From the TUC

Benefit cuts are unfair

06 Jul 2010, by in Society & Welfare

The latest edition of Social Trends provides the data that confirms fears that welfare cuts will hit the poorest hardest, as benefits account for such a high share of their income. The Budget announced benefit cuts worth £11 billion, and the Chancellor hinted at the possibility of more to come: “if we can find any additional savings to social security and welfare beyond those which I will shortly outline, then that will greatly relieve the pressure on these departments and that 25 per cent figure.”These cuts will mean more to the poor than to people on middle incomes and much more to people on middle incomes than to the rich. Table 5.8 of Social Trends shows households’ “sources of gross income” in 2007/08, and divides households into ‘quintile’ – fifths, ordered by their income. This allows us to see how much of each quintile’s income comes from pensions, from wages and from ‘state support’. The table in the report is damning enough – if we only look at how much each category is worth in cash we can immediately see how much more important benefits are for the poorest:

Sources of gross income, cash

 

Bottom fifth

Next fifth

Middle fifth

Next fifth

Top fifth

All households

Earnings

£4,600

£10,850

£19,350

£30,350

£68,200

£26,650

State support

£6,500

£6,550

£4,450

£2,850

£1,700

£4,400

Investment income

£400

£450

£650

£1,000

£6,600

£1,800

Income from occupational pensions

£400

£950

£1, 500

£2,050

£3,150

£1,600

Miscellaneous income

£350

£500

£600

£600

£850

£600

             
Total income

£12,250

£19,350

£26,600

£36,800

£80,500

£35,100

If we look the figures for the proportion of families’ total gross income accounted for by each category, the picture is even clearer:

Sources of gross income, share of the total

 

Bottom fifth

Next fifth

Middle fifth

Next fifth

Top fifth

All households

Earnings

37.6%

56.1%

72.7%

82.5%

84.7%

75.9%

State support

53.1%

33.9%

16.7%

7.7%

2.1%

12.5%

Investment income

3.3%

2.3%

2.4%

2.7%

8.2%

5.1%

Income from occupational pensions

3.3%

4.9%

5.6%

5.6%

3.9%

4.6%

Miscellaneous income

2.9%

2.6%

2.3%

1.6%

1.1%

1.7%

             
Total income

100%

100%

100%

100%

100%

100%

It is very hard to see how this can be squared with a commitment to fairness. If benefit cuts were part of a balanced approach there might be some justification to this policy – though it is hard to see how, even then, it would be fair to people with their heads just above the water. But the point about the Coalition’s policy is that they want to maximise the contribution made by benefit cuts: the more they succeed, the greater the unfairness.

2 Responses to Benefit cuts are unfair

  1. The Squeeze
    Jul 6th 2010, 12:21 pm

    But how much housing benefit also accounts for the ‘investment income’ of the top fifth?

    In fact is rent-seeking accounted for as ‘earnings’ or ‘investment income’? A sole trader running a few BTL’s might take an income out as ‘drawings’ meaning some of the £68.2k is a state subsidy?

  2. debbie
    Jul 8th 2010, 9:32 am

    there would be no need to cut SOME benefits if this goverment stopped paying out to workers in the public sector 6 mths full pay when of sick, i no of 2 doing it now & no intentions of going back to work untill the 6 mths is up, take there jobs & give them to someone that wants them i say