Charlotte Pickles is Senior Research Director at Reform.
The promise to cut a further £12 billion from the welfare bill has taken on almost mythical status. Speculation over where these savings would come from echoed through the election campaign. No answer was forthcoming and this remains the case. Perhaps this is because there is no easy answer. With pensioners protected, the Work and Pensions Secretary is left little room for manoeuvre. With the Prime Minister ruling out changes to Child Benefit, it is nigh on impossible.
Perhaps when the £12 billion target was set the expectation was that another coalition would lead to a watered down figure. The emphatic Conservative victory has meant that any reduction will be seen as a u-turn, but it is one the Government must make. The public understood and supported the reforms of the last Parliament. They were about building a welfare state that was affordable and legitimate in the eyes of the taxpayer, and one that supported people to move into work. The narrative was fairness and making work pay. It was a moral stance that the majority of citizens bought into.
The Government will lose this moral authority if their cuts damage the welfare system’s basic ability to help people in need. The polling is clear: whilst people support reducing benefits for unemployed people, they do not support reducing the benefits paid to disabled people unable to work or people working on very low incomes. The Government must take heed and modify its approach.
Further welfare reform is indeed essential and savings can be made, but the approach must be strategic, with social justice at its heart. Abolishing Child Benefit and compensating low income families through Universal Credit would save almost £5 billion. This would be a principled stance that ensured taxpayers monies went to those in need. The Prime Minister should concede the point and break his promise to protect this middle class benefit. Likewise, taxing Disability Living Allowance and its replacement Personal Independence Payment would save almost £1 billion.
Together these changes would deliver a healthy down-payment on the £12 billion. As Reform argues in a new paper out today, the focus for further savings must be on tackling the drivers of demand. Benefit freezes are not the answer. Average benefit awards are already low, and have been falling; eroding them further risks pushing people into poverty.
Instead, the Government should seek to make significant and sustainable reductions in the bills for three key benefits: Housing Benefit, Tax Credits and out of work sickness benefits. Spending on Housing Benefit has increased by 50 per cent in a decade, not because it is supporting more people but because it is paying for much more expensive private sector rents. This is an inefficient use of taxpayers’ money. Rather than trying to extend Right to Buy to Housing Associations, the Government must get on with building more houses. Reducing the £30 billion Tax Credit bill means tackling persistent low pay and helping people progress in work.
Addressing the £14 billion cost of Employment and Support Allowance (ESA) means reducing the 2.4 million caseload. That requires a radical overhaul of the benefit. The Government should start by reducing the rate of the Work Related Activity Group within ESA to that of Jobseeker’s Allowance (JSA). Set 40 per cent higher than JSA, it is incentivising people to ‘fail’ the Work Capability Assessment. They should also address the inadequate levels of conditionality applied to claimants. If adhering to a treatment plan and managing a health condition would enable a claimant to move from benefits into work then the State should expect them to comply. If they don’t there should be repercussions. There is a wealth of evidence that work is good for health and wellbeing; trapping people on benefits is bad for them and the country.
Ministers naturally want to act fast, taking advantage of the moral authority gained by the election win. But the Government will lose this moral authority if their cuts are seen as harsh and arbitrary. Welfare reform is a must but it needs thought and compassion rather than machismo.