Right now, we have a rare chance to change Britain. Many of us feel there has been a steady, decline in its culture, behaviour, crime and more besides. This has been accompanied – I would say largely caused – by the growth in welfare dependency. At last there is an opportunity to start reversing all that.

The man who, potentially, could turn our country round is Iain Duncan Smith, the new Secretary of State for Work and Pensions. He is an unusual man. He looks and talks as though he were still in the Guards. But he is the one Tory MP who has, in the years of opposition, dedicatedly studied our ‘broken society’. He has looked at the root causes and developed a plan to make things better.

David Cameron has had the guts to put him in charge of welfare benefits. We all remember that Tony Blair once wanted Frank Field, another keen reformer, to ‘think the unthinkable’ about welfare. But Blair never had the courage to put Frank Field in charge and after a while sacked him even from his junior position. Tony Blair funked it. David Cameron, though, has put a true radical in charge.

Yesterday Duncan Smith explained his plan which is, basically, extremely simple. He wants to make work pay. It is as obvious and commonsensical as that.

You may think, “but surely the Labour government often said it wanted to make work pay so hasn’t that been done already”. In short, no. Some improvements were made. But after 13 years of Labour reforms, plans and schemes, there are still people who, if they decided to work would face a combination of benefit withdrawals and taxation amounting to 95 per cent or more of what they would earn. As Ian Duncan Smith has said, the rich would shout the houses down if they faced a marginal tax rate like that and say it discouraged enterprise. They would be right. Exactly the same applies at the other end of the scale.

How does Duncan Smith intend to make work pay?

He wants to sweep away the complex system of different benefits and perks that have built up over the years and replace them with just two benefits. Doing this will enable him to devise a system in which everybody on benefits – absolutely everybody – would always be better off working – even part time.

When he was working on his plan at the think tank he set up, the Centre for Social Justice, he published a paper called “Dynamic Benefits” which illustrated the idea. He took, for example, the case of a couple with two children. Under the existing system, if one of them were to take a low-paid job, the combination of benefits withdrawal and taxation would amount to 96 per cent of what the worker earned. But under Duncan Smith’s plan, some of the benefits would not be removed, so the family would face a much lower rate of 69 per cent.

You will have noticed that, unfortunately, this costs money in extra benefits. But to make work pay, you need to do one of two things. There is no third way. Either you cut benefits for those who are out of work or you increase benefits for those who take up work. Lowering taxes helps but not enough. The first option of lowering benefits would be politically almost impossible and in some instances unfair. So that leaves the second option of raising benefits. Duncan Smith therefore needs to get some money off the Treasury.

His think tank estimated the cost at £3.6 billion. Obviously this is a terrible time to be going along to the Treasury and asking for money. Duncan Smith has tried to downplay the problem saying that he has found balancing savings he can make. But the savings his plan will make tend to be longer term and the costs would be immediate. John Hutton, a former secretary of State who tried to bring in reforms, said yesterday, “you always end up having a row with the Treasury”.

It is essential that Duncan Smith persuades his colleagues. Even Hutton, a Labour man, has said that Duncan Smith’s plan is “exciting”. A great deal is at stake. If the scheme is put through, suddenly it will be worthwhile for everyone to work – something that has not been true for over 40 years. It would be a revolution, possibly even bearing comparison with the successful welfare revolution in American signed off by President Clinton. His central idea is accompanied by other useful measures such as an insistence that people should be willing to accept work as a condition of getting Jobseekers’ Allowance.

Making work pay, though, is the key thing. The earlier the plan is put in place, the sooner the initial cost will be replaced by savings as more people have good reason to work. They will then come off benefits and start paying taxes. In three years or so, the plan will start saving money instead of costing it. If they get on with it, this reward will happen before the government faces the next election instead of after.

The pluses would not stop there, either. The unemployed are often demoralised and unhappy. Getting more people into work would literally make a significant number of people happier. And when more people see that work pays, then it will become more obvious that getting a good education matters. It will become clearer that having good manners and a good record are important, too – in order to get work. All these things can contribute, as time passes, to a renaissance in the decency and culture of British people. The damage that has occurred in our society could be counter-acted. The change could be the most significant that this government could possibly make. David Cameron’s promise to combat the ‘broken society’ would resonate loudly at last.

The prize in front of us is great indeed. I only pray that the current financial problems and long-standing failure of the Treasury to understand welfare will not prevent us from taking it.

The above is the unedited draft of an article I wrote for the Daily Express yesterday. The Daily Express link is here. Late last night I realised I had phrased the description of the combine benefit withdrawal and tax rates incorrectly. I apologise for this.

Posted by James Bartholomew • Indexed in Reform • Welfare benefits

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