Autumn Statement: the poorest pay twice

Following yesterday’s Autumn Statement, Chris Johnes, Oxfam’s Director for UK Poverty, reacts to the Chancellor’s announcements and their impact on those struggling to get by in the UK.  

The Chancellor announced yesterday that the UK economy was recovering, and the predictions say it will continue to grow. I am pleased that we are beginning to recover and that unemployment is falling, yet I can’t see the “responsible recovery for all” that Osborne talks about.

I am pleased that we are beginning to recover (…), yet I can’t see the “responsible recovery for all” that Osborne talks about.

It’s not clear to me that this recovery is indeed for everyone: poverty continues to rise, with people looking for work increasingly having their benefits spuriously sanctioned and resorting to food banks. The cost of living is still spiralling, while wages are still stagnant and low paid and insecure work
continues to put millions in a vulnerable position that cannot be ignored. With nearly a million young people unemployed, the measure to sanction the benefits of under 21s for neither learning nor earning is a deeply concerning attack on young people, depriving them of support in their formative years.

But one of the government’s less heralded and indeed less easily comprehensible moves announced today may be one of the most significant. In this case, the old mantra of keeping spending under control will have widespread ramifications further down the line, meaning more people will face cuts in state support at the time they need it most.

The government understandably announced that it wishes to get a grip on social security expenditure, by putting an annual cap on benefit spending. This cap will mean that when demand for benefits rises these will now be shared by more people from a fixed finite pot.

In total, welfare is one of the fastest growing parts of public spending and one that remains largely demand driven – the more people qualify for a benefits, the more gets spent – meaning the Chancellor doesn’t have total control on how much is being spent. In this context, the idea that the government might put an annual cap on benefit spending might seem a reasonable thing to do as a means of controlling public spending. It’s even more reasonable when benefits that vary with economic cycles (like Jobseeker’s Allowance) are excluded from the cap – so that
if there is a big increase in unemployment there will still be money to pay for the dole.

[W]ith this cap the amount of support per person will inevitably go down at a time of greater need.

The problem is that when times get tough people also need other benefits – Housing Benefit and tax credits to top up low incomes are obvious examples – to get by, and with this cap, the amount of support per person will inevitably go down at a time of greater need. Unable to find enough work to pay the bills, people will find that the already meagre levels of state support will be reducing – a “double whammy” on the people who can least afford it. We know those levels of state support are insufficient to keep hundreds of thousands of people
from the doors of food banks, so unfortunately we can only conclude that these changes are likely to make things worse.

There is an alternative way to cut welfare spending, though, one that Oxfam and other charities have put forward to Government in recent weeks. Instead of getting tough on welfare in the short term, why not get tough on the causes of long term welfare?

What about ensure there is sufficient social housing to bring down both rent levels and Housing Benefit? Or investing in decent skills training to get people into work, or support for struggling families? All these measures will help reduce the need for state support in the long run, and bring both welfare bills and poverty down. The current approach may cut state spending in the short term, but it will inevitably stoke up poverty in the long term.

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Photo credit: HM Treasury

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Author: Chris Johnes
Archive blog. Originally posted on Oxfam Policy & Practice.