The changing outlook for incomes, benefits and your local park

Afternoon all,

I’ve used up all my wordcount covering developments around the welfare changes in our something for the weekend feature, so let’s keep this short.

Given it’s been such a febrile week, we thought we’d pick some nice uncontroversial topics– HS2, small-boat crossings and park-bashing. If you need me, I’ll be draped over the office fan bracing for another heatwave (and yes they are hotter in London actually).

Have a great weekend,

Ruth
Chief Executive
Resolution Foundation

Park life. Park season is truly upon us, and this read asks the big question – are our parks fairly distributed? Access to green space is absolutely an important marker of quality of life and we’ve found that more than one-in-ten children living in a poor household had no nearby outdoor space in which to play. But this paper finds – somewhat surprisingly – that deprived areas are more likely to have a higher rate of parks per person. It also develops a new typology of parks, flagging that more deprived areas see a surplus of sport-focused parks and a dearth of biodiversity parks. Maybe ensuring fair park provision by type should be added to the national to do list… not at the top though?

Watching the crossings. This interesting paper considers the impact of the most visible kind of irregular migration – small boat crossings.While they account for less than 2 per cent of immigration to the UK, so aren’t shaping our demographics, the paper finds they *are* having an out sized impact on our attitudes. A one thousand person increase in small boat crossings leads to a 0.027 standard deviation decline in support for all forms of immigration in the following days. Conversely, the paper also finds that heightened negative attitudes to migration  are least pronounced when it comes to asylum seekers (the group most likely to arrive on small boats), and largest towards (legally immigrating) foreign students.

Homework helpers. Some parents like to work from home for their own sake (personally not a fan of the multi-tasking), but does it help their kids as well? This research examines the familial impact of WFH in the Netherlands, analysing how children’s test scores are affected. Children with WFH parents scored 9 per cent of a standard deviation higher than those who didn’t. The effects were driven by children in the middle of the achievement distribution, who were 4 percentage points more likely to qualify for the academic secondary school track (as opposed to the vocational track) when parents WFH. This creates a boost to kids with no cost to government budgets – and with parents that worked from home maintaining the same hours and income. Good outcomes all round! But a crucial caveat: the benefits disproportionately affected children with higher-educated parents in higher-income families.

The slow decay of Britain. In case you missed it, the Government coughed up another £25.3bn for HS2 – over double the £10.2bn announced for upgrades to the rest of the country’s rail network. In response, this blog dubs HS2 a mascot of the ‘national festival of incompetence’ whenever we attempt to deliver new public infrastructure projects. Originally intended to address the lack of rail capacity between London and Northern cities, its purpose and design became confused by the economic case focused on reducing travel times. British exceptionalism didn’t help – as we decided to try and make our high-speed line significantly faster with more frequent trains than almost every other country. And of course there’s the infamous £120m ‘bat tunnel’ to protect 300 bats (more on that here). As it stands, we’re looking at expected costs of around £100 billion to build a train line from London to Birmingham…

Something for the weekend? | Weighing the benefits

We thought we’d get you clued up on the benefits bill ahead of the vote next week…oh well, best laid plans and all that. Still, here’s what you need to know.

First, the context. We’ve had claims that the welfare bill is rising exponentially. Does anyone remember when the PM announced defence spending increases based on nominal numbers and we all piled in criticising? Let’s be clear – the total welfare bill is growing in nominal terms but that should hardly come as a surprise. It does also grow in real terms over the next five years, though by less than total departmental spending. And it’s roughly flat as a share of GDP (slightly falling).

Within that growth, spending on pensioners and health-related benefits is offset by falls in other working-age benefits. And there are worrying trends in the take-up of and low off-flows from health-related benefits which are a combination of a quite long-running trend in higher claims for disability benefit and post-pandemic spike in claims for incapacity benefit.

Second, let’s be clear about the substance of the concessions. On Personal Independence Payments, the Government has stuck to the proposal to change the scoring system to make eligibility harder, but this change will now not apply to existing claimants. That avoids average loses of £4,500 a year for 370,000 existing claimants. On Universal Credit, the Government was already treating new and existing claimants very differently – with new claimants due to be paid just over half the rate given to existing ones. Previously, new claimants were set to continue to receive their entitlement in cash terms, but now will have  “their incomes fully protected in real terms”. As I hit “send” on this email, it’s not yet clear whether that means that their UC-health payments will grow with inflation, or that their overall benefit income will grow with inflation. Because the standard rate of UC is set to go up by more than inflation, the second would be less generous. With me? It’s almost like policy announcements are best accompanied by costings….but for now you are stuck with ours. As an aside, the commitment to bring employment support forward, if it is finally coming with actual extra money, is very welcome.

Meanwhile, the public’s enthusiasm for spending more on disability benefits is at a record low, but there is little support for spending less. The most expensive legacy of the last few months is probably not the temporary cost of the concessions but the risk that serious reform of a system that needs to change is not tackled. The UK is getting sicker and our disability benefits bill has grown faster than comparable countries post-pandemic. As we move forward, we need a serious examination of the drivers of – and the solutions to – both our health and our benefits bill.

Chart of the week

The Government’s welfare reforms have touched a nerve because the support is vital for people’s living standards. But what is the wider outlook for household incomes? Chart of the Week, taken from our latest Living Standards Outlook, shows that the central outlook for a typical household is…not great. A 1 per cent rise, in fact, over the next four years – less than the income growth they’ve experienced over the past 12 months. The outlook varies a lot by household type. Pensioners are set to do better than families with kids while households with above average incomes are set to do better than those with below average ones. But the end of the decade is a long way away, and much can change. An optimistic outlook, in which pay growth maintains its strong recent performance and employment returns to pre-pandemic levels, boosts living standards across the board. Add in some astute policy interventions – scrapping the two-child limit, funded via extending the personal tax threshold freeze – and you’re approaching respectable, shared income growth of 2 per cent across the population. The outlook may be bleak, but the future can be brightened…