Bonus Bonanza vs Benefit Squeeze: a Tale of Two Caps

October 2023 and the City of London sees the removal of the cap on bankers' bonuses - a few will now start to receive their Brexit Bonus. Yet this post-EU policy shift stands in stark contrast to the continued squeeze on low-income families through the Benefits Cap. While both measures involve limitations on income, they paint a worrying picture of a widening economic chasm.

Proponents of the Bonus Cap lift cheer the return of London's financial clout. They argue that rainmakers deserve their golden parachutes, attracting talent and boosting the sector's competitiveness. But critics warn of a return to the casino culture that fuelled the 2008 financial crisis. Unfettered bonuses, they fear, could incentivise reckless risk-taking, leaving taxpayers on the hook for the next meltdown.

Meanwhile, those on the breadline face a different kind of squeeze. The Benefits Cap, in place for a decade and applied to just under half a million households, has had a devastating effect. It was claimed that it would control government spending and nudge claimants towards work, but more often it just pushes families into impossible choices. Food banks report a surge in demand, a stark reminder that the safety net has become a frayed tightrope.

This tale of two caps exposes the brutal realities of economic inequality. The government prioritizes growth within the financial sector, potentially at the cost of ever-widening income disparity. The squeeze on benefits, while aiming for fiscal responsibility, simply pushes the most vulnerable further into the abyss.

The jury is still out on the long-term consequences of these policies. The bonus bonanza might fuel a short-lived financial frenzy, but the hangover could be severe. The continued Benefits Cap necessitates a hard look at its effectiveness. Can it truly incentivise work without pushing people into destitution?

We need policies that foster a thriving economy for all, not just a select few. Striking a balance between fiscal responsibility and social welfare requires a government that listens to the struggles of those reliant on benefits. We need a government that shows respect for people rather than policies based on perverse ideology that penalises the poor - and exposes their callous disregard of the real suffering they have caused. Only then can we bridge the growing economic divide and build a fairer society.

Comments

Opinion: Labour won’t deliver 300,000 new homes

Following the debate about how many houses are needed in the UK, industry-expert Peter Brown directs our attention to a topic this argument could be overshadowing. The debate around how many new homes are needed misjudges the big issue – a new Labour government will struggle to increase housing completions for sale and for rent. Public services are failing, satisfaction rates are at record lows and waiting lists are soaring. Focusing on hospitals, schools and the courts, the IPPR claimed that public services won’t return to acceptable levels of quality until the 2030s and that the post-election government will inherit one of the most challenging contexts of any government since the Second World War. In October, at the Labour Party conference Keir Starmer’s pledged 1.5 million homes over the next parliament and conference was told that a Labour government will “deliver the biggest boost in affordable and social housing for a generation”. Yet despite a ...

Shared Ownership - a housing market fix?

Shared Ownership has given homes to around 180,000 families and it’s claimed that it offers a third way, an opportunity to house many more at a lower cost, another tenure that broadens the landlord offer. Some housing association websites go further and claim “It’s about getting your foot on the housing ladder. It’s a great alternative to renting and perfect if you can’t afford to buy a house outright.” Really? Whilst housing associations like selling them, the experiences of the occupiers can be quite different. Higher entry costs, administrative charges, rents rising annually, plus the responsibility for all repairs can mean the worst of all worlds. Why do increasing numbers feel trapped in the tenure? “It’s a step on the ladder” , yet Cambridge University found ( 2012 ) that over 12 years only 27,908 had staircased to 100%, and in many rural areas freehold ownership is expressly prohibited. They concluded that many shared owners simply cannot afford to buy their property in fu...

Slavery and the Origins of Social Housing

The horrific death of George Floyd in May 2020 and the subsequent Black Lives Matter movement shone a spotlight on systemic discrimination within organisations. Since then many have been examining their roots to identify whether they are founded on racism. Social housing has that same responsibility, and it may help us understand why racial discrimination persists in current activities and practices. The Transtlantic Slave Trade saw 12 - 12.5 million people transported from central and west Africa to the Americas where they were put to work growing crops such as sugar, cocoa, coffee, cotton and tobacco. As property, the people were considered merchandise or units of labour, and were sold at markets with other goods and services. These crops generated vast wealth for many traders in Europe, and from 1769 to 1853 Britain dominated. After the Slavery Abolition Act of 1833 the following decades saw slave trading gradually reduce. How could this atrocious period in our hi...

