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Those govt cuts - slasher horror or history-changing brilliance?

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Don't pretend it's not about ideology

What's much more fun is screaming at these ideologically driven cuts. And yes, they are ideologically driven, whatever platitudes the Boy Dave gives us – but perhaps not by quite the ideology that everyone seems to think. You know, this slash-the-state and overturn the post-war consensus thing: even after all the cuts, at the end of this Parliament, the State will still be 40% of GDP (if everything goes to plan, which it won't) which is above that post war average. The ideology is, rather, that said State, the haphazard expansions of it, had got rather out of hand. Take, for example, the housing benefit changes.

Housing Benefit will be reformed so we do not subsidise people to live in private sector accomodation on rents working families couldn't afford.

That's a quote from the Labour Party Manifesto by the way, the one written by Ed Miliband. And I do think the Coalition's played a political blinder on this one. Whatever you think of the policy, the presentation has been an object lesson in how to do it. The first limitation was the £400 top whack on the largest houses.

Cue every lefty in the land screaming blue bloody murder, then the reminder that this is per week, not per month. It will still be possible for a family to get the median wage (post tax) just to pay for housing even after these cuts and limitations. Once this sunk in the comments sections were full of “You what? You mean I pay tax on my £25k a year so that...but, but, hang them!”

After that, the revelations of the much more important (and possibly much more damaging) reductions from 50 per cent of area median rents to 30 per cent have simply not made that much public impact. The Great British Public has heard one story about bloodcurdling cuts, found them not believable, and isn't going to pay much more attention.

Opportunity knocks at DWP's door

The change that's probably going to make the most difference over time though is the one about raising social rents from 50 per cent of market rents to 80 per cent. It's true that social housing largely pays its costs from the rents paid for it, yes, but economists insist upon something called opportunity costs. Rent foregone is a subsidy just as much as lashing out cash in housing benefit is.

If social rents rise then there will be more requiring HB in subsidy, so we'll be nowhere different at all you might say. Except for two things. This first one is the entirely insane way that we allocate housing subsidies.

If you at some point qualify for social housing: you're broke, homeless, just divorced with small kiddies, whatever, then you get that subsidy of below market rent for your whole life. It's as if having been unemployed for a few months you get dole forever: sick pay continues when you've recovered and you're playing first team rugby again. Increasing the rents (ie, lowering the subsidies) means that we'll only be paying out HB to those who need subsidy, rather than those who did need subsidy at one point in the past.

For the life of me, I cannot grasp why Lee Jasper should have had a council house at £150 a week when he was earning £100,000 a year from Ken Livingstone's administration. Nor why Baroness Uddin had social housing (from, erm, the social housing organisation her family ran) while owning a flat in Maidstone and building a villa in Bangladesh. Oh, while making speeches about the short supply of “affordable housing” when she was bedblocking a unit of that very affordable housing.

How much will it cost, eh?

The second is the cost of all of this. Taking rent foregone as just as much a subsidy as cash paid out, my back-of-the-fag-packet numbers are that housing subsidies cost £40 to £60bn a year (£20-£40bn in lost rents, a wide range as no one actually publishes the figure that I can find, plus £20bn HB). That's enough to raise the personal income tax allowance by £10,000 to £15,000 a head, to take income tax back to what it was, something paid only by those on median incomes or above.

If we move a large chunk of this from that opportunity cost, which we can't see, to a line item of expenditure, then the pressure to really deal with the structural problems of the housing market will grow. For example, it would help if we freed up the planning process (at least 50 per cent of the cost of a house in the south of England is the planning permission to build the thing), and perhaps realise that while the Green Belt is a lovely and wondrous idea, here's the cost: income tax kicks in £10k lower than it has to.

A man can dream can't he?

One more example of ideology: the introduction of markets into schools and hospitals. It's entirely possible to read this as the bastards carving out profits for their buddies from our tax money and thus hold the Red Flag high and march on Downing Street. We could also read a little Polly Toynbee.

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