Margaret Thatcher, the 1983 election and the ‘bedroom tax’

margaret-thatcherLike Caron, I spent more than a healthy amount of my Bank Holiday Monday watching BBC Parliament’s re-run of the 1983 general election.

It’s not an election I remember (I was 6). But the symmetry of yesterday’s hyperbolic Guardian (‘The day Britain changed’) front page and the televised reminder of Margaret Thatcher’s first landslide seemed calculated to confirm the left’s view that 1st April 2013 marked the ultimate victory of those on the right who wanted (and still want) to destruct the welfare state.

What Mrs T, Geoffrey Howe and Nigel Lawson started — the left exhorts — Dave, George Osborne and Nick Clegg are concluding. But at the risk of breaking up the right/left battle that’s brewing, the prospect of which both sides appear to relish, it’s a lot more complicated than that.

Let’s take the most controversial issue of all, the ‘bedroom tax’/’spare room subsidy’, the reduction in housing benefit paid to those who are said to have surplus rooms. It’s a classic case of a policy which is right in principle and wrong in practice.

There are currently two million households in England on housing waiting lists, 250,000 families living in over-crowded accommodation and one million bedrooms standing empty. Attempts over many years — including cash incentives and help with moving — have failed to re-allocate the stock of social housing efficiently.

Understandably social housing tenants do not want to move until they are offered at least as good an alternative new home. Who can blame them? But equally who can blame those in need on the waiting list forced to rent overcrowded sub-standard accommodation in the more expensive private sector from looking on aggrieved at families living in under-occupied houses bigger than they can hope to afford? Added to that private renters were hit by their own ‘bedroom tax’ when Labour introduced the Local Housing Allowance in 2008, calculated on the same basis as the Coalition’s ‘bedroom tax’.

The principle of the ‘bedroom tax’, then — to try and maximise the availability of social housing and reduce the chronic waiting lists — is a reasonable one. Where the policy clearly breaks down is on a human and practical level. Though the Coalition has responded to concerns raised by introducing exemptions for foster carers, military families and so on, it will not have covered every eventuality. The harsh reality is some people, some of the most vulnerable in society including the disabled, will be made poorer. It’s unlikely the transitional relief money that’s been made available will meet the needs of all these cases.

Worst of all, in some areas it’s unlikely those affected will have any choice available other than to see their meagre incomes reduced: there simply isn’t the choice of social housing available to allow them to downsize to fit the guidelines. As Inside Housing reported last year, one housing association with 2,500 tenants affected had only 16 one-bed properties in which to place them. Those impacted will have to accept the cuts, or find lodgers or work (if they can) to make up the difference.

I’m clear then that the ‘bedroom tax’/’spare room subsidy’ is a mistaken policy. But I’m equally clear there are no easy answers to this: without it, those on the waiting list will stay there for years.

The real problem once again is clear: the lack of housing in the UK, in particular social housing. Less social housing was built under the last Labour Government than under Margaret Thatcher’s. And — to come full circle — she started the process of selling off millions of council houses now in such need, a popular policy which helped her to a famous election victory… in 1983.

* Stephen was Editor (and Co-Editor) of Liberal Democrat Voice from 2007 to 2015, and writes at The Collected Stephen Tall.

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29 Comments

  • Old Codger Chris 2nd Apr '13 - 9:00pm

    Lack of housing is indeed the fundamental problem – and we need to stop pretending that we can save every green space, every village, every town from development. Secondly too many houses are sub-standard.

    But the whole concept of two classes of rented homes – private and social (formerly council housing) – is wrong. A return to a Fair Rents policy giving private landlords a reasonable, not a windfall, return, would be a start. Then begin raising Social rents to the level of fair private rents while ensuring that taxes and benefits make them affordable.

    Another desirable result of such a policy would be that “buy to let” would cease inflating the market to an unacceptable degree.

