Identifying the right problem

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There was a report of an opinion poll in the i paper a few days ago on the issue of paying benefits to young people who are not in employment, education or training. The article itself is behind a paywall, but the data is available in Table 53 in this report. The headline figure was that 56% of those questioned believed that all benefits should be stopped for such people. As one might expect, the numbers vary between supporters of different parties, with those supporting parties of ‘the right’ most likely to support the proposition. Asked in isolation, it’s easy to see why so many might support that (why, the implication is, should anyone not seen to be ‘contributing’ expect to be supported?), but I wonder whether the implications have been thought through by those responding to the survey.

For people in that ‘NEET’ category, benefits are likely to be their only direct source of income; removing it implies that those 56% of respondents are quite happy for the young people to go without food, clothing or shelter. In reality, of course, many (but by no means all) in that category will be living with their parents, who would presumably be expected to continue paying the living costs for their adult offspring. The key economic fact to note, though, is that the withdrawal of benefits from anyone means that someone, somewhere, has their own spending power reduced. Maybe it’s the individuals directly affected, maybe it’s their parents who are obliged to divert money from their own discretionary expenditure. In economic terms, it matters little to the basic conclusion: somebody’s spending power would be reduced, with a consequent reduction in overall demand. In fact, there’s a more general point which this underlines – if a government cuts spending or increases taxation in pursuit of the alleged nirvana of a balanced budget, someone, somewhere must always have their spending power reduced.

The political question is that the ‘who’ and the ‘where’ are ultimately choices being made by politicians. The claims that ‘benefits’ or ‘pensions’ are unaffordable are not the result of some iron-clad law of economics; they are the direct result of political choices as to who should pay for the entirely arbitrary need to pursue a balanced budget. Worse, they are framed in such a way as to encourage us to believe that governments have no choice but to act to reduce such expenditure, and that the impact of doing so will be felt by ‘someone else’. But if we ask a rather different question, it’s easy enough to expose the lie. That question is, in simple terms, ‘are there enough resources in the UK to provide every citizen with a decent standard of living?’ The answer, unquestionably, is ‘yes, of course there are’. That we ‘choose’ not to use those resources to achieve that aim is down to ideology, not economics.

None of that, of course, provides an answer to the problem of so-called NEETs – but then neither does simply cutting their benefits. The only ‘problem’ that that solves is how we continue to ensure that resources are concentrated in fewer and fewer hands. But that concentration of wealth is the much bigger economic problem.