One week on: digesting the implications of the Spending Review
In the drive to reduce the national deficit during the 2015/16 financial year, the Chancellor of the Exchequer, George Osborne, last week revealed a programme of further cuts to government spending.
With the proposed cuts totalling £11.5bn, we thought you’d appreciate a roundup of the implications of the Spending Review.
In a nutshell
There was good news on new funding for affordable homes and hostels, as well as a 10 year guarantee that the link between rent and inflation would be retained, albeit at the slightly lower rate of CPI + 1%. However, with the NHS, schools and the foreign aid budgets exempted from the cuts, both local government and welfare budgets saw significant hits.
Expanding affordable housing
The Government’s proposed plan to invest £3.3bn in building 165,000 new affordable homes over a 3 year period from 2015 should be welcomed in what will, in effect, be a continuation of the Affordable Homes Programme.
Although it is encouraging to see that the Government has recognised the sector’s concerns around the current lack of affordable homes, we question whether the planned investment goes far enough to address the chronic shortage.
The Department for Communities and Local Governments, for example, estimates that the number of households in England is set to rise by almost five million, from 22.8 million to 27.5 million, over the next two decades, signifying a need for at least 233,000 homes a year.
The Government’s definition of what constitutes affordable housing is also debateable. A property is currently considered ‘affordable’ at 80% of market rents, yet for a great number of people properties let at this rate are still out of reach. In order to support low income individuals and families into the housing market, the Government must seriously consider making more properties available at truly affordable sub-market rates.
The news that social rents will continue to keep pace with inflation until 2025 at CPI + 1% is positive in the sense that it will allow landlords to make concrete plans for the future based on guaranteed levels of rental income. Nevertheless, it remains contentious as to whether setting rents in accordance with CPI, rather than RPI, will encourage landlords and private sector companies to maintain, or even increase, their investment in the sector.
More council funding cuts
More accommodation is critical to help tackle rising homeless numbers, but individuals also need support to get back on their feet.
News that the Department of Communities and Local Government has agreed to a further 10% cut in its budget now takes the overall cut to DCLG funding to 60%. As a result, we have to question whether local authorities can realistically be expected to continue to find savings, without losing critical services.
Our research has shown that previous cuts have already led to a reduction of vital service provision for homeless people and, with a new round of spending cuts scheduled for 2015/16, this pattern looks set to continue. This renews the need for the sector to demonstrate the value of the services it provides in terms of reducing costs to individuals and communities in the longer term.
Further pressure on welfare recipients
The Department for Work and Pensions will see its budget cut by an additional 9.5%, with a string of new conditions imposed on jobseekers designed to save the department around £365m.
In the final part of the review, the Chancellor announced a series of unexpected measures, including plans to extend the current time that the newly unemployed are unable to claim Jobseekers Allowance from three to seven days.
In addition, claimants who do not speak English will be required to attend mandatory language classes or risk losing their benefits, while single parents will have to begin preparing for work once their youngest child reaches the age of three, with the aim of securing work by their 5th birthday. Claimants will also be required to sign on weekly, rather than once every two weeks.
While we might support the broad aims of the Government’s welfare agenda, the potential effects these reforms may have on some of society’s most vulnerable people are of huge concern, particularly the impact of the increased delay in the payment of benefits.
Delays to social security payments are already causing individuals and families to rely on food banks and unsecured personal loans from pay day lenders. An extended seven day wait for benefits will only serve to heighten this dependency and cause further unnecessary hardship.
By introducing further conditions around the continued receipt of benefits, the Government is also increasing the likelihood that claimants will face sanctions, which in turn could lead to a potential rise in the number of people becoming destitute.
Overall benefit cap
From April 2015, alongside caps to individual entitlements, there will also be an overall cap on the amount of money that the Government can spend on certain social security elements, including housing benefit, tax credits, disability living allowance and some pensioner benefits.
The inclusion of housing benefit within an overall cap on welfare expenditure will do little to address the underlying causes of the rise in expenditure on this benefit. If poor economic growth continues, along with insufficient affordable housing supply and low paid employment, demand for housing benefit will continue to increase.
Health and hostels
Further to the £3.3bn set aside for affordable homes, the Chancellor has also promised the Department of Health £3bn of new investment to improve integration between the NHS and local councils around the delivery of health and social care. Health and Well-Being boards will be responsible for deciding how the money is spent, with local councils and clinical commissioning groups (CCGs) only receiving funding if certain conditions are met.
While better integration between health and social care is a positive step, it is unclear how far housing needs will be taken into account when funding for services is allocated by Health and Well-Being Boards. If the NHS and local authorities wish to improve health outcomes, it is vital that the needs of homeless people are represented as a local priority and services are funded accordingly.
The Department of Health has also been allocated £40m to invest in tailored hostel accommodation for rough sleepers, with the aim of reducing admissions to acute hospital services and improving mental health outcomes. Having worked closely with the DCLG and providers to improve the quality of hostel accommodation over the last 8 years, we welcome this new investment and the cross departmental approach to rough sleeping which has made it possible.
However, it remains to be seen where the money to run these new hostels will come from. If support services continue to be squeezed by the lack of available funding, these hostels may not be utilised to their full potential.
Although the announcements around much needed capital subsidy for housing are a welcome boost during these tough economic times, unless service provision can be adequately maintained and there is a concerted effort at a national and local level to reduce homelessness, the plans outlined in the Spending Review will only serve to apply further pressure to an already hard pressed homelessness sector.
We will be continuing our work to demonstrate the value of the sector and the long term benefits it provides.
You can find our full response to the spending review here.
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Jonathon was our policy officer until June 2016.