How can we make sure families have enough to live on?

On the Six O’clock News on BBC1 on Thursday there was a report on children living in poverty.

Mark who is a single dad is not working so I suppose we should expect him and his children to be living in poverty. He lost £340 a month because of the benefit cap. It is our policy to abolish the benefit cap but that is not enough to remove Mark and his family out of poverty.

The report correctly states that those who work more than 15 hours are not subject to the benefit cap. Therefore the problem must be the level of benefits.

Corey is working being paid the minimum wage but he and his partner Danielle and their children are living in poverty.

The report states that Corey some months receives no Universal Credit because he can receive two lots of wages in a month. I assume he must be being paid every 4 weeks. On the government web site it states, “If you’re paid weekly, every 2 weeks or every 4 weeks, you’ll receive more than one set of wages during some assessment periods. This means your earnings might be too high for Universal Credit. You’ll be told if they are and whether you’ll need to reapply to continue to get Universal Credit”.

This is a madness. Surely Universal Credit should be paid on the assumption you receive the same amount of wages each week and then if you earn more for a particular week then the amount is adjusted downwards for that week which is being paid on the day of the month allocated to that claimant, but that you don’t end up with no benefit just because there are two pay days in one calendar month.

Lara is a single Mum with one child who works 20 hours a week and according to this report she is left with £13 a day after paying her rent, debts and bills.

Turning to consider the system itself. A couple with one of them aged 25 or over receives £498.89 in Universal Credit for a month which works out (x 12 / 52) as £115.13 per week. If they have two children they receive £277.08 for the first child (if born before 6th April 2017) and £231.67 for the second which works out as £117.40 a week. For two children they would also receive £34.40 a week in Child Benefit. These all total up to £266.93 a week. According to the Joseph Rowntree Trust a couple with two children needed £401 a week to live on the poverty line in the year ending April 2016. For the two children the JRT state £153 a week is required and for the two adults £248. The amount for the children is £1.20 a week short of the amount needed in 2015/16, while the amount needed for the adults is £132.87 short.

We shall assume that they also receive benefit to pay their rent. The National Living Wage is currently £7.50 per hour. If we assume one of the adults works for 37 hours a week they will earn £277.50 a week minus £22.85 NI & Income Tax and their Universal Credit will be reduced by 63% on 277.50 minus the work allowance 44.31 (146.91) down to £85.62 They will keep the £34.40 child benefit. Their new total is £374.67 and they are still £26.33 short of the £401 they needed in 2015/16.

The solution is easy we should increase Child Benefit by a pound per child (£21.70 and £14.70 making £36.40) and increase the level of Universal Credit to £124 per adult making £248 for two adults. Then this couple if both were not working would receive £401.80 a week.

And if one adult was working 37 hours a week on the National Living Wage they would end up with £532.39 a week and they would be living above the poverty line even accounting for inflation since April 2016.

* Michael Berwick-Gooding is a Liberal Democrat member in Basingstoke and has held various party positions at local, regional and English Party level.

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23 Comments

  • Michael’s sums definitely make sense if we are to tinker with the present system. In that sense it is probably right to call for the government to make such adjustments. However for those on low incomes that do not receive any form of benefit, for example the low paid self employed whose hours of work may be precarious, tinkering will be of little use. We need to be looking at ways of ensuring all have enough to live on and the only way to do this is through implementing some form of universal minimum income or universal basic income. We need to start looking at a number of ways of making this possible and financially viable and implementing this as policy. Michael’s suggestion is a step in the right direction towards the complete overhaul that is needed.

