YES, WE CHEAT THE SYSTEM, BUT GIVE US HELP TO STOP

FIRST PUBLISHED BY: THE OBSERVER

PARENTS WHO ADMIT THAT THEY CLAIM BENEFITS WHILE DOING CASH-IN-HAND JOBS, BUT INSIST 'NEED RATHER THAN GREED' IS THEIR MOTIVATION

'I was telling my kids this morning: you always get what you need but, this year, you mightn't get what you want,' says 33-year-old single mother Kelly. And what do her seven- and nine-year-old boys want for Christmas? 'An Xbox 360, PlayStation 3 - everything every other kid wants,' she says.

Kelly (not her real name) is one of a group of people who have been invited to talk about their attitudes towards work, money and debt at the old Canning Town Public Hall, home to Community Links, a local charity based in the east London borough of Newham.

Christmas this year will prove a tricky exercise in managing kids' expectations for any cash-strapped parents. The difference for Kelly and others at the meeting is that they work in the 'informal economy'. In other words, they are paid 'cash in hand' while claiming state support; to put it bluntly, they are 'benefit cheats'.

Until a couple of weeks ago, you didn't have to look hard in Newham to appreciate that society sees such people as social pariahs. 'We're closing in,' said a poster outside the hall, one of 160 such adverts in the borough. If you crossed the road to the Abbey cash machine, another poster reminded the people of Newham how to shop their benefit-cheat neighbours.

Newham was one of 40 local authorities that recently piloted a 'hard-hitting' £6m advertising campaign by the Department for Work and Pensions. The posters feature an image of a 'target' framing an appropriately furtive 'benefit thief' and inviting the public to ring a 'hotline'. A couple of weeks ago, most of the posters in Newham came down.

A DWP spokesman reckons 600 calls are made every day to the hotline. 'We are investing £6m in this campaign as part of our ongoing efforts to reduce benefit fraud,' he says. Benefit thieves stole an estimated £800m from public funds.' But this figure represents just 0.7 per cent of the total benefits budget, says Community Links.

The campaign will now go nationwide. Work and Pensions Secretary has promised lie-detector tests and the loss of benefits for those on the fiddle. Last week's white paper said income support would be scrapped and claimants moved to jobseekers' allowance. Jobseekers, including single parents with children over seven, will have to take active steps to find work before they are paid benefits.

In Newham, Kelly readily admits she plays the system, but insists that 'need, not greed' is her motivation. She has signed on for the past eight years and has had a string of cash-in-hand jobs, from bar work to collecting money for a loan company. She left the loan company last summer, where she was earning £100 to £150 a week.

She has had salaried work before and says she would like nothing more than to have a proper job again, but she admits: 'The idea of coming off benefits now scares the hell out me. I don't know how I'd survive.' The two big stumbling blocks for her are losing housing benefit, which covers her £97 a week rent, and finding a job with the flexibility to allow for childcare.

Kelly receives about £160 a week in income support and child benefit (as well as housing and Council Tax benefit). Can a family of three live on that? 'Yes, but only if you are prepared literally not to have a life,' she says. 'The fact is my kids want swimming lessons, they want to do their dancing and boxing after school.'

Then there are Kelly's debts. She has 'maxed out' on credit cards and owes £9,000. Earlier this year, she took out a social loan for £700, administered by Jobcentre Plus, for furniture and a new TV, costing £30 a week from her income support. 'This is the worst it's ever been. I've hit rock bottom,' she says.

Tracy, a 31-year-old friend of Kelly's with two children, connects cash-in-hand work with debt. As she puts it: 'You get your money to live from the social and then the cash-in-hand pays the debts you are trying to clear.'

The east London meeting was organised by the newly launched Informal Economy Campaign (www.neednotgreed.org.uk), which is run by Community Links and supported by a coalition of 50 groups, including the TUC and Oxfam. Its aim is to improve the image of a section of the public demonised by press and politicians alike.

The campaign points to research that suggests 12.3 per cent of gross domestic product, around £120bn, is generated by informal economic activity. 'Working cash-in-hand is a survival mechanism, taking people out of absolute poverty but trapping them in relative poverty. It is a way for families to get by,' says campaign co-ordinator Maeve McGoldrick. 'The purpose of the campaign isn't to say that cash-in-hand work is OK, but that we need greater understanding as to why people do it, and base the creation of a more effective welfare system on this. Being on benefits should not in itself be a barrier to work and cash-in-hand work should not be the only way to escape absolute poverty. Many people aren't making money out of it. It's to pay off debt collectors, prevent evictions and provide for unbudgeted expense.'

The campaign is seeking to reform the system so people can make a gradual transition from benefits to formal employment, and aims to help those working cash-in-hand to formalise their work. It argues that prosecution of those acting out of need will ultimately increase debt and poverty levels, forcing people to work cash-in-hand again. 'The benefits system set-up is like an on-and-off switch,' argues McGoldrick. 'You are either in work or you're on benefits and the transition is terrifying. People fear their families will fall deeper into poverty and, when in work, that their safety net is gone. The Jobcentre is no longer able to support you, but you are still struggling.'

The coalition argues that benefit laws act as a disincentive in a number of specific ways: the application of the 'earnings disregard', allowing people to try small bits of work and earn small amounts of money without losing benefits (limited to only £5 a week for single people); the limit on the number of hours claimants can work; and the loss of state support such as housing benefit. It wants a tapered withdrawal of benefits.

It is an approach endorsed by Oxfam. The welfare state must 'reflect the world as it is today, rather than harking back to a time of jobs for life', says Kate Wareing, the charity's director for UK poverty. Many available jobs are 'low-paid, short-term and part-time' and for many people - such as carers and those with poor health - full-time, long-term work isn't possible. 'The welfare system has to change so that people can move from benefits into the type of jobs that are available,' she says. 'So it helps people combine part-time work with some benefit payments if necessary.' For those people who are unable to work, 'an adequate financial safety net must be a basic entitlement - not a luxury,' she adds.

So what does working cash-in-hand mean to those that do it? 'Survival,' says Kelly. 'I do it for the everyday basics.'

Tracy agrees, but also says she loves working. 'It drives me mad when people talk about single mums living on benefits. Well, I don't. I get off my arse and go to work.' Her employer has 'formalised' her job since October, so Tracy now goes through the books. She believes that that is a direct response to the DWP campaign: 'You never know who is going to grass you up.' As a result, she is no longer paid her rent or Council Tax benefit. 'Roughly speaking, I am making £230 a week, but last week I only got £180.' The loss of benefits means that there is little financial incentive for working: 'They don't make it worth your while.'

What does she make of the adverts? 'Don't just come after us; help us. Find out why we're doing this. We are doing it because we don't have enough money to live on.'

She points out that her 11-year-old son wears adult sizes. 'My daughter's trainers are £20 a pair and his are £50. If I have to buy them a pair of trainers and I'm living off £130 a week, that's going to leave me with £50.'

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