The government’s response to its defeat in the Lords last night over benefit caps has been notable for its lack of substance. Iain Duncan Smith has taken two lines: that the policy is enormously popular, and that Bishops and left-leaning peers ought to be as concerned by the people paying for the benefits as they are of the people who receive them.
The popularity argument is, well, true. But it is a pretty hollow one. It is hardly surprising that public attitudes have hardened following years of rightwing propaganda emanating from what passes for the British press and, given the small amounts of money involved, this is rather a bread and circuses argument. Throw a couple more Christians to the lions to keep the plebs happy.
They are on stronger ground when they argue that peers ought to consider the needs of hardworking taxpayers more. But this looks like crocodile tears from the Conservatives who appear only willing to raise regressive taxes like VAT, are pressing to cut the upper rate of income tax and won’t even consider the introduction of wealth taxes. The fact that Vince Cable’s Mansion Tax is considered radical within the cabinet, which would only be levied on properties worth over £2 million, shows you how far we need to go to make the case for a fundamental shift from income to wealth taxation.
Fundamentally, this cap saves very little (and may even cost money), applies only to especially large families and undermines the concept of a universal child benefit. It is ironic that Iain Duncan Smith, the great proponent of symbolic taxes designed to encourage marriage is attempting to force through a benefit change which would give the poorest a major financial incentive to break up their families. It is a complete distraction from the real debate which is needed about benefits reform.
One thing that appears to be getting lost in this debate about the benefits bill is how much money is being wasted not to help the poor but to subsidise the privileged. I touched on the way the welfare state subisidises large companies who refuse to pay decent wages – thus ramping up the tax credit bill – last week. When it comes to housing benefit, too few politicians seem prepared to question why we are shelling out so much money which goes straight into the pockets of private landlords and only propose to tackle this issue by forcing people into worse accommodation.
This blind spot isn’t limited to the coalition; after all the housing benefit explosion continued unabated throughout the Labour years. The only justification for it appears to be that policies designed to tackle this problem at the landlord end of the telescope might harm property prices. And property prices help drive the economy.
There is some truth to this: no-one doubts that a collapse in property prices would damage growth. But it does rather bring all this talk of “ethical capitalism” into perspective. Because who is actually benefiting from this racket? Not taxpayers, who have to pay inflated housing benefit bills. Not the poor on welfare, who don’t see a penny from this spending. Not hard working people struggling (and mostly failing) to get onto the first rung of the property ladder. The beneficiaries are, once again, the very people who have managed to insulate themselves from every other aspect of the economic downturn.
If the introduction of land value taxation – which would discourage the speculative ramping up of rents – is not to be contemplated, then the very least we should be considering is the return of rent controls. The introduction of such a policy would mean many more winners than losers. The only real barriers to doing so is dogma about distorting the housing market (which one could argue has already failed chronicly) and fear about how the financial sector might react in its customary intimidatory way.
Instead, we seem hellbent on driving through policies designed to stigmatise the poor and provide everyone with less security. Until politicians on all sides are prepared to take on this beggar-thy-neighbour form of rentier capitalism, I won’t be getting too excited by this ‘new ethics’.
You are looking at this the wrong way. It’s the availability of HB that has (together with our growing population) driven rents up
Rent controls will have (have always had) a simple effect of reduicng the supply of rented housing, reduce mobility and make the problems worse.
Housing benefit has kept the Ponzi scheme which is the British domestic economy running for years after it would otherwise have collapsed as all Ponzi schemes must.
Consider how house prices work – people borrowed far more than was safe because they HAD to in order to get a roof over their heads, and also because they were told it was an investment that would pay back as house prices rose, and they were led to believe as house prices rose they would lose the chance even to get a “foot on the ladder”. Well – that’s what a Ponzi scheme is – one which pays out only because it sucks in a large number of people willing to pay large amounts to get into it.
Well, now even at current interest rates few first time buyers can get in, buy-to-let comes to the fore, those who can pay a substantial deposit – mostly gained from housing again, maybe a large inheritance, or a fortunate downsize – can get into it, and the rent is guaranteed.
It is quite remarkable how this central aspect of welfare payments is hardly being mentioned, so one would assume from all the coverage of the subject that big benefit payments go to the nominal recepients to spend on booze or big TVs or whatever. But for those who howl about over-large welfare payments to admit this woukd be to admit that the REAL layabouts in this country are all those who make big nmoney through nothing but sitting down and owning property. And that would mean repudiating almost all that has happened economically in this country since 1979, which has essentially been about money gained through things oher than doing work. So maybe not so remarkable that it’s been kept quiet.
“Tell Sid” privatisation and council house right-to-buy was all about suckering in almost everyone into this idea that real money-making was not about working but instead about passive ownership. Put this as leading to the recent case of the world’s biggest Communist government buying up a substantial part of London’s water supply, and you can see Thatcherism led to precisely the opposite of what the naive still think it was about.
Had council housing been kept in sufficient supply, let out at cost only basis to those in need, but enough of it to provide modest housing to everyone who needed it, housing benefit to private landlords would be used sparingly, and a cap at the cost price of local council housing would be entirely fair.
Can an advocate of rent controls please explain why they think they would work. i.e. what the consequences would be overall. Thanks.
All of this – housing prices, benefit payments, bail-out packages – and in fact every penny the government spends is just a symptom of the core problem.
Every penny the government spends is borrowed from private corporate banks which Create Money Out Of Nothing. Not only are governments borrowing this Created Money, they have to pay interest on it as well. As the private banks only create the principal – where does the interest come from? The simple answer to that question is: Inflation. This is the driver behind the blind charge towards Growth at all costs. Prices must go up to pay the interest but, because there isn’t enough money being created to pay the interest, the poor have to give up their houses and jobs so that they can be converted into money to pay this stupid debt interest.
If governments reclaimed the right to create their own money From Nothing then there would be no interest to pay as well as no repayments at all.
At present governments lend money into society. With the one simple reform above, governments would be able to spend money into society.
For a brief explanation of this Core Problem, watch the following short (2m42s) video on Youtube: http://www.youtube.com/watch?v=TXXNZ00Afyo&list=FLjHSuE3Q9N4xH1wMlSRjvAg&index=1&feature=plpp_video
Don’t we already have rent controls in respect of housing benefit? If the local council feels the house is too big for the claimant’s needs or the rent is above the market rate they can refuse the claim.