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Bookmark and ShareAndy Wimbush is nef‘s Communications Assistant and blogmaster.

I am trying to make this a regular Friday thing…

The good news:

  • The billions we currently spend on unemployment benefits could be used more effectively help deprived communities weather the recession. So says nef‘s latest report Benefits that work.
  • Breaking up the banks is no longer a marginal idea: it seems that everyone from Andy Haldane at the Bank of England to Alistair Darling now thinks that breaking up the mega-banks would be sensible. nef called for this earlier in the year in our report I.O.U.K.
  • Age of Stupid director Franny Armstrong was ‘saved’ from a mugging by Boris Johnson . The Mayor of London just so happened to be cycling past as Franny was being intimidated by a group of teenagers wielding an iron bar. Saving a green activist while riding a bike has got to be the act of eco-friendly Good Samaritanism par excellence. Let’s hope Franny managed to get Boris to sign London up to 10:10.

The bad news:

  • Climate change could lead to a new era of global insecurity, so say the top military figures who make up the Military Advisory Council at the Institute for Environmental Security in the Netherlands (via New Scientist).
  • Ed Miliband has admitted that the chances of a global deal at COP15 in Copenhagen is increasingly unlikely. The Minister for Climate Change and Energy said that a full treaty could be up to a year away.
  • Lord Griffiths perpetuates the myth that inequality is somehow ‘good’ for us. The Conservative peer – who is also the vice-chair of investment bank Goldman Sachs – tried to justify the bonus culture of the City by telling an audience that “inequality is a way of achieving greater opportunity and prosperity for all“. Richard Wilkinson, of the Equality Trust, provided a rebuttal, while nef‘s own research in The Great Transition shows that inequality could cost the UK alone up to £4.5 trillion over the next forty years, because of the social problems it causes.

Bookmark and ShareAleksi Knuutila is a researcher in the Valuing What Matters programme at nef

Some commentators believe that the worst of the current recession is behind us. Whether this is true or not, we can be sure that its full social consequences have not yet been felt. People are still losing their work, and unemployment may well rise to 3 million next year. Drastic cuts in spending may make this harmful trend worse.

As previous nef research expected, the recession increases the gap between wealthy and poor areas. Recent research by the Joseph Rowntree Foundation the communities that already had highest unemployment have suffered the largest losses of jobs. These areas don’t suffer only from a lack of employment. The downturn has also forced over half of local authorities to reduce their staff and cuts services. The poorest neighbourhoods suffer from both job losses and a cut in the services that support them.

In the form of benefit payments, billions of pounds are spent on these areas. These resources succeed in keeping their recipients out of the gutter. At the same time, benefit payments constrain claimants’ possibilities to improve their lives. Our social security functions more like a trap than a ladder, and is fuelling the deprivation of poor communities.

Welfare reform has for long focused on making work pay. nef’s new report, Benefits That Work, shows that purely financial calculations don’t capture what matters to the unemployed. Benefit claimants are above all concerned that accepting work will make their life more insecure. Benefits systems are function like an on-off switch; either you are on it or not. This makes it insensitive to the fickle and uncertain nature of today’s labour market. Taking up a job with irregular hours and no employment protection risks leaving people penniless.

The benefits spend could be channelled so that it allows people to improve their own communities while helping them to move towards employment. Benefits That Work presents an Social Return on Investment (SROI) analysis of an innovative scheme to make the happen. With the Community Allowance, community organizations would be able to hire unemployed people to work with them for the good of their area. The participants would have their benefits secured for a year, and would be able to earn a small, capped income on top of them. Protecting the current level of benefits would allow the claimants, with the support from the community organization, to focus their efforts on moving towards the labour market.

What makes the Community Allowance effective is that it plays up the strengths of the claimants. Many employment schemes offer subsidized work placements for the unemployed. They often leave the participants feeling stigmatized, as if they would not be good enough for the work without government footing the bill. In contrast, Community Allowance engages the unemployed in work that they are best placed to perform, due to their close connections with the neighbourhood or their capacity to act as positive role models.

Our SROI analysis of the Community Allowance shows that for each £1 invested into it, £10 of social value is created. This extra value is received by the participants, their communities and families. The state is likely to recuperate more than the resources necessary to run the scheme. Channelling the benefits spend so that it works for the good of deprived will take the edge off the ruin of the downturn.

Bookmark and ShareVeronika Thiel is a researcher and project manager on nef’s Access to Finance team.

Job Centre

The government announced today that single parents on benefits with children over one year are expected to find work or else face sanctions.

This is a move that beggars belief, for several reasons.

Firstly, couples on benefits with children are not expected to find work until their children are seven. This smacks of discrimination against lone parents – are we still making a moral judgment based on the marital status of a parent?

Secondly, this move makes rather blatant assumptions about the availability of good-quality childcare in every part of the UK, something that is clearly not the case. Where are parents supposed to leave their children?

Thirdly, starting to work costs money upfront. Not only for childcare when the parent is working, but also for childcare when going to interviews. For suitable clothing. For transport to and from work. For lunches that need to be bought when at work. Who covers the cost for that?

Fourthly – and most importantly – the minimum wage does not provide a living wage, especially not when seeking good childcare. Already, millions of people on low incomes or benefits take out revolving loans with doorstep lenders at interest rates of up to 186% to cover basic costs of living. Forcing lone parents into work without ensuring that their wages can cover increased costs of good quality child care will only add to their debt load.

We finally need to start a discussion on living wages and living benefits, and of stable jobs worth doing for a living. Furthermore, it needs to be acknowledged that many low-skill jobs are very unstable, and many companies operate a hire- and fire policy. In a current recession, this will only become more common place. Full employment is now more unattainable than ever. Building skills and confidence as the Government proposes to do is a good thing, but it is not the only prerequisite of securing a stable job – the availability of jobs is a rather more important factor.

The Government needs to provide far more carrots than a vague promise that only those who will not take steps to return to work will be sanctioned. I can’t imagine that the level of trust in the Government is very high among benefit recipients, and applying the stick is certainly not going to change this.

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nef employees blog in their personal capacity. The opinions expressed here do not necessarily reflect those of the new economics foundation.