The benefits Britons want to save are the ones the Tories want to cut

Declan Gaffney examines Progress' report on the support for benefits cuts in depth, and finds that it doesn't show what it purports to show

 

‘The end of welfare?’ is the headline on the current issue of Prospect magazine, illustrated with a celebrated Bert Hardy photograph from the 1950’s – which is appropriate, as the first occurrence of that headline probably dates from the same period.

The main story is by Peter Kellner, and is a lot more nuanced. His main argument is that coalition welfare reform is strongly in tune with public opinion.

Drawing on a specially commissioned Yougov poll, he says (£):

‘The public’s verdict is emphatic: We think the current system is too expensive. We asked: In general, do you agree or disagree with this statement ‘The Government pays out too much in benefits; welfare levels overall should be reduced?’ …A huge majority, 74 per cent, agrees; only 17 per cent disagree.’

But however much the public may dislike social security spending in the aggregate, fitting that general attitude to concrete proposals for reform that will yield major savings while still reflecting the detail of public opinion is a different matter. This, to me, is one of the clearer lessons from Yougov’s detailed polling questions.

Thus, while the coalition aims to cut Disability Living Allowance expenditure and caseload by 20 per cent, the poll shows the majority want expenditure to stay where it is or increase – even if that means higher taxes – while only 11 per cent favour cuts.

This is one of the major new findings of this poll, and why Prospect didn’t make more of this glaring mismatch between the coalition’s welfare reform bill and public opinion baffles me.

The poll also showed minorities, ranging from 9 per cent to 23 per cent, in favour of cutting pensioners’ benefits, benefits to the low paid and child benefit for families paying standard rate income tax.

Strong support for cuts was confined to only two of the six types of benefit (or rather of recipient) that Yougov asked about: unemployed people and unmarried single parents, where 42 per cent and 44 per cent favoured cuts.

So the focus of the demand for cuts is not ‘welfare’ as a whole, but out-of-work benefits to non-disabled people.

How much does the UK spend on these benefits, and how much has expenditure increased over time? Kellner cites growth in overall social security expenditure from 5 per cent of GDP in the early 1950’s to 14 per cent today, but this is of little relevance until we know how much of this growth has gone to unpopular as opposed to popular spending.

Answering this question means sorting through the data on social security expenditure and extracting information on the benefits people seem to dislike most – or that go to the people they dislike most –  while excluding spending on items (or people) they do like.

The chart below shows expenditure on the main out-of-work income replacement benefits for working age people: unemployment, invalidity and social assistance benefits and tax credits to out of work families.

Note that because this includes invalidity benefits, there is a lot of expenditure on disabled people included here (more than half of recipients of these benefits are currently receiving DLA, which puts them in a category the public favours, as we have seen.)

As of 2009/10, the UK was spending 2.37 per cent of GDP on these benefits. This was almost exactly what the UK was spending thirty years earlier in 1979/80, and a lot less than in most years since then. Bear in mind that this was after the biggest collapse in GDP since the great depression.

Comparisons with years before 1978/9 are less robust because we can’t exclude some payments to pensioners from the data prior to 1978/9 (although this really does not seem to make a huge difference to the trends).

With that caveat in mind, we can say that expenditure on these benefits as a share of GDP prior to the recession probably wasn’t very different to the early 1970’s. The popular notion that the UK has been spending record amounts on these benefits in recent years is the opposite of the truth.

Expenditure-on-income-replacement-benefits-percentage-of-GDP

I expect these figures to be greeted with disbelief: three broad points might help with any confusion.

The first is a reminder that expenditure is expressed as a share of GDP: obviously if expressed in cash terms, with or without adjustment for inflation, the trends would be different.

Secondly, as the chart shows, expenditure on these benefits did increase dramatically at various points during the late 1970s, 1980s and early 1990s, and these successive rises were usually only partly reversed during periods of prosperity until the turn of the new century, so the reversion to 1970s levels of spending is a very recent phenomenon .

The third is that housing benefit, one of the few major sources of growth in out-of-work benefit expenditure, is not included in the chart, which is confined to income replacement benefits intended to cover other basic living expenses.

Why has expenditure fallen so much?

Partly it’s because there are a lot fewer people on out-of-work benefits than there were in the mid-1990s (by about 1.2 million).

But that can’t be the whole story because while there may be lower reliance on out-of-work benefits now than in 1995, that doesn’t hold if we compare with the 1970s and 1960s. The key to the puzzle lies in the declining value of these benefits over time, largely due to the fact that from the 1980s they were uprated with prices rather than with earnings or GDP growth.

So these benefits, contrary to what seems to be widely believed, have been falling ever further away from average living standards over time. Alternatively, and this is just the same thing phrased differently, the U.K. got a lot richer and was better able to afford these benefits.

