Andy Burnham urged to increase bloated housing benefit bill by ANOTHER £2billion at the Budget by Labour's favourite think tank
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By SAM MERRIMAN, POLITICAL CORRESPONDENT
Published: | Updated:
Andy Burnham should hike housing benefits by £2billion a year at the Budget next month, Labour’s favourite think-tank has said.
The Resolution Foundation urged the Prime Minister to link the amount that people can claim in housing benefit to rising rental prices – even in expensive areas like central London.
New analysis from the think-tank ahead of the Budget on October 28 found that linking Local Housing Allowance (LHA) to rents would cost the Government an extra £2billion a year by 2029-30.
The Resolution Foundation previously called on Labour to scrap the two-child benefit cap – at a cost of £2.3billion in 2026-27 – ahead of the last Budget, which then chancellor Rachel Reeves subsequently did in November 2025.
Now the think tank has called on the Government to relink LHA to local rents in next month’s Budget – and ensure this would automatically increase annually in line with rent prices going forward.
LHA determines how much housing benefit people can claim and varies by council area, meaning a private renter on benefits in London gets more than somebody in the North East, where rents are lower.
But for the past few years LHA rates have been frozen and have not increased in line with rent price rises, which the Resolution Foundation says has left housing benefit claimants with a shortfall each month.
LHA rates have been frozen since April 2024 after the number of people eligible to claim housing benefit soared by more than a million since 2020. The total cost of housing benefits is forecast to hit £39billion this year, according to the Department for Work and Pensions.
Prime Minister Andy Burnham has been urged to increase the housing benefit bill by another £2billion at the Budget on October 28
Shadow work and pensions secretary Helen Whately said: ‘Last year Labour MPs forced the Prime Minister to lift the two-child cap. It’s just a matter of time until Labour MPs seize on this report and demand more spending on housing benefit.
‘Most people have to live within their means. If you can’t afford an expensive area, you live somewhere cheaper. The same should apply to households on benefits too. That’s only fair.
‘We know Andy Burnham puts social security before national security. He’s wrong. We have to bring welfare spending down, get borrowing under control and invest in defence.’
The think tank’s announcement comes after Kemi Badenoch set out plans earlier this month to slash £4billion from the housing benefits bill to fund Britain’s defence.
Under the Tory plan, some £1.8billion would be saved by lowering LHA rates for new tenancies. For existing tenancies, rates would be frozen until they gradually fall in line.
Mrs Badenoch said it didn’t make sense for taxpayers to fund rents in expensive areas and ‘if people need local housing allowance they will need to move somewhere cheaper’.
She added: ‘I think you should aspire to live wherever you want to live, but you shouldn't aspire for the government, i.e. other taxpayers, to pay for you to live wherever you want to live.’
LHA was first introduced in 2008 to support claimants to cover the cost of the lowest 50 per cent of rents in an area. It was cut to cover the lowest 30 per cent of rents in 2011 and Governments since 2016 have frozen rates on an ad hoc basis, with it last being frozen for 2026-27.
The Resolution Foundation said that because of this low-income families renting a 2-bedroom home in Inner East London face a typical monthly shortfall of £324, and at least £200 across the rest of London. It added that the gap is now above £100 in more than half of all areas in England.
Critics argue that unfreezing LHA would not help tenants at all, with landlords simply raising their rents to match the increase and pocketing the extra support.
But the think tank said its analysis found this was not the case and that unfreezing LHA ‘would lead to a genuine improvement in rental affordability, rather than a funding bonanza for landlords’.
Stephen Hunsaker, economist at the Resolution Foundation, said: ‘With many tenants receiving housing support already going without essentials to pay their rent today, the Government should restore the automatic annual linking of LHA to relieve the pressure on low-income families in the private rented sector.’
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