DWP published its evaluation of the cap on household benefits (Benefit Cap) yesterday, arguing that it has succeeded in its aim of incentivising people into work. Some of the commentary by the media has been laudatory; for example The Telegraph argued that the new figures ‘give strongest evidence so far that the benefits cap is encouraging people to move off welfare and into jobs’. It highlighted that of those affected by the cap 19% had found jobs 12 months later, and that more than 30% of claimants who lost £200 or more per week had found jobs in the same period.
An unequivocal success?
This initially appears like compelling evidence for the cap, and Community Links as an employment support provider welcomes the focus on getting people into work. However, as we have argued before, audiences should be wary of seemingly simple statistics masquerading as the whole story.
The first problem with the evaluation is that it sees moving into work as being synonymous with “a household having an open Working Tax Credit claim”. Let’s assume for a moment that this is a suitable way to measure success. At best it means that the Benefit Cap has actually incentivised some people to move into work. However, how many of these jobs are of a high enough quality to improve a household’s situation? Research from Australia has shown “unambiguously that the psychosocial quality of bad jobs is worse than unemployment”.
Put simply, unemployed people who move into poor quality work suffer a significant worsening of their mental health as compared to those who remain unemployed. As the author of the above article points out, this doesn’t undermine the need to support people to find work, but it does undermine the idea that we should force people to find any job at all. Community Links has previously explored one possible solution to this, beyond the structural changes needed to improve labour market conditions, which is to ensure that jobseekers are properly assessed by employment support services.
Causing and Compensating for Problems Elsewhere
The other problem with using open Working Tax Credit (WTC) claims as a measure for the success of the Benefit Cap is that it means that people are just being cycled onto a new benefit. Not only that, but a benefit that is inherently tied to being on a low income. In some cases they are a useful way to help those who need to work part-time supplement their earnings. However, in most cases WTCs are merely compensating for low wages, the precarious nature of employment and/or underemployment. Therefore WTCs may currently be vital for numerous people’s livelihoods, but are largely a subsidy to employers who insist on paying low wages. Unfortunately this role – compensating for failures elsewhere – is a fundamental part of our social security system as it currently exists. In our most recent report, the Early Action Task Force sets out some new underlying principles and changes to current spending rules that challenge this role.
Furthermore, as the Institute for Fiscal Studies points out, “there is still much we do not know” about “the large majority of affected claimants” who have “responded neither by moving into work nor by moving house”. Indeed, there are a variety of other responses to the Benefit Cap that the quantitative data does not explore, including cutting back on spending, building up debts and/or getting help from family and friends. All of these responses are likely to have both social and financial costs. For example, a recent report by StepChange highlights how ‘problem debt’ has a social cost of £8.3 billion that includes additional welfare claims, moving and eviction costs, lost productivity and demand for care, support and other state services.
It is therefore important that we don’t forget those who are not captured in these statistics, particularly when we consider the fact that at least 73% of the individuals affected by the cap are children and that the estimated cost of child poverty in 2013 was £29 billion. As such, the Benefit Cap actually causes costs elsewhere – both financial costs to other already cut back services and social costs to the lives of those affected.
Ten Year Tests
The Early Action Task Force has long been arguing that we should build a society that prevents problems from occurring rather than merely coping with the often more costly consequences. One specific recommendation we have made recently is to apply Ten Year Tests to new policies in order to ascertain the effect of a decision across the whole public sector budget in a decade’s time. The Benefit Cap, amongst other policy changes, should be subject to such a test to gauge it’s (potential) success as although the projected savings from the Benefit Cap were approximately £500 million between 2013 and 2015, it is likely to have caused far more costs than it has saved.
We must therefore think beyond headline statistics highlighting the ‘success’ of policy reforms that only yield short term benefits and instead seek to understand their long term impact. The social security system, and in particular the Benefit Cap, is currently not doing this.
In isolation the announcement by DWP yesterday does seem like a success, but the evaluation largely misses the point. Until we start looking at the broader picture – including thinking about the long-term future – such mistakes are destined to continue.