The claim
“There seems to be a fundamental misunderstanding about the affordable rent programme…That does not mean that there will be no pressures on the housing benefit bill; those pressures have been acknowledged, but they will cost tens of millions of pounds, not thousands of millions.”
Grant Shapps MP, Housing Minister, 28 June 2011
The background
The Housing Minister today threw out claims that the Government’s new “affordable rents” policy would push up the bloated housing benefits bill by a further £1.2 billion.
Pointing to research by his department, he said: “Note that the Impact Assessment that was published showed that the scheme would cost in the region of £25m to £50m. We do not recognise the figures running into billions of pounds that have been thrown around…”
The analysis
Tackling the benefits bill – and with it those dastardly families who’ve been “milking the system” living on welfare in mansions – has been central to the Government’s efforts to make benefits fair again.
The bill has ballooned from £14bn a decade ago to £21bn, leaving the Work and Pensions Minister Iain Duncan Smith ruing “absurd situations” where some people have been working the system to live in mansions on benefits of £100,000 a year.
To help rein in the bill, the Government plans to slash the affordable housebuilding budget from £8.4bn to £4.4bn by the end of the current Parliament.
It wants to plug the gap in the housebuilding budget with money from a new “affordable rents scheme”. Under this scheme, available from next year, landlords will be able to charge 80 per cent of local market rates.
Ministers hope the policy will deliver 56,000 new homes over the Spending Review period – as opposed to 27,000 under the old Labour policy.
The Department of Communities and Local Government (DCLG) compares the new policy with Labour’s old policy in its Impact Assessment report here.
It shows that under Labour’s old policy, the Government would save £625m; while under the new policy the housing benefits bill will climb by £553m (taking the “central” scenario figure). That’s a cost of £1.178m, or £1.2bn.
So how is it that Mr Shapps can dodge the billion pound bullet? The DCLG’s assessment of the costs is based on a 30-year period.
The Shadow Housing Minister Alison Seabeck challenged Mr Shapps over the costs in the Commons today, and later told FactCheck: “The Tory Government is in a mess on this: on the one hand you’ve got the DWP saying that they’re going to cut housing benefit whilst on the other hand there’s DCLG introducing a policy which will force families into benefit dependency and push up the housing benefit bill even further.”
The verdict
The DCLG has acknowledged the housing benefit “pressures” Mr Shapps’s proposals will bring. As Mr Shapps claims, its report concluded that the Affordable Rent Scheme brings “greater costs to the Government through increases in housing benefit expenditure”.
However, he was perhaps disingenuous not to mention his cost estimate of £25m-£50m over four years, was based on the DCLG’s analysis – which explicitly covers a 30-year time period; and which clearly recognises that the costs could run to £1.2bn.
By Emma Thelwell
