Why Clegg is wrong to say poor must accept benefit cuts


8:50 am - September 16th 2010

by Sunder Katwala    


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The Times predicts that Nick Clegg will stir up controversy in his own party with an op-ed article for the paper, which it reports under the headline ‘Poor must accept cuts in benefit, says Clegg’ today.

The article states that there will inevitably be losers from welfare reform. However, the op-ed, in invoking Jo Grimond to argue that liberals must attack welfare dependency, is mostly a collation of broad-brush soundbites from the standard Clegg repertoire.

Second, liberals believe that people should be in charge of their own lives. Independence is a central liberal value. Dependency of any kind offends against this unwavering liberal commitment to self-reliance: and welfare dependency is no exception.

But Clegg’s analysis of welfare dependency – an important issue – appears simplistic.

1) Employment rates of disadvantaged groups rose considerably in the last decade, which Clegg’s piece ignores entirely. Prior to the recession, an employment rate of 75% was the highest ever achieved.

2) Clegg seems confused and contradictory in his short piece, first complaining about high marginal tax rates as benefits are lost – “Labour presided over a shambolic tax credit system that left too many people receiving paltry rewards for making the brave leap into work. More than half a million people face an effective tax rate of more than 90 pence in the pound, as benefits are withdrawn and tax kicks in”.

That attack on a “paltry” system must mean Clegg thinks it gave those in work too little. Yet the same article attacks Labour for putting more money into redistribution, arguing that it entrenches dependency. He must surely know that additional resources were very heavily focused on in-work support through tax credits – precisely to make work pay – while out-of-work benefits continued to lose value in real terms.

Clegg would seem to be for more and less redistribution at the same time.

3) The Liberal Democrats have argued that Labour should have done more to reduce inequality. Labour’s redistribution was pro-poor and held inequality in check. Nick Clegg is against it, when his party is not for more of it.

So perhaps Clegg should talk to his own policy adviser Richard Reeves, who wrote of a similar argument from David Cameron that:

It makes literally no sense to argue that inequality needs to be reduced and then to call for a reduction in state benefits. The issue is not ideology; its not politics; its just arithmetic … Labour’s record shows that cash transfers can work to reduce basic income inequality. It also shows that even a broadly centre-left government did not feel able to transfer money on the scale needed truly to make society more equal. So inequality has been checked, not reversed …


A longer version is over at Next Left

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About the author
Sunder Katwala is a regular contributor to Liberal Conspiracy. He is the director of British Future, a think-tank addressing identity and integration, migration and opportunity. He was formerly secretary-general of the Fabian Society.
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Story Filed Under: Blog ,Economy ,Equality ,Libdems ,Westminster

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Reader comments


I’m sorry, but unchecked housing benefit levels have made our country uncompetitive as they have the side-effect of raising overall housing costs for workers and non-workers alike.

Slightly OT, but Clegg has put his Sheffield house up for sale, I wonder if this means that he’s going to defect to the tories or has he heard the word on the streets?
@1 It was the mass sell-off of social housing which caused the increase in housing-benefit levels.

Housing benefits have pushed up house prices? What amazing and utter tosh!

Income inequality and the benefit trap are indeed problems that need confronting. Clegg’s analysis appears to be deeply flawed. It looks like he’s having to tie himself in knots to justify the ideology he’s promoting.

Coalition policies won’t get any of the people I know out of the benefit trap, though they may get them out of their houses when they can no longer afford to live in them. It’s just sickening.

“Independence is a central liberal value. Dependency of any kind offends against this unwavering liberal commitment to self-reliance: and welfare dependency is no exception.”

I’d be mildly surprised to hear this kind of crap from a mainstream Tory figure – it sounds for all the world like something a Republican Tea Party candidate would come out with in the land of Rugged Individualism. But it beggars belief that the leader of a party that, just a few months ago, was widely perceived as a social democratic party to the left of Labour could put his name to this.

When a so-called liberal stops talking about ‘freedom’ and starts talking about ‘independence’, alarm bells should start ringing. Effectively, what he’s doing is washing his hands of any responsibility to ensure that ‘dependent’ people, who for whatever reason don’t earn much money of their own, enjoy the basic positive freedoms that come from having a decent income and access to decent services.

