Saturday, 26 June 2010

Scale of coalition government attacks on welfare



The most drastic cuts in the Budget affect welfare. The headline announcements are:
  • Freezing Child Benefit for three years
  • Linking benefit increases to CPI instead of RPI
  • Cutting tax credits for middle-income households
  • Capping housing benefit
  • Cutting £1.4 billion from Disability Living Allowance
  • Cutting Jobseekers Allowance for the long-term unemployed
These measures are an attack on the most vulnerable people in society. Let's look at the likely impact of each:

Freezing child benefit
New Labour, for all its faults, increased Child Benefit above inflation in their period of office. Child Benefit is one of the dwindling band of universal benefits - collected as of right. With inflation likely to average around 4-4.5% this year and 3% in the next two years, this is a real terms cut of 10% by the third year. This will inevitably impact upon child poverty, despite the increase in Child Tax Credit (which of course is means-tested and has a lower take-up rate).

Linking benefit increases to CPI instead of RPI
The government states this will save over £6 billion over the next four years - as CPI as a measure of inflation is consistently lower than the RPI measure (which itself is more often than not lower than the increase in average earnings). This is because CPI excludes housing costs, which would make it an accurate measure if everyone lived in tents. Since most people require housing, which needs paying for, excluding housing costs from inflation measures is therefore a nonsense.

Take Jobseekers Allowance for example. If that had been linked with earnings since 1979, it would today mean the unemployed receiving £110 per week. Instead they receive £64.05. This gap between benefits and earnings will now increase even further under this "progressive alliance" government.

Cutting tax credits for middle-income households
Tax credits are unwieldy - they're costly to administer and complicated to claim. However, by cutting them from households earning less than £30,000 (i.e. two people on say £18,000 and £12,000) this will hit the disposable incomes of not very wealthy households. Cameron says he wants a private sector-led recovery. That surely requires people with higher disposable incomes to buy things (add on the VAT rise and Cameron's economic hopes are looking very shaky.

Capping housing benefit
In one of the most idiotic pieces ever posted on Comment is Free, Westminster Councillor Philippa Roe welcomes Osborn's move: "[before] there was also little incentive for them to move or work, as under the benefit laws they would lose much of their generous housing payments". Philippa obviously doesn't understand that housing benefit claims are often directly paid to landlords, and even if not are used by people (only 1 in 8 of whom in London are unemployed) to pay their rent.

The real problem of course is that the Thatcher government abolished Fair Rent Tribunals and attacked council housing. So now if people need housing, there is none available and the state ends up subsidising the inflated demands of private landlords. As ever, the problem of the poor is the rich.

Cutting £1.4 billion from Disability Living Allowance
The Government is already continuing the inherited programme of giving everyone on IB/ESA a work capability assessment (i.e. re-assessing every single Incapacity Benefit claimant) - well a private company called ATOS Healthcare is anyway. This is now to be extended to Disability Living Allowance. By 2014-15 this will be saving over £1bn per year - taking away support from disabled people which helps them live independently.

Cutting Jobseekers Allowance for the long-term unemployed
Almost gone unnoticed so far is the Coalition Government's plan to cut benefits for those who are long-term unemployed. Having lived for a year on £64 per week, the government thinks people will have built up enough of a nest-egg to be able to survive on 10% less. Just to put this in perspective, the number of people currently unemployed for 12 months or more is 258,000. There are currently 2.51 million people unemployed in total and only 492,000 vacancies.

Now, you might argue that all this is necessary. After all there is an unprecedented (post-war) national deficit. However, the cost of all the above measures combined - and throw in the public sector pay freeze too - is less than the more than £25 billion subsidies to big business through corporation tax cut, small business rate cut and higher threshold for employer NI.

These are not welfare cuts to pay down the deficit, they are welfare cuts to subsidise big business. Welcome to the "progressive alliance".

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