Posts Tagged 'George Osborne'

Free extract: How austerity has been biting the UK since 2010

In light of the media surprise at George Osborne’s 2016 botched Budget and Ian Duncan Smith’s sudden bout of conscience we thought we’d treat you to some tasty extracts from Mary O’Hara’s book Austerity Bites.

 Chronicling the true impact of austerity as it has been felt in the UK since its inception in 2010 and calling the government to account for the pain inflicted on society’s most vulnerable, Austerity Bites reveals that the wounds of austerity have been visible for quite some time…

Mary O'Hara

Mary O’Hara

In February 2015 Tory Party grandees believed it was acceptable to hold a Black and White Ball fundraiser with tables going for £15,000 a time and to have among the items being auctioned bound copies of George Osborne’s Budgets, including the first ‘Emergency Budget’ that ushered in austerity.

While the average British citizen has been living in ever-more precarious circumstances and paying through the nose for bankers’ malfeasance the rich can rest assured that they won’t have to pay their fair share. This is the situation almost five years into Austerity UK.

This Tory and the previous coalition government have presided over manifold cases of people so crushed by the brutish, punitive changes to the welfare system, including the inexplicable ‘Bedroom Tax’, and sanctions that many have gone without food, resorted to begging or taken up ‘survival shoplifting’ after their meagre benefits support has been withdrawn. People are suicidal.

Despair

The government has driven innumerable disabled people to despair with its spectacularly inappropriate and mismanaged ‘back-to-work’ programmes that are still plagued by criticisms of callousness and ineptitude. Continue reading ‘Free extract: How austerity has been biting the UK since 2010’

Summer budget 2015: Lower income families hit by housing policy changes

In today’s guest post Bristol University academic and author Alex Marsh reviews the implications of the proposal to cut housing association rents by 1% each year for the next four years, announced as part of the recent government summer budget.

Alex Marsh

Alex Marsh

George Osborne’s recent “emergency” budget proposed many changes to state support to lower income households in a bid to fulfil the Conservatives’ manifesto pledge to cut £12bn from welfare spending.

One unexpected aspect of this package was the proposal to cut housing association rents by 1% each year for the next four years.

This proposal was justified with reference to social housing rent rises over the last few years. These have pushed up the already substantial housing benefit bill. Households have needed greater state assistance in order to afford the rents being set. Bearing down on rents over the next few years will, it is claimed, both reduce the housing benefit bill and force social landlords to deliver efficiency gains.

Plausible

To the unwary or unfamiliar this argument could appear entirely plausible. It is surely time to try to rein in this sort of behaviour: landlords extracting income at the taxpayers’ expense.

Yet, it is important to understand how we have arrived at the current situation and what the consequences of this policy change are likely to be.

The 2010-2015 Coalition government did not want to see new housing association properties built for rent being let at conventional sub-market social rents. Instead it introduced the Affordable Homes Programme.

Under the AHP the level of capital subsidy per property was limited and the expectation was that the properties built would be let at so-called “Affordable Rents”. Affordable rents could be set at up to 80% of the local market rent. The greater income stream that would flow as a consequence would allow the housing associations to access the private finance necessary to build the properties in the first place.

There was no presumption that tenants of these properties would have a different profile to conventional social housing tenants. So it was likely a significant proportion would need to claim housing benefit. Indeed the higher Affordable Rents meant that it was likely that a greater proportion of tenants would need assistance to meet their housing costs.

“Many housing associations will be tearing up their existing business plans and having a major rethink”

In addition, the Coalition government encouraged housing associations to convert existing social rented tenancies to Affordable Rent when there was a change of tenant, in order to increase their revenue stream still further.

Finally, in 2013 the Government indicated that housing associations would be able to increase their average rents by CPI for the next ten years. This would give housing association boards some clarity and allow them to plan their strategies accordingly. So decisions were taken, in the light of projected income streams, about how many new properties could be planned, largely financed from private sources.

The Chancellor’s announcement last week pulls the rug out from under all of this. Many housing associations will be tearing up their existing business plans and having a major rethink.

Forecasts

There have been several forecasts of how much housing associations will scale back their planned new development activity as a result. The OBR estimated 14,000 properties, while the National Housing Federation suggested 27,000. In the context where it is generally acknowledged there is a crisis of housing supply this is more than a little unfortunate.

More dramatically, it is likely that there are housing associations who planned on the basis of previous assurances and borrowed on the basis of what they thought were firm commitments by Government who will now find themselves in serious difficulty. A few will almost certainly go out of business. There are likely to be urgent mergers and acquisitions talks relating to organisations in distress.

