Erosion of universal benefits is destroying public support for the welfare state

by Robin Thorpe

Earlier this week George Osborne stated that “this month, around nine out of 10 working households will be better off as a result of the changes we are making”.

The BBC report on this speech (before it happened, which frankly annoys me, why can’t politicians just give a speech and have it reported after the event? Why must it be released beforehand?) states that;

“This month saw the start of sweeping changes across public services including reform of the benefits system.

Mr Osborne argues that the government has had to take difficult decisions to cut the deficit and the current benefits system is fundamentally “broken”.

Changes include:

  • The introduction of a £26,000 cap on the amount of benefits a household can receive
  • A cut to housing benefit for working-age social housing tenants whose property is deemed to be larger than they need
  • Disability living allowance replaced by personal independence payment
  • Working-age benefits and tax credits uprated by 1% – a below-inflation cap

The chancellor believes the changes to benefits and tax will be fairer and help ensure that the country can live within its means and compete globally”

For all the rhetoric both in favour and against these cuts I would agree with Osborne on the limited claim that the vast majority of the public are in favour of these changes to the benefit system and do not agree with Labour or other critics of the changes. The very fact that 9 out of 10 people will purportedly be better off underlines the reason why most people agree with the changes. This, however, does not make it the right thing to do.

Osborne and IDS both claim that they are doing this for the good of the poor and that “defending every line item of welfare spending isn’t credible in the current economic environment. Because defending benefits that trap people in poverty and penalise work is defending the indefensible.”

I can’t help but think that it is low wages that means that work does not pay, not a benefits system that barely facilitates survival. JSA is currently £71 per week; for all your expenses this is not a significant sum (think food, heating, travel, internet, phone, and water /sewerage). If you don’t qualify for housing benefit or council tax reduction then you really are going to struggle. IDS may claim that he would manage if he had to, but I think he would find the changes that he would have to make to his lifestyle more then just unpalatable.

Of the four changes highlighted above, the one that is least discussed is the limiting of the rise in benefits to 1%.  Done on the basis that many people’s wages are stagnant or are also limited in a rise and therefore a rise of benefits in line with inflation would be “unfair” to those in work. I can see the logic in this; the problem, however, is that when we, as a society, have decided that £71 is the minimum you need to survive on each week then not increasing this in line with inflation means that people will, by definition, not be able to cope.

Unfortunately for those who are in receipt of benefits they are characterized by a group of people who insist on spending their money on television subscriptions, computer games, cigarettes and lager. Intentionally or not the BBC chose to study a family that precisely fit this description. The number of children that live in this household result in child tax credits of over £300 per week.

There are many more people in receipt of tax credits that are in work then those who are unemployed; however there are many more people of all political persuasions that do not agree with the way that some people choose to spend the benefits that they receive. Is this not what is truly at the core of this debate?

To some extent I do agree with Osborne and IDS that the system is flawed, albeit not in the way that they mean. I don’t agree simply that people get too much money. The fact that ‘benefit dependence’ seems to be widespread is, I would suggest, more a result of pockets of deprivation arising from a paucity of opportunity. Where the system is deeply flawed is in the considerable sum of money paid in housing benefit to private landlords.

Welfare, benefits and unemployment all seem to be viewed as individual parts of a national problem. It would be better if they were viewed as the same issue on a regional basis. Even well-educated people see benefits as being a separate part of the welfare state and thanks to biased newspaper reporting see welfare dependency and fraud as a bigger problem then they truly are.

Pensioners despair of ‘work-shy’ youngsters playing the system when they receive a state-pension, a second-state pension (for some), a free bus-pass, free TV-license (for over 75s), free prescriptions, full access to all NHS facilities, free book loans and a winter-fuel payment.

These are not labeled as ‘benefits’ but they all come from the welfare pot; furthermore although pensioners claim to have worked all their lives to pay for these benefits the hard-truth is that when these people began paying tax 50 years ago the benefits system was nowhere near as generous. The welfare bill is higher now then it has ever been and that is largely due to the number of pensioners.

Health-care, pensions, education and social care are all part of the welfare-state and by attempting to pry out parts of it the whole edifice is at risk of falling down.

The reason so many people are in favour of reducing the welfare bill is that they perceive it to be wasted on undeserving scroungers. I reluctantly agree with Fraser Nelson when he states “welfare reform is one of the most popular things this government is doing. And it’s never more popular than amongst those on low wages, who share housing estates with the welfare-dependent and can see the injustice”.

Furthermore I agree that a tax-cut for the low—paid is desirable. I don’t, however, agree with his argument that “welfare cuts increase the incentive to work”. There may notionally be record-employment but a significant number of people are under-employed and are paid low wages and unemployment is still historically high.

I would contend that the majority of people do not agree with the current benefits because they perceive that they are paying into ‘the system’ and getting nothing in return and others are taking out of ‘the system’ and are not contributing.

This situation arises because of the tendency towards a residual welfare system. Universality was always a central tenet of the UK welfare state, which was intended to be institutional i.e. where need is accepted as part of normal social life and where welfare is provided for the population as a whole. A residual welfare state is where provision is only for the poor. The removal of universal child-benefit made residual welfare the official policy of the UK government for the first time since 1947.

The end of institutional welfare, and the notion of social solidarity that goes with it, follows several decades of joblessness and the sell-off of council housing. The impact of increasing home ownership has been to not only create indebtedness but has also deepened the divisions between those who have and have-not. Once upon a time there may have been some stigma attached to being unemployed but following the dissolution of British industry in the 1980s unemployment became endemic in some urban areas and consequently being on the dole is now the norm.

