Once more on the great disappearing unemployment mystery ...

Last week we reported on the great unemployment disappearing act, focusing on growing divergence between the claimant count and the ILO measure of unemployment (see graph).

But this growing disparity isn't uniform across the UK. As the chart below shows, there is a massive regional disparity between the claimant count and ILO unemployment in some UK regions, but a close correlation in others.

To make matters clearer the table below shows, for each region or nation of the UK the claimant count as a percentage of ILO unemployment:

Our 13 November analysis highlighted the growing divergence between the two unemployment measures (showing that in 1993 the claimant count was 96% of ILO unemployment, but today is only 53%.

Health warning: the figures used are from the latest ONS Labour Market Survey stats, which for claimant count are October figures and for ILO measure are July-September. However, this difference in monthly accounting does not explain the sharp differences either within or between regions.

However, across the UK there are massive disparities. So why is it that in London and the South if you're unemployed you are far less likely to claim jobseeker's allowance than if you're in the North East or Northern Ireland? And why does jobseeker's allowance reach so many more of the unemployed than everywhere else in the UK?

What explains the differences? I honestly don't know, but I've posited some options below - please leave your views in the comments ...

• Unemployed people in London and southern England are more likely to be ineligible for JSA due to household circumstances or personal savings
• Bad data - the regional data for ILO unemployment is dodgy (the claimant count won't be as it's simply the number of people claiming JSA)
• Sanctions are being unevenly imposed across different regions - disproportionately reducing the claimant count in some regions
• The stigma of claiming benefits is stronger in some regions than others
• Something else? Let us know in the comments ...

UPDATE (21/11/13): As was pointed out by Labour market stats wonk, Paul Bivand, Northern Ireland has some devolved powers over social security - and the UK sanctions data (analysed here) doesn't include Northern Ireland. So is that the answer - is it due to a less stringent sanctions regime there?

The Myths of the Benefit Cap

“People on benefits can be getting as much as a higher-rate taxpayer” – Iain Duncan Smith

“The Benefit Cap has a very simple principle at its heart: no family that’s out of work should receive more in total benefits than the average family gets in work” – George Osborne

“We have been encouraging working-age people to have children and not work” – David Cameron

Since 1 April, the benefit cap applies in four London boroughs: Bromley, Croydon, Enfield and Haringey, and will be applied nationally from 15 July. It caps the total benefits a household can receive at £26,000 (roughly equivalent to the median full-time wage).

Instinctively many people – 62% according to an IPSOS-MORIpoll – favour such a limit on the receipt of welfare benefits.

There are many problems with this benefit cap:

1. It takes no account of need.

Families are capped at £26,000 regardless of whether there are three, five or fifteen people living in the household. While many people seemingly disapprove of people having large families that are supported (often only temporarily) by social security, it is doubtful that equates to wanting the children of those families to suffer as a result.

As Ipsos-MORI pollster Ben Page says 

@andrewfisher79@barbaraweed agree that most don't think thru implications for children- just shows widespread resentment at tiny minority
— Ben Page, Ipsos MORI (@benatipsosmori) April 4, 2013

2. It does not compare like-for-like income

Many of those in-work households earning £26,000 or less also receive child benefit, child tax credits, working tax credit and housing benefit (93% of new housing benefit claims in the last two years are from households in which at least one person works). And so the out-of-work household is not receiving anything that a low income in-work household cannot also claim in the case of child benefit, child tax credit and housing benefit.

If you add together total income – from benefits and work – it is, I would suggest, almost (if not actually) impossible for individuals in out-of-work households to be better off per capita than those in in-work households.

3. It protects landlords’ subsidy while cutting poor people’s living standards

Households only breach the benefit cap due to the cost of housing benefit. Housing benefit is paid from the state to landlords, the household sees none of the money at any point, and has no control over the rent charged. It is a state subsidy for private landlords (edit 05/04/13: today the Daily Telegraph describes housing benefit as "allowing private landlords to game the government for excessively high rents. This in turn has spawned a new, and largely parasitic, industry in buy-to-let.") 