Housing associations should freeze their rents now – or face tenant strikes

Housing association tenants are more likely to be suffering from social isolation, threats to employment and exposure to Covid-19 in poorly paid jobs. Few realise that they’re also facing a rent hike. This Monday, social landlords increased their rents by 2.7%. Little wonder that pressure is growing to suspend rent payments to ease financial pressures. In countries implementing a lockdown, those renting their home are becoming more vocal on the possibility of rent strikes. Pressure is mounting across the globe and there are demands in Boston and New York in the US, South Australia and Canada . In the UK, rent strikes are being discussed in numerous major cities, notably in Islington in the capital. In Cheltenham, estate agents shop windows have been graffitied with slogans such as “Can’t Pay? Don’t”. One area where there is a greater degree of influence over rents is in housing associations. Following nearly 50 years of subsidy, these are wealthy organisations. In England, t...

5 Ways to Reduce the Spare Room Subsidy

As we approach the anniversary of the introduction of the bedroom tax, its’ impact is becoming clearer. DWP figures to November 2013 show that the HB reduction has been applied to 498,174 households and each has lost on average, £14.40 per week. With increases likely as families move into the higher priced private sector, the reduction in HB is likely to be £150m short of the recently claimed £490m. Let’s remind ourselves of the core argument. Speaking in the Lords on its introduction, Lord Freud said, “We do not think that taxpayers should be expected to meet the cost of somewhere approaching 1 million spare bedrooms, a cost of around £0.5 billion every year...” So, what else could be done to make up this shortfall? How else could households be incentivised not to hold spare rooms? In the interests of fairness, what else could be done? After all, as an exercise in using fiscal policy to influence behaviour change, the spare room subsidy has been pretty successful. It has opened ...

Leadership and Seductive Innovation

Whatever sector, whatever industry you are in, these are challenging times. It is all hands to the pump to find the right course. And for those fearing their very survival, it is understandable that the search for that new, powerful idea should dominate. But success will never lie in new technology alone; it is also critical to look in the right direction, not to get waylaid into seemingly seductive solutions. Look at the business and be honest, are a series of technological innovations likely? And if they are, will they make the impact on your industry that you anticipate? For service organisations in particular, constant technomania is probably an absolute distraction from the core business. Worse, it will beguile you into believing there is a promised land; that there is a magic bullet that will solve the organisation’s problems. The techno-fetishists earn their crust by promoting ever whackier and unachievable ideas. New jobs are being created, innovation labs are springing up. Cha...

Who is Gagging Tenants?

Khan is right - Tory voter ID plans gag the poorest. But it’s not just in London. Here's what we can do about it ' On New Years’ Eve, Sadiq Kahn warned that a new wave of hard right populism could see Susan Hall in London’s City Hall. And the new requirement for voter identification at the ballot box might accelerate this trend. He’s right, but it’s not just London that is affected. The voter identification requirements deliberately make it more difficult for those who traditionally support Labour, to vote. After the 2019 General Election, IPSOS estimated how voters voted. Their results came as no surprise, Labour had a 43 point lead among voters aged 18-24, but the biggest change was among 35-54 year olds, who saw a three point rise in the Conservatives’ vote share and 11 point fall for Labour. There was a gender gap, with the Conservatives ahead of Labour by 15 points among men, and by nine points among women. Among BME voters, Labour led the Conservatives by 64% to 20%...

Time catches up with Eric Pickles

Eric Pickles has been in the news again. He’s a busy man. Almost exactly a decade before his reappearance, I attended ‘Herefordshire 2020: A Vision for the County’, a half day conference in Hereford. It was a brave attempt to demonstrate how the private and public sectors could work together for a positive future. The star of the show was the Secretary of State for Communities and Local Government, who gave a bizarre and disturbing performance . The theme of Eric Pickles’ speech was that we need to get away from the central control of policy; we need to deregulate and stop the tick box mentality where there are regulations for everything. Make government officials with clipboards get a sense of perspective. On entering his department, he proudly told us, he gave his civil servants his three priorities; localism, localism and localism. “Localism will support growth and growth will support localism”. His confidence grew. To a Parish Councillor trying to achieve change he chided, “...

The Threat to Rural Housing

Rents Hit Record Highs - it's time for controls

It’s time for an informed debate on rent controls. The laissez-faire, competitive market approach in the privately rented sector has demonstrably failed - as average private rents in Britain have climbed to record highs, renters are suffering and excessively high rents create a drain on the economy. Property website Rightmove has said that in May this year, the typical advertised rent outside London reached a record £1,316 a calendar month. In London it was £2,652 a month – almost three times the £894 asked for in north-east England. Rightmove said the average advertised rent outside London in May was an inflation-busting 7% higher than a year earlier. This leads those in the property industry with a vested interest to argue for an increase in supply. But it’s economically illiterate to believe that simply adding more privately rented housing will bring rents down. We need to look seriously at rent controls. Rent control policies vary widely across European countries, with ...

Housing: creative solutions

Search This Blog