In principle, those living on benefits with spare rooms shouldn’t get extra money for them. Yet the implementation of the under-occupancy charge has been weak at best, cruel at worst, and may turn out to be a national false economy.
Early this year, MoneySavingExpert.com published welfare changes information to help those impacted by them. We don’t usually see our role as campaigning against an elected government’s initiatives.
However, last Friday night I was a guest on Radio 4’s Any Questions (listen here) and was asked about the bedroom tax. In light of that, I wanted to put my view on the record here. I had hoped just to print a transcript of the programme. Yet just in case the spoken word doesn’t crisply transcribe, I’ve taken what I said and speedily edited it into some bullet points.
The term "bedroom tax" isn’t a good one.
This is one of those occasions where the political spittle over the argument has risked damaging people’s practical finances.
The problem with the term "bedroom tax" is I’ve been asked many times, by those not on benefits – older people especially – if they’re going to be taxed more because they have a spare bedroom.
Actually, this is a substantial reduction in benefits for those in social housing (council or housing association) who are deemed to have an extra room.
Yet by now, it has become so well known as the "bedroom tax", that had I titled this blog "the under-occupancy charge", few would’ve known what I was talking about.
In principle, we shouldn’t pay people more for spare rooms.
I understand the idea that the state shouldn’t be subsidising people whose houses are too large for them. We don’t want two people being given housing benefit to pay for them to echo around in a six-bedroomed house.
If (thankfully, we don’t) we lived in a controlled economy, where we could simply move people to a new house when they had too much room, it would all make sense.
The problem is homes aren’t liquid.
The issue here isn’t the concept itself. It’s the transition to making it work. It isn’t the individual who gets the extra cash, it’s often going straight to the landlord.
The problem is homes are not liquid. We do not live in an economy where you can say: "Oh, I’ve got one too many rooms, I’ll just downsize. I’ll be there next week." It doesn’t happen like that.
They’ve used push economics to push people into doing something they can’t do.
The charge on people who have extra rooms is a financial incentive to get people to downsize to free up bigger social housing homes for others. Yet there are no homes for people to move to.
One lady reported her borough, Camden, said there were 400 people trying to downsize to one-bed homes because of this, but there were only nine homes available. I haven’t verified that stat, but these numbers are on a similar scale to others I have heard across the country. They can switch to the privately-rented sector, but that’s usually more costly (hence more benefit needed, or they fall foul of the cap).
It may be a false economy, as councils will need to house people anyway.
If you add the bedroom tax together with the move to universal credit – where we’ll pay people who have no budgeting skills by the month (including, for the first time, their rent) – we’re going to have people who no longer pay their bills.
If they’re put out on the street, councils are likely to be obliged to house them. So as well as the rather damaging effect on each individual, it could be a false economy, because we’re going to end up paying more as we still have to house people who don’t have homes.
The answer is home-building and a long-term plan.
We need to build more houses so the housing market is more liquid, as well as having a 10-year plan where we have a slow transition so people move into smaller properties and there aren’t these arrears. Plus we manage and help people move.
Those were my main arguments. In the time I didn’t mention the increased stress for many people will add to NHS mental health costs, or the fact that some people have extra rooms that aren’t actually spare (ie, their carer stays when they are ill), or that many people on benefits can’t afford the cost of moving.
Below is an unofficial transcript of the Any Questions bedroom tax discussion. It hasn’t been checked or approved by the BBC or the debate’s participants. Apologies for any errors.
Chris Stevens (audience member): Would the omnishambles of the bedroom tax have been avoided if it had exempted people who had agreed to move if smaller, suitable accommodation became available?
Jonathan Dimbleby (presenter – JD): Menzies Campbell, in the background to this we have Ed Miliband’s announcement now that he would actually reverse what Labour calls the bedroom tax – it’s called by the Government, the subsidy to the second bedroom, or the spare bedroom subsidy. Menzies Campbell?
Menzies Campbell (former Lib Dem leader – MC): Well one part of me is rather pleased that Ed Miliband has made that announcement. Why? Because it’s the first announcement he’s made about the welfare reforms, which this coalition Government has been trying to implement.
JD: Even though he would overturn what you’ve committed yourselves to?
MC: Well he would say that, wouldn’t he? Because they’ve said that pretty well every proposal for reform has been something they have opposed in the House of Commons but made no promises as to whether or not they would reverse any such decision, were they to come to government.
