The Taxpayers Alliance has released a new report on welfare dependency, but the proposed solutions do little to save costs and only adds to hardship.
The right wing organisation the TaxPayers’ Alliance has released a new report on welfare dependency, arguing that the amount the country spends on benefits is too high and it is necessary to implement a ‘Work for Dole’ scheme.
The report’s proposed Work for Dole scheme will do little to solve the costs it moans about and only add to the hardships of the poorest in society.
The report begins:
“Over the past 50 years, welfare spending has relentlessly grown and now consumes 28 per cent of all government spending. 57 per cent of this goes on benefits for working age people.”
At first glance the TaxPayers’ Alliance’s picture of a Britain suffering the costs of paying for benefit claimants seems shocking, but the statistics reeled off here – similar stats often emblazoned in Daily Mail articles – are not so shocking when you take a look at the detail.
So, where has the 28% figure come from?
Yes 28% of government spending goes on welfare, but welfare isn’t just made up of the benefits this report attacks. A huge amount of welfare spending, 43%, actually goes on pensions. So the author could have simply started off with the less startling fact that 16% of all government spending goes on ‘benefits for working age people’, but I guess this is a less eye-catching figure. It’s good that in the second line the TaxPayers’ Alliance does admit that only 57% of this goes on the type of benefits it focuses on, but it really makes you wonder what was the necessity of the first line…
Anyway, 16% of total government spending is still a vast figure so it’s worth investigating what exactly all this money goes on.
Are taxpayers funnelling money to the lazy?
What do these ‘benefits for working age people’ involve?
The list of benefits that the welfare budget goes to (excluding pensions) includes:
- housing benefit
- child tax credit
- disability living allowance
- child benefit
- income support
- working tax credit
- job seekers allowance
- employment support allowance
The largest amount of money on this list goes on housing benefit and child tax credit, which are both benefits that are open to people who are in work. This somewhat detracts from the picture of a Britain that can’t help giving money to the workless.
It is also not as though these benefits are lining the pockets of the idle. For example, housing benefit goes straight to landlords. Over the years spending on housing benefit has risen by a lot but this is more a result of successive governments failure to build new houses rather than any upshot in people happily revelling in welfare dependency. The housing crisis in this country has contributed to a great many social and economic problems and one of these is the huge growth in spending on housing benefit.
So what is the Taxpayers Alliance’s solution?
Their solution is ‘Work for the Dole’. This scheme involves anyone who has been claiming Universal Credit for a certain period of time to undertake activity like clearing parks or graffiti, working for a charity, participating in a training programme or work experience. The amount of work you are expected to do depends on whether you are in a job, how many hours you work or whether you have childcare commitments. The report says that
“the programme shall continue indefinitely, until either (i) the person is working more than 30 hours per week (or their benchmark if lower) or (ii) until they stop claiming Universal Credit benefits entirely.”
Work for the Dole is very similar to the government’s own much despised Workfare policy. Both schemes involve people working without receiving a wage. And it is fair to say that both schemes have major drawbacks. For example, jobs like clearing parks or cleaning graffiti are that – jobs. People who do these socially valuable activities deserve proper pay. To force unemployed people to do them is not only punitive and unnecessary, but is patronising to people whose job it actually is to clear parks or clean off graffiti. It also ignores the fact that most jobseekers are actively seeking jobs. It is not their fault, and they should not be penalised, for an atrocious job market.
The Taxpayers Alliance’s proposals also includes the brutal specification that anyone who ‘is not compliant with Work for the Dole activity requirements’ will ‘have all of their Universal Credit payments suspended.’ It even goes onto admit that there might have to be changes to, or an opt out from EU laws to achieve such a punitive policy.
We have seen a huge rise in the number of food banks in the UK in recent years, and there is strong evidence that this is connected to the government’s welfare reforms. This means that we are already seeing the disastrous effects of a more severe benefits system. Another round of even harsher benefits reforms – as proposed here by the Taxpayers Alliance – is likely to drive even more people to use food banks.
Will the Work for the Dole save money?
The report boldly claims that its proposed ‘Work for Dole’ scheme will make annual savings of £3.51 billion a year . When you look a bit closer you realise that this is a saving of 4.7% of expenditure on benefits included in the Universal Credit umbrella and also housing benefit and child tax credit. So this means it is not even a saving of 4.7% of the non-pensions welfare budget, let alone 4.7% of the welfare budget as a whole. If you are seriously looking to save costs, is piling on the pressure on a very vulnerable group of society a sensible solution? Evidence shows that big companies avoid paying taxes to the tune of £5.5 billion, but we don’t hear the Taxpayers Alliance harping on about this.
After all we read from the Taxpayers Alliance about the horrors of our bulging welfare state it is a little disappointing that their solutions amount to relatively little in financial savings for the taxpayer, but contribute so much more to the hardship faced by the poorest members of society.
