A worker on £40k per year is £39 pw better off than his unemployed counterpart.

(181 Posts)
orwellian Wed 16-Oct-13 15:40:20

I find this astounding.

A nuclear family in one of the outer London boroughs (2 parents, 2 kids) with husband sole breadwinner will have an income of £30,007 (£577 per week) on a £40k wage plus child benefit of £1,750 per year or £33 per week. Council tax is approx £30 pw. A travelcard from zone 4 into town is £43.60 per week.
Pay in full for school meals.
Pay in full for prescriptions.

Weekly total (minus council tax and travelcard) of: £536.

A nuclear family where both parents are unemployed in London would get;

child benefit x 2: £33
child tax credits x 2: £115
2 bedroom LHA allowance (outer London) of: £236 or 3 bed if children are different sexes and over a certain age: £300
income support/jobseekers allowance: £112.55.
No or little council tax to pay.
Free school meals.
Free prescriptions.

Weekly total of: £497 (2 children both same sex) or £560 (if different sexes or one over ten).

So, the household with one earner on £40k per week is at the most £39 a week better off than their unemployed counterpart and the unemployed family is not affected by the benefit cap unless they claim the 3 bedroom rate of LHA.

Work really doesn't pay does it.

3asAbird Tue 22-Oct-13 17:40:03

Journey I think the thresholds 32k for tax credits thees days

so anyone on average wage 20-30k would still come some housing and tax credits to top up their wage. so reckon sometimes evens out as 40k net think is approx 34 net.

Its the tax credits that mean employers can pay low wages as state tops up, same with hb although rents have been allowed to get too high which actually costs the state more.

ttosca Sat 26-Oct-13 14:33:09
orwellian Sat 09-Nov-13 11:52:23

I just wanted to clarify some things.

I got the figures from either the DWP or from the various official benefit calculators. The figures are correct.

The problem I have with this situation (and call me a benefit basher if you like, I really couldn't care less) is that it has devalued the work ethic as there is no real reason to work hard (especially in a shitty job that you hate) when you can get less stress and be not much worse off on benefits. It also defeats the point of working hard at Uni or getting into debt since these days you won't necessarily be financially better off.

Also, can people please realise that although housing benefits do go straight to the landlord those in receipt of such benefits get the benefit in kind that this pays for (a roof over their head) and those in work also do not see this part of their salary which also goes straight to the landlord. The difference is that one is getting this benefit in kind courtesy of the taxpayer, the other gets it from their taxed salary which they have worked for.

Another problem with housing benefit is that it means those that are not entitled to such benefits not only have to compete for rental properties with the spending power of those who do get such benefits but they also have to pay for this competition through their taxes, so they are effectively pricing themselves out of an area by being higher rate taxpayers.

I do agree that the main problem is that the main welfare recipients are landlords and big business who need subsidies from the taxpayer (via housing benefit and tax credits) in order to get their profits and it is these subsidies that are the main reason why benefits and income are so grossly distorted. Also this is not capitalism, since real capitalism would let businesses and landlords that cannot survive without subsidy fail. It would also not prop up a rigged housing market. What we have at the moment is neither capitalism or socialism but something in between that is the worst of both ideologies.

My solution would be to divert the money the government currently pays all these private landlords into a mass social house building programme which would create a profitable asset, provide homes to those currently priced out, keep money in the country and let workers keep more of their own salary so there is more to be spent in the wider economy rather than going into the pockets of the already rich landlords. Tax credits should be phased out in return for a raising of the income tax threshold so that low paid workers do not pay tax at all rather than paying tax and then being given it back in the form of benefits.

ttosca Sun 10-Nov-13 01:17:07

Orwellian-

Have you ever been on benefits? It's almost impossible to survive. There may be some exceptions where someone has many kids and where their support is increased to take this in to account.

For the majority of people, claiming JSA is most certainly not better than working. You shouldn't be under the impression that there are loads of people out there falsely claiming benefit so that they can sit at home and do nothing instead of work. The DWP itself puts the figure of fraud at less than 1%.

Also, remember that the majority people receiving benefits of one sort of another are in work. We've reached a situation where rents are so high, the cost of living is so high, and wages are so low, that people - ordinary hard working people who work full time - can't afford to cover for the rent and all living costs without some kind of state subsidy in the form of benefits.

What is happening, in effect, is that the government is subsidizing business.

