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Published on January 9th, 2013 | by Isabelle Mngadi
Image © [caption id="" align="alignnone" width="566"] © HelenCobain[/caption]   Following a series of parliamentary votes, proposals and reforms, it is safe to say that welfare in this country may never be the same again. The Labour party unveiled a new proposal on Monday to reduce tax relief on pensions for those earning over £100,000, and channel the money into providing work for the long-term unemployed. Meanwhile, the Government initiated its new, means-tested approach to giving Child Benefit, and yesterday’s vote on the 1% cap on rising benefits was won by the coalition. The cap will come into effect in April, and has been the subject of much debate recently. The vote dealt with the passing of the Welfare Benefits Uprating Bill, which aims to “break the link between welfare payments and inflation, which earlier this year saw benefits uprated by 5.2%.” Inflation is currently at 2.2%, meaning that a 1% cap will greatly affect how much money welfare dependents receive, and how far their income keeps up with the rising cost of living. In the most severe cases, it will affect millions of people’s prospects and everyday quality of life. Prime Minister David Cameron, Chancellor George Osborne and Work and Pensions secretary Iain Duncan Smith have been staunch in their defence of the cap, stating that workers would struggle even more if welfare was not slashed because taxes would have to rise. Duncan Smith has called for attention to welfare in order to tackle the deficit, which will continue “fuelling huge borrowing and […costing] taxpayers enormously unless we get it under control”. Indeed, the benefit system cost the taxpayer £202.6 billion in 2010-11, with those earning £50K per year paying almost 10% of their income towards welfare. Duncan Smith has also, on numerous occasions, painted the strong picture of the short-changed, industrious workforce of Britain; the early risers who pass the curtain-drawn houses of jobless dozers as they trudge past on their way to work. The story is certainly self-pitying, aimed at stirring a sentiment echoed by Cameron, who highlighted the 20% increase in benefits, versus 10% increase in wages over the past few years as “unfair”. But the other side of the coin is that rather than keeping the rise in benefits in line with inflation (not above it), the Government has resigned those living on benefits to harder future. The measure is projected to save £3.7bn from the welfare bill, but when so many are set to lose out, the decision is worth questioning. The Institute for Fiscal Studies (IFS) has calculated that half of working-age households (nearly 10 million) with someone in work will be hit in some way by the cap, with 2.5 million workless households losing an average of £215 every year. And if the rate of inflation increases, so will the capacity for viable living. Currently, Job Seeker’s Allowance is £71 for single over-25s, and even less for young people who’re often just looking for a little extra help as they enter the tough climate of the world of work. Already, those on benefits are not getting much, so how do the government think they will be able to cope since the rise will be frozen for the next three years? One argument behind the cap is that welfare is not meant to encourage people to stay on benefits, and one way of avoiding this is to prevent life on benefits from becoming too financially comfortable. Yes, this is understandable: the harder it is to stay on benefits, the more people will be encouraged to find paid work. But with the Work Programme failing as it is, making benefits unviable so that people seek paid work is not fair if you cannot assure them that they will get paid work. In doing so, the core aims of welfare – encouraging self-sufficiency, but also supporting families that fall on hard times through the tax an national insurance contributions they have already made – are not being realised. As the Shadow Work and Pensions Secretary, Liam Byrne succinctly put it, “welfare to work doesn’t work without jobs”. To be clear: my issue is not with freezing the rise in benefits, since the money recouped could be channelled into other areas. But it must not be taken for granted that those who are affected are only the lazy, the unemployed, or the fraudsters (only 0.7% of welfare spending is wasted on fraud). In the case of those who have been in long-term unemployment in particular, the limitation on benefits should be coupled with the provision of work: unemployment schemes such as the recently-scrapped Future Jobs Fund should be considered as worthy investments into the future of this country and its people. That the Welfare-to-Work scheme failed to meets its targets is a sign, not of the capacities of any particularly Party, but to the importance of investing financially in such programmes. Recent Labour opposition to the benefits cap was coupled with suggestions for schemes which feature subsidized paid work experience, with employers who would offer training, and allow time for participants to seek paid employment. Another Labour initiative, which was surely unveiled in the run-up to the vote in order to maximize the votes against the cap, was to raise £1bn (which is about the cost of being able to guarantee or create paid work for everyone, according to Ed Balls. Balls claims this could be achieved by cutting the tax relief that people on over £100,000 get on their pension savings.) As I said before, the solution is not Party-dependent but concern-dependent: what do David Cameron, George Osborne and Iain Duncan Smith care about? The deficit? The cost to tax-payers? The childish bitterness of working men and women who believe others enjoy being unemployed and poor? Furthermore, the unemployed are not the only victims of the benefit cap, as families with at least one person in work will also be affected. Up to 40,000 soldiers, 150,000 teachers and 300,000 nurses will lose out because of tax credits and the benefit cap. Single parents are likely to lose more than others, because they have a lower employment rate than average and also often qualify for in-work support, with the poorest losing the most, and 33% of women being affected, compared to 29% of men. In response to Duncan Smith’s suspicion of the curtain-drawn dozers, shadow Chancellor Ed Balls yesterday stated "Sixty per cent of families hit by the tax changes are in work. According to the Institute for Fiscal Studies, as a result of the Autumn Statement measures, a working family - the average one-earner couple - will be £534 a year worse off by 2015. These are the very people who pull up the blinds and go to work." Many such people are in work, but still have a need for jobseeker's allowance, employment or support allowance, income support, elements of housing benefit, maternity pay, sick pay or some tax credits. The sheer variety of benefit types available signifies that being in employment does not necessarily signify that one does not need benefits. It is also a reminder that not everyone who claims benefits fits the anti-welfare characterisation of the lazy skiver. Finally, it may be said that the cap on benefits will deal with the deficit. But why are the poorest the first choice to be penalised, when the rich get away with tax cuts, and the British public support increased tax on the rich. The ethos should not be take from the poor to make the rich feel better, but encourage those who can support themselves and support those who cannot.