I hope mainstream Lib Dems read and re-read that quote; maybe it will start to dawn on them that the role of Clegg & co in the coalition is not to ‘rein in’ the Tories’ right-wing instincts, but to keep the social liberals and social conservatives in their own parties on-side while pursuing a right-wing market liberal agenda.

‘Neo-liberal Democrats’ indeed.

Interesting to note that this “explosion of welfare dependency” the right talk about hasn’t really happened.

DWP stats on benefit expenditure http://campaigns.dwp.gov.uk/asd/asd4/alltables_budget2010.xls (real terms – at 2010-11 prices) show that in 2010-11 compared to 1996-97:

* Benefits directed at children down from £16.3bn to £3.5bn
* Benefits directed at working-age up slightly from £47.1bn to £49.2bn (up from a pre-recession low of £39.9bn)
* Tax credits have increased significantly from £3.2bn (when Family Credit in 96-97) to £27.6bn in 2010-11, but this still gives a net increase in child/working age benefits of £13.9bn – much of this directed to making work pay rather than funding those not in work.

However, benefits directed at pensioners have rocketed from £65.7bn to £99.9bn

In other words, the Government are saying that an increase in the number of pensioners is an “explosion of benefit dependency” that needs clamping down on by punishing working-age disabled people.

You are quite right it is the ageing society that is a big driving force behind the welfare and health spending, Sevillista. Other than bump off some pensioners the spending is not really discretionary.

The quicker Clegg defects to the Tories the better.

Try this news item from January 2006, well before the financial crisis developed in 2007:

“Work and Pensions Secretary John Hutton has unveiled plans to get one million incapacity benefit claimants back into work, saving £7bn a year.”
http://news.bbc.co.uk/1/hi/uk_politics/4641588.stm

This graphic in a feature in the FT was from July this year: “1,710,000 people gain less than 30p or less for every extra £1 they earn by moving from benefits into work”
http://www.ft.com/cms/s/0/cce241ee-9bb7-11df-9ebd-00144feab49a,dwp_uuid=ec12e25a-624a-11de-b1c9-00144feabdc0.html

And these are recent news items:

Sutton Council’s benefit fraud investigation team have retrieved almost half a million pounds from benefit cheats in the last 12 months. This is the result of around 150 penalties ranging from small fines to arrests and prison sentences between March 2009 and April 2010. The team has prosecuted, cautioned or fined more offenders in the last year than the other five boroughs in south west London.
http://www.sutton.gov.uk/index.aspx?articleid=9221

Sutton’s fraud investigators and benefits team have been nominated for two national awards for their work fighting crime and helping the needy. Sutton Council’s staff have been shortlisted for the ‘Excellence in Anti-Fraud’ and ‘Most Improved Team of the Year’ categories in the Institute of Revenues Rating and Valuation Performance awards 2010. Following the recession benefits claims increased by 20 per cent since April 2008 and the team is recognised for continuing to provide an excellent service despite the increase in workload.
http://www.sutton.gov.uk/index.aspx?articleid=10896

The Lib-Dem controlled Sutton Council is one of the councils selected to pilot the government’s Big Society initiative.

In the 80s the key to making the wider public accept skyrocketing poverty and the decimation of families and communities by a ‘rebalancing of the economy’ was to make them feel that those who suffered deserved it.

Cast them as lazy scroungers. That way those of us in jobs feel a nice glow of moral superiority, and the warm comfort that because we are not lazy or inclined to scrounge, it couldn’t possibly happen to us.

It worked last time and it will work again this time.

Only when Labour got into power did people start to talk about or care about poverty again and demand it be bought down. Only when Labour got into power did they make the case that helping people into work was a better bet than punishing people for being lazy.

Labour changed the debate, and it should take years to change it back.

But sadly because 10% of the population are tories who have spent the last two decades mascarading as yellow-rossetted-lefties, their “conversion” appears all the more compelling and draws in others who still habitually believe they are caring and thoughtful and have no inherrant tory agenda.

And unfortunately that speeds up the process of changing the terms of engagment their way.

