Cast from the new production of Rising Damp (2014). The guy being subsidised is the one in the middle by the way.

Subsidy Street

I’m going to propose something you don’t often hear from a socialist – I’m going to suggest we do away with a benefit. It looks like the government has its work cut out finding £12 billion of savings from the welfare budget so, in the spirit of post-election co-operation, here’s my contribution.

After pensions, housing benefit is the biggest element in the welfare bill, and is expected to top £27bn by 2018-19. Almost 40% – some £10 billion – of this is paid to private landlords.

Housing benefit isn’t really a benefit, it’s a subsidy. It enables landlords to charge rents that their tenants (i.e. customers) can’t afford to pay. If the government gave us money in order to buy a car we couldn’t otherwise afford, this would rightly be seen by everyone (probably including the EU’s lawyers) as a subsidy for the car manufacturer. To meet the social need to get about, we would expect the government to invest that money in better public transport.

What’s worse, it’s a subsidy that’s out of the government’s control. Landlords effectively decide how much subsidy they receive. They keep rents high knowing full well that the government will pay them on behalf of tenants (at least up to the ceiling set by the benefit cap). Rents aren’t set freely by the market; the market is “made” by the government. We don’t pay housing benefit because rents are high; rents are high because we pay housing benefit.

Of course, no good will come of withdrawing housing benefit overnight and on its own. It will simply lead to evictions and a collapse of the private rental sector. But that just shows how this is an economic sector dependent on state aid. Landlords are charging rents that are above what the market will bear because taxpayers are making up the difference.

If the government were to phase out housing benefit and invest all or some of the proceeds in social housing, tenants would gain security and (probably) better homes, while taxpayers would save money and acquire valuable assets which can be used to meet the housing needs of future generations. The social benefits of families being able to count on secure accommodation, rather than being shunted around from year to year on the profit-seeking whim of property speculators, are incalculable. (Of course, all this would be much easier to do in the short-term if we had a modern system of rent regulation, a policy unreasonably trashed during the election campaign by people who labour under the delusion – or pretend to – that we have a perfectly functioning housing market.)

The government knows this of course, but is happy to let the current situation continue because it doesn’t want a revival in social housing for ideological (and electoral) reasons. Right-wing governments always talk about getting rid of subsidies in theory, but are happy to pay them if the benefits are going to the right people – in this case landlords and property speculators, who are among the biggest supporters of the Conservative party. When the IPPR proposed something like this last year, it was endorsed by both London mayor Boris Johnson and Labour leaders. Nothing has been heard about it since.

Phasing out housing benefit, or even ending the practice of paying it straight to landlords, would cause rents to fall sharply, something which everyone knows has to happen sooner or later. Yes, some landlords will sell up, which would also reduce our stratospheric house prices. A lot of people wouldn’t like that. But that doesn’t mean it isn’t the right thing to do.

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