Matthew Sinclair is Director of The TaxPayers’ Alliance.
We recently released a report from Chris Philp – an award-winning entrepreneur and Conservative candidate in Hampstead and Kilburn at the last election – Work for the Dole. Chris recommended that the Government follow the example of other countries where robust work requirements for welfare recipients have been introduced to great success, including the United States, Canada and Australia.
Then he set out a detailed plan for how that could be accomplished here in Britain. This morning, the Daily Mail reports that the Government is planning to do exactly that.
The report is worth reading if you want to find out more. But there are three key reasons why we think this is a vitally important idea and why I think the Government is keen to pick it up.
The first is that we have a more concrete base of evidence that what the Americans and Canadians call workfare, what the Australians call work for the dole, works. By a remarkable quirk of fortune – documented in Jim Manzi’s book Uncontrolled – the American workfare schemes were established with proper, experimental tests of their effectiveness. There is an evidence base for this policy that just does not exist in many other areas where we have to argue about their effectiveness after the fact, without results from a controlled experiment.
The second is that it offers a way to break what is known as the “iron triangle” in welfare reform. You normally have to choose two out of the following three objectives: directly raise the incomes of the poor, increase the employment of the poor and reduce welfare spending. Taxpayers rightly do not want to pay more and that means attempts to improve the incentive to work – which means allowing people to keep more of their benefits as their earnings increase – also means reducing the level of benefits. That is why – even when the Universal Credit has been introduced – total marginal withdrawal rates will still be frighteningly high. For every pound they earn, people will still only get to keep around 30p.
Because work for the dole attacks the attractiveness of staying at home – by requiring people to go out and work for their benefits whether they find a job or not – it improves the incentive to work without cutting the level of benefits. Breaking the iron triangle and improving the incentive for people to take up new jobs is an exciting prospect if we want to ensure that everyone benefits from the economic recovery quietly gaining steam.
Finally, we think that the principle is a good one and could restore trust in the benefit system. Taxpayers will know that benefits are not a free ride and fraudsters will not be able to claim benefits while working in the black economy.
Under the system proposed in Chris’s report, there would also be a significant contributory element. Those with a longer history of National Insurance contributions would be given a longer grace period before they were required to work.
If the Government can build on the excellent work that Iain Duncan Smith has already done at the Department for Work and Pensions and give some of the schemes that have so far produced underwhelming results the teeth they need, the results could be remarkable: savings for taxpayers; opportunities for the unemployed; and a benefits system that people can trust again.
P.S. If you are coming to the Conservative Party Conference and would like to hear more, join us at the Freedom Zone on Monday at 2.45pm, where Chris and other experts in this area like Peter Lilley MP will discuss our proposals.