Ian Duncan Smith’s benefit cap plan – what’s best for children?

I’m sitting here typing this having just seen that the government has been defeated by the Lords in a vote on its plans to cap benefits for a household to £26,000 per year.  The amendment to exclude child benefit from this cap proposed by Bishop of Ripon and Leeds, the Rt Rev John Packer, was backed by the other bishops, Lib Dem and Labour peers.  It was passed 252 votes to 237 so it’s back off to the commons to be considered further.

I’m not a great follower of proceedings in the House of Lords, but over the last couple of days it’s been hard to get away from hearing about it.  According to the Department for Work and Pensions, the cap will affect 67,000 households with an average loss of £83 per week.  This is only a tiny proportion of the households that receive benefits and yet it’s caused something of a media frenzy.  When you get all three major parties agreeing in principle to a proposal, then change is definitely in the air.  However, the first I heard of anyone challenging this concensus, was a group of bishops writing a letter of opposition to The Guardian back in November.  For once, the bishops in the House of Lords were getting ready for a fight.

Ever since, I’ve been grappling on and off with the question of if and how such a cap should work.  The bishops’ opposition to the bill is based on a report by the Children’s Society drawing attention to the likely outcome that 75% of those affected by the outcomes of this bill will be children, especially those from larger families (the DWP estimates it will affect 220,000 children).  However, the overwhelming public opinion seems to be against them.  The thought of those on benefits receiving any more than £26,000 per year (the average median household income after tax) is not a pleasant thought for most people, especially those earning less than that, which by definition is roughly half the country.  So for the bishops to be asking for more on top puts them squarely against most public opinion.

I really believe that as a country we need to do as much as possible to ensure that children are supported and protected as they grow up in as stable an environment as possible.  They don’t choose to be born and they have no say whether they are born into a strong supportive family or a dysfunctional one.  Is the risk of some having to move home and their parent/s receiving a reduced income enough of a reason to oppose the government’s plans?

It is hard to understand the claim by the bishops that many of these children will be thrown into poverty and/or homelessness by this bill.  If £26,000 is not enough to live on then how are many families in our country coping?  Plenty of families get by on less than this without ending up on the streets.  Most families cannot afford to live in expensive parts of our country such as London where 54% of those on benefits over this amount live.  So why should the state be paying for some families to be living in expensive accommodation if cheaper alternative accommodation can be found, even if it is in a different place?

The problem is that we should not have allowed this situation to develop in the first place.  When times were good no one appeared to  take too much notice of it, but now in leaner times we can’t afford to carry on as we did.  The government has realised this and those on benefits need to too. Those living in expensive properties who have been on benefits for years are unlikely to be able to find work that will provide them with sufficient income to continue living where they are.  They are trapped in the system with very little incentive to change.  This is not good for society as a whole and the government needs to make sure families are not allowed to fall into this dependency by subsidising them to live in unaffordable accommodation.

However, for those children who are facing disruption and change to their lives, the government has a responsibility to minimise the potential pain of these changes.  They are living in their current circumstances because government has allowed this to happen and it now must make sure that the rug is not pulled from under their feet.  As housing benefit has increased so have rents and so has housing benefit again.  Landlords who have done very well out of this arrangement over the last few years need to realise they also have a part to play in easing the burden by adjusting their rents.  Whether many would be willing to do this, though, is another matter.

What we’ve ended up with today is a position where the bishops have a valid moral point, but so too do Ian Duncan-Smith and the government.  We need to pray that the best outcome can be achieved.  I would like to suggest two ways this might happen, even though I doubt it will make any difference.  Firstly I would propose that children should not be forced to move schools, and so families should be allowed to stay in their current home until more affordable accommodation is found, with the necessary housing benefit continuing as long as is it is needed.  Secondly I would propose that the cap is reduced below £26,000 p.a. but that it excludes child benefit.  This would lessen the impact to welfare costs whilst providing protection to larger families.

Update: Tuesday 24th January
This was a really tough piece to write, as my natural inclination is to go with what the government are proposing, but I also wanted to try to see things from the bishops’ perspective.  Having mulled things over since posting this, I’ve decided that the idea of children being allowed to remain in their schools with their families able to stay in the same house would be unfeasible.  Having said that, the government really needs to make sure that this transition phase is handled carefully with the education and well-being of those children affected being disrupted as little as possible.  School is one of the few areas of stability for many of these children and to uproot them is going to cause a good deal of upset and pain.

