Austerity gutted the welfare state – preserving benefits now can’t make up for that

Many people on low incomes will have breathed a sigh of relief when the UK Chancellor, Jeremy Hunt announced, in his autumn statement on November 17 2022, that he would be increasing benefits by 10.1% in 2023. This is almost in line with the rate of inflation.

The past decade of welfare reform, however, combined with low pay has meant that even before the cost of living crisis, many people could not afford the basics of food, heating, rent, shoes, and school uniforms. Hunt’s decision to match inflation is laudable, but it isn’t enough to make up for the years of cuts to the real value of benefits in the UK. And the lower levels of government support he announced, in terms of meeting rising energy costs, will further impact poorer households: energy prices are set to be three times higher than they were two years ago.

Less prominent in the news coverage was the chancellor’s announcement that over 600,000 people on universal credit would be coached to increase their hours at work or their earnings. At the same time, the legal wage floors continue to fall below independently calculated living wages.

This means that many people will be obliged to work more hours for poverty wages. It also means that the chancellor assumes a nationwide availability of work, despite the fact that poorer places are least likely to offer decent job opportunities.

But the Conservative government’s 2022 autumn statement has not occurred in a vacuum. It follows a decade of austerity, of which the disastrous – and uneven – cuts to welfare were one notable outcome. Research by economists Christina Beatty and Steve Fothergill shows that that people in some areas of the UK faced much bigger cuts to benefits than others.

Previous rounds of austerity cuts have affected people and places in numerous ways. From the individual and the social levels to the wider health and economic wellbeing of the nation, these measures systematically hit the poorest people hardest.

Now, like then, the government has repeatedly justified such cuts, citing a lack of alternatives. This time around, the cuts are phased in, but they will hurt local communities nevertheless. Research has long shown that “efficiency savings” tend to be a false economy.

Our new research details how the austerity-led implementation of the universal credit system greatly compromised the capacity of the state to care for its most vulnerable citizens. A decade of welfare reform means the previous, more human-centred approach has been replaced by digital interfaces and punitive, algorithm-based decision making. For many people already on low incomes, this has made their lives worse.

Universal credit, which began to be implemented in 2013, amalgamates six previously means-tested benefits into a single package and is withdrawn gradually as claimants increase the amount they work. The idea behind consolidating these payments was to incentivise people to work, while reducing errors, fraud and admin costs.

Our case study focused on Great Yarmouth in Norfolk, the first poor urban setting to have the new welfare package rolled out. The slow transition to universal credit left many people without an income for up to six weeks. What the government called an “advance”, but is better described as a loan to cover this period, meant that many people were in debt before even receiving their first payment.

People were dealt with quickly and heavy-handedly, with minor infringements – such as being late for job centre appointments, forgetting to log on to the system, or voicing frustrations at the inflexibility of the system – penalised. Sanctions were often imposed, which would pause or even end their welfare payments.

One of our interviewees likened that their experience to British film director Ken Loach’s 2016 film I, Daniel Blake, which tells the story of a single mother of two, Katie, and an older man, 59-year old Daniel, as they navigate British social security. Loach depicts with great clarity the rigidity and punitive qualities of this system, which operates not with human compassion but disciplinary sanction.

Whether the universal credit system offers value for money in economic terms is unclear. The human cost at which it comes, though, is undeniable.

The rigid requirements of a digitised system, combined with sanctions, do not recognise when someone needs encouragement or to be cut some slack. It does not see that pausing welfare payments is highly counter-productive for people’s wellbeing.

Austerity, of course, took numerous forms including a big hit to local government budgets which influenced how local authorities supported the local social infrastructure. Adult and child social care, homeless services, funding for youth clubs and emergency grants were all affected. So too was provision for education and special educational needs in particular, as well as healthcare. All of these services might be seen as fundamental building blocks to the local welfare state – a local welfare state increasingly in tatters.

The strains caused by the contraction of the local system of support together with welfare reform can be seen in Great Yarmouth, as in many other parts of the UK. The fabric of our multi-threaded social safety net is unravelling.

Homelessness in the UK doubled from 2010 to 2019. The need for foodbanks from the Trussel Trust increased from 41,000 in 2009-10 to 2.1 million in 2021-22. People were unable to pay rent and council tax due to changes to the low level of benefits they receive.

Government grants to children’s centres were reduced to the extent that 500 had to close between 2010 and 2018. These included Great Yarmouth’s Priory Centre, a once bustling community hub which had started out as a Sure Start centre, to support parents and children from all backgrounds. A former mentor described the crucial role it played in catalysing community solidarity:

We’ve had people who come into the club who are homeless or say,
“I’ve not eaten for 3 days,” and it’s like, “OK, bear with me I’ll see what
I’ve got.” I’ve had other attendees say, “Actually I live locally, I’ll see what we’ve got.” As rough as times are, the community comes together. People still want to support and share what little they have.

A volunteer support worker at a different centre explained how preventative, upstream interventions have moved from the state to the third sector. In fact, the third sector has stepped in to fill the holes left by a retreating state. She summed up how the state’s role has become minimalist, as state services struggle to afford to do the essential work of prevention and ongoing caring support: “They pick up the pieces, put them in a paper bag, and hand them back.”

The void left by this retreating welfare state has been filled in several ways. Libraries have provided the IT, internet access and support crucial to looking for work – a requirement to qualify for universal credit – and to filling out benefits claims themselves. Volunteer-run charities, like the Great Yarmouth Unemployed Workers Centre, have stepped in too, but these are often micro-charities, limited in capacity and subject to unreliable funding.

Rising homelessness and council rent arrears, not to mention the desperation and burnout among staff and residents alike demonstrate keenly quite how the UK cannot absorb any further rounds of cuts.

So before we get overly excited about the UK’s chancellor’s decision to almost provide an inflation-matching increase to benefits, let’s remember the context. Communities like Great Yarmouth have experienced a decade of public spending cuts. People who rely on benefits were already struggling to find ways to cope with a system which often failed to provide for their basic needs. The benefits system is often seen as punitive, difficult to access, and frustrating. And even before the recession, many local economies are seeing little expansion which might offer opportunities to people.

Let’s remember that austerity cuts to public spending are, in fact, ideologically driven. These are political choices with real and lasting consequences in communities. Matching inflation is helpful, but it is not enough.

Anna Barford recently or currently receives funding from the British Academy, ESRC, Cambridge Political Economy Society Trust, and as philanthropic research grant to the University of Cambridge from Unilever. She is in Business Fights Poverty's Circle of Advisors and is a Commissioner on the Business Commission to Tackle Inequality (part of the World Business Council for Sustainable Development).

Mia Gray receives funding from the Cambridge Political Economy Society Trust, the British Academy and the Canada-UK Foundation. She is a Board Member of the Regional Studies Association and the Cambridge Citizens Advice Bureau.