The Treasury and Downing Street narrative of events is that Iain Duncan Smith produced proposals to reform the Personal Independence Payment (PIP) last Friday; that George Osborne took them on into the Budget; that Duncan Smith – having heard the Budget proposals in Cabinet – was aware of them in advance; that it is a nonsense for him to have resigned over plans that he himself published; that these will, in any event, be reconsidered, so vulnerable people will be protected – and that Duncan Smith’s resignation is less about welfare reform than the EU referendum. The former Work and Pensions Secretary has deliberately picked his moment to hit the embattled Chancellor as hard as possible.
Unsurprisingly, the Duncan Smith story is utterly different.
According to this version, the only reason why the PIP proposals were produced in the first place was because the Treasury insisted on having them – or else having other plans from the Work and Pensions Department to find equivalent savings.
The prime driver for this Treasury demand, according to Duncan Smith’s friends, is the welfare cap – and, more generally, Osborne’s targets. The Budget revealed that the Chancellor will miss his debt target this year. He is in danger of missing his surplus target at the end of this Parliament. And he has already breached his own welfare cap once – last autumn.
With spending for richer older people protected – in other words, NHS spending ring-fenced, the state pension triple locked and free bus passes, TV licences and the winter fuel payment guaranteed – the Chancellor’s only means of not busting that welfare cap twice is to bear down even harder on benefits paid to people who are below state pension age. These include PIP.
Duncan Smith’s friends insist that the PIP proposals – or, to be more specific, the Government response to an earlier consultation about them – invited responses from people who might be affected and from the interest and lobby groups who campaign on disability. They say that Duncan Smith only published them for fear of having other benefit reductions imposed on his department if he didn’t – and that he also spotted the danger of producing firm recommendations before the Budget.
They go on to say that this delicate compomise might have worked had the Treasury – they claim – not aggressively briefed the Daily Telegraph last Friday that the PIP proposals were “hard” rather that “soft” – in other words, that these would definitely find the required £1 billion or so of welfare savings, irrespective of what those affected by the proposal or the lobby and interest groups might say.
They add that Duncan Smith did not endorse this interpretation of the plans in Cabinet, and that Osborne duly ploughed on to mention the PIP savings in his Budget speech on Wednesday, covering his back by referring to Duncan Smith’s authorship of the consultation response the previous Friday.
By that evening, they claim, Osborne realised that a political storm was brewing. He then rang Duncan Smith to try to find a way of calming it. Duncan Smith replied that he had warned against producing any PIP proposals pre-Budget, and complained about the assertive Treasury briefing to the Telegraph the previous Friday. It will not have been the breeziest of conversations.
As Mark Wallace reported on this site on Thursday, Osborne then hinted publicly that the plans might be watered down – or at least was believed to have done so. Nicky Morgan then picked up this ball and ran with it on the BBC’s Question Time that evening. Cue panic in Downing Street and the Treasury. Was that £1 billion saving going to found or not? Which came first – voter opinion (and backbench protest) or deficit reduction? What should the line be?
At this point, Duncan Smith’s friends say, Downing Street made it clear that the saving would somehow be found. And it was this which apparently tipped him into resignation. The core of Duncan Smith’s case is that he strived for a week to square accomodating the Treasury, shielding the Government from a repeat of the tax credits disaster, and striking a balance between finding PIP savings and protecting vulnerable people. And only yesterday did he come to realise that, since the Prime Minister himself is insistent on finding that £1 billion or so, his first aim is incompatible with his second and third. Those friends claim that they have written evidence that Cameron himself ordered the savings in the first place.
So Duncan Smith resigned – furious, too, at being briefed against as responsible for the debacle. Do I hear you say that he should have quit sooner? Perhaps: but then neither of us are Cabinet Ministers struggling to reconcile collective loyalty with personal conviction.
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Osborne, Duncan Smith and Cameron have woven a knotty tapestry between them, but several threads in it shine out clearly even to the most confused.
First, the Chancellor’s need to get the deficit down has a new urgency, given the Office of Budget Responsibility’s new gloom.
Second, with richer retired people relatively protected from reductions in the rate of spending, the welfare axe must fall further on poorer working ones if the welfare cap is not to be breached.
Third – and as this site has long argued – this protection is distorting spending priorities, blighting both economic effiency and social justice, and is ultimately unsustainable.
Something had to give. In the short-term, it has been Duncan Smith. In the medium-term, it may be Osborne, whose future leadership prospects are being harmed by his support for Remain, gathering economic clouds, and the running out of luck and time that eventually overtakes long-serving Chancellors. The resignation also adds to the cocktail of events threatening Cameron’s position even if Remain wins in July: the loss of some two in five Conservative MPs to Leave, the manoeuvrings of Boris Johnson, the departure from Cameron’s inner circle of Michael Gove, and the backing of Brexit by two out of three party members. The longer-term implications for the Party of this cocktail of economic hazard and constitutional difference are baleful.
In my view, Duncan Smith’s resignation was not directly connected with the EU referendum, but there is an indirect link. Among so many Conservative MPs and members, debating Britain’s EU membership is rather like drinking too much alcohol. Cups and mugs are drained, tongues are loosened, old resentments come to the surface, things are said that would have been better unsaid, tempers are lost: in vino veritas. In more normal times, Osborne and Duncan Smith might have lurched on together to the next lamp post, as they have done so often before. But these are not normal times. We are not a happy family.