Quite how severe a problem this policy change has created is still to emerge. One technical, but potentially significant, issue is that valuers are currently debating how this change to income forecasts will affect the valuation of housing association assets and therefore loan security. This is on top of the Government pushing to extend the Right to Buy to housing associations, which will also erode the asset base.

“They are being punished for embracing the previous Government’s agenda”

The Credit Rating Agencies have an eye on the sector for the possibility of a sector-wide downgrade as a result of the impacts of welfare policy change. This would reduce the viability of current businesses as well as further constrain new housing development.

This whole situation adds up to a paradigmatic example of policy-induced uncertainty.

The organisations that most fully embraced the previous Government’s Affordable Rent regime will find themselves more exposed to the cuts now being proposed. The organisations that responded most ambitiously to the apparent certainties offered by the ten year rent pledge will now find themselves having to undertake the biggest rethink. It is hard not to conclude that they are paying a significant price for taking the Government at its word.

Caution

The question is what to do next? And how much weight should housing organisations place on any commitment given by Government, when it has been demonstrated that the rules of the game can so quickly be turned on their head without warning? Proceeding with extreme caution would seem advisable.

Some housing associations will no doubt increasingly look to develop activities that do not rely on government and to house people who do not depend on social security. As independent organisations they have the discretion to strike out in different directions. But the question of how we, as a society, deliver good quality affordable housing to those on low incomes remains just as pressing as ever.

#budget2015

The battle of the bedroom tax [FC]Alex Marsh is Professor of Public Policy, University of Bristol. Alongside Dave Cowan, he is co-authoring a Policy Press ShortThe Battle of the Bedroom Tax –  which will be published later this year. To keep in touch with this and other forthcoming publications why not sign up to the Policy Press enewsletter here?

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The views and opinions expressed on this blog site are solely those of the original blogpost authors and other contributors. These views and opinions do not necessarily represent those of the Policy Press and/or any/all contributors to this site.

 

Are the first cuts the deepest?

What has happened as far as the tally of injustice goes since the election results came out? For a start the election made one of the graphs in Injustice: Why social inequality persists look slightly out of date. As predicted the Conservative segregation index rose even higher than before. If you have a copy of the book turn to page 175 and put an extra dot in the margin, where 2010 would be, at a height of 16.4%. What happened was that on May 6th 2010 the greatest swings towards the Conservatives occurred in the seats where they were most popular to begin with. This is a symptom of a still dividing country, but it is also a quite inefficient way to increase your support. Thus the Tories did not manage to secure an overall majority. They increased their vote most in the seats they already held. In some of the poorer parts of Britain, and especially in Scotland, the votes for Labour actually increased. The Liberals were squeezed out and lost seats in the middle of this polarisation. They ended up sharing power as no one could rule without them.

Today we saw the beginnings of what this increased political polarisation means, the very first cuts were announced. Among them George Osborne declared the demise ever slowly slightly redistributive Child Trust Fund, cutting payments of £320 million in 2010 and £520 million a year from 2011-2012. In the fund’s place he announced new funding of an almost charitable nature: An extra £20 million each year from 2011 being spent on addition respite care, 8000 one week long breaks for severely disabled children.

What you should expect is much more of this. Cutting something which is actually redistributive and replacing it with something that costs only a tenth as much and is useful but tokenistic – aimed at the most ‘deserving’ of cases. Thus some 4000 council houses will be built; a paltry number, but just enough to salve a few consciences. It would be very better to reduce the wealth of the richest so many gave up their spare homes which others could then use. Similarly, there would have been no need for a Child Trust Fund in the first place had income differential not widened under New Labour.

Other cost cutting is also indicative of what kind of the world the Conservative-Liberal coalition would like to see emerge. David Laws, the Liberal Chief Secretary to the treasury, suggested that the £45 million annual first class travel by public servants should be curtailed. This is good, but far better not to be running train carriages designed for different social classes into the twenty-first century in the first place. It is far simpler just to begin to abandon first class tickets for anyone, and the kind of thing a country that has just become a great deal poorer might have to begin to think of doing (to use track space more efficiently). Would David Cameron’s dream of a big society still have first and second class travel, with just public sector workers, students, families and lower private sector management and anyone else not quite like him in ‘economy’? I worry that is their dream. Too many still want a more unequal world.

Daniel Dorling, author of Injustice: Why social inequality persists


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