1

The 1% Cap on Welfare: Who Really Benefits?

© HelenCobain

 

Following a series of parliamentary votes, proposals and reforms, it is safe to say that welfare in this country may never be the same again. The Labour party unveiled a new proposal on Monday to reduce tax relief on pensions for those earning over £100,000, and channel the money into providing work for the long-term unemployed. Meanwhile, the Government initiated its new, means-tested approach to giving Child Benefit, and yesterday’s vote on the 1% cap on rising benefits was won by the coalition. The cap will come into effect in April, and has been the subject of much debate recently.

The vote dealt with the passing of the Welfare Benefits Uprating Bill, which aims to “break the link between welfare payments and inflation, which earlier this year saw benefits uprated by 5.2%.” Inflation is currently at 2.2%, meaning that a 1% cap will greatly affect how much money welfare dependents receive, and how far their income keeps up with the rising cost of living. In the most severe cases, it will affect millions of people’s prospects and everyday quality of life. Prime Minister David Cameron, Chancellor George Osborne and Work and Pensions secretary Iain Duncan Smith have been staunch in their defence of the cap, stating that workers would struggle even more if welfare was not slashed because taxes would have to rise.

Duncan Smith has called for attention to welfare in order to tackle the deficit, which will continue “fuelling huge borrowing and […costing] taxpayers enormously unless we get it under control”. Indeed, the benefit system cost the taxpayer £202.6 billion in 2010-11, with those earning £50K per year paying almost 10% of their income towards welfare. Duncan Smith has also, on numerous occasions, painted the strong picture of the short-changed, industrious workforce of Britain; the early risers who pass the curtain-drawn houses of jobless dozers as they trudge past on their way to work. The story is certainly self-pitying, aimed at stirring a sentiment echoed by Cameron, who highlighted the 20% increase in benefits, versus 10% increase in wages over the past few years as “unfair”.

But the other side of the coin is that rather than keeping the rise in benefits in line with inflation (not above it), the Government has resigned those living on benefits to harder future. The measure is projected to save £3.7bn from the welfare bill, but when so many are set to lose out, the decision is worth questioning.

