What are benefits for? Thanks to the residents of both James Turner Street and Downing Street, this is a question that’s tap-dancing across our politics. Are they a vaccine against deadening poverty? Are they an encouragement to work? Are they a reward for all those years of filling in your tax returns? Are they all of these things and more?
The author of our Welfare State, William Beveridge, had very clear ideas about this – so clear, in fact, that they can be summed up in a single sentence. In his report of 1942, he basically advocated that people in work make a flat-rate contribution to a state insurance fund that they, or their families, could then draw on should they ever fall out of work. This was mostly about life’s predictable surprises – illness, old-age, redundancy, that sort of thing – and guarding against them.
But that original blueprint bears little comparison to the multi-story Escherian edifice we have now. To each according to their contribution? Nah. Nowadays, less than half – about 40 per cent – of all benefits expenditure is officially accounted for by contributory benefits. (And, unofficially, the proportion is probably lower than that since, in the words of the Institute for Fiscal Studies, “individuals can be credited with National Insurance Contributions without having actually paid them”.) Instead, our benefits system is a rash of means-tests, cliff-edges and giveaways that Beveridge would barely even recognise, much less support.
Some of this has happened for a very good reason: the Beveridge Report has been outpaced by real-life. He was writing at a time of shorter life-expectancy, when a much greater proportion of the male population was in work, and when more women stayed at home to raise the kids. His system was not created with, say, unemployed lone parents it mind. Nor did it accommodate the sort of means-testing that’s essential for Housing Benefit, on the grounds that this would encourage people to stay poor. Good ol’ William just didn’t plan for the Twenty-first Century.
But today’s benefits sprawl has also been brought on by something much less reasonable: politics. Take the old Invalidity Benefit, which, along with Sickness Benefit, eventually became Incapacity Benefit. The number of people signed up to this benefit more than trebled between 1975 and 1995. Was this due to the Thatcher Governments actively encouraging claimants off the unemployment rolls and on to the sick list? That’s up for debate. But it’s certainly true that Thatcher’s ministers were terrible gatekeepers of this benefit – almost wilfully so. It suited them, in the end, to have lower unemployment numbers, regardless of Beveridge’s wish that the Welfare State be “designed to save [claimants] from habituation to idleness”.
This politicisation of the benefits system was hastened during the New Labour years. Not only did the number people claiming incapacity benefits swell to greater, even more suspect, levels, but there was also Gordon Brown in town. The former Chancellor made himself the master – as was his wont – of the Government’s welfare policy. He extended Tax Credits to the middle classes from his office in the Treasury. Winter Fuel Allowance was handed out to all pensioners, whatever their wealth. Child poverty targets were devised and then gamed. And most of this was to make a single claim on claimants: vote Labour.
When the Coalition first came to power it began to unwind this awful tangle. We all know about Iain Duncan Smith and his Universal Credit, but, in some ways, Chris Grayling’s project to identify Incapacity Benefit claimants who are fit for work was more totemic. This was, admittedly, a reform that had been introduced by Labour’s James Purnell – but Grayling turned it up to eleven, like Spinal Tap. If you were truly unable to work, you could claim the new Employment and Support Allowance. If not, then it’s Jobseeker’s Allowance for you. The resultant decisions may, sadly and predictably, have been wrong in some cases, but this wasn’t a government looking for easy votes. The Coalition, unlike so many governments before it, was willing to increase the unemployment figures in aid of fixing the benefits system.
“Ah,” you say, “but that’s just because they needed to find spending cuts.” And, it’s true, that’s part of it: the Coalition had – and has – to try and contain the £160 billion benefits bill (not including pensions) for the sake of reducing the deficit. But it’s worth noting that not all of their welfare reforms involve the axe. The most important of them all, IDS’s plan to wrap various benefits together to reduce disincentives to work, requires a big, gameshow-style cheque from the Treasury. It may save money once it’s up and running, but that’s beyond the lifetime of this Government. It may even be beyond the lifetimes of your great-great-grandchildren.
But as the Government mines deeper into the benefits budget – another £12 billion after the election, we now know – it exposes more of its own dirty politics. I know I go on about this, but why argue that it’s “difficult to justify” paying Child Benefit to the better off, but retain various benefits for even better off pensioners? Politics, of course. David Cameron made a promise to… oh, you know the story. Once again, electoral considerations have won out.
Of course, all government involves politics, in the sense that policies and priorities are forged out of political belief. But electioneering through the benefits system is something else, something more iniquitous. One way of limiting it would be to put greater emphasis on what’s called the “social value” of a policy. This approach was detailed in a report from the Centre for Social Justice, but IDS put it more concisely in a speech a couple of years ago. “For every pound we spend,” he said, “we should be asking: how does it promote life-change?” In other words, measure the effectiveness of a policy by its outcomes. If benefits are meant to, say, incentivise work, then they should be judged according to that standard.
But this just returns us to the question at the start of this post: what are benefits for? If governments don’t have a clear answer to that question – or, worse, if they think that the answer is “electoral gain” – then we’re not going to get very far.
Which is why I’m increasingly in favour of a full review of the welfare system. This isn’t something I’d normally advocate, as reviews are generally an excuse for prevarication, but it seems so necessary in this case. The original tenets of the Beveridge Report have been eroded, across decades, by social change and cheap politics. It’s about time we had another account of the Giant Evils and how they can be thwarted during a period of spending restraint. What’s the purpose of National Insurance Contributions when we’ve meandered so far from a fully contributory system? What sorts of benefits can, maybe should, be cut? How feasible is widespread means-testing? These are the questions, among others, that a review would deal with.
Okay, when I say it’s “about time” for such a review, it’s probably not exactly the right time. Four years into this Parliament, and with much governmental business yet to be completed, the Coalition won’t be in the mood to return to first principles. But some Government ought to soon. The next election, to the dismay of people I speak to in the welfare trade, is likely to set a new high-water mark for the politicisation of benefits. And when politics meet benefits, a mess is sure to follow.