New evidence that more generous state benefits leads to more ’scroungers’
Dear James Purnell,
It’s not often that I support a Labour policy. Your recent welfare reforms, designed to bring private and voluntary firms into the mix, was a notable exception to this. So long as people are looking for work, the government will help support them. Not only is the reduced role of the government to be welcomed, the incentives for the benefit claimants are more appropriate as well. The question running around my mind this morning is will you extend this logic to child welfare as well? A new study by the Institute for Fiscal Studies (IFS) says that reforming child benefits is urgently needed, and it doesn’t take a genius to work out why.
Tax credits are one of Labour’s favourite pressure points on the electorate, knowing that many voters have benefited from the government giving them some of their own money back. A new study by the IFS released today showed that the value of state handouts to the poorest families increased by the equivalent of 10% of their entire income in between 1999 and 2003 thanks to the Working Families Tax Credit and an increase in Income Support. For couples who both left school at 16, the reforms meant an increase in benefits of 45% from £39 a week to £56.76 – almost twice as much as the handouts for a couple who went on to sixth form college, which increased by 25 per cent to £37.27 a week. According to the IFS, this 10% increase triggered a rise in taxpayer spending on children “unprecedented” in the previous 30 years and led to poorly educated mothers having an additional 45,000 children in the year after the reforms were introduced, with many admitting they had stopped using birth control methods. Need I remind you that this IFS study comes just weeks after the conviction of Karen Matthews, who had never worked but because she had seven children (by five different fathers) she was able to claim almost £300 a week in benefits.
These figures are deeply disturbing for two reasons. Firstly, if your buddies Brown and Darling didn’t tax poor people into oblivion in the first place, tax credits wouldn’t need to exist in the first place. Secondly, what this study beautifully demonstrates is the dangers inherent in giving financial incentives to benefit claimants. If you give people more money for having children, they are more than likely to accept your generous offer. What incentive do people have to get an education if you give them more money for having a child than going to college? What message does that sound out to poorer families? Obviously as a Labour minister you are aware of the need to ‘buy’ as many votes as possible and I’m sure the government looks at these increases as a means of solidifying your support in poorer communities, whereas the reality is that you are tearing society apart. The situation that Labour have created is poorer families are in effect taking their income from the middle-class taxpayers via state handouts instead of earning income themselves, and they have every reason to do so.
Allow me to explain to you how to put the correct ‘incentives’ in place: 1. Raise the personal allowance to £10,000 a year and scrap all tax credits; 2. The only benefit for families would be a simple ‘child benefit’ payment, which is only available from age 21 onwards; 3. Child benefit is only payable to you for one relationship in your life. Parents will not receive any benefits for having a child with a second partner; 4. Child benefit is only payable for your first two children. As a Conservative I believe that the choices should be made by the individual, not the state. If people of any income or age group want to become ‘baby factories’ then by all means let them do so. I would just make it clear to couples that they will only be supported to a limited degree by the state. As you have realised in work-related benefits, people will more often than not follow the money that you put in place. I only hope that you now see how important this is with regard to families.
Yours sincerely,
A.Tory
Witanagemot Blogs
After the controversy of the weekend, I’m glad to say that I broadly agree with the thrust of this letter!
I have been a vociferous opponent of ‘Tax Credits’ which I characterise as a scheme to reward behaviours the State likes with your own money. Scrapping them and pushing the Personal Allowance up to 10k immediately incentivises work because it gives the equivalent benefit to a 12k pa salary, or there abouts.
I’m a bit sketchier on the social control aspect of tying child benefit to specific relationships. What if, rather than being feckless, a young woman has a child with her partner who ends up being killed on Active Service in the Gulf. If she remarries, why should she not gain benefits for subsequent children? And once you start getting into this kind of hair-splitting you create a complicated system that will be expensive to administer, doing away with the saving reaped from firing all those Tax Credit bureaucrats! My final two points are that increasing the age limit of Child Benefit to 21 for the recipient parent is something I agree with but you need to be braced for the inevitable sob-stories of uneducated 16 year old single mums subsisting on the Bread Line. This may be the idea because a 5 year period of overt suffering may deter people from that lifestyle but you’re going to hurt a lot of individuals (and their children) in the interim.
The final point about ‘baby factories’ is interesting. WHen, demographically, we are constantly told that we are an ageing population and need immigrants to look after us and pay taxes in the future, do we not want to incentivise domestic breeding? France, I believe, pays women directly to breed and we could do likewise (tying it to having worked for 3 years – easily checkable through NIC/Tax reciepts – so as to not just reward the feckless).
Shaun, if someone died or if someone had a child after being sexually assaulted or some other horrible circumstances struck them then obviously they should be looked after. If someone chooses to have a child at 16 and go sobbing to the newspapers, that is their choice – but the government must draw the line and they should not be drawing it at age 16.