Imposing onerous sanctions on the unemployed will not create jobs nor will it make those out of work employable. Where employers can be picky they will select those who are already at least partly trained. A brick-layer cannot cheaply be retrained to be a barber; a welder cannot quickly be taught how to be a barista. The issue of benefits is as deeply intertwined with education policy and socio-economic regeneration as it is with job-creation.

So just as an idea how about giving low-skilled, unemployed people the opportunity to re-train? This could be funded by creating local credit-unions specifically to provide training loans – to be paid back when the person is in employment (in the same way that the Student Loans Company was created). This would empower those looking for work to have more control over what they want to do and would give them personal responsibility for repaying the debt. It is not a quick fix and yes some money would be wasted but people need employable skills to find a job.

It would also be handy if there were more jobs and if there was a larger and more flexible provision to help people find a job through the job-centre. Cutting back the resources required to help people back into work (as the coalition did two years ago) are self-defeating.  Apparently there is no money to pay for it; however short-term investment would lead to long-term gain. Finally let us remember that benefits underpayment amounts to more than benefits fraud furthermore HMRC estimate the tax gap to be £30bn. George Osborne should have bigger fish to fry.

Robin Thorpe is a consulting engineer for a small practice on the south coast

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6 Responses to “Erosion of universal benefits is destroying public support for the welfare state”

  1. I’d welcome some clarity on just how big those famous “cuts” really are – indeed whether they actually exist.

    John Redwood claims the cuts don’t exist, and this is supported by Stefan Karlsson (Swedish economist). See respectively:

  2. Ex-Labour says:

    Our system of benefits has been universal because previous Labour governments, and Conservative to a lesser extent, have been focused on redistribution of wealth. Inevitably having used the tax system to do this there will be an effect on certain income groups which then need tax credits to ‘repay’ what was taken in the first place. That’s why Labour quotes the 60% statistic. Furthermore I don’t see the issue in residual targeted benefits and why welfare should be a normal part of life as you state? It was always intended as a short term safety net.

    The fact is that the vast majority of the population recognise unfairness when they see it and more importantly feel it when it hits them in the pocket. Many people have not had pay increases for several years, so is a 1% cap unreasonable? Bear in mind welfare claimants got a 5% increase last year. Where and who does this money come from ? There is of course another issue in that those who live in high unemployment areas see some benefit claimants misuse their funds. There will always be those who are workshy, feckless and feral and maybe there is a case here that benefits should be in the form of vouchers for food, travel etc. If we are really serious about poverty why not some ‘tough love’ ?

    There is the usual canard in your piece which suggests that low wages make benefits look attractive and are to blame. We are in a global economy where, like it or not, we have to compete with countries that have different attitudes to us in terms of employer and governmental obligations. The fact is that there is now a myriad of benefits for claimants to collect so quoting JSA alone is being misleading.

    The piece started with the acknowledgement that based on recent tax and welfare changes 9/10 are better off. I suggest that in any form of change there will be winners and losers and any government has to devise a solution to maximise winners, that’s the ‘real politik’ and more importantly it should be the aim of any government, whatever colour it is.

    Your notion of “social solidarity” has never really existed. Social studies have shown that we in the UK are individualistic in nature and culture. Over the years the left has tried hard to push us towards collectivism but deep down it’s never really worked. That’s why we say one thing to the pollsters and do another when we are in the voting booth.

  3. Robin Thorpe says:

    @Ralph – it is true that some parts of the budget have increased not decreased, but at a local level there are certainly cuts. Councils are being forced into closing libraries, youth-centres and SureStart Centres and reduce services.

    @Ex-labour – It is not true that the welfare state in the UK was only intended to be a safety-net. The intention was that it was universal – hence mass provision of social housing, universal child-benefit and universal pension.
    I don’t agree that quoting JSA alone is misleading. Individuals don’t get housing benefit (by far the largest benefit) – it is paid direct to the landlord. Not all people are eligible for tax credits – only those who are either working (working tax credit) and/or have children (child tax credit).
    I do acknowledge that there are many who do not spend their benefits wisely. I am not really a fan of the tax-credits system and I think that rather then spending huge sums on redistribution these monies would be better invested in schools and skills training. But that is never likely to be Labour policy.
    I did qualify the 9/10 claim with ‘purportedly’ better off, as the increased tax threshold is offset for some by a loss in tax credits. Furthermore the high level of VAT and other indirect taxation (which affects those on lower incomes proportionately more) means that many are worse off at the end of the month.
    I agree that social solidarity has never been a big part of British life. WW2 did briefly increase solidarity, which enabled Labour to make the sweeping changes in the post-war settlement, but this has ebbed away ever since.

  4. e says:

    “welfare reform is one of the most popular things….never more popular than amongst those on low wages, who share housing estates with the welfare-dependent and can see the injustice”.
    Indeed, but scratch the surface and you’ll recognise this is heavily dependent on the belief that the word reform means something positive – that it means jobs rather than a succession of purposeless training schemes. That reform means all working age members of their family will be able, through work, to contribute much needed coffers to their household budget.

  5. John Reid says:

    I think frank field voted against due to the retrospective legislation, which when it comes to other things like expenses being paid back for back dated changes like M.P.s not being allowed second homes who live in London he’s against, regarding this its different its re evaluation, maybe he just felt the principle was the same, funny when labour refused arbitration s back dated pay settlement to the police in September 2007 he was quiet then

  6. Lauren says:

    Well, it’s important to provide a quality and fair beneficial system in the UK. I think that this reform can help to boost the economy and these changes can be helpful. I think that working people should get fair benefits while those who are used to live for unemployment benefits should consider going to work. It’s not right when people don’t work because they know that they can get benefits from the government and stay afloat. They don’t even have a need of taking out instant money loans because they know that the benefits are enough to cover expenses.

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