One of the amazing things thrown up by the Comprehensive Spending Review (CSR) a few weeks ago was the list of things most of us had no idea we paid for in the first place.
Who knew that with absolutely no cap on benefits at all, there were families out there getting £90,000 in benefits? That's about the same as a real worker on a salary of £140,000 would clear after tax.
Who knew that you could inherit the lease on a council house? Turns out there are 90,000 council tenants living in properties courtesy of taking on the leases of their parents. Their own needs or lack of have never been assessed.
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And who knew that Education Maintenance Allowances existed? Until they were scrapped it would never have crossed my mind for a second that our taxes were being used to pay up to £30 a week to "allow children 16-18 years old from low and middle income families" to stay at school through the sixth form. Not just low income, which might be one thing, but "middle income" too.
And then there is housing benefit. We knew the bill was big and rising, and we knew that landlords found all sorts of ways to take advantage of the payments. But until Osborne announced a cap on weekly payments who knew that the state was paying £100,000 a year plus in rent for some families? If a tax-paying family wanted to clear £100,000 after tax to pay rent they'd have to earn £165,000. That's just for the rent. No wonder the housing benefit bill has hit £20bn a year. Or that it has doubled in a decade. It now costs us more than the police and university combined.
So here's the big question: are the changes to housing benefit suggested in the CSR fair? Lots of newspaper columnists don't think so. They say that it will mean key workers can't live near their work and that expensive areas of London in particular will be "cleansed" of the poor. They also worry that, combined with the rebasing of the rate at which benefit is paid from 50% of median rents to 30%, it will cause hardship across the UK.
But will the caps on rent really change the social make up of most areas? A letter in the Guardian from a Camden councillor suggests not. In Camden there are and will continue to be 30,000 low-rent homes for poorer tenants council houses and housing association houses. Around 800 families are in private rented accommodation. Some will have to move and that won't be particularly nice for them. But others will be moving anyway (10% a year do so) while others may find they suddenly see rent reductions (landlords won't be as stubborn on price as they claim they will be when their tenants start packing).
Others may just move a few miles. It'll cost you £2,000 a month plus to rent a small 2-bedroom flat in Westbourne Grove. Two miles further out it'll cost you half that and you'll get a garden too. Others may get "discretionary benefits". £60m has been set aside for this which is good and should cut the hardship that might result from the changes. But either way, Camden and the rest of London will be keeping the vast majority of its poor.
What it won't have is what it hasn't got now. Middle-income earners. Is it fair that middle managers and administrators who have reasonable incomes but can't afford to live in central London have to commute in for miles? Do you think the person who manages the crockery department at John Lewis lives in Knightsbridge? Or that any of the back office staff at the average hedge fund live in Mayfair? Or for that matter than any of the Moneyweek staff live in penthouse flats on the Southbank (where our office is)? Of course they don't.
The truth is, as many commentators have pointed out, that central London has already to use the language of the hysterics been 'cleansed,' not of the very poor but of the middle-income part of the population who, as Matthew Parris puts it in the Times, have been "very slowly and over more than a century" priced out of the city. No one can afford to live centrally any more except the super rich; those provided with accommodation by their employers (ex-pats and housekeepers living in mews flats); and the state-financed poor.
And let's not forget that if you look at it like this, the cap isn't fair either. £400 a week comes to £20,800. A family getting no benefit would have to earn just under £30,000 a year before tax just to pay that rent. Then they'd have to earn another £20,000 pre-tax (£15,000 post tax) to be able to feed themselves. So that's £50,000-odd a year you need in order to live like the state subsidised. We have major problems in the UK with our private rental sector, something this whole row has thrown into sharp relief. We need to address these problems fast. But the way to do that is not to force the taxpayer to overpay so as to house people inside the current system.
The thing that politicians might like to bear in mind here, should they be thinking of turning, is that the public appears to agree. Look at this piece by Polly Toynbee on the very good Guardian website Comment is Free. She is very angry about cuts to housing benefit and you would expect to find that her readers would be with her. Not that many of them are.
My favourite comment on the column? It comes from benjiwengy and pretty much sums up the conflict between tax payer and benefit receiver. "Polly, if it's my right to live wherever I want, can I move in with you please? I'm sure you've got room and I won't get in the way. Promise. X" More on this in this week's magazine out on Friday. If you're not already a subscriber, subscribe to MoneyWeek magazine.
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