Steve Hughes is a public policy consultant and former Head of Economic and Social Policy at Policy Exchange.
When the Conservative-led coalition took office in 2010 public trust in the welfare system had been falling for years. There was a feeling that what was meant to be a safety net in times of need had morphed into something that encouraged the wrong type of behaviour and that could be abused by too many people. By the time of the 2015 General Election benefit rules, eligibility and payment levels had undergone a dramatic – and often controversial – transformation, contributing billions towards reducing the deficit in the process. From a political perspective it is without doubt that on polling day the Conservatives owned the agenda, with the Labour Party nowhere near convincing people that they were serious about reform. But just eighteen months on from leading the debate, and after some infighting and big policy u-turns, it is now time for the Tories to renew their narrative and policy approach on welfare.
For a new approach to be successful requires an understanding of how the old approach came unstuck. The problems started in January 2014 when George Osborne made a speech, arguing that a further £12 billion of welfare savings were needed to support deficit reduction. He reasoned that if savings were not found from welfare it would mean either raising taxes or deeper cuts to the budgets of already under strain government departments. The £12 billion figure found its way into the Conservative manifesto, but with no detail of how the savings would be achieved other than making clear that pensioner benefits would be protected.
The lack of specifics about what the £12 billion would entail was subject to some criticism at the time. Some may have believed that this didn’t matter, as those defending the commitment sounded tough on welfare and the public generally like politicians sounding tough on welfare. But it did eventually matter, as there is much greater nuance to public opinion. The British Social Attitudes Survey tells us that there is support for less spending on unemployment benefits and a belief that working couples without children should look after themselves rather than have their wages topped-up by the state. When it comes to benefits for disabled people who cannot work and for working parents on low incomes there is public support for more spending.
Yet even these statements cannot be taken at face value. While some are straightforward value judgements, the average person answering these questions is, understandably, unlikely to have a complete grasp of the ins and outs of benefit expenditure. Indeed, other polling tells us that there is a tendency to vastly overestimate how much is spent on unemployment benefits and how many claims are fraudulent. In short, the great majority of people are unlikely to have understood what £12 billion worth of cuts meant in practice for the parts of the welfare system that they had sympathy for.
The unexpected Conservative majority meant that the detail of the £12 billion commitment had to be revealed in the Budget that followed the election. Other than the big savings realised from simply freezing the level of benefit payments, it was the low-income wage top-ups of Tax Credits and their successor scheme, Universal Credit, that were going to take the biggest hit. It resulted in some Conservative backbenchers rebelling and the Lords rejecting the changes. The Tax Credit part of the policy was reversed four months later.
History would repeat itself around Budget 2016, this time with an attempt to save £4 billion through changing how a disability benefit was awarded. Some backbenchers again openly criticised the move, which was this time accompanied by the resignation of Iain Duncan Smith as Secretary of State. This policy was also scrapped. There was plenty of opposition to the Government’s remaining welfare reforms, but attention in the summer turned to the EU referendum and fallout from the leave vote. Now, we are beginning to see focus return to welfare.
There has certainly been speculation about how welfare policy will feature in tomorrow’s Autumn Statement. Some have argued that it should be used to reverse planned cuts to Universal Credit – a legacy of that £12 billion commitment – as they are not compatible with the new Prime Minister’s support for those people who are “just about managing”. Others have pointed to the fact that the Treasury’s cap on welfare expenditure, imposed only a couple of years ago, has been breached since November 2015. With it being made clear that there will be no new cuts to benefits and that the public finances are deteriorating, it does not seem like the Chancellor has much room to address these issues.
It is important to say here that the welfare reforms made between David Cameron taking office and Theresa May taking over had many successes, many failures and the jury is still out on some. The point is that from 2014 onwards the mood of the public and of some Conservative MPs on welfare reform was badly misjudged and led to some significant mistakes. The new Secretary of State for Work and Pensions, Damian Green, has begun to outline the direction that he wants his department to go in. Over the coming weeks and months he has a big opportunity to set out a new narrative and new policy direction on welfare.
A new narrative should have as its mantra that the UK’s welfare system is a two-way street. Jobseeker’s Allowance claimants should make the maximum effort to find work, but the Government should ensure that there is sufficient investment in high quality, personalised employment support to help them. A person making contributions throughout their working life should expect a decent State Pension in retirement, but they should also accept that the Government cannot continue to promise an unsustainable uprating of it. Recipients of welfare are asked to adapt to changes to the rules and eligibility of their payments, but the Government should do better at consulting, testing, communicating and implementing the changes that it wants to make. There are many more examples.
A new approach to policy should focus upon managing costs, enhanced devolution of responsibility and greater use of technology. There should be no more new cuts to the working-age welfare budget without addressing the cost of ring-fenced pensioner benefits. Whilst there are obvious political difficulties, changing eligibility for future claimants rather than current ones is an option worth looking at. Devolution of powers to local authorities has massive potential to improve how welfare is being delivered. One example is a wider roll-out of youth employment centres that operate under local control to support young people into work. Technology can revolutionise public services and the Government should look at how it can help deliver policy innovations. For instance, online accounts could be used to realise a 21st Century version of contributory welfare.
Welfare reform is made harder if some in your own party and the public lose faith in the rationale for doing it, but a coherent new approach that both can buy into should make it much easier.