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Freezing benefits makes no sense

There is a spurious logic to the Treasury's argument about benefits.

It goes something like this: as we're "all in this together", it's not fair that wages barely budged last year while benefits increased by 5.2%. Inter alia, this reduces incentives to work. So, as "all must play their part in reducing the deficit", benefits should be frozen for a couple of years.

A London broadsheet thought this was a splendid idea, an editorial waxing lyrical about "cacooned welfare claimants" who had "scooped a handsome increase" from the "extraordinarily generous 2012 benefits uprating". Meanwhile, "hard-pressed working families are having to tighten their belts". Let us briefly deconstruct this argument. Ten quick points:

1. Indexation is not an increase. It is an uprating to prevent the poorest becoming even poorer. As Bill Scott of Inclusion Scotland asked yesterday: "If Iain Duncan Smith can freeze benefits, can the Government also freeze food, fuel and transport prices?"

2. Families affected already live on or below the poverty line. Allowing inflation to eat into their benefits merely increases the severity of their poverty in one of the richest countries in the world. (I challenge Mr Duncan Smith to try living on Job Seeker's Allowance.)

3. Support available to households with children has been cut already by 20%. According to the Institute for Fiscal Studies, they have borne the brunt of the cuts. Taking another £10bn out of the welfare budget, while protecting the state pension, would increase that figure to 25%. While Mr Duncan Smith told his Glasgow audience yesterday that Universal Credit will reduce child poverty in Scotland, the IFS says this reduction will be "more than offset" by other changes to tax and benefits. They predict 800,000 more British kids (80,000 in Scotland) will be pushed into poverty by 2020, without a radical shift in policy.

4. People who rely on benefits also have lost most from deep cuts in local services, on which they rely more than others.

5. "Making work pay" is the Government's mantra but many of Scotland's poorest claimants are those who are in work but who don't earn enough to escape destitution. That's my definition of a "hard-pressed working family". A freeze would hit them hardest, especially as it's combined with penalties for those unable to work more than 16 hours a week, in the tightest labour market in a generation.

6. For the disabled, who have had to jump through absurd Atos-styled hoops to hold on to their benefits, a freeze would add insult to injury. Even those deemed sufficiently disabled to receive state support will be told to meet increases in the cost of food and fuel themselves.

7. All in it together? Proposals to freeze benefits are set against a backdrop of income tax cuts for the richest that hand 14,000 millionaires £40,000 a year each. By contrast, the "extraordinarily generous 2012 uprating" increased JSA for under-25s by £2.80 per week.

8. Pensioners, who account for half the welfare budget, have been assured that state retirement pensions will be excluded from any change or freeze, even if they are multi-millionaires.

9. There is even talk of breaking the link between benefits and average earnings. DWP figures show the value of unemployment benefits compared with wages has already dwindled from 17% in 1980 to 10% today.

10. Taking money from the poorest would damage the entire economy as that is the section of society that can be relied upon to spend what they have.

Still convinced that freezing benefits makes sense? The Coalition can get away with such heartlessness because it has successfully demonised the poor. In the latest British Social Attitudes survey fewer than 60% said the state should be mainly responsible for ensuring the unemployed had enough to live on, down from nearly 90% in 2001. Can the LibDems be relied on to hold out against this scandalous proposal or will they follow Mitt Romney's lead and write off claimants as scroungers?

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Finance

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