Foreign observers reading the British press may be forgiven if they expect death squads roaming the streets of London from next April on, expelling the capital’s poor. There has been no shortage of martial metaphors describing the changes to Housing Benefit (HB). “Social cleansing” is already among the milder ones; with Polly Toynbee’s “final solution” surely topping the list. But when narratives about a reform begin to develop a life apart from the reform itself, it is advisable to take a second glance at what is actually being discussed.
For the purpose of determining local HB rates, London is currently divided into twelve hypothetical geographical units. The HB rate for each property size is then set equal to the median rent in this area. The exact rates are shown in the table below, below the caps announced by the coalition, with HB rates that exceed the cap marked with an asterisk.
It shows that the effect of the cap will be largely confined to four out of twelve zones, because everywhere else, the maximum HB rate is lower than the cap anyway. The table does not include London’s commuter belt, where the caps will be virtually unnoticeable. It remains Polly Toynbee’s secret how these reforms should be “removing families and their belongings from London boroughs to places like Hastings, or Shoeburyness”.
Table: Local Housing Allowances (=median rents) in London
Area / Number of bedrooms
Inner East London
Inner North London
Inner South East London
Inner South West London
Inner West London
Outer East London
Outer North East London
Outer North London
Outer South East London
Outer South London
Outer South West London
Outer West London
-Data gathered from LHA Direct
Another controversial move consists of pegging HB rates to the 30th instead of the 50th (median) percentile of the distribution of local rents. But the effect of this change is overblown no less. There is a huge spread between the highest and the lowest rents within each area, but there is usually a fairly smooth distribution of rents in the surroundings of the median. Rents at the 50th and at the 30th percentile of the distribution of rents are seldom very far apart.
None of this means that the coalition’s HB reforms are especially praiseworthy. A spending cap is a highly clumsy measure, and so are arbitrary limits like a minimum age of 35 for single adults to qualify for a self-contained flat. The coalition should have started from scratch, and realign the whole incentive structure of the HB system. It should have broken the close link between HB and local rent levels, and gradually converted HB into a lump-sum type payment that is less dependent of where exactly a recipient chooses to live. Relocation movements would then have been induced naturally, because it would pay for recipients to shop around for affordable places to live.
And yet, the coalition is moving into vaguely the right direction. It should pay no heed to the predictable hysteria staged around the plans. Capping rent entitlements at an annual £15,000 for a two-bedroom flat is barely a case for the International Court of Justice.