  • Yep – the lack of housing is the fundamental problem, not just for the neediest who rely on social housing, but for so many younger members of society. Houses are just too expensive, and that price is propped up by a lack of supply. We are in Government now, can we *please* get house building up? If we don’t then an ever-growing number of younger voters will get angrier and angrier that they are facing ever-rising university fees, their pension entitlements are being shredded, and houses are more and more out of reach.

  • Of course, the real elephant in the room is the Right to Buy.

    Even if a local council has a well-managed Housing Revenue Account, with headroom to build new homes, the incentive isn’t there despite recent reforms. Councils could potentially lose a lot of money with the way things stand.

    We should be looking seriously at a combination of measures which would address the problem. Right to Buy should be suspended until an individual house is paid for – this could be through the discounted purchase. If this would prove too complicated we should even look into the possibility of suspending Right to Buy itself for a period of time.

    It wouldn’t have to be this way if we could open up the possibilities for house-building. Freeing local councils to raise funds on the capital markets would also help.

  • @Stephen – Housing Benefit in the private sector has always had a size restriction – before LHA this was and still is evaluated in pre LHA claims by a Rent Officer who will make a size related rent determinations when households are over accommodated (its called claim related rent/local reference rents)
    Labour did not introduce this reduction in LHA, it has always been in there in private sector Housing Benefit claims and is still applied to pre LHA claims.

    http://www.voa.gov.uk/corporate/RentOfficers/housingBenefit.html

  • I tend to agree with HBTone – I remember a Council official visiting my house in the early 90s to check on the size of the accomodation I had (a weird hybrid part flat/part house share as I had my own kitchen but shared bathroom).

  • LHA isn’t the same as the bedroom tax. With LHA you are given an allowance that is widely publicised based on the composition of your household. You can then claim up to this amount for your rent regardless of the number of bedrooms the property has. So if you only need a 2 bedroom property and have an LHA rate of say £120 per week but can find a cheap 3 or 4 bedroom property for £120 per week you will still get the full £120 per week even though you are over accommodated.

    LHA also wasn’t retrospective like the bedroom tax. It only applied to new claims so people knew in advance the amount they could claim before taking on a tenancy.

  • Adrian Fullam 2nd Apr '13 - 11:44pm

    I’m afraid housing will always be a problem when the affluent can corner a large surplus of available space. Ever more building will never sate the almost universal desire to expand our personal patch. As long as wealth is disparate, those without wealth will always be overcrowded because the better off will take the large proportion of any new growth. The current social sector just parcels off a chunk to those who can demonstrate themselves the most unproductive and even allows surplus of space to a subset of those. This is grossly unfair to those who find themselves at the same starting point, but make an effort to be self-supporting, they suffering overcrowding in the private sector or have to postpone family plans for decades .

    The only remedy is a system which taxes land values and offers personal tax-free allowances per resident. So modest properties fully occupied will attract low taxes, while large under-occupied properties carry an ongoing liability. Clearly if someone is on a low income in this regard, they will be faced with down-sizing. However, this land tax should replace income tax, so that workers will find they are better off – and will generally use their extra income to purchase more space (see first point above) thereby raising the amount they pay in tax. By varying the tax levels, the government could modify land distribution to be equitable and eliminate the need for housing benefit altogether. Simply put, if you work hard in your lifetime, you have a real chance to get decent space to live in. If you inherit a lot of property, you have to work hard to keep it. Of course, you have a great start. I believe this is an example of meritocracy and what liberalism should be all about. Try this for an interesting perspective…http://www.guardian.co.uk/commentisfree/2013/mar/25/property-theft-bedroom-tax-rich

  • Stephen,

    I would echo your conclusion in this article “I’m clear then that the ‘bedroom tax’/’spare room subsidy’ is a mistaken policy. But I’m equally clear there are no easy answers to this: without it, those on the waiting list will stay there for years.”

    There has been much written about buildiing new social housing and bringing empty properties back into use, with the proceeds of council house sales, to reduce the ever growing housing waiting lists. Rather than seling off existing council houses, I would consider mirroring in the social housing sector the response of the private rental market to changing demographics and family sizes – namely investment in the conversion of surplus larger family houses to two bedroom flats for single parent/smaller families and houses in multiple occupancy for single occupiers or couples without children to balance social housing availability more closely with social housing demand.