  • Mick Taylor 25th Mar '18 - 3:00pm

    The truth is that were the levels of basic income sufficiently high, much of the benefits system could be scrapped. What we, as Lib Dems, need to tackle is the widespread belief that to provide a decent level of income for all would be to pay some people for doing nothing.
    Perhaps there is another way of looking at this? If we establish various rights that we think people should have, like food, clothing a place to live, healthcare and education then we can go on from there to argue that this means providing the wherewithal to achieve those rights.
    If we also couple this with increased use of computers and robots then we can start to move towards a society where no-one is enslaved by poverty, ignorance or conformity.
    Work is something most people want to do, but it needs to be fulfilling or it’s just wage slavery. We have to be imaginative and look to the creation of new types of work and recognise that we need to pay much much more for health and social care and pay those who work in that area proper wages they can live on..
    But it’s not just benefits we have to sort out or UC. The culture that has grown up around us that it’s OK to pay people crap wages has to be challenged along with the view that it’s OK for people to get filthy rich at the expense of the rest of us.
    I am sure I’m not alone in disbelieving the myth that you have to pay the captains of the finance industry zillions. I am confident that if the city stopped paying the so-called experts the ridiculous levels of remuneration they do that other people would be willing to do the job for a lot less and would do the job as well if not better.
    Time to stop regarding much of the system as sacrosanct and radically change it so that it works for all of us, not just the very rich.

  • @ Rick Heyse

    I support there being a Basic Citizens Income, but I don’t think we could introduce it and get it to £124 a week in a five year Parliament and so we need to keep the means tested system while a Basic Citizens Income is increased to 60% of average earnings (over two Parliaments). Also I understand that Vince is not convinced that a Universal Basic Income is a good idea. We really must try to convince him it is a very liberal idea and he should be supporting it.

    There have been reports that Universal Credit doesn’t work well for the self-employed. Once we have identified why this is so we can reform Universal Credit so it does work and the self-employed don’t have to live in poverty.

    @ Mick Taylor

    I don’t think there is any point in establishing UK rights to have a job that suits a person and pays the Living Wage and a home of their own are sufficient. We need to have the policies to achieve this. It means building more than 300,000 homes a year and having as our main economic aim full employment coupled with a job guarantee scheme and free training for the unemployed. Once we have these as our policies I will support you in getting us to have a policy that gives everyone living in the UK the right to enough food, enough clothing, a place of their own to live in (rented, mortgaged or owned outright), free education, free healthcare and free training.

  • Having observed the growth of poverty and the awfulness of Universal Credit in recent years – with both the CAB and a food bank – I am rapidly moving to the same conclusions that Mick Taylor has set out so well.

    Professor Robert Skidelsky of Warwick University (Keynes’ biographer) recently produced a detailed paper advocating a national minimum income. The party would be well advised to ask him to convene a working party to thoroughly research this issue asap looking at the experience and experiments in other countries. Are you listening Vince?

  • Mick Taylor 25th Mar '18 - 5:47pm

    MichaelBG: I am getting an old age pension of £139 a week! If you accept that there has to be appropriate higher taxation, and you set the citizens’ income at a sufficiently high level, then there would be no need for many of the means tests and benefits that currently cost so much. With both increased taxation for those who can afford it and serious savings on the benefits system £124 is a very modest target.
    Of course there are additional policies that go with my suggestions, though I think 300,000 homes a year is far too modest a target. In my youth the UK was building between 500,000 and 750,000 a year. With a Swedish style jobs programme and extensive retraining I see no reason why work can’t be available for all. We could start by replacing the huge number of jobs lost in the public sector due to austerity!
    The party will have to change its tune on tax and start rehabilitating tax as the price we all pay for a civilised society rather than joining the race to the bottom in promising wonderful services AND tax cuts as all political parties since Thatcher have dishonestly promised.

  • Nonconformistradical 25th Mar '18 - 6:27pm

    @Mick Taylor
    “In my youth the UK was building between 500,000 and 750,000 a year. ”

    From where do those figures come?

    http://www.new-homes.co.uk/why-buy-new/history-of-house-building/ suggests that during the 1950s between 300,000 and 400,000 homes were built per year.

    And given the wartime bomb damage it’s hardly surprising that housebuilding rates were high then.

