But we have to acknowledge that over the last five years those on out of work benefits have seen their incomes rise twice as fast as those in work. With pay restraint in businesses and government, average earnings have risen by around 10% since 2007. Out of work benefits have gone up by around 20%.
That’s not fair to working people who pay the taxes that fund them. Those working in the public services, who have seen their basic pay frozen, will now see it rise by an average of 1%. A similar approach of a 1% rise should apply to those in receipt of benefits. That’s fair and it will ensure that we have a welfare system that Britain can afford.David Smith, writing in the Sunday Times, repeated the Chancellor's argument verbatim and stated that:
"In five years, out of work benefits have risen 20%, earnings 10%. That is unsustainable.."
The numbers are correct: but they are highly selective, and David's conclusion is simply wrong. The value of out of work benefits relative to average earnings (and more broadly the incomes of those in work) has fallen steadily over the past three decades, until the recent slight uptick resulting from the recession:
As a result, we already have "a welfare system that Britain can afford", at least for those of working age. Declan Gaffney et al note (table 3) that all out-of-work benefit spending only amounts to some 3 percent of GDP. And even overall benefit spending, which has to accommodate the growing number of pensioners, has levelled off, as Chris Dillow has pointed out. There is nothing remotely unsustainable about any of this.