  • A Social Liberal 3rd Apr '13 - 2:12am

    Trying to force older people out of the homes they have lived in for decades is not going to eleviate the problem of higher grade social housing. Forcing siblings to share bedrooms will likewise do nothing to ease the lack of three and four bedroom homes. The only thing that will solve our social housing crisis is to build more. Not affordable housing forced on developers by section 106 decisions (who then dodge the ruling by claiming to have run out of money) but building councils building council houses and housing associations their social housing properties.

    Cutting the amount central government gives to councils will only excacerbate the problem, just as cutting grants to housing associations did.

    Joe Burke – can I ask, why do you think the bedroom tax was brought in. Surely it is because there is a dearth of 3,4 and 5 bedroom social housing? I sincerely hope this is so because it is the impression I got at the last HA meeting I attended in January

  • Phil Beesley 3rd Apr '13 - 3:19am

    Stephen Tall: “There are currently two million households in England on housing waiting lists, 250,000 families living in over-crowded accommodation and one million bedrooms standing empty. Attempts over many years — including cash incentives and help with moving — have failed to re-allocate the stock of social housing efficiently.”

    You’ve said it all there, Stephen. After loads of nudges, people do not wish to move home unless it serves them. Accept it. Citizens are not cattle, to be shuffled from one shed to another.

    If citizens do not wish to be nudged, just say “OK”. The party name is Liberal Democrat not Utilitarian Democrat, and we have to qualify whenever we act as Utilitarians.

  • Paul Reynolds 3rd Apr '13 - 3:49am

    The ‘bedroom tax’ is poor policy in many senses. It is ineffective at tackling the underlying problems, it is a PR disaster for the Coalition (especially the Libdems) and it crowds out remedies to the wider complexities of the problem.

    Housing policy, especially in relation to the poorer parts of the population, needs to take into account the dynamics of the welfare system and its relationship to housing, the regional trends in housing demand, the housing planning system and behaviour of private housebuilders, right to buy, and the cost/benefit of housing subsidies (housing association and local authority housebuilding).

    The politically catastrophic bedroom tax seems primarily designed not to deal with empty bedrooms but to deal with the alleged practice of ‘council flat’ households choosing the unemployed or lowest earner as the official tenant in order to game the welfare system.

    This type of logic arises with the current compartmentalisation of housing policy

    The Dutch and Swedish probably have a better approach – and fewer housing problems.

    Amidst all this, the supremely superficial Cameron reads some focus group data and comes up with some rhetoric about immigrants getting priority on the housing list

    What hope is there for proper comprehensive policy that works ?

  • There are a couple of other coalition policies which use supply side measures to attempt to tackle demand side problems as well, but this is the worst of them. Thing is, no Chancellor wants to upset the property owning classes by solving the problem of housing demand because whichever way you slice it that would necessitate a massive tumble in house prices, and successive governments have persuaded people that continual inflation of the house price bubble makes them richer.

    We already know that George wants to see the bubble continue to inflate by his stupid mortgage guarantee policy. Anyone who thinks that any Chancellor would try to control this is living in cloud cuckoo land. I’d say there’ll be riots on the streets of London first, but there already have been and it made no difference.

  • William Jones 3rd Apr '13 - 9:52am

    ‘Bedroom Tax’ has nothing to do with fairness on distribution of suitable housing it is purely a cost saving on the welfare budget. The fairness angle is purely a selling point.

  • the need is for more social housing. Building on greenbelt land does not provide affordable homes. It’s popular with builders because it does the exact opposite and is popular with conservatives because of an anti urban electoral bias in their favour. The problem is really that the economic right have no real plan beyond trying to increase personal debt and are more interested in reinflateing the property bubble than actually housing anyone.

