Last week, a local MP claimed that some benefit claimants were collecting seven-figure sums from the state. As Croydon residents are about to be used as lab rats in a social experiment, ANDREW FISHER, left, explains that as well as the MP’s claim being demonstrably untrue, the idea of the benefit cap fails to address the real problem of the social security system
Croydon is one of only four areas in the country which will be turned into a laboratory for one of the coalition government’s flagship policies – the benefit cap.
The benefit cap will mean that no household can receive more than £26,000 a year in benefits. That might sound perfectly reasonable. After all, £26,000 is about the average full-time wage, so why would a non-working household be able to amass so much in benefits?
Local MP Gavin Barwell, who avidly supports the benefits cap, claimed on Twitter that some on out-of-work benefits getting seven-figure sums – that means more than £1 million a year. Barwell, after being challenged, corrected this the next day, conceding he “should have said 6 figure”. But still, more than £100,000 per year on out-of-work benefits? That’s astonishing!
Barwell insists that it is more than mere hyperbole or exaggeration. He says he “discussed individual cases with the ministers”. Were these cases in Croydon? I asked Gavin how this could possibly be – could he provide a breakdown of how these claimants received this? He ducked this and instead asked, “Consider it a hypothetical question if you like: if there were such people would you call them ‘leeches’?”
This is typical of a Conservative-led government that will, from April, reduce taxes on both the richest 1 per cent of income earners and on the profits of big business, while capping the benefits of those made redundant, the disabled, children, and even women on maternity leave. To justify this grotesque policy they instead whip up scare stories about those claiming social security.
Nevertheless, given the absence of any of the evidence our esteemed Croydon Central MP says that he has, and in the spirit of honest inquiry, let’s see if we can work it out for ourselves …
Out of work benefits in Britain are low. Jobseeker’s Allowance (JSA) is £71 per week or just £56.25 if you’re unemployed and under-25. Given that equates to just £3,692 per year (£2,925 if under-25), there would need to be 28 or 35 unemployed people living together in a household to breach £100,000. So that’s not likely.
Unemployment benefit was worth 21 per cent of average earnings in 1979. Today it’s worth 11 per cent. If it was worth 21 per cent today, JSA would be £135.55 per week – and that’s still below the official poverty line.
But the benefit cap doesn’t just cover unemployment benefit. There’s Child Benefit and Child Tax Credit (CTC) too. The former – not increased for three years and removed from those earning more than £50,000 – is £20.30 for the first child and £13.40 for subsequent children. CTC is a little more complicated to calculate, but according to HM Revenue & Customs’ online calculator, an unemployed couple with four children would get £3,260 per year.
So can we get to £100,000 with an unemployed couple with four children? JSA for a couple is £111.45 per week, so £5,795 a year. If they have four children, they’ll receive £60.50 per week in Child Benefit – £3,146 per year. Plus, as noted, above they’ll receive £3,260 in Child Tax Credit. In total this hypothetical family of six would get a grand total of £12,201 a year – a long way short of Barwell’s £100,000 myth, and less than half the benefits cap level.
Of course, the family needs somewhere to live and will be entitled to housing benefit. With four children, they would probably look for a three-bedroom property. A quick look on a property website finds only two three-bed properties in Croydon for less than £1,000 per month.
So if we say take a conservative £12,000 per year in housing benefit plus £12,201 in other benefits, this family is now perilously close to the £26,000 cap. To get to Gavin Barwell’s mythical £100,000 benefits bonanza would take another 70 children in additional child benefit and CTC.
A new child or a rent increase could tip the family over the benefits cap limit. If their benefits are cut, will their landlord evict them? If so, where will Croydon Council house them?
The benefits cap policy that is so warmly welcomed by Gavin Barwell (state-paid annual salary as Croydon Central MP: £65,738, plus expenses and other generous allowances) threatens to disrupt family life, social networks and children’s education.
Some have gone further and said it will lead to “Kosovo-style social cleansing” of London. That was the view of London Mayor Boris Johnson, a Tory colleague of Barewell – yet Barwell still defends this policy being inflicted on his own constituents.
In 2011, a Freedom of Information request found the Department of Work and Pensions could identify “fewer than five” families receiving £100,000 per year. Follow-up work by the Telegraph claimed to have found all five of these cases to be in Westminster, where thousands of council homes were sold off during the homes-for-votes scandal in the 1980s. Surely the answer for Westminster – and elsewhere – is to build some more reasonably priced council housing, rather than rely on private landlords who charge exorbitant rents, often in the knowledge that the state will pick up the bill?
Housing benefit is a £23 billion a year industry that diverts public money into the pockets of wealthy landlords with ever-expanding property portfolios. This is the grotesque abuse of our welfare state, not the struggling families. The lack of affordable housing means that in the past two years, 93 per cent of housing benefit claimants have been in work. Even those on a wage cannot afford to put a roof over their heads. Something has gone seriously wrong with housing policy.
By capping benefits and not rents, the coalition government is saying that the right of millionaire landlords to profit from their investments is a greater priority than the right of families to an even minimal standard of living.
There is an alternative – and it’s one that Margaret Thatcher accepted for nine of her 11 years in office as Prime Minister. Private rents were capped and regulated until controls were removed in 1988. That same government oversaw the mass selling off of council housing, through right-to-buy and wholesale stock transfer, something which has skewed the market since, removing tens of thousands of homes from the supply side.
We need urgently to build council homes, not just to meet housing need and create much-needed jobs in construction and the supply chain, but so that councils could keep rents at a sensible level and any housing benefit paid out is simply being recycled around the state, rather than leeched away by profiteering property speculators, the real undeserving beneficiaries of this aspect of the welfare state.
Rather than whipping up scare stories about people on six-figure benefits, Tory ministers, councils and their MPs should be looking to tackle the housing crisis.
Helpfully, Gavin Barwell will be speaking at a meeting on welfare policy on Tuesday February 19 in Croydon Town Hall. I’d urge everyone to attend – there’s a lot that Mr Barwell could learn from us, such as a little understanding when, on £65,000 a year, he can’t afford to pay for his own meals. “I claim £5 a week for a meal when the House sits late,” he cheerfully concedes.
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- MPs react to benefits cap vote on Twitter (itv.com)
- Benefit cap ‘is likely to increase homelessness’ (itv.com)