Categories: Benefits & unemployment, Government, Poverty

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11 replies

  1. I’m currently taking an intro to micro-economics class (I know nothing about economics, and thought that I should do something about that) at my local university. The other day we learned that economically speaking, in the long-term, it’s actually a BAD idea to have great/extensive unemployment benefits. With that in mind…it seems like that capping the benefits really is necessary. It might cause some problems for a few in the short term, but I really do believe that it’s what’s best for the long term (and children in the future). Also…if the average household income is 26,000 pounds, that doesn’t actually mean that half the population makes less than that. If the median household income were 26,000 pounds, then yes, half the population would make under that amount, and the other half would make more than that. I’m understanding the term ‘average’ to actually be referring to the ‘mean’ in this case. The mean is when you add up all the household yearly incomes, and then divide by the number of households. So you could actually have a case where most households make over 26,000 pounds a year, but that you have two or 3 households that make nothing, which will skew the average.

    /math lesson 😉

    • I’ve checked the figures and £26,000 is the median average income and not the mean. I’ve changed the wording on the post to clarify this. This hasn’t been made clear in most reports that I’ve looked at, but yes, half of households in the UK DO have an income of £26,000 or less according to government figures.

  2. The problem with your idea is that presumably in London, and other expensive areas, there is no cheaper accommodation available, which is adequate for these larger families. Private landlords cannot be forced to charge less than market rents. So your proposal “until more affordable accommodation is found” in effect, in very many cases, means “indefinitely”. The only other ways out are a massive boost to provision of affordable housing, which would probably cost more in government subsidies and take several years, or to move the families away from London – and the children away from their current schools.

    • Thanks Peter. I had another think about this after I’d posted it and I’ve decided that the idea of waiting until alternative accommodation was available would be a non-starter. What you’ve said has reinforced this. I’ve added an extra bit to the end of the post to explain my change of mind. To me there is a huge injustice when people receive large benefits payments, with this cap being long overdue, but the difficulty with the changes is that it will lead to many children being ‘punished’ for the failings of their parents.

  3. Great post. Capping is all about throwing the onus onto the individual and or family. It must have occurred to those living in high rent properties that the situation could not continue. I do understand the need for cheaper housing to come onto the market but of course not in high rent areas – though it is possible for an organisation to provide lower rent housing if there was a need for it in such areas. The need is not there in high rent areas – it is a privilege to have the state pay for your rent if you are living there, not a necessity; markets work like that.

    The responsibility to look past welfare rent payments should have been an introductory prerequisite when accommodation and housing benefit was agreed. As you say, it is the states fault this situation has come about. They could have imposed a time limit and or a capping limit in the first place.

    I also understand that jobs are scarce and that travel and time costs are a huge deciding factor in peoples lives as to where they want to work. So is where to send children to school. But truth is that we all have to adjust to our budgets and the capping is a way of putting the onus back onto the individual to work out a way of budgeting differently and not be in sole reliance on welfare. Sad as it might be that children might have to go to a different school, thousands have had to change school in the past owing to parental job changes or budget needs. This is not about punishing the children but about the reality of social welfare provision; the reason behind social welfare has been clouded and abused by irresponsible politicians, milked by landlords and accepted as permanent by those in receipt of such. Welfare does not replace work wages nor budgetary rent considerations. It is a means to a work related or a self-affordable retirement end.

  4. So the only answer seems to be to move the families to low rent areas. That may cut the short term bill. But the family is then probably in an area of high unemployment (that’s why rents are low) where they have no contacts, and stand out as outsiders as soon as they open their mouths. That means that they are far less likely to get jobs, and so perpetuates their dependence on benefit. I note that a 17% increase in the time they remain on benefit will cancel out the savings from a reduced weekly amount. So maybe the cap will in fact be a false economy.

    • The government has already admitted that most of those households facing the cap have not had anyone in work for a long time. I suspect they believe that this won’t change for the majority and are looking to make savings without any real expectation that the circumstances of these households will change. If that assumption is right then it won’t matter to the government where they end up living.

  5. When i was a boy we lived in a council house, We paid a low rent, my father was a low wage earner. My mother did casual agricultural work. Following the right to buy my parents bought their council house at a highly discounted rate. My father went into business which was a success and we moved up the property ladder. Have we ever really replaced this loss in social housing. In high rent areas, low rent state provision could be an answer but would require investment in the short term. Not likely at a time of cut backs !! How to incentivise  work is an almost impossible task if your low wage does not cover your high rent and energy bills. In some parts of the country scores of people are chasing a single job. High unemployment carries many hidden health and social costs. We need to get back to creating employment. We should be able to marry low wage jobs with low rent state accomodation but again it needs investment. An employed person is able to pay his way has independance and self respect. Providing 3 million jobs however would be hugely expensive. It would require higher taxes and reduced living standards and lifestyle change for us all, this is before we get to how this would effect the wealth creators who would no doubt take their business (and jobs ) elsewhere in the world. Not an easy problem to solve in a globalised situation. Would we be prepared to earn less to provide this combination of basic social housing and employment for our fellow citizens or are we happy to pay other peoples rent merely because it may be a cheaper option.  What would jesus say

