‘The newly unemployed face a bigger cut in their living standards in this recession than those who lost their jobs under the previous government’, the TUC said on Wednesday in a call to the government to increase unemployment benefits in next week’s Pre-Budget Report.
The TUC believes that increasing Job Seeker’s Allowance (JSA) would prevent hardship and provide an effective boost to the economy alongside tax cuts.
JSA for a newly unemployed single person over 25 is just £60.50 a week.
The gap between earnings and JSA has increased over the last 30 years because JSA has increased each year in line with price inflation, not earnings.
This means that the newly unemployed will face a bigger drop in their income than in the recessions of the 1980s and 1990s.
If JSA had been increased in line with earnings over the last thirty years, the rate for a single person over twenty-five would now be more than £100 a week.
Increasing it in line with earnings since 1997 would give it a value of £75 a week – £15 more than its current level.
This means that the gap between benefit and earnings has grown by 20% since the Labour government came to power.
An increase in JSA allowances of at least £15 would give real help to the newly unemployed, who face a rapid descent into poverty, and provide a fiscal stimulus the economy desperately needs, the TUC has told the government.
A recent study by the US Congressional Budget Office showed that extending unemployment insurance benefits and increasing food stamps was the most cost-effective way to stimulate the economy.
Current JSA levels are not enough to live on – recent research into minimum income standards has shown that a single working age adult needs an income of at least £153 a week ‘in order to have the opportunities and choices necessary to participate in society’.
The TUC is also calling for an end to JSA rules, introduced in 1996, that require people laid off from a job to which they will be able to return to when conditions improve, to either give up this job after 13 weeks to search for a new position or lose their benefit.
TUC General Secretary Brendan Barber said: ‘Putting more money into ordinary people’s pockets must be part of the response to the recession.
‘Tax cuts have a role, but there is an even stronger case for boosting unemployment benefit.
‘It is the quickest way to stimulate the economy and protects the newly unemployed from a catastrophic fall in their income.
‘Job Seekers Allowance is less than £10 a day.
‘Going from a typical wage down to this poverty income will be a terrible shock for people losing their job through no fault of their own.
‘The gap between benefit and earnings has grown because the government wants to look tough on scroungers.
‘We have never agreed with this approach as it hits those making every effort to find work as hard as anyone who is abusing the system.
‘But with unemployment now climbing every month, there can be no case that poverty level benefits keep unemployment down.
‘The government can pay for this by closing the tax loopholes the super-rich use to avoid paying a fair share of tax.
‘There will be some justice in making many of those who did spectacularly well from the unsustainable asset bubble that has now burst contribute to helping their victims.’
The TUC is also calling on the Chancellor to improve redundancy pay and allow the newly unemployed to keep more redundancy pay before it is liable to tax.
Minimum redundancy pay is worked out by a formula based on how long you have been employed and your weekly pay.
But weekly pay above £330 a week is not counted, even though more than half (53%) the working population earns over £330 a week.
The current limit is just 73% of the average pay of £452.
To make matters worse, workers have no right to any redundancy pay until they have been working for their employer for two years and roughly one worker in three is excluded by this rule (30.6%, according to the Labour Force Survey).
The TUC believes that the statutory weekly limit for calculating redundancy pay should raised to £500 and the service needed to qualify should be cut to one year
The limit above which Statutory Redundancy Pay is taxed should be raised to £50,000.
• The GMB union said on Wednesday that the government needs to make people aware of their legal rights to consultation as the speed of the economic slowdown gathers pace.|
Responding to the rise in the unemployment numbers, Paul Kenny GMB General Secretary said:
‘Employers may be too quick to lay people off through redundancy thereby damaging the skills base of their organisations.
‘If they follow the consultation arrangements, as required by law, they often give trades unions an opportunity to explore real alternatives to redundancy.
GMB was able to do this at JCB. (a reference to the union’s proposal for a £50 a week pay cut to save some jobs – News Line)
‘The government need to make people aware of their rights to consultation as the speed of the slowdown gathers pace.
‘They should also make it harder for employers like JJB Sports to classify each shop as a separate workplace to evade the 90 day consultation requirement when more than 100 redundancies are contemplated.
‘The recent cut in interest rates should help too.
‘The Chancellor is right to spend money to keep people in work rather than spend money on unemployment benefit.
‘He needs to keep the pedal to the metal in terms of spending on regeneration.
‘This is also an ideal economic opportunity for the government to kick start its social housing programme in that unsold blocks of private sector housing should be acquired and added to the social housing stock.’
News Line is for the defence of every job and opposed to wage cuts.
Industries that want to sack workers must be expropriated and nationalised.
We are opposed to wage-cutting as the price for not cutting jobs. Wage-cutting does not save jobs.
In the face of massive price increases, there has to be a trade union price index and a sliding scale of wages.
Every job must be defended and wage cuts rejected.