Thursday, 10 January 2013

Benefit Spending On The Unemployed Is NOT 3%(Probably)

I get annoyed, extremely annoyed, when I see careless assertions that distort the data or ones which are easily misinterpreted so that people then go on to unwittingly believe something that isn't true.

I've sat with my head in my hands this past week, reading and listening to people who should know better fluff this time and time again. This is the Guardian datablog on the subject. This is the graph it produces.

3% of the DWP expenditure in 2011 went on Jobseekers Allowance, the benefit for the unemployed. So that is '3% of the budget is spent on the benefit for the unemployed'. This morphed into a monster because widespread ignorance of the benefits system has been so successful in how it has been propagated by opportunist politicians and irresponsible journalists that it has even affected people who support the social security system. It should be noted that the percentage is less if you include the HRMC-administered tax credits, it gets closer to 2.2%. Whether tax credits should actually be considered benefits is a debate politicians of all sides do their very best to avoid; both Labour and Conservatives have introduced payments specifically dubbed 'credits' and 'allowances' so to decouple their targeted demographics from being 'claimants'.

Some unemployed people only get JSA because they aren't eligible for anything else due to complex circumstances the system doesn't recognise. I myself only get JSA and DLA and am not eligible for anything else. But many are eligible for other benefits which are not specifically targeted at unemployment, but on anyone with a low income, of which the unemployed have the very lowest. These are means-tested benefits, with the exception of Child Tax Credits(correction: they are means-tested). As the benefit uprating cap affects virtually every working-age claimant, the calculations used by the IFS and others to determine who gets hit is a rough measure how many households(important: there are no equivalent figures for individual claimants) receiving benefits/credits are in work. The figures vary between 60-68%.

That leaves the remainder that is made up of the unemployed, the sick and disabled and lone parents. The average rate for JSA claims in 2011 was: 1,451,025. The average rate for Lone Parent Income Support claims was: 593,592. For Incapacity Benefit and ESA it was: 2,391,750. JSA makes 32% of those affected among the non-working proportion then, which is somewhere between 10% to 12%. Be warned that these workings are rough, but people should stop being so careless as to claim '3% of benefit spending goes on the unemployed'. It's three or four times more.

The issue is that is still a low proportion of the overall expenditure. People have to really decide if they want the social security system to only be a circumstantial safety net or to be a comprehensive means of redistribution to prevent those circumstances from happening in the first place. Some might feel that should be determined by utilitarian cost:benefit, usually prevention is less expensive in the long-term than crisis management. Others may feel that the morals of it matter more; people should support themselves where possible and employers must pay wages people can live on.
For me, simply sticking with data and correcting errors who ever makes them is all I feel I can do most of the time. Treat the figures here with caution though- I've had to use information that is both for households and individual claims together and there is bound to be parts which don't square if they were combed over. This was done in a hurry, but I believe the basic premise is true. 


  1. I presume you knew this,just in case-

    Social Security -whatever happened to that?

  2. Lord Freud in the House of Lords,on record-"While I am discussing the points made by the noble Lord, Lord Alton, about disability-picking up his query on PIP-I suspect we will have a chance to talk about that more next week. There is not a difference: the 50 meter to 20 meter change does not create any substantial difference in entitlement. I will be able to go into that in some more detail."

  3. Lord Freud in the House of Lords,on record-"While I am discussing the points made by the noble Lord, Lord Alton, about disability-picking up his query on PIP-I suspect we will have a chance to talk about that more next week. There is not a difference: the 50 meter to 20 meter change does not create any substantial difference in entitlement. I will be able to go into that in some more detail."

  4. Why are the Government doing this? The Tories think it necessary and perhaps desirable. The Liberal Democrats, I think, find it necessary but perhaps regrettable. Their argument goes-I will list it and try to address these points-first, the welfare cost is unsustainable; secondly, it is creating welfare dependency; thirdly, welfare has to be cut if we are to cut the deficit; fourthly, it is not right that pay be limited to 1% while benefits rise at CPI; and finally, in any case, the rise in tax allowances offsets all this.

    A fair summary, I hope, of Government views. Every point is false; every one. First, the welfare bill is not unsustainable. According to the DWP's former chief economist, benefits took 12.5% of GDP under John Major in 1994, with 8% going to working age households. As of January 2012, benefit spend fell to 10.5% of GDP with only 5% going to working-age people. The driver of benefit spend is simply more pensioners getting better pensions. I welcome that, but poor children should not be made poorer to pay for it.

    Next, in the Telegraph a fortnight ago Mr Duncan Smith asserted that tax credits and benefits created welfare dependency, when he knows that they make it possible for families to live on the same wage as that paid to a single man. A single parent, a Telegraph reader from Amersham in Buckinghamshire, wrote back on 3 January that she had brought up 3 sons while working part-time. Two are now at university and she is about to go into full-time work. She concluded:

    "I object to Iain Duncan Smith's suggestion that tax credits have made people lazy dependants who rely on hand-outs ... the tax credit has been a life saver".