I agree that the tax threshold should be raised. We should also raise the minimum wage to a living wage, so that no one who works full time at a job should have to struggle to survive and pay the rent and bills.

Rent controls and house building are both needed to bring down the ludicrously sky high rent costs which the public have to put up with.

orwellian Sun 10-Nov-13 12:48:57

Ttosca - yes I have been on benefits for a very short period about 15 years ago.

You are right that if you are single or a couple with no children, then life on benefits will be very difficult. However, as soon as children come into the equation then it is much more "lucrative". You can get child tax credits, child benefit, a much better housing benefit/LHA entitlement and very different requirements in regard to seeking work plus lots of satellite benefits and discounts.

This is the aspect of the welfare system that is wrong and needs to be addressed in my opinion. Nobody should be paid more benefits simply because they have had another child and it is wrong for single, low paid taxpayers to be paying to subsidise other peoples children. I believe that children are the parents responsibility and if they want to have lots of children they should do so with pleasure but with their own money, not other taxpayers.

At the moment we have a system that gives people more money for each extra child they have. Not only is this a perverse incentive but it might encourage children to be brought into the world partly because of the financial incentive for a small minority of families (like Baby P and the Philpotts). In my opinion child benefits should be capped at 2 which is widely regarded as the necessary replacement rate and then those that want more can have them but won't get anything extra from the state.

I also think that if a worker cannot afford to live in a certain area without subsidies then propping them up via tax credits/housing benefit does nothing to address the real problem and just distorts the market. There is no law that says those in low pay have a right to live in a certain area and it is common knowledge that people have to move all the time for different reasons if circumstances permit. I have moved at least 5 times in the past few years and on more than one occasion it was because I could not afford the rent and needed to find somewhere I could afford. That is just life. I didn't expect anyone to subsidise me to stay in a particular area.

As I said above, if someone can work part time in a low paid job and take home the same amount of money as someone on £40-£45k then it completely defeats the point of career progression and work ethic. I certainly would not work for £40k in a full time job if I could work part-time and get the same amount, it is a no-brainer.

The whole system is currently not fit for purpose and has been constructed to mainly benefit big business and landlords (that is why they continue to pay large amounts of housing benefit, this is for the benefit of the BTL landlords that would lose out if they cut it, rather than the tenants).

ttosca Sun 10-Nov-13 16:12:11

Orwellian-

> This is the aspect of the welfare system that is wrong and needs to be addressed in my opinion. Nobody should be paid more benefits simply because they have had another child and it is wrong for single, low paid taxpayers to be paying to subsidise other peoples children. I believe that children are the parents responsibility and if they want to have lots of children they should do so with pleasure but with their own money, not other taxpayers.

You make the assumption that there are large number of people who have children in order to simply collect more benefits.

First of all, what evidence do you have that this is the case? Because there is a heck of a lot of unfounded assertions going around about benefit claimants. Various polls have shown the public is, on the whole, completely misinformed about the costs and amount of fraud related to social security. Most people are unaware that the majority of social security is spent on pensions.

Secondly, it happens often, especially during a recession, that there are families who find the working parent or parents unemployed. This family has children. Should this family receive the same amount in support as a single adult? Why should they? They lost their job due to a recession and they have kids to feed. That's exactly the sort of thing that social security was invented for.

> In my opinion child benefits should be capped at 2 which is widely regarded as the necessary replacement rate and then those that want more can have them but won't get anything extra from the state.

And sometimes middle-class families with more than 2 children find themselves unemployed or hit with other financial disaster and will need more support for their children. This is absolutely normal and right.

> I also think that if a worker cannot afford to live in a certain area without subsidies then propping them up via tax credits/housing benefit does nothing to address the real problem and just distorts the market.

All markets are 'distorted'. There is no free-market. If we allow rents to increase at ludicrous rates and wages to continue falling, whilst at the same time reducing social security and housing, you'll have a situation where the UK will be even more unequal and even more segregated than it is now. The UK is already one of the most unequal societies in the West, and now has wealth inequality not seen since Edwardian times.

First we need to address the root causes of the problem: poverty. Increase the tax bracket. Increase the minimum wage to a living wage. Build more houses. Enact rent controls. This will go a long way to reducing the cost of the tax-payer towards the social security bill, and it will do so without making thousands of people homeless or starving.

Join the discussion

Join the discussion

Registering is free, easy, and means you can join in the discussion, get discounts, win prizes and lots more.

Register now