Myth-busting the welfare debate

Posted: 25/10/12

The national debate about welfare has taken on a distinctly harsher tone of late. Perhaps it is not accidental that the hard line emerging from the government to accompany announcements of a further £10 billion in cuts ( on top of the £18 billion beginning to work their way through the system now) is wrapped in ever tougher language. For if the public perception is that social security really is excessively generous, traps people in dependency, and is mostly claimed by shirkers and fraudsters, then cutting a few more holes in the safety net is just that bit easier. The trouble is, so many of the announcements made by government ministers to justify their positions are either wrong, misleading or flimsily anecdotal. So here are a few myth-busters.

Myth number 1: ‘You are better off on benefits". Wrong. Work already pays in almost all cases, even where wages are low, because of the availability of in-work benefits to help with housing, Council Tax or to top up low pay (tax credits). The trouble is, it often doesn't allow people to keep much of their earnings. The new Universal Credit being introduced by the government next year may roll a number of benefits and tax credits into one, but it works on the same principle as the system it replaces, topping up low incomes and withdrawing as incomes rise. There will be gainers from the slower rate at which benefits are withdrawn under Universal Credit, and because of the increase in the personal tax allowance, but many others will be worse off or see no benefit- and unfortunately the losers look like they will include many London households facing the highest housing and childcare costs.

Myth number 2: Spending on welfare for people of working age has spiralled out of control. Although spending on benefits like Job Seekers Allowance, Income Support and Employment Support Allowance do, of course, cost a considerable amount, they account for less than one-sixth even of all social security/tax credit spending- the largest parts of which are pensions and support for low income working people- and 3.4% of all public spending last year.

Myth number 3: We have a crisis of inter-generational worklessness. In fact, if you don't include students, just 1.5 households out of every 100 have never had anyone in work ( that includes disabled people), and the number of inter-generational unemployed is tiny . The bigger issue is that so many people move in and out of employment, usually because the jobs are themselves temporary, seasonal or casual, and 1.4 million people are working part-time when they really want full-time work.
Myth number 4: There are jobs for all who want them. At last count, there were 5.5 people chasing every registered vacancy, but this figure rises to over 20 to 1 in parts of Scotland, Wales and the north of England. Welfare Minister Ian Duncan Smith has said more than once that there are half a million new jobs referred to Job Centre Plus every week. The true figure is around one tenth of that.
Myth number 5: Under the last Labour government, welfare dependency grew. In fact, up until the recession hit it 2008, the number of working age people on out-of-work benefits numbers had been falling steadily. The majority of the fall was in unemployed claimants, the numbers of which fell by a third over the period.

Myth number 6: Poverty is all about the ‘behaviour' of the poor, including the 120,000 ‘troubled families'. But 3.8 million children live below the poverty line, and half of families in poverty have at least one adult in work.

No-one is arguing that we shouldn't take fraud seriously and that there aren't some people who abuse the system. And it is true that work is usually both valuable in its own right and critical to lifting people out of poverty. Yet we risk spending too much time on the wrong things, when our priorities should be jobs growth and apprenticeship opportunities, skills training fair pay, affordable housing and childcare. So we miss the bigger targets and in the meantime, real people suffer.