47 Responses to “TaxPayers’ Alliance welfare proposals save little money, but add to misery”
John
So does Sales. Why? Because it’s a P&L item, not balance-sheet. Want to stick to just the balance-sheet? Then there ARE differences, as obligation is analysed under short-term liabilities, while loans and long-term debts are analysed under the long-term liabilities. The distinction is important when calculating a businesses (or governments) capital which, in turn, is important for those working out whether this entity is worth loaning money to
I suspect very few governments would get loans if they had to follow the accounting rules others do.
“What you are doing is saying that the state doesn’t have to pay the pensions because it owes no-one a penny.”
Simplistic, but essentially correct. A government’s main property which distinguishes it from all other regulatory entity is the fact that it is ungoverned. Which is why democracy came about; so the actions of a government could at least be held to account.
However
If a government has no choice on an issue it will take the only option available and will likely spend some time, before or after, shifting blame. Given that, and given the huge size of the pension debt I reiterate; it’s immaterial. It won’t get paid in full.
“Take a bank as an example. Deposit money (pension contributions) with
them for future withdrawal (pension payout). Does the bank owe you the
money? Does it have to record that as a liability?”
Except most pensions are invested on the stock market. However, even where they simply put in a bank account, and then said bank goes bust they would absolutely owe you the money. You just wouldn’t get it. Tough titty.
“Because it shows up the problem.”
People who are refusing to acknowledge the problem are as capable of ignoring lots of zero’s as none. For those who DO acknowledge the problem, most admit it’s a problem that won’t get solved by snipping at the budget a little here and there. A new solution is required.
OldLb
Yep – official figures.
Remember there are 4 numbers involved. The two dates on which they are measured, and the two debt figures.
Each debt figure could be right, under valued, or over valued.
However, I can tell you that each figure is an under valuation.
For the explanation you will have to understand annuities.
So back to the questions which I’m still waiting for an answer, even from all your references.
1. If the criteria put forward by full facts is that because the debts are paid over 60 years, they must be affordable, why not quadruple pensions. Still paid over 60 years, that must be affordable. We can pick any number for the pensions and increase them.
Sensible argument for affordability or not?
2. For you or full facts.
If you disagree with the ONS number, you must have a number you think is right in order to say that the ONS are wrong. (they have low balled it by the way, its bigger).
What’s your number for the pensions debts?
If you want to go through how to calculate the debt in detail, I’m always willing to go through it. It shows the flaws in the ONS numbers and why they are too low. It’s also interesting from a purely curiosity angle. How do you calculate what you are supposed to pay out when you don’t know when Fred Bloggs will die.
blarg1987
So how did the debt increase by £4 trillion in 5 years? You keeep bleating on about pensions being the big source of this, how did generations suddenly age overnight? Either things were added to the source figures in which case it should be based on like for like or we are building a death star in space in secret.
OldLb
Aging.
It’s part of the increase, but not a big part.
Every 8 years life expectancy goes up by 1 year. That’s the current increase.
Given the life expectancy of well over 85 years if you make it to 65 that’s less than a 5% change.
So what’s going on?
It’s that the opening figure is way too low. Remember the assumption used, which is that they are running a pension scheme that has invested the money, rather than a pension scheme with no assets [1] [2]
They had to change the assumption of how much money they were making on their ‘assets’
However with no assets, the correct rate is inflation. They are still assuming inflation busting returns, and no defaults. The later doesn’t matter. No assets means no defaults.
So the increase is caused by the discount rate going down, resulting in a increase.
Now before you jump to any conclusion, that must mean the debt is smaller, you need to work out if their discount rate is above or below the correct rate, which is inflation. Its above, so that means the debt is underestimated.
The true debt is bigger than the ONS reports. The increase is partly due to the 2005 being a bigger underestimate that the 2010 underestimate.
The growth in the pension debts are due to to several factors.
1. Longevity.
The number of years you expect to pay out pensions, against the number of people you have to pay it out too. 5% increase in every 8 years, roughly.
2. Rectangularisation
http://www.med.uottawa.ca/sim/data/Rectangularization_of_mortality_e.htm
For Canada, but the same thing is happening here. Here more people survive for longer, increasing payouts.
3. Population increase.
More people accruing rights to pensions, means a bigger debt.
Migration, youngsters.
4. Change of terms.
Triple lock increased the debt.
Decreases
5. RPI to CPI took 15% off the civil servants pensions.
A default on the contract unilaterally imposed.
6. Increases in retirement age.
10K off for 2 years for everyone. A default on the promise
[1] You cannot loan money to yourself, to make an asset. The NI fund, covers a few months payouts, and is a loan from the state to the state.
[2] At current rates of depletion, the fund is gone in 3-4 years.
So back to the question you seem to have a problem in answering.
What’s your figure for the pensions debt?
OldLb
So why don’t you provide a number for what the state owes for pensions?
You don’t like the ONS number, so you must have a number to compare it against when you claim the number is too high in order to make the claim the ONS is wrong. [It is, their number is too low]