Thursday, March 1, 2012

Cameron promises end to unemployment, single parenthood

That is the only plausible interpretation of this headline: No more 'languishing on the dole' after welfare reforms, says David Cameron in the Telegraph.

Well, where have we heard that before? In 1979, when Britain had unemployment of just over £1.5 million, Margaret Thatcher promised to end the 'dependency culture'. This programme was so successful that the number of welfare dependants increased astronomically by the time of her departure. Now, David Cameron promises the same thing, but unlike his predecessor, who felt that the best way to deal with dependency was to follow a stringent monetary policy that doubled unemployment, the current government will simply cap the amount a family can receive in benefits, at £26,000 a year. The reason for this number is that this is the average disposable income of a family in Britain, and no-one should receive more than this for not working. A laudable principle, on the face of it.

Until you consider the reasons why someone may be on £26,000 a year benefits. Basic unemployment support - the 'Jobseeker's Allowance' - stands at just under £70 a week. So, do the math as they say - that amounts to only £3640 a year. In other words, you can't earn an average salary on unemployment benefit, unless the government increases it by a factor of 7+.

So where might the other £22360 come from? The answer is, housing benefit - the rent subsidy the government pays to families in need - and child benefits and credits. Now we get to the crux of the matter. Benefit recipients could be invited to leave their houses, which in some high cost areas would lead to savings of something in the order of several thousands pounds a year. But the problem here is that local authorities have a statutory duty to house homeless families. The government does not apparently intend to abolish this. So councils would have to spend possibly even larger sums housing families in bed and breakfast accommodation, or, as someone suggested, in Hull (a fate worse than death to a Guardian journalist).

Finally, child benefits tend to be more generous than unemployment support, on the not unreasonable grounds that children can't be expected to go to work, and should not suffer just because their parents don't. The government has shied away from suggesting that children in poor families should share the pain, but large families could still easily find themselves up against the benefit cap. But there is an obvious solution that this family-friendly government must be aware of. A benefit cap gives poor families with many children a big disincentive to stay together. The cap, remember, applies to the household. A family of two adults and 2+ children leaving in London could avoid the cap by splitting up. The result would be that local councils would have to house more families, a net increase in expenditure. Is this likely to happen on a large scale? My guess is no, but only because welfare dependent families are not the cynical money-grabbers portrayed in the right-wing press. The rational strategy would be to maximize access to welfare by creating as many family nuclei as possible.

The coalition is about to find out that welfare may be assailed by 'irresistible forces', but it is also an 'immoveable object'. If reforming welfare was so easy, it would have been done by now. Of course, LSE students know this already.