October 21, 2010 • 5:18 pm
The Chancellor George Osborne yesterday announced his much-anticipated Comprehensive Spending Review. In the first of several in-depth looks at the various policy areas affected by his announcement, Full Fact investigates the veracity for Mr Osborne’s claims on Welfare and Employment.
“In fact, in the last three months alone the economy created 178,000 jobs.”
The Chancellor’s figures come from the most recent Labour Market statistics, which show that in the three months to August the number of people in employment rose by 178,000 on the previous three months – so not much to quibble with there.
That said, how many of these jobs were ‘created’ by the economy is a point of debate, given that 25,000 of the increase was from those working as unpaid family workers, and another 43,000 were those who class themselves as self-employed.
But such considerations only challenge Mr Osborne’s rhetoric rather than his statistics.
Verdict: True
“Nor will fraud in the welfare system be tolerated anymore. We estimate that £5 billion is being lost this way each year.”
When announcing reforms to the benefits system earlier this month, the Department for Work and Pensions predicted that £5.2 billion was being lost to mis-payments every year.
However despite this, George Osborne is wrong to say that welfare fraud is costing the UK taxpayer £5 billion each year.
This is because, according to the Government’s own figures, of the £5.2 billion being lost, only £1.5 billion is due to fraud, with the remaining £3.7 billion lost to error on the part of the Government or the claimant.
Full Fact will write to the Chancellor to highlight this mistake and request that the record is amended to reflect this.
Verdict: False
“In some cases, the benefit bill of a single out-of-work family has amounted to the tax bills of 16 working families put together.”
This claim by the Chancellor caught our eye because of its mix of the amorphous and the precise: on the one hand it is hard to pin down what is meant by “the tax bills of 16 working families”, but on the other, the assertion that some out-of-work families receive 16 times more in benefits than these combined tax receipts seems carefully calculated.
Certainly there have been numerous examples printed in the press in recent times of benefit claimants receiving exorbitant amounts from the state. But whether or not these families have been receiving as much as Mr Osborne suggests depends greatly on the terms of reference used.
According to HM Revenues and Customs (HMRC), the average paid by Britons in income tax in 2009-10 was £5,220. The Treasury therefore gains an average £83,520 from 16 taxpayers.
However in his comparison, Mr Osborne makes reference to “working families” rather than individual taxpayers. The Office for National Statistics (ONS) defines a ‘working household’ as one where all working age adults are in employment. If a similar definition is applied to Mr Osborne’s “working families”, it would encompass at least two adults, meaning that the average return from income tax for 16 such families could be doubled to £167,040.
However when you factor in other forms of taxation, such as VAT, fuel and alcohol duties and  in 2009-10, HMRC received a total of £372.7 billion from 30.6 million taxpayers, which approximates to an average contribution per person of £12,180. Therefore, 16 of these hypothetical ‘average taxpayers’ would therefore contribute £194,880 each year to the Government’s coffers.
Again, if we define a ‘working family’ as a household where two people are employed, this benchmark would rise further to £389,760. To our knowledge, even the most assiduous of red top editors has failed to unearth a family receiving this sort of sum in benefit payments.
Last year it was reported that one family was receiving £147,000 per year in housing benefit. In this example, the family could have claimed a maximum of £3,403 in Job Seekers Allowance and £5,236, meaning that they hypothetically could have received £155,639 in benefits that year.
For Mr Osborne’s figures to add up, we therefore have to assume that he is talking about taxpayers contributing significantly less than the national average. Without confirmation of the specific examples that he is referencing however, it is impossible to completely verify or dismiss this claim.
Verdict: The jury’s out…
“Benefit bills have soared by 45 per cent under the previous government.”
The Chancellor made similar but subtly different claims when announcing the Budget back in June, telling the House of Commons that “total welfare spending has increased from £132 billion ten years ago to £192 billion today. That represents a real terms increase of a staggering 45 per cent.”
Deep within the Budget documentation, the Treasury point to the Public Expenditure Statistical Analysis (PESA) report of 2010 as the source of these claims.
After liaising with the Treasury, we discovered that these figures were calculated by measuring the 2009-10 ‘social protection’ expenditure (£222.5 billion) less that spent on ‘personal social services’ (£30.2 billion), and comparing it with the same figure, in real terms, from a decade previously.
Whilst this adds up, it is worth pausing to examine the semantic transitions that this claim has undergone to get to this point.
Social protection, as defined by PESA, includes a number of payments which may or may not be classed as ‘welfare’ or ‘benefits’, as Mr Osborne has subsequently described them.
The Department for Work and Pensions, which is responsible for administering benefits, produced its own analysis for the Budget, which showed a much smaller rise in benefits payments over the last decade.
According to these figures, there has been a much smaller 17.2 per cent increase in total benefits expenditure over the past decade, with a 19.4 per cent increase evident since Labour began in Government in 1997.
Verdict: The jury’s out…
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