Daily Mail Welfare Story - Untrue and Dangerously Misleading

If I blogged every time the Daily Mail printed an untruth about people on benefits I wouldn't get away from my laptop very often. But today’s untruth is designed to soften up public opinion for benefit cuts to be announced on Wednesday – and as such it deserves some examination.

The argument from Government which is supported by this erroneous article is that the UK cannot afford the current welfare system and that its costs have spiralled out of control. Affordability is a value judgement – is the benefit of our Welfare system worth the price. The price however is a matter of fact. A useful understanding of the price is can be informed by data and is all too easily misinformed by distortions and untruths.

The key line in the article is “In 1948 spending on benefits accounted for 10.4% of Britain’s total income, against 24.2% this year.” This is under no circumstances true.

National Income is a term that generally refers to the Gross National Product* (GNP). “Benefits” is a difficult term to define but to illustrate I have produced a graph showing both the Office of National Statistics and the Department of Work and Pensions figures at their very largest. They include, in size order, pensions (over half of total spending), sickness and disability, Tax credits (ONS only) income support, unemployment (under 5% of total spending) and various other money transfers. It is a graph of Welfare spending as a proportion of GDP over time from 1979 to 2012/13. These are the numbers I have to hand  – but the point is clear – Welfare spending is a lot less than 24.2%

Graph of Welfare spending as a proportion of GDP data available Data

You may notice something else – that using the very sensible measure of Welfare spending as proportion of GDP welfare spending is still lower than the mid-1990s. Not something you will hear Government spokespeople saying. Indeed the article quotes an increase in 60% of benefits under Labour – I am sure there is a way of defining the terms such that this is true – I am equally certain it is at best a small fraction of the truth.

Other points made in the article are that the state pension has trebled since 1948 and unemployment benefit has doubled. I wouldn’t take the numbers at face value as the make up of the benefits has changed markedly eg. Pension credit, contributory pension, housing benefit, winter fuel allowance and other transfers may or may not be included in the comparison. It is important to realise that neither the state pension nor unemployment benefits have kept pace with the average wage for over 30 years. Recipients of only these basic benefits are in reality a great deal poorer than the 1980s.

Can we afford the current Welfare Budget?

In cash terms and real terms (where the numbers are adjusted for inflation) Welfare expenditure has increased – a great deal. Our personal incomes and national income has also increased a great deal – in recent years faster than the welfare budget.

The question is do we think the old, the sick and the vulnerable (who make up the vast majority of welfare recipients) should share in our increased national wealth? The alternative is that these groups become increasingly disadvantaged relative to the rest of the population. If, as I do, you think these people should not be gradually disadvantaged the comparison of national income to welfare spending is the most important measure to use. In which case we have afforded greater than the current welfare levels in the past and should not accept the argument that we are unable to afford it now.

Link to the data – workbook include graphs of the groups receiving benefits over time, essentially working age families decreasing as a proportion of spending and retired age families increasing.

 

*The term “total income” might mean the UK Govt’s tax take but that doesn't get to 24.2%. My best guess is that the number is derived from the ONS welfare expenditure, which is the largest measure available, and projected to be 24.17% of the Total Govt's managed expenditure in 2013/14 - nothing like "Britians Total Income".

The Housing Crisis

The word 'crisis' is overused, but the National Housing Federation's warning of a coming housing crisis is not so much alarmist, as inevitable unless a fundamental change of policy takes place. Beyond the lesser crisis for party politics and middle-class aspiration, there is a growing threat of increased poverty and homelessness due to the shortage of affordable housing.

There are nearly 5 million people on social housing waiting lists in the UK, homelessness is rising and cuts to housing benefit are tightening the screws on those on low incomes. On 2010 Government figures, 48% of Local Housing Allowance claimants, i.e. private sector tenants in receipt of housing benefit, experienced an average shortfall of £23 per week between their rent and the benefit they received. £23 is a serious sum to have to meet from a low wage or unemployment benefit. And these figures were before the cuts announced in the Comprehensive Spending Review of October 2010, which have begun to come into effect from April this year: preliminary studies suggest things are going to get much worse.

