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The Observer (Business section, p5) carries a feature outlining the problems - financial and practical - facing the...
The Observer (Business section, p5) carries a feature outlining the problems - financial and practical - facing the treasury, the department of social security and the DETR as they consider proposals

to reform housing benefit to be included in a housing green paper later this year.

One of the biggest problems with housing benefit - which is paid to 4.7 million people at a cost of£12bn a year - is that for many it guarantees that it doesn't pay to work. In addition, the structure

of housing benefit, which usually pays 100% of the rent whatever sum it is, significantly distorts the housing market. One option being considered to encourage people to shop around for cheaper rents or negotiate rents downwards is to make the benefit a flat rate payment towards housing costs. The flat rate would be based on average local rents, but if a recipient then moved to a cheaper property s/he would keep the difference.

But many housing charities fear a flat rate could lead to hardship, with people having to make up the difference between rent and housing benefit from their income support - possibly pushing them into

debt or rent arrears, and possibly into homelessness. Government thinks this could be avoided by making the flat rate more generous - by setting at, say, 110% of local rents. Officals insist a flat-rate

system could lead to more support, not less, and that a less complicated system could also reduce opportunities for fraud.

But that would not tackle the fact that housing benefit ensure that work doesn't pay. The only way to do that is to integrate it with other in-work benefits, such as the working families tax credit, to ensure that the total benefits received are withdrawn at a slower rate when someone earns more money. That means housing benefit needs to become a tax credit administered by the Inland Revenue. But

that is fraught with problems because many recipients - such as pensioners - do not pay tax.

But, says the article, all reforms would be largely meaningless unless the chaotic pattern of social rents is also tackled. The rents for council properties often bear no relation to their size, location

and condition of the proerty. The government realises it will have to overhaul local authority and housing association rents before it tackles housing benefit.

National Housing Association chief executive Jim Coulter said: 'I doubt there'll be a big bang change because that will cause chaos. I cannot see any fundamental reforms to housing benefit in this parliament'.

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