Why benefit sanctions could end up costing the taxpayer more

Sanctions push people into insecure, badly-paid jobs that leave them back on welfare soon afterwards.

The welfare system is now tougher than ever. Figures out today show there were half a million sanctions against Jobseeker’s Allowance (JSA) claimants between 22 October 2012 and June 2013.

Sanctions and conditions in the benefits system that are clearly communicated and fairly applied make an important contribution to a well-functioning welfare-to-work system. But they must go hand in hand with measures to support people into good, sustainable jobs. Together these actions can promote behaviour that is in the interests of claimants and taxpayers.

But JRF’s systematic review of the international evidence on the impact of sanctions shows that in practice they often create perverse effects. These can cause severe hardship and create higher costs in the long-term. Evidence from the US shows that sanctions can be an effective tool for getting people off benefits, but this is partly because people drop out of the system altogether. This may reduce the welfare bill in the short-term but can cause destitution and cost the public dear in other ways.

Evidence from Europe shows the use of sanctions can increase people moving into work, but it tends to be lower-paid, insecure work, which sees people quickly back on benefits again. This is because the threat or use of sanctions makes people take poorer jobs than if they had been allowed to wait for better opportunities. JRF is conducting a review of the impact of welfare sanctions, which will cast more light on this in the future.

New targets for jobcentres encourage them to focus on keeping people in work and helping them progress to better-paid jobs and move off in-work benefits; this is exactly what all the evidence says they should be doing. But it seems sanctions are not being used to support this. Rather, they undermine it by pushing more people into insecure, badly-paid, dead-end jobs. 

The welfare system as a whole needs to be refocused to concentrate on getting people into work that they can sustain and that will allow them to increase their hours and pay to a point where they no longer need the state to top up their earnings. At the moment, bits of it have been reformed to achieve this, while other bits still have the old approach of 'get a job, any job!' Let’s get the whole system pulling in the same direction.

Helen Barnard is Poverty Research Manager at the Joseph Rowntree Foundation

People enter the Jobcentre Plus office on January 18, 2012 in Bath. Photograph: Getty Images.

Helen Barnard is a Policy and Research Manager for the Joseph Rowntree Foundation.

Getty Images.
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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.