Osborne’s £12bn cuts mainly hit those in work and will backfire badly

Contrary to incessant Tory propaganda about a pervasive culture of welfare dependency, the evidence actually shows jobless benefits claims are now at a 35 year low, but will be put at risk if Osborne pursues his £12bn welfare cuts at the expense mainly of people in work. Of the three out-of-work benefits – unemployment benefit and income support mainly for single parents and disabled persons – the proportion of the working age population receiving one of these benefits (according to the Resolution Foundation) peaked in 1993 at 17%. It now stands at 10%, its lowest level since 1980. The number of children living in workless families has also dropped from 20% in 1996 to 12.5% now. There are now fewer than 100,000 workless couples with children (excluding where adults are disabled). Moreover the UK employment rate for single mothers has risen from under 40% in the early 1990s to 62% now, and has continued to rise through this latest recession.

These statistics point to two important conclusions. One is that the Tory-promoted stereotype about a welfare class opting for a life of State-funded leisure is utterly wrong. The other is that the gains that have been achieved by providing significant financial support for working households are in danger of being eradicated if Osborne gets his way by victimising those on in-work benefits. Because the government regards pension benefits as out of bounds, the welfare cuts will be mainly concentrated on tax credits and disability benefits. But this will have perverse results. Reducing the value of tax credits may well make it no longer economically worthwhile for people on the lowest paid margins to work. Equally, if Osborne curbs Britain’s system of maternity pay and rights which has kept so many young mothers connected to the labour market, the economic incentive to stay connected will simply drain away.

The real answer of course is raising the wages of the depressed bottom third of the working population. It has been estimated that the saving to the State in tax credits and in-work benefits would actually outweigh the cost of the higher wages. What is really needed now is a significant rise in the minimum wage, currently £6.50 an hour, to a Living Wage standard of (say) £8 an hour which is then annually increased either in accordance with the national average wag or with inflation, whichever is the higher.

Osborne will certainly not do this. But what he will do, just as his deficit-cutting machine will choke off growth, his welfare cuts machine will whittle away most of the employment gains of the last 20 years.