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Editorial – March 2012

The nature and scope of subsidy

We hear a lot about how much ‘subsidy’ is involved in providing social housing and how much ‘subsidy’ individuals receive through housing and other welfare benefits. And how we can’t afford this level of subsidy, whether it comes through capital or revenue budgets, or the welfare benefit system.

However, an article in the Guardian on 27 January 2012 by John Perry flagged up the importance of being even-handed when talking about where subsidies are applied. The article, which draws on this year’s UK Housing Review, identifies the extent to which home-owners are subsidised by Government:

  • all owners still enjoy capital gains tax relief, currently worth almost £6 billion
  • those with no or only small mortgages also benefit from not being taxed on the value of their home (as used to happen through the old schedule A tax). This tax relief is now valued at over £11 billion
  • owners in difficulty can receive support with mortgage payments
  • all governments have provided subsidy to shared ownership
  • significant subsidy has been provided through the discounts that applied to Right to Buy

Taking the stamp duty that home-purchasers pay into account, the total amount of ‘subsidy’ provided to home-owners across the UK by the means listed above, is estimated to be £1.6 billion in 2010/11. Is this amount of subsidy achieving the best possible outcomes in terms of meeting housing needs?

It is also interesting to consider these facts alongside:

  • constant questioning of recipients of disability related benefits and those who are finding it hard to manage on low incomes about whether they spend their money on the ‘right’ things
  • recent debates about pay levels in the private and public sectors, including bonuses

Different logic is being applied to different groups of people which is perhaps not surprising. But, as with so many aspects of housing, when we are making decisions about future direction and policy, we need to be more aware of the totality of facts across all aspects of the housing system, rather than only considering certain parts of it. Given the interconnectivity of housing with the non-devolved tax and benefits systems, putting this into practice presents a significant challenge to the Welsh Government.

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