The issue of a falling birth rate is an interesting one. Personally I would use the savings from the tax credits and put it into higher child benefit for the parents who are over 21 and also invest heavily in early years support through third sector providers.
I agree with most of this too, as soo intead of having an increasingly ageing population we will also be seeing and increasingly stupid population.
We definetly shouldn’t be incentivising people to be having children. Continental Europe is having more issues with ageing populations as they structure state pensions differently. A current working person will pay directly for an older person’s pensions so they don’t have the same giant pot of pension money as we do in this country. Increasing the population on the whole is a very bad idea as it has been predicted that in the next 100 years we will need 5 new Birminghams. and that is at the current incres (including immigration). We do not have the natural capital to deal with this especially considering the current energy dilemma.
France has a population of around 64,473,140 and the UK has 60,587,300. Then consider the size difference – France is 674,843 km2 and the UK is about a third of the size – 244,820 km2. We are already one of the most over populated countries – I don’t think it would be wise to push for more children. In fact a more Chinese approach to the whole thing would be much better.
Germany has had massive problems with a falling population and they are throwing money at the problem. Of course, if we made big savings by removing child benefit for those under 21 or who have children from multiple relationships we could easily put this money into much higher child benefits for families and more generous leave allowances to encourage a higher birth rate with appropriate boundaries already in place.
Good letter, but put me in the Shaun pilkington camp.
and..
If we import people to pay the pensions of the elderly, then when these same people become elderly we will need twice as many young people to support the newly pensioned. And the new elderly will be living even longer so we will need an even greater contribution from the young, or import,impregnate even more young people.And so on..
Isn’t this how Madoff was doing his scheme?
Not sure, but it does sound messy!
I thought it was well established that benefits, including health, was a Pyramid scheme. You don’t pay for treatment you will recieve in the future, you simply pay. And when you are ill or old and not paying, the new guys will be paying, not for their treatment, but for yours. And, as Bill observes, like all such schemes as the numbers of new suckers dries up (falling birthrate, ageing workforce), the pyramid collapses. See also: Public Sector Pensions.
Agree with all (for once!).
“I agree with most of this too, as soo intead of having an increasingly ageing population we will also be seeing and increasingly stupid population.”
Well, perhaps they’ll eventually be too stupid to breed? We can but hope…
Well, perhaps they’ll eventually be too stupid to breed? We can but hope…
I doubt it. Immigrants breed faster that the domestic population, the lower socio-economic groups outstrip the middle and upper classes numerically and, I’m presuming, in birthrate and both of these groups suffer from lower educational outcomes.
On that basis, I’d suggest that (if anything) you’ll find a correlation between lack of education and stupidity and breedingg versus education and lower/delayed child-birthing!
I’m with Shaun. Lower commitment to education = lower prospects = more desire to pop out sprogs at the state’s expense instead of working.
That’s what makes the tax credits situation so distressing.
As I keep saying tax credits are distressing for all sorts of reasons; philosophically they are objectionable as they require the state to tax you in order to then (at a cost) be administered back to you as a ‘credit’ if you are behaving in some way that the state approves of or if you have been targeted by nuLab as a potential state ‘client’.
As we all know, the state, regardless of who’s in charge, is a remarkably crap guide for behaviour. Legislated (and near legislated) disapproval is littered with poorly designed, drafted and legislated policies that were either ignored or had totally unanticipated consequences. Making drugs illegal, for example, appears to make them *more* attractive the *more* illegal they are. Nobody seriously believed that an unintended consequence of the welfare state would be a broken society and while that shouldn’t put us off welfare or helping the needy, or stopping the jobless starving in the street, it means that we need to think much, much more deeply about the possible effects of any action, support or intervention taken.
People always say ‘but that’s not the idea’ and yet that’s why we call them UNINTENDED consequences. Which is not to say they were unforeseeable…
Bill Quango/12:12 and Shaun Pilkington/1:45 – Accuse me of having wonderful hindsight if you wish, but it’s been clear for decades that the pyramid scheme of producing increasing population numbers to deal with current / future commitments has got a limited life. The real problem is that 30 years ago some lateral thinking might have solved it; but now it’s likely to be decided for us by some apocalyptic reaction that we’re not prepared for.
We may (is anyone certain?) have enough people to deal with most, if not all, of our future needs if we become more efficient. Instead of needing, say, 10% more bricklayers or bus-drivers we think of ways of making them more effective; and making “the cake” bigger.
I remember when London had a shortage of bus-drivers after 2ndWW there was a proposal to train women to drive buses, but that was rejected by the unions “as women may suffer a miscarriage”. Well, yes, but there wouldn’t have been an insistence on pregnancy as a qualification; and many buses had had power steering since pre-war.
It seems to me that much of our effort is put into building hurdles for someone else to dismantle.
