Opinion: Time for Lib Dems to change the debate on welfare

autumn statementOn Friday evening, a page entitled “We’re interested in your views about the fairness of our benefit reforms” popped up on the Conservative party website. It invited people to comment on the decision announced in the Autumn Statement that the Coalition want to limit increases in most welfare benefits by 1% for the next three years.

The language used on the website reflects that contained within the Autumn Statement document. Similarly, the main argument used for defending the 1% rise is that “since 2007, [out of work] benefits have increased by 20% whilst salaries have only increased by 10%.” For fans of Treasury produced graphs, this is reflected in Chart 1.14 of the Autumn Statement.

These figures are accurate. However, their use is very misleading and another example of how the language being used by the Coalition Government (and I use that term as it is not only the Conservatives who are guilty of this) distorts the impact that government policies are having on the poor.

Another way of comparing the increases in out of work benefits and salaries is to look at the actual monetary levels of growth. In 2007-08 Jobseeker’s Allowance and Income Support were set at £59.15 per week for over 25s. For 2012-13, these benefits are now worth a weekly amount of £71, an increase of £11.85.

Over the same period, average earnings have risen from £440 in April 2008 to a predicted level of £481 per week in April 2013 — a rise of around 10% or, to put it another way, £41.

So, while in percentage terms out of work benefits have increased by twice as much as average earnings over this period, in monetary terms average earnings have increased four times as quickly as benefits.

Returning to the Conservative party website, they next turn to the increase in the income tax threshold. They state that “anyone in work and receiving benefits will gain more from paying less tax, than what they lose from benefits not increasing in real terms.”

Firstly, I believe that the increases in the tax threshold are a real Lib Dem win in government and something that we should rightly boast about. However, this statement is clearly false. One of the things frequently forgotten about the tax threshold rise is that it doesn’t actually benefit the very low paid, i.e. those who earn below the threshold. As a result, the low paid who don’t gain from the threshold increase are in work and receiving benefits and will lose out from the 1% cap on benefit increases.

This group, the working poor, are among those who, despite our arguments otherwise, are bearing the brunt of the Coalition’s spending reforms. According to the Joseph Rowntree Foundation, 6.1 million people now live in poverty in Britain despite someone in their family going out to work. This is one million more than those living in poverty in workless households.

This statistic should shock Liberal Democrats.

I will readily acknowledge that the Autumn Statement was better for Lib Dem participation in the Coalition. There was no removal of housing benefit for under-25s, child benefit wasn’t capped after the second child, and, thanks to the triple-lock we introduced, the basic state pension is now at the highest share of average earnings in the last 20 years.

However, as a party we must also be ready to acknowledge that limiting welfare increases to 1% is a policy that will hit the same people who have already been impacted upon by the household benefit cap, the local housing allowances cap, the VAT increase and the changes to council tax benefit. It should also not be forgotten that the majority of people who will be affected by this latest welfare policy are in work.

It’s time that we stop couching welfare cuts in terms that pit those in receipt of benefits against those in work. Much of the time, these are one and the same. The Tory DWP Minister Lord Freud recently claimed that the poor have the least to lose. Maybe this is true, but only because they’ve had the most taken away.

* Jonathan Featonby is a Lib Dem Member in Bromley

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11 Comments

  • Excellent post.

  • It is also pretty false to assume that anyone who earns a low income now will do so for ever and a day.Many lower income earners are either students or pensioners. The students are likely to go into full time work so their low earning status will change. Pensioners on the other hand have been largely protected against cuts.

    With a £10,000 personal allowance it gives people a big incentive to take on more hours and to up their earnings. If we can implement a further rise in the personal allowance to the level of the full time minimum wage, we will be giving a massive boost to low paid workers without relying on Labour’s answer to low wages: subsidise them with even more borrowed money. That solution has clearly failed and is contributing to our rising benefits bill.

    If a couple working full time can earn around £25,000 between then without paying income tax, that would be a pretty important step forward in helping people out of poverty.

  • @ RC

    Agreed, and if we could get employers NI threshold up to Minimum wage we would make giving people staring out a foot in the ladder even more attaractive.

  • Jonathan,

    “It’s time that we stop couching welfare cuts in terms that pit those in receipt of benefits against those in work.”

    Re-introducing a Citizens Income to replace personal tax allowance and basic welfare benefits/tax credits as Libdem policy would be a good start . Any uprating of a basic citizens income would be an equal sum across all income deciles, benefitting those out-of-work and on low /average incomes propotionally more than those on higher incomes.

    The best way to incentivise work and kill all this grandstanding about ‘Strivers and Skivers’ is a minimum wage job guarantee scheme coupled with an employment or disability requirement as eligibility for access to social housing tenancies and/or housing benefit.

  • Excellent post.

    This welfare cut means that the Job Seekers Allowance will only increase by £2.15 in 3 years. We already know that energy bills and food costs are rising at a much faster rate, and that these already account for almost the entire spending of the £71 a week support.

    This is serious poverty, and it is a terrible decision.

    Social security needs to be based on the prices that people pay – we must ensure it covers a basic standard of living, like the minimum income standard.

  • Furthermore, the increased conditionality and sometimes punitive requirements required to access social security need to be reviewed.

    Sanctions of 3 years – that’s 3 years that people are denied any state support which they would normally be entitled to – will only push people to crime and serious illness.

    We may see the outcomes of these polices in a serious deterioration of public health.

  • While I recognise a “fair” tax and benefit system as one in which working people have more than non-working people, rather than one in which outcomes are equal, I would just like to question the arbitrary choice of 2007 as the base year. Who says the balance was right then and not some other year like 1997, 1979 or 1894?

  • You don’t need to look at the actual monetary amounts involved. Even sticking with percentages, the government’s line on this is highly misleading and divisive.

    In normal times earnings rise faster than prices, and indeed the relative value of out of work benefits compared to average earnings has been decreasing over the last few decades. If you pick a starting point of 2007, the automatic stabiliser effect in a recession will obviously mean you get a distorted snapshot. So, “since 2007, [out of work] benefits have increased by 20% whilst salaries have only increased by 10%” is a meaningless statement, used purely to turn the poorest people against each other.

    Unless of course Osborne thinks that we will have perpetual recession, and earnings will never again rise faster than prices.

  • @RC ‘With a £10,000 personal allowance it gives people a big incentive to take on more hours and to up their earnings’. Employers DECREASE hours and are giving short hour contracts, even zero. It is impossible to have a second job as the contract will tie you in to one employer and hours can be as many and whenever the employer decides. The employee has no say in it whatsoever. Welcome to the real world. Now we can be thrown on the scrap heap after 45 days and on to benefits, thanks for that. Venture capitalist and Tory donor with a share in WONGA idea taken up by Lib Dems.

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