Sunday, 4 October 2015
What is the difference between housing benefit and maintenance loans for 18 to 21 year olds?
by Mark Corney
The majority Conservative Government remains intent on removing the automatic entitlement to housing benefit for unemployed 18 to 21 year olds. The stated rationale for this policy is ‘to ensure young people in the benefit system face the same choices as young people who work and who may not be able to afford to leave home.’
18 to 21 year olds in employment are paid a wage. Unemployed 18 to 21 year olds are eligible for Jobseekers’ Allowance or Universal Credit worth £57.90 per week or £3,010.80 per year.
In August 2014, 96,000 young people aged 18 to 21 were claiming Jobseekers’ Allowance although only 30% of claims last longer than six months. The annual cost to the Treasury is around £0.55bn.
Both unemployed and employed 18 to 21 year olds, however, can claim housing benefit so long as they are not in full-time education and do not live at home or with a relative.
In May 2012, around 130,000 young people aged 18 to 21 were claiming housing benefit in England, about 8% of all 18 to 21 year olds not in full-time education. Of this group, 25,000 were in employment. The vast majority were on welfare benefits, although fewer were on JSA than other benefits such as income support. In February 2015, according to YMCA England, 19,000 18 to 21 year olds in Great Britain were claiming both JSA and housing benefit (Uncertain Futures, August 2015).
The cost of housing benefit claimed by 18 to 21 year olds on JSA is about £170m compared to £82m for those in work and £440m by those on other benefits including income support, employment and support allowance, and disability benefits.
Importantly, housing benefit can be paid to 18 to 21 year olds living away from home who are employed including those on apprenticeships or in part-time in further and higher education. Unemployed 18 to 21 year olds claiming JSA and living away from home on traineeships can also claim housing benefit.
In the Summer Budget, the Government announced vulnerable young people would be protected from the abolition of housing benefit for unemployed 18 to 21 year olds.
Unemployed 18 to 21 year olds will also continue to receive housing support if they have been in work for 6 months prior to making a claim.
With these exemptions, the withdrawal of housing benefit is forecast to produce savings of £40m by 2020/21 compared to £170m from the blanket abolition of housing benefit for all 18-21 JSA claimants.
The result is a policy looking for a problem. But the message is clear. The Government is seeking to withdraw financial support from ‘18 to 21 year olds not in full-time education’ to leave home to look for work or training, including jobs with apprenticeships and traineeships, expansion of which are policy priorities.
But this resistance to unemployed 18 to 21 year olds moving away from home is completely reversed when it comes to 18 to 21 year olds going to university. Leaving home is central to the ‘uni’ experience and the Government actively encourages it through the maintenance support system.
The vast majority of students entering full-time higher education do so aged 18 to 21. Recruitment peaks at 18 when some 160,000 start full-time degrees. Fewer than 10,000 do so at age 21.
Four fifths of full-time students in higher education live and study away from the parental home.
Full-time students in higher education living away from home receive an extra £1,000 per year compared to those living at home.
And in the Summer Budget, the Government announced an extra £766 per year for the poorest students “to ensure universities are affordable to all students from all backgrounds.”
Students from the poorest backgrounds living away from home and studying outside of London will receive maintenance support of £8,200 per year (Abolition of maintenance grants in England from 2016/17: House of Commons Library, 15th July 2015).
From September 2016, however, all maintenance support will take the form of loans, although the cash cost to the Treasury will still exceed £5bn per year.
Concerns are being raised that poorer students who would have been eligible for a £4,000 maintenance loan and a £3,000 maintenance grant will be deterred from going to university now they face a maintenance loan of £7,000 because of increased debts.
If they are, they can always save £1,000 per year by living at home. But bright poor students are no different than bright affluent students: they know living independently away from ‘mum and dad’ is what university is partly about.
More concerning is the way in which the Government is encouraging one group of 18 to 21 year olds to live away from home to make their way in the world at the expense of another.
Rather than compare unemployed 18 to 21 year olds with employed 18 to 21 year olds, the Government should be comparing unemployed 18 to 21 year olds with 18 to 21 year olds in full-time higher education.
The proposed saving of £40m from withdrawing the automatic entitlement to housing benefit to unemployed 18 to 21 year olds is hardly worth the political flack. The Government should scrap it in the Spending Review and rethink the policy afresh.
Originally, of course, the Government intended to withdraw housing benefit from ‘all unemployed’ 18 to 21 year olds. Prior to that the policy was to withdraw the benefit from ‘all 18 to 21 year olds’ – whether employed, unemployed or inactive – and before that to abolish housing benefit for all under 25s (Housing Benefit: withdrawing entitlement from 18-21 year olds: Briefing Paper, House of Commons Library, August 2015).
If the long-term pressures on welfare spending are so great due to an ageing population, the Government should look to the HE maintenance support system for inspiration. Housing benefit for 18 to 21 year olds could be turned into income contingent loans, thereby treating all 18 to 21 year olds equally.
Mark Corney is policy adviser to the Campaign for Learning and an independent consultant
Posted by Campaign for Learning at 10:30