Welfare reform is on the political agenda in a way not seen in over a decade.
According to his article in the Manchester Evening News, David Cameron wants to save the public the £5.2 billion per year lost in fraud and maladministration. Off the cuff, he has also proposed some measures which, if pursued, could substantially redefine the relationship between the welfare state and its beneficiaries: ending permanent council tenancies, for example.
This comes after the recent publication of a Department of Work and Pensions Command Paper, 21st Century Welfare, in which the Secretary of State Ian Duncan Smith champions a ‘tapered relief system’ – a single benefit payment which would be slowly withdrawn over time as the recipient moves into work.
In so doing, IDS plans to combat the two problems of the myriad complexity of existing benefits (51 separate benefits are currently available) and the allegation that the present system includes significant disincentives to work. The proposed reform, claims Smith, would mean the system would be simpler for claimants to navigate, cheaper for government to administer, provide fewer opportunities for fraudulent claims and reduce the punitively high effective tax rates that can result from several benefits being withdrawn at once if someone moves into employment.
Something of a consensus is developing behind the proposals. Those on the right support it because it promotes independence and encourages people into work, those on the left because it takes the moral imperative to support the vulnerable seriously.
Inevitably, there are problems: first, the solution is philosophically neat, but fails to take into account the huge variety of situations which result in ‘worklessness’, not all of which can be solved by removing disincentives. There are people who don’t work for want of a decent education, those that can’t work because of the external economic reasons (i.e., they simply can’t get a job – see this graphic on the spread of unemployment), there are some people who aren’t ‘in work’ because they’re doing something hugely important that no-one calls work (carers, for example).
Second, the proposal, which will require anything between a £3-7 billion upfront investment in the will have to avoid the fate of Frank Field’s Green Paper of 1998. Ensuring work pays by dealing effective tax rates can only really mean one of two things – cutting back on out of work benefits, or increasing in work benefits. It is surprising enough that IDS is pursuing the later, but the theme of 2010 is austerity. How will the Treasury be persuaded to stump up the extra cash?
Third, historical examples of the state ensuring a minimum income for those in working poverty – which is effectively what the tapered relief system would do – have been difficult. ‘Bread scales’ like the Speenhamland system in the eighteenth century allowed employers to continue to pay low wages, while the parish would make up the difference between pay and a level of basic subsistence. Employers took the support of the state for the very poor as a sign that they had been absolved of their responsibility to pay a just wage. As Karl Polanyi argued in The Great Transformation, the system was a defensive measure on the part of a society engaged in socially disruptive forms of production – it simply allowed bad practice to flourish.
For a variety of practical reasons, the welfare system clearly needs reform. The principle of the dignity of work suggests that those who are able should be gainfully employed, the principle of charity that those who are unable to work are properly provided for. But that people can be in full time employment and still in need of state support is a deep injustice, and the fact that the welfare system is being asked to bear the burden of ‘making work pay’ should ring the alarm bells.
The welfare system, not matter how well designed, could still be used to throw a veil of modesty over the most egregious effects of market capitalism.
Paul Bickley is Senior Researcher at Theos.
