All together now
by Claudia Wood
George Osborne’s Autumn Statement was full of good news for low income families. First, the Chancellor has stuck to his ‘triple lock’ guarantee on benefits and pensions, so that benefits next April will rise by September’s inflationary rate of 5.2 per cent.
In September, when the Treasury realised how much this unprecedented CPI rate would cost in benefits increases, there was talk that Osborne would renege on this policy and increase benefits in line with earnings – at about 2.5 per cent.
This smacked of moving the goal posts, after already changing the rules so that benefits are increased by the lower rate of CPI rather than RPI. But the government has not only stepped back from this option, but has gone further by announcing that the child and disability elements of tax credits will increase in line with the higher rate of RPI.
This, plus an extension of free childcare and subsidised right to buy for social tenants, might help take the edge off the fuel and transport increases, the costs of which are already weighing heavily on low income families.
But the big news is of course the SME loan guarantee scheme, the raft of new infrastructure project investments, and the £1bn youth contract for subsidised job placements. The central message is that the government is injecting cash to stimulate the economy and create jobs – and it is this, not the tweaking at the edges of benefits and living costs – that will have a long term impact on low income and unemployed people.
In order to reduce the benefits bill by around £18bn, the government has embarked on the most radical welfare reform agenda since the system was created. Not a single benefit escapes reform – from housing benefit (capped), to Jobseeker’s Allowance (more conditional) to Child Benefit (frozen and means-tested). Every one is being tightened or cut in some way or another.
Disability benefits are seeing the greatest upheaval, with Disability Living Allowance replaced by the less generous Personal Independent Payment and Employment Support Allowance being reassessed, according to more stringent rules, and becoming time-limited for many.
This unprecedented reduction in welfare support has been described by the government as a means of ending benefits dependency and incentivising work. According to this narrative, long-term benefit claimants become ‘work shy’ and need the additional stimulus of reduced benefits income to motivate them to find work.
Of course, there is little use in making unemployment less attractive at a time when jobs are so scarce. Making people more financially desperate won’t help people find jobs if they don’t exist, however motivated they are. Those who have been out of work for many years, or who are disabled, are usually at the back of a very long queue of job applicants.
It’s clear that only an increase in welfare to work support and the creation of new jobs, alongside benefits reform, will lead to increased employment. So the investments announced today could be great news for all those benefits claimants who are feeling ‘incentivised’ to work but have little opportunity to do anything about it.
But several questions remain unaddressed. The investment – in infrastructure projects like roads, power stations and railway lines – does not guarantee that jobs will be suitable or accessible for disabled or vulnerable people. Is the government going to ensure that, of the many jobs being created, some at least will be suitable for disabled people? Or that some will be targeted – reserved even – for the most vulnerable and long term unemployed who find it the hardest to get back into the job market?
Will the loan guarantee scheme for SMEs come with some conditions attached, such as making reasonable adjustments to offices so that more workplaces are accessible? Will the Youth Contract provide additional incentives for employers to take on at-risk and vulnerable young people?
If the answer to all of these questions is negative, then while the small changes around benefits are welcome, the big investments will mean little for those furthest from the labour market.