1% benefits rise at odds with principles of Welfare Reform

This day last week I was on BBC Radio Ulster’s “Good Morning Ulster” programme discussing welfare reform, and perhaps surprising a few people by opposing the Coalition Government’s 1% cap on benefits rises.

The Coalition’s defence of the rise is disingenuous – deliberately quoting only recent rises in out-of-work benefits to justify a real-term reduction in working-age benefits, of which out-of-work are only a small proportion. But even that is not really the point – the point is that the 1% rise defeats the point of one of the Government’s own (perfectly reasonable) objectives in its current Welfare Reform proposals.

Perhaps the objective which is most widely understood around Welfare Reform is the aim of “making work pay“. Two things have to be understood about this:

  • “making work pay” is not a simple matter of money (the amount received in benefits versus the amount received in wages), but about the overall impact of having work (the impact on benefits received, if any; and the cost of work as well as the wage received); and
  • the advantage of work is not merely financial (be it to the worker him/herself or to the taxpayer) but also social (creating social networks, developing a career ladder, potentially even adding value to the extent of creating other work).

The Centre for Social Justice has long noted this, but the Coalition Government appears to have forgotten.

Here is the problem: assessing benefits payments in comparison with work wages defeats the object. People in work often have options to increase their wages without penalty – working a few extra hours, taking on some extra income, or whatever; people on benefits (and other fixed state income) have not. Furthermore, people in work are en route to a career (hopefully), with perhaps a low initial wage likely to be increased through life (all being well); this is not the case for people on benefits. In any case, it is not true that public sector pay is only rising 1% – including increments, full-time public sector pay rose 3% across the UK in the last financial year. It is for these reasons and others that benefits always rose in line with inflation, not pay; the main point being that the value of work is much more than just the money received from it, which is the very reason encouraging work is such a fundamental part of the reform.

I have long cautioned that a set of reforms which, in theory, is largely positive, could be undone by the Treasury, whose only concern is money rather than long-term social welfare. This caution continues to apply.

Advertisements

3 thoughts on “1% benefits rise at odds with principles of Welfare Reform

  1. James Campbell says:

    Ian,

    Perhaps your Tory soul is showing. Pay rate annual increments are a sort of deferred entitlement rather than a pay increase. Also, when talking about “pay rises”, it is a mistake (at least) to only reference salary when other relevant factors are changing. For me when I was a worker, the bottom line was what I took home not what my nominal annual salary was. Pension contributions and tax were the two major negative factors. For civil servants the effects of increased pension contributions have in most cases outstripped rises and increments.

    • Think that rather demonstrates rather than refutes my point (though don’t accept your point re increments).

      The point is it is ludicrous to base benefits on public sector pay.

      • James Campbell says:

        I wouldn’t ever disagree with you on that. The whole ConDem philosophy on benefits is hostile and it will be interesting to see how it pans out with their own supporters. Particularly interesting will be IDS taking money away from the agricultural sector.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: