Most proposed Citizen's Income schemes shy away from including Housing Benefit in the suggested flat-rate CBI, because while it would be perfectly affordable to extend the entitlement to low-rate benefits of £60 or so a week (such as Income Support, Jobseekers Allowance and Incapacity Benefit - currently claimed by around 5.3 million adults) to an additional two or three million adults on low- or no incomes, such as married mums and students, provided the worst excesses of the welfare system (e.g. Tax Credits) were scaled back or scrapped, increasing taxes to pay for an additional £82 per week for all households in Housing Benefit/Council Tax Benefit would be totally counter-productive (£68 plus £14, see previous link).
Opponents of Citizen's Basic Income-type schemes see this as an Achilles' Heel. Not so ...
As ever, it helps to look at the bigger picture: 82% of Housing Benefit claimants are in social housing (over 4 million households), so the amount paid out is a meaningless figure - this is merely different branches of government shuffling money round between themselves. We could achieve the same net transfer/subsidy without all the admin, fraud and hassle by simply reducing social rents*. There are only 750,000 households renting privately claiming Housing Benefit. As this is a subsidy to land ownership, it ought to be phased out anyway, or as a stop-gap, be replaced with 'Workfare' jobs paying a similar amount.
Looking at the even bigger picture, if we moved to proper Land Value Taxation, the LVT bill for households in smaller homes would drop anyway (compared to their current Council Tax/TV licence); LVT would be payable by the landlord/owner, not the occupier, so for tenants it would be absorbed into overall rent levels. As overall rent levels are set by market forces, these would by definition be 'affordable', so there would be no need for 'Land Value Tax-Benefit'. If you want to help the poor, it is always better to increase the tax-free personal allowance rather than to subsidise one particular item of expenditure (or taking the extreme view, to provide council housing at all).
Going further than that, I am in favour, as far as possible, of replacing taxation with user charges, preferably set locally so that everybody can decide whether they are getting value for money. And what are rents from social housing if not user charges? Further, don't forget that receipts from rents of social housing are currently earmarked and ring-fenced, so councils don't benefit if they manage to increase their rental income past a certain point! Surely, councils should be allowed to keep all the rents they collect, which will go in the same pot as locally collected Land Value Tax and other user charges?
And finally, Housing Associations are publicly funded, so they compete unfairly with private providers, and they are subject to fewer constraints than local councils. Their assets should be either sold off to private sector or brought back under local authority control.
* Or even better, setting rents in the social sector as a flat percentage of a household's income. Those with no income would pay the same as now, i.e. nothing; those on low incomes would have slightly lower net housing costs, but not face the ridiculous marginal withdrawal rate of 95.5% that results from means-testing of Housing/Council Tax Benefit; and those on high incomes (who shouldn't be in social housing anyway) will pay more so they are more likely to move into private renting or home-ownership. Trebles all round!
A grim document
10 hours ago
3 comments:
I think the 750K in private housing will present a bigger problem than you suggest. Simply phasing out the benefits won't solve the problem of where they're going to live once they can't pay their private landlords.
You have to look at the bigger picture.
In the short term, they can take a Workfare job, in the medium term, with an end to these subsidies for private landlords, rents in private sector will fall slightly - and once, once I introduce LVT, more people will be willing to let out a spare room - and my reforms to rents in social sector will mean that turnover in social housing is much faster, so for people with low earnings potential but with a proper job (postmen, shelf stackers) the overall change will be beneficial. And people in short term or temporary jobs will have to learn to cut their cloth accordingly.
I had the benefit of reading and reviewing two books outlining how different countries approach this, and as none of the systems really work, you might as well do nothing.
Mark,
I do think it is interesting for HB to be pro rata to earnings. It will still appear to be, in effect, a form of marginal "taxation" when one earns more, though.
I believe the biggest problem facing the poor is the very fact that they are in State housing. They cannot easily move or upgrade their housing. They are stuck in the awful places the State builds or we get an equally awful spectacle of the State demanding to inject low cost housing onto what is supposed to be private land. And you prefer to abolish the private rented sector at this level? I think Chris Dillow is nearer my position on this one, if not right at it.
BTW "Workfare" is a dubious solution IMHO.
Whatever you think might happen, LVT WILL be paid by the tenant, just as the Rates were and just as Income Tax is paid (first) by the employer. "Absorb" is a rather misleading term, I think. LVT will be bundled into the rental. In fact I see that as an ADVANTAGE of LVT, as it will be part of the great decision making process of where people live and what compromises they make.
It is interesting you make this point:
"If you want to help the poor, it is always better to increase the tax-free personal allowance rather than to subsidise one particular item of expenditure"
Why not take it to its logical conclusion (adding in the jist of Chris Dillow's piece) and increase the tax free personal allowance to, erm, infinite, i.e. no income taxes and to tax them on their "items of expenditure"? User charges are another form of consumption taxation, too, Mark.
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