What would you do?

Last week the Joseph Rowntree foundation published ‘need, not greed’, a report which analysed the reasons why people take informal cash in hand work. The findings make fascinating reading for those familiar with the one dimensional government approach of enforcement and cracking down on benefit fraud. Every week I meet people who want to find legitimate work, but are frustrated by the benefits and tax system.

Andrea (20) had been out of work for a few months after personal problems before she found herself a 16 hour a week job in a hairdressers, which earned £88 per week. She wants to get back into full time work, but doesn’t yet feel she has the confidence to do so. The government estimates that she needs £45.50 a week to live on and therefore stops paying her Job Seeker’s Allowance. In addition, two thirds of the money above £45.50 a week that she earns is deducted from her Housing Benefit claim. She is £14.36 a week better off. However, because her hours and her pay vary from week to week she has to inform the Job Centre and the Housing Benefit department every time she gets paid. Sometimes she is not paid on time by her employers and she has to trust that she will not get caught out by inefficient, impersonal, unhelpful benefits administration that might delay the payments she needs for rent and living expenses.

Is it any wonder that people take on cash in hand work, whilst staying on benefits? If Andrea had taken cash in hand she would be £88 a week better off without taking the risk of being without money for weeks if her job stopped and she struggled to ensure she got the right benefit payments. There are numerous non-financial advantages to working part time rather than staying on benefits. It raises self esteem, helps people to get back into the job market, makes it easier to access privately rented housing and crucially, averts boredom and a downward spiral into lethargy and depression. When people ask me about cash in hand work I advise them that legally they must declare their earnings, but I would much rather they worked cash in hand than not at all. There are extra problems to cash in hand work over legal work– you are more liable to be exploited, be paid less than the minimum wage or not get paid at all, but in the context of the immediate minute to minute financial needs of most people on benefits these risks are worth taking.

The government is right that you can survive on the Job Seeker’s rate of £57.50 a week for over 25s, with the help of Housing Benefit and Council Tax Benefit. But imagine not being able to afford birthday cards and presents for your family; not being able to treat yourself once in a while without knowing that it will put you into debt at the end of the month; not being able to travel to visit your grandma for want of what is often just a few pounds. People don’t just want to survive, they want to live.

This is not an argument for increasing benefit rates. We need to encourage, equip and support people back into work in as many ways as possible (education, training, preparing CVs, fare to job interviews etc etc) and a higher weekly allowance will not achieve that. Neither would it reduce the amount of work in the informal shadow economy. We need to make a bigger financial differentiation between benefits and work, through significantly increasing the minimum wage and allowing a greater ‘run-on’ of benefits for the first few months when someone finds work. We also need an efficient and accurately run benefits administration. The ‘faceless bureaucrats’ which Gordon Brown and Oliver Letwin fight to cull have an important job to do in ending Benefit dependency.

The informal cash in hand economy can be an insecure and difficult financial environment, but it can be a lifesaver for those on benefits and I rarely feel the need to reach for the phone number of the government’s Benefits Fraud Hotline.


Name and some of Andrea's details have been changed.