If the blue tories label the poor feckless, people will be suspicious. If the yellow tories do it, they will think maybe there’s something in it.

And as for those who think Clegg defecting would help, take a look at the party you are kidding yourselves can be saved for the left. It is saved. It is where it wants to be. A handful of people so deluded by the ‘Dems’ facade that they went as far as mistakenly joining it – will leave. But the rump of the party has for a long time been, basically, tory in spirit.

Middle class, Middle incomed, well educated, prosperous, and slightly resentful at having to give a lot of it to the poor.

Spot on analysis.

My contempt for Clegg is ever-growing. I do not necessarily object to Clegg forming a coalition with Cameron. That in itself is not a break from the principals he proclaimed or the election he fought. What’s so stomach churning is the unbridled enthusiasm he was for far-right policies.

The benefits trap is an issue that needs looking at properly but the idea that simply cutting benefits will improve the situation is ludicrous. It simply doesn’t make any sense, quite apart from the immorality of penalising the poor.

It seems to me that we are constantly being told that unemployed people are unemployed because they don’t want to work. This is again deeply offensive but also ridiculous. If that were true then unemployment couldn’t be rising. Because where are all these newly unemployed coming from – presumably they had jobs and hence must have been prepared to work. Have they just changed their minds?

AFZ

AFZ

“It seems to me that we are constantly being told that unemployed people are unemployed because they don’t want to work.”

By many accounts, it was the same story during the depression of the 1930s. The thoughtful might reflect on why this was happening in so many countries at about the same time.

It would be kinda funny if the Tories dumped the liberal Cameron and crowned Clegg their leader.

Sunder,

Asides from your failure to recognise that liberalism is about individualism (go and check its history) – and this would not rule out ‘progressive’ measures, just dependency (and incidentally, do you agree with dependancy on the state? You never address that), I think there is a number of problems with your three arguments.

1. Employment rates amongst disadvantaged groups apparently rose in the last decade. This is good – it shows we have a more equal society – but how the hell does it affect welfare dependence which can apply to members of all groups equally. I think you are confusing “disabled people, lone parents, ethnic minority people, people aged 50 and over and the lowest qualified ” (from your DWP link) with those trapped in welfare dependence. Only one of those groups, the lowest qualified, are normally considered in welfare dependency (there may be cross over with other groups – these are not exclusive labels). Interestingly, your link shows employment rates for the lowest qualified 1992-2007 fell from 58% to 50.8%, remaining roughly stable at that horribly low rate since 1998. So the achievements of ethnic minorities or the disabled may be impressive, but the group normally considered to be in danger of welfare dependency has not benefited from extra spending at all (to be fair, the main fall in employment was under John Major’s government, so you could say spending stopped a declining trend, but this is hardly justifying your point).

2. How does thinking a system disincentivises work actually contradict the point that extra money in tax credits etc entrenches dependency? Do you not see that the point is that there is so little point in taking on work exactly because the extra money coming in is almost totally counterbalanced by taxation and the loss of tax credits? This is a question of marginal rates, not redistribution as you suggest. This is also consistent with Liberal Democrat policy to raise the lower limit of income tax to a more suitable level (above where benefits are paid). That would produce a situation where people earn their money and keep it, rather than earn it, pay it to government and have it paid back (with two areas that cost (transactions cost money you know, and someone has to pay for them) and are subject to potential miscalculation etc). I do not understand your problem here, but it seems to be failure to understand that taking money away and giving it back is different from letting people keep their own earnings.

3. Redistribution is always (in British politics) pro-poor. I think what you miss is that Mr Clegg believes the current system is not working. If you think it is, and that this is efficient use of money, please make the case. Do not try and distract us from the actual argument by trying to imply anyone talking about welfare is trying to redistribute away from the poor (hint, the redistribution is from taxes, as government spending has to be drawn from somewhere).

You may have an argument against Mr Clegg’s ideas, but as he is trying to change a system and you are (seemingly) defending it, perhaps you should do that rather than making assertions about misunderstandings and intentions that are clearly wrong.

14. alienfromzog

I have just been browsing through the National Statistics website.

