Jan 21 2013
The centrepiece of the government’s deficit reduction strategy has been a massive assault on welfare – with £30bn of cuts so far announced. Astonishingly, up to £10bn of these cuts are still to be fully spelt out, revealing their ideological nature – pick a figure first, then work out how to meet it.
Can you imagine a Tory minister allowed to announce £10bn of cuts in health, education or defence without any questions about how, where and why? Welfare though has been successfully demonised to the point where if Blankety Blank was reincarnated, the most popular word to follow ‘welfare’ would be ‘scrounger’. A climate has been created in which cutting welfare is self-evidently justified. That same climate has led to a rise in disability hate crime.
Of course, the given reason for the Tory-led coalition’s welfare cuts is as part of the deficit reduction strategy. But this isn’t working well: the Institute for Fiscal Studies predicts that Osborne will borrow an extra £15bn this year.
There is no doubt that the total welfare bill is a huge part of government expenditure, just under £200bn a year. The largest portion of that – £80bn – goes to paying pensions, something most people consider separate from welfare.
David Cameron has promised to target “people sitting on their sofas waiting for their benefits” while his millionaire friend and economy-strangler George Osborne vowed to target “people who think it is a lifestyle to sit on out-of-work benefit”. Completing the unholy trinity is Iain Duncan Smith, of whom Labour’s Liam Byrne describes himself ‘a critical friend’. Further bi-partisan cover was given by Scottish Labour leader Johann Lamont who talked about a ‘something for nothing’ culture.
Despite our concerns about the human tragedy of mass unemployment, only around £5bn (2.5% of total welfare spending) is on unemployment benefit.
To some extent that is because Jobseeker’s Allowance (JSA) is demeaningly low – £71 per week (£10 per day), or for those irresponsible enough to be under-25, as around 1 million unemployed are, it’s only £56 per week.
Who would pick that ‘lifestyle’? And of course it’s not ‘something for nothing’ either. We pay national insurance while in work precisely to be insured against poverty if unemployment or illness deprives us of an income through work.
When a PCS-commissioned ICM poll in 2009 asked the public whether they thought they could live on JSA 79% of people were ‘not confident’ of surviving on it. Only 4% were ‘very confident’ they could.
The next biggest section of the welfare bill after pensions is housing benefit. The solution though is not to cap benefits, but to build council housing.
This would help solve the triple crisis of unemployment (by creating jobs), housing shortage, and welfare expenditure.
Any housing benefit paid to council tenants is effectively just a book-keeping matter for the Treasury – transferring amounts from welfare budgets back to councils (and then back to the Treasury again for reallocation). It costs the state only a small administrative cost.
Currently an army of tax-subsidised buy-to-let merchants are leeching billions from welfare coffers to house people in often substandard and overcrowded accommodation. So while a mass council house building programme took place, instead of capping benefits, councils should be given the ability to cap private rents.
Part of the reason that people in work need benefits is because rents are too high, but it’s also because wages are too low.
Over £40bn of the welfare budget goes to people in work on low incomes, and much of the £34bn on ‘children and families’ is also required because of inadequate pay levels.
Our minimum wage is worth just 46% of average earnings. In France the minimum wage is worth 60%, in New Zealand 59%, in Canada 56%, in Australia and Belgium 52%.If the living wage rate of £7.45 became the new minimum that would still only be 55% – but it would save the Treasury billions.
The welfare state is subsidising exploitative low-paying employers and wealthy landlords. So, when you hear the phrase ‘welfare scrounger’, don’t imagine a single mum on a council estate or a young unemployed man in a B&B. Instead think of well-suited landlords with property portfolios, hiking up rents because “the market” (lack of social housing) allows them to. Or a chief executive counting his bonus while his staff on minimum wage get another pay freeze, forcing them to apply for a benefit top up in order to survive.
But changing our conceptions is not enough. We also need to change policy. If they really want to reduce welfare bill, not just demonise and attack those on benefits while defending the rich, the three most urgent things the government should do are:
- Cap rents and build council housing
- Increase the minimum wage to the living wage (and use welfare savings to increase benefit levels)
- Provide universal affordable childcare