Why rail against “benefits cheats” when the system encourages them?

The right might complain about the welfare state, but the left don’t want to talk about it at all.

It's surprising how much of what is considered unsayable in polite policy circles is common currency among academics. It's well known, for instance, that our welfare state model no longer fits. Politicians expend all that energy turning a screw here, removing a leg there - and, all the while, they're trying to reshape an elephant into a bird. If only academics would speak to ordinary people and politicians could be more honest, we might get somewhere.

In the first week of March, what academics call the medicalisation of unemployment burst into the newspapers with reports about the disproportionately high rates of prescription of antidepressants in the north of England. It isn't news that unemployment is higher in the north and that being unemployed is depressing: seeing your industry wrecked and being unable to discern any prospects for your children is miserable. Nor is it news that depression entitles you to incapacity benefit (IB) or Employment and Support Allowance - or that there are two to three times as many IB claimants in the north as there are in the south.

A study by Christina Beatty and Stephen Fothergill at Sheffield Hallam University seven years ago revealed that there were 12 times as many sickness benefits claimants in relation to the population in one impoverished district in County Durham than in a wealthy district in Hampshire. In total, 68 districts in England, Scotland and Wales had at least a tenth of the working-age population claiming sickness benefits. Not one of these was in London or south-east, south-west or eastern England.

Life's other side

Until 2008, when the system was changed, IB paid as much as a third more than Jobseeker's Allowance (JSA). Because it was not means-tested, a man with a pension from a previous employer and a working wife was able to claim it and didn't have to sign on every two weeks or pretend to look for work. No wonder the numbers claiming sickness benefits rose from 600,000 to 2.7 million in two decades, at a time of improving health, while politicians claimed to have "solved" unemployment.

As Beatty and Fothergill noted, "Almost certainly, what can be observed in the rise in the number of long-term sickness claimants is, to a great extent, the interaction of a difficult labour market and the UK social security system." In the dead job markets of former industrial areas, people who were harder to place, such as older workers, women with young children or those with slight disabilities, were shoved on to IB.

All the while, Westminster continued to operate in a fantasy world where it believed that, as long as it handed out enough "skills" (for which, read "pieces of paper") or introduced enough "incentives" (such as an interview with a halfwit at a jobcentre), people would get jobs and come off benefits. But, in straitened economic circumstances, people develop alternative economies. The medicalisation of unemployment is one of these. A study on a deprived area of Sheffield, conducted by Massimiliano Mollona, noted: "As a consequence of the rise of sickness claimants vis-à-vis the industrial unemployed in Sheffield, de-industrialisation is increasingly discussed as a medical issue rather than as an issue of industrial policy."

Mollona, an anthropologist at Goldsmiths, University of London, spent 18 months employed in a workshop in a former industrial area and discovered a thriving alternative local economy based on unreported, cash-in-hand work, prostitution, bartering, trade in stolen goods and the smuggling of spirits, tobacco and drugs. He calculated the average family income to be £17,000 a year - far higher than the £4,000 recorded in official statistics. One in four people was "informally" self-employed.

You can affect outrage or call this initiative. Where people don't have enough money - no one can survive on £3,403.40 JSA a year - they develop alternative economies. You can see this happening among the hard-pressed middle classes, too: think of cash-in-hand childcare, the manipulation of tax credits and even online exchange systems such as Freecycle. (The rich have always had alternative economies of insider dealing and tax avoidance.)

Real reform

Iain Duncan Smith's welfare reforms should be supported because they try to bring the unemployed closer to the "real" economy, where doing paid work is good for your family income, not damaging to it. The only productive effort currently recognised by the benefits system is the production of children: a lone parent with two children, £600-a-month rent and £1,000 to pay in council tax receives £18,500 a year.

Censorious admonitions from Westminster about "abusing the system" are meaningless when the system invites it. Many live in daily financial chaos. Another study, by Nick Emmel and Kathryn Hughes at the University of Leeds, noted that those in low-income communities no longer notice the national economic cycle because they have been stuck in recession for decades. Listen to one of the participants: "You know, it's budgeting [that] gets you in the nick, because . . . you have to pay your TV licence and you have to pay your water and your gas and then summat changes and then you get a deduction and then summat else happens entirely after that and it just muddles, messes with your head."

Another family in that study was financially devastated when an abusive father named his eldest daughter as next of kin, meaning that she became liable for his £2,000 funeral costs and had to go to moneylenders to pay for it. Two years later, the family was still paying. In circumstances such as these, getting yourself on to benefits (or having another baby to avoid being forced to look for work) can look like sensible financial planning. But the right considers it cheating, while the left deems it unsayable.

This article first appeared in the 14 March 2011 issue of the New Statesman, Who owns the world?