I appeared - briefly - on BBC Radio 5 yesterday lunchtime to talk about the new government's plans for welfare reform. Yvette Cooper, the shadow secretary of state, came on to criticise the plans.
Prior to the interview, there was precious little I could glean from the Queen's Speech so I went back to the paper, Dynamic Benefits, produced by Iain Duncan Smith's think tank, the Centre for Social Justice, last year.
It does seem that part of the plan is include housing benefit inside the framework of the two benefits which would come to exist. If that is right, the plan is more ambitious than I had first thought and has greater potential for always giving people a good incentive to get work. It is also clear that those who did the work on it did a lot of detailed calculations.
There are basically two ways to make work pay. One is to reduce benefits for those who don't work. The other is to increase benefits for those who do work. The latter is - for political if not humanitarian reasons - the one that Duncan Smith opted for. In a word, he plans to take away less of the benefits when people get jobs. This way, it will always be financially worthwhile to work.
The trouble is that, in the short term at least, this costs a lot of money. In Dynamic Benefits, Duncan Smith's think tank suggested the extra cost would be £3.6bn offset by increased tax receipts of £0.9bn. The paper argued that there would, however, be savings in government expenditure in the form of reduced need for policing, lower NHS costs and reduced costs of administration in the Department of Work and Pensions. Unfortunately the savings he looked forward to will take time to come through whereas the increased cost of the benefits will be immediate.
With our current financial problems, will Duncan Smith be able to persuade the rest of those in the government to give him the money for the initial cost? I hope so.
Posted by James Bartholomew • Indexed in Reform • Welfare benefits
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Mr Skinner -
"I find it hard to see how benefit cuts can be avoided."
Precisely. And this is the political case which needs to be made, however distasteful some may find it.
Incidentally, without even touching existing levels of JSA etc, it could be made clear that from a date, say, nine months hence, no additional benefits of any kind will be forthcoming for any children beyond a first child.
This deals with cases like that of the lady, whom I heard on the radio a couple of days ago, pointing out that - if she was compelled to seek work when her child turned 5, she would simply give birth again. The future of such children is pretty much mapped out in that they will probably become welfare clients themselves. Think of the long term savings (not only monetary) in breaking this cycle...
Posted by: Danbo at May 28, 2010 01:14 PM
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Another way to make work pay is to eliminate taxes on work.
The Lib Dem commitment to increase personal allowances to £10,000 is better than the current c. £6,000, but there is something very wrong with a tax system where people who do not earn enough to live on are being taxed.
The transition is clearly difficult, but I doubt we should be taxing anyone earning under £20,000 pa.
If people were to be enabled to provide for their own pensions, health, and children's education before having to pay for others', the personal tax allowance would have to be higher still.
The simple truth is that the larger the welfare state, the harder it is to live independently, and the less worthwhile it is to work: which in turn causes the welfare state to grow.
With the current financial crisis, caused in large part by the demands of the welfare state, we have pretty well reached the end of the road.
Unless the government continues with large-scale deficit financing, I find it hard to see how benefit cuts can be avoided.
Posted by: Tim Skinner at May 26, 2010 11:18 AM