The Welfare State We're In, The website of the book by James Bartholomew
November 11, 2010
Thursday
The importance of Clegg and other notes on the welfare white paper

Notes on the press conference, the Commons debate and a few other things:

It was very noticeable that Iain Duncan Smith gave special thanks to Nick Clegg for his support. He said that it would have been more difficult to get to this point - bringing in this welfare reform bill - without Mr Clegg's support.

Also striking was the way that the Labour shadow secretary of state suggested that Iain Duncan Smith would have liked to have a tax and benefits withdrawal rate of 55% but had had to settle for 65% because of lack of support by George Osborne. Duncan Smith of course replied that it was Labour who left the cupboard bare. The implication, of course, was that yes, in an ideal world Duncan Smith would have liked the rate to be 55%.

The changes being announced really put an end to the Beveridge concept of a welfare system. His idea was an insurance system - rather like that of many Friendly Societies. He wanted a flat rate contribution for a flat rate benefit. Simples, as the advertisement says. He intended and expected that means-tested benefits not dependent on contributions would be a minor part of the system since everyone would be covered by their insurance contributions. Well, that idea has been gradually disassembled. Now it is even less important.

The 65% rate does not include certain passport benefits like free school meals. If you are unemployed your child gets them. If you are employed, he or she does not. No taper. So the incentives to work are not quite as good as they at first appear. I believe the passport benefits might have been kept because some others in government - perhaps No 10 - wanted 'no losers'.

On the same tack, in his commons speech (see previous posting) Duncan Smith refers to top rates of tax and benefit withdrawal rates that are much higher: over 95% before the reforms and over 76% after. It is not clear to me at the moment how these are calculated. Those figures certainly make the reforms appear desperately needed.

It was noticeable that three or more Labour MPs congratulated Duncan Smith on his Commons statement. It was as if much of the political elite knew in its heart that this sort of reform was needed. Twenty years ago, these reforms would have caused an uproar from Labour. Now the whole attitude to benefits has changed. There is much more awareness of how they have gone wrong. Duncan Smith said in his press conference: "as a political class we have got this wrong for too long".

I spoke to Polly Toynbee of the Guardian after the press conference. She commented that the reforms were 'incremental' and 'technical' and that the tax credits introduced by Gordon Brown had gone a long way to make work pay. She said the old taper was 70% and the new one was 65%. A good change but not a revolution. I think this is unfair. For a start, the new taper includes housing benefit - a major issue. I don't think the taper she is referring to did. Also there were different kinds of taper for different benefits. I doubt that the overall rate was 70%. There are also the host of other reforms being brought in at the same time, including the restrictions on housing benefit and the work placements. The hard truth is that Labour did some incremental changes but took 13 years doing them. Duncan Smith has not gone as far as I would like, but he has covered a huge area and made work pay more clearly than for a generation - all worked out in about six months. It is a vastly better performance.

I remember one Labour secretary of state for work and pensions saying on the radio that the big difficulty was getting money out of the Treasury to help make work pay. Duncan Smith appears to have had precisely that difficulty. But through his determination and his preparation before taking office, he has done better on this than anyone before. One can only hope that if or when money gets easier, the government will go further to make work pay.

In the house, Duncan Smith spoke approvingly of the drive to increase the personal allowance. This helps make work pay for the low paid in a very direct and easy way without any paperwork. It was what Labour ignored, preferring complicated tax credits. Incresing the personal allowance is very much a Liberal Democrate policy and it is interesing to hear Duncan Smith speak approvingly of it.

I spoke to David Freud, one of the DWP ministers, after the press conference. I used to work with him at the Financial Times many years ago. He said 'We've got your book. We're doing what you said aren't we?'. Well, as he well knows, that is an oversimplification, to put it mildly. The book was not prescriptive, for a start. But it is nice to think it might have had some influence.

Duncan Smith is the man of the moment. But as Tolstoy argued in War and Peace, even the Napoleonic wars were not really just the work of one man. Those wars depended on many others - perhaps a great mass of the population. Similarly, these welfare reforms derive from many people. The change in attitude on the Labour side is crucial. So too among the Lib Dems. Peter Lilley was at the beginning end of the change in attitudes. And the public, though such things as opinion polls and in phone-ins, have shown a changed attitude. The background was right.

Here is a link to the white paper: http://www.dwp.gov.uk/docs/universal-credit-full-document.pdf

Posted by James Bartholomew • Indexed in Reform • Welfare benefits

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