Benefiting from Recession


More people heading here over the next few months

On Tuesday, in a response to the Bank of England’s Inflation Report, Tony Dolphin at IPPR added the organisation’s voice to the increasing number of left leaning think tanks who are advocating an increase in benefits as a targeted measure to tackle the recession. The argument was rather robustly put by Will Hutton et al in a Work Foundation research paper back in November as they looked forward to a deep recession in 2009.

Both the Work Foundation and IPPR agree that increasing benefits in the short run would alleviate the burden on some of the poorest people in our society while also adding some much needed consumer spending. Their suggestions aren’t without merit and, as Hutton points out, such a move would also target a group that is more likely to spend than save.

Could the government risk such a move in the April budget? It certainly wouldn’t sit easily with their commitment in the recent White Paper to moving people off benefits, into work and increasing conditionality on claimants. However, as the recession deepens and benefit claimants find themselves in a market with greater competition and Job Centres struggle to place long-term claimants in work, the government’s employment target will become more and more unrealistic; the background on which the White Paper was written has now completely altered.

Businesses who are still recruiting will have ample talent to choose from. And the private companies that have willingly worked with government to place benefits claimants in work may well fall away as their business becomes less profitable.

It’s unlikely that the government would look to raise benefits in April, not least because it would be politically unpalatable. At a time when savers are suffering, “rewards” for “undeserving” benefits claimants would not go down well. However, as Hutton pointed out in November, any policy to target the recession will have to be timely, targeted and temporary. What’s more likely to come in April will be a move to alleviate the impact on savers; responding to a core concern of some traditional Labour voters who feel that the low interest rates have squeezed them. This isn’t likely to meet any of Hutton’s criteria and will probably not provide the increase in consumer spending that is a necessary part of the recovery.



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4 Responses to “Benefiting from Recession”

  1. Increasing benefits abroad | Downturn Depot Says:

    […] Benefiting from Recession […]

  2. Is it safe to wash out a paintbrush in a kitchen sink? Says:

    […] Benefiting from Recession « Frank Owen’s Paintbrush […]

  3. Stimulate me fiscally baby Says:

    Giving out more generous benefits would almost certainly boost consumer spending but would that necessarily all go straight back into the UK economy? Young people these days seem to buy everything from abroad over the internet. Rather than relying on more consumer spending perhaps a more appropriate measure would be a fiscal stimulus in the shape of some MASSIVE infrastructure programmes. Every town in Britain should have a bridge and a lighthouse in it – even if it doesn’t need one.

  4. voteredgogreen Says:

    I like the sentiment, though would prefer if the infrastructure projects WERE useful – we’re not exactly a country brimming with excellent roads/rail links/power stations etc at the moment.
    I’ll refer you to my earlier post about the benefits of public spending in a recession (, ‘cos I’m like that.
    Also, I don’t want to know whether it *is* safe to wash out a paintbrush in a kitchen sink – but Yahoo keeps telling me I should in these comments. Annoying.

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