Bedroom Tax – will cost millions more than it saves and is political

This paper argues:

1. The bedroom tax will cost millions and perhaps a billion more to the public purse than it saves

2. The bedroom tax is a politically motivated attack nothing to do with cost saving as

3. The removal of council tax relief for under-occupiers, owners, social and private tenant would save the public purse TEN times the claimed bedroom tax saving.

The way I look at any issues is first to look at the bottom-line, do the numbers stack up in other words. It helps being numerate and I have been called a freak as I see patterns in numbers and don’t have any problems with arithmetic. Yet so many of the population at large do have problems with numbers and especially if they attend a palace in Westminster, that is MPs.

The bedroom tax will have impacts which are not included in the purported impact assessment which all have a cost to the public purse. Homelessness is one of these and there are many more such as an increase in domestic violence and abuse costs as well as displacement costs of tenants moving and so many more – notably the coalition does NOT take any of these costs into consideration in its purported impact assessment; rather it simply states with incredulity that the public purse will save 660,000 lots of £14 per week or £480m in the first year.

Here I discuss a tiny proportion of these additional public purse costs to expose the coalition saving of £480m per year to be a myth. In fact the bedroom tax will cost the public purse millions MORE per year and as much as a billion pounds more!

Shelter has done a cost of homelessness research here which makes interesting reading as it looks at the costs just of a homelessness application and decision and landlord costs and puts this at £6690. As has the Govan Law Centre in Glasgow which researched much more deeply using Shelter Scotland figures which look at wider costs to thee public purse such as NHS etc and puts the cost at £24,000. None of these directly look at the impact of domestic violence and abuse which I briefly looked at here that if the bedroom tax sees a rise of 5% in DV will add a further £275m per year to the impact cost of the bedroom tax. So the cost could well be more than £24,000 per case and indeed the GLC costing say that complex cases can cost £83,000 and we know that Westminster is currently paying £12,768 per month or £153,000 per year in temporary homeless costs.

The bedroom tax will cost the social tenant on average £14 per week we are informed which is £728 per year and the government simply multiply this by the 660,000 they say are affected to arrive at the £480m per year saving. Yet that figure assumes no additional cost to the public purse whatsoever and in the government’s view they will save £480m in year 1.

Yet if the homeless cost is £24,000 per year it would take just 20,000 evictions and homeless cases to cost the public purse an additional £480m per year and wipe out any savings. 20,000 out of 660,000 affected means that if just 3% of bedroom tax affected social tenants are evicted then there is no saving at all to the public purse!

It is worthy of note here that the direct payment pilot programmes have shown rent arrears increase from 2% to 8% in Torfaen, they have quadrupled – and that is with a very carefully controlled set of social tenants which excludes those likely not to pay too!  So if 8% of the 660,000 bedroom tax affected social tenants are evicted, which is 52,800, then the cost to the public purse at £24,000 each becomes £1,267 million or about 2.5 times the expected savings of £480m and a net cost in the first year of £787.2m!

Throw in the additional £275m in DV added costs and it is easy to make an argument that the bedroom tax will cost an additional £1bn to the public purse in the first year!

So much for the bedroom tax being a saving!!

Last week I posted a blog that said the overall benefit cap due in the summer with create 8 times the number of homeless cases than the bedroom tax which it will given the average reduction in benefit is projected to be £93 per week compared with the £14 per week bedroom tax deduction. That does NOT mean the bedroom tax will not directly create homelessness (arrears to eviction to homeless) as it will; it’s just that the OBC will create homelessness in far greater numbers. I said there I can easily see an additional 100,000 homeless cases being created next year and this adds to my argument above and adds a further £2.5bn in cost to the public purse.

Again so much for the overall benefit cap being a saving!!

Both of the above don’t operate in a vacuum either and when we throw in direct payment of HB to social tenants and the problems that will cause with budgeting and factor in the removal of council tax benefit which will see social tenants having to pay part of the council tax for the first time the real issues begin to emerge.

On that point a few weeks back I wrote that the bedroom tax is the exact opposite of council tax relief which sees the government rewarding single people with a 25% deduction in their council tax. The bedroom tax penalises the single tenant in a benefit deduction yet single person council tax relief rewards them! Over the weekend I received some information about a Freedom of Information request from Mendip Council which illustrates this huge perversity. They will receive a reduction in bedroom tax HB of £497,000 or so per year; yet will pay out £5.14m per year in single persons council tax relief.

So one council will reward its single occupants by 10 times more than its tenants will be penalised by the bedroom tax!