    • Most people are paid market wages – the wage an organisation is prepared to pay – and of course this is in relation to minimum wage regulation, which is why some people advocate no minimum wage and the supposed opportunity costs of hiring at a lower market rate to increase some employment. It is not about taking a lower wage to benefit others but about the ideological preference of the government of the day to either have control of the market or allow it to utilise itself; the government wants to control the market and try to make it utilise itself – a oxymoron thinking if ever there was.

      As for wages, no one truly wants to take a lower wage, though most normal workers were prepared, and have accepted to have a pay freeze, unlike the greedy blighters in the finance industry. We are NOT all in it together so the ideology will not work.

      What has happened is that the free market ideology has not created enough jobs and is still unable to create enough jobs for the thousands of workers the government is sacking or have already sacked, and I use the work sacking deliberately – and to be fair even if there was no minimum wage those jobs would not be created by the private sector as it all about demand, profit and supply. No demand, no profit orientation therefore no jobs. That is why the Keynes plan worked. The government created jobs and people not only worked in those jobs but those involved in the application of increased jobs benefited from the contracts and wages and of course then everybody bought more goods to improve their lifestyles or life choice, which in turn manufacturers produced more of and around we go. Of course it is government planning – but the government is planning now through its own idiosyncratic ideology.

      The free market ideology of no real boost in social housing has been the problem for ages in this country. In truth we cannot all afford to own our homes; and some people do not want to because of the continuous overheads involved. The Thatcher mantra was ideological moonshine. The only way that would really work was if the social homes sold off were replaced, then there would eventually be a minimal surplus, but they were not so there isn’t. The move to allow council house buying and now Housing Association property buying opportunities misses the point of why such housing is there in the first place – sell and build more works but not sell and stagnate.

      It can of course still come down to areas of unemployment and what employment there is; living accommodation is often applicable to job areas. There are jobs out there but they do not match the unemployed as such – of course the US way is to say tough, you have to take any job and any number of jobs to survive. It still comes down to, as you said Graham, that we should be able to marry jobs and rents in certain areas – though there will always be the high rent desirable areas that normal workers will never be able to afford, and there will always be areas that are below the norm that no one wants to live in let alone look for a job in. Sadly that would mean a total revamping of the government as the Nu-Labour and the Conservatives before them were all about free market ideology – but only when it suited them and they were backed by their chums if they still got handouts or perks.

      Nu-Labour and the Conservative government of today have failed and are failing to put into place certain prerequisites that would have allowed people to see that if they remained unemployed or could only find low paid jobs then adjustments would have to be made – not fair I know – but that they would be helped with such adjustments. The alternative is a state run system like the Communist system where the elites were all right thank you very much and the ordinary workers were treated like battery hens and ‘put into’ flats or houses as designated; a bit like the first designation of social accommodation in the UK. Private rented accommodation was traversed by corrupt local government officials and nobody could really ‘move on’ or ‘out’. The black market rented accommodation was as bad as some of the tenements blocks in the States. Or the system allowed, as it did in the UK, the behaviour of such blighters as Peter Rachman; see “The Welfare State We’re In” by James Bartholomew.

      All in all we either rely on the government or we work it out ourselves the best way we can, which does mean having to make some hard and very unpleasant choices. Government policy is about making people make choices and not being sustained indefinately by the state. How we start to react to that is where the ordinary folk are now at. And it is never ever fair.

      What would Jesus do Graham, I think he would say work together and provide for each other the best you can under the regime you live in. It would be up to the community to provide more and subside more through cooperation and fraternity if not fellowship. It would be up to the community to work along side local government where possible and along side private organisations where possible but at the end of the day the community and not the government would be shaping the environment.

  6. efgd Thankyou An excellent post. I suppose its all about finding the right balance, to allow people to progress themselves and to encourage personal responsibility but not at the expense of large sections of the population whereby the system damages their motivation potential and self respect. Where else but the teaching of Jesus

  7. I difficult subject for sure. Maybe there should simply be a freeze on benifits in the same way mamy workers have had a freeze in pay. That way over time benifits reduce naturally. This buys time and saves money as the debate rages on, as it will.

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