We’ve got 2.9 million on permanent sick-notes. Surely that should be dealt with first, so that they can make some contribution before they “retire”?
There’s a lot more to add, but I’m trying to keep this short.
Yeah but unfortunately, we can’t mail our findings to the past in the expectation that they’d be sorted out. Yes, 30 years ago may have been the cahnce to sor tout the benefits Pyramid but we’re here and now. The challenge facing us is to ensure that the old and the weak are not left to die in poverty and squalor while we work out how to organise our economies or societies.
I’m 34, married and work full time. But I have MS and will one day be of retirement age so its foreseeable that at some point I will need or recieve welfare provision (not always the same thing but private provision does not always equate to a lack of need as any number of people from collapsed pension funds will tell you!) so I accept that I’m not entirely disinterested. That said, the challenge remains – how do we turn a successful and yet inevitably failing pyramid scheme into a system that can fulfil the basic role of providing the safety net that it was set up to be?
I’d tie child-related benefits, allowances,premiums and disregards [important to Housing Benefit and Council Tax Benefits which often seem to be left out of these calculations] to the mother’s National Insurance number.
Let her choose her menfolk wisely and be aware that the benefits well will run dry after,say, a third child. This is suggested to encourage replacement breeding – that being 2.1 or 2.4 or whatever it is, because higher populations in positive sum societies such as polities of freedom actually INCREASE wealth. Specialisation increases production and the variety of products/services available. Higher populations lead to higher specialisation, so we surely don’t need our country’s population to decline.
Take it from one who works in, and blogs about, the Welfare State: make girls and women responsible for their actions, make them the budget-holders of whatever modest benefits you pay for families, and tell them that it’s going to end when Tertius or Trinity hits five years old, and you can wave goodbye to MOST serial bastardy and MOST bed-hopping doley fast-breeders..
NN, I saw your post on the subject and we seem to be thinking along similar lines. The reality is that the long-term solution to this problem – and yes Lefties, it is a problem – is quite feasible and would save the taxpayer billions every year. It all comes down to the lack of personal responsibility, as with so many Labour policy disasters.
Then don’t tie it to age or relationships. Tie it to the one thing that matters in this society – the responsibility to work if you can and to do as well as you can at it. Connect, as I suggested earlier, Child Benefit, and controversially levels thereof, to the relieved National Insurance contributions of the mother. Then take a maximalist view and set the scale of that payment to match the curve of age in which women have the healthiest babies who become the most succesful children (18-38 as over 40 leads to a higher incidence of birth defects set against parent better placed finacnially and educationally to raise a child) to dovetail the current expenditure with future healthcare & benefits savings.
I should add that my above comment would rely on multiple governments being able to adhere to such a plan which in a 5-year, First Past The Post environment would require a completely unprecedented level of consensus.
I think you or more accurately the Telegraph from which you quote are being intellectually dishonest in your reading of the study – the original reserach (issued this Summer) on which this is based can be found here:
http://www.bristol.ac.uk/cmpo/publications/papers/2007/wp177.pdf
It does not reach the same conclusions that you or the Telegraph reached. The 40,000 figure you quote is double the 20,000 figure mentioned in the report – but even that isn’t that surprising – it is a fairly natural thing for people who are already in a relationship to want to have more children when they get extra support through tax credits – but a 10% elasticity is actually a pretty low figure The researcher certainly didn’t load his report with all the value judgements that you attributed to him. The report also mentioned that there is a negative elasticity for those who are single – so the answer would appear to be give such people more support so that they do not become single mothers – I look foward to you and others esposing this empirically based finding as future Tory policy.
It is also interesting to look at another piece of recently published IFS research by the same researcher – which shows that the proportion of families receiving the majority of their
income from the state declines under Labour – see http://www.ifs.org.uk/pr/state_private.pdf – which of course again flies in the face of the usual Tory view.
Back to the drawing board – old bean – if you want to use academic studies to support your predujices in future – could I please suggest that you do so a little bit more diligently rather than relying on the unreliable filter of the Daily Telegraph. In the meantime, in the spirit of Christmas, could I perhaps suggest that you read a bit of Dickens – I think you will find that many Tories had the same view in those days about how benefits encouraged the feckless poor to breed. Perhaps you might wish to look at movements in birth rates and state benefits since Dickens time – if you want some long term empirical evidence!
Well I just read through your first link and have found that “the increase in payments to families with children increased the probability of a birth. This is an important, if unintended consequence, of increasing benefits to families with children.” Admittedly the 40,000 figure does look wrong but this conclusion from the authors is precisely what my letter was about. The report also found “high levels of awareness of the new benefits even among those who were not receiving it”, suggesting that handing out money in return for nothing does not go unnoticed, which was also important in my letter in terms of incentives. Even research from the US found that “there is clearly a positive statistically significant correlation between welfare generosity and fertility”, suggesting that my “prejudices” are pretty accurate.