Mendip District Council is a good example to use as it has 71% of its properties owned or mortgaged and close to the national average.  It also has 67% of its social tenants claiming HB and bang on the national average. It’s social rented housing to private sector housing numbers at 66:34% are also very close to the 67:33% national average and so it is in Housing Benefit terms very close to the national average council.

If we extrapolate this we see £480m being taken nationally from single ‘under-occupying’ tenants yet £5bn being given to single ‘under-occupying’ tenants and owners for the same principle reason! Whether you are a social tenant, a private tenant or a homeowner you receive a benefit and are paid that by the government for under-occupying through the 25% council tax relief – the exact same issue a social tenant is being penalised for with the bedroom tax

IF the government abolished the council tax 25% relief for being a single occupier then this would save ten times the amount the bedroom tax would.

It would also mean the average weekly deduction to all single occupants, whether social tenants, private tenants or home owners would be £6.94 per week and less than half the average £14 per week bedroom tax deduction. That would cause less homelessness and less stress and TEN TIMES the amount of money would be saved to the public purse.

Yes this would affect homeowners and pensioners – the precise two categories of groups the government is seeking electoral support from!  Yes reader you begin to see what the bedroom tax is – an attack on social tenants and social tenants alone!

Note well I haven’t included the council tax discounts landlords get from having properties empty or the council tax discount people get on their second or third or eleventh homes, which of course would save even more to the public purse wouldn’t it!

UPDATE 16:00

If my figures above of a £5bn per year cost are accurate for the 25% single occupier council tax rebate are correct then why not reduce this to 10%. This would produce a saving of £2bn per year to the public purse and be 4 times the bedroom tax saving and we could abandon the bedroom tax altogether.

It would apply to all single occupiers, which means owner occupiers as well as tenants and to pensioners too. It would mean every single occupier having a benefit reduction of £2.78 per week – and after all aren’t we all in this together?  £2.78 per week is far more manageable than £14 per week (the national average) or even £22 per week (the London average) and it would negate the homelessness aspect described above and the huge stress of moving and displacement cost the bedroom tax will cause.

It could even be reduced to 20% in Year 1, 15% in Year 2 and then 10% in Year 3 and still save the public purse far more than the bedroom tax. It would be equitable and fair as it would apply to all under occupiers regardless of tenure and not just social tenants. After all every single occupier get this relief and so why is it that just social tenants are getting hammered by the bedroom tax while single owner occupiers are being rewarded? We also see single social tenants being bizarrely rewarded with council tax relief and at the same time penalised with the bedroom tax and that just doesn’t make sense!

It is also bizarre that empty homes get this benefit when the purpose we are told of the bedroom tax is to better occupy available properties!  For an empty property to get public purse funding is bloody ridiculous. For a second and third and subsequent home to get public purse benefit is also bloody ridiculous too in light of the making better use of stock rationale of the bedroom tax.

WHY, I ask myself, is it only social tenants who are getting penalised for single and under occupancy?

Scrap the bedroom tax immediately and scrap the 25% public purse benefit of council tax relief and the public purse saves more and does not have the homeless and displacement cost and domestic violence increases. Then by all means have a rationale debate and make better use of stock in social and other forms of housing. Why for example are social tenants given just £20 per week tax-free then taxed at 85% if they take in a lodger when an owner occupier gets £81.45 per week / £4250 per year tax-free if they take in a lodger? Why not increase the £20 tax free element to £50pw for a social tenant and reduce benefit thereafter by 45% – the top rate of tax a billionaire pays?

Why do social tenants have to be disincentivised to move or change when everyone else is incentivised?

The perversity of the bedroom tax in theory and in practice is there for all to see and it is and needs to be seen for what it is – a politically motivated attack with no economic rationale – on social housing.

I was not surprised to read that a 50,000+ home housing association said last week it had downsized 16 tenants and had plans ro downsize 16 more.  32 tenants out of 50,000+ shows just how bogus the argument is that tenants will downsize. You would expect about 8,500 of the 50,000 to be affected yet just 32 will downsize – about 0.3% means that 99.7% will not downsize!!

It’s time such alternative or comparative arguments were made to go alongside the many legal arguments that have already surfaced in the past month or so. It’s time to challenge the bedroom tax not just on ts emotional shortcomings as the human interest stories the press and media love, but on ts alleged economic rationale of saving which is bogus or its political rationale of fairness which is also bogus or that it will through disincentives make better use of scarce housing stock.

Courtesy of Joe Halewood at SPeye