The Benefit of Work?

To be honest, I am sick to the back teeth of hearing Cameron bleating on about the Benefit Cap and how it is that people on benefit are earning more than people in work and I am more infuriated that people believe his rhetoric. With this article, I aim to shed some light on to the subject.

The official line is, the average household earnings are around £35,000 per year before tax, which equates to approx £26,000 after deductions. This is true.

However, what this does not tell you is that same family will still receive Child Benefit AND Child Tax Credit (CTC), plus any Disability Living Allowance (DLA) entitlement, industrial injuries and a slew of other benefits available in varying circumstances.

Also, to earn a pre tax wage of £35k, you need to be earning approximately 3 times the national minimum wage of £6.08 an hour! Or put another way, a shop assistant in Asda will have to work for 3 years to earn what a teacher gets in one! However, the teacher will be able to buy a house and the Asda worker won't.

The quality of life however, need not be as far apart as one may think. The table below shows the varying wages of four identical families in different circumstances, along with benefit entitlement, and yes, Tax Credit ARE state benefits, like it or not. (Apologies for the formatting, I couldn't find a way to make an Excel speadsheet convert well to a jpg)

	The Work Benefit Analysis
		Family 1		Family 2		Family 3		Family 4
	Gross Earnings	35,000.00		£12,014.00		£5,058.56		£5,509.40
	Less Tax and NI	8,712.00		£1,477.00		£0.00		£0.00
	Net Earnings	26,288.00		£10,537.00		£5,058.56		£5,509.40
	Child Benefit	3,164.00		£3,164.00		£3,164.00		£3,164.00
	Child Tax Credit	3,289.00		£10,735.00		£10,735.40		£10,735.40
	Working Tax Credit	0.00		£2,364.48		£6,502.08		£0.00
	Housing Benefit	0.00		£7,800.00		£7,800.00		£7,800.00
	DLA	0.00		£0.00		£2,672.80		£0.00
	Total Net Income	32,741.00		£34,600.48		£35,932.84		£27,208.80
	All families based on 4 children and 2 adults, renting a 4 bed house at £150/week
	Family 1 is earning the average wage of £35,000 before tax
	Family 2 earning National Minimum Wage of £6.08 / hour, 38 hours a week
	Family 3 with 1 disabled adult working 16 hours a week @ NMW
	Family 4 - Not working and on JSA
	Housing Benefit assumes entitlement to 4 bed rate based on figures from benefit calcualtor at http://derby.gov.uk/apps/benefitscalculator/
	Tax Credit and Child Benefit figures based on the benefit calculator at http://www.familynest.co.uk/Tools/Tax-credits-benefits-calculator/
	JSA rates found at http://www.direct.gov.uk/prod_consum_dg/groups/dg_digitalassets/@dg/@en/documents/digitalasset/dg_200090.html
	DLA rates found at http://www.direct.gov.uk/en/disabledpeople/financialsupport/dg_10011925
	DLA rate here assumes 1 adult with High Rate Mobility Componant Only, families with disabled children or adults with care needs get more
	Income Tax and NI payable worked out here http://www.incometaxcalculator.org.uk/index.php

What Does This Table Tell Us?

Family 1 have the best paid job overall but pay the highest tax and get the least Tax Credits and no help with their rent.

Family 2 work an unskilled job on minimum wage but work the same number of hours as family 1. NMW is so pitiful that they could not afford to live if it wasn't for the boost from Tax Credits AND Housing Benefit. However, this then means the overall income of family 2 is higher IF they have 4 children, the less children they have, the further behind family 1 they fall.

Family 3 has the main earner with a disability which entitles them to work just 16 hours a week to get Working Tax Credit and the rate of WTC is much higher. Coupled with the DLA, this brings the overall income of this family above both of the first two.

Family 4 has 2 unemployed adults so all of their income comes from State sources.

Remember the Cap?

Based on this outline, both family 3 and 4 have TOTAL benefit payments of over £26,000 and would therefore be hit by the new proposals.

The family with a disability would stand to lose £6,000, more than wiping out their entire disability support and child benefit! Family 4 would lose nearly £100 month. This makes the people who are already the most vulnerable, even more so!

The other 2 families lose nothing and I'm not saying they should. However, as Child Benefit is universal it should not be counted in the cap. If you can get it no matter what you're income, it is only fair to exclude it from any benefit cap. This would make family 4 safe, they wouldn't have to move home or make a choice between eating or paying the gas bill.

Family 3 however, would still be stuffed! Remember, despite having a disability, they are still trying to work and raise 4 kids. These are the families the government should be encouraging and really do need the support. DLA is also a universal benefit, you get it as a pauper or a millionaire. It is essential for most disabled people's mobility and / or care needs.

What is the point of have benefit supporting disability if you just take that off Housing Benefit or some other essential form of support? With both CB and DLA protected, family 3 would also be safe.


What about Housing Benefit?

This is spoken of like it's some kind of luxury the sponging benefit scroungers are living the high life on, yet it avoids the truth. It get paid to people who can afford to own multiple houses, landlords!

Tenants do not get to have the money, it pays to have a roof over their head, but they do not see the cash! What would you propose we do? Kick all Housing Benefit claimants on the street?

Remember, a good proportion of HB claims are for people who ARE trying to work but get paid crap wages, or who have been made redundant or are either too disabled, sick or old to work! One of these situation could very easily befall you one day soon and you will be asking for support too.


The Abusers?

In every system, in every walk of life, you get those who want to take advantage of the generosity of others. There is no way to stop this and we need to accept that. We can threaten, punish, humiliate, beat and imprison these people but it will NOT stop if from happening. It will only serve to make it harder for these people to rejoin the workforce.

Yes, we do need to work together to minimise exploitation and encourage people to want to take part in society again. We need to rebuild communities and help people to help themselves. We need to re-empower people and give them a voice.


Conclusion

We are told the maximum possible savings from a benefit cap are £300m. That is less money than Vodafone has avoided in tax last year. It is a mere 20% of the money failed banks received to continue to pay their bosses £900k bonus packages. It way less than has been spent on unused aircraft carriers. Yet this one measure is going to affect hundred of thousands of children and vulnerable people.

Exclude DLA and Child Benefit from the equation and things balance out a bit, but it is rents that are most people's biggest outgoing and the one thing you can't cut back on. There isn't any surplus social housing for people to fall back on and private rents are increasing with demand.

A one-size-fits-all cap can not possibly work all over the country taking in to account the huge variations in housing prices and the cost of living. We need to accept the fact people in different parts of the country need different amounts to live on and we need to stop judging others for what they're getting, for one day it could you your turn!

What's more, if a family can get more on benefit than they can in work, it doesn't mean the benefit should be cut, it means the wages need increasing!