Welfare cap to make 40,000 homeless?

Ed Miliband and the leftist press have had a field day with the leaked memo from Eric Pickles’ department alleging that the proposed welfare cap would make 40,000 households homeless.


Two points on this.

First of all, it doesn’t prove (despite Labour assertions) that the government had the statistics, but lied to the Commons and said they hadn’t.  Ministers may well have considered the memo and decided that its rationale was inadequate, that its assumptions were misplaced, and that they could not rely on its predictions  In this case, they would be quite right to say that they didn’t have the data.  In any case, a prediction of this kind can be no more than an estimate.

But secondly, it’s a racing certainty that the estimate made use of what I call “The Static Assumption”.  In other words, the writer assumed that you could change the welfare payments level and nothing else would change.  This fallacy appears most often in tax calculations, as in “The new 50% tax rate will raise an extra umpty-ump billion for the Treasury”.  No it won’t, because people will change their behaviour.  They may retire early, do less work, decide not to invest, or to invest abroad, or hire sharper accountants, or just retire to the Isle of Man.

Those familiar with the Laffer curve will understand that above a certain level, higher tax rates can actually reduce revenues, as they depress growth and disincentivise individuals.

The same will apply to the welfare/rent cap.  If the policy of welfare recipients is to stay in their £1000-a-week rented house until they go broke, they will end up homeless.  But if they move to a cheaper area, they can get a new home.  Move from Kensington to Keighley, and they’ll manage just fine.  Shades of Norman Tebbit.  He attracted a lot of flak for saying that the unemployed should get “on their bikes” to look for work, but he had a point, and the same point surely applies to affordable housing.

They will of course say they prefer Kensington.  But it can’t be for their employment, or they wouldn’t be on welfare.  How about the right to family life?  How about staying close to Mum?

I have little sympathy with this line.  Before I got into politics, I spent 33 years in the private sector, and during that time I moved house ten times — including spells in East and South East Asia.  I moved to save my job, or to progress my career, in order to provide for a decent lifestyle for myself and my wife, to put the children through school and college, and to make some provision for eventual retirement.  After all that, I have little patience with anyone who won’t move across town to find an affordable rent.

The same thinking applies to buying houses.  I might have wanted a million-pound house in a posh area, but I couldn’t afford it.  Like most homeowners, I had to look in the price-range I could afford.  It’s difficult to see why welfare recipients shouldn’t take the same approach.

Above all, it can’t be right that tax-payers on modest incomes are subsidising welfare recipients to live in expensive properties that the tax-payers themselves could never afford.  So Pickles and the Coalition should get on with the welfare cap, and ignore the noises off.

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3 Responses to Welfare cap to make 40,000 homeless?

  1. Sean O'Hare says:

    A couple of weeks ago my wife and I had reason to spend the day in Central London. We parked in the underground car park in Park Lane. Neither of us had been in Central London for ten years or so and were horrified to encounter our first dossers in the subway and several more on our walk to Picadilly. As the day wore on we came across more and more people sleeping rough. It is now far worse than I remember London when I was growing up in London in the 50s and 60s. What an indictment against 14 years of the Labour government!

  2. Gail Wharmby says:

    Well said! Please come and stand as M.P. for my area as he ignores me and several of my friends when we need help, but has just been Knighted for services to Politics and his Constituency!! He only takes up causes that make him look good in the press. Why should ordinary people work to keep the idle and immigrants who come here expecting handouts? I admit that not everyone on benefits is idle, but the young who have never worked and have no intention of working (because they know how to work the system) should be made to work for their benefits as I and many others have to work for their living. Maybe then they would get a job of their choosing if they didn’t like what they were made to do. My M.P. should also work for his money. His surgery is only open when I and others who work can’t get and his attendance at Westminster is low. It’s a sorry state of affairs when a 15 going on 16 year old foster child won’t go on a training scheme or get a job because he knows how to work the system. When he went into semi-independent living he was allowed £300.00 towards bedding etc. After 6 months he was allowed a further £1200.00 allowance for furniture etc. A total of £1500.00 and then some ( I won’t say all) of them sell the goods and finish up homeless. What hope is there for this country?

  3. Personally, I find it very hard to believe that a figure as high as 40,000 is credible. Firstly, a large number of people currently relying on welfare payments to provide for their housing; already have more space – than what many would regard as necessary. Indeed, many could simply move into smaller or less expensive accomodation (despite their protestations). Another observation, have you noticed how so many of the so-called homeless are never actually seen in need of shelter, during bad weather? Where do they, suddenly disappear to? Further, “food for thought”.

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