Analysis: Iain Duncan Smith is trying to save £10bn, using the rhetoric of scroungers to slice the benefits bill
Iain Duncan Smith, the welfare secretary, appears to be undertaking a bold demographic experiment to reduce the growth in state spending by limiting the amount of welfare that couples can receive.
At present, poor families get child benefit and child tax credits for every child they have. In the future it appears such payments will be restricted to just the first couple of children. Call it the coalition’s two-child policy.
Duncan Smith, in comments leaked before a speech on Thursday in Cambridge, asked: “Should families expect never-ending amounts of money for every child when working households must make tough choices about what they can afford?” – arguing that parts of the benefits system promoted “destructive” behaviour.
Duncan Smith appears to be conflating the idea of worklessness with payments for children. If that is the case then he will not be saving much money with this measure: just 4% of families on jobseeker’s allowance have more than two children. Say each child gets roughly £65 a week – about £50 from child tax credits and the rest in child benefits – then the savings are about £300m a year. In fact they would be much lower, as half the people on jobseeker’s allowance get work within six months.
Now consider that Duncan Smith is trying to save £10bn a year. To make this magnitude of savings the government would have to look at the 2 million children in the 584,000 working families with more than two children who get child tax credits. These are people who are in low-paid jobs struggling to make ends meet. There are another 880,000 working families with more than two children receiving child benefit, with around 2.9 million children affected.
Child tax credits are means-tested but the Children’s Society calculates that the saving on them, if they were restricted to taking a maximum of two children into account, would be about £8bn a year. Savings on child benefit, if reshaped in a similar way, would yield up to £5bn. This is big money.
However, such calculations expose the government to the charge that it is targeting strivers rather than the much-touted slackers of modern-day Britain. As Karen Buck, Labour MP and parliamentary welfare expert, points out: “Just 1.5% of the benefit population have never worked.” Targeting such families would yield little cash for the Treasury.
Instead the government is using the rhetoric of scroungers to slice benefits from low-paid working families. The result is many more are forced to rely on welfare – just look at predictions that a million earners will be dependent on welfare to keep a roof over their heads by the next election, more than double the number before the recession began.
To his credit Duncan Smith has faced down more radical calls to prune welfare. However, he appears to divide people into the lifetime poor and the striving, working classes – and claims that people’s vitality has been sapped by the social programmes meant to save them. Like Mitt Romney’s inaccurate description of America’s 47% – an entitlement society dependent upon government – the welfare secretary’s words suggest he too has bought into the idea that the poor are not victims of circumstance but of their own actions.
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