In my previous post, I suggested that we could not hope to meet the several challenges that face the welfare state by simply demonizing a part of the population that depends upon the welfare state or by defraying the costs upon those who are already poorest. Yet this is more or less exactly what the Coalition government has been doing over the past five years. Faced with the need to address the size of the public deficit (itself largely a product of the banking crisis of 2007/8), the Coalition government determined that most of this reduction should be achieved by reductions in public expenditure rather than by increases in taxation. It also chose to ring-fence the budget for healthcare and for schools and to protect pensioners’ incomes by applying the so-called ‘triple lock’ (guaranteeing an annual upgrade of at least 2.5%).
Reductions in expenditure were achieved by increasing VAT, freezing Child Benefit before moving to a 1% p.a. upgrade and means-testing, holding increases in working-age benefits for three years to 1% p.a. (and subsequently upgrading in line with increases in prices rather than incomes), inducing reductions in Council Tax Benefit, tightening eligibility tests for people with disabilities, applying further restrictions upon Housing Benefit (including the so-called ‘Bedroom Tax’) and imposing a household ‘welfare cap’ of £500 for a family and £350 for a single-person household. At the same time, Disability Living Allowance was replaced with Personal Independence Payments and other incapacity benefits were also changed, with new and tighter ‘fitness to work’ tests (saving the Treasury around £5.85 billion p.a.). Overall, benefit spending by the Coalition for 2015-16 is £16.7 bn. lower than it would have been with ‘no change’ since 2010. But as there has been a net increase of 6.2% in spending on pensioners (including a 12.6% hike in the costs of providing the basic state pension), the bulk of the reductions has come in working-aged benefits which have fallen by 6.5%. Generally, it is working aged households with children who have lost the most (across the income profile). Overall, the distributional effect of tax and benefit changes since April 2010 has been regressive (except for those in the top one per cent of the income profile), with those in the bottom ten per cent losing between 4-5% of their income, as well as losing out disproportionately from cuts in the provision of public services.
Rhetorically, these changes have been justified by an emphasis upon welfare dependency, disincentives to work and personal failings (including ‘family breakdown’ and ‘drug and alcohol addiction’) and there has been a persistent focus upon able-bodied people of working age in receipt of benefits and the imperative to ‘make work pay’. But this is misleading. Jobseekers Allowance for 2015-16 is projected to cost around £5.2 bn, about 2.5% of all benefits expenditure or a little more than one per cent of the overall welfare state budget. The bedroom tax will save around £465 million in a full year. The ‘welfare cap’ may yield as little as £100 million in savings (though it consequences are concentrated upon a comparatively small number of poor families).
One of the imperatives of Coalition reform has been to ‘make work pay’. This idea of ‘less eligibility’ has a very long history, not least in the post-war settlement envisaged by William Beveridge. But there is increasing evidence that work does not pay – or, at least, it does not pay enough. A greater proportion of poor people in Britain are in working rather than non-working households. There are more people employed in Britain in 2015 than ever before but 9.6 million of them are part-time workers, of whom 1.8 million reported that they wanted to work more hours, and as many as 1.8 million are on zero-hours contracts. Here’s the conclusion of the Social Mobility and Child Poverty Commission, established by the government under the Child Poverty Act (2010), in their 2015 pre-election report, Bridging the Social Divide:
There are more jobs than ever in the British economy. The number of poor children in workless households is falling. But almost twice as many children in poverty now live in a working household than a workless one. Work, the best stepping stone away from being poor, is not the panacea it once was. High levels of low pay, with 5.3 million people – mainly women – earning less than the Living Wage, mean that poverty is today a problem for working families rather than just the workless or the workshy. Public policy, for decades focused on welfare to work, now needs to realign to move more people from low wages to living wages.
The costs of austerity have been disproportionately focussed upon the poorest people and this has been justified by mobilizing opinion against a ‘scrounging’ culture, in practice confined to a very small number of people on the fringes of the welfare system. The working poor have been required to pay the costs of a crisis they had no part in creating.
In the next post, I turn to the ways in which the Coalition government has disadvantaged the young.
Chris Pierson is Professor of Politics at the University of Nottingham, author of Beyond the Welfare State and lead editor of Political Studies.
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