It’s astounding that there has been little to no coverage of the impact of benefit cuts in this election. Even in a campaign dominated by Brexit, the effect of austerity and almost a decade of benefit cuts, many of which are electorally popular, are having a huge impact on people who vote. 

Throughout this election campaign there has been little to no electoral price to pay for benefit cuts. Yet these cuts are a large part of the reason why well-intended reforms like Universal Credit have struggled. As voters head to the polls this week a new paper by the University of Warwick seeks to put benefit cuts back on the agenda. 

I think the paper is important because it challenges the government on their own terms. Chancellor George Osborne argued that the savings generated as a result of benefit cuts were necessary, but this new paper states that:

“Importantly, we show that the policy was close to neutral from the fiscal stand-point. The direct fiscal savings to the central government for lower housing benefit payments were substantially offset by an increase in the demand for temporary accommodation.”

The paper argues that austerity hasn’t really saved much, if anything, while causing a great deal of hardship to those that have had to endure it.

“It also implies substantial reallocation of resources, since the savings were accrued by the central government, and the costs are mostly born by the local councils. Taken together, this evidence suggest that policy substantially reduced the welfare of the benefit claimants, with little-to-none implied fiscal savings.”

This has long been suspected; anecdotal evidence from Policy in Practice’s work with over 100 councils certainly points to limited savings. However, the evidence has never been able to produce a ‘smoking gun’, not least because the complex and wide range of reforms has made it difficult to establish a causal link from austerity to the knock-on increase in local authority spending required. 

I read the report to see if there was anything in the methodology that local authorities could apply to better quantify the impact of welfare cuts and to share what I think a sceptical Treasury official might make of it.

Benefit cuts shunt costs onto councils

“Across the whole of the UK, the projected ex-ante fiscal savings from the cut to local housing allowance were estimated to be around £400 million. Our estimates imply that the actual savings were closer to £542 million. This is offset with an overall increase in spending on council anti-homelessness measures of £259 million, implying a dramatic shifting of burden from the central government to local governments.”

Being unable to pay the rent is obviously a key driver of homelessness. The paper focuses on flaws in how rents are estimated, driving different impacts across councils.

Number of households affected, and average loss per household per year, by local authority. Source: Thiemo Fetzer, Srinjoy Sen and Pedro CL Souza, Housing insecurity, homelessness and populism: Evidence from the UK

“The reference rents are empirically estimated by the Valuation Office Agency on the basis of a sample of rents submitted voluntarily by the landlords and real estate agencies. Thus, naturally, the 50th and 30th percentiles are noisy empirical estimates of the corresponding quantities along the true underlying distribution of rents. This creates the prospect that in some places the policy shock was stronger than in others, simply due to different random draws of the effective benefit cut – driven by the difference between the 50th and 30th rent percentiles.”

Isolating this shock, the authors look at the impact on a range of measured negative outcomes for tenants, which would drive increased costs for local authorities, comparing these to Housing Benefit savings.

  • Evictions
  • Insolvencies
  • Temporary Accommodation and Homelessness spending by councils
  • Statutory homelessness and rough sleeping
  • Electoral registration and support for Brexit
  • Crime rates locally

They use the social-rented and owner-occupier sectors as ‘placebos’ or controls against which to compare outcomes for claimants in the private rented sector (PRS). In all of the above areas, they find a link between the benefit cut and worse outcomes. The only area where they don’t find a link is in employment rates – which is unsurprising as lower benefits may be compensated for by moving into work. 

The number of voters impacted is staggering – benefit cuts affecting support for those in the private rented sector has affected a large number of people by a significant amount:

“In England, the median household spends more than 33% of their net disposable income on housing. In the lower tercile, this share increases to 41% across England; in the lowest income decile, English households spend 64% of their disposable income on housing.”

“It was estimated that 774,970 households would lose a part of their housing benefit – among a total case-load of 939,220 individual cases.”

Lower housing benefit spending versus increased homelessness costs. Source: Thiemo Fetzer, Srinjoy Sen and Pedro CL Souza, Housing insecurity, homelessness and populism: Evidence from the UK

The evidence is strong, but not conclusive

A sceptical Treasury official view may find a number of holes to pick in the paper. Some of the outcome measures used are dubious, for example it would be a leap to attribute personal bankruptcies to cuts in LHA for instance. 

Similarly, causality can always be challenged when using aggregated data.

  • Are bankruptcies or evictions driven by the LHA rise, or are they driven by other factors?
  • The figures quoted show the average treatment effect covering the years 2011-2016 when other government reforms began to take effect. If these policies (e.g. cuts to council tax support, wider cuts to councils) are part of the problem, shouldn’t the savings from these reforms also be counted against the cost?
  • Evictions are also driven by the attitudes of landlords, is a growing rental market fully accounted for, and is the social rented sector acceptable as a placebo group when they are more likely to show greater forbearance for late or missing rent payments?

