By Will Horwitz
Edit: We only just noticed, hidden away at the bottom of this page, the introduction of the ‘Hidden Economy Advisory Group’ in today’s Pre-budget report. This is fantastic news, it’s great that government is recognising the importance of those working informally, and looking at positive steps to include them in the formal economy. A major success for our Need Not Greed campaign. We’ll keep you up to date with how it develops.
The report also saw the nationwide rollout of the Better Off in Work credit, which tries to make sure people earn more in work than on benefits and has been piloting for the last year in Yorkshire. Our Need not Greed campaign highlights the lack of incentives for many people moving off benefits into work, so this is interesting news, welcomed by the our coalition partners the TUC amongst others. It shows government recognises some of these barriers, but we don’t believe it’s the right solution.
The scheme is aimed at people moving off benefits into full-time but low-paid work. Often these people actually end up worse off, as they lose not just one but several benefits all at once. This is a powerful incentive not to get a job. The scheme ensures people are atleast £40 better off per week in their job than they would have been on benefits, by topping up their income. It lasts 26 weeks, and is administered by the jobcentre.
There are several problems. Firstly, it’s actually a top-up on a top-up, since tax credits are supposed to ensure that work pays. It’s adding even more complexity to a system that desperately needs to be simplified, and for that reason will probably not be accessed by many of those entitled to it, who will never find out about it.
Secondly, it ignores the fact that people can often only access part-time jobs from the jobcentre – over a third of jobcentre vacancies are temporary and part time. These part-time jobs can be a vital step back into work, but the credit does nothing to improve incentives for people moving into them.
And thirdly it doesn’t address the fundamental problem of low pay. Half of poor children live in families where someone works, despite tax credits. A living wage would ensure people don’t have to rely on a top-up to get by.
The scheme has just finished a year-long pilot in Yorkshire and Humberside, and it would be fascinating to see the evaluation results. If anyone knows where they are, do let me know.
Last week we called for people on Jobseekers Allowance to be allowed to earn up to £50 a week before it affected their benefit. Our experience shows this would act as a good incentive for people to take the first step back into work. It was good to see the chancellor recognising the often-perverse incentives facing those getting a job, but the Better off in Work credit probably isn’t the right solution.
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