Leading article: Only root and branch reform will be enough

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Housing benefit needs reform. The existing system of support creates malign incentives and fills the pockets of (often lazy and inadequate) private landlords with public money. But the initial steps by the Coalition to enact reform have not been impressive. The effort has been inadequately thought through and ineptly handled.

A £400-a-week cap on housing benefit for a family renting in the private sector was announced in George Osborne's emergency Budget in June. And in last week's Comprehensive Spending Review, the Chancellor announced that housing benefit will be cut by 10 per cent for those on jobseeker's allowance for more than 12 months.

But now the Coalition seems to be back-pedaling. In the wake of protests from Liberal Democrat backbenchers, the Communities Department is apparently to transfer an extra £10m (on top of £60m specified in June's Budget) to councils to be used as discretionary funds to help "special case" families in need of housing support. The Government claims it is sticking to its original course, but the more money ministers transfer to councils, the more likely they are to negate the effects of both the cap and the cuts. The state will be taking with one hand and giving back with the other.

There are echoes here of the Chancellor's flip-flopping over child benefit at the recent Conservative Party conference. When it comes to welfare reform, this is looking increasingly like the government-by-headline of the Labour years. Policy is announced first and questions about consequences are asked later.

There has also been a worrying failure by the Coalition, thus far, to engage with the root problems of the housing market in this country. While it is probably true that the £21bn of annual state spending on housing benefit is inflating private rental prices, it would be nonsense to argue that this is the only factor sustaining private rents at their present level.

For several decades now there has been an inadequate supply of both social housing and general private housing in Britain. This has not only resulted in vast (unmet) demand for council accommodation, it has helped to drive up house prices in general and, in turn, inflated rents. This is the crucial context in which attempts to reform housing benefit must be seen. If the housing market were left to its own devices, the less well-off would be priced out of many city centres (London in particular) and driven into effective ghettos. This is the French model, where wealthy urban enclaves are surrounded by banlieues of the poor and dispossessed. Housing benefit is the means by which successive governments have sought to deal with the consequences of their failure to increase the supply of homes and their chronic under-taxation of housing.

Ed Miliband put pressure on David Cameron in Prime Minister's Questions yesterday over the Coalition's disarray on housing benefit. But Labour should beware falling into the trap of simply defending the present system and all its distortions and inefficiencies. A more credible approach would be to demand that the Government do more to increase the supply of social housing. The Coalition's claim that it can build 150,000 social homes over the next four years while halving the social housing budget in real terms deserves rigorous scrutiny.

Even better, politicians of all parties could come up with policies that will curb the tendency for Britons to view their houses as cash machines and substitute pensions plans, rather than places in which to live. It is not just housing benefit that needs reform, but wider social attitudes to bricks and mortar.

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