There’s far less “scrounging” than you’d think from the headlines—but we’ll have to work to 70by Peter Kellner / March 26, 2015 / Leave a comment
Published in April 2015 issue of Prospect Magazine
There is an economic case for welfare reform. The government shells out more than £200bn a year on pensions, child support, unemployment benefits and help for low-paid, sick and disabled people. If it could make real inroads into that budget, it could reduce the deficit faster, cut taxes, spend more on schools, hospitals and new homes—or some combination of all three.
There is also a moral case for welfare reform. If too much goes to people who don’t deserve their benefits, or don’t really need them, this offends our sense of fairness, provokes resentment among taxpayers and, many of us fear, creates a dependency culture.
In the weeks ahead, we can expect all the parties to make both arguments as they set out their policies for reforming our benefits system. The trouble is, the public debate is based on fundamental misconceptions among voters which few politicians are prepared to dispel. The misconception is that the same policies will tackle both the moral and economic problems. They won’t, for the simple reason that the two problems are completely different; but none of the main parties seem willing to say so. With welfare, as with many other election controversies, most politicians prefer to pander to voters’ fears rather than confront them.
The public misconceptions are clear from YouGov’s latest survey for Prospect. Most voters vastly overstate the amount that is spent on benefits for the unemployed, the level of fraud, the degree of “welfare tourism” by immigrants and the proportion of people who lose their jobs and go on to claim jobseeker’s allowance for more than a year.
According to the Institute for Fiscal Studies, crunching data from the Office for National Statistics, Britain’s total welfare bill in 2013/14 was £205bn. This is almost a third of all government spending, and as much as it raises from income tax and corporation tax combined. By far the biggest component is state pensions. Together with pension credit, the total comes to £90bn. Benefits for families with children (mainly child benefit and child tax credit) total £37bn a year. Almost as much, £36bn, goes to sick and disabled people. A further £34bn helps people on low incomes; two-thirds of that takes the form of housing benefit.