Wednesday, January 06, 2010

Welfare UK-style

The following is from James Bartholemew, author of The Welfare State We Are In. Which NZ government does the opening paragraph remind you of? Hint. National hasn't even talked big - yet.

Housing benefit provides the biggest discouragement to work

In the great roll call of this government’s failures and blunders, its record on housing benefit deserves to have a prominent place. This was the government that was going to “think the unthinkable” on welfare benefits. Instead it “did the predictable”. Instead of embarking on radical reform like the administration of President Clinton in America, it opted to muddle along. It talked big and acted small.

Housing benefit is arguably the worst of all the benefit failures. Why? For two important reasons. One, it costs an amazing amount of money after nearly doubling since Labour came to power to £20 billion. That – for those who can bear the idea – amounts to £692 for every working person in Britain. Most people imagine that Jobseekers’ Allowance is the big, key welfare benefit. Not at all. Housing benefit costs more than three times as much.

The second and even more important reason why this failure matters is that housing benefit is probably the biggest single discouragement to the low-skilled unemployed to getting a job. Get a job and you lose housing benefit at a rapid rate. So housing benefit is one of the most important reason why more one in four people of working age are not working.

The official cost of £20 billion is just the beginning. Nearly all the people who are discouraged from working are also getting other benefits including Jobseekers’ Allowance and – in many cases - Incapacity Benefit or Income Support. But worse even than that is the effect on the morale and culture of those at the lower end of society who get accustomed to welfare dependency. It causes depression and alienation and contributes to uncivil and even criminal behaviour.

There is a simple rule for creating sound welfare benefits. It was described 175 years ago in the report of a Royal Commission into the operation of the poor laws. The commissioners decided that benefits should not be more advantageous than the income that would be obtained by the individual taking on low-paid work. It is as simple as that. Work must always pay. .

On radio phone-ins I have often heard people exclaim: “Do you realise how little you get on Jobseekers’ Allowance? You can’t live on that!” Unfortunately interviewers – being part of the upper middle class - rarely understand that the Jobseekers’ Allowance and other benefits are normally accompanied by other benefits such as a free school meals and, very likely, the big one: housing benefit. Only when they are all added together do they amount to a meaty discouragement to work for the low-paid.

It will come as a surprise to many people to know that not all countries pay housing benefit – or at least not to as many classes of people as Britain does. In Italy, for example, an unmarried teenage mother does not climb up the council housing queue, get income support and housing benefit. She is expected to live with her parents or other relatives or perhaps the father of the child. The result is that there is far less unmarried parenting in Italy than here. They make their decisions and live with them. That means they make better decisions.

If there were prizes for tinkering with the welfare benefit system, this government would certainly win the gold trophy. I used to get press releases from the old Department of Social Security as it was called. If I had had a strange notion of interior decoration, I could have wall-papered my bedroom with them within a few weeks.

To be fair, some reforms have gone in the right direction. James Purnell, when he was in charge, decided that people should only get benefit to pay for a maximum of five bedrooms. Yet you can see from this example just how cautious the reform has been. For people who struggling to afford accommodation with two bedrooms, it will seem outrageous that others can going on having babies and getting more and more bedrooms at the expense of taxpayers. And people sometimes get benefit at a level based on expensive housing. Hence the scandalous case recently of one family getting £2,875 a week.

America was far more radical in its reforms. President Clinton agreed to a limit to the total number of years in a lifetime during which people could claim unemployment benefit. America was determined to do something about the benefits culture. Britain under Labour has merely strutted on the stage – posing, pontificating and making precious little difference.

What could be done? One idea – from the Centre for Social Justice - is to subsume housing benefit with many benefits into just a couple of major benefits. The benefits could be withdrawn at a slower rate than now when someone gets work, thus reducing the discouragement to getting a job. The trouble is that, other things being equal, this would cost a lot more.

The truly radical idea would be do something like that but significantly reduce the amount paid and leave it to the recipient entirely what accommodation is rented – if any. That would provide a powerful incentive to lodge with relatives or to go to a different area with lower rents.

But has Britain got the guts to do this sort of thing? I would like to think so but there is every reason to doubt it. The upper middle class elite does not get the seriousness of the problem. The BBC, the readers of Guardian and the Independent believe that their support for generous benefits makes them into generous, good people. Unfortunately it does not. It results instead in the continuance of a welfare dependant lower class with tremendously damaging social effects both to the poor themselves and everyone else.

(This is the unedited version of an article that appeared in the Daily Express today.)

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