June 26, 2012, by Fraser

Sorry Prime Minister, but the labour market is flat

Professor Bruce Stafford, from the School of Sociology and Social Policy, wades in on the PM’s plan to withdraw housing benefit for under-25s.

In a major speech on welfare reform, the Prime Minister outlined a number of welfare reforms.  The one reform that has received widespread publicity is that to abolish Housing Benefit for those aged under 25 years.  The justification given is that as a group they do not require the ‘safety net’ of the welfare state because either they have ‘other means of support’ or have not fallen on ‘hard times’.  For the under 25s the implication is that their families should support them.


However, there are a number of reasons, even if you support the contentious notion that the main purpose of the benefit system was to act as a safety net, why removing Housing Benefit from this group would be counterproductive.

Firstly, and this seems to have escaped some of those commenting on the proposal, Housing Benefit is paid to people in-work and out-of-work.  It is designed to help those on low incomes meet the cost of rented accommodation, and so is paid to those in and out of employment, as well as to those no longer active in the labour market.  Thus a proportion of the 385,010 under 25s in receipt of Housing Benefit (as at March 2012 according to official figures) would have been in paid work.  The published figures do not say how many were in employment, but it is possible to make a rough estimate.

Housing benefit for those in employment

Official figures show that 17.6% ofall Housing Benefit recipients are in paid work.  If this was true of the under 25s this would mean 67,671 were in employment, and under Cameron’s proposal would lose entitlement to benefit, despite doing what was the Government wants them to do – have a job.  It might be objected that it is unreasonable to apply this percentage to this age group, after all youth unemployment is very high.  However, even if the proportion is halved it still removes from benefit around 34,000 young people in work with no support for their housing costs.

Secondly, it would undermine the Government’s attempt to tackle child poverty.  Of those under 25s in receipt Housing Benefit, a majority (53%) have children.  Removal of Housing Benefit from these families would increase their risk of child poverty.

Thirdly, the Government would like unemployed young people in areas of high unemployment to move to locations where there are jobs.  But this proposal would reduce geographical mobility.  Without Housing Benefit young people would have a less of an incentive to go where the jobs are.

Means-tested benefits

Fourthly, the Government are replacing a number of means-tested benefits, including Housing Benefit, with Universal Credit.  One of the claimed benefits of this reform is simplification of the benefit system.  Simplification is a worthy objective – it can mean lower administrative costs, a public who are clearer about their entitlement (and hence higher take up rates) and less benefit fraud and error.  Yet even before Universal Credit is introduced some of these simplification gains are being given up.

Finally, and as acknowledged by Cameron, there are some young people who are estranged from their parents/guardians and who should not be expected to live with them.  However, he does not seem to appreciate the complexity of some young people’s family lives, or the administrative burden (and complexity) applying these ‘exceptions’ to his policy.

What didn’t get covered!

What is also interesting about the immediate media coverage of Cameron’s speech is a proposal that did not attract, as far as I can tell, any media attention.  He comments favourably on the use of time limits to benefit entitlement in the US.  He does not propose ‘US-style time-limits’, but ‘we could perhaps revise the level of benefits people receive if they are out of work for literally years on end.’  A policy he refers to as ‘softer time-limits’.

The media omission is important, because if enacted this would affect significantly more than the 385,010 young people in receipt of Housing Benefit.  Cameron points out that there are 1.4m people in the UK who have been out of employment for at least 9 of the last 10 years.

For more from Professor Stafford, visit his blog Welfare Comment.

Posted in Politics