Some interesting facts;

Of the currently 2.47 million people unemployed, 48% of them have been unemployed for less than six months. and two thirds have been unemployed for less than a year.

In the three months to Aug 10, there were 467,000 job vacancies. Now a simple bit of maths tells me that 2.47 million – 2.47 million = 2 million. So even if we forcibly matched people to jobs, there would still be 2 million left over… like a great big game of musical chairs. Except of course, this is people’s lives we are talking about…By comparison in two years ago, there were 1.72 million people unemployed and 613,200 vacancies.

So, of those currently unemployed, two-thirds of them were in work less than a year ago. There are not enough vacancies to employ all those who do not currently have a job.

This clearly fits with the argument that the unemployed are welfare-dependent. Clearly we have a large number of people who don’t want to work and are simply on benefits by choice.

AFZ

15. Mike Killingworth

[5] That’s the key point. It’s the demographic time bomb – as my daughter puts it, “the baby boomers who ate the world”.

When Lloyd George introduced Old Age Pensions the actuarial calculation was that each recipient would draw their pension for less than three years before they died.

From the National Statistics Office website [blockquote]Based on 2006–08 mortality rates, a man aged 65 could expect to live another 17.4 years, and a woman aged 65 another 20.0 years[/blockquote]

I would have some sympathy with Clegg’s position if we had full employment or anything like it. But we don’t and there’s no prospect of it. There is a global labour marketplace and the skills level of the British workforce probably prices it at an average of £1.50-£2.40 per hour. If he’s at all logical, his next speech will call for the abolition of the Minimum Wage.

The political consequences are probably that he is now resigned to the defection of a dozen or so MPs, a coupon election in 2015 with Tories and Lib Dems only fighting each other in seats where Labour is a very distant third with a view to the parties merging (and Clegg fighting a Tory right-winger when Cameron stands down).

16. margin4error

Watchman
May I be so bold as to answer on Sunder’s behalf?
“Incidentally, do you agree with dependancy on the state?”
I agree with it. It definitely exists. I defy anyone to suggest otherwise. Indeed it has done for centuries if we include dependence on charitable acts by the church, which was itself part of the state long before the welfare state came to be.
Or are you asking the utterly fatuous question “do you think we should end it?” which is one of those lovely idealistic questions a little like asking would we like a world without crime. It’s a nice idea but in the real world scrapping all laws would just lead to more rape and murder and theft and so on – and likewise ending welfare would result in more death, starvation, homelessness, ill-health and ill-education among the next generation.
1. Only one of those groups, the lowest qualified, are normally considered in welfare dependency (there may be cross over with other groups – these are not exclusive labels). Interestingly, your link shows employment rates for the lowest qualified 1992-2007 fell from 58% to 50.8%, remaining roughly stable at that horribly low rate since 1998.
Two points
a) Did the “lowest qualified” group grow or shrink. A big part of reducing unemployment and poverty was improving educational attainment, so success might have been achieved without the rate falling. (I genuinely don’t know if it shrank or rose)
b) do you consider welfare dependency to be a binary issue? Is it all or nothing? Or, is moving some one from having 100% of their income from the state to having 50% of their income from the state – a good thing? If so fair play to Labour and the tax credit system that helped move people from full dependence to a lesser degree of dependence by supporting jobs and making work pay.
This also covers your “2” issue about marginal rates. One can increase marginal rates by not taking away benefits when people enter work. The tax credit system does just that. (Which is why it seems odd that you don’t like tax credits in your analysis – unless off course 100% dependence is as bad as 1% dependence (which makes the case for shutting the NHS and free schools and the police and so on – as we are all a bit dependence on the state)

“If he’s at all logical, his next speech will call for the abolition of the minimum wage”
Great, then we can all pay for the increase in tax credits which would follow.

15
BTW, the average life expectency in 1908 (when Lloyd George introduced the OAP) was 49 years for a male. Which turned out to be next to useless as it coudn’t be taken until you reached 70.

It’s so great that one and a half million people have spent nine out of the last ten years living off benefits! Obviously we should just leave them alone, accept that they’ll never get jobs and pay taxes, and continue to foot the bill for their dependency.

