The Chancellor has returned to announcements made earlier this year, that ‘welfare benefits’ have to be cut by £10 billion. People on benefits are expected to live on very little, and it is obvious that cuts would hurt some vulnerable people; the question is which. The IFS have suggested that cuts will take one of three forms: more means testing (which saves little – taxing benefits would be easier and fairer), cuts in the general level of benefits (which would save a great deal), and cuts in the range of people entitled – it’s been suggested that Housing Benefit will be suspended for those under 25.
If pensioners were to be completely exempt, that £10 billion would have to come out of about £52.6 billion going to people of working age. That’s a tall order, and it’s more likely that it will come from benefits that also cover pensioners. The PM has referred specifically to Housing Benefit, which currently costs nearly £23 billion. Housing Benefit works currently by assessing rent, income, and tapering the benefit to cover the difference.
Housing Benefit could be controlled more effectively if it were not so very responsive to individual differences. The last government introduced a Local Housing Allowance, and then paid people irrespective of what their rent actually was. That makes it possible in principle to set a payable figure independent of actual rents. Once the link is broken, it should be possible to set a desired level of expenditure and design the awards to fit that level of expenditure. But the first economy that the current government made in Housing Benefit was to look at this arrangement and say, ‘that means some people get more benefit than is merited by their actual rent’ – so they cut out that difference. In other words, they did the exact opposite of what they needed to do if they wanted to make the benefit manageable and bring it under control.