The Chancellor creates more pain for the unemployed

Wed, 05/12/2012 - 22:16 -- nick

Chancellor of the Exchequer George Osborne today gave his Autumn Statement, the annual mini-budget which sets out the government’s spending and tax plans and predicts the future of the economy, to the House of Commons.

The Statement included two key pieces of information for unemployed people. The first is that unemployment is predicted to increase by around 200,000 people to 2.7 million, or 8.3% of the population.

From a point when unemployment has been falling consistently for months, this is not encouraging. Many thousands of people will be drawn into the benefits system, including many who have not experienced it before, and they are unlikely to find it a positive experience, particularly when experiencing the judgements of press and politicians and wondering why getting made redundant made them so immediately morally lacking.

The other piece of bad news was that working age benefits will only be increased by 1% for the next three years, cutting them in real terms when measured against inflation, which currently stands at 2.7%.

If inflation stays at this level, this will mean Jobseeker’s Allowance (JSA) should have been increased each year to:

2013-14 - £72.92

2014-15 - £74.89

2015-16 - £76.91

But with the Chancellor’s 1% annual increase, JSA will be:

2013-14 - £71.71

2014-15 - £72.43

2015-16 - £73.15

A JSA claimant who is unemployed for all three years (with the predicted unemployment rises, and current large increases in long-term unemployment, this is likely to apply to thousands of people) will lose over £386 over that period just from this change in how the annual increase is calculated.

Any benefit increases from then on will start from a lower point, entrenching lower value benefits unless an above-inflation increase is implemented, as it must be if large scale poverty is to be avoided.

It is a particularly maverick act to set benefit increases for three years at a time when inflation is so unpredictable. It may be 2.7% now, but only last year it was nearly twice as high, meaning if inflation averaged last October’s rate (5%) , by the end of the three year period JSA should be more than £9 higher than it will actually be to maintain its value.

But those who receive JSA can’t afford to lose any money at all. Already we hear stories of claimants being forced to choose between heating and eating; with energy and food costs two of the biggest risers in the last few years we are concerned that the current CPI measure does not adequately cover real inflation for unemployed people, and this is why we campaign for a new Benefits Price Index which includes only the things claimants actually buy.

We also campaign for benefit levels to be reassessed from scratch as a matter of urgency; when claimants have to choose between heating and eating we cannot possibly say we are meeting their basic needs.

But there is another reason for reassessment that might appeal more to the Chancellor’s ideas of moral right. Jobseeker’s Allowance used to be called unemployment benefit, and the change in name was supposed to reflect a change in the way it should be used. It is supposed to support not just living costs but also job seeking activities.

Eroding its value risks entrenching poverty in areas of high unemployment, through ensuring those who receive it cannot access work support services (not all pay travel expenses and much jobseeking activity takes place unsupervised in libraries, churches and other community centres), cannot pay for work clothes or tools and cannot project themselves well to employers when cold or hungry, as well as risking being unable to pay for basic living.

Accessing work is being made harder with the Chancellor’s reduction in the value of tax credits; the assertion that work should always be made to pay is being undermined if medium and low paid jobs can no longer support an average family.

If reducing unemployment is truly the aim of the government, it must pay Jobseeker’s Allowance at a rate that supports both living costs and jobseeking activities. Anything less is both immoral and economically dubious; while the private sector is creating jobs those who are unemployed must be supported to access them, or the costs in benefit payments and loss of tax receipts will spiral.

A few pounds may seem like an affordable amount to lose, but for those who have crossed the poverty line it could make a huge difference. A few pounds could buy a meal, a few hours of heating or a bus trip to a job club; these aren’t things that should ever be lost to a jobless person.