Housing benefit: how international perspectives can shape reform Peter Kemp University of Oxford

How Britain differs 1.The HB subsidy rate Maximum amount of benefit Marginal rate of benefit 2.The HB means-test Income taper Calculation of income Complexity of rules Changes of circumstances

Maximum amount of benefit In Britain, HB can cover all of the rent NB: the Local Housing Allowance [LHA] In other countries, HB generally does not cover all of the rent This difference in part reflects differences in social security provision

Marginal rate of benefit In Britain, the marginal rate of benefit = 100% i.e. for HB recipients, the marginal cost of housing is nil. In HB schemes overseas, the marginal rate of benefit is typically < 100% In the LHA, the marginal rate of benefit = 0%

The income taper The HB taper rate in Britain is very high -> implications for work incentives HB in Britain goes less far up the income scale -> implications for work incentives Hence in Britain, HB is more closely targeted on the poor - & this affects work incentives

Calculating incomes In Britain, HB is calculated on: Net income Current income Weekly or monthly income Elsewhere, HB is more typically calculated on: Gross income Income in the previous tax year Annual income

Means testing HB HB in Britain has very detailed rules Elsewhere HB tends to be much less complex HB in Britain is highly responsive to changes in circumstances Elsewhere HB is generally much less responsive This affects: 1.Administrative performance; & 2.Work incentives

Conclusions HB (incl. the LHA) in Britain is relatively unusual from a comparative perspective The design and administration of HB in Britain 1.have both positive & negative impacts on work incentives 2.are ill-suited to the realities of the modern labour market and how people now live their lives