Interesting welfare state fact

The Department for Work and Pensions estimated this year that up to 12,000 of the highest-claiming households on welfare were receiving more than £34,000 a year in benefits, equal to the take-home pay of an employee with a £47,000 salary.

You can get more post tax income on welfare than if you were in the top 10% of earners in the country?

Private Conservative polling suggests that the plan is one of the Coalition’s most popular ideas, and ministers are keen to highlight the policy and its impact.

Yes, yes, I can understand that.

10 thoughts on “Interesting welfare state fact”

  1. I notice that it says “households”, which means it’s not comparable to the “pay of an employee”. There can be more than 2 adult claimants in a “household”, so the result isn’t surprising.

  2. JJ: it’s impossible to tell from the (non-)data in the article, because we aren’t told how many people are actually in the households mentioned. That helps decide whether the benefit per person is disproportionate. For instance, anecdotally, I’ve been told of one where there were 10 loosely related in one house, but that included a few children, leaving 4 or 5 adults. (I’ve no idea how much benefit money is involved, but they certainly aren’t all working, and don’t seem to be suffering.) At even 7,000 to 8,000 each, you’re quickly getting up there, but individually it’s less than they could earn. I suspect (but don’t know) that most £47,000+ households in work do not have that many earning occupants. Perhaps the conclusion could be that the examples demonstrate the advantage of communes and clubbing together!

    We don’t know, and I think it’s wrong of the Government and the press not to try to normalise the figures if they are going to compare them.

  3. I should add that I think benefits should be there to tide people over between periods of employment, not provide a sinecure. (I’m ignoring the handling of long-term real disabilities.) Even then, it’s really only suitable for the low-paid, although the rest of us contribute. (Ie, I pay NI, but if I lost my contracts, the system would not provide even a stop-gap. Given that, I’m not too happy myself about subsidising the feckless.)

  4. Worth noting that the only way you can get the benefits total above is to add in-work benefits like HB and child benefit. Which an earning household in the same position would also be eligible for.

    CHF: that seems a bit rough. How d’you manage to be contracting with no eligibility for benefits if terminated, whilst also not being able to pay tax as a freelancer? You’re stuck in exactly the wrong part of the IR35 net?

  5. I know of a household earning AU$2,550 a fortnight on disability, which is about $90,000 a year or so before tax. It’s three people on the disability pension living as flatmates.

  6. JohnB>

    The way IR35 works in practice, it’s only the long-term contractors who manage to claim to be freelance – which is precisely the opposite of how it’s supposed to work, of course. If you do shorter contracts, you’ll probably do so through an agency, and that comes under a different set of regs.

    That said, I don’t know about others, but I factor that into the rate I demand for a job.

  7. Matthew:
    Good example. The government provides A$30k (c.GBP20k) to give an adequate lifestyle to disabled folks who can’t work. That’s about the minimum to maintain a household as a single adult whilst having a modest but not completely austere quality of life, particularly given the additional expenses associated with most disabilities.

    If three disabled chaps decide that they’re going to share a flat, thereby saving not only on bills but also on many associated expenses (one accessible van instead of three, and so on), it’d be a bit rough to immediately claw back the money they’re saving. But the net result is you get a “$90K BENEFIT HOUSEHOLD!!!” headline.

    Dave:
    Ta for that. I’ve worked salaried in the UK but I work as a contractor through my service company in Aus, so I’m aware of IR35 through mates and freelancing sites rather than direct accountant advice. Yet another one of those tax rules that does the exact opposite of its intent – score.

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