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Some context to Welfare Spending

Posted on July 21, 2015 by Paul Mac Flynn

An article appeared in this morning's Belfast Telegraph outlining expenditure on some welfare benefits in Northern Ireland for the latest financial year. The figures were obtained in response to a parliamentary question to the Minister for Social Development and can be found here . The article made a number of claims about where expenditure has increased and then went on to quote some rather inept comparisons between the financial positions of Northern Ireland and Greece. All too often the debate in Northern Ireland regarding welfare reform has been sensationalist rather than intelligent. It is worth putting the figures reported today in some context.

The first thing to note from the figures presented is that they are nominal figures not adjusted for inflation. The table below uses a standard GDP deflator to make the relevant adjustment and consequently the increases in most benefits appear more modest. Simply adjusting for inflation, expenditure on Job Seekers Allowance has actually fallen by only 9% owing to a modest improvement in the labour market over those years.

welfare table

However not all changes appear modest. The Belfast Telegraph only mentioned the increase in the Employment Support Allowance over the last year; this was because if they had highlighted its increase over the last 5 years the figure would have been over 650%. This is because the Employment Support Allowance has only existed since 2008 and is a replacement benefit for Incapacity Benefit, Severe Disablement Allowance and some cases of Income Support. As the above table shows expenditure in all these other benefits has been decreasing whilst ESA expenditure has been increasing. Subtracting the fall in Income Support and Incapacity Benefit and adjusting for inflation the real increase in ESA is only 4%.

The other benefit which is highlighted is Disability Living Allowance, and it is true to say that it has increased by 14% in real terms over the last five years. What is not mentioned is that DLA is a benefit paid to those suffering with a disability both in and out of work. It is meant to adjust for the cost of living with a disability and not to provide an income. What is also not mentioned is that just under half of DLA claimants are either pensioners or children.

Additionally some politicians used the figures to claim that in Northern Ireland, "work doesn't pay". They're right, but it has little or nothing to do with welfare. It has a lot to do with the fact that Northern Ireland has the lowest wages and the highest proportion of low paid workers in the United Kingdom. That in turn might have something to do with the fact productivity in Northern Ireland is just three quarter of the UK average due to our under developed private sector. If politicians wish to make work pay then grappling with this problem may prove a far more productive use of their time.

Posted in: Government SpendingNorthern Ireland

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