Emergency Budget 8 July 2015
George Osborne has delivered the Conservative government’s first budget. He used his budget speech to update the House of Commons on the state of the economy and to announce the government’s financial priorities, including how some manifesto commitments will be taken forward. The government’s overarching priorities are to:
• Support the aspirations of working people
• Create a higher wage, lower tax, lower welfare society
• Reduce the deficit so the nation’s budget is in surplus by 2019-20
Delivering this vision requires spending cuts:
• The deficit will be cut at the same pace as in 2010-15
• £17bn of £32bn savings are included in this budget, with the rest to come in the comprehensive spending review
• £5bn will be found by reducing tax avoidance
• The welfare budget to be £12bn lower in 2020 than it is today.
The budget contained a number of headline announcements about housing and welfare, many of which are very important for social housing tenants and landlords.
This briefing gives an overview of what was announced and possible implications.
• Social housing rents to reduce by 1% a year for 4 years (until April 2020)
• Social housing tenants earning more than £30,000 (£40,000 in London) to pay market rents from April 2017
• Right to Buy to be extended to housing association tenants
• Use of lifetime tenancies to be reviewed and limited
• Help to Buy ISA to be available from December 2015
• Restrict mortgage interest relief for buy to let landlords, phased in over 4 years
• Inheritance Tax reforms so estates up to £1m will be exempt
• Rent-a-Room relief increased from £4,250 to £7,500 a year from April 2016
• Further planning reforms to be announced on 10 July
Welfare (in date order)
• 7 waiting days to be introduced for Universal Credit from August 2015 (ie no benefit payable for first 7 days of claim)
• Working age benefits to be frozen for 4 years from April 2016 – disability benefits will increase by CPI over this time
• Benefit cap to be reduced to £20,000 (£23,000 in Greater London) – to be phased in from 2016-17
• Housing benefit can only be backdated for 4 weeks from April 2016
• Work allowances in Universal Credit to be abolished for non-disabled childless claimants and reduced for everyone else from April 2016
• Tax credits income threshold lowered and taper rates increased (so fewer people get support and it is lost more quickly as income rises) from April 2016
• £800m for Discretionary Housing Payments 2016-2020
• Automatic entitlement to housing support removed from unemployed tenants under 21 years old from April 2017
• Youth Obligation for 18-21 year olds on Universal Credit from April 2017
• ESA claimants in the work related support group to receive the same rates as JSA claimants from April 2017
• Tax credits can be claimed for no more than two children from April 2017 (existing claims exempted from this)
• Family element of benefits claims abolished for new families from 2017 (currently £17.45 per week)
• Parents whose youngest child is 3 or older will be required to look for work from April 2017
Personal tax and earnings
• National Living Wage of £7.20 per hour to be introduced for people over 25 from April 2017
• Personal allowance to be raised to 11,000 in April 2016 and £11,200 in April 2017
Detail and impact
Increasing social rents for higher earners
Social tenants with a household income of £30,000 or more (£40,000 in London) will be charged a market rent rather than a social rent. The extra rent collected by local authorities will go back to the Treasury, and extra rent collected by housing associations will be used by those associations to fund new development. Government will consult on the detail of policy before it is implemented.
This policy an extension of the Pay to Stay policy that was introduced in April 2015, which allowed landlords to choose to charge market rents to tenants with a household income of over £60,000.
The current benefit cap, which means unemployed households cannot claim more than £26,000 in benefits, will be lowered to £23,000 in London and £20,000 in the rest of the country.
As an illustration, a lone parent with two children living outside of London would currently be entitled to £258.75 a week in benefits. Under the cap, they would be left with £125 per week to cover rent. In London they would have £183.55 to cover rent.
The cap has been in operation since April 2013, and affects households of working age who are not in employment and are not disabled. Claimants who are affected have their housing benefit reduced to bring their income under the cap. If a claimant gets at least 16 hours work the cap is removed.
Housing Benefit for people aged under 21
People under 21 will not automatically be entitled to housing benefit. The message is that people should not set up home on their own until they are able to support themselves. Parents whose children live with them, vulnerable groups, and those who were living independently and working continuously for the preceding 6 months will be exempt from this measure.
Help to Buy ISA
People saving to buy their first home will be able to save up to £12,000 in a Help to Buy ISA, and government will match this with 25% up to £3000. Savers can pay in £1000 up front and then £200 a month.
Cutting social rents
An average sized housing association would charge around £24million in rent each year.They would lose £240,000 in the first year of this policy, with losses compounded in later years. A tenant paying £80 per week rent would save £41.60 a year.
How will the budget affect you?
That’s the big question, and we want you to tell us. As you’ve reflected overnight on news coverage or as you read this briefing you should have a feel for how you are affected by the key announcements. We’d like you to share your reactions and your budget reality for us at the TPAS conference.
This budget will clearly have a massive impact on Britain’s lowest income working age households, many of which are social tenants. It will also affect social landlords incomes and how they run their businesses, and this will have knock on consequences for tenants.
TPAS chief executive Jenny Osbourne said, “Today’s budget brings massive challenges for working age tenants and social landlords. Today at our annual conference we are hearing first hand the anticipated impacts on people’s lives
We want to see tenants’ given the opportunity to work alongside their landlords to find savings so they can help ensure negative effects for tenants are minimised as far as possible. As legislation that redefines social housing comes to Parliament we want to make sure tenants’ voices are heard in debates.
At TPAS we know active tenants will rise to the challenge, but what a shame that they have to.”
We will continue to support the work of Real Life Reform as the new welfare reforms are understood and implemented. In particular this means gathering and sharing the views of tenants and people who work in tenant involvement.
We’re all together here at conference, and we want to know your reactions and your budget reality here and now. Share your views on camera or in writing in the networking area.