  • Katharine Pindar 25th Mar '18 - 8:52pm

    Michael is absolutely right to focus on how we should ensure families have enough to live on. This should be our first priority, in my view, for Liberal Democrat campaigning. It is a scandal that people are sinking more and more into poverty in this rich country. To increase the National Living Wage to £10.605 by 2022 should be our first demand, with the follow-up of requiring a Citizens’ Basic Income. Benefits meantime should be rapidly increased. We also need to demand that housing costs should be related to people’s incomes, whether they are buying or renting their homes, and work for the necessary reforms to ensure this. Our party should become known as the one which will not accept poverty and has the will and the policies to fight it.

  • @ Katharine Pindar

    Thank you for your very supportive comments

    @ David Raw

    If Universal Credit is the problem and it can’t be reformed then we could revert to the old system which is being phased out and reform that instead. I don’t believe we can abolish mean tested benefits and replaced them with a Universal Income of a sufficient size over one Parliament without causing some of the poorest in the UK to be worse off.

    @ Mick Taylor

    If your pension of £139 a week is your only source of income I suggest you apply for Pension Credit and you should get an extra £21.34 a week (https://www.gov.uk/pension-credit).

    My target for a Basic Citizens Income which would allow means tested benefits to be scrapped is 60% of average earnings which for a single person was £144 in 2015/16 and so would be more now and more again in 2027.

  • Mick Taylor 25th Mar '18 - 9:26pm

    MichaelBG. It isn’t. I just wanted to make the point that quite a lot of people on benefit already get more than £124 per week – mainly pensioners.

  • @ Mick Taylor

    I am happy to read that you have more than £139 a week to live on. I am sorry I missed your point. I do accept that £124 is still a low level and it wasn’t enough for a single adult even in 2015/16. The point I was trying to make was if that was the minimum then a couple with children would nearly be out of living in poverty if they lived only on benefits and the benefits cap was abolished. And if Universal Credit was reformed and if one of the adults was working full time as per my example the couple with two children would live above the poverty line. I know it isn’t enough, but it is a start and we could be calling for it to be brought in for April next year as a step in the right direct.

  • Michael BG,

    the Universal credit system certainly needs improvements in delivery. I am not quite sure if you are referring to the benefit cap (based on after-tax average income), or if you referring to the withdrawal rate of UC?

    There are two schools of thought in the debate over rising inequality and tackling poverty. The first, like your article, is based on helping the less well-off through the redistribution of income through taxes and government programs— tax-and transfer programs.
    The second camp is based on dealing with the underlying market forces that cause inequality in the first place – pre-distribution. This approach prioritizes policies that more directly intervene in the labour market to reduce income inequality over polices that redistribute incomes after taxes are levied. For policymakers concerned about the incomes of those at the bottom of the income ladder, a predistributionist approach would favour raising wages, perhaps by increasing the minimum wage or strenthening the bargaining power of workers, over increasing government transfers to those workers in the form of Universal credits.
    The question, then, is which method is the most efficient way to reduce inequality: raising market incomes or raising incomes after taxes and transfers.
    If moderate increases in the minimum wage don’t lead to increases in unemployment then raising the minimum wage won’t reduce efficiency as much as previously thought. In fact, the losses in economic efficiency from raising revenues from high-earning workers and then transferring them to low- and moderate-wage earners may be more costly.

  • If you’re in a working family, then any top up to your wages for a living wage should be viewed as income so your employer or you is being subsidised by the state. If not then depending on circumstances it should be possible to calculate what is a reasonable benefit to live on. To receive benefit, you would need to account for your expenditure and adjustments made as necessary. Then there is the messy area of reducing benefit as you take on work. Your total income certainly should never fall as you start working. No-one working should receive less than they would if they were not.

  • @Peter Hirst – Well the problem is the insistance that benefits and tax should be separate systems. Merge them and then you can treat benefits as a taxable benefit. I think the reduction can be handled relatively simply through applying a higher basic rate of tax on those receiving benefits to those who don’t.

  • Lorenzo Cherin 26th Mar '18 - 3:44pm

    I agree with much here from, Michael bg, Mick Taylor and David Raw.

    We need a universal basic income to replace most benefits, to scrap the benefits culture, and, as with ofsted in education, scrap, job centre plus.

