Jonathan Bradshaw, University of York
Since the Second World War the living standards of the population of the UK have been protected by a safety net provided by social security, free health care and other public services. Social security, now often odiously and inaccurately described as ‘welfare’ has in the last few years stopped being secure – the safety net is in tatters. What has been going on?
A perfect storm of benefit abolitions, freezes, cuts, failures to uprate and conditionality have lowered the value and reduced the coverage of the safety net.
The social security system introduced after the Second World War was never the universal and comprehensive scheme that Beveridge had intended. Britain was broke after the war and most benefits were introduced at a lower level than he had planned. Family allowances were only paid for the second and subsequent child. His plan also had flaws – it failed to cover rent and rates; the civilian disabled and the low paid were not covered; and married women could opt out of pension contributions.
Despite the efforts of successive post-war governments to extend social security and fill the gaps, soon the contributory national insurance system lost its way and social security became increasingly non-contributory and means-tested. In 1948 fewer than one in twenty of the population were dependent on the means-test. Today more than one in five depend on a means-tested benefit. Now only 12% of spending on the unemployed is on contributory Jobseekers Allowance (JSA) and effectively the national insurance system consists of the basic state pension.
But my argument is not really about the merits of means-tested versus contributory benefits. It is about the undermining of the capacity of the whole system to provide a safety net, and part of that story is about the means-test. National assistance from 1948, supplementary benefit from 1966, Income Support from 1983, now income tested JSA and ESA, Pension Credit, tax credits and their predecessors plus housing benefit and council tax benefit, free school meals and exemption from health services charges – all provide part of a safety net.
Of course it was never perfect. Means tested benefits and tax credits were and still are not claimed by substantial proportions of those eligible. With direct taxes they created poverty plateaus and other incentive problems. But they provided a safety net – a predictable and guaranteed minimum that no one should be living below. Until very recently a welfare rights advisor could do an assessment and say to a claimant you will have £x per week to live on. Indeed our minimum income guarantee, though never as generous as the Mayor of Calais has recently suggested, was safer than even in some Nordic systems where social assistance is not a right but reliant on social workers discretionary judgements.
Now it is all going wrong. The high point was perhaps just before 1979. Then Margaret Thatcher came to power and abolished entitlement to social assistance for 16-18 year olds and began to uprate benefits by price inflation (or freeze them in the case of child benefits). The level of the safety net which had doubled in real terms and more or less maintained parity with average earnings up to that point began to lose touch with the living standards of those in employment.
But the real damage has been done by this present government.
The uprating of working age benefits by substantially less than inflation since 2010 and cuts made in tax credits has resulted in falling living standards. This was the first time that the real level of the safety net had fallen since Unemployment Assistance began in 1934. The Child Poverty Action Group recently estimated that the failure to uprate child benefit by inflation since 2010/11 has meant it has lost over 15 per cent of its value over this parliament compared to its worth had it been uprated using RPI. In practical terms, this means a family with one child has lost £543 of support over the five years, and a two-child family has sustained losses of £900. The failure to uprate the child element of tax credits over the course of this parliament has resulted in reducing the real value by 8.5 per cent. As a result, a family with one child will have lost £628 in the last five years, and a two-child family double this (£1256). This is one of the main reasons why the Equality and Human Rights Commission found that the combined effects of taxes and social security changes since 2010 had reduced the income of couples with children in the bottom income decile by 13%.
Out of work benefit income as a proportion of the Minimum Income Standard has fallen to 57%. So low has JSA become (currently £72.40 for those over 25 and £57.35 for those aged 18-24) that it appears that increasing proportions of the population have just stopped bothering to claim. Thus there has been a growing gap between the unemployment rate and the claiming rate – only about 47.5% of those registered unemployed are now claiming JSA.
Some of these non-claimers will be ineligible for income tested JSA. Others will have been caught by the recent extension of waiting days before claims can be made. Others will have been caught by the increasingly harsh sanctions regime associated with the Work Programme. There is evidence that some unemployed people have drifted into part-time self-employed work supported by working tax credit in order to avoid oppressive sanctions.
Council tax benefit was rebated 100% for those living on the safety net income. Council tax was localised by the Coalition government. Local authorities were left to administer their own schemes on 10% less money with the obligation to protect pensioners. So depending on which local authority you live in non-pensioners on social assistance have had to pay some of the council tax out of their falling safety net minimum income. Those unable to pay it are being taken to court and fined further undermining their living standards.
In the past those people on out of work benefits had 100% of their rent met by housing benefit. The government has sought to contain this growth by, among other things, introducing local limits to private sector rent covered by housing benefits and then reducing it to the 30th percentile, introducing a general cap on the level of benefits payable and, in the public sector, introducing a so-called ‘bedroom tax’ which reduces housing benefit payable if a household in the social housing sector has ‘excess’ rooms.
The consequences of these policies are that, whereas in the past housing benefit usually covered 100% of the rent of those on out-of-work benefits, many households are now paying part of their rent out of their basic benefit or income. The introduction of the bedroom tax has affected 11.1% of all social tenancies. So far 41% of tenants have paid the full amount; 39% have paid some; and 20% have paid none. To cope, 57% of claimants report cutting back on household essentials, borrowing the money from family or friends (26%) or running up debt. As a result, the adequacy of the minimum income guarantee is being undermined. About 80% of private tenants on housing benefit are caught by the local rent limits, 10,000, mainly in London, by the benefit cap and over 500,000 tenants of social housing are paying the bedroom tax.
EU migrants have recently been the subjects of wave upon wave of regulatory change that has undermined the safety net for them: the introduction of a three month prior residence rule for Jobseeker’s Allowance, which has been extended also to Child Benefit and Child Tax Credit; the scrapping of Housing Benefit for all EU jobseekers; the withdrawing of job centre interpretation for EU jobseekers; the introduction of a six month cut-off for Jobseeker’s Allowance, coupled with a ‘compelling evidence of genuine prospects of work’ test; and the introduction of a ‘minimum earnings threshold’ to have work classified as work.
The Educational Maintenance Allowance that helped low income teenagers stay on at school and the Health in Pregnancy grant which was the only benefit to help low income women maintain adequate diets in pregnancy – both newer and welcomed elements of the safety net were abolished as the Coalition’s first acts.
More is to come. We are less than halfway through reducing the deficit. Both Conservative and Labour have identified working age benefits for further cuts. Meanwhile the Trussell Trust, the largest food bank organiser, says that 913,000 people got at least 3 days’ emergency food last year – an increase of 163% on the previous year – the best possible evidence of the collapse of the safety net. We can expect more evidence – in rising poverty rates, deteriorating health indicators, increased homelessness, rising suicide rates, family breakdown and civil unrest. Watch this space.
Jonathan Bradshaw CBE FBA is Emeritus Professor of Social Policy at the University of York and Professor of Social Policy at Durham University. He is the UK expert on the European Social Policy Network. He is a Trustee of the Child Poverty Action Group. Twitter @profjbradshaw