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The Welfare Uprating Bill: The facts behind George Osborne's cunning plan

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The Welfare Uprating Bill: The facts behind George Osborne's cunning plan

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Published by Jon Land for 24dash.com in Central Government and also in Housing

The Welfare Uprating Bill: The facts behind George Osborne's cunning plan The Welfare Uprating Bill: The facts behind George Osborne's cunning plan

Ahead of today's vote in the House of Commons on the Government's Welfare Uprating Bill, Human City Institute Director Kevin Gulliver explains the impact the policy will have on some of society's poorest.

As the wheels of welfare reform crank into gear this week, the effects on social housing communities and fragile local economies is laid bare.

While the week began with the botched withdrawal of Child Benefit from top earners, the media’s attention now turns to the Welfare Uprating Bill, George Osborne’s latest cunning plan to make low earners and those on benefits pay for the international financial crisis.

The Bill, debated in Parliament today, which proposes to uprate work-related benefits by 1% per year for the next two years, will significantly increase the financial burden on social housing tenants and suck much-needed demand out of struggling economies in inner city areas and remote regional outposts.

Research by the Human City Institute, supported by social housing providers Aster, Matrix, Trent & Dove and Trident, estimates that more than £3.5 billion will be lost in purchasing power in social housing communities over the next three years as in-work benefits and stagnant earnings are eroded by inflation.

Our research also shows how this projected fall in real terms income of tenants comes in the wake of at least a 10% loss of tenants’ purchasing power since the Credit Crunch hit, equating to a total drop in real terms income of £3bn between 2008 and 2012. This has resulted from above inflation increases in necessities, such as food, fuel and transport, which take up disproportionate amounts of tenants’ incomes.

Reforms of welfare already announced will remove a further £2bn from tenants’ pockets by 2015. So between 2008 and 2015, we calculate that social housing communities will have seen their real incomes fall by a total of £8.5bn. This has significant impact on the economy overall and is contributing to, at best, stagnant demand.

The Chancellor believes that he has the public’s backing in reducing the costs of welfare and many polls back him up. Last week, the TUC/YouGov poll showed that 41% of people think that much of the social security budget goes to those who are unemployed and 27% think that much is spent on fraudulent claims. The real figures are actually 3% and 0.7% in each case. So there is clearly a gap between perceptions and reality.

The reality in social housing is underscored by our research. The majority of tenants already subsist on low incomes. Over half have total household incomes below £10,400 per annum. Almost 90% have household incomes below the national media wage of £26,000.

While one quarter of tenants are fully retired and in receipt of state pensions, the majority - 75% - are reliant upon low wages, in-work benefits and out-of-work benefits. One third are unemployed of whom 79% have been out of work for more than two years. Tax credits are claimed by more than two thirds of working households. One in three claim child benefit.

In the face of incomes that are barely increasing in cash terms and are actually falling in real terms, more tenants are struggling to make ends meet than at any time in living memory. Even an inflation upgrading of work-based benefits over the next three years would have left most tenants on the margins but the proposed 1% upgrade will see tenants’ purchasing power plummet. To illustrate this, from now until 2015, the 1% up-rating represents a weekly cash increase of £2 only on the current Job Seekers Allowance whereas food, fuel and transport bills are predicted to climb by at least £10 per week.

The viability of social housing communities is now called into question. Our research concludes that social landlords like Aster, Matrix, Trent & Dove and Trident are on the front-line in the fight against deepening poverty. While social landlords are directly providing advice on welfare benefits, money and debt, working with food banks, establishing affordable warmth initiatives to tackle fuel poverty, offering furnished tenancies and supporting tenants through employment and training schemes, their work is a palliative only in the face of an assault on the living standards of those at the bottom of the pile. We are definitely not ‘all in this together’.

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