Benefit payments at historic low

A decade of austerity, the freezing of benefit levels and the introduction of universal credit have helped take benefit payments to their lowest level since 1948 , finds a new report from the IPPR, 'Social (in)security - reforming the UK's safety net'.  Or is it even longer... see below.

The welfare reforms of 2015 (the benefit cap, two-child limit and benefits freeze) combined with some of the most severe cuts the welfare system has seen, has resulted in poverty now growing again, particularly among pensioners, children and those in-work. It asks whether the system can be effective when funding is at an all-time low:

'"When Unemployment Benefit was first introduced in 1948 it was equivalent to 20 per cent of average weekly earnings, whereas comparable Universal Credit Standard Allowance payments have fallen to just 12.5 per cent of average earnings today."

The report finds that the system is at breaking point with some claimants in a constant state of financial insecurity. Clare McNeil, IPPR Associate Director and lead author of the report, said:

“It is remarkable that in post-war Britain the support for those living in poverty was closer to average earnings than it is today. This is the very simple fact that lies behind the record levels of personal debt, rising use of food banks and increasing destitution that we see in the UK."

The report also argues that the claims that restricting social security payments to subsistence levels or below, combined with strong sanctions, provide a strong incentive to work.l do not match the evidence. The report finds that, by contrast, "people need a degree of financial security in order to be able to make choices and provide for their family in order to secure and maintain work.". 

Ahead of the election, the think tank is calling on political parties to end the ‘security deficit’ by investing £8.4 billion emergency funding package into the benefit system every year over the next parliament. It also calls for a fundamental re-engineering of Universal Credit, including capping debt reduction payments, reducing waiting times for payment and the severity of sanctions, increasing work allowances and reducing the taper rate to 60%. This programme would be far more effective at raising the incomes of households in the bottom half of the income distribution than raising the National Insurance threshold. It notes that: "While the Conservative government has held steadfast to its flagship policy, the Labour party has now committed to ‘scrapping’ universal credit, while the Liberal Democrats have said they will fix the problems with UC and ‘construct a new benefits system’ which provides dignity and respect. The SNP have also said the system should be ‘radically reformed’."

For full details see: 'Social (in)security:Reforming the UK’s social safety net' by Clare McNeil, Dean Hochlaf and Harry Quilter-Pinner, IPPR,  November 2019. Available at: Read the press release here.

Is the situation even worse than the IPPR suggests?

The seminal analyses by Nobel Prize winning economist Richard Stone (1997) showed that in 1688 the average income of pauper families was 16%  of average income.
Therefore, Universal Credit Allowance payments are today - at 12.5% of average earnings - not only less generous, compared with average incomes, than at any time since the beginning of the Welfare State in 1948; they also appear to be relatively less generous than the 1599-1601 Old Poor Law system established during the reign of Elizabeth 1st. 
A note from the PSE team

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