Osborne makes myths

Following a circular request from Jonathan Bradshaw, who has asked for evidence to counter the myths, I’ve been looking at the Chancellor’s speech in more detail than it merits.  The speech was packed with misrepresentations.  Osborne claims that:

  • spending on ‘welfare’ is why we have a deficit.  Most of the increase in benefits in recent years has been driven by pensions; but neither is the basic reason for the deficit, which is due to the state of the economy.
  • spending on people of working age is ‘unaffordable’.  In 1992/93 DWP benefits for people of working-age took up 4.3% of national income.  In 2012/13 the equivalent figure will be 3.5%.  The relative cost of ‘out of work’ benefits fell from 3.9% to 2.5%.
  • “people found they are better off on the dole than in work”.  The replacement ratio in the UK is less than a fifth of salary, markedly lower than in most other developed countries.  Check out this table from Tim Vlandas.
  • “welfare dependency can become deeply entrenched, handed on from one generation to the next”.  I’ve covered this argument on several occasions.  There is little continuity in one generation, let alone in  successive ones.
  • some people get £100,000 a year on Housing Benefit.  There are 4.8 million claimants of HB.  The number receiving more than £100,000 was revealed by an FoI request  to be ‘less than 5’, fewer than one claimant in a million.   There have been 5,180 claimants receiving  Housing Benefit in excess of £25,000 a year (£2083 pcm), but the figures do not tell us how many of those are working, or how many are over retirement age.
  • this undermines the incentive to get a better paid job.  That might be  true if people lost Housing Benefit when they work – but they don’t.   The taper, or marginal rate of deduction, is less than the rate that the government is now proposing for Universal Credit.

“In recent days”, the Chancellor goes on, “we have heard a lot of, frankly, ill-informed rubbish about these welfare reforms. …  shrill, headline-seeking nonsense.”  Now there, we agree.

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