The Institute for Fiscal Studies (IFS) has calculated that half of working-age households (nearly 10 million) with someone in work will be hit in some way by the cap, with 2.5 million workless households losing an average of £215 every year. And if the rate of inflation increases, so will the capacity for viable living. Currently, Job Seeker’s Allowance is £71 for single over-25s, and even less for young people who’re often just looking for a little extra help as they enter the tough climate of the world of work. Already, those on benefits are not getting much, so how do the government think they will be able to cope since the rise will be frozen for the next three years? One argument behind the cap is that welfare is not meant to encourage people to stay on benefits, and one way of avoiding this is to prevent life on benefits from becoming too financially comfortable. Yes, this is understandable: the harder it is to stay on benefits, the more people will be encouraged to find paid work. But with the Work Programme failing as it is, making benefits unviable so that people seek paid work is not fair if you cannot assure them that they will get paid work. In doing so, the core aims of welfare – encouraging self-sufficiency, but also supporting families that fall on hard times through the tax an national insurance contributions they have already made – are not being realised. As the Shadow Work and Pensions Secretary, Liam Byrne succinctly put it, “welfare to work doesn’t work without jobs”.

To be clear: my issue is not with freezing the rise in benefits, since the money recouped could be channelled into other areas. But it must not be taken for granted that those who are affected are only the lazy, the unemployed, or the fraudsters (only 0.7% of welfare spending is wasted on fraud). In the case of those who have been in long-term unemployment in particular, the limitation on benefits should be coupled with the provision of work: unemployment schemes such as the recently-scrapped Future Jobs Fund should be considered as worthy investments into the future of this country and its people. That the Welfare-to-Work scheme failed to meets its targets is a sign, not of the capacities of any particularly Party, but to the importance of investing financially in such programmes.

Recent Labour opposition to the benefits cap was coupled with suggestions for schemes which feature subsidized paid work experience, with employers who would offer training, and allow time for participants to seek paid employment. Another Labour initiative, which was surely unveiled in the run-up to the vote in order to maximize the votes against the cap, was to raise £1bn (which is about the cost of being able to guarantee or create paid work for everyone, according to Ed Balls. Balls claims this could be achieved by cutting the tax relief that people on over £100,000 get on their pension savings.) As I said before, the solution is not Party-dependent but concern-dependent: what do David Cameron, George Osborne and Iain Duncan Smith care about? The deficit? The cost to tax-payers? The childish bitterness of working men and women who believe others enjoy being unemployed and poor?

Furthermore, the unemployed are not the only victims of the benefit cap, as families with at least one person in work will also be affected. Up to 40,000 soldiers, 150,000 teachers and 300,000 nurses will lose out because of tax credits and the benefit cap. Single parents are likely to lose more than others, because they have a lower employment rate than average and also often qualify for in-work support, with the poorest losing the most, and 33% of women being affected, compared to 29% of men. In response to Duncan Smith’s suspicion of the curtain-drawn dozers, shadow Chancellor Ed Balls yesterday stated “Sixty per cent of families hit by the tax changes are in work. According to the Institute for Fiscal Studies, as a result of the Autumn Statement measures, a working family – the average one-earner couple – will be £534 a year worse off by 2015. These are the very people who pull up the blinds and go to work.”

Many such people are in work, but still have a need for jobseeker’s allowance, employment or support allowance, income support, elements of housing benefit, maternity pay, sick pay or some tax credits. The sheer variety of benefit types available signifies that being in employment does not necessarily signify that one does not need benefits. It is also a reminder that not everyone who claims benefits fits the anti-welfare characterisation of the lazy skiver.

Finally, it may be said that the cap on benefits will deal with the deficit. But why are the poorest the first choice to be penalised, when the rich get away with tax cuts, and the British public support increased tax on the rich. The ethos should not be take from the poor to make the rich feel better, but encourage those who can support themselves and support those who cannot.

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About the Author

Isabelle Mngadi

Isabelle has recently graduated from the University of Kent, with a degree in Comparative Literature. She has completed work experience with her local MP, Ann Keen, and during her time at university, a significant portion of her studies were dedicated to exploring neo-colonialism and post-colonial development in Africa and Latin America. She has a background in working with young people from the UK and all around the world, and is passionate about helping them express their voice and be a positive influence to those around them. She is mostly interested in discussing international politics, particularly the intricacies of conflict resolution, globalisation and the establishment of human rights.



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