When is a tax not a tax? When it’s the “Bedroom Tax”, which is in fact a change to housing benefit and not a tax. Campaigners, charities and Ed Miliband have thrown this term around to describe the Government’s recent proposals to reclaim some of the Housing Benefit given to those claimants that have a spare room. As Guido points out, giving someone less in Housing Benefit because they have a spare room is a welfare reform or a benefit cut, but not a tax (regardless of what you think of the measure).
Just in case we’re not clear what a tax is, here is how the Concise Oxford English Dictionary that sits by my desk defines a tax:
A compulsory contribution to state revenue levied by government on personal income and business profits or added to the cost of some goods, service and transactions
So why has a benefit reduction, been labelled a tax? It’s all about the politics of language.
These days raising taxes is seen as a bad thing by all but a few committed ideologues, so labelling something a tax is designed to inspire opposition. It is designed to make people think that the proposals will mean ordinary homeowners face higher bills. As Mark Wallace (formerly of this parish) points out, the fact that many campaigners for higher spending (and in the end higher taxes) now accept that raising taxes is seen as a bad thing is actually very good news in the long run.
So, after you’ve cut through the spin, we’re left with the question: is reducing benefits for under occupancy the right thing to do? In principle yes, but it won’t address the fundamental problem of housing shortages and there are dangers the authorities need to address. The aim of the under occupancy charge is to stop a precious resource like council houses being underused. It is right to do something about the problem of scarce council houses not being given to those who need them the most.
There are some who still believe that a council house should be for life. It is tough to ask someone to leave where they have lived for the last ten years is, but when there are families of four and five queuing up for three bedroom properties how can we justify someone living in a council house with two spare rooms? Clearly there is a balance to be struck, and people should be encouraged to move on when they can.
The taxpayers paying for the system also need to be treated fairly. For many people, the idea of a spare room seems like quite a luxury. Most people my age (myself included) need to live with housemates and rent a room, let alone afford their own place and a spare room. So why should the benefits system provide a better standard for those in receipt of housing benefit than the people paying for those benefits enjoy themselves?
There is a serious risk that undermines the incentive to work.
The under occupancy charge may make the social housing system a little fairer but it only tackles the symptoms of the problem, not the cause. The real problem we face is that we aren't building enough homes. With taxes depressing people’s income as well, that makes property very hard for many families to afford. Until the Government gets serious about cutting taxes and making it easier to build new homes, these reforms will just be a sticking plaster. There is an absolute thicket of regulation that does nothing but create an administrative burden and slow development, which they could cut away to increase development.
Those opposed to this new welfare reform will campaign against it aggressively. They will find some cases where, if it is applied too inflexibly, the reform creates real hardship. That's why there should be a hardship fund which has been announced. But all those cases will show is that there does need to be some room for discretion at a local level, not that we should continue to abandon reforms that can make the whole system fairer and more affordable for taxpayers struggling to manage their own finances.