Welfare advice websites are awash with listicles of the top ten days out for those on Universal Credit<\/p>\n<\/blockquote>\n
The same is true in state-subsidised leisure centres. Better, which provides swimming pools, gyms and sports facilities on behalf of London councils, offers half-price memberships for benefit claimants. While a chunk of these discounts are covered by charities or full-fee payers, the thinktank Onward has identified a hidden benefits bill of \u00a310 billion paid directly by taxpayers. Onward\u2019s report reveals discounts for broadband, reduced council tax bills, subsidised utilities, cheap travel and even holiday provision. Add it all up and it\u2019s hard to argue that those on benefits are enduring this cost-of-living crisis in quite the same way as the rest of us.<\/p>\n
This week, the standard UC allowance rose by 6.2 per cent \u2013 just shy of double last year\u2019s inflation rate. Labour has guaranteed the allowance will rise above inflation for the next three years. Meanwhile, average earnings for employees are up just 4.1 per cent. At the same time, those in work are expected to help shield the economy by drawing down savings built up during the pandemic, while frozen tax thresholds drag five million more people into higher bands.<\/p>\n
To understand where the rot began, you have to go back to a Tory policy, \u2018Help for Households\u2019. In the dying months of the Boris Johnson government, David Buttress, a former CEO of Just Eat, was appointed \u2018cost-of-living tsar\u2019. On top of the discounted entry prices for attractions, he pushed for \u2018social tariffs\u2019 on broadband and browbeat retailers, including Asda, Morrisons and Amazon, to offer discounts to shoppers on welfare. Not only were these policies popular but they were seen as a right by a public that now demands more and more state support. Truss, Rishi Sunak and now Starmer have bolstered them.<\/p>\n
When governments give up on growth as the driver of higher living standards, they reach instead for controlling the cost of living. Labour takes the same approach. Starmer has appointed Lord Walker of Broxton, the executive chairman of Iceland, as a \u2018cost-of-living champion\u2019. Much of this role seems to involve attacking business. Two weeks ago, Lord Walker said: \u2018Businesses using a global crisis to rip off households need to be called out and penalised.\u2019 Indeed, since the Iran crisis began, not a week has gone by without Reeves or Starmer summoning supermarket bosses, shipping magnates or petrol producers to Downing Street to insist the government \u2018can\u2019t do it alone\u2019 and demand support.<\/p>\n
Part of this is pure political strategy: create a myth of price gouging and profiteering when prices rise in order to shift the blame away from your management of the economy. But there is also a deeper misunderstanding of the role prices play.<\/p>\n
The unintended consequence \u2013 as we\u2019ve seen before \u2013 is untrammelled inflation. A top Treasury official \u2013 at the coal face in 2022 \u2013 explains: \u2018We put in place a whole load of support schemes for households and companies which enabled them to accommodate higher energy prices without having to cut their expenditure elsewhere. And so the price of the whole basket went up. I can\u2019t escape the conclusion that it was a combination of those energy price hikes by fiscal authority that enabled inflation to rise so high.\u2019<\/p>\n
\nFactor in the discounts, price protection and top-ups, and the British system is a pretty lavish one<\/p>\n<\/blockquote>\n
Now, Labour plans to bake all this into the system by reviving a Gordon Brown plan to add a new \u2018socio-economic duty\u2019 to the Equality Act. The change will force public bodies to consider reducing inequality in everything they do. The trouble is, as the Chancellor discovered when scoping out means testing, the Whitehall system will revert to the path of least resistance and meet its duties by prioritising those on benefits, entrenching this two-tier system in law.<\/p>\n
Advocates of the status quo argue that our welfare system is actually not generous at all. And it\u2019s true that, on its own, Universal Credit is not especially benevolent. A single adult over the age of 25 who is out of work receives \u00a3424.90 a month as a basic allowance, placing Britain towards the lower end of OECD members. That leaves the British system behind countries such as Germany (\u00a3490) and France (\u00a3530). By contrast, the most generous systems in Europe are in the Netherlands and Denmark; support in the latter can reach \u00a32,500 a month or up to 90 per cent of previous earnings.<\/p>\n
Our European neighbours are more generous on child benefit too. While we argue about the two-child cap (which was abolished on Monday), countries such as Sweden and Austria offer higher child payments and bonuses for larger households. But this generosity comes with far stricter expectations.<\/p>\n
A Briton out of work typically receives far less of their previous salary than workers elsewhere (12 per cent vs 55 per cent). But those more generous systems also expect more in return from those out of work. The Danish system operates more like unemployment insurance, and every citizen has to pay a monthly fee to fund their own protection. If you find yourself unemployed your payment is based on past earnings \u2013 an incentive for high pay \u2013 and, crucially, payments reduce after three months and grind to a halt after two years. It\u2019s our failure to incentivise contribution that makes Britain stand out in Europe.<\/p>\n
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