It’s time to stop kicking people at the bottom
Welfare spending has dominated the political debate since the Coalition came to power. At the end of last month, David Cameron launched into an assault against a ‘culture of welfare entitlement’ in a speech which sounded as though it had been stitched together from focus group findings. And indeed it is certainly true that hostility to ‘welfare’ and ‘benefits’ (both increasingly pejorative terms) have increased even as hundreds of thousands have lost their jobs.
With a crisis of the market transformed into a crisis of public spending, the realities of the welfare state have been all but hidden. Welfare spending is often said to be out of control, and the widespread sense is that this is due to growing numbers of feckless layabouts. Few know that around 43% of welfare spending is on pensioners’ incomes, worth around £87bn – a figure that has grown by £18bn in 10 years. Another £41bn goes on family benefits, income support and tax credits. Just over £30bn goes on incapacity benefits, a figure which has grown slowly. Another £25bn is spent on housing, with just £5bn on unemployment benefits.
Attacks on the welfare state long predate this Government. Since Margaret Thatcher came to power in 1979, successive governments have abandoned policies promoting full employment; those out of work as a result have been demonised instead.
It is the dramatically changed economic and social situation that has put stress on William Beveridge’s original settlement. In his famous Beveridge Report in 1942 – which laid the foundations for the modern welfare state – he proposed a universal framework on the basis that all were at risk of being plunged into poverty through unemployment, poor health or old age. But unemployment benefit was only originally intended as a temporary safety net: at a time of virtual full employment, it was not envisaged that people would be out of work for the long-term. Indeed, until the mid-1970s, unemployment was consistently below a million. But long-term unemployment last year was higher than unemployment as a whole in the early 1960s.
Britain continues to suffer from the destruction of skilled, medium income, secure jobs from the 1980s onwards. The failure to replace them has led to structural high levels of unemployment in many communities – which then, in turn, end up demonised. When Iain Duncan Smith suggested that the unemployed of Merthyr Tydfil – one such community badly hit by deindustrialisation – ‘get on a bus’ to Cardiff, it was later discovered that there were 9 jobseekers chasing every vacancy in the Welsh capital.
This legacy also partly explains the number of Incapacity Benefit claimants. A study by Dr Christina Beatty and Professor Steve Forthergill put forward two explanations for the number on Incapacity Benefit: firstly, that claimants did have genuine health problems, and secondly, that the underlying cause was a lack of work. As they put it: ‘The long economic recovery from the mid-1990s onward helped plug the gap, but never completely.’ With a lack of demand for labour in the areas affected, some individuals were squeezed out: particularly those who were a ‘poorly qualified, low-skilled manual worker in poor health.’
Glasgow was a striking example of this process. The number of people claiming some form of disability benefits peaked in 1995 at one in five of the working population, or three times the national level. As a study by Glasgow University and Glasgow City Council put it: ‘The main reason for the huge growth in sickness benefit claims was the city’s rapid de-industrialisation.’ The number of manufacturing jobs in the city in 1991 was just a third of the level twenty years earlier.
If welfare spending is to be brought down in a sustainable way – without simply kicking people at the bottom – it will mean creating jobs. Although the official unemployment figure is over 2.6 million, it is likely to be significantly higher: as the TUC has shown, if you include other ‘economically inactive’ people not included in the official unemployment figures, as well as part-time workers forced to do full-time work, there are over 6 million people looking for secure work – and less than half a million vacancies. As the Telegraph put it at the end of last year, there are 23 people chasing every job.
That will mean an industrial strategy. Germany has avoided the ‘hollowing out’ of industrial jobs in part because it avoided the ‘let the market decide’ and ‘the state shouldn’t pick winners and losers’ approach of New Labour and the Tories. By doing so, it first caught the hi-tech boom, and then built a thriving renewable energy sector. An active industrial policy – backed up by a public investment bank – could help create secure jobs and, in doing so, reduce welfare spending.
Tackling the housing crisis is also key. Billions of pounds of taxpayers’ money is being wasted on housing benefit – but that is lining the pockets of private landlords, not going into the bank accounts of tenants. It’s the result of the failure of successive governments to build council housing, and the abolition of rent controls in 1988. A council housing building programme could create jobs, stimulate the economy with a ‘multiplier’ effect, bring down housing benefit spending, and reduce the 5 million-strong social housing waiting list in this country.
And then there is the low wages crisis. Tax credits are a lifeline for millions, but they are effectively a subsidy for low pay. A living wage would reduce the amount spent on tax credits – and reduce the housing benefit bill, too, given 93% of claimants last year were in a household in which at least somebody worked.
Tackling this triple crisis would help bring down welfare spending without kicking people at the bottom - and build a better, more equal society, too. But the prevailing consensus - that welfare spending has increased due to people's behavioural failings - has to be challenged. It is neo-liberal policies that have driven all three crises: only a break with the past will resolve them.
- Policy areas: Economy and Industry, Inequality
- Projects: A Fair Economy, An Active Government
- Tags: fair economy, unemployed, welfare