A budget for 'One Nation'?
Bromford CEO, Philippa Jones, shares her views on the Summer Budget and the challenges ahead for our customers and the sector.
David Cameron’s acceptance speech after the General Election was framed around ‘One Nation’ but after yesterday’s Budget announcement, the task of bringing the Government’s attention to the realities of life for people struggling on the edge of that nation is now even greater.
How far will this new budget help or hinder progress towards this ‘One Nation’ and will it feel fairer for everyone?
Here at Bromford we are working hard with many of our customers to help them get off benefits and into work so the aspirational principles set out by the Chancellor are theoretically attractive. However the practical implementation will bring perhaps unintended consequences for housing associations (HAs) and for many of our customers.
Welfare reform - the longer transition period for implementing the threatened £12bn of benefits cuts is welcome but this will still have a huge impact on many of our existing and future customers.
Reducing the overall benefits cap to £20,000 outside London for all households sounds superficially fair to working families but, like the bedroom tax, is applied retrospectively, cutting essential income particularly for larger families when it is clearly too late for them to decide to have fewer children. That feels like unfair punishment of both parents and children. And it will hit particularly hard families who need three or more bedrooms in high cost areas outside London where the housing benefit for their rent alone will take up a large proportion of the £20k total.
The introduction of the new National Living Wage will not go as far or as quickly as a true Living Wage but will increase the existing minimum wage at least for the over 25’s. This will rightly start to reduce the current state subsidy to low paying employers but is unlikely to improve the overall financial situation of most low paid workers because it is largely offset by cuts to tax credits and in-work benefits. For many of the working poor, this concept of giving something with one hand but taking it away with the other is going to make it even harder for them to escape poverty. Unfortunately, for many of those people striving to better themselves these measures are going to bring some tough choices on how they can live and will undoubtedly feel like additional barriers to achieving any aspirations they might have in the short term.
Preventing young people under 21 from claiming housing benefit is supposed to encourage them to stay at home with their parents for longer. But for thousands of vulnerable young people there isn’t a safe, happy family home for them to choose to stay in. Supported housing schemes are likely to be exempt but if we can’t move young people on from these hostels and specialist services into their own tenancies we can’t free up space for others in the most urgent need. While there will be limited assistance available for exceptional cases we know this won’t ever be sufficient. Inevitably this will lead to more vulnerable young people ending up living rough on our streets.
The Government is now requiring social landlords to means test our customers and charge a higher rent to any with a household income above £30k. Again the logic is fine but it’s hard to see how this can this be implemented fairly and cost-effectively. If we do find a way to do this effectively then increasing rents will simply drive more of these customers to exercise their new ‘Right to Buy’, thus further reducing long-term availability of affordable homes for the future.
Which brings me to the final piece in this jigsaw of chipping away at our long-term ability to keep building the affordable homes the country so desperately needs. The sector’s ability to build more homes has relied in recent years on access to the financial sector, not grant funding. In May 2014, the coalition Government announced a 10 year plan for annual reviews of social and affordable housing rents at CPI plus 1%. This gave HAs and our lenders some certainty of income, allowing us to plan our borrowing and investments for building new homes. Scrapping this agreement so quickly destroys any trust in longer-term commitments from Government and will reduce the confidence of lenders – making it harder and more expensive to borrow the funds for new building. This may not affect the larger providers but will certainly limit many others and in-turn will result in fewer homes being built.
And of course all this comes on top of the separate proposals to impose discounted ‘Right to Buy’ with no clarity about how we will be compensated and enabled to replace the lost homes.
How will HAs respond to all this? Well that will depend on the strength and risk appetite of individual associations. Those of us who can, will of course keep looking for innovative ways to continue to fulfil our social purpose, however hard the government makes it. But many smaller and more financially stretched associations may find it extremely hard to do that. Surely it is an unintended consequence that the most successful model of social enterprise and public/private partnership anywhere in the world should now be so fiercely attacked by the state it so much wants to help succeed?
So, does this tax-cutting, benefit-cutting, Living Wage budget move us closer to a fairer ‘One Nation’? Maybe in theory, but in practice for many of our customers that feels highly unlikely.
Follow Philippa on twitter: @PhilippaJones2