Clegg’s dubious jobs claim

Nick Clegg writes in today's Guardian about welfare reform. But his claims on jobs, incentives for work, the welfare bill, and poverty do not stack up.

PMQs was dominated by exchanges on tuition fees where Nick Clegg’s pre-election promises came under close scrutiny. But the Deputy Prime Minister’s article in this morning’s Guardian on welfare reform was riddled with nearly as many holes as a Lib Dem pledge on university funding. Nick Clegg’s claims on jobs, incentives for work, the welfare bill, and poverty.

Nick Clegg writes:

“The measures in our reform package share one animating feature: they ensure that work pays…

“We will remove the artificial disincentives created by existing rules about the hours people have to work. It must always be worth working, even a few hours a week. Taken together, our welfare reforms should reduce the number of workless households by 300,000 within three years of implementation.”

Mr Clegg is referring to the “universal credit” which will not even begin to come into effect until 2013 meaning that the 300,000 target will not be reached until 2016 – hardly a rapid response to the current jobs crisis. As Douglas Alexander points out “there are five unemployed people chasing every job vacancy in the country.

Clegg goes on to repeat the Cameron-esque line that, “People moving into work can still lose more than 90% of every pound they earn: a punitive tax burden on the shoulders of the poor.” The universal credit does seek to end the disincentive to work and should be welcomed if it achieves that goal. Nonetheless, the scale of the problem is over-stated. Of the “five million on out of work benefits” only 130,000 (just 2.6%) face “marginal deduction rates” of over 90 per cent. Indeed, according to Table A3 of the June Budget this is 20,000 greater as a result of George Osborne’s June Budget.

Clegg’s other claims don’t stack up to scrutiny. The Lib Dem leader writes, “during [Labour’s] 13 years in office the welfare bill rose by 40% to £87bn.” Clegg deserves credit for avoiding George Osborne’s references to “the £200 billion benefit bill” which conflated pensions with welfare spending. But he fails to outline how the most significant rise in the welfare bill is due to tax credits targeted at families with children. This spreadsheet using Government data shows how the 40% rise in welfare was due to an increase in child benefit, tax credits, and other children’s benefits. These rose from £16bn in 1996-97 to £39bn in 2009-10. The welfare bill for working age benefits rose by only 3.6% in real terms from £46.7bn to £48.4bn. Indeed, this fell by £5.2 billion from 1996-97 to 2007-08 before rising because of the recession.

Clegg also writes that, “even those who ended up above the poverty line rarely saw real changes in their lives, or their children’s life chances. Poverty plus a pound is simply not an ambitious enough goal.” But the IFS have shown (Figure 3.4) that those between the 1st and 4th deciles received among the highest growth in income during Labour’s period in office. Gordon Brown’s welfare to work and tax credit policies did far more than moving people from one side of the poverty line to another.

The final word goes to Mehdi Hasan who, elsewhere in today’s Guardian, writes “Ministers are keen to discuss welfare and worklessness but have little to say about the chief cause of poverty: low pay.”

I am grateful to Graeme Cooke, Declan Gaffney, and Nicola Smith for their help with this piece.

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