Caroline Flint, the new housing minister, has announced plans to oblige council house tenants to seek employment as a condition of their tenancy—the latest in a long line of initiatives designed to get people off welfare and into work. In doing so, she has raised an important issue: the responsibilities that go hand in hand with the rights of benefit claimants. But she is also ignoring two far bigger issues: the huge financial disincentives to move from welfare to work created by the tax credit and benefits system, and the disincentive for people to move home in search of work created by the social housing system.
To take these in order: two thirds of all social housing tenants claim housing benefit (and a higher number among unemployed tenants—the group targeted by Flint's proposals). Once these people are earning £5,500, their housing benefit is withdrawn at a rate of 65 per cent. Add income tax, national insurance and the withdrawal of working tax credit to the mix, and suddenly the state is effectively taking 95 pence of every additional pound earned. So even if Flint's idea does wonders for the employment statistics, it will do little to lift people out of poverty—the ultimate goal.
Then there is the problem of labour immobility. Council housing is often found in areas with few jobs. But unemployed council tenants who want to get "on their bike" to seek work elsewhere (as Norman Tebbit famously urged them to do) put their families at terrible risk by doing so. This is because if someone gives up their council home to move to find a job, they will find themselves at the bottom of the housing list in their new local authority. Given that council housing is around two thirds the cost of private rented housing, it is unsurprising that very few take the risk. As David Freud, the government's welfare-to-work adviser has said, the system consigns people to virtual "house arrest."
How to deal with these problems? There has been much discussion of making greater use of sanctions in the effort to get people off benefits and into work. That is certainly part of the solution. But a real anti-poverty strategy will need to include carrots as well as sticks. If we are serious about ending child poverty, we will have to return to the Clintonian formula—that if you work full time, you should not be poor. Increasing the minimum wage and ensuring that tax credits are not withdrawn until the recipient is working the equivalent of 30 hours a week at minimum wage would help honour that promise.
In the longer term, however, we will have to grapple with a much thornier issue: how to create a more flexible social housing system which rewards those who are most determined to find work, if necessary, by moving home. Until we do so, we will be saddled with a system that restricts labour market mobility to the detriment of the poorest areas and the poorest people.