  • Yes Stephen the point of LHA was to incentivise claimants to find cheaper accommodation and as such at the beginning of LHA claimants could keep up to £15 per week if their rent was cheaper than their LHA rate. Many people were actually £15 per week better off under LHA as opposed to £14pw or more worse off under the ‘bedroom tax’. So they were not ‘hit’ first by these restrictions under Labour in the private sector.
    And people justifying this as Labour started it so they shouldn’t be commenting on it is just plain wrong. Housing Benefit rates in the private sector have always been based on size and composition of the household and and always been based on local average rents (well as far back as 1992 that I know of).
    I work on the front line in Housing Benefits and this policy is an absolute disaster that is only going to get worse. Give it 2 or 3 months for tenants rent arrears to start mounting up and the landlords will start issuing Notices Seeking Possession on a massive scale.
    Hopefully these wont lead to evictions because apart from the enormous personal cost to people and families thrown out on the street it will lead to increased costs on local authorities who will then most likely have to pay for expensive emergency accommodation in Bed and Breakfast.

  • A Social Liberal 3rd Apr '13 - 2:25pm

    David Wright

    I am curious, why would it be alright to pressure anyone out of their homes? Rather than force people to leave houses they have lived in for perhaps 20 plus years why not give councils and housing associations grants to build the housing stock needed – the reality is is that central government has cut the grants to both types of organisations and forced them to put their rents up to 80% of provate landlords in order to make up the shortfall.

    In forcing people out of the houses they occupy the government is sending a clear message – only the wealthy deserve homes, the poor have to make do with temperary accommodation throughout their lives. Only the offspring of wealthy parents can have their own bedrooms, children of the poor have to share with their siblings no matter the detrimental effects of this.

  • A social liberal,

    “why do you think the bedroom tax was brought in. Surely it is because there is a dearth of 3,4 and 5 bedroom social housing? I sincerely hope this is so because it is the impression I got at the last HA meeting I attended in January”.

    In my area of West London the councils pressing need is not for 3,4 or 5 Bedroom homes but rather for one or two bedroom flats and single room shared accommodation.

    There has been a significant move in recent years to care for the elderly in their own homes using agency carers rather than making available places in more suitable sheltered or council run residential care homes. As a consequence there has been a rapidly growing number of elderly people isolated in large family homes where the grown children have long left, while at the same time an acute shortage of housing of all kinds has developed. These policies appear contradictory and result from the lack of coordination of Central government and local council financing of public services.

    Increasing both the private and social housing stock is the only solution to this long term and growing problem. That will need to happen on a number of fronts – new build, refurbishment of empty properties, sheltered and residential care homes for the elderly, as well as conversion of existing stock to better meet the changing profile of local area demand.

    Social housing was, in large part, develped to move people out of city centre tenement slums and was a successful program when regular employment was a criteria for access to social housing tenancies. In my view, it should be again – coupled with a minimum wage job guarantee program as a backstop against involuntary long term unemployment.

  • Graham Evans 3rd Apr '13 - 3:25pm

    One of the principal difficulties of determining the appropriate level of housing benefit in the council and HA sector is that rents seldom equate to the market rate, and are usually significantly lower. In some cases this is because the properties have been financed by central government grants – otherwise the rent would be at the same level as a mortgage on the property; because the rents of more recently built properties are cross-subsidised by the rents charged on older properties – and it is this mix which may explain why rents in some local authorities are significantly different from neighbouring authorities; because some councils had high debt compared to the value of their housing stock, and received financial support from central government whereas other councils found themselves having to pay money across to central government; and so on. In the private rented sector there is however an essentially free market, albeit perhaps somewhat influenced by the level of housing benefit support government is willing to pay. Consequently there is no incentive for those living in public sector housing to move into the private sector (where in many areas there is now a surplus of one and two-bedroom flats) if their accommodation is deemed too large for their needs (not to mention the loss of security of tenure), nor is there any incentive for private finance to build social housing. I do not believe that a massive building programme of social housing will solve this programme, as in many areas, and particularly in London, there simply is not the land available without a major encroachment on the Green Belt. The only way I can imagine to genuinely free up the market is to oblige councils and HAs to charge market rents, and then offer housing benefit support to tenants on exactly the same basis as operates in the private sector. The “profit” thereby generated could then be return to central government to finance the otherwise increased housing benefit bill. I am not saying this is the solution, but I do throw the idea out for discussion.

