September 30, 2014

UK proposes welfare policy changes

The leaders of the UK coalition government have announced proposed changes to the benefits system at the Conservative Party annual conference.

Prime Minister David Cameron has announced that the maximum benefit cap is being reduced from the current level of £26,000 to £23,000. The scheme will bar childless 18 to 21-year-olds from receiving housing benefit, and unemployment benefit will be removed after six months.

Chancellor of the Exchequer George Osborne’s speech at the conference highlighted that benefits have been rising more than wages, and set out plans to freeze benefits for working-age people for two years after the general election. He claimed these measures could save £3bn.

Chris Goulden, the head of poverty research at the Joseph Rowntree Foundation, commented: "The household benefit cap may be popular but in fact it does little to cut the deficit […] If we want to reduce the welfare bill, we need to address the underlying drivers of poverty."

Matt Downie, director of policy and external affairs at Crisis, said: "Further cuts to housing benefit would be cruel and counter-productive. Homelessness shatters lives and it is hugely costly to the public purse to help people put the pieces back together."

Robert Moffitt writes about unemployment benefit programs, reflecting that "the policy challenge is to protect workers while minimizing undesirable side effects."

Konstantinos Tatsiramos remains ambivalent about the positive effects of allowing workers a longer time with unemployment benefits to find a more suitable job weighed against their contribution to the economy.

Duncan McVicar’s research supports the logic of the government’s proposed welfare reforms, noting that benefit sanctions generally reduce unemployment duration. However, he highlights some evidence suggests that sanctioning can lead to withdrawal from the labor force, warning that more research is needed to examine long-term effects.

Read more here.

Related articles:
Unemployment benefits and unemployment, by Robert Moffitt
Unemployment benefits and job match quality, by Konstantinos Tatsiramos
The impact of monitoring and sanctioning on unemployment exit and job finding rates, by Duncan McVicar