If benefits are capped, there are three obvious scenarios: a) the private landlord will benevolently drop the rent (this won’t happen as there is a housing shortage and the landlord could find tenants who will pay full rate); b) the family is forced out of their home and into more overcrowded accommodation or to move out of their local area (with bad consequences for the children’s education and the family’s local support networks); or c) their already low benefits are cut and their living standards drop.

Over five million people currently claim housing benefit. In the last two years 93% of new claimants have been from household in which at least one person is working. Housing costs in the UK are so expensive that the state is subsidising even working households to pay private landlords inflated rents.

We should be capping rents not benefits as this ‘Who benefits?’ flyershows.

4. No one is arguing that any single benefit is too generous

The welfare system in the UK is entirely means-tested. A tiny amount of fraud aside, people get what receive in social security based on their needs.

Of the benefits included in the benefits cap:

• Jobseeker’s Allowance (JSA) is worth just 14% of average full-time earnings; 11% if you’re under-25. It is worth only 31% of working full-time on the minimum wage
• Child benefit is £20.30 per week for your first child and £13.40 for each subsequent child – if anyone thinks that covers the cost of a child and incentivises
• Child tax credits are pretty difficult to calculate (depends massively on personal circumstances) but are higher if you have childcare costs for which you can only generally claim if you are working
• Income Support – which you only get if you are a carer or a lone parent with a child under 5 (i.e. have caring responsibilities). Income support is paid at the same rate as JSA (see above).
• Carer’s Allowance – which is £58.45 a week to look after someone with substantial caring needs for at least 35 hours per week. So this is someone doing the equivalent of a full-time job for at best £1.67 per hour.

Despite many politicians arguing in favour of a benefits cap, I have not heard a single politician argue that any of these benefits are too generous. Given all of these benefits are need-based and not overly generous then the argument that some people are getting too much is nonsense.

Better off on benefits? The benefit cap could leave some children living on just £2.20 per day.

I live in Croydon - one of the four London boroughs (the others are Bromley, Enfield and Haringey) that since yesterday is piloting the benefits cap, before the national roll-out on 15 July.

This policy means that no household - no matter how many people live in it, and no matter their situation, can receive more than £26,000 per year in benefits.

The Work & Pensions Secretary, Iain Duncan Smith MP, says: 

"It’s sheer madness that people on benefits can be getting as much as a higher-rate taxpayer earns. We need a welfare state that acts as a safety net and encourages people back to work, not traps them in out-of-work dependency." (reference)

He says this without presenting any evidence, and it is loyally parroted by his backbench MPs - including Croydon Central's Tory MP, who says:

.@insidecroydon But on this issue I often meet constituents who are fed up paying for others to have a better lifestyle than themselves
— Gavin Barwell MP (@GavinBarwellMP) April 1, 2013

So is it true - and how could it be? Let's try to calculate. Let's start with three variations of a two parent family of three (all figures rounded to nearest £; tax credits figures via HMRC Tax Credits calculator).

Firstly where one parent works and the other doesn't (assume the youngest child is under 3 and the second parent is caring for them). To make work as low paying as possible, let's put that parent on the minimum wage of £6.19 per hour. If they're working a full-time job (37 hours per week). So here is their annual income:

Wage: £11,910

Child Benefit: £2,449

Child Tax Credit: £4,888

Working Tax Credit: £1,404

Total household income: £20,651

Secondly, where both parents work. To make work as low paying as possible, let's put both parents on the minimum wage of £6.19 per hour. One working a full-time job (37 hours per week) and the other part-time (21 hours per week). So here is their annual income:

Wage: £18,669

Child Benefit: £2,449

Child Tax Credit: £4,888

Working Tax Credit: £1,092

Total household income: £27,098

Finally let's have a household where neither parent works. Both are claiming Jobseeker's Allowance:

Wage: £0

JSA: £5,795

Child Benefit: £2,449

Child Tax Credit: £1,228

Working Tax Credit: £0

Total household income: £9,472

So where's the benefit in not working? Really I'm at a loss to find it. What about more unusual households?

