Coaltion cuts hit poorest

“Conservative-Lib Dem cuts will hit the poorer people in society”, says Lucas



New Green MP and Party Leader has had some interesting things to say about housing benefit after a Crisis report:


She has warned that the coalition government's cuts to housing benefit could result in increasing social problems with serious debt and homelessness.



The Green Party leader was commenting on a recent report published by homelessness charity Crisis (1). The report highlights the social risks of housing benefit cuts, which will affect 936,960 households across the UK who are currently claiming local housing allowance (LHA). On average, these households will lose over £600 a year (2).



The report also warns that cuts to housing benefit could have hidden costs in the future, in order to deal with the social problems of homelessness, including health problems and providing accommodation.







Housing benefit cut is equivalent to big increase in income tax for poorer people





Caroline Lucas MP said:



“Consider someone earning £16,000 (after tax-free allowance) and receiving housing benefit. If they lose £728 that would be the equivalent of paying an income tax rise of over 4.5 per cent (3, 4, 5).



“These particular Tory-Lib Dem cuts will leave more people struggling to pay the rent, more people falling into serious debt and ultimately more people becoming homeless.



“This is very unfair, coming at a time when many of these people are facing economic uncertainty or even redundancy.



“Once again we see the Conservative-Lib Dem coalition’s cuts hitting the poorer people in society. The government could avoid these cuts by properly tackling tax avoidance and tax evasion perpetrated by some of the wealthiest, which could raise billions of pounds a year (6).”

It seems we too in Epping Forest will be affected with 1,000 households being hit. (7)







Notes



1. The report by Crisis can be found at http://www.crisis.org.uk/data/files/publications/1008HBCuts%20formatted.doc. Crisis comments, “The Government announced cuts of £1.8bn to housing benefit in its emergency Budget soon after coming to power. According to an impact assessment by the Department of Work and Pensions, every one of the 123,000 households in the region reliant on Local Housing Allowance (LHA) — the form of housing benefit paid to tenants in the Private Rented Sector — will be affected. On average, claimants in the South East will see their LHA cut by £12 per week, or £624 per year.”



2. Figures from “New figures reveal areas hardest hit by housing benefit cuts”, Crisis news release of 12 August 2010: http://www.crisis.org.uk/pressreleases.php/403/new-figures-reveal-areas-hardest-hit-by-housing-benefit-cuts.



3. £728 is the extra rent that people in one-bed properties in Caroline’s own constituency, Brighton and Hove will be forced to pay annually due to cuts in housing benefit. The amount will vary from area to area due to the government’s method of calculation. The calculation of housing benefit is complicated. The level of benefit you can claim is linked to local rents in the area and is calculated at the median rent level. The government is moving the basis of calculation of entitlement from the 50th to the 30th percentile (of rental costs of properties in a given area). The reason for the relatively high figure in Brighton and Hove is that there’s a bigger gap between the 30th and 50th percentiles. This is because there’s an especially large private rented sector in Brighton and Hove, so rent levels are more spread out, hence the bigger gap, hence the higher average cut in benefit.



4. £728 as a percentage of £16,000 = 4.55%. Of course taking into account tax-free allowance, the actual percentage would be much higher.



5. This and all other raw figures here are derived from the aforementioned report by Crisis, citing two government sources: http://www.dwp.gov.uk/local-authority-staff/housing-benefit/claims-processing/local-housing-allowance/impact-of-changes.shtml and http://www.dwp.gov.uk/docs/impacts-of-hb-proposals.pdf.



6. See Cuts: The Callous Con Trick by Caroline Lucas et al, http://www.financeforthefuture.com/TaxBriefing.pdf. See also Green Party news release of 19 June 2010, “Cuts ‘destructive and unnecessary’ says Green Party leader”, at http://www.greenparty.org.uk/News/2010-06-19-callous-cuts-report.html.

7 The figures can be found here:
http://www.dwp.gov.uk/local-authority-staff/housing-benefit/claims-processing/local-housing-allowance/impact-of-changes.shtml