UK welfare benefits fall short of international standards

15 Jun 2017, by Hannah Reed in Economics

Within hours of the General Election, the government was held to account on the international stage for the failings of the UK welfare system – with worker reps from Sweden, France, Australia, the International Transport Federation all calling on the UK government to bring UK provision into line with international minimum standards.

The International Labour Organisation’s Committee of Experts (an independent body of legal experts who assess whether governments adhere to international labour standards) has concluded the UK’s system falls well short of minimum international standards – notably ILO Convention 102 on social security. This was despite the UK having been a signatory to this Convention for more than 60 years.

The ILO Experts’ findings were debated by governments, unions and employers from across the world in the Committee on the Application of Standards which met as part of the International Labour Conference in Geneva.

During this debate, the TUC made clear that UK unions have always supported the principle that employment should provide the primary route out of poverty for people of working age. But an effective welfare system is vital to ensure those who are unable to work – whether through sickness, unemployment or under-employment – are protected from poverty and guaranteed a decent standard of living.

This is a fundamental right for working people and the hallmark of a modern and civilised society. So the UK’s shortcomings in this area are a matter of serious concern.

The TUC then outlined four areas of particular concern.

Firstly, current UK social security benefits do not provide an adequate safety net for the most vulnerable in society. The ILO Experts found the UK failed to meet “even the lowest EUROSTAT at-risk-of-poverty threshold of 40 per cent of median equivalized income in the United Kingdom and in the European Union as a whole.”

These findings are supported by the latest official UK statistics, which show that 70 per cent of working age adults in workless families are in poverty.

The value of out-of-work benefits in the UK has also failed to keep pace with earnings. In the 1970s, unemployment benefits were worth around 20 per cent of average earnings. Their value has now fallen to less than 15 per cent. This means that people on benefits are often cannot afford to cover the essentials for modern life and to participate fully in society.

Secondly, although the report focuses on out-of-work benefits, the UK has record levels of in-work poverty. More than 7 million people, including 2.6 million children, face poverty despite being in a working family. This means that a majority – 55 per cent – of those in poverty are in working households.

Thirdly, in contrast with the spirit and aims of Convention 102, no attempt is being made in the UK to improve social security provision. In fact, government proposals mean that the level of protection is set to be cut in future years, with many working age benefit rates due to be frozen until 2020 and support for families with children set to be reduced.

Universal Credit will be significantly less generous than existing tax credits, with cuts to the proposed level of ‘work allowances’ (the amount that can be earned before benefits start to be tapered away) set to leave families significantly worse off. A single parent working full time on the UK National Minimum Wage could be up to £2,600 worse off a year, while a couple with children will lose up to £1,000.

It is therefore not surprising that the Institute of Fiscal Studies has projected that the UK is likely to experience a rise in absolute child poverty in future years.

Fourthly, the government has failed to adapt the social security system in response to changes in the UK labour market. In the last decade the UK has experienced rapid growth in insecure forms of work, be it zero-hours contracts, agency working or the emergence of online platform work, which is often referred to as the gig economy. Those in insecure work are significantly more likely to qualify for in-work benefits due to their low rates of pay. But, due to the fluctuating nature of their working hours, such workers face serious difficulties accessing benefits.

The current UK tax system creates incentives for employers to increase their reliance on forms of insecure work to cut costs by avoiding national insurance contributions. If employers employ staff for fewer than 20 hours a week on the National Living Wage they will be exempt from paying this element of taxation. Employers can also reduce their tax liabilities by employing individuals on a self-employed basis or even by misclassifying workers as self-employed.

The TUC called on the UK government to take all necessary steps to comply with international standards, including increasing the level of benefits. The government should – in consultation with the national social partners – carry out a review of existing social security arrangements with a view to:

alleviating poverty levels

assessing whether the existing rules incentivise the use of insecure work

ensuring all working people benefit from effective social protection

Following the debate, the ILO Committee on the Application of Standards called on the government to submit additional information so that the ILO Experts can review how the Convention is applied in the UK.