(LONDON, Thursday 16 July 2009) _ More than 100,000 households could be lifted out of poverty by converting Housing Benefits into capital payments, a report published today by Demos’ Progressive Conservatism Project says.
By paying £17,000 as a lump-sum, capital grant to recipients of Housing Benefit for use as payment for a deposit on a home—and offering below-market rate mortgages through state-controlled banks—government can help lift as many as 115,000 eligible households out of welfare dependency by giving them a stake in their home, the report says.
The report uses new economic modelling to argue that:
§ Housing Benefit currently pays out year after year, providing no route to home ownership for recipients and no benefit to the state.
§ Existing Housing Benefit payments average £64 a week per household. Over a period of five years, that costs government £17,000 per eligible household.
§ By paying £17,000 as a lump sum, government no longer has to pay those households and can make overall, real terms saving of nearly £400 million per year after 5 years.
Recapitalising the Poor makes proposals across Housing Benefits, pensions and money-lending. It criticises the current cash-based, drip-feed welfare system and says that government can give low-waged workers and families the assets to lift themselves out of dependency.
The proposals respond to David Cameron’s pledge to ‘recapitalise the poor’ in his speech in Davos in January. In the foreword to the report David Cameron calls the report “a good example of progressive conservatism” and says:
“As this report shows, we need to reform welfare and give people the chance to start their own businesses and own their own assets.”
Max Wind-Cowie, the report’s author, said:
“What we propose makes use of benefits people are already entitled to, to help them get a new start in life. Recapitalising the poor is not about simply keeping people alive—it’s about giving them a lifeline. The model helps our poorest workers create their own wealth, whilst also saving money for the state.”
To coincide with the release of the report Demos announces that David Willetts MP has joined the Progressive Conservatism Project as Chairman.
“I am delighted to be part of Demos’ Progressive Conservatism Project and contribute to exploring ways in which conservatism can serve progressive ends," Willetts said.
“Social justice and ending poverty do not belong exclusively to any one political party. We can develop ideas to tackle these problems even in tough times and this project is the ideal platform to develop independent and rigorous new approaches."
Recapitalising the Poor also recommends:
§ Ring-fencing up to one-half of our poorest workers’ taxation for purchasing private pension funds, so the taxes become money recycled back into their pockets. This entails government investment, but would amount to savings of at least £2.1 billion in pension credit expenditure. This would generate a pension for a single person that is around 30 percent higher than the Pension Credit eligibility level. For two-person households, assuming both adults had paid into the scheme, their combined income would be around £332 per week – almost 70 per cent higher than the Pension Credit couple level of £198. It would reduce pension credit claims in the pensioner population from the current level of 45 per cent to 30 per cent - a reduction of one-third.
§ Reconnecting the poor with safe credit by instigating a British version of the US Community Reinvestment Act compelling banks to consider their lending policies and aggressively tackle predatory lending.
Note to Editors
Also joining the project’s Advisory Board is Rohan Silva, adviser to George Osborne MP, Conservative Shadow Chancellor. David Freud, welfare advisor to the Conservative Party, helped launch the report at an event today.
Background
The poorest quarter of the UK’s population own less than 1 per cent of the country’s total assets. Within that tier of people, 11 per cent own assets of a total value less than £500 (June 2009, Bank of England).
Only 3 per cent of the population hold roughly one sixth of our total asset wealth (June 2009, Bank of England).
Between 1976 and 2003, the poorest half of the population went from owning 12 per cent of wealth to just 1 percent (June 2009, Office of National Statistics).
The poorest fifth of the UK population spend an average of 12 per cent of their disposable income servicing unsecured credit – this is four times the ration for those in the wealthiest fifth (Gibbons, D, Debt on our Doorstep, May 2006).
The jobless total currently stands at 2.38 million, the highest level since 1995 (June 2009, Office of National Statistics).
Singapore has 92 per cent home ownership, compared with around 70 per cent in the UK, driven in part by their use of asset-based welfare to finance home ownership (June 2009, Office of National Statistics).
Pensions
The state pension is worth 20 per cent less, relative to income, than it was in the 1950s (October 2003, Government Actuary’s Department).
Sixty per cent of pensioners will soon be eligible for means tested benefits, signalling a rise in the elderly poor (December 2007, Pensions Policy Institute). In 2007-8, total expenditure on Pension Credit was around £7.5bn (July 2009, Hansard Society).
The Progressive Conservatism Project at Demos
Launched early 2009, the Progressive Conservative Project aims to establish itself as the UK’s leading centre of contemporary conservative thinking. Focusing on political economy in its first year, the project would also look into a long-term prospectus for public services, and a clearer vision on social issues such as family policy.
The full pamphlet can be downloaded at:
www.demos.co.uk/publications/recapitalisingthepoor
Contact
To discuss broadcast possibilities, or for any queries about the Progressive Conservatism Project, please contact:
Beatrice Karol Burks,
Press and Communications Officer
020 7367 6325 or
079 2947 4938 (out of hours)
beatrice.burks@demos.co.uk
Peter Harrington,
Head of Communications
020 7367 6338 or
079 3966 4133 (out of hours)
peter.harrington@demos.co.uk