Jim McCormick: Wake-up call ends alarm-clock Britain myth

The Chancellor’s claim, says Jim McCormick, that poverty is a result of refusing to work is simply not true a new report shows

Winter is here with a vengeance. The Chancellor’s Autumn Statement seemed out of place in that sense at least. Based on the long period of austerity ahead, living standards aren’t about to ease until at least 2014. And revised figures now suggest the public finances won’t climb above freezing point till 2018. While austerity is tough for most, it’s hardest for people living on the lowest incomes. The uprating of most benefits – payments made both in and out of work – by 1 per cent will increase poverty faster than previous projections showed.

The eye-watering scale of welfare cuts still to come appears popular with the public, for now at least. That’s partly because we’ve been persuaded by the idea that Britain – and Scotland no less – is made up of strivers and skivers, the hard-workers and the work-shy. It’s based on the premise that benefits go to people out of work, while hard-working families earn their way free of state support. It’s a seductive tactic for an unpopular government, but toxic. And it flies in the face of the evidence.

Some people and places are much more likely to be workless than others. But the number of families where no-one has ever worked is tiny. Looking back to a time before recession may strain our memories, but we shouldn’t forget that the employment rate rose steadily during those years of growth, even in the poorest neighbourhoods and especially so among lone parents.

An independent check on how Scotland is faring, to be published by the Joseph Rowntree Foundation early next year, will again show a clear majority of children in poverty live in families where someone works. To say, as politicians of all stripes do, that work is the best route out of poverty is a half-truth. The odds of escaping poverty when moving into work are only a little better than 50:50. And if a couple have been living below the poverty line for more than two years, their chance of escaping poverty through work are even lower. A much bigger issue than motivating the workshy lies in improving people’s chances of staying in work and springing the poverty trap through better jobs.

That’s because of what’s happening at the murky end of the jobs market. A significant chunk of work consists of limited hours on low pay for short spells before returning to the dole. This “revolving door” of low-pay back to no-pay affects seasonal, casual and agency work in particular. Training is less common, so the odds of breaking the cycle are diminished.

The real-terms cuts in welfare represented by a 1 per cent rise affects the in-work benefits received by people who are getting up at 4am to clean offices or working till midnight serving fast-food. The Resolution Foundation estimates that 60 per cent of the impact will affect people already in work. When the Chancellor compares the heroes of “alarm-clock Britain” with homes where the curtains are still drawn at 9am, he invites us to criticise the workshy. How many of them have come off a night-shift in a care home or supermarket? Or are among the ranks of 100,000 unemployed 16 to 24 year old Scots for whom job prospects continue to deteriorate?

A 1 per cent rise in most benefits seems fair in the context of a long pay freeze for public sector workers and a proposed 1 per cent rise from April. But only in a superficial sense. We shouldn’t be fixated on the use of percentages. A 1 per cent rise in Jobseekers Allowance which currently pays less than £10 a day feels quite different from a 1 per cent rise for someone earning above the average wage. Living standards have slumped for all but the wealthiest, but are squeezed hardest at the bottom. Attitudes towards people out of work have become harsher during recession. So appeals to fairness won’t work. But simple economics ought to have more influence. The poorest usually spend what they have quickly and locally, in economies which are already stretched. Making the case for maintaining their ability to pay for the basics of food and fuel – and avoiding destitution – should feature prominently in any assessment of the Autumn Statement.

All of this is a prelude to the Coalition’s “big-bang” reform of welfare benefits. Starting next year, Universal Credit will group together a range of means-tested benefits for working age people into a single payment. It ought to make life simpler and reduce duplication. And it is meant to improve work incentives. But it will be paid monthly in arrears, and will require some tenants to pay rent to landlords for the first time. Few believe a major spike in rent arrears can be avoided.

Against the backdrop of a major squeeze on the welfare budget, the coalition has raised the personal income tax allowance each year. This takes many low-paid workers out of income tax and gives a tax cut to many more. Job done? Not for people in the lowest-paid jobs or those who move in and out of work frequently.

Look at the example of Peter a married father-of-two living in Glasgow. He works for an employer committed to paying a Living Wage. From April he will earn £7.45 an hour, well above the minimum wage. But his working week has been cut to 20 hours.

This helps fit with school hours, so he can pick up the children when his wife is still at work, but means he earns less than £8,000 over a year. He earns too little to pay income tax in any case, so doesn’t benefit from the rise in the personal allowance.

Or take the case of Sarah a single mother from Edinburgh. She lost her job recently and now receives £68 a week in Jobseekers Allowance. She is offered a few hours of work in a pub, but can only earn £20 before her benefits are reduced and will only be a few pounds a week better off. If she lived in Dublin she could earn the equivalent of £110 before starting to lose her income safety net.

Looking ahead, Scotland’s chances of emerging from austerity in decent shape – under any constitutional option – won’t just be down to decision on welfare.

While people’s pockets are squeezed, their future prospects can still be improved by keeping a long-term eye on the quality of pre-school education, reducing childcare costs and improving access to training for the least-skilled.

On all of these, powers to act are already devolved.

• Jim McCormick is Scotland Adviser to the Joseph Rowntree Foundation