The Great Benefit Swindle
07/01/2013 1 Comment
Tomorrow MPs will debate the real-terms benefits cuts proposed by George Osborne in his Autumn statement last month. (Was it Autumn last month?) Anyway, I’ve been wondering what all of this is about and have found some quotes from the government to shed some light on things.
…Conservative methods are not just good for the strong and the successful but the best way to help the poor, and the weak, and the vulnerable. David Cameron
Oh, that’s a relief – I thought they were going to do something nasty to poor people for a moment. Oh, hold on – here are some more quotes from the government about what it’s like to live on benefits.
Don’t get a job. Sign on. Don’t even need to produce a CV when you do sign on. Get housing benefit. Get a flat. And then don’t ever get a job or you’ll lose a load of housing benefit.David Cameron
…out of work for years, playing computer games all day, living out a fantasy because he hates real life… David Cameron
…it pays not to work. That you are owed something for nothing. David Cameron
…fairness is also about being fair to the person who leaves home every morning to go out to work and sees their neighbour still asleep, living a life on benefits. George Osborne
And all of this time I’d thought it would be quite unpleasant to have to live on benefits but actually having read those things, it sounds ace! They continue:
The system we inherited was not only unaffordable. It also trapped people in poverty and encouraged irresponsibility. Those within it grow up with a series of expectations: you can have a home of your own, the state will support you whatever decisions you make, you will always be able to take out no matter what you put in. David Cameron
…there was a stronger culture of collective responsibility in this country. But as I’ve argued for years, the welfare system has helped to erode that culture. David Cameron
Time and again people were not just allowed to do the wrong thing, but were actively encouraged to do so. David Cameron
So it would seem from the government’s position that over time, working-age benefits have become more and more attractive. That the welfare system has, over time, changed people’s incentives from wanting to work to not wanting to work. The one statistic used to back this up was presented in George Osborne’s Autumn statement but has been quoted many times in the press since:
…over the last five years those on out of work benefits have seen their incomes rise twice as fast as those in work. With pay restraint in businesses and government, average earnings have risen by around 10% since 2007. Out of work benefits have gone up by around 20%.
Well, no wonder people’s incentives are moving from wanting to work to wanting to live off benefits – the benefits are going up twice as quickly right? Hmmm.
Jonathan Portes immediately spots the slight of hand George used here. Although that stat is correct George has done some quite amazing cherry picking and completely discarded the vast majority of the useful data. As Portes notes:
The value of out of work benefits relative to average earnings (and more broadly the incomes of those in work) has fallen steadily over the past three decades, until the recent slight uptick resulting from the recession:
In 1979, unemployment benefit (the predecessor to Jobseekers’ Allowance) was about 22% of average weekly earnings; today it’s about 15%, a relative decline of about a third. What’s going on? Simple: JSA has been indexed to inflation. In normal times, earnings rise faster than prices, as workers become more productive and the economy grows; this chart shows the cash value of both JSA and average weekly earnings:So indexing benefits to prices has been far from unsustainable, or “unfair” to working people, over the last 30 years. Indeed it has resulted in a substantial reduction in spending on out of work benefits as a proportion of GDP, compared to the alternative of indexing benefits to earnings.
So take a good look at that green line compared with the red line in Portes’s second graph. Average weekly earnings have far outstripped job seeker’s allowance for the past thirty years. If we accepted the idea that people are now choosing not to work because the benefits system makes job seeker’s allowance so attractive, then how would we explain that graph? It should have been much more attractive in the past than it is today.
(Another possibility for people not working is that the economy is depressed and there are fewer job opportunities than there are people who want to work. I think that one might be worth considering before we wage war on the unemployed. The government and I disagree on a lot though.)
Now when it comes to many of the things that have gone wrong in the economy, people argue that George Osborne has been dealt a difficult hand, or that he is well-meaning but numerically incompetent. On this occasion though we can see exactly what has happened and it is just pure deception. There is absolutely no way that George wasn’t able to access to stats before 2007 – he simply ignored all of the data that didn’t back up what he wanted to do.
When we look at the true picture we see that the income of those on job seeker’s allowance has fallen further and further behind the income of those in work. I don’t doubt that there are a small number of people who exist who can’t be arsed to get a job but these are a tiny minority and to label everyone out of work in this way, especially during a depression, is really unbelievable.
The government wants to cut benefits – I understand that. If they said something like:
“We understand that job seeker’s allowance was closer to average wages in the past and understand that it has fallen further and further behind over the years. Even taking this into account though we still think that it is too high and we would like to have a debate to discuss this.”
Then at least we would be going into a debate on an honest premise. If we go into a debate based on a single statistic that was cherry-picked for the express purpose of distorting the debate and couple it with the propaganda in the quotes above, how can we really expect to get any kind of sensible outcome?
And to the politicians it might just be a debate but let’s remember what we’re actually talking about here. Banks around the world caused a financial crisis on a truly huge scale. In the UK a million working people lost their jobs. They didn’t overnight choose not to work because they were “scroungers” or because they wanted to spend their days “playing computer games”. We are talking about cutting the benefits for people who, through no fault of their own, lost their jobs and are now in dire trouble with no imminent prospects to return to the work they had.
Sometimes when I write these posts I’m despairing of the government. On other occasions I am angry with them. Today I am neither of these. Today I am just ashamed.
RedEaredRabbit
About RedEaredRabbit
RedEaredRabbit 
The problem with this debate is like you say the people that lost their jobs due to the banks complete loss of reality are the one’s who are now suffering. The debate is always skewed as there are two types of benefit claimants historically, ones trapped in an area of little economic activity and those simply exploiting the system (I.e. most of the claimants in London) and from time to time when the incumbent government eventually fucks up those ranks get swelled. I am all for reducing the exploitative misuse of the benefit system. A point I would make that is overlooked is a lot of self employed people are doing a double whammy as they not only under declare earnings thereby denying the government significant tax revenues they are also then claiming child tax and working tax credits.