    His welfare dependency; her life saver. His smear; her experience. I know whom I believe.

    Next, the Government tell us that we have to cut welfare to cut the deficit, otherwise, it will be nurses and teachers-the usual rhetorical flourish. It is a matter of policy choices. It always has been and always will be. I will offer mine, although they are not necessarily those of the Labour party. While private pensioners enjoy more than £30 billion a year of tax relief, two-thirds of which goes to the better-off, while we cap the upper earnings limit, which saves higher rate taxpayers £11 billion a year, while we refuse-as my noble friend Lord Campbell-Savours has reminded me-an ad hoc Lords committee, urged by my noble friend Lord Myners, on tax-avoiding personal service companies, and while millionaire earners see their tax rate fall to 45p at a cost of £3 billion, I think that there is money from those who can afford to pay.


  5. Fourthly, we are told that as pay is limited to 1% so must benefits, which since 2007 are outpacing pay. Until 2007, earnings outpaced RPI benefits. Why else did pensioners demand that the state pension be linked to earnings not prices? Yes, since 2007, during the recession earnings have fallen behind inflation. Does that mean that we reduce benefits so that they do not keep pace with inflation either? In any case, it is a false contrast because many families with 1% pay increases also rely on tax credits, housing benefit or council tax benefit for a living income.

    As the Child Poverty Action Group has said, this child is poor not because its mother is a lone parent but because she is a cleaner; this child is poor not because its father abuses drugs but because he is a security guard. Five million people are paid less than the living wage. Two-thirds of those benefits cited by Mr Duncan Smith go to households in work to ensure that work pays, as we all wish to see. However, to make the unemployed poorer, the Government will make all the working poor receiving benefit poorer as well. One despairs.

    Finally, the Minister may say that raising the tax threshold significantly is the best way to support low-income working people-except that it really is not. Very many of the working poor are below the tax threshold, and others-the full-time cleaner or the security guard on the minimum wage-keep only 15% of that alleged gain because means-tested housing benefit and council tax benefit taper away 85% of the increase in tax allowance, and then the other cuts pile in.

    Every justification used by the Government for these benefit cuts is untrue-every single one. If, in a final throw, the Government say that the public support them, that is because the Government, with the aid of some of the press-none of whom, I suspect, will experience these benefit cuts themselves-have peddled the view that the poor must become poorer to save the rest of us.

    Do the Government know or care what damage they are doing as they finger the vulnerable, the fragile, the poor, the soon to be underemployed, the soon to be unemployed, the soon to be in severe debt, the soon to be evicted-and, yes, the soon to be hungry-and encourage those who are themselves just a rung or two up the ladder, also struggling, to blame not those above them, bankers and the like, but those below them for their struggle? That is ugly, cynical, and utterly indecent.

  6. The noble Lord, Lord Freud, referred to cumulative assessment. With the help of Citizens Advice and Landman Economics, we were able to work out pretty precisely-to within 10p or so-the total cumulative effect, since 2010, of the benefit cuts and tax changes. I did it for one family type-the security guard with a wife and two children. If we can do it over a weekend with wet towels and half a bottle of gin, I am quite sure that the Government can do it with the numbers of staff that they have in the Treasury. The answer is that the Government are not choosing to do it. They do not want to be shamed by us and others as to the effect of what they have done over time. There cannot be any other reason why the noble Lord, of all people, who has the utmost respect from the House for his integrity on these issues, and the Government continue to duck the consequences of their action by giving us the cumulative statistics today.

  7. Finally, the noble Lord, Lord Freud, sheltered behind averages, which of course fall in the middle of the third quintile. I was trying to describe the effects on the poorest quintile, particularly the poorest decile. He did not rebut one of those statistics.

    A long time ago, the Reverend Thomas Chalmers, a Scottish Malthusian in 1819, said that character is the cause, comfort is the result. He had the excuse of not being able to read the early effects of an industrialising society and its profound effects on the poorest and the most vulnerable, and its children. What is our excuse? I beg to move.

    Motion agreed.

  8. Who needs satire-

    We could have cut off both arms for all but decided to slightly exempt
    some people-end of impact assessment.

  9. WE could have dug a trench and buried everybody alive,but decided not to-end of impact assessment.etc.



  12. Increase the allowances that supposedly account for the extra costs of disability/illness to a level that does so.Allowances which would still be very much cost effective after such an increase.The reason and the only reason(not fecklessness,financial irresponsibility,any such epithets thrown at us)we are in receipt of means tested benefits is because of the LACK of such account)It is often stated that we are unsustainable-and no longer afforded-the opposite of course cannot afford not to.I am the meanest person you could ever meet,frugal to the nth degree-I am being squeezed til the pips squeak,if I am many more less fortunate are going to change such a lifestyle choice,rendering much extra cost to the State and dismay.

  13. And stop with the "financial independence" crap-you are dependent on ME and many others.