Wat Tyler (Burning Our Money) has posted a nice chart on welfare fraud, error and overpayment, which arrives at a total of £3 billion per annum. I note that the chart does not include Tax Credit fraud and error, which would add another £2 billion to that figure.
For some reason, WT focuses in on Housing Benefit and falls for the old myths:
... this week's revelation that in some areas an extraordinary 40% of households are now in receipt of housing benefit makes us even more concerned. When taxpayers are subsidising that much of the private rental market, rents are inevitably being inflated way beyond their true level. No wonder it's costing us so much.
Oh dear. None of this is new, for those who can be bothered to sit down and think about it. I left a comment as follows:
"Sure, 40% of people in some areas are on HB. But three-quarters of HB is claimed by social tenants, so it is just one branch of the government (DWP) paying money to another branch of the government (the local council or housing association). The areas with high incidence of HB are also those with high incidence of social housing (in some London boroughs, 50% of housing is social housing!)
This three-quarters of HB does not cost the taxpayer anything like as much as is claimed - the [cash cost] of having somebody in social housing is the maintenance, repairs, insurance etc, and on the whole, the social tenants who do pay some rent cover those cash costs and social housing costs 'the taxpayer' plus/minus nothing. (I'm ignoring opportunity cost of below-market rents for simplicity - 'market rents' are inflated anyway due to house price bubble and HB payments to private landlords).
It is only the one-quarter paid to private landlords that inflates rents and house prices. About one-third of the ten per cent of households who live in private rented accommodation are on HB. Even worse, the majority of those are in ex-Council flats that were sold off at a huge discount and the taxpayer is now paying top dollar [the people who got the big discounts] to house the people who would otherwise have been living there cheaply.
I would be happy to scrap [HB for private landlords] forthwith - it's a subsidy to private land ownership and hence the worst kind of subsidy. Far better to use the money to build a bit more social housing."
Protecting People From Themselves...
23 minutes ago
16 comments:
Do you think with councils not paying private landlords, their rents would have to drop?
[Thanks by the way and we'll be getting a way of signing up soon.]
JH, yes of course they'd drop! I won't bore you with economic theory, just please read this post by Rantin' Rab.
"The true cost of having somebody in social housing is the maintenance, repairs, insurance etc" - er, what about the capital cost then? The cost of having me in my house is mainly my mortgage payments...
Adam, what 'capital' cost?
Could you please break down the oustanding amount of your mortgage into:
a) the amount that relates to location value.
b) the amount that relates to actual bricks and mortar value.
c) the amount that relates to the 'hope' value that you will be able to sell the house at a tax-free capital gain in the future.
and further subdivide the monthly payment in 'capital' and 'interest' payments (so we end up with six components), then we can do a sensible compare-and-contrast with social housing.
Of the six components, it's only the (notional) interest element on the bricks and mortar value that is relevant to the local council. Everything else nets off to nothing from their point of view. And seeing as an average council home costs £40,000 to build and councils pay a low interest rate, that cost is only about £20 per week per home, on average.
"read this post by Rantin' Rab"
I did, and I still don't see how the cost of renting an ex-council house for people on benefits affects the cost of renting a house in the nice part of town for ordinary working folk. The ex-council house is more expensive, I suspect, because of the insurance companies, who ordinarily won't insure a house if it's let to people on benefits, thereby ensuring that there is only a limited supply of privately-owned social housing available, but given that people on benefits and working types are two distinct markets as potential tenants, why should prices in one sector affect the other?
wv: counc
Sorry, I can see why "private" rents affect "public" ones, but not vice versa.
It is really a matter of anxiety, The rent should not be increased like that.
Amazed that benefit fraud & up-buggerage is only gbp3bn - that's pretty much a rounding error.
Bayard, either way, HB must push up rents, whether that's ex-council housing or not.
John B, £5 billion is not just a rounding error. It's approx. half as much as Child Benefit, or slightly more than total Council Tax Benefit.
Mark,
1. HA's are not a branch of government, they are independent organisations.
2. About half of the residents of the HA I work for claim HB. The 'true cost' to the taxpayer therefore is the level of HB that gets paid to the resident (or direct to us)as we don't pay any of that money to the government.
@ Anon.
1. HA's are creatures of legislation, whose management are appointed by and are under the control of The Housing Corporation (I thought that had been re-named recently?), which is in turn part of the DCLG. They get substantial grants and cheap loans from the taxpayer, they have statutory duties and all manner of tax breaks (primarily corp tax exemption/refunds and SDLT exemptions when they buy land and buildings).
2. Basic bookkeeping says whether the taxpayer pays money to HA's via the DWP (as Housing Benefit) or via The Housing Corporation (as grants and loans) makes bugger all difference. People have to be housed and costs have to be met.
PS, The HC's accounts show that they made total grants of £2 billion in 2007-08 and had made cumulative total loans to HA's (also known as RSL's) of £17 billion (less amounts written off, unknown).
@Mark, in the context of total government revenue & spending - I'd've expected inefficiency and thievery in the benefit system to be far worse than that.
@ JohnB, OK, add £5bn running costs* to £5 bn FEO and we're talking proper money. That's enough to pay ever benefit claimant another £20 a week! I'm halfway through a post explaining how stupid the system is and how it encourages FE&O.
* Remembering that running costs and FE&O on flat-rate universal benefits like Child Benefit are virtually nil%.
"Bayard, either way, HB must push up rents, whether that's ex-council housing or not."
Mark, please could you explain how HB puts up rents in the "private" (i.e. non-benefit-receiving tenants) sector given that:
1) most tenants who are not on benefits wouldn't usually be looking to rent a property available to tenants who are on benefits due to location and price and
2)most tenants who are on benefits wouldn't be looking to rent a property available to tenants who are not on benefits because the insurance companies will make sure the landlords of these properties won't rent to them.
Bayard, the matter is not as clear-cut as that. I know enough landlords and have been one myself. Following your numbering:
1) Yes they would, if it were cheap enough compared to 'nice' housing. But HB pushes up such rents for 'not so nice' housing, and hence indirectly influences the rents for the 'nice' houses.
2) It has little to do with insurance companies (unless things have changed a lot in the last five years). I once had a tenant who was working when he moved in, lost his job, got the council to pay his rent and as he sent the letting agents a cheque every month, I never noticed a thing (until he moved out and turned out to be a terrorist, different story).
Further, some landlords (I know a couple) hand over their property to the council for fixed terms of three years for a decent rent plus promise to refurbish at end of term. The council then lets the home out to all sorts of desirables, but the landlord has no counter-party risk.
So while there are some homes which fall clearly into category 1 and some clearly into category 2, there is still a huge grey area in between.
It's like prices for oil and gas. Gas is used for central heating and electricity generation; oil is used for petrol and diesel. But there is still an overlap, and an increase/decrease in the price of one leads to an increase/decrease in the price of the other.
So, if there is a war in the middle east, the price of gas from the North Sea or Russia goes up; if Russia has bother with the pipeline countries, the price of oil from the North Sea or the Middle East goes up.
Mark, I used to notice adverts in the press for accomodation to let that said "No DSS" and think this was prejudice. When I came to let out part of my house as a self-contained flat, I informed my insurance company and they said that I would not be covered if I let it to a tenant on benefits. Either things have changed, or your insurance company would have used their four favourite words (you are not covered..), if you had tried to make a claim. I suspect the council arranges its own insurance wrt properties it rents from private landlords. (BTW, why isn't this done more often, instead of putting families in B&B or paying HB to tenants of private landlords?)
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