    We could have flexible advice, voluntary, and exciting, confidence building, classes taught by people like me who have, seen both sides, poverty and delivery, and yet cannot do this work now because for a decade the system prefers rules and coercion.

    We need equality , and harmony. We have inequality and division.

  • Tim13,

    one of the key aims of pre-distribution is to eliminate much of the need for in-work benefit and unemployment payments by, for example, seting the minimum wage at the level of the living wage, introducing schemes like Vince Cable’s leaning accounts to fund vocational training, putting a job-guarantee scheme in place to develop the work skills of long-term employed and to act as an automatic stabiliser during downturns and making child care affordable for working mothers.
    Welfare benefit payments would be largely centred on those unable to work through ill-health or disability.

  • @ JoeB

    When I write the “Benefit Cap” I mean the cap on the total amount a person not in work can receive in benefits. A policy supported by us in Coalition and which at the September 2016 Conference we agreed we would abolish but missing from the 2017 manifesto. Currently the Benefit Cap outside London is £384.62 a week for a couple with or without children, and a single person with children and £257.69 for a single person without children. The rates for Greater London are £442.31 and 296.35 per week (https://www.gov.uk/benefit-cap/benefit-cap-amounts). The Joseph Rowntree Trust state that a couple with two children before rent needed £401 a week in 2015/16!

    I support increasing the National Living Wage to 70% of average earnings. If the OBR is correct with their forecasts this would be £10.605 in 2022.

    I agree with Tim13, it is not an “either or” debate.

    @ Peter Hirst

    I hope you are not advocating scrapping benefits for those in work. We could use the Joseph Rowntree Trust calculation for what is needed to live on before rent and increase them by the rate of inflation since April 2015. The rates for April 2015 were £401 for a couple with two children, £248 for a couple without children and £144 for a single person. Would you support such rates?

    The current Universal Credit withdrawal rate is 63% and so if you are earning over £11,500 for every pound you earn you will be 5 pence better off! And if your Council Tax Benefits is still being reduced when earning this then you will only keep 4 pence.

  • Peter Martin 26th Mar '18 - 5:06pm

    @ Michael BG,

    From a neoliberal perspective the problem is that if you guarantee that everyone has enough to live on they’ll always expect to have that. They won’t be worried about unemployment. They will tend to join Trades Unions and go on strike more money.

    That’s what they think happened in the 70s. So it needed Margaret Thatcher to come along and put a stop to all that by lengthening the dole queues.

    Look I’m being Devil’s advocate here! They may not say that in so many words but that’s what they think and that’s why we have, not so much open unenemployment, but lots of hidden unemployment in the form of ZHCs etc.

  • Michael,

    the 2016 conference paper referred to the benefit cap as too blunt a tool to reduce costs. Benefit payments were instead to be lowered by reducing the cost of housing benefit with housing policies designed to reduce rent costs. That is more an aspiration than a policy ready to go.

    The manifesto introduced a number of policies:
    … it is more effective to tackle the causes of the benefits bill – low pay, high rents, unemployment and ill-health.

    That’s why we will reverse unfair Conservative policies like reducing support for younger people and cutting the benefits of people not fit for work. We will reinstate the legally binding poverty targets of the Child Poverty Act. We will:
    •Uprate working-age benefits at least in line with inflation.
    •Abandon the two-child policy on family benefits, and abolish the Conservatives’ ‘rape clause’ where a woman has to declare children that are born as a result of rape in order to access benefits.
    •Help young people in need by reversing cuts to housing benefit for 18-21-year-olds and increase the rates of Job Seeker’s Allowance and Universal Credit for those aged 18-24 at the same rate as minimum wages.
    •Reverse cuts to Employment Support Allowance to those in the Work-related Activity Group.
    •Increase Local Housing Allowance in line with average rents in an area, ensuring that LHA is enough for a family to pay their housing costs no matter where they live.
    •Scrap the ‘bedroom tax’, while seeking to achieve the aim of making best use of the housing supply through incentivising local authorities to help tenants ‘downsize’.
    •Scrap the discredited Work Capability Assessment and replace it with a new system, run by local authorities according to national rules, including a ‘real world’ test that is based on the local labour market.
    •Withdraw eligibility for the Winter Fuel Payment from pensioners who pay tax at the higher rate (40%). We will retain the free bus pass for all pensioners.
    •Ensure that those using food banks are aware of their rights and how they can access hardship payments where relevant.

