More than a safety net

There is always a temptation to think that benefits only exist to provide a safety net against poverty. Whilst it should pull us apart with shame that there is still poverty in Britain, I find this a depressingly unambitious way of thinking about social  security – like thinking about the health service as if it was just A&E.

In my book Broken Benefits I talk about another goal which is equally important – to correct inequalities which cannot be addressed through the labour market.

A single mum with a disabled child, isn’t going to be paid any more by their employer on account of their circumstances. Nor should they be. The world of work would be incredibly complicated if pay had to be adjusted to people’s individual circumstances. This is not a problem which can be resolved through increasing pay.

But the magic of social security is that it can step up to the challenge of equalising incomes between households with different compositions. Tax credits and child benefit can pay extra to take account of the additional costs of the child, disability living allowance to recognise the additional costs of the child’s disability.

This isn’t about whether or not the family are living in poverty – this is about basic fairness – about social equality. She could be earning £8,000 or £30,000, but she would still face additional costs over a co-worker without children.

This misconception of the role of the benefits system can lead to misunderstandings about how best to fix it. For example, some think that the key question is how to increase pay to the point where we no longer need benefit top ups (at least for working claimants). A much better question to ask is how the benefit system can be effectively integrated with the labour market, in order to provide financial support alongside and as a supplement to earnings for those with higher levels of need.

Instead – and increasingly over recent years – the benefits system has been made less flexible, less able to respond to differences in need.

For example, one group which clearly have a higher level of need which cannot be met through employment is disabled workers. Often, people with disabilities face higher costs of working, and the disabled worker element of working tax credit played a key role in addressing this.

However, for disabled workers on universal credit, this support has been reduced or removed. It was intended to be replaced through the payment of a limited capability for work element paid in work, and through an enhanced work allowance for disabled people – but the first was scrapped when the government got rid of the ESA work related activity component, and the second is not paid to disabled parents.

Another area where different people clearly face different levels of need is retirement. Different groups can face very different life expectancies, and so some flexibility in the age of retirement is also needed as a result. Until 2010 some of this flexibility was built into the benefits system since those on a lower income (both men and women) could receive pension credit – which provides a retirement level of income – from the age of 60.

Since 2010 the pension credit entitlement age has been rising in line with the pension age for women – so that by the end of the decade it will have reached 66. As a result the number of over 60s on out of work sickness or unemployment benefits has soared – to 350,000. It is simply not right that those on the lowest incomes are seeing their retirement age rise the fastest.

This situation is made worse by the treatment of mixed age couples under universal credit. Under the new system, if one partner is over state pension age and the other is under, they are both effectively treated as being of working age – and given no more than a working age benefit entitlement as a result.

A typical couple with one partner over pension age and the other under face losing around £10,000 per year extra by 2020 compared to 2010, principally because of this measure.

We cannot eliminate poverty in Britain without an effective social security system, but it can do so much more. It is often said that a system for the poor tends to be a poor system. This is exactly the direction in which recent policy – and the rhetoric of moving to a low tax, low welfare economy – has been driving our social security system.

So let’s transform social security to build a system which doesn’t see benefits as simply a necessary evil to top up low pay, but instead to create something which works in harmony with the labour market to make family resources relate more closely to their individual household needs, rather than just to a worker’s value in the labour market.