The Tory cut to housing benefit could have swung the 2016 Brexit vote, according to new research revealing evidence of the cut eroding democratic participation as electoral registration rates declined sharply.
Pitched into the general election campaign, the University of Warwick paper estimates the savings from Tory cuts to housing benefit amounted to around £500m – while council spending on homelessness prevention alone shot up by an estimated £265m at least.
“As councils have limited means of raising revenues, let alone issue debt, they are left with cutting services elsewhere to pay for these extra costs,” says the paper’s co-author Thiemo Fetzer, Associate Professor in Economics at University of Warwick and Visiting Fellow at London School of Economics.
“Fiscally, this policy likely did not save a penny due to the costs associated with higher crime, evictions, bankruptcies.
“We know this is a huge costly social policy choice, but even in the short-term it turned out to be very costly.
“The increase in homelessness to whom councils owe a duty implied that councils had to dramatically increase spending on homelessness prevention measures,” said Prof Fetzer.
“The cost of temporary accommodation has shot up by 94% [and] in many cases, local councils now have to lease or rent former council homes that were sold off from private landlords/investors – at market rents,” he said.
But the paper – Housing insecurity, homelessness and populism: Evidence from the UK – also exposes a decline in electoral registration rates since the cut was imposed.
The paper suggests it is likely the decline in registration affected the 2016 EU referendum vote by shifting the composition of those engaging with democratic processes.
The paper reports referendum turn-out in areas more affected by the housing benefit cut was two percentage points lower, with support for Leave up one-to-three percentage points higher.
Prof Fetzer says this is likely due to missing voters when, among those that did not turn out in 2016, support for Remain to Leave is 2:1.
“If you hardly make ends meet and live in insecure accommodation, making sure your election roll details are up to date [is] second order,” said Prof Fetzer.
Produced by the University of Warwick Centre for Competitive Advantage in the Global Economy, the paper explores the reduction of reference rents underpinning housing benefit allowance in the UK, in the wake of the so-called austerity cuts.
The paper pitches the high social and human costs, as the policy substantially increased evictions, individual insolvencies, temporary accommodation, statutory homelessness, and rough sleeping.
Its authors also say how the policy to a large extent “gave to one pocket by taking from another”, estimating that, once the increase in local spending by local councils is considered, the cost-saving elasticity to be around 47% for each pound of Housing Benefit reduction.
On aggregate, the average savings per household to the median council was £3.06 per thousand households, while the projected fiscal savings were close to £542m – substantially offset by an increase in temporary housing expenditure by £259m.
This, the paper says, highlights the potential for unintended policy consequences, with social as well as economic consequences.
And the paper argues the policy had that effect on representative democratic participation where, in the most affected districts, electoral registration rates dropped markedly.
This finding is reproduced during the 2016 EU referendum vote, where the research team found evidence that the turnout was substantially lower in the more affected areas.
Support for Leave was shown as higher in those places – acknowledged as possibly driven by a composition effect on the electorate since those leaning toward Remain was substantially higher among those who did not turn out to vote.