What you have to remember is in the private rented sector, there is no such thing as the additional payment in relation to rooms which are not occupied. And that seems to me to be very discriminating.
You also have to understand, as I’m sure you do, that we have a very considerable shortage of housing in this country.
If people are in local authority houses, who’ve got larger accommodation than they require, it’s at least reasonable to say we should not be subsidising you for that. But remember too, because it’s often forgotten, that the Government’s agreed some £150 million, plus another £20 million as available to local authorities in order, if necessary, to deal with any particular issues of hardship that might arise.
But let me finish with this point. Welfare costs us as much as health, education and defence put together. 40% of that welfare is spent on people of pensionable age, I suppose, like myself.
The idea that we could make our economy stable once again in this country – it looks as if we’ve begun as I think has been said, to turn the corner – the idea that we could do that without doing something about the size of the welfare bill is frankly risible.
I wish it was possible to give everyone everything they want, But in a time of austerity, when the very survival of the country and the economy is at stake, I’m afraid there are some very hard choices to be made.
JD: The Government is saying that this, Emily Thornbury, would save £500 million as a result of this changed policy, and yet Ed Miliband says: "Well we’re not going to go along with it, or we would reverse it."
Emily Thornberry (Labour, Shadow Attorney General – ET): That’s right. Yes, we’re not going to go ahead with this bedroom tax. It is mean, i i’s horrible, it’s trying to divide people. It is picking on the most vulnerable in our society.
There are 400,000 people who are disabled who are going to lose money as a result of this bedroom tax, and it is a disgrace. I think it’s even worse than the poll tax, because at least the poll tax hit everybody unfairly. But this is actually picking on the most vulnerable and those who are having the most difficult time.
We will scrap it, and good for us because we should do, and we’ll pay for it – Jonathan, since you’re asking – we will take back the £150 million tax cut that this Government wants to give to hedge funds, we will stop the rather silly ‘shares for rights’ scheme, and we will stop the tax scams for the construction industry. And that is how we’re going to pay for it because those are our priorities.
JD: Just on the last of the shares for rights schemes is that employees, it happens quite widespread, employees, in return for having shares, give up some of their employee rights.
ET: That is right. So instead of taking off time for having a baby or having a right to be able to sue if you’re unfairly dismissed, you’re going to be given some shares instead. We don’t think you should be able to buy people’s rights in that way and we’ve always been against it.
JD: Martin Lewis, your view.
ML: An aside on the bedroom tax before I start. This is one of those occasions where I find that some of the political spittle, if you forgive me, is actually very damaging to people’s practical finances with my day job.
The problem with the terminology, ‘the bedroom tax,’ is I’ve had countless people who are not on benefits worried, older people especially, worried that they’re going to be taxed more because they have a spare bedroom. That is a problem with misnaming it.
We have the same with the way student finance was just so polemically argued that it put many people unnecessarily off going to university. Even if you don’t like the system, the political spittle in the Commons can be a dangerous form of communication.
But let’s get on to the under-occupancy charge. In principle I understand the idea that the state shouldn’t be subsidising people who have too many large houses and if, and thankfully we don’t, we lived in a controlled economy where we could simply move people to a new house when they had too big a room, it would all make lovely sense.
The problem with this concept isn’t the concept itself, it’s the transition to making it work. It isn’t the individual who gets the extra cash, it’s the landlord. They’re not actually getting the money, it’s going often straight to the landlord.
What we have to understand, is that homes are not liquid. We do not live in an easy-to-move economy where you can go, "Oh I’ve got one too many rooms, I’ll just downsize. I’ll be there next week." It doesn’t happen like that.
And if you add the bedroom tax with the move to universal credit and paying people who have no budgeting skills by the month, we’re going to have people who no longer pay their bills. They’re going to be out on the street and that means councils are obligated to house them.
So as well as the rather damaging affect this has on the individual, it is a false economy because we’re going to end up paying more because we still have to house people who don’t have homes. It should be scrapped.
JD: The spare room subsidy, as the Government calls it, should be scrapped because amongst other things, says our money expert, it’s a false economy. Dominic Grieve?
Dominic Grieve (Conservative, Attorney General – DG): Well I disagree it’s a false economy.
I mean if Emily’s logic is correct, then indeed not only should the Labour Party wish to scrap it, but they should decide that any person in privately-rented accommodation, irrespective of its size, should get housing benefit sufficient to pay for it, even if their children have left home, and that has never been the position.
