Fraser “see no evidence” Nelson wrong on UK benefits generosity

Declan Gaffney disproves Fraser Nelson's claims that UK benefits "are some of the most generous in Europe".

Nelson shouldn

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Last week, Fraser Nelson announced that “our benefits are some of the most generous in Europe”. This assertion has led to some surprise and a certain amount of confusion.

fraser_nelsonHow generous is the UK social security system in international comparison? Full Fact looked at this in response to Nelson’s comments, but their article focussed on expenditure levels rather than specifically on generosity.

Usually welfare generosity is assessed not in terms of how much government spends but on how much benefits are worth.

A common summary measure of this is the ‘replacement ratio’ which shows how benefits when out of work compare with income when in work.

Fortunately the OECD publishes detailed comparable national data on net replacement ratios for different household types and at different points in the earnings distribution so it’s possible to assess Fraser’s assertion on the basis of evidence.

On the OECD’s summary data on net replacement ratios, the UK is placed 18 out of 24 European nations: the nations which have lower ratios (on this summary measure) are Poland, Estonia, the Slovak Republic, Hungary, Greece and Italy.  So on the face of it, the claim that the UK is among the most generous looks severely misplaced.

But, inevitably, there is no single figure that summarises the comparative evidence in a simple manner. The generosity of the benefits system varies by family type, with some systems, including the UK’s,  skewing support heavily towards families with children.

Relative generosity varies by earnings level: a system that provides ‘generous’ protection to a low-waged worker can be stingy towards higher earners. In many countries, benefit levels are higher during an initial phase of unemployment (typically 18 months to two years) and lower for the long-term unemployed.Average wage levels affect estimated generosity. And the UK’s relative generosity depends a lot on how much of ‘Europe’ is included in the comparison.

Still, looking at the full range of evidence, two broad conclusions about UK benefit generosity seem clear. For people who have just become unemployed, the UK has one of the least generous benefit systems in Europe.


See also:

After Jubileegate: Five reasons why the Work Programme gets it wrong 6 Jun 2012

£25bn welfare cuts? Hilton’s plan is absolute nonsense 17 May 2012

MSPs outline “grave concerns” about UK welfare reforms 16 May 2012


Over the longer term, as people in other countries exhaust earnings-related benefits and move on to social assistance benefits, the UK looks far less stingy compared to other European countries, although it is still stretching things to say unequivocally that UK benefits ‘are some of the most generous in Europe’.

Here’s the evidence.

The table below shows how the UK replacement ratio during the initial phase of unemployment compares to the average for 24 European nations. Yes, these are ratios of ratios unfortunately – we need some way of summarising a lot of data, so I’ve divided the UK  ratio by the cross-national average.

Where this gives a figure less than one, the UK replacement ratio is lower (less ‘generous’) than the average. Three points in the earnings distribution are shown- 67%  of the average wage, 100% and 150%. Six different household types are also shown so there are 18 combinations of earnings and household type in total.

table 1

The UK is below the cross-national average for all 18 categories. In two cases, for single earner couples with children on low or average earnings, the difference is trivial. For other categories the UK ranges from .52 to .89 of the European average. In general, people without children receive much less generous benefits.

But perhaps the cross-national average is being pulled up by a handful of exceptionally generous welfare systems? In that case the UK might still be among the most generous while being below the average. Unfortunately not. This table shows where the UK fits in a ranking of the 24 countries.

table 2

Out of the 24 countries, the UK ranks 24th for eleven of the eighteen categories and between 20th and 23rd for five of the remaining categories. Only for two categories, single earner couples with children on low to average wages, is the UK higher than 20th:  not coincidentally, these are also the only two categories where the UK ratio is close to the cross-national average.

