The Welfare Reform Bill is to be debated by the House of Lords later today. One of its most controversial features is a benefit cap of £26,000 for those out of work. Tim Leunig takes a close look at what this cap will mean in reality for those on benefits, and finds that people could be left with as little as 62p per day after basic expenses.
Today I published an analysis of the Government’s £26,000 benefits cap for people out of work. It makes for grim reading.
After basic expenses – rent, council tax and utilities – it turns out that the government expects people to live on 62p per day. That is physically impossible. I have been asked where my figures came from, so here is the breakdown.
£392.31 for rent (the allowable rent for Tolworth, typical of a cheaper property)
£39.06 for council tax (Kingston Council, Band E)
£28.18 for gas and electricity (DECC English average + 20% for large family, in 2011 £s
£7.21 for water (OfWAT UK average + 20% for large family)
£6 for telephone/broadband – the cheapest BT anytime package
Starting from £500 means that you have £26.23 per week left over for the family, which is 62p per person per day to the nearest penny.
We can argue over these exact figures. Clearly the family could choose to be cold, or to shower infrequently to save money. But against that, private rented housing is typically less well insulated, the family are at home every day, so energy bills may be larger still. I have not included a mobile phone, or any calls to mobile phones, or to 08 numbers not included in the basic package.
In any case, even after rent and council tax, the family has only £1.64 per person per day to live on. No alternative figures will make any difference: this is simply not a living income for a family with 4 children in private rented accommodation in a cheap part of outer London.
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What is the solution? It seems to me that Keynesian economics cannot solve things this time, however this won’t stop the current government from pushing the trend.
If that there isn’t a cut to benefits are people going to work? It seems that it is in every logical persons benefit not to work under the current system, and this only infuriates those who are working class seeking to increase their personal wealth.
If that benefits are to be increased or maintained then this must necessitate higher taxes, and higher government spending, meaning bigger government and bureaucracy. This in turn damages the private market, which usually gets poluted in regulation aimed at helping workers, but often results are negative in the long run. For example the minimum wage is not going to help in the long run as inflation rises due to less competition because small businesses cannot afford to employ at a minimum wage, whilst a MNC can do so and still be labelled “exploitive”. So the necessary response from the left would be to increase wages with inflation, but this undoubtedly creates more inflation if followed, because more cost in labour is distributed into the price of a product (also that’s if businesses would even accept this rise in wages for this exact reason; unlikely, thus strike action) so the minimum wage in the long run becomes a measure of damage, because of a decrease in real wages, also economic uncertainty caused by inflation and the measures taken against this may lead to stagflation, or in severe cases a recession. Also it must be noted inflation gives temporary profits (which become quite substantial when considering how much 1% of say £100mil. is). At this point I wonder whether such measures are chosen for efficiency, or simply upon an egalitarian or equality minded ideal, which is then exploited by big business?
I would be incredibly interested in an option available which will solve these issues, and will in fact do so with a favourable level of efficiency, genuinely so- I think that these issues are incredibly important, but it seems government action is often negative even if intended like that of a saint, which given the current political scenario is doubtable.
The existence of generous benefits for those in work on low incomes means that, almost without exception, people are better off financially if they work.
I am serverly disabled unable to stand or walk, incontinence bladder and bowel, live alone. Employment and Support £94.25 per week
I’m on disability allowance care £19.55 per week and mobility £51.40 I have a car that is always breaking down cannot justify loosing 51.40 per week to cover a new car with mobility. When my heating, electric and water rates are paid using my mobility allowance. I’m not only in fuel poverty I’m in food poverty as well.
I would love to have the choice to work why would I choose my current circumstances living in poverty in the UK