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Thursday, 18 July 2013

Why Iain Duncan Smith is wrong even if he’s right

There's been a lot of fuss recently about the "Benefit Cap" that's being introduced to the UK. Basically it limits the total amount of welfare benefits anyone can receive to around the average working wage.

You might be shocked that anyone on benefits can get anything like the average wage? In fact, only around 1% of benefit claimants do and will have their income reduced by the cap. Typically, these are people with quite a few children living in expensive rented accommodation.

Iain Duncan Smith believes this isn't so much a problem as an "incentive to work" and he has claimed that thousands of people notified that they will be affected have gone out and got a job.

However, the UK Statistics Authority are not happy with this claim

In rather dry language, they say:
We have concluded that the statement attributed to the Secretary of State for Work and Pensions that 'Already we've seen 8,000 people who would have been affected by the cap move into jobs. This clearly demonstrates that the cap is having the desired impact', is unsupported by the official statistics published by the Department on 15 April

It's important to note that "unsupported by the official statistics" doesn't actually mean "wrong" - it's just possible that Iain Duncan Smith will be proved right in the end - maybe the cap does move people into jobs. Let's look at the implicationsof him being right:

  • 8000 soon to be “capped” people have moved into work despite there being roughly 5 unemployed people  chasing each vacancy
  • Presumably, a largely different 8000 people would have got those jobs otherwise
  • Meanwhile, around 40,000 less employable people with large families in expensive areas will lose money – one in three will be over £100/week worse off.
So the real achievements of this policy include:
  • To have changed who got appointed to 8000 jobs
  • To have inflicted severe poverty on tens of thousands of families
  • It will save a couple of hundred million pounds
So, Iain Duncan Smith is wrong even if he's right

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