  • I fail to see how charging market rent will increase availabilty except by making more people homeless. It just seems to be one of those when in doubt dump on the nearest pleb ideas and would actually make things even harder for the working poor. A big part of the real problem is the grotesque overvaluing in the property market and part of the answer to this is to let the prices drop. And also it might make sense to stop equating a local housing proplem in London with the rest of the country. Coz once you leave the capital the housing situation changes drastically. Also maybe end the the Right to Buy and impose rent caps.. The point is the housing proplem has been almost entirely driven by the spiv economics. of the Thatcher, Blaire and now Cameron years. No one wants to tell banks and to a lesser extent home owners their investment wasn’t as solid as it seemed..

  • Graham Evans 3rd Apr '13 - 7:15pm

    I am not suggesting that charging market rents will increase availability, though it might encourage private sector investment through REITs. However, by encouraging movement between and private and public rented sections it may improve the use of the housing stock, i.e. there is a surplus of one- and two-bedroom accommodation in the private sector and under-occupation in public sector housing.

    All governments since WW2 have encouraged the population to buy their own homes; and have promoted property ownership as a sound investment and a hedge against inflation, so to blame the current housing problem simply on Thatcher, Blaire and Cameron is naive. The housing problem is in many respects merely a symptom of the de-industrialisation and economic decline of many parts of the country. Where the economy was thriving, not just in London but in areas such as Cambridge and indeed much of the South East, the private sector responded by extensive house building, but this was unable to match the growth in population because of a land shortage where people wanted to work and live. The inevitable result has been house price inflation. Simply defining the property market as being grotesquely overpriced will not solve that problem.

  • I used to work in properyt, back in the mid 90s and you could see it getting sillier by the week. The diference between the Thatcher era to present and previous governments is that they were promoting home ownership not investment hense the costs were more stable and they built council houses for people who could not afford their own homes.. In the 80s loans became much easier to obtain. It was not driven by deindustrialisation, but by the relization that in banking terms debt is profit. Thus the more expensive houses became the better the investment looked on paper. By the 90s financial types were even saying that debt was an economic miricle. But debt is only really debt if you can pay it back. If you can’t it becomes loss. As my old Pop always said you can’t get blood out of a stone. The the point being that disposible incomes have dropped to the point were housing is simply too expensive and so the market has stagnated.. People will not buy at the price on the tin and the owners can’t afford to take the hit. To me the answer is to build social housing and make it not just affordable, but cheap enough to mean that people have spare cash in their pockets to spend day to day.

  • Helen Dudden 4th Apr '13 - 7:56am

    I feel that we should stay with social housing, but maybe look to find other landlords, look to find those who will take one step father than simply be in the rented sector.

    Not just the money making side of things, but the more inventive ways of providing homes for those who need it.

    The photograph of the above iron lady, who would have thought she could have sat so proudly on your page?

  • Matthew Huntbach 4th Apr '13 - 11:09am

    Graham Evans

    All governments since WW2 have encouraged the population to buy their own homes; and have promoted property ownership as a sound investment and a hedge against inflation, so to blame the current housing problem simply on Thatcher, Blaire and Cameron is naive.

    Before Thatcher it was accepted that council housing should exist and be available to provide a minimum standard of accommodation. If you wanted something bigger or more luxurious obviously you would need to buy your own place, but council housing was a fallback option for anyone who could not afford to buy and who had a long-term commitment to the area. Private rented housing was only really for those looking for something short term, willing to pay the cost for the convenience and choice and also for having all the tiresome maintenance elements of property ownership take off their hands.

