Housing benefits claimants should each be given £17,000 to lift them out of poverty, according to a report published today by a prominent think-tank.
The Recapitalising the Poor report, published today by Demos’ Progressive Conservatism Project, says more than 100,000 households could be helped if their housing benefits were converted into capital payments.
A £17,000 lump-sum capital grant – given to recipients of housing benefit for use as payment for a deposit on a home – and below-market rate mortgages through state-controlled banks would enable the Government to 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.
It states that existing housing benefit payments average £64 a week per household. Over a period of five years, that adds up to £17,000. It says that by paying that £17,000 as a lump sum, the Government would no longer have to pay those households and could make overall, real terms saving of nearly £400 million a year after five 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 the Conservative Party leader 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, while 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 poorest workers’ taxation to purchase private pension funds, so the taxes become money recycled back into their pockets.
This would require Government investment, but the report claims it could amount to savings of at least £2.1 billion in pension credit expenditure and would generate a pension for a single person that is around 30% 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% 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% to 30% – a reduction of one-third.
The Progressive Conservatism Project at Demos, launched early 2009, aims to establish itself as the UK’s leading centre of contemporary conservative thinking.
Focusing on political economy in its first year, the project also plans to 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.
