NCPA - National Center for Policy Analysis

British Welfare Reform May Encourage More Dependency

June 8, 1999

"The days of automatic right to benefit will go," claims British Prime Minister Tony Blair, regarding his government's new welfare proposals. "If you can work, you should work."

However, critics say Blair's proposals are rooted in a pervasive welfare culture that limits the chances for meaningful reform.

  • Some 30 million of Britain's 59 million residents currently receive some kind of state assistance, and most people view such benefits as a right, not a privilege.
  • Blair has pledged to cut $1.6 billion a year from the $158.9 billion a year welfare bill by eradicating waste and fraud, and $1.2 billion a year from disability benefits programs by tightening eligibility requirements and cutting benefits to higher-income recipients.

In October 1999, the government plans to replace the Family Credit , an entitlement program, with the Working Families Tax Credit, a refundable tax credit. The new program is supposed to "make work pay" -- however, benefits are even more generous:

  • Under the old program, recipients lost 70 cents of benefits for every dollar earned above a maximum allowable; under the new program, they will lose only 55 cents for each additional dollar earned.
  • Child benefits are increased by nearly $4.80, to $23 a week for the eldest child, with $15.35 per subsequent child.
  • Child care tax credits will reimburse 70 percent of child care costs up to $160 a week for families with one child and $240 a week for two or more children; furthermore, the qualifying age for children receiving the credit is increased to 15.
  • The definition of "full-time" employment for eligibility is only 16 hours per week, unchanged from the current program.

The likely impact of these generous credits is that many recipients will receive more benefits than they earn, especially single parents. Critics say this encourages family breakdown, and creates a disincentive to improve skills or work more.

Source: David G. Green, "An End to Welfare Rights: the Rediscovery of Independence," Choice in Welfare No. 49, March 199, IEA Health and Welfare Unit, Institute of Economic Affairs, 2 Lord North Street, London SW1P 3LB; and Sarah Lyall, "Blair's Counterculture Plan for Welfare: Get Work," New York Times, May 23, 1999.

 

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