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| Tory climbdown over pay-to-stay plan to raise social housing rents | Tory climbdown over pay-to-stay plan to raise social housing rents |
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| Ministers are preparing a climbdown over controversial plans to force hundreds of thousands of social housing tenants to pay market rents once they earn more than £30,000 a year – as they “clear the decks” of controversial policies ahead of the EU referendum. | Ministers are preparing a climbdown over controversial plans to force hundreds of thousands of social housing tenants to pay market rents once they earn more than £30,000 a year – as they “clear the decks” of controversial policies ahead of the EU referendum. |
| George Osborne has abandoned a package of radical pension reforms, including cuts to tax relief for higher earners, for fear of upsetting voters and causing a political distraction. The Observer now understands that ministers are also planning to modify hugely contentious elements of the housing reforms the chancellor announced last summer. | George Osborne has abandoned a package of radical pension reforms, including cuts to tax relief for higher earners, for fear of upsetting voters and causing a political distraction. The Observer now understands that ministers are also planning to modify hugely contentious elements of the housing reforms the chancellor announced last summer. |
| A retreat on the “pay to stay” policy – which is under attack from a cross-party group in the House of Lords – will be seen as part of an attempt to avoid issues that could create negative headlines before the 23 June vote. | A retreat on the “pay to stay” policy – which is under attack from a cross-party group in the House of Lords – will be seen as part of an attempt to avoid issues that could create negative headlines before the 23 June vote. |
| Ministers have also delayed a range of controversial decisions until after the referendum, including those on expanding airport capacity in the south-east and the future of the BBC. The Queen’s Speech, which lays out the government’s upcoming legislative programme, has also been put back until after the vote. | Ministers have also delayed a range of controversial decisions until after the referendum, including those on expanding airport capacity in the south-east and the future of the BBC. The Queen’s Speech, which lays out the government’s upcoming legislative programme, has also been put back until after the vote. |
| Related: ‘Pay to stay’ trap will force working families out of council homes | Related: ‘Pay to stay’ trap will force working families out of council homes |
| The partial U-turn, while unlikely to satisfy all critics of the policy, means that rather than social housing tenants facing massive rent rises once their household income rises above £30,000, a tapering system will mean that those who earn just over £30,000 will pay only “a few pounds extra a week”. This will rise gradually in line with income, and the most brutal increases, it appears, will not come in until a household’s combined income exceeds £50,000. | The partial U-turn, while unlikely to satisfy all critics of the policy, means that rather than social housing tenants facing massive rent rises once their household income rises above £30,000, a tapering system will mean that those who earn just over £30,000 will pay only “a few pounds extra a week”. This will rise gradually in line with income, and the most brutal increases, it appears, will not come in until a household’s combined income exceeds £50,000. |
| The Observer has highlighted intense opposition to “pay to stay” since it was announced in last summer’s budget. Criticism of the policy has come not only from housing experts, thinktanks and charities, but also from the Local Government Association, which warned recently that tens of thousands of families would be forced out of their homes, and unable to buy or rent locally, if the policy was introduced as planned from April next year. | |
| In his summer budget last year, Osborne announced that every household with an income over £30,000 outside London, and over £40,000 in London, would have to pay a market rent for their home from next year. Osborne said this was necessary to cut the deficit and prevent those on higher incomes being “subsidised through social rents”. | In his summer budget last year, Osborne announced that every household with an income over £30,000 outside London, and over £40,000 in London, would have to pay a market rent for their home from next year. Osborne said this was necessary to cut the deficit and prevent those on higher incomes being “subsidised through social rents”. |
| The policy created a storm of protest, with many warning that it could be this government’s poll tax, and would force people out of their homes in areas where market rents and buying would be unaffordable. | The policy created a storm of protest, with many warning that it could be this government’s poll tax, and would force people out of their homes in areas where market rents and buying would be unaffordable. |
