Social security spending out of control?

[Wizeman]

The UK spends about £334 billion on social security. Around £177 billion of that goes on pensions, which as a young person I’d definitely want when I’m older — especially if I’ve worked all my life and paid into the system. What I don’t understand is why some younger people are against older people getting a pension, because one day they’ll want one too.

About £145 billion goes towards working-age benefits, which is a massive amount of money. Around £76 billion of that is for disabled people, which I think is fair and necessary. But you hear so many stories about people taking advantage of the system, and a lot of those stories turn out to be true.

They say about 1 in 3 people in Britain are on some kind of benefit. I’ve personally been in hospital with serious injuries and had operations that put me out of work for months, and it never crossed my mind to claim benefits. I’ve also been out of work for about a year before while working towards getting a new job, and I just lived off my savings.

That said, I’ll be honest — I’ve always had support from my parents, like being able to stay at their house. I know not everyone has that kind of support.

But it does feel like fewer people want to work and some would rather claim benefits.
I also don’t think removing the two-child benefit cap will really solve the problem.
In Poland, for example, people get tax breaks for having kids, which encourages people to work.

Either way, £334 billion just sounds like an insane amount of money to me.

@LougleI hope your husbands job is safe. Just wanted to say though that he should apply for those jobs even if he doesn’t have the formal qualifications, if he has been trained in those areas by the LA. Just pop it in a covering letter. They’ll be trying to weed out anyone who is unskilled in those areas. We often put desirable qualifications in our job descriptions, but would consider (and have employed) those who didn’t have the qualifications if they were experienced in that area.

Indeed. Gordon Brown's benefit splurge caused housing cost inflation.

Likewise, student loans caused a massive increase in the cost of student accommodation.

It's simple economics - greater available of funding just sucks up prices causing inflation.

https://www.tax.org.uk/tax-gap-2025

Most of the tax gap is small business, black economy and mistakes! The report shows that "big" tax evasion is actually a very small component. It's basically huge numbers of "small" people evading/avoiding relatively small amounts but all add up to huge numbers because of the huge numbers involved. It's NOT mostly a small number of millionaires/billionaires evading big amounts. It's simply a numbers game. A few million people evading/avoiding relatively small amounts is a bigger figure that a handful of billionaires evading big figures.

If enough people couldn't afford rents/food etc then prices WOULD come down. It's simple economics of supply and demand. A landlord isn't going to leave his property empty for months when he knows he could rent it out a bit less than he'd hoped for. It's because of benefits, NMW increases etc that there's money "in the system" that sucks up prices due to basic economics.

It's really not this simple.

Where I am we have spiralling rent costs due to the entire available privately held housing stock being snapped up by speculative landlordism. It invariably ends up BTL or on Airbnb.

The remaining privately owned properties on the market then see enormously increased monthly rents, because the owners could, in theory, also place existing stock on to the short-term, holiday let, and party flat market and increase their income, so they increase monthly rents accordingly in order to make up for this "loss" of income.

It's nothing at all to do with Housing Benefit, or benefit claimants, because HB is strictly capped and would not begin to cover the cost of a typical private rental here. The net result is HB claimants end up in either LA or HA stock, usually after a years long wait in emergency accommodation, and the rents in LA and HA stock are often around a third of those in private stock.

So no, the only thing driving up rental prices here is good old speculative landlordism and greed.

If enough people couldn't afford rents/food etc then prices WOULD come down

Well how do you reconcile this with the fact that in my city, private rental prices are totally unaffordable for most normal residents, and yet for years and years prices have just steadily increased?

It's because of benefits

Well no, because as I've already explained, benefits wouldn't cover rents in typical privately held tenancies here, so it's absolutely not a case of landlords milking the HB cow.

Sellers don't prioritise future landlords when selling. A family can also offer on a property.

This makes absolutely no sense unless a huge percentage of the properties are being removed from the long term rental market and being turned into short term lets.

Rents are generally set by supply and demand. This is true whether the property is owned by a corporate giant or a small time BTL landlord. They can't just charge whatever they fancy because they want to make up perceived lost profits from not being an Air BnB owner. Tenants would simply go elsewhere and rent more cheaply unless there is a shortage of supply. What percentage of housing in your area is short term lets?

Looking into this, even Cornwall only has 5% of it's housing stock as short term rentals or second homes. This silly isn't enough to cause rents to long term rents to spiral as it isn't enough to materially impact stock levels. It's just an easy target for people looking for easy answers.

It was ever thus, i.e. greed etc. But today's market with holiday lets and Air BNBs is very different to the Brown years that started the house price inflation over the past 20 years. But the holiday let/Air BNB situation is also down to simple economics of supply and demand. There are clearly more and more people wanting short breaks/UK holidays etc, no doubt partly the cause of the demise of lots of hotels, guest houses, etc as people seem to have shifted away from hotels/guest houses into Air BNB and holiday lets. And of course, the massive increase in population that means more people not just wanting somewhere to live, but someone to holiday too!

This makes absolutely no sense unless a huge percentage of the properties are being removed from the long term rental market and being turned into short term lets

Which is precisely what has been happening for years. It got to the point whereby legislation was passed in an attempt to bring about stricter licensing restrictions for STL purposes, and of course, the landlords immediately screamed blue murder and launched a legal challenge to the legislation. Fortunately they lost, but the private rental market is still completely out of the reach of typical residents.

