Where’s the carrot?

How would you feel if you hadn’t had a pay rise since the 1980s?
And do you think that the government is really serious about
helping unemployed people back into work?

These two seemingly unconnected questions are in fact closely
linked to an apparently “forgotten” issue within the benefit system
– the amount of wages that a benefit claimant can receive and still
claim jobseeker’s allowance (JSA), housing benefit or income
support.

The levels of what are called “earned income disregards” for people
who receive welfare benefits are almost unchanged since the 1980s.
For example, unemployed claimants can earn just £5 a week
before their JSA is reduced penny for penny. People who are sick or
disabled who claim income support can earn just £20 a week
before being hit in the same way.

The government has set a clear target of getting people off
benefits and into work. People on carer’s allowance and incapacity
benefit have gained from that in recent years, as the amount they
can earn while still claiming has been increased substantially
(from £40 to £72 for carers and from £45.50 to
£78 for incapacity benefit claimants, for example, from 1996
to date)

Yet the earnings disregards for people who rely on means-tested
benefits are unchanged for nearly 20 years.

Apart from the direct disincentive for claimants to take “trial”
employment, there are several other side-effects. There is
considerable confusion among clients with health problems who
believe that they can earn £78 a week with no loss of benefit,
who then find they lose their income support “top up” and part of
their housing and council tax benefit.

The present inadequate disregards also encourage people to work in
the informal economy for cash-in-hand jobs and not declare it. If
you are on JSA, for example, you can only do just over one hour’s
work at the national minimum wage before you begin to lose
benefit.

Of particular concern for many local authorities is that a lot of
user-involvement strategies founder because of these inadequate
benefit disregards. These include schemes where the local authority
wishes to pay service-users for their time and expertise. In doing
so, service-users who are also claimants often find that they lose
some or all of their weekly benefit. This can involve the claimant
in extra hassle as their claim stops and then has to be restarted
when their short-term involvement with the local authority ends.

They also stunt business start-ups and development by discouraging
people from trying self-employment.
Ideally, income disregards should be increased in line with
inflation each year in the same way that the personal tax allowance
is increased. Had the income disregards threshold received the same
treatment since its introduction, it would now be worth £50 a
week, rather than £5.

Income disregards should also be increased for a limited period to
act as an incentive for people to move into work; and for specific
types of work in the community – for example, those that contribute
to the regeneration of an area or assist local authorities in
developing services for specific client groups.

Gary Vaux is head of money advice, Hertfordshire Council.
He is unable to answer queries by post or telephone. If you have a
question to be answered please write to him c/o Community
Care