An Economic Bulletin published by the free market Centre for Policy Studies today examined latest Office for National Statistics data on household incomes, taxes and benefits.
Adam Memon, head of economic research at the CPS, said welfare dependency was “economically destructive”, removed incentives to work and kept people trapped in cycles of low aspiration and low pay.
“The welfare state must protect the vulnerable and encourage self-reliance but for too many households it has become a permanent trap,” he said.
“Net dependency at 51.5% is still too high. Simply attempting to alleviate difficult economic conditions with welfare payments can only ever be a short-term fix.
“Indeed, the case for making a further £12bn of savings in the welfare budget rests not only on the need to reduce the budget deficit but also on the need to reform welfare to boost employment and encourage growth in real wages.”
However, Memon’s report also noted that net dependency of the middle fifth of households has declined by 27% since 2010/11 when the Conservative-led coalition government took office. It also claimed that inequality was now lower than at any time under the last Labour government.
Tim Knox, CPS director and the report’s co-author, commented: “These new data demonstrate the success of the last government’s reforms. Dependency is falling, inequality is lower than at any time under New Labour and disposable income is increasing for all.
“So the policy implication for the new government is simple: go further, faster on both welfare and employment reforms.”
Details of the government’s planned £12bn cut to the welfare bill will be revealed in the chancellor’s post-election Budget statement next week.
