Bedroom tax: ministers ‘overstated likely savings by a third’

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Analysis suggesting savings could be £160m less than official projections of £480m dismissed as ‘vested interests’ by employment minister

The government faced fresh calls to overhaul the unpopular bedroom tax on Monday, after new research into the first five months of the scheme suggested ministers may have significantly overestimated the savings it is likely to generate.

The analysis – which ran real data collected by four housing associations since April through a model used in 2012 by the Department for Work and Pensions (DWP) to assess the likely impact of the policy – found that savings were likely to be £160m less than the official projections of £480m for the first year.

But employment minister Esther McVey dismissed the findings, which she claimed reflected the housing associations’ “vested interests”.

Despite heavy criticism – the Labour party has vowed to repeal the bedroom tax and opinion polls suggest it is unpopular – ministers have persistently argued that it was essential to push ahead with the policy, officially known as the spare room subsidy, to bring the UK’s soaring housing benefit bill under control.

But Monday’s report, written by Professor Rebecca Tunstall at the University of York’s centre for housing policy, says flaws in the DWP model means that it is likely to have overstated the likely savings by a third.

Tunstall said: “The savings estimated by DWP assume that of the 660,000 households affected, none of them will move to a smaller home, but we know from our own research that over a fifth want to downsize to avoid the penalty.

“Tenants are already on the move, and with nearly half of those who have chosen to stay already in rent arrears, we can only see that figure going in one direction.”

In particular, the DWP appears to have underestimated the number of tenants who move from social housing into private rented housing in order to avoid the bedroom tax penalty. Rents in the private sector can often be double those in social housing, therefore generating higher housing benefit payments.

The DWP estimated that between 10% and 30% of social housing tenants would move into the private sector. But the research suggests that figure is likely to be nearer 41%.

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