I still don’t understand this distinction that has been drawn between people in the privately-rented sector, who apparently can adjust perfectly well – I’m sure sometimes it’s quite difficult – but when their children leave home, realise the housing benefit they’re getting is no longer sufficient to pay for the rent and they have to move elsewhere. And apparently this different group, who are in social housing, are to be protected forever. It simply does not make sense.
It does not make sense because of the number of people who are living in overcrowded accommodation who might benefit from that accommodation – at least a quarter of a million – and the fact that there are many other people who are looking for accommodation in the first place.
Now I accept one of Martin’s points, all transitions – and I know this as a Member of Parliament – are difficult. I am the first to recognise that and I think, looking at it and looking at how my housing associations are coping with it, that lots of people need more support than they perhaps have been getting in managing the transition. I have noticed that.
JD: Many thousands, we are told, are in arrears already.
DG: I accept that there is a need, because lots of people have become very dependent. And as a result of that, when they are asked to do something independently, they find it much harder.
And this may be a distinction between those in the private sector and those in social housing, certainly what I have noticed in my own surgery in the constituency.
But the basic premise that people should downsize if they don’t need the accommodation, unless they can bring somebody else in, who they are going to sublet to and help them pay the rent, seems to me to be utterly unexceptionable.
And in a crowded island, if we are really going to continue burying our heads in the sand and decide that we can continue providing such a subsidy, I have to say to you that I just don’t think it is credible.
I listened to Emily, and at the end she said she was going to pay for this out of hedge fund taxes. Actually what she is saying is that it is another Labour raid on pensions.
ET: Can I just come back to you because you see I hear what you say and I keep hearing coalition politicians talking about how concerned they are about people on the council waiting lists and how people are in the wrong-sized accommodation, well we would believe you more, frankly, if you were building some council housing, which you’re not.
And secondly, if you were really concerned about people living in properties that were too big for them, then you would have included pensioners in this bedroom tax, but you haven’t.
JD: Are you saying that they don’t actually care, is that your charge? That Menzies Campbell and Dominic don’t care?
ET: What I am saying is that it is a cover, I think. It’s a cover for what they are doing. And again they keep trotting out, because it’s an argument that is obviously in some sort of script, they talk about the difference between the private sector and the public sector. But the people in the private sector still get a subsidy from council tax.
If you are on your own in a private sector, you will get money off your council tax for example. So that is a subsidy you’ll get.
But the fundamental point is this. People do want to move and they want to move into appropriate-sized properties, particularly when they get older, into a property that they will be able to stay in for the rest of their lives, particularly when their children have left home.
But their property doesn’t exist, and there is not a sufficient amount of it. And you know that, and if you didn’t know it before, you know it now. So scrap this bedroom tax, it is not fair on people. People with very little money are losing large amounts of money and are going into debt. And 25% of the people who are now in debt have never been in debt before.
JD: Okay, thank you. Menzies Campbell.
MC: We would believe you more if you hadn’t spent 13 years in which you built hardly any council houses at all. The absence of council housing did not occur in the last three years.
ML: I don’t care whose fault it is, it is a problem that we have to fix, so stop bickering about "it’s me" or "it’s you". Let’s get this straight. First of all they have excluded pensioners, quite correctly, because once people get to be 60 or 70, they don’t move house and we can’t ask them to move house. I am glad that they have done so.
But the point on the bedroom tax, we all get: we don’t want two people being given housing benefit to live in a six-bedroomed house. What you have to do, and we should all agree, is we need to build more houses so that the housing market is more liquid, have a 10-year plan that we have a slow transition, so that people move into smaller properties, so that we are not having these arrears.
Manage it and help them do it. You’ve used push economics to push people to do something that they can’t do. And that’s the problem.
JD: Let me ask the audience here. It’s been played out around two terms which, in general, describe the attitude that people have towards it. Who in this hall is inclined to regard it as a bedroom tax, who a spare room subsidy? Who thinks it is a bedroom tax? Would you put your hands up. Who sees it as a spare room subsidy? Would you put your hands up.
In this hall, and always stressing that this is not a scientifically-selected community…
ML: It is an under occupancy charge, it’s a charge, it’s not a tax, it’s not a subsidy.
JD: That’s not the point though, we are talking about politics here, and it is about attitude. So I have to report that the majority here do regard it as a spare room subsidy.