Outlook: It’s clear from yesterday’s Queen Speech that much of the Conservative Party manifesto was well-represented. Big ticket policies such as the extension of right to buy to housing associations, reducing the welfare cap, removing housing benefit eligibility from 18 to 21 year old job seekers and doubling the entitlement to free childcare were all there.
It’s worth looking at what wasn’t there. The policies outlined thus far suggest only £1.5bn in welfare cuts have been decided (mostly made up of the reduction in the welfare cap and the restriction of housing benefit to job seekers aged 18 to 21) leaving another £10.5bn worth of the estimated £12bn cuts to welfare identified by the Conservative Party. The IFS have suggested these further cuts could fall in three areas: benefits for families with children, housing benefit and disability, and incapacity and carers’ benefits.
Potential proposals mooted by the IFS – and it’s important to stress that these are just suggestions – include the introduction of a new 10% co-payment for all social tenants (i.e. social housing tenants contribute 10% of their rent while housing benefit covers the remaining 90%) which it is estimated could cut spending by about £1.6bn. Another mooted proposal is to reduce the amount of child benefit payable for the first child in the family to the same amount payable for subsequent children (£13.70 a week). The IFS estimate that this would save £2.5bn per year and would mean a real terms cuts of about £360 a year for all families receiving child benefit.
“Legislation will be introduced to support home ownership and give housing association tenants the chance to own their own home.”
Analysis: This will include the much discussed policy of extending the right to buy to housing association properties as well as requiring councils to sell off high-value, vacant council housing to help finance new affordable homes on a one-for-one replacement basis. It will also increase the supply of Starter Homes (offered only to first time buyers at 20% discount) as well as ensuring local people have more control over planning. It will also introduce a new ‘right to build’ requiring councils to allocate land for self-building as well as introducing a statutory register for brownfield land.
Draft Public Service Ombudsman Bill
Analysis: This draft bill, currently in consultation until the 16th June, would essentially create a new Public Service Ombudsman providing a more effective and accessible final tier of complaints redress within the public sector. It would – as is currently proposed – absorb the functions of the Parliamentary Ombudsman, the Health Ombudsman, the Local Government Ombudsman and, potentially, the Housing Ombudsman. The main aim of this bill to simplify and improve access to redress for customers of public services who feel their complaints have not been appropriately handled. It is envisioned that the new Ombudsman would be independent of Government and directly accountable to Parliament.
Full Employment and Welfare Benefits Bill
“To give new opportunities to the most disadvantaged, my government will expand the troubled families programme and continue to reform welfare, with legislation encouraging employment by capping benefits and requiring young people to earn or learn.”
Analysis: The main thrust of this bill is to deliver the Government’s commitment to freeze the main rates of a number of working-age benefits, tax credits and Child Benefit, and to reduce the level of the benefit cap. The reduction of the benefit cap from £26,000 to £23,000 was a Conservative manifesto commitment and so is certain to form a small part of a wider drive to reduce spending on welfare. The Institute for Fiscal Studies (IFS) have suggested however, that such a measure would only reduce spending by around £100m. This is in addition to the freeze in the main rates of most working-age benefits until 2017.
Another manifesto commitment was to remove housing benefit from 18-21 year olds claiming job seeker’s allowance (JSA) which would be a significant cut for nearly 20,000 young adults. Research by the Northern Housing Consortium (NHC) has found that there are 19,320 such young people claiming housing benefit and JSA in the UK, of which 6,007 are in the North (constituting the North East, North West and Yorkshire and Humber). That is 30% – nearly a third – of the total number that may be affected.
Removing housing benefit from 18-21 year-old job seekers will be a significant cut for about 20,000 young adults, but the small numbers affected limit the saving to just £100m (£0.1bn) according to the IFS. It is believed that this would increase the incentive for affected individuals to move into paid work, or to claim a different out-of-work benefit (Employment and Support Allowance or Income Support) instead. Questions surrounding exemptions – such as for those with dependents or care leavers – will likely be addressed in the legislation.
Cities and Local Government Devolution Bill
“To bring different parts of our country together, my government will work to bring about a balanced economic recovery. Legislation will be introduced to provide for the devolution of powers to cities with elected metro mayors, helping to build a Northern powerhouse.”
Analysis: This bill will provide new primary legislation to fulfil the Government’s manifesto commitment on devolving powers to local areas in areas such as housing, employment and skills training, retention of levies such as business rates and health and social care. The bill will be generic, granting powers (where necessary conditions are met) to elect a mayor for the combined authority; for said mayor to undertake the functions of the Police and Crime Commissioner and enable local authority governance to be streamlined as agreed by councils.
Personal Tax Allowance
“Legislation will be brought forward to ensure people working 30 hours a week on the national minimum wage do not pay income tax, and to ensure there are no rises in income tax rates, value added tax or national insurance for the next five years.”
Analysis: Another well-trailed Conservative Party manifesto. The Government plans to raise the income tax personal allowance to reflect changes to the national minimum wage (NMW) so that individuals working 30 hours a week on the NMW do not pay income tax. The Government estimate that this will benefit around 30 million individuals. The legislation would ensure that future increases to the income tax personal allowance reflect changes to the national minimum wage, so that individuals working 30 hours a week on the national minimum wage do not pay income tax.
“Measures will be brought forward to help working people by greatly increasing the provision of free childcare.”
This bill would double the entitlement to free childcare from the current 15 hours a week to 30 hours a week for families where all parents are working. It would focus on three and four year olds and would be redeemable for 38 weeks of the year (equivalent of the school year). The bill would ensure that parents are able to access information about this policy and about other childcare provision or services (presumably for those not eligible for the 30 hours free childcare for three and four year olds). It will also require local authorities to publish information about the provision of childcare in the local authority area.