Leading article: Ministers are on the back foot — and have only themselves to blame

Saturday 30 October 2010 00:00 BST

The Coalition Government has been struggling with unforeseen consequences this week. Removing child benefits from higher rate taxpayers was presented as a simple reform when the Chancellor, George Osborne, announced the policy on the eve of the Conservative Party conference earlier this month.

But it is turning out to be quite a headache.

The anomaly that a family with two earners with individual incomes below the higher rate threshold will continue to be able claim the benefit was immediately obvious and undermined the "fairness" justification for the reform. And now the fact that the benefit is paid directly to the child's mother is presenting practical problems too.

The Inland Revenue will need to ask the mother whether she is living with a higher rate taxpayer when she applies for the benefit. But it is unclear what happens if the mother's partner is self-employed and unsure of his income over the coming year. Perhaps such problems can be ironed out, but the reform is certainly not as simple as first presented.

It is a similar story with the Coalition's cap on the amount of housing benefits that a single family can receive in a week. The consequence of imposing this cap is that (on Whitehall estimates) some 17,000 poor families in parts of London with high rents will be forced out of their communities. This prospect is causing alarm not just from backbench Liberal Democrats, but also Conservatives representing outer London constituencies who fear an influx of poor residents from the centre. The London Mayor, Boris Johnson, threw petrol on the flames when he spoke of "Kosovo-style social cleansing".

Yesterday the National Housing Federation also pointed to perverse incentives arising from the Government's plans to raise social housing rents closer to those in the private sector. The federation argues that rents at this level will provide a disincentive for social tenants to find work since any job they could find would be most unlikely to pay enough for them to afford the new rent without the continuing help of housing benefit. It is becoming clear that, without a massive increase in the supply of social housing and a general fall in private sector rents, attempts to cut housing benefit are simply going to impose costs elsewhere.

The irony is that the general thrust of both policies is reasonable. The £21bn social housing bill is a colossally inefficient use of public money. And it is intolerable to pay wealthy families child benefit at a time when the public finances are under such pressure. At a time of inevitable economies, all fiscal transfers should go to families in most need of support.

Yet the Government finds itself on the back foot. And it only has itself to blame. The Treasury announced these policies with insufficient consultation and inadequate analysis of the social consequences. The debacle over housing benefit is particularly revealing. The Prime Minister, David Cameron, claims that it is one of his animating desires to spring the welfare trap and reduce poverty. But his Chancellor's policies on benefits have been driven primarily by a dogmatic urge to reduce the deficit over the course of a single parliament. What this week's shambles has revealed is that, as far as the Treasury is concerned, the interests of the poorest and most vulnerable in our society are very much an afterthought.

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