In the same week as welfare reforms come into effect, spread all over the front pages of the newspapers is the archetypal ‘scrounging scumbag’. Of course, government ministers would not be crass enough link the murder of six children to the need to reduce welfare entitlements but they don’t need to. The usual suspects have done that for them. The message is clear; the welfare reforms are necessary to stop nasty people like Mick Philpott living it up with your money. It’s no wonder the welfare bill is out of control when we give handouts to people like that.
But how typical is Mick Philpott? And is welfare for the work-shy really the reason why the benefits bill keeps rising?
Apparently, the ever-increasing cost of social security has even government ministers baffled:
Several ministers have begun to openly question why the welfare bill is still rising, as unemployment has fallen by about 200,000 since the general election.
Now this is rather disappointing because ministers have highly paid advisors and civil servants to explain stuff to them. For example, the people who produce bulletins like this.
Here we can see what is pushing up the cost of social security. Pensions and tax credits are two of the biggest increases. One is for retired people, the other is mostly for people in work.
Thanks to the IFS Green Budget, we can see some of this in a bit more detail.
Over the past decade or so, there was an increase in the cost of benefits to the unemployed but most of the rise was due to tax credits and housing benefit. (Most of the recent rise in the cost of housing benefit was due to claims by those in work.) As the IFS explains:
Nearly two-thirds of this real-terms cash increase was driven by higher spending on tax credits, which were substantially more generous than the benefits they replaced. This encompassed increases in means-tested support for families with children in general, and particularly big increases in support for those in work. Spending on tax credits for those in paid work increased from under £3.3 billion in 1997–98 to more than £20 billion by 2010–11.
In fact, if you break down the total welfare expenditure, unemployment benefits don’t account for that much of it.
Source: A Survey of the UK Benefit System - IFS
The OBR predicts that the benefits bill will continue to rise even after the economy begins to recover. It’s not benefits for the unemployed that is driving this though. As the DWP/HMRC graph above shows, pensions continue to rise and the cost of tax credits stays stubbornly constant. This suggests that, even with a growing economy, there will still be a need to support the incomes of those in low wage employment from public funds.
So for all the talk of feckless scroungers pushing up the benefits bill, the figures indicate that payments to pensioners and those in work are behind much of the increase. Even if we could round up all the Mick Philpotts and force them to go back to work it would make very little difference. More worryingly, the forecast persistence of in-work benefits for the next five years suggests that, even when the economy does create new jobs for the unemployed, a lot of them will still be claiming benefit.
Whatever the Daily Mail and others might like us to think, the existence of a few people like Mick Philpott makes very little difference to the overall cost of benefits. The welfare bill is a bit like a volcano. A lot of smoke and fireworks comes from the little bits at the top but, underneath, slowly but surely pushing up the cost, is the rising magma of pensions and in-work benefits, the inevitable results of an ageing society and a low-wage economy.
- This is not meant to imply that pensioners and in-work benefit claimants are scroungers. (Note to self: be more careful with post title choice.)
- Nor is it meant to imply that unemployed people are scroungers. Most have worked relatively recently. The Mick Philpotts of this world are a minority of a minority. A very small one.