The problem with simplistic calls to cut ‘welfare’ therefore is that the elements that people don’t like represent ony a fraction of expenditure, and one that was in long-term decline until the recession. In fact, the benefits included in the chart account for only 16 per cent of all ‘welfare’ expenditure.

This is what our political classes are in denial about: on all sides, politicians and commentators are desperate to maintain the illusion that there are big savings to be made by cutting payments to claimants who are unpopular with the public when the great bulk of spending is going where the public seems to want it to go.

And that simple, inconvenient truth explains why the burden of coalition welfare reforms is falling so heavily on the disabled and on people in work as well as on the out-of-work claimants for whom the public, the politicians and most of the commentators show so little sympathy.

See also:

Look Left – The human cost of the government’s inhumane welfare reformsShamik Das, January 20th 2012

As Lords debates DLA reforms, charities call for pause to welfare reform billHelen Sampson, January 17th 2012

Employment minister Chris Grayling does not appear to understand his own disability reformsDaniel Elton, January 13th 2012

The government’s replacement for DLA is not fit for purposeAnjuli Veall, January 18th 2012

Welfare reform bill in tatters after Lords defeatsShamik Das, January 12th 2012

Benefits included in this analysis: Social assistance benefits: national assistance, supplementary benefit (excluding pensioners from 1978/9), income support for those below pension age (including Income Support for unemployed from 1991/2-1996/7), one parent benefit. Invalidity benefits: Industrial injuries benefit, sickness benefit, invalidity benefit, statutory sick pay, severe disablement allowance, incapacity benefit, employment support allowance. Unemployment benefit includes jobseeker’s allowance from 1996/7. Tax credits include family credit and child tax credit to non-working households. Data is from DWP benefit expenditure tables and HMRC tax credit take-up estimates. GDP is from ONS, GDP at current basic prices (ABML series).

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60 Responses to “The benefits Britons want to save are the ones the Tories want to cut”

  1. Redisbleu

    I keep getting the feeling this is what is actually happening – people assume the welfare cuts are hitting the “lifetime claimants” of housing benefit and so forth, and completely miss that these aren’t the only people this is hitting; some of the most brutal cuts are happening to disabled people. There is no option for them, they won’t just suddenly leap up and not be disabled anymore if their benefits are cut – they’ll die, plain and simple. When it’s put into that context, people’s opinions seem to backpedal rapidly into the “Oh, no, I don’t mean YOU…” sorts of statements so they continue their anti-housing-benefit diatribes.

    No one is saying protect the scroungers – but I think people don’t quite understand the extent of the cuts to people other than the typical “scroungers” we’re been marinated in thanks to the media. People I actually tell the extents of cuts to are invariably shocked and then horrified. It would be better if they were apologetic and angry, but I’ll take horrified for now.

  2. Anonymous

    Thus, while the coalition aims to cut Disability Living Allowance expenditure and caseload by 20 per cent, the poll shows the majority want expenditure to stay where it is or increase – even if that means higher taxes – while only 11 per cent favour cuts.

    ===========

    You forgot to ask.

    Should DLA go to people who aren’t disabled?

  3. Anonymous

    So why has the number of disabled gone from 1 million to 2.5 million?

    It’s not that some people are living longer, that is a minority. It’s not that more women are entitled.

    Answer, hidden unemployment to use the jargon.

    I see no reason why the criteria shouldn’t be tightened up so that only those that need it get help.

    So what should the criteria be in your books?

  4. Arecbalrin

    You need to first provide some evidence that there is a significant problem with this. The government has pulled out all the stops to try and all they could come up with is some faulty cherry-picked data from a seven-year old review. They naturally didn’t want to commission a new one with some quality controls to get up-to-date and accurate data.

  5. Arecbalrin

    The point has been addressed before, you just keep choosing not to listen or you really are here to do nothing but troll.

    The rise you speak of happened almost entirely in a few short years between 1991 and 1995, when it was the Invalidity Benefit. It followed two major explanatory events: Care in The Community and the introduction of Disability Living Allowance.

    One thing that needs to be remembered about spending on benefits per GDP is that some of it displaced expenditure from other budgets; in the case of the introduction of Care in The Community, residential units were closed to save money. Some of those savings were transferred to benefits. At the time DLA was introduced, the government was worried it wasn’t being taken up quickly enough and there was a campaign to promote it. Many who claimed it were also eligible for Invalidity Benefit.

    The rise was expected, but the government feigned panic anyway and called it ‘inexplicable’ when they knew the rise would be temporary and would stop soon. They decided to do some reforms anyway because of bad headlines. Invalidity Benefit was replaced by Incapacity Benefit in 1995 just as the rise in claims peaked.

    By the way, the number of disabled people is ten million(around four million of them being pensioners). DLA and IB conditionality was always so tight that few of them qualified.

    If you want to assert the ‘hidden unemployment’ nonsense, then you’d have to show a correlating statistical signature in unemployment figures. But believe me, there isn’t one and don’t think a lot of people smarter than you haven’t tried producing one.

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