19
And there’s a greater number of people in employment who are receiving millions of pounds worth of benefits to subsidize employers who won’t pay a living wage. We can move all the unemployed to all of these mythical jobs and pay them peanuts and they will probably receive the same amount in benefit for working in a poorly paid job than they would being unemployed.
But I suppose it’s alright to fund employers albeit in an inderect way.

21. Mike Killingworth

[19] Benefits are taxable income, Blanco. Who told you otherwise?

This news report in Thursday’s FT seems to be the clearest indication so far of the government’s plans to cut benefits:

“More than 500,000 people currently on incapacity benefit could be moved on to the dole over the next few years, Iain Duncan Smith, the work and pensions secretary, has told MPs. . . The move will save the government and the taxpayer money, since jobseeker’s allowance pays just over £65 a week compared with more than £90 a week for the two levels of employment and support allowance. . . ”
http://www.ft.com/cms/s/0/863b60cc-c0f6-11df-99c4-00144feab49a.html

Why is anyone suprised that the Lib Dems are perfectly willing to kick the lungs out of the weakest members of society? Surely everyone voting for Clegg knew he was was little more than a Tory wankstain anyway?

A few Left of centre people were conned into voting for the Lib Dems and all hell breaks lose? Why? Vote for a pro Tory Party and you get a Tory Government.

When I was young a common saying about the, then, Liberal Party was that they were just “Tories with consciences”

This was obviously wrong, they are in fact just other plain old Tories.

By the way, Jo Grimond who was (and still is) something approaching a saint to many Liberals was a big admirer of Thatcher and once said “Much of what Mrs Thatcher and Sir Keith Joseph say and do is in the mainstream of liberal philosophy.”

25. Not a scrounger

#22

“The move will save the government and the taxpayer money, since jobseeker’s allowance pays just over £65 a week compared with more than £90 a week for the two levels of employment and support allowance.”

The FT are misleading people there (to be fair they’re not the only ones who say this about IB). It is true that IB (ESA) is a greater amount of money per week than JSA. However, only IB claimants who don’t claim housing or council tax benefit will actually see this extra cash.

This is because when you claim housing benefit while on IB, the difference between IB and JSA (approx £25 if the FT’s figures are correct) per week is deducted from your HB. You get a letter saying that because the government feels you only need £65 per week to live on (i.e. the basic JSA rate), and you get £90, you will only therefore receive [rent minus £25 per week] amount of housing benefit. That’s if you’re lucky – if you happen to live in a place where rents are higher than the median for your area (I believe it’s the 30th percentile now), you’ll get even less. So you have to make your rent up out of your IB.

So if you live on your own, or your partner is out of work too, meaning you have to claim housing benefit, you’re not actually seeing any financial benefit from being on IB as opposed to JSA. The only benefit is a practical one of not having to sign on and not being hassled to get a job.

So when politicians and the media make out that IB costs so much more than JSA, well, it doesn’t. Not when you take into account other factors. The government saves money on housing and council tax benefit for IB claimants by making deductions that take into account this extra amount per week that IB pays.

It would be interesting to see figures for how many IB claimants also claim housing or council tax benefit, just to see by how much the picture is being distorted. I suspect this emphasis on how much IB pays in relation to JSA is to engender a sense of outrage about it.

if you happen to live in a place where rents are higher than the median for your area (I believe it’s the 30th percentile now)

Not yet – that comes in next October, and will apply to existing claimants on the anniversary of their claims. (At least, for those of us on LHA. I’m not sure what will happen to people on old-style housing benefit.)

So if you live on your own, or your partner is out of work too, meaning you have to claim housing benefit, you’re not actually seeing any financial benefit from being on IB as opposed to JSA.

That’s true for the first 12 months. After 12 months on IB or incapacity-related IS (or immediately, if you get DLA), you’re awarded the disability premium too – currently £27.50pw. If they then bounce you onto JSA, you’ll lose that unless you get DLA (or various other qualifying benefits, but if you’ve just failed a WCA, DLA is the key one). Since IB was replaced 2 years ago, everyone still on IB/IS should now be in receipt of the disability premium, so a lot of people will end up losing money from the switchover.


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