Friday, 5 April 2013

Why the welfare bill has risen

Last week Britain’s Work and Pensions Secretary, Iain Duncan Smith MP, said he could live on £53.00 a week. He couldn’t.

The Tory politician’s comment came during a BBC Radio4 programme in which Duncan Smith was attempting to defend welfare reforms that will hammer those already living in poverty. A caller said he only had £53.00 a week to live on and challenged the Government Minister to see if he could survive on that level of income. Mr Duncan Smith replied, “If I had to, I would”.

A single person on Jobseekers Allowance is paid just £71.00 per week, but after last week’s welfare reforms even that amount is now taxed – a local person living in a one-bedroom flat will see £3.55 deducted from their benefit to pay the Council Tax. This leaves just £67.45, despite the law saying that £71.00 is the amount the person “needs” to live on. From that amount they must pay for gas, electricity and water. From what is left – considerably less than the initial £10.00 per day – they have to buy food for a week. Should their shoes finally fall apart or a washing machine breakdown, replacing such items is beyond their means, unless they borrow money, and the only companies that will lend to the unemployed are the ones who charge soaring rates of interest.

Although they receive a little additional money, single parents and families on benefits have the added worry of trying to keep their children fed, clothed and warm.

Iain Duncan Smith cannot even begin to imagine what it is like to live on poverty-level benefits, yet the millionaire Tory MP last week introduced a range of welfare changes that will make the poor even poorer.

Duncan Smith is a former officer in the Scots Guards. On leaving the military he worked for GEC-Marconi, selling armaments, before a brief spell with a London property firm. He was then employed by Jane’s Information Group, initially selling gun-related magazines, finally working his way up onto the board of the company.

Mr Duncan Smith is married to Elizabeth ‘Betsy’ Fremantle, daughter of the 5th Baron Cottesloe, and they live in a £2m Tudor mansion in the grounds of his father-in-laws estate in Buckinghamshire. The property comes with a swimming pool and tennis court.

As a senior Member of Parliament, Iain Duncan Smith receives a publicly-funded salary in the region of £100,000 a year, plus publicly-funded expenses covering his travel, accommodation and food. In addition, the government minister is reported to have amassed a personal fortune in the region of £1m, mainly from speaking engagements on the ‘after dinner’ circuit.

This is the man who thinks he could live on less than a tenner a day. This is the man who believes it is right and fair to further reduce the living standards of the poorest people in the country.

According to Mr Duncan Smith, his welfare reforms are “essential” in order to reduce what he describes as Britain’s “soaring benefits bill”, with the added invective that portrays the unemployed as spongers and skivers living off the taxes of hard-working ordinary men and women. We are to take from Iain Duncan Smith’s comments that the welfare bill has soared because the undeserving unemployed are living the high-life on hand-outs. Nothing could be further from the truth.

When Duncan Smith’s political heroine Margaret Thatcher came to power in 1979, unemployment benefit was 21% of the average wage. Today, the £71.00 (before the new tax deduction) a week received by an unemployed person represents just 13.9% of the average wage. Had benefits even just remained at the equivalent of the 1979 level, instead of £71.00 a single person on Jobseekers Allowance would be receiving £135.00 a week. So, despite what the UK Government and right-wing newspapers would have us believe, an increase in the amount paid-out in benefits is not the result of the unemployed being better-off.

The capitalist, free-market economic policies of successive British Governments – Tory then Labour and now Tory-Lib Dem – have resulted in millions of people being thrown out of work and having to rely on subsistence-level benefits to survive. However, the unemployed are not responsible for this situation. Any increase to Britain’s welfare bill resulting from mass unemployment is entirely down to the failed policies of Westminster politicians.

But let’s look closer at the right-wing rhetoric of people like Iain Duncan Smith. We are also told the welfare bill is soaring because of work-shy freeloaders who claim benefits to which they are not entitled. The Department of Work and Pensions’ official figure shows the total cost to the taxpayer of benefit fraud is £1.2bn. Now, that is not an insignificant sum, but it doesn’t come close to the figure for unclaimed benefits – money the Treasury saves because people don’t know they are entitled to it – which for the same year (2010/11) was £12.25bn.

So, even the ‘duckers and divers’, so beloved of Daily Mail headlines, are not responsible for the country’s “soaring welfare bill”.

One element of the welfare changes introduced by Iain Duncan Smith is the Bedroom Tax, which financially punishes any household with more living space than the UK Tory-Lib Dem Government says they need. One ‘extra’ bedroom sees benefit slashed by 14%, while two rooms would result in a 25% cut. The result of the Bedroom Tax is that anyone who finds themselves in such a position will either have to come up with a considerable amount of money from their already meagre benefits to make-up the shortage in rent caused by the reduction in Housing Benefit or they will have to move to a smaller property. The problem is that councils and housing associations don’t have anything like enough one-bedroom houses.

Therefore, if people are forced to move from their homes, they will require to rent from private sector landlords, where rental charges are much higher. Such a situation will add to the position where, over the past 10 years, Housing Benefit spent on private tenants across the UK has increased by 153%, compared to 21% for council and housing association tenants. In the last financial year, 40% of the entire spend on Housing Benefit went to private landlords, despite the fact that 75% of tenants rent from social landlords. This is public money going into the pockets of the private sector: between 2011/12 and 2014/15, £35bn of Housing Benefit will be spent on private landlords, which is £13bn more than in the previous three years.

Of course, Iain Duncan Smith and his Tory Party champion the private sector, so don’t expect them to tackle the real cause of Britain’s soaring welfare bill.

If we want to reduce spending on benefits, we need to create work – real, sustainable jobs paying decent wages – and build sufficient numbers of social houses. However, to do that we need to elect politicians who will put the interests of people before the profits of private sector companies and corporations.

Incidentally, the parties that form the UK Government finished third (Lib Dems) and fourth (Tories) in the democratically expressed opinion of the people of Scotland at the 2010 Westminster General Election. They are only able to impose their right-wing policies and draconian cuts north of the border because Scotland remains part of the British Union.

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