And while we’re on the subject of lone parents, your second link showed that under Labour, the number of lone parents has rocketted from 459,000 to 791,000 – an increase of almost 60%. Feel free to embarrass yourself with more misguided criticisms of my letters in future.
As it turns out, my supposed “prejudices” have been beautifully supported by your empirical research, so many thanks for the links. It seems as though you are just as susceptible as the Daily Telegraph for not doing your research diligently enough.
All the study says is that in the case of couples (including those working on tax credits) is that there is a slight positive elasticity between increased benefits/tax credits and child birth. I hate to tell you that there is a positive elasticity between levels of income and most things – yes it does increase the probability – but by how much and what other factors may have an impact?? If you knew more than a little about economics you would know that the 10% elasticity is actually a small figure in relation to income – and it says nothing about causality. I suspect that you may find those being helped by the government may also do all sorts of other virtuous things as well as having children in 2 parent families (for that is the population to which the survey relates)
The way in which you (and the Daily Telegraph) have misquoted a serious academic study in order to try and support your political views really is nothing short of scandalous. To then compond this by your observation on loan parents really just compounds your unscientific approach even further – if you look at the first study (by the same author) he finds a negative elasticity between benefits and births to single parents – so whatever has increased the the number of loan parents he doesn’t think that it is increased benefits.
Of course you ignore this point and the main conclusion of the 2nd study namely that under Labour there has been a sharp reduction in the numbers who rely on benefits for the majority of their earnings. Like it or not the dependency culture has been reduced under the Laboour Government!
The academic concerned would certainly not agree with your conclusions – and to pretend otherwise is to be dishonest. The empirical research is not mine – I just provided the links.
Oh dear, you insist on digging a bigger hole for yourself. *sigh*
I used to teach economics so don’t embarrass yourself by explaining elasticities. You claim the first study says nothing about causality (which it doesn’t), only to then claim that Labour should be credited for lowering the number of people who supposedly rely on benefits – even though there is no discussion from you of what other factors may have been involved. One rule for me and another rule for you, apparently. For you to claim that “there has been a sharp reduction in the numbers who rely on benefits for the majority of their earnings” is hilarious. If you consider a drop from 22.1 million to 19.9 million over 12 years to be a “sharp reduction”, I think you need a little help. Yet again, with this figure you failed to provide any context e.g. the number of immigrants families has massively increased over this period but they are often ineligible for state benefits (particularly those from outside the EU), which would massively distort the figures – but you clearly ignored such inconveniences that don’t support your ideas.
To claim that the dependency culture has been reduced without even attempting to look at other socio-demographic changes over the same period is laughably weak on your part, unscientific and frankly dishonest. You didn’t even bother to address the fact that Labour have left 19.9 million families depending on the state for at least 50% of their income, which is the most shocking example of a dependency culture I have ever heard. Your second study only looks at those families who rely on the state for at least 50% of their income and totally sidesteps the problem of families who are forced to rely on the state for anything from 1-49% of their income. This is a major consideration because families are taxed to oblivion by Labour, only to get a small proportion back in the form of tax credits i.e. Labour leave these families considerably worse off than they would be if the tax threshold was increased (also covered in my letter) yet they claim success for giving them some of the families their money back.
Your dishonesty and inability to see the bigger picture, despite providing evidence of how catastrophic Labour have been, is truly enlightening. Like it or not, your evidence proves nothing other than Labour’s failures.
If you read what I said about the reduction of the dependency culture carefully you will see that I didn’t claim causality – but interesting that you inferred it, I think you must assume that I am committing the same sins as yourself (look at the “leads” in your headline)
As for the reduction in dependency – here is what the report actually concluded:
“The proportion of families receiving more in ‘net state support’ than from wages and unearned income rose
from 25% in 1979 to 31% in 1996-97, before falling back to 28% in 2008-09.”
I’m sorry that you don’t think that this is good news – and doesn’t represent a sharp reduction, but given what happened in the past and the historical trend it looks a pretty sharp reduction in my eyes. I wonder what your explanation is for the increase in the figure from 1979 to 96/97 and its subsequent reduction – makes you wonder what the Government was doing between 1979 and 96/97. My guess if Labour had been in power in those years you would have pointed to those figures as evidence of their inherent Marxism or worse – and you know that I’m not wrong!
Your comment on immigrants families is plain wrong – the figures for dependent families fell in absolute terms – no amount of extra immigrants not entitled to benefits would in itself lead to a fall in absolute numbers – unless of course we assumed that they gave an overall stimulus to the economy; which somehow I doubt is your argument.
Also the demographics argument looks weak – the population is ageing which normally leads to an increase in dependency figures.
Complete red herrings I’m afraid!