Tuesday, 25 November 2014

Thinking about big numbers. Housing benefit

A recent question in the Lords asked this: 

My Lords, if business improved productivity by just 1% and divided that between employer and employee, how many millions would be saved on housing benefit, much of which goes to landlords?

The Guardian has a useful visualiser on welfare spending, which shows spending of 15bn on housing benefit, but that is out of date.

More up to daate is the Housing Benefit bill for England: £21.2 billion.

Now, UK GDP is 1.6trillion.1% of 1.6tr is 16bn.Wages are 66% of GDP =  10bn. 

Around 1m people in work claim housing benefit and there are 30m people in work.

If the rise in wages is evenly distributed ( a big if) then 1/30th 10bn is 0.3bn.  

If a rise in wages of £1 saves 70p of housing benefit, then a rise of .3bn saves .3bn*0.7= 210m  which is 0.1% of the housing benefit bill. 
 So a saving of millions is only a tiny fraction of benefit spending.