The single main cause of the pending crisis is the ongoing failure of successive governments to build sufficient social housing in combination with the 'right to buy' scheme introduced by Thatcher in the 1980s. This led to a chronic and unsustainable loss of social housing stock especially following the previous Labour Government's wasted opportunity to invest in social housing during the boom.

During an economic downturn, with home ownership set to fall to 1980s levels, the increased difficulties in getting mortgages, along with benefit cuts, make the need for social housing acute. Yet Government has announced an approximately 50% cut in its social housing budget from £8.4bn to £4.4bn from 2011-2014.

Whilst the Keynsian attitude that a country must spend its way out of an economic crisis is not universally valid, it arguably applies to housing, which is on a par with national infrastructure. History shows that the cost of investment in good social housing is soon recouped. Increased investment in social housing would also create jobs and incentivise the housing and related sectors.

It would also offset the net result of this and the last Government's housing policy which is an ever-increasing transfer of taxpayers' money to private landlords. According to the (aptly-named) housing charity, Crisis, the average private sector rent rose from £79 per week in 1997/8 to £129 in 2007/8, while the average housing benefit award in 2007/8 was £109.25

The current housing benefit bill is estimated at £21bn - this is a massive sum. But the most significant cause of the last decade's increased bill is the steep rise in private rental prices. One of the many damaging effects of the way housing became bound up with global financial speculation and irresponsible borrowing and lending was that house prices in the UK appoximately trebled in the last decade. The persistent high value of property not only prices many out of home ownership, but contributes to landlords charging higher rents. Contrary to popular opinion, this is not merely an issue for the unemployed: 2010 figures showed that more housing benefit claimants were in work (26%) than out of work (22%). The net result is that private tenants struggle to pay the rent while their money drains away instead of serving to support social housing stock.

It is fundamentally scandalous that average wages (and benefits) are so low that people need the current high levels of housing benefit. But the Government's housing benefit cuts look set to increase pain for the growing proportion of the less well off in the UK without resolving the problem. It has justified setting the Local Housing Allowance at the 30th percentile instead of the median, and an 'affordable rent scheme' allowing housing associations to charge tenants up to 80% of local market rates, by claiming that landlords will reduce rents to accomodate falls in benefits. In view of the high demand for accomodation and ongoing property values, this remains an unlikely scenario.

The other solution would be for Government to cap rents. That this policy is politically unpopular is a sad reflection on how property and the land it occupies have been equated, mistakenly, with the market. This leads to property speculation and high housing costs and works agaist communities. From a Biblical point of view, it ignores the theological view of the earth as God's creation and a field not just of opportunity but stewardship and moral action. Housing is not a lifestyle choice and land not a 'possession' in the way a car is; they are more fundamental should be guarded against being made subject to concepts of profit and 'value added'. Until our society revisions the concept of land value and the malpractice of exploiting people's basic need for shelter and a context in which to thrive, property will continue to enshrine a feudal attitude of enclosure and landlordism.

A week with the Methodist Church

Tim Fry is a student of Clifton College, Bristol who has just completed his GCSE's and has spent one week on work experience with the Joint Public Issues Team. In this guest post Tim gives his impression of this week and the work he did on Housing Benefit.


Wow, a shame that such a thrilling and interesting week has come to a close. A very varied experience in which I learned about how the Methodist Church brings their work together on public issues and advocacy.

From the communications department which posted the goings on to all concerned to the statisticians/ researchers who tirelessly work at their computers and travel the country and find out exactly what’s going on. And also the Joint Public Issues Team (JPIT) who are making important issues heard and also presenting the policy of the churches to both decision makers and church members.

A very informative week was mostly spent on the government’s proposed cap on Housing Benefits which threaten the poor and will cause over half the homes in London to become unaffordable by 2016 and between 500,000 and 750,000 people to be affected.

This was a startling wake up call for me as I realized just how dire the situation was for the impoverished with their situation seemingly becoming worse with every action the government takes to cut expenditure. Questions must be raised however by its unwillingness to cut as much from the MoD even though the tip of the spear in Osama Bin Laden has been blunted and the terrorist threat level lessened.

Though such serious thoughts faced me this week still the brightness of the whole JPIT team shone through and made it an extremely enjoyable week.

Tim Fry