Housing Benefit Claimant Numbers and the Labour Market: Modelling and Analysis

This analysis assessed how changes in the labour market could impact upon Housing Benefit claimant numbers in the UK.

The analysis was undertaken in two stages:

• Developing a model to explain the relationship between Housing Benefit claimant numbers and labour market statistics, including analysis of time lags;
• Using that model to assess the possible impact of the labour market on Housing Benefit claimant numbers and expenditure.

The model developed provides a strong description of changes in Housing Benefit claimant numbers.

Short-term forecasts from the model indicate that the number of Housing Benefit claimants may decrease gradually during the first half of 2011 before starting to increase back up to around 4.8 million claimants during the second half of the year.

Medium-term forecasts show quarterly claimant numbers increasing until the end of 2012. If the modelled relationship continues to hold, by the middle of next year there will be almost 250,000 more Housing Benefit recipients than current government estimates suggest. These differences would impact on the level of expenditure on Housing Benefit: expenditure would be £400 million higher than government forecasts in 2011/12, rising to £1.2 billion higher than forecast for 2012/13.

This, once again, highlights the sensitivity of Housing Benefit expenditure to increases in claimant numbers.