Some of us – including myself, I must admit – thought that David Cameron was just a Tory version of Tony Blair. He could sweet-talk and put on a great look of concern but he was not going to do anything radical or worthwhile. He would just let this country continue to drift. But now, against these expectations, his government has announced something dramatic and important. The welfare benefits system really is going to be reformed.
Governments are always announcing ‘the most radical reform of the welfare state since Beveridge’. It came to seem like an annual event under Labour. But it really is happening this time.
The central idea is that work should always pay. The real shock for some people is the realisation that we have gone through thirty or forty years during which time, for hundreds of thousands of people, work has not been worthwhile. It has been crazy. It has been an embarrassment that this country has managed its affairs so badly.
There have been over 30 benefits and they have had different rates at which they have been withdrawn when someone has taken a job. The plan by Iain Duncan Smith is to bring those benefits into one pool with one withdrawal or ‘taper’ rate. Everyone will know that they will gain financially by working instead of living on benefits.
That is not all. The reforms should be seen as a package. Mr Duncan Smith is creating community work placements for the unemployed. They will have a double effect. They will help and encourage those lacking in confidence and work skills become used to getting up in the morning, getting to work on time and having the satisfaction of contributing . The placements will also make fraud far more difficult because you can’t work for cash on the side and, at the same time, sweep leaves in park for your local council.
The sanctions for not accepting job offers will be increased. If someone refuses job offers three times, he or she will face losing benefits for three years.
A fourth big change will be to involve more private companies and charities to help people into work. Frankly, the Job Centres have often not been very good at this. The idea here is that they will get paid according to results. They won’t just be going through the motions. Most ambitious of all, Duncan Smith is also taking on Housing Benefit. This has long been the elephant in the room. People getting huge Housing Benefit payments could never earn enough to make work pay. This had to be tackled. No government for the past 25 years or so has dared confront this. Iain Duncan Smith has.
Ever since Peter Lilley was the Secretary of State in charge, back in the days when John Major was Prime Minister, there have been attempts to make work pay a bit better than before. Labour ministers continued on the same path. But it was all piecemeal and uncoordinated. Frankly there is not much competition for the title “most radical reform of the welfare system”. This is the first big attempt. It is bold and welcome. This country has shown that after a generation of an appalling welfare system, it is finally ready to do something about it. But the reform still does not go far enough.
Yes, it is good that those who come off benefits and take work will lose no more than 65p out of every pound they earn in tax and withdrawal of benefits. But when Duncan Smith was outside government, he argued that they should lose even less than that: 55p. That would make it much more clearly worthwhile to work – a key factor in ending the mass unemployment we have become accustomed to ever since the early 1970s.
There were hints yesterday on how we came to get to reform that was more modest than Duncan Smith really wanted. Labour suggested that it was George Osborne who had refused to put up the extra money. The criticism was a bit rich coming from the party which emptied the treasury. But the point remains. Even after the reforms, work still won’t be financially rewarding enough to tip many tens of thousands into work. More money needs to be pushed into this and the sooner the better. The one good thing is that, once the new system is up and running, it will be the work of a moment to make work more rewarding still.
The other thing that did not go far enough was the requirement to work in the community. When far more radical change was implemented in America – notably in Wisconsin and New York – people were not given the option to hang around at home. If they could not get a job in the open market, they were given a community job like cleaning or maintaining parks. These were not just short term placements. They had to work and - a day or two every week - they also had to turn up to an office and apply for jobs. There was no scope for working on the side. They had no time. And meanwhile every effort was made to encourage and prepare people into work with support and by using incentivised private and charitable outfits. The effect was dramatic. In America overall, welfare rolls fell by 60pc. If that happened in Britain, unemployment would fall by well over a million. We also have more of a problem than other with hundreds of thousands of children whose parents never get married. That is related to welfare benefits and needs tackling, too.
So, Duncan Smith does deserve congratulations. So does David Cameron for appointing him and at least partly backing him – though it seemed from some remarks yesterday that Nick Clegg might have been just as important in this or more. This is genuinely a radical, important reform. But Britain’s dysfunctional welfare state is still a long way from being fixed.
This is the unedited version of an article which was published in the Daily Express today. The online version is here.
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