Just to give the Daily Mail a chance, let's re-run the out-of-work household with eight children:

Wage: £0

JSA: £5,795

Child Benefit: £5,933

Child Tax Credit: £12,584

Working Tax Credit: £0

Total household income: £24,312

So even with eight children our unemployed household still doesn't reach the benefit cap level - and that's split between ten people - each living on the equivalent of £46.75 per week. That is the reality of our generous benefits system.

Politicians add in what I call 'landlord subsidy' (officially known as housing benefit). This of course does not make the family 'better off'. The transaction is between the state and the private landlord - the family sees none of the money at any point. If rental prices dropped they would see no money, if rental costs rise they see no less.

According to the Rightmove website, the cheapest five-bedroom property (the bare minimum for a family of 10) in Croydon is £1500 pcm or £18,000 p.a.

Added to the total household income that makes £42,312 pa - over the £26,000 benefit cap. So the household income through social security will be capped at £8,000 instead of £24,312 (as the reality is that private landlords won't cut rents and councils can't provide council housing). This means each of the ten people in the house (2 adults and 8 children) will be living on just £15.38 per week or £2.20 per day.

This is the brutal reality of the benefits cap: £2.20 per day to eat, pay the bills, and buy clothes.

This is why the Child Poverty Action Group calculates that an additional 200,000 children will be living in poverty this year, rising to an extra 1 million by 2020.

A Tale of Two Frauds

In 2009, a Lancashire mother was found guilty of defrauding the state of £45,000. She claimed over £45,000 in housing benefit, council tax benefit and income support by not including her husband’s details on the claim forms.

She pleaded guilty and was jailed for 16 months.


A week ago, two men from Leeds were also found guilty of defrauding the state of £45,000. They made up false invoices and documents in order to make false VAT claims worth £45,000.

They pleaded guilty, but avoided jail. Instead they were given community sentences, and made to pay court costs.


What makes these cases interesting is that they were for exactly the same amount: £45,000 dishonestly defrauded from the state - and all defendants pleaded guilty to the charges. So why is it that benefit fraud is considered so much worse?

Why, when benefit fraud costs us £1.1 billion per year and tax evasion an estimated £70 billion, is so much more effort and opprobrium directed at benefit fraud?

Of course both crimes were wrong. But is someone who commits benefit fraud a danger to society - who needs to be locked away for over a year of their life? I don't think so.

It's the inevitable result of a society where successive governments and the tabloid media (step forward the Sun and Daily Mail) have whipped up hatred against those out of work. That prejudice is reflected in the sentences.

The same economic crime means very different time.

Punishing the poor

On 21st July 2008, the Government unveiled its latest plans for welfare reform in a new Green Paper, announced by Work & Pensions Secretary James Purnell.

The Conservatives welcomed the proposals, claiming Labour had stolen their ideas. So what are they. An article on Comment is Free by Professor Gregor Gall explains exactly what is being proposed and why we should oppose it. Rather than being stolen from the Tories, these policies trace their ancestry back to the workhouse and the 'work for dole' schemes in Wisconsin.

John McDonnell MP said, “At a time of increasing unemployment such draconian measures will not only prove counter-productive, but the requirement for forced labour and the greater harassment of disabled people is a moral disgrace.”

Jeremy Corbyn MP said, “The whole history of the Labour Party has been supporting a comprehensive welfare state to ensure that no-one ended up either homeless or destitute. The green paper does not seem to bare any resemblance to the principles of the Labour Party”

Mark Serwotka, PCS General Secretary, said. “These proposals are regressive and draconian, going further than even Thatcher dared in the 1980s. The government should be working with people to get them back into employment rather penalising and threatening them”

This proposals are the neoliberalisation of welfare.