What percentage of housing in your area is short term lets?

It's supposedly around 18-19%. This is exacerbated by the fact it's a university city, and over the past 10 years or so practically every plot which becomes available is bought up by developers for the purpose of throwing up yet more student blocks, which are then rented out during the academic year to students, and tourists across the peak June/July/August period.

It's just an easy target for people looking for easy answers

It's really not, which you can see quite clearly if you look at the ridiculous discrepancy in rents between similar privately owned and HA lets. HA one bedroom flat in a perfectly decent area will typically be around £500-600 per month. An almost identical privately owned let will be advertised at anywhere from £1500-2000 per month. Nobody on HB can even look at private let, not that landlords would consider them in any case, and precious few residents on typical salaries can afford that sort of rent in any case, which means they either have to spend a ridiculous proportion of their total income on housing, or live in bedsits in HMO's, or remain with parents into their 30s and 40s, at which point they might just, with significant parental assistance, be able to scrape together a mortgage deposit.

Landlords selling up means more choice of available properties to buy. Especially good for 1st time buyers at the lower end of the market.

Student accommodation isn't classified as short term lets. They may be used as short term lets in the summer but fundamentally the primary purpose of the accommodation is not to function as short term lets. It's like classifying someone's home that is rented out for summer on Air BNB as a short term lets when clearly that isn't it's primary use. Arguably the type of scenario you describe is actually an efficient use of accommodation and would actually increase supply of holiday accommodation in peak season which would suppress prices and lead to less regular housing stock being bought up for this purpose as the profit margins would be lower with so much competition.

I am very interested where exactly you live as I referenced earlier that Cornwall has 5% of all accommodation as holiday lets or second homes and this is judged as high. Unless you live in very specific suburbs of London I really doubt the 18% figure unless you have also included student accommodation.

I also think your last point about HA rents is naive. HA rents are often effectively subsidised by the government. The cost of capital is rarely reflected in the rent charged and this gives people an artificial idea about what rents should be. It's like comparing someone's mortgage payments with and without interest applied and then suggesting that the one not paying interest is paying the 'correct' amount.

Student accommodation isn't classified as short term lets

I did not mean to imply I believed otherwise. It's accommodation that isn't available to the general population in any case. The point of mentioning it was to emphasise that potential plots which could be used to build general residences for housing locals are invariably used to throw up more and more student accommodation, thereby exacerbating the pre-existing shortage of affordable options for renters.

I am very interested where exactly you live as I referenced earlier that Cornwall has 5% of all accommodation as holiday lets or second homes and this is judged as high

The 18% figure is the proportion of all rental properties which are STL, not just the proportion of all properties. The latter figure wouldn't really have any pertinence to this discussion because it's about rental prices, therefore it's only the rental market which has any real relevance.

HA rents are often effectively subsidised by the government. The cost of capital is rarely reflected in the rent charged and this gives people an artificial idea about what rents should be

This is all fair enough, but I initially pitched into this because of the claim that it's overly generous HB driving up rents, when that's self evidently not the case in my city because HB claimants can not afford private rents in any case, and by contrast, HA and LA rents remain an order of magnitude more affordable than those being charged for similar properties by private landlords.

I know that its just an experience BUT

My suggestion is that there are a lot of people with 'Treatable' conditions eg Mental Health, Muscular/Skeletal etc who are not well enough to work but not sick enough to get treated either.

So why are we not resourcing the NHS to deal with this?

Also what about retraining people who can no longer carry out their old jobs for medical reasons as happens in Germany?

But in order for the person who cares to get Carer's Allowance, the person being cared for needs to be in receipt of a respective benefit.

Even those on £100000 per year salaries are only spending £42 per year of their tax bill on unemployment.

https://www.telegraph.co.uk/money/tax/news/britain-working-costing-calculate-pay-benefits-tax/

So what do you want then? Starving pensioners?

The weekly benefit bashing post is back...

In reality the UK has some of the lowest pensions and benefits in Europe.

Many people who claim benegits are in work but paid poverty wages.

Benefit fraud levels are tiny based on the DWP own stats.

The employment market is dire at the moment and employers have no interest in giving jobs to people with disabilities or long term health conditions or older people.

That is the reality, not the Daily Mail propaganda...

In Poland, for example, people get tax breaks for having kids, which encourages people to work in the UK

Fixed

The word 'encourages' is part of the problem. You shouldn't have to be encouraged to work. It should be if you want money and have no additional means of income you need to work.

Issue is that work does not always pay enough to live on.

And tax breaks to encourage people to have children, wouldn't better maternity care, maternity leave, paternity leave, flexible work, affordable childcare be more encouraging?

Jobs need to pay more. A straightforward system.

But that causes inflation, both cost plus and demand pull. It's not that easy. Basic economics. Housing costs will rise if people could afford more. If wages increase, businesses will increase their prices to pay for it, thus reducing money in peoples' pockets.

Wages have risen over the past couple of decades. But costs have risen faster. Proves the point really.

Jobs used to pay enough. Progress hasn't helped many people.

Wages have stagnated over the last couple of decades.