    Thatcher’s right-to-buy, without any plan to replace the council housing lost, was the key point which ended that. Council housing is now available only to those in dire emergency, and even then is something of a lottery. It is no longer an option open to most people to choose. This has, of course, pushed private rents up – if there’s no longer the cheaper council housing option, landlords needn’t fear losing tenants to it. There’s no longer the option to live cheaply in council housing and use the money saved to build up a business. High housing costs drain money from the young and active who could be using it to drive the economy, and passes it to the old and retired who are not going to use it in an entrepreneurial way. The social costs coming from the instability caused by the lack of this fallback option are very high. Because in the end we cannot force children to sleep on the street, we do have to use expensive private letting for families who cannot afford to buy – subsidised by the taxpayer in housing benefit.

    Like so much of what Mrs Thatcher did, this was something that looked good and won her votes in the short term, but was disastrous in the long-term. Like burning off our North Sea oil to give the impression of prosperity, running down our manufacturing industry because we were supposed all to be able to make a living selling houses and shares to each other, privatising energy and transport infrastructure so it could be sold off into overseas ownership, it all looked good back then. Now we are starting to face the consequences, it has taken a generation for them to start to hit hard, but they are hitting hard now. The consequences are the very opposite of what Thatcher said she was all about – they have destroyed the family, they have destroyed the British work attitude, they have sold control of so much of our country to foreigners, they have destroyed so much of what was traditional to this country, they have built up unsustainable debt.

  • @Matthew

    “Before Thatcher it was accepted that council housing should exist and be available to provide a minimum standard of accommodation.”
    Since Thatcher, many council houses are superior (build quality, size of accommodation etc) to much new housing in the private and social sectors, that has been built to comply with planning regulations …

    “High housing costs drain money from the young and active who could be using it to drive the economy, and passes it to the old and retired who are not going to use it in an entrepreneurial way.”
    Yes high housing costs do drain money from the young. However, I’m not sure that they (the young) would use the money in an entrepreneurial way. Like the old and retired, they would spend it, the only difference is the sectors in which that money is spent. It could be argued that having an ageing population is providing customers for the services provided by astute entrepreneurs. Also if the grandparents pay for a grandchild’s education or guarantee a loan, is that not being entrepreneurial?

    “we were supposed all to be able to make a living selling houses and shares to each other”
    Looks like we haven’t learn this lesson, by banging on about building more houses, that we can sell to each other…

  • @Graham Evans
    “All governments since WW2 have encouraged the population to buy their own homes; and have promoted property ownership as a sound investment and a hedge against inflation, so to blame the current housing problem simply on Thatcher, Blaire and Cameron is naive. The housing problem is in many respects merely a symptom of the de-industrialisation and economic decline of many parts of the country. Where the economy was thriving, not just in London but in areas such as Cambridge and indeed much of the South East, the private sector responded by extensive house building, but this was unable to match the growth in population because of a land shortage where people wanted to work and live. The inevitable result has been house price inflation. Simply defining the property market as being grotesquely overpriced will not solve that problem.”

    People certainly don’t choose to work and live in the South East. If they have migrated there from other parts of the country over the last few decades it is because that is where employers choose to locate. It’s hardly surprising that employers choose the South East given the huge amount of infrastructure spending that goes on there, with the exception of housing. As for the point about houses being overpriced, it is important to distinguish between the increase in price due to shortage of supply, which is only marginal and in the South East, and the huge increase due to increased demand in the form of reckless lending, shared-equity schemes, etc, propped up by bailing out failed banks and thousands of home-owners (sic) who would have been re-possessed if it wasn’t for the fear the government has of falling house prices. Yes, houses are over-priced because of that artificial demand. The low supply of new-builds has made very little difference to prices.

  • “A return to a Fair Rents policy giving private landlords a reasonable, not a windfall, return, would be a start. Then begin raising Social rents to the level of fair private rents while ensuring that taxes and benefits make them affordable.”

    Social rents are already well above what would be a fair level for private rents.

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