The truth about Britain’s “bloated welfare” system

Britain does not have a "bloated welfare" system despite George Osborne's rhetoric. The truth is that welfare spending is lower than at any time from 1979 to 1997.

Stick the term “bloated welfare” into google and a series of articles from the Daily Mail, Daily Express and Daily Telegraph dominate the screen.

George Osborne has encouraged this rhetoric with his speech to Conservative party conference and last week on the Spending Review:

“The truth – as everyone knows – is that the welfare system is failing many millions of our fellow citizens. People find themselves trapped in an incomprehensible out-of-work benefit system for their entire lifetimes, because it simply does not pay to work. This robs them of their aspirations and opportunities.

“And it costs the rest of the country a fortune. Welfare spending now accounts for one third of all public spending.”

The statistic is startling … and wrong. The Treasury’s own breakdown of total government expenditure on page 14 of the Spending Review shows “welfare” making up well under a third of public spending.

A better comparison is provided on Left Foot Forward contributor, Duncan Weldon’s excellent blog:

Using figures from the Treasury’s Public Expenditure Statistical Analysis, Weldon shows that while Britian’s welfare spending is rising, it is lower than at any time from 1979 to 1997. And don’t forget that any broad definition of welfare spending includes popular tax credits such as the child tax credit, working tax credit, and pensions credit and universal benefits including child benefit and the winter fuel payment.

These figures are not an argument for no reform. Welfare should be attached to an obligation to work for those who can, as simple as possible to administer, and – in some circumstances – better targeted. But the cut-at-all-costs approach taken by the chopper Chancellor is unnecessary and foolhardy.

UPDATE 10.54:

I’ve just been alerted to another dubious section from the same passage of George Osborne’s spending review speech. Channel 4 FactCheck (scroll down) have the goods:

“In some cases, the benefit bill of a single out-of-work family have amounted to the tax bills of 16 working families put together.”
Chancellor George Osborne, Spending Review announcement, 20 October 2010

FactCheck’s eyebrows raised when the Chancellor dropped in this little factoid in his spending review speech today. Can the benefit bill of one out of work family match that of 16 working families?

Well, yes it can – but it depends on how much those 16 families are paying in tax. You can be a working family and not actually pay any tax – and on this basis, even the average family, let alone an out of work family, claiming child benefit would receive more in benefits than those 16 working families.

Will Hadwen, rights advisor at the charity Working Families told us: “If you work 16 hours at the minimum wage (£5.93) you would be earning just under £5,000 per year and so wouldn’t be paying any tax. And working families can also get benefits, for example council tax benefit, housing benefit and working tax credit.”
So although his claim isn’t untrue, it’s not the full picture.

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