| Critics have also pointed out that “pay to stay” would create a huge disincentive for people to take on extra work, as many would face massive extra rental costs if they earned more. In areas where private rents and prices are high, these increases could exceed £3,000 a year. | Critics have also pointed out that “pay to stay” would create a huge disincentive for people to take on extra work, as many would face massive extra rental costs if they earned more. In areas where private rents and prices are high, these increases could exceed £3,000 a year. |
| Signalling a retreat, the Department for Local Government and Communities (DCLG) made it clear that while it stuck to its view that people on higher-than-average salaries should not enjoy subsidised rents, the rises would be small and gradual above £30,000. | Signalling a retreat, the Department for Local Government and Communities (DCLG) made it clear that while it stuck to its view that people on higher-than-average salaries should not enjoy subsidised rents, the rises would be small and gradual above £30,000. |
| A spokesman said: “It’s simply not fair that hard-working people are subsidising the lifestyles of those on higher-than-average incomes, including tens of thousands of households with incomes of £50,000 or more. Pay to stay better reflects tenants’ ability to pay, while those who genuinely need support will continue to receive it. Government has consulted on options for a taper, which, if introduced, could allow rents to rise gradually in relation to income – so households with incomes just above £30,000 would see rents rise by a few pounds a week.” | A spokesman said: “It’s simply not fair that hard-working people are subsidising the lifestyles of those on higher-than-average incomes, including tens of thousands of households with incomes of £50,000 or more. Pay to stay better reflects tenants’ ability to pay, while those who genuinely need support will continue to receive it. Government has consulted on options for a taper, which, if introduced, could allow rents to rise gradually in relation to income – so households with incomes just above £30,000 would see rents rise by a few pounds a week.” |
| Crossbench peers in the Lords –including Lord Kerslake, a former DCLG permanent secretary, and housing expert Lord Best – have tabled amendments stipulating that social housing tenants spend no more than a third of their earnings on rent. | Crossbench peers in the Lords –including Lord Kerslake, a former DCLG permanent secretary, and housing expert Lord Best – have tabled amendments stipulating that social housing tenants spend no more than a third of their earnings on rent. |
| Nigel Keohane of the Social Market Foundation said any tapering would still have to be introduced sensitively: “Even tapering could result in very high effective tax rates, and any charge must, therefore, be graduated in very slowly.” | Nigel Keohane of the Social Market Foundation said any tapering would still have to be introduced sensitively: “Even tapering could result in very high effective tax rates, and any charge must, therefore, be graduated in very slowly.” |
| Osborne’s decision to abandon plans to cut pension tax relief is being viewed by many in the context of his leadership ambitions, particularly following Boris Johnson’s decision to please Eurosceptic Tories by announcing that he would campaign to leave the EU. | Osborne’s decision to abandon plans to cut pension tax relief is being viewed by many in the context of his leadership ambitions, particularly following Boris Johnson’s decision to please Eurosceptic Tories by announcing that he would campaign to leave the EU. |
| The moves demonstrate the extent to which the EU referendum is dominating politics, with its repercussions directly influencing domestic policy. | The moves demonstrate the extent to which the EU referendum is dominating politics, with its repercussions directly influencing domestic policy. |
| Responding to the news that Osborne will not be reforming pension tax relief in his 16 March budget, Huw Evans of the Association of British Insurers said: “We welcome the chancellor’s sensible decision not to proceed with a pension ISA. Although we argued for a savers’ bonus, the current system works well and delivers valuable incentives to save for retirement. We now need a period of stability to ensure confidence can grow and the benefits of auto enrolment can be realised. | Responding to the news that Osborne will not be reforming pension tax relief in his 16 March budget, Huw Evans of the Association of British Insurers said: “We welcome the chancellor’s sensible decision not to proceed with a pension ISA. Although we argued for a savers’ bonus, the current system works well and delivers valuable incentives to save for retirement. We now need a period of stability to ensure confidence can grow and the benefits of auto enrolment can be realised. |
| “There is still much to be done to help people understand pension tax incentives and we must all focus our efforts on raising awareness and using better language so tax relief does its job in encouraging people to save more for their retirement.” | “There is still much to be done to help people understand pension tax incentives and we must all focus our efforts on raising awareness and using better language so tax relief does its job in encouraging people to save more for their retirement.” |