In the debate over benefit caps, many commentators seem to have forgotten the old adage “If you want to know what is going on, follow the money”.

Much has been made in the press of families supposedly receiving more in benefits than in work. It is important to clarify that the bulk of welfare payments a family receives is almost always going on housing benefit which goes to landlords, not for the personal enrichment of the family concerned.  This is the result of the operation of the housing benefit system created in 1987 and the removal of rent controls. 

Since the abolition of rent control on January 15th 1989 under the Housing Act 1988, rent levels have rocketed. The housing benefit bill has risen accordingly. Effectively, housing benefit has become a welfare state for landlords, being the second most expensive benefit payment after old age pensions.

Thus, the bulk of any £26 000 claim or higher in benefits will actually end up in the pocket or bank account of  private landlords who since 1989 have been allowed to charge whatever figure in rent they wish, the so-called “market rent”.

One aspect that has hitherto received little attention is that much of this money is actually flowing out of London to absentee landlords, many of who are not UK taxpayers.  Experience over the last three years, of Nucleus and other advice agencies with clients claiming housing benefit is that the money is ultimately paid on to landlords living in Ireland, Spain, Italy, the United States, Cyprus, Nigeria, Lebanon, South Africa and in one case Ethiopia. Obviously, this has become an opportunity for fraud, particularly in central London boroughs.

But why are the Government oblivious to the obvious remedy of controlling rent levels, rather than cutting benefits? If rents were controlled again to the equivalent of the 1970s – 1980s the benefit bill would be cut and properties would be affordable. It is also predictable that homelessness would be greatly reduced. Effectively, it might be said a political choice has been made to subsidize landlords – wherever they are in the world – rather than actually look after the interests of British taxpayers and people receiving welfare in the UK. Could it be that many decision-makers are simply unaware of the system that has been brought into existence?

Much could be done by saving the £20 billion being paid out for inflated rents, so how has the Coalition missed two obvious solutions to reduce housing benefit bills by (1) re-introducing rent controls and (2) ensuring wherever possible that money  is ultimately being s paid to landlords who are UK taxpayers or whose identity can be clearly ascertained, if resident abroad?