Much of the argument about the benefits cap is based on an exaggerated emphasis on a very small number of people, intended to give people the impression that the system is far more generous than it really is; but there are some people affected (I met someone who was being capped last month). Iain Duncan Smith defended the cap on the Today programme this morning. Part of his defence was the claim that people on benefit were receiving support to pay for housing that people in work could not possibly afford. That has to be wrong. Housing Benefit is payable to people in work, at a slightly superior rate to people not in work – it is more generous partly because of earnings disregards, and partly because people in work don’t suffer the same penalties, like the bedroom tax. The taper – the rate at which the benefit is withdrawn – is 65%. This is the same figure as the taper being introduced for Universal Credit.
There is a more fundamental problem in the design of Housing Benefit; it is that the benefit depends on the level of the rent, and rents can be very high. If we accept that government is going to meet a large part of the cost that independent and private providers charge, then over time, those charges will come to reflect the benefits available to pay them. This is the trouble with Housing Benefit, and the same problem can be seen with some other benefits, including child care costs from tax credits, legal aid and residential care fees. In the short term, the way to deal with the issues is to cap the costs, rather than the benefits. In the longer term, however, the issues will not be resolved without direct provision of essential services.