Will welfare reform mean increased poverty?

In the news, Inequality, Poverty in the UK

As UK MPs consider proposed changes to the welfare system this week Seb Klier, UK poverty Parliamentary and Advocacy Advisor, explains why they should be concerned about provision of ‘decent work’, the safety net and child poverty.

As UK MPs return to parliament after the party conference season, they may need reminding that fundamental welfare reforms, with profound implications for UK poverty, will be passing through the latest parliamentary stage this week.

Line-by-line examination of the Welfare Reform and Work Bill is currently taking place, considering a raft of new measures including a new definition of child poverty, a reduction in the benefit cap and the freezing of certain working benefits.

Oxfam’s published evidence to the committee has highlighted how many of these measures could, impede efforts to reduce and measure poverty across the nations.

The submission also highlights the gendered nature of the reforms, with women being disproportionately affected by benefits changes, and the need to target policy in ways that reduces gender inequality.

The problems with the proposed welfare reform

Oxfam has three broad concerns with the Welfare Reform and Work Bill as it stands:

Model of decent work1. Work as a route out of poverty

The bill’s central contention is that work (including apprenticeships) is a route out of poverty. It therefore feeds into the government’s aims of full employment and creation of three million apprenticeships, by making it a statutory annual duty to report on these targets.

However, Oxfam knows that work and training need to be of a good standard, with room for development and progression, if they are to support people out of poverty. We should be measuring new employment through the lens of ‘decent work’ (see graph below), providing work that is sustainable, well- paid and with good terms and conditions.

The bill has no reference to decent work, nor does it set out measures to report on what sections of the population are accessing new work and training, which would help to inform policy to support those who most need it.

2. Benefit levels and work incentives

The bill also freezes a number of in-work benefits, including housing benefit and working tax credit, and reduces the overall benefit cap. Not only does this raise the likelihood of claimants who are in employment falling into poverty if inflation rises, it also draws an arbitrary line below which the state will support people, rather than this level being based on need. Previous policy has already resulted in increased poverty, and we should resist repeating that failure.

The reduction in the benefit cap is also unfair. Some research shows that the current cap has failed to act as a work incentive. Oxfam is aware from our programme work, that barriers to employment are connected to a range of factors often unrelated to benefit levels. Furthermore, a new benefit cap that will make all housing across London and the South East unaffordable for unemployed families with more than three children surely stands against stated aims of
social mobility and labour progression

3. Redefining child poverty

The bill also repeals much of the Child Poverty Act 2010. It brings in indirect measures around unemployment and educational attainment as alternative poverty metrics, and removes the centrality of income in defining poverty, as if a lack of resources is somehow irrelevant to how we understand poverty today. This is a huge concern and threatens to set back work on domestic poverty reduction that has been achieved previously. Our current four statutory child poverty measures are the best we have for properly assessing the life chances of children and, while new metrics can be added to these, overwhelmingly the evidence insists that income based measures of poverty must nonetheless remain central.

What next?

Does welfare reform inevitably mean increases in inequality and poverty? It’s a fair question to ask, given that previous legislation has often had this result. However, if government pursues reforms based on principles of decent work and welfare need, and understands poverty as defined by income, then it can move towards an economy where work supports people and they don’t rely on in-work benefits to top up low wages from employers.

After this week the bill will go for examination in the House of Lords, where these arguments must be made again, and the bill amended to ameliorate some of the worst potential outcomes.

We are at the very start of a new parliament. Oxfam’s UK poverty work will continue to push government to bring forward legislation that reduces poverty and inequality, focuses on supporting women in particular to find exits out of poverty and seeks to reduce the country’s growing reliance on food banks. Inserting new principles into the Welfare Reform and Work
Bill is a critical start in achieving those goals.

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Photo: Kamika and her daughter with Hammersmith and Fulham food bank manager Daphine Aikens. Credit: Sarah Brodbin/Oxfam

Author: Seb Klier
Archive blog. Originally posted on Oxfam Policy & Practice.