Mark Wadsworth

This is a spare 'blog in case my main 'blog at markwadsworth.blogspot.com isn't working

Westminster Council adopts an idea from UKIP’s Welfare Manifesto

From our Welfare Manifesto (2010 version, pdf)

6.5 UKIP therefore recommends that social rents be set at a single inclusive figure (rent plus Council Tax, net of notional Council Tax and Housing Benefit) calculated at around 20 per cent of each household’s gross income: This would ease the poverty trap for the most needy; social tenants on very low incomes would keep 49p for every £1 earned (assuming a flat tax rate of 31%) rather than 4.5p as at present.

It would also encourage households on higher incomes to move into the private rented sector or owner-occupation, as above a certain level of income, the social rent they are paying would be higher than a comparable rent in the private sector or the cost of a repayment mortgage. This may seem unfair, but it is exactly these households who will benefit most from UKIP’s proposal to double the tax-free personal allowance, so taking the two measures together, very few households will lose out.

The preceding paragraphs 6.1 to 6.4 are worth a read if you want to see the workings. I explained how the extra ‘about 20%’ could be collected with the minimum of administrative hassle by using K-codes for PAYE on my ‘blog here (scroll down a bit to the section beginning “Here’s my crash course in the existing PAYE system”).

Lo and behold, from yesterday’s Daily Mail*:

Conservative-led Westminster Council has asked Government for new powers to introduce a sliding scale which would link social housing rents to incomes. The move comes after the council found it had 2,200 social housing tenants earning more than £50,000-a-year, and more than 200 on over £100,000…

Many of those on £100,000 or more were paying rents of £97-a-week for a one bedroom flat, or £110-a-week for a two bedroom place, said Mrs Roe. She said a new formula should be applied which would see tenants paying 35 to 40 per cent of their net income on accomodation, the national average.

They say 35 to 40 per cent of their net income, we said 20 per cent of their gross income, which comes to the same thing in £-s-d, only 20 per cent of gross income is far easier to calculate.

From the point of view of the council, there must be a revenue maximising point; i.e. if they set the rate too low then they won’t get much rental income and much longer waiting lists; if they set it set it too high then they’ll discourage out of work and low earning tenants from earning more and they’ll lose all their better earning tenants.

Sure, there may be some middle to higher earners who would end up paying above market rents on the place they’re in in the short term, but – even if they don’t move out – the advantages to them are:

a) The council will be more inclined to upgrade them if a nicer council house or flat becomes available, and

b) It’s like unemployment protection insurance with a mortgage; you overpay while you are still working, but if you lose your job, take a pay cut or retire and draw your pension, then you get your money back.

c) It’s got to be better than being turfed out entirely, as the Tory government has vaguely suggested, a strategy with pretty obvious unintended consequences…

d) The local council will then give preference to people on the waiting lists who have jobs, so you’ll probably end up with nicer neighbours.

* Spotter’s Badge, MBK.

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2 responses to “Westminster Council adopts an idea from UKIP’s Welfare Manifesto

  1. AC1 May 15, 2011 at 7:18 pm

    Bad Idea. People should live where their income allows it not block others. This is an Anti LVT.

  2. markwadsworth May 15, 2011 at 7:30 pm

    AC1, yes of course, but things being what they are, we need council housing as a safety valve. And then they faff about with below market rents, housing benefit and council tax benefit. Although this might be a Bad Idea, it is a lot less bad than the present system.

    By the way, the old blog is up and running again.

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