Progress | Centre-left Labour politics

The tax on London

Last Tuesday saw the arrival of the benefits cap in Haringey – just one of four boroughs selected by Iain Duncan Smith to trial his most radical welfare reform to date. It is just one of many pernicious attacks on our residents that overall will see £115m cut in benefits or £636 for every working person in the borough.

However, behind the headlines lies a government department with no system, no mechanism and no back-up plan to deal with a policy that is flawed in principle, and flawed in its implementation.

The key problem with benefit payments is that life is hardly ever statit for claimants, and the Department for Work and Pensions has failed to develop a system that gives them one single view of the claimant. Instead, it is having to go manually into 13 separate databases to work out total benefits being received and then verify this with Haringey council’s housing officers

If it sounds like a long, complicated and arduous process, that is because ultimately it is. Last week Haringey was notified by the DWP of just 22 households that needed to be capped. It takes a whole three days to decipher the data sent through by the DWP, before we can even work out whether the information is correct and begin to contact families to notify them of the changes.

While we expect the DWP to speed up its work, the fact is that if we continue at this rate it will take a full 12 months before the cap is fully implemented in the borough. The basis on which a family is being selected for the cap appears to be completely arbitrary, and is operating like some sort of Kafka-esque lottery.

Then a key challenge is that, essentially, few families will receive less cash in their pocket. Instead, an automatic deduction is made to their housing benefit, which in most cases means that payments will be reduced to landlords. No matter how hard we try to contact residents, the reality is that there is a huge risk tenants will simply be oblivious to the debts they are building up, which could become near-impossible to pay down within a few weeks.

We estimate under a third of capped households will lose less than £50 per week and landlords may well choose to accept reduced rents. But, as for the other two-thirds, it is clear that Haringey could face new burdens of something in the region of £7m to avoid families becoming homeless.

Looking at the 22 families who have been capped is informative. Four avoided the cap by moving to smaller or cheaper accommodation, or by finding enough work. Of the remaining 18, 11 are currently in the private rented sector and five are already homeless families in temporary accommodation.

Ten of these families are losing more than £50 per week, the threshold where we believe it becomes impossible for families to have any hope of closing the shortfall in income, with one family losing more than £300 per week.

As shocking as this is, we cannot escape the fact that the notion that families can claim as much as £800 per week, equivalent to just under £60k per year pre-tax salary, will never seem fair to those who are struggling to pay their way in work, and deal with the same exorbitant and escalating childcare and housing costs.

This is why we need to have a serious conversation about what our values mean for social security, welfare and entitlements and the relationship we as a Labour party have with enabling people to work.

This leads us to the second, and even larger, issue, which is unquestionably finding a solution to the housing crisis. We learnt last week that rents are rising by eight per cent last year in London. Unquestionably the reason the cost of housing benefit is growing is not because of a growth in dependency culture, but because of the spiralling cost of housing.

The fact is that, of all people affected by the benefit cap, 54 per cent – over half – are residents in London, making it more or less a tax on London and urban living. In such circumstances we need to understand that there is a supply-side issue as much as a demand-side one, and we need to show how we can provide truly affordable housing for all.

Ed Glaeser, urban economist, argues in The Triumph of the City that people will do almost anything to be near the greater opportunity that city living offers them, and that in any city you will find and will need districts for lower paid people and people seeking work to live. The question is what form that living takes and what conditions we want their families to grow up in.

In Rio it takes the form of the favelas. Without some action now, the concern is we could see people move into dangerous, overcrowded slum accommodation.

In Haringey we are finding evidence of people moving into cold disused factories, sleeping under the eaves of uninsulated roofs. We are taking action on such properties. But for how long will enforcement services be able to cope with the volume of people in London who will move into such accommodation rather than give up the opportunity of finding work in one of the most prosperous cities in the world?

The sad thing is that the postwar settlement understood these matters well. The solidarity between all working people in 1945 created the consensus that made it a necessity to clear the slums and build new estates and it is why we need to fight to reassert that spirit once again.

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Joe Goldberg is cabinet member for finance on Haringey council and tweets @joedgoldberg

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Photo: Nico Hogg

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Joe Goldberg

is a Labour councillor for Seven Sisters ward in Haringey

2 comments

  • Whilst the bedroom tax may fall disproportionately on London, the overall impact of benefits changes is having the greatest effect in the North – as demonstrated by the FT analysis last week – http://ig.ft.com/austerity-map/. London’s housing crisis is a function of an over-centralised national economy. We need a national debate about how big a capital city we really want and whether we should follow Germany with a more proactive approach to regional economic development – as set out by IPPR North – http://www.ippr.org/publication/55/9949/northern-prosperity-is-national-prosperity-a-strategy-for-revitalising-the-uk-economy.

  • What about the benefit to landlords? It’s unpalatable that people who own property, sometimes massive portfolios, don’t set fair rents when the taxpayers are paying. It pushes rents up for people who have to pay and it keeps tenants from looking for and finding work because they will never earn enough to pay the rent. Joe knows some of these landlords operate in his ward and borough. What’s he doing about it?

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