Does the amount we spend on benefits for the unemployed justify the attention they get?
We write a lot about welfare benefits on this blog. They’re an important part of social policy that rarely spends long out of the newspaper headlines. Especially in the UK. The most recent development in this area is the UK welfare benefits uprating bill. This bill, which recently made its way through parliament, limits increases in most state benefits (with the notable exception of pensions) to a below inflation 1%. Labour opposed this bill, but they made sure to let us know that they had their own plan to keep those pesky benefit claimants from getting away scot-free. People who had been long-term unemployed would be made to take up government funded jobs, on pain of losing their benefits.
Looking at this debate, and at the perennial position of unemployment benefits at the top of the political and news agenda, you would be forgiven for thinking that they were a big part of our current economic mess. In fact that seems to be exactly what the public think. In a recent YouGov internet survey commissioned by the TUC, when asked what proportion of total welfare spending went to the unemployed, people’s average estimate was 41%. This result should be taken with a tiny pinch of salt, as people who have strong views on benefits are obviously going to be more inclined to participate in the survey. But, as far as I can see from the breakdown, the sample was pretty representative, and the question they asked seems fair:
“The government’s welfare budget pays for pensions, tax credits, benefits for the unemployed, the disabled and other groups. Out of every £100 of this welfare budget, how much do you think is spent on benefits for the unemployed?”
£41 may be a little higher than what most of the general population think (or a little lower), but it’s probably in the right ballpark. So how much do we actually spend? Well, Job Seeker’s Allowance (JSA), the main benefit that goes (almost) only to people who are unemployed, makes up only 3% of the welfare budget – only 0.7% of total government expenditure. 3% vs. 41%! It would be funny if it didn’t have such tragic real-world consequences.
Obviously there are other items to add to this bill; particularly housing and council tax benefits. But a lot of that goes to people who are actually in work. For the 2011-12 fiscal year, an average of 50% of housing benefit and 36% of council tax benefit went to people who actually had a job (though note that these numbers from the DWP apply only to people for whom we have information on whether they have a job or not, and don’t include people who are ‘passported’ into these benefits through their eligibility for other benefits).
If you add all that up (all of JSA, 50% of housing benefit, and 64% of council tax benefit) we only get to 10% of total welfare spending (2% of total spending) – still nowhere near 41%. This makes me despair. How can we have a reasoned discussion about how much we should be spending on welfare benefits when most people have no idea how much we actually spend now? I mean, if I thought that almost half of welfare spending went on unemployment benefits, even I might entertain the idea that they should be cut.
The coalition’s relentless focus on long-term unemployed ‘skivers’ has led to the impression that they are an overwhelming drain on our resources. A drain which needs to be fixed to address the deficit. It’s true that there’s currently a large gap between what government spends and what it takes in, and that it would be better if this gap were smaller. But the money we spend on the unemployed is a very small part of this story. If we truly did spend 41% of the total welfare budget on the unemployed, then reducing our spending on this group by a ‘reasonable’ amount, let’s say 10%, would shrink the deficit by around £7bn (5.8%). Not a massive drop, but not an insignificant one. In the real world, a 10% cut in spending on the unemployed would take only a £1.7bn bite out of a £121.6bn deficit (completely ignoring the extent to which this cut would harm the economy by reducing demand). Still worth doing, you might think. But worthy of the rancorous arguments, of all the endless ink spilled in ‘skiver’ bashing articles?
Given all this, my question for Labour is this: Why on earth are you allowing yourself to be dragged into a fight about who’s tougher on the unemployed, when there are much bigger fish to fry? You’re never going to win this argument. The conservatives will always (quite correctly) be considered to be the party who are ‘firmest’ on benefit claimants. Continuing the argument just plays into their hands by further inflating in the public mind the importance of unemployment benefits to our overall economic gloom. Not to mention making it harder for us to properly support people in need into the future. There is increasing evidence that the coalition has bungled the economic ‘recovery’; taking our money in tax increases and welfare cuts, to very little positive effect. This is the field of battle on which Labour should be fighting, rather than raising the profile of a skirmish they can only lose.