Contemporary political debate in Britain appears sold on the idea that there is a clear division between a large permanently ‘welfare-dependent’ group and the rest of the population who pay taxes to support it. It’s skivers vs strivers – or those with the curtains drawn in mid-morning against Nick Clegg’s ‘alarm clock Britain’.
Yet these views miss the complex reality of people’s lives – the fact that people’s incomes change, with many people having been out of work at some point, but few staying out of work for long. And they miss the fact that the majority of what the ‘welfare state’ does is redistribute over the course of people’s lives – from those of working age to children and pensioners – rather than from the ‘rich’ to the ‘poor’.
In today’s Chalk + Talk here at the SMF – part of our ESRC sponsored seminar series – Professor John Hills unpacked these myths and demonstrated their consequences by presenting the findings of his new book, ‘Good Times, Bad Times: The Welfare Myth of Them and Us’.
Public perceptions about benefit recipients are very different from reality
Public perceptions of a group of permanently ‘welfare-dependent’ people are pervasive. Politicians have given concerned accounts of families in which three or more generations have never worked. In a recent poll, respondents were asked the proportions of those claiming Jobseekers’ Allowance they thought will go on to claim for more than a year. The median response was 50%; and a quarter of respondents thought it would be two-thirds of more. But DWP figures show the number to be only 10% – with half of all JSA claimants no longer claiming after just two months.
Opinion polls also highlight another misperception: that unemployed people consume a large proportion of government resources. Asked about the proportion of the Government’s welfare budget – defined as pensions, tax credits, unemployment benefits, and benefits for disabled people – that goes to the unemployed, respondents thought 40% on average. A quarter of respondents thought over 60%. Yet figures from the Treasury show that less than 4% of the social security budget goes on unemployment benefits.
Taking a dynamic perspective on people’s lives – and what the welfare state does – can resolve some misperceptions
Three big items make up the majority of Government expenditure on the welfare state. Of the £489bn spent on the welfare state in 2014-15, £140bn went on healthcare, £114bn went to pensioners (mainly through the state pension), and £98bn went on education. Each of these three key expenditures is strongly linked to the life-cycle, and much of the Government’s budget is spent on smoothing life-cycle incomes (see chart). People of working age pay more in taxes than they consume in services; but in older age are net recipients, mainly due to state pensions and healthcare.
Figure 1. Lifecycle average receipts and taxes (2005-06, £/year, not equivalised)
The welfare state does redistribute between those on high and low incomes. If one takes a snapshot of a particular point in time, people of all income groups will benefit from the state’s benefits and services, but those on higher incomes pay much more in taxes. Yet looked at from a dynamic perspective, much of this is taking money from those of working age – when incomes are high on average – and giving cash and services to older people, and families with children.
People’s incomes in working age also change very rapidly. When looked at from a dynamic perspective, the state has an important role in smoothing working age incomes, as they go up and down from year to year – and for many people from month to month. People move in and out of poverty; and many frequently move onto and out of JSA.
Perceptions of ‘us’ and ‘them’ interact with the media and political discourse
Perceptions of ‘us’ and ‘them’ are perpetuated and even encouraged by television programmes such as ‘Benefits Street’. But they are also influenced by political discourse. A key recent example is an HMRC tax summary, sent to each taxpayer to demonstrate how their tax contributed to public spending (see an example below).
The tax summary features a highly unusual use of the word ‘welfare’. It refers to neither of its commonly used meanings: ‘social security’ and ‘unemployment benefits’. Yet it accounts for almost a quarter of total spending – equating to around £180bn of Government expenditure. State pensions are omitted, demonstrating to the reader that ‘welfare’ does not mean ‘social security’ – so on first impressions it seems it must refer to unemployment benefits.
In 2014-15, less than 1% of total Government expenditure went on unemployment benefits; and around 5% went in total on out-of-work benefits (including for sick and disabled people). Yet a reader unfamiliar with Government statistics could be forgiven for thinking unemployment benefits make up a quarter of Government expenditure.
Figure 2. Example HMRC annual tax summary
The dangers of a failure to understand the welfare state – and the Government’s proposed £12bn cuts
The myths of ‘them’ and ‘us’ are problematic for two main reasons. First, if people think that ‘welfare’ is a large part of overall expenditure, it appears more plausible for it to be able to absorb large cuts. The Conservatives have announced further welfare cuts of £12bn. If people think the overall welfare budget is a quarter of all expenditure – as implied by their annual tax summary – then these cuts do not seem so draconian. But the actual welfare budget is only £38bn, and so would have to be cut by almost a third. It is important to be clear about what this would mean to welfare recipients – including sick and disabled people.
Second, failing to understand the dynamic nature of people’s lives creates an illusion of two static groups – ‘them’ and ‘us’. So much of what the welfare state does is to smooth incomes and service provision across the life cycle. If we fail to understand how much we use the welfare state across our lives then the myth of ‘them’ and ‘us’ will be perpetuated.
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Chalk + Talk is the SMF’s popular lunchtime seminar series, run in partnership with the ESRC. Chalk + Talk brings the best policy output from the world of academia into the heart of Westminster.