“in the last three years there has been a 50% drop in the number of landlords taking people who are on benefits. It is now down to only one fifth; 22% of our landlord members whom we surveyed say they have LHA tenants, and 52% of those surveyed said they would not look at taking on benefits tenants.”

However, the authors could push back because their analysis only accounts for a fraction of the cost to the public sector. Rising direct costs, such as discretionary housing payments, are not mentioned in the paper. Lower social participation and knock-on consequences for indebtedness, mental health and wider outcomes are not accounted for but have undoubtedly been felt. 

Ultimately, the paper makes a hugely important point about a flawed rationale for significant benefit cuts, whilst at the same time failing to tackle the underlying drivers of high and rising housing costs. 

Instinctively and anecdotally, I agree with the thrust of the report’s findings. Much of the savings from welfare reforms appeared elsewhere and the true social costs haven’t been fully accounted for by the government.

Analysis by Policy in Practice on the benefit cap found that while people affected by the cap were 21% more likely to move into work, the cap meant that for every child whose parents move into work as a result of the cap, eight will grow up in families whose financial circumstances have worsened following the introduction of this policy.

I know how difficult it is to evidence the link between welfare reform and local authority costs given the work Policy in Practice does on the cumulative impact of welfare reforms. I believe that better use of administrative data, which the paper by Fetzo et al doesn’t use, is the key to tracking the impacts of policy. 

A timely intervention

The paper from the University of Warwick is important because it challenges one of the key drivers for welfare cuts. It asks whether the savings generated from them are worth the price paid. I don’t think it’s conclusive, but it is thorough and timely.

Before we head to the polls on Thursday, consider who will tackle high housing costs, who will think about the potential future full costs and benefits of a policy, who will introduce proper policy evaluation and help those you believe are most in need of support.

This election is about more than just Brexit, it’s about the next five years of economic and social policy. The living standards of one-quarter of the population will have a bigger impact on the UK’s future than our trading relationships with other countries. 

Further reading

  • Request notification of Policy in Practice research supported by the LGA on the impact of the LHA freeze on homelessness, coming soon
  • Request notification of Policy in Practice research with the Cabinet Office and Newcastle and Barking and Dagenham councils on the impact of an holistic approach to debt collection and enforcement and broader social outcomes, coming soon
  • Read our review of how the party manifestos compare on welfare spending here

Register for an upcoming webinar

TitleDateStart TimeDurationRegister
LIFT platform refresher training Join your LIFT account managers, James Rawlins and Paul Garlick, for resfresher training on getting the most out of your LIFT platform.

In this session James and Paul will show you the main features of your LIFT platform.

In addition, they will show how, using insights from your own administrative data, you could use LIFT to decide who to distribute your Housing Support Grant.

Join this session to hear:

- How other local authorities are using LIFT to identify households to target for their Housing Support Grant
- How you can use your LIFT to identify households to target, based on your local challenges/decisions
- How you can best maximise benefit take up campaigns while distributing your Housing Support Grant

Whether you are an experienced LIFT user or you are just getting started with the platform we are very happy to answer any questions you may have.

People who should attend

- New team members who need an introduction to using LIFT on a regular basis, either new or already experienced
- Team members who already use LIFT regularly but who need a refresher on all the features and functionality
- Team leaders who are deciding how the Housing Support Grant will be spent

To help us tailor the refresher session please tell us what areas of LIFT you'd like to focus on in the registration form.
19/10/202111:00 BST1.5 hours
Register
How Kent County and district councils collaborate with data to tackle poverty Covid has turned our world upside down. Many residents in Kent, as elsewhere, have experienced financial hardship whilst, for organisations, the pandemic has been the catalyst energising them to work differently.

In summer 2020 Kent Districts and Communities Recovery Cell set up a group to focus support to residents at risk or already experiencing financial hardship because of the pandemic. Residents unused to facing financial hardship suddenly needed help to navigate support and advice systems. The group knew that things are likely to get worse for Kent's residents before they get better as furlough ends and families who were just about managing are tipped over the edge.

In a first for local government, Kent county and district councils have boldly chosen to collaboratively share their data to get powerful cross-county insights that will drive their poverty prevention activity. The information will help them to target of a wide range of campaigns to residents such as employment support, free school meal take-up, public health interventions, housing initiatives and benefits take up.

Importantly, the project has transparency built-in so that councils can very easily benchmark with each other to identify and share best practice in a safe, collaborative way.

Join this webinar to hear:

- Kent County Council's vision for greater collaborative working with districts
- Folkestone and Hythe District Council's impact achieved so far from data-led poverty prevention campaigns
- How councils can use data to target the new Housing Support Grant most effectively

We will be joined by guest speakers, Zena Cooke, Corporate Director Finance at Kent County Council and Jane Worrell, Revenues and Benefits Senior Specialist at Folkestone and Hythe District Council.
21/10/202111:00 BST1.5 hours
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