Once Europeans have exhausted any earnings-related unemployment benefits the picture changes. The UK is now above the cross-national average for most household types and earnings levels, although this result is influenced by the fact that two countries have a net replacement rate of zero for some household types, pulling down the cross-national average. The last table shows where the UK fits in a ranking by long term replacement ratio.

table 3

Again, there are eighteen combinations of wage and household type and 24 countries. The UK is in the top third of the national rankings (i.e. 8th or higher)  for 7 of these combinations, all families with children. We could say that for seven out of 18 combinations, the UK benefit system is among the more generous in Europe for long-term claimants.

So the UK benefit system is spectacularly ungenerous compared to other European countries for people who are not long-term unemployed: that is, let’s remember, for the great majority of people who ever experience unemployment. But because it tends to tilt support towards families with children, and because European countries reduce generosity sharply when earnings-related benefits are exhausted, the UK is among the higher ranked countries for longer-term generosity to out-of-work families with children: similar to France, somewhat less generous than Germany, a lot less generous than Denmark.

Which of these aspects is more important? It depends what you’re interested in. Personally, I’m interested at the moment in why attitudes to social security are so negative in the UK compared to other European countries.

In that context, the lack of generosity of the UK system in the initial period of unemployment is by far its most striking feature. Yet again,  ‘nothing for something’ rather than ‘something for nothing’  seems to be the defining feature of out-of-work benefits in the UK.


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  • Anonymous

    To be fair, yes, our corporate welfare IS among the most generous in Europe.

  • Mr. Sensible

    “Personally, I’m interested at the moment in why attitudes to social security are so negative in the UK compared to other European countries.”

    One word. Media… Need I say more…

  • JC

    I’ve been unemployed now since December. Am I long term, medium term or short term? Over the last 15 years, I’ve spent about 2 years being unemployed, so have experienced the system at close quarters. Rather than claim benefits now, I am working for an agency at minimum wage. It’s been better than JSA, and I do get interviews on the back of it.

    Given that there are few jobs offering above £25,000 and never have been, then the idea of capping benefits at an equivalent wage of over £30,000 sounds reasonable. Where would I get a job paying that much?

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  • Anonymous

    The threshold is 6 months, I believe, at present, for being sent do to slave labour.

    And you are, of course, ignoring in-work benefits. And the fact that you think increasing longer-term costs by ripping people away from their communities and families through no fault of their own, but Government policy designed to cause social cleansing, is a good idea.

    There /are/ solutions. Like rent caps. That you refuse to consider them…well, you’re a useful idiot for the Tories.

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  • Honukokua

    Very interesting article/post. Could be expanded upon perhaps?

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  • JC

    I can see that you are, as usual, not in this for a debate, just to push your own views regardless. How about expanding on your personal experience of benefits instead of decrying other’s?

    I can also remember the days of rent caps and rent tribunals when I rented accommodation. I didn’t believe it helped then, and I don’t believe it will help now.

    What’s your experience of rent caps and being unemployed? Can you expand on your times on tax credits and how much a pleasure it was/is?

  • Anonymous

    Rot. I’m quite ready to argue on the facts.

    And of course you don’t “believe” so, because you’re going entirely by your own experience and ignoring said facts – that housing benefit has been neutered, that housing costs to spiral and rent caps are the ONLY way I can find to avoid, in the short term, social cleansing.

    The simple fact is that we have a critical housing shortage thanks to Thatcher’s sins and Labor’s failure to remedy them (pretty much as usual).

    Why do you support social cleansing and tearing people away from communities and families? How do you make kids invest in their community when they have to keep moving to poorer and poorer accommodation, in different parts of the country? How do you plan on dealing with the social and crime issues this raises?

    I’ve been periodically unemployed for some years, I’m a freelancer and work’s been hit directly – both in Games and Universities – by a Coalition *actively hostile* to them. As to tax credits, sometimes I’ve been eligible and sometimes not, thanks to the arcane eligibility rules. It’s hardly ideal, but the fact is without re-balancing the economy to stop capital from pushing out wages, as it has since the 70’s, they’re necessary for poor people to avoid starvation and homelessness in many cases, even moreso now that other benefits have had much of their bone removed (there was no flesh left anyway).

