleansing and then let them check Kensington flats for any unemployed on housing benefits.

As per usual, both sides are a bit right, and use it to push their entirely wrong agendas.

For a start, we can say that there are few groups of people here. First, we have genuine social cases, such as a pensioner with no family living in an area that got (recently, from his/her perspective) gentrified. Or people who have a temporary problem and HA just lets them bridge it. I think most people would have no problems to pay them a bit more in cases like these. The term is limited, and we think they “deserve” the help.

On the other extreme are another group who are “structurally” unemployed. Not employed, and have not much interest in being employed. As for myself, I struggle to find a good reason why, if we are going to support them, we should support them in London as opposed to say Orkneys.

In between is probably a very large group that can’t make ends meet with their (low) income and (very high) housing/living costs in London. As usual, I have an Unreasonable Response to their situation.

That is, the housing benefit is actually hurting them. Why? Well, think about it. You can’t make the ends meet, because you are paid the minimal wage, so you get extra money from the government. Now think, what would happen if they left London?

There are two possible scenarios.

One, their job is actually needed! The fat-cat Londeners would find out that their minimum-wage (or even less) cleaner/nanny/whatever is suddenly not there! Well, maybe if they want to continue using them, they have to pay them well enough to be able to live in London? You don’t pay, you don’t get. At the moment, you can think of the housing benefit to working families as a subsidy so that rich Londoners can have cheap cleaning.

Or, their job is not needed – in London. Chances are, that the job is needed somewhere else – and almost by definition, if you are on a minimum wage, your money will got further anywhere outside London (there not being many more expensive places in the UK). So you will be – at least financially – better off.

But that is not the only benefit. The flat you had can now be rented by someone who is not subsidized, which by definition means they have higher salary. Before they could not work in London (by definition – you paid market rents, which means someone else was after your flat). Chances are that they had lower salary before they moved to London – moving to London just to be able to spend more is a bit perverse, unless you are a Russian oligarch.

So, you’re at least no worse off (financially), possibly better off. Someone else is better off, and, importantly, they pay HIGHER taxes (higher salary = higher taxes).

In one go,:
– you have more money to spend (or better place/less commute/etc for the same money)
– government saved money by spending less on the housing benefit
– got more money in taxes (which can be used to say improve your lot again).

Q.E.D. In either case, people on housing benefits are better off (or at least no worse off) than before, even without housing benefit.

Instead, we make it so that their wages don’t go up to a decent living standard, and tie them down to the life of living from hand to mouth.

Of course, the above does not take into account things like “I used to live here, it’s what I know, I want to live here”. True. But people who don’t get housing benefit have the same problem – and does anyone look after them?
Is it fair that a family with a marginally higher income, that doesn’t qualify them for HA, has to move from an area where they lived for years in search of jobs, but their single neighbor, who’s poorer, doesn’t have to?

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