Citizen's Income & Housing Benefit

One common objection to replacing the entire Welfare State with a flat-rate Citizen's Income/Citizen's Pension system (i.e. every legally resident British citizen gets the sum of £x in cash every week, depending on age/disability, which would be non-contributory, non-taxable and non-means tested) is that the amount would have to be very high to be enough to cover housing costs, which would make it too expensive, a gripe shared, interestingly enough, by right-wingers and left-wingers, rather than my suggested starting figure of £70 per week for adults (£35 for kids, £140 for pensioners) which would cost a lot less than the current Welfare State.

That's missing the point. Housing and Council Tax benefit (total nominal outlay about £18 billion a year) can be neatly divided into two chunks;

Chunk 1) Two-thirds of that goes to social tenants, so it counts as an expense to the DWP, but counts as income for local authorities. So that's not really an expense at all. Rather than the over-complicated system whereby local councils have two departments to chase social tenants for rent and council tax and another two departments sort out Housing Benefit and Council Tax Benefit, which are savagely means-tested (withdrawn at a total of 85% of your post-tax income, which includes Tax Credits, natch), even in the absence of a CI-style scheme, it would be much better to scrap rent/council tax for social tenants and give them a PAYE code with a higher rate of tax. I calculate that a rate of about twenty per cent would be revenue-neutral.

We can then do a more honest appraisal of the true cost of social housing, as we can easily identify the extra PAYE collected by HMRC and councils/Housing Associations can identify their running costs. It appears that social housing runs at roughly break-even, or possibly a small surplus. With a reduction in means-testing from 85% to 20%, more social tenants are likely to work and hence the surplus would increase.

Chunk 2) One-third is paid to private landlords. This is anathema to me, of course, as it is a subsidy to private landlords. It would be far better for the state to scrap it forthwith and take that £6 billion a year, gear up a bit and use the money to build more housing for the 1.6 million families on council house waiting lists. Private rents would fall, of course so after a year or two, there'd be hardly anybody on the waiting lists and we'd have an extra million units of social housing. The average revenues would be more than enough to cover interest and running costs, so we've saved the taxpayer £6 billion a year, reduced rents for private tenants and kept a bit of a lid on house prices (which would go down if rents went down).

Quite what happens from here on in is a matter of conjecture of course - my view being that the private land market is so savagely rigged in favour of incumbents, for whom strict planning restrictions are a one-way bet (and an easy way for politicians to win votes), the state ought to just keep going. If the economy is growing at three per cent a year, why shouldn't the number of homes be increasing at three per cent a year (i.e. three quarters of a million homes)?

As long as private rents are significantly above twenty per cent of local incomes, there'll be demand for social housing, so we can just keep building it - a volume of 250,000 new units a year would be quite enough to give every young couple household the opportunity to move into a new home, for example*. And if more people are in state-owned housing, their average incomes would increase, so the tax rate could fall to maybe as low as ten per cent, which would in turn keep private rents and hence house prices down.

There, I've said it.

* Sure, the state is not particularly good at running housing - they're rubbish at evicting nuisance tenants, for example, but there's nothing to stop them sub-contracting that to private or mutual organisations with a profit motive; and sure, there will be more and less desirable housing, which can be allocated by charging a premium for the nicer homes, which again will help reduce the marginal tax rate and so on. That's all details, and different areas will try different things until we work out in practice what's best.