00:00There is a growing argument that for some families, welfare now pays more than work.
00:07That claim has gained attention after Labour removed the two-child limit from universal credit from 6 April.
00:16Ministers say the change is designed to cut child poverty and support low-income households.
00:23Critics say it risks weakening work incentives.
00:27So the real question is whether the numbers back up the claim or whether the picture is more complicated than
00:33that.
00:35There's no doubt that we have an issue in terms of the welfare system and the cost that is borne
00:42by the exchequer.
00:43And where does the exchequer get its money from? Well, of course, it's taxpayers.
00:47So, of course, what you need if the burden is going up, then, of course, you need people working harder,
00:53longer, perhaps, to pay more taxes.
00:55But, of course, as we know, we're in a situation where unemployment is starting to edge up.
01:00We've also got the next technological revolution in terms of AI and the consequences that may have.
01:07There won't be or there'll be fewer people working, therefore less money going into the exchequer.
01:11We've also got the added complication that we have the tail end of the sort of the baby boom, which
01:17were people born after the Second World War and the sort of 1950s and 60s in particular,
01:23who are coming up to sort of old age insofar as that they'll be able to get their pension at
01:2766 and 67 and, of course, eventually 68.
01:32And, of course, just a sort of footnote, there is a review of that going on and it's confidently predicted
01:37that sort of the state pension age will go up.
01:39But putting all that into a nutshell, you've got this pie which needs to be created and you've got less
01:45ingredients or fewer ingredients, I should say, going into it
01:48because, of course, of the sort of the number of people working.
01:50And, indeed, of the sort of the working population, that's between 16 and 64, although I appreciate the sort of
01:56the state pensions as age has gone up,
01:59we have 33 million people in employment, which means the sort of the rest, you know, some 17, 18 million
02:06people are on some sort of benefit,
02:08which, of course, may be unemployment, may be about their students.
02:12It may be sort of a whole range of other things, which, of course, you know, housing, disability.
02:16And there is an issue that quite clearly, as, you know, working wages or the average wages have not gone
02:23up dramatically.
02:23This has been a problem that's pertained since the global financial crisis, which is almost 20 years ago,
02:30where, of course, people remained in employment, but their wages were not going up.
02:33There is a difficulty.
02:34So the average wage, which is somewhere around about 30,000, is, you know, in order to get, yeah, you've
02:42got to work to earn that,
02:44you can be on benefits and, as is the introduction of this, better off by being precisely on benefits if
02:52you sort of put them all together.
02:53So there is a sort of clear disincentive to sort of work.
02:57Politically, Labour says removing the limit is part of its child poverty strategy
03:01and argues it will lift 450,000 children out of poverty by the end of this parliament.
03:08Government documents also say almost three in four children in poverty are in working families.
03:15Reform says it would reverse the change, while Conservative criticism has focused on cost and fairness to taxpayers.
03:24So the row is really about what the system is for, reducing poverty as far as possible,
03:29or maintaining a sharper gap between benefits and earnings.
03:34So is it true that benefits now pay better than work?
03:37In some individual cases, critics argue the balance may have shifted.
03:41But the broad, official picture is more complicated than that,
03:45because many of the families affected are already in work,
03:49and the change is aimed at cutting child poverty, not replacing wages.
03:54Now, of course, work is a very good thing.
03:57I fully appreciate in terms of the esteem that it gives you and the purpose and whatever else.
04:02But, of course, when it comes down to pure economics, if people are better off,
04:06they will do, sometimes, not always, the things that most suit them.
04:10So it's a big difficulty.
04:11And, indeed, it's one of the things that reform are certainly looking at
04:15in terms of reformation of the welfare system and trying to somehow disincentivise.
04:22Perhaps another thing to add in, there is a view that what makes the UK such an attractive place
04:27in terms of immigrants and maybe those who come sort of through other means,
04:32i.e. not legal, through boats, is the fact that if you get here and can remain thereafter,
04:38then, of course, it's fairly attractive.
04:40So there's a whole host of sort of difficult issues.
04:42But, of course, as we know, under the current Labour government,
04:45there's been a sort of great reluctance, particularly amongst backbench MPs
04:49who came on the promise of making people better off to try and sort of deal with this.
04:54So it's a real difficulty for the current government.
04:56But I think it's one that I know that sort of the economists are sort of looking at
05:00and there will have to be sort of some sort of redistribution
05:03or perhaps some sort of reduction in benefits
05:06because we simply can't afford to have as many people not working
05:10because there are not enough people working to afford it.
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