  • Joe,

    Page 2 the Policy Paper 124 “Mending the Safety Net” has “Liberal Democrats would scrap the Benefit Cap …” and page 18 in 2.2.7 the last sentence is “We would therefore scrap the benefit cap” ( https://www.libdems.org.uk/autumn-conference-16-policypapers). There were no conditions attached. Scrapping the benefit cap is party policy. (The paper stated there were in 2016 “1.8 million households on council social housing waiting lists”. It refers to policy paper 104 and a 2015 policy motion “Delivering the Housing Britain Needs” which I am sure you are aware do not set a target of 1.5 million homes to be built over 5 years, promising only after five years to build 300,000 homes a year.)
    I don’t understand why you are even questioning that this is party policy. Do you oppose scraping the benefit cap then?

    I don’t understand why you have quoted part of pages 59 and 60 of the 2017 manifesto. I have never said we should scrap any of these policies.

  • Michael BG,

    The Policy paper “Mending the Safety Net” begins with a statement of intent:
    “The Benefit Cap is a blunt tool to reduce benefit payments that disproportionately affects larger families and certain locations. Liberal Democrats would scrap the Benefit Cap and manage the level of benefit payments by reducing the cost of the Housing Benefits bill through housing policies.”

    The Manifesto section on families and communities opens with “… it is more effective to tackle the causes of the benefits bill – low pay, high rents, unemployment and ill-health.” This is what pre-distribution (versus redistribution) means.

    Liberal Democrats pride themselves on listening to the concerns of people on the ground. Asking people in South Wales or the Northeast to pay more taxes so that ever greater levels of housing benefit can be paid to landowners in London and the Southeast is not a policy that will garner public support.

    Rent payments have to be tackled so that benefit caps that arise almost exclusively because of housing benefit payments are no longer required. There have been housebuilding targets for years – under Labour, the coalition and Conservatives with dismal results. This will continue to be the case until we get serious about the cost of Land.
    Quite simply, I am saying that welfare policy needs to be addressed at the root (exactly as the manifesto states) by tackling the issues of low pay, high rents, unemployment and ill-health so that ever higher welfare payments and the taxes to pay for them are not required.

  • Joe

    I am disappointed that you want us to change our policy so we no longer declare as paragraph 2.2.7 of our current policy paper does that “We would therefore scrap the benefit cap”.

    As has already been pointed out it is not an “either or” situation we can have both sets of policies. I would support us having policies which “tackle … high rents, unemployment and ill-health”. I pointed out in my previous post that our current housing policy (which is being referred to in that policy paper) will not build enough new homes to house the 1.8 million households on council social housing waiting lists. There is little point in increasing the Local Housing Allowance in line with average rents in an area, ensuring that LHA is enough for a family to pay their housing costs no matter where they live, (which was in the 2017 manifesto) if we keep the benefits cap, because those trying to live only on benefits will not be any better off.

  • The Liberal Democrats trooped through the lobbies to introduce the benefit cap in 2010 and 2012……. In 2016 they opposed it…… In the 2017 Manifesto they ignored it. And then……they wonder why 93% of the population don’t vote for them and, more important, don’t trust them.

    Then they say EU Liberal PMs support them in demanding a second referendum…. And then said PMs deny it. Frankly how can anyone believe a word that’s said…. It’s worse than herding cats.

    The present leader led the way in outsourcing/privatising and now it costs 50% more to post a letter in the UK than in Europe whilst it increasingly becomes apparent that the outsourcing house of cards is collapsing. Sorry, but there’s a credibility problem. As of now I can’t see a way out of it. All over the place.

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