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  • JC

    I must say that I wasn’t aware I supported social cleansing until you told me I did. I am grateful for your insight. As for tearing people away from their communities, well, we need a mobile workforce as new technologies and businesses develop. We can’t all be software developers and testers with the opportunity to work from home. I work in food safety, so have to attend whichever factory or laboratory will employ me and I imagine many others are in a similar position.

    I agree with you about tax credits. A complete waste of time and money as the rules are too complicated.

    We need to build many more houses to relieve the housing crisis, probably by relaxing the current complex planning laws.

    It is the first time I have heard someone in the services sector of the economy arguing that it is too large though. How would you suggest that it changes? Do you want to increase manufacturing, already at very high levels, or do you have an alternative like state created jobs?

  • Anonymous

    Then you’re now informed. And you still support it.

    There is a vast difference between a workforce which is mobile, and shunting people off away from their jobs and comm8nities because housing benefit is now designed to cover progressively less of the housing stock.

    I’m sad to hear, given the same attitude of course applies to your work, that you’re involved in sabotaging food safety.

    Moreover, that’s not what I meany about tax credits, as you’re well aware. Stripping income from the poor might strike you as a good idea, but I can’t support it at a time when wages are being crushed by capital, and will continue to fall.

    Building on green built is always the answer of the Tories, and private interests will not substantially increase building houses usable by the poor and even the middle class. The only reasonable answer is council houses, but in the short term they’ll not a sufficient answer – that’s where rent caps come in.

    And why do you think I’m in “services”? I’m involved in the creative sector, which is not generally listed as such. A sector which has faced active hostility from your Government, something which is worth reconsidering.

    The answer lies in both pulling up from the economic death spiral your Tories have tried to trap us in, and properly taxing capital, allowing wages to get out from under the trap they are present in (forever shrinking), and providing the necessary tax base.

    I’m sure you’ll respond with another blank-minded defense of coalition policy, and a complete disregard for the poor.

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  • iglwy

    google “Beveridge report. From deserving poor to scrounger” by Tom de Castella BBC News Magazine.

  • iglwy

    also look on youtube “Handout Hunger” RT Russia Today London Bureau hit piece on poor people. Make sure to leave negative feedback.

  • LB

    There are some obvious explanations.

    1. People have personal knowledge of people getting a lot more money from not working than they do for working, or people who get close.

    2. Migration. If you’re on a waiting list for a council house, and someone jumps the queue because they score more points, people quite rightly view that as extremely unfair. It’s back to people getting something for nothing.

    3. The left’s current attitude. The rich and the middle class have to pay all the bills, but if they want something back, well they are scum aren’t they. If you have to pay lots of money for services and are then denied them, but others who haven’t paid in get them for free, again it sticks in the throat.

    A good example of this is the child benefits, and people who have to sell their homes to fund care, but the feckless (or poor) get it for free.

    4. Value for money.

    Since its basically your retirement money that’s been diverted to the welfare claimant, people are questioning the value for money aspect of NI. FOr a 26K a year worker, if they had put their NI into the FTSE, they would have had a fund exceeding 560K. The state pension costs less than 130K. That hard working person, hardly rich, has had 430K taken off them. Now in retirement, they are on welfare as a result. Putting people into welfare because the state has deprived them of money, is the fault of the state and its welfare system.

    So those people will target the receipants of that largess.

    5. It is largess. Tot up all the money that’s going their way, from income, to free housing to free schooling, free food in some cases, to free medical care, and then the free pension (they haven’t paid in), and its lottery sums of money.

    That’s why its hardening, and its going to get far far worse. The reason is the state is bankrupt. It can’t pay. Imagine the consequences of not paying the state pension and no welfare in its place.

    That’s what’s going to happen.

    However, we have plenty who want their cake now.