Another Hidden Cut

Z2K’s Marc Francis explains why we think the Chancellor must end his freeze on LHA rates and reverse his cut on Discretionary Housing Payments in next week’s Budget Statement.

Ever since our earliest days, Z2K has argued that means-tested Social Security benefits are set at levels that that leave people without the money they need to feed and clothe themselves and keep their homes warm in winter.  If that was true in the 1990s and 2000s, it is even more the case now after a decade in which we have seen repeated “freezes” on benefits for working-age people.  That’s why we backed the Chancellor’s £20 a week increase in Universal Credit (UC) at the start of the pandemic and why we campaigned so hard for that increase to be extended to those in receipt of “legacy benefits” too.

Hidden in the small print of the Chancellor’s Autumn Statement last October was yet another freeze on Local Housing Allowance (LHA) rates of Housing Benefit for tenants in the private rented sector.  When LHA was originally introduced it was to be set at the median of local market rents – effectively meaning around half the homes available to rent in any part of England would be affordable to someone in receipt of the LHA.  In 2011, that was cut back to the 30th percentile of local market rents, so that only a third would be affordable.  A couple of years later the link with real world rents was broken completely.  There then followed a complete freeze for the next four years.

The latest Government figures show that nearly a million private tenants now face a shortfall between the rent they owe their landlord and the LHA they get to pay for it.  In England, the average shortfall is £100 a month.  That’s a shortfall that can only be made up from other benefits designed to ensure families have food on the table and disabled people can meet the extra costs they incur.  Understandably, most choose their children’s well-being over their landlord’s profits and end up accruing arrears that leave them facing eviction and homelessness.  The need to increase LHA rates is one of the key demands of the tenants we work with.

The Government had already planned to end the freeze on LHA rates before the pandemic broke.  But alongside his decision to increase UC by £20 a week, the Chancellor went further and pegged LHA rates back at the 30th percentile – not enough, but certainly a big step forward.  Many more of those who lost their jobs as a result of covid were received enough LHA to cover or at least nearly cover the rent than would otherwise have been the case.  Interestingly, DWP published an Equalities Impact Assessment (EqIA) showing the positive impact. 

Two years on, what seemed a progressive move is now looking like another attempt to hide just how threadbare the UK’s Social Security system has become from all those who were suddenly dependent upon it.  Last spring, amidst the intense focus on the possible continuation of the £20 a week UC uplift, the Government quietly sneaked out its decision to freeze LHA rates once more.  And it doubled down on that last October by freezing them again in 2022/23.  This represents a significant real-terms cut, especially for tenants living in areas of high demand like London.  Unsurprisingly, DWP hasn’t published a fresh EqIA showing the effect of this two-year freeze.

Throughout this decade of austerity, the Government has repeatedly cited the money it gives local authorities to offer tenants a Discretionary Housing Payment (DHP) to cover the shortfall as justification for its cuts to LHA.  These DHPs were supposed to be helping those tenants hit by the Benefit Cap or Bedroom Tax as well, so it was already spread way too thinly to help everyone.  But in yet another hidden cut, ministers have now slashed another £40 million from the DHP budget too.  Journalist, Chaminda Jayanetti has shown the DHP pot will now be at its lowest level since 2012.  Councils will be left facing a choice to help a third less tenants or the same number with a third less of the amount of DHP they would have received – a completely invidious choice.

With inflation well above the 3 per cent UC, JSA and ESA are being increased by next month and energy costs rocketing, Z2K is totally behind the coalition of charities demanding the Chancellor increase those benefits further.  But we also think he needs to urgently think again about these freezes on LHA and especially the catastrophic cut to DHPs. 

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