The claimFactFiction2 FactCheck: are benefits rising faster than pay?

Many working-age benefits have risen by 20 per cent since 2007, easily outstripping a 12 per cent rise in private sector pay.
Iain Duncan Smith, work and pensions secretary, 2 January 2013

The background

Just a couple of days after taking on Labour over tax credits, Iain Duncan Smith is attacking the party for their benefits bill.

It has ballooned, he said, which is not acceptable.

The work and pensions secretary said that “many working age benefits” have gone up at an even higher rate than private sector pensions.

Only a couple of days ago, FactCheck took issue with some of his claims.

So what do we make of it this time?

The analysis

The Institute of Fiscal Studies has collated benefits rates from the last 16-odd years, and has split them up into things like jobseekers’ allowance (JSA) and unemployment benefits.

Working age benefits might include something like JSA for a single parent above the age of 18, which is the same as that paid to a single person above 25.

In April 2012, that person would get £71 a week in JSA; in April 2007, it would have been £59.15. That’s an increase of 20 per cent over that period.

In fact, whether it’s JSA for 18-24-year-olds as a whole, for lone parents above the age of 18, or a couple who are both over 18, they’ve all seen, over that period, their weekly earnings go up by 20 per cent.

So how does that compare to private sector pay?

The Office for National Statistics publishes weekly earnings, by sector.Benefits0202 260x300 FactCheck: are benefits rising faster than pay?

In the private sector, between April 2007 to April 2012, average weekly wages went from £420 to £468 – a rise of 11.4 per cent.

So from what Mr Duncan Smith has said, he’s correct – benefits from 2007 have gone up by 20 per cent, and private sector wages by just under 12 per cent. (Click on the graphic to the right to see it full-screen).

However, it’s worth bearing in mind that the period he talks about includes the recession and the credit crunch, when private sector wages were badly hit.

FactCheck went back further, by nine or 10 years or so, to a time before the recession and depressed earnings. Incidentally, this seems to be roughly the way the Labour Party has approached these figures as well.

That found that from April 2003 to April 2012, JSA for a single person above 25 went from £54.65 a week to £71 – up by 30 per cent.

Over the same period, private sector weekly wages rose from £351 in April 2003, to £468 – an increase of 33 per cent. Which is high, but not as high as the pay rise the public sector saw over that period – of 35 per cent, from £355 to £481.

The verdict

Mr Duncan Smith is correct when he says that working age benefits rose at a faster rate than private sector pay over the last five years.

But that’s because private sector pay was badly hit in the credit crunch and recession, not because benefits, which are linked to the Consumer Prices Index (CPI), have seen a sudden rise.

It might be argued that during a recession, it’s right that benefits takes a hit if private sector earnings have also had to suffer.

Good news for governments wanting to cut the benefits bill during the recession, but perhaps not so good for them during a boom.

By Fariha Karim

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