A report that should influence welfare reform for years to come
Peter Hoskin 2:32pm
Iain Duncan Smith's Centre for Social Justice has released a very important report today, and one which should influence the welfare debate for years to come. At around 350 pages, it's a weighty enough tome, but I'd recommend that CoffeeHousers give it a flick through.
Its subject is how to fix a benefits system which incentivises worklessness. At the moment, unemployed people are eligible for so many benefits – there are 51 in total – that they can accumulate an income which rivals, or sometimes even exceeds, the wage they'd get by taking a job. And even if they could get more money in work, the current benefits system still acts as a disincentive. With so many claims, conditions and complexities, plenty of unemployed people simply don't know what they stand to gain or lose from hopping into the labour market. They approach their benefit portfolios like a house of cards: if you pull one card out, then you could bring everything else collapsing down with it. So, many just don't bother.
This problem was brought into sharp relief for me when I visited a private welfare-to-work provider in one of the country's most deprived local authorities, Tower Hamlets, last week. The managers there come across a range of what they call "barriers to work" - problems like drug addiction and poor education, which stand in the way of claimants getting back into work. But one told me that the "biggest barrier of all" is the benefits system itself. As he put it:
"I've been in this industry for most of my working life now, and, for me, the saddest thing is the benefits trap: 'I'm better off on benefits. At the moment, I get £150 every two weeks, get my rent paid, get numerous other add-on benefits. If I go to work, yes, I might get the same amount of money I get now. But now I get it without lifting a finger - so why should I work?'"
In this company's case, the solution was to place more emphasis on the non-financial benefits of having a job: the friendships you can accumulate, the opportunities you'll have further down the line, that kind of thing. And it works: their success rate is considerably higher than the state-run job centres. But the benefits trap remains a massive constraint for these workfare providers to operate under. They'd have far more success, you suspect, if they could be more vocal about the financial benefits too.
As we approach 3 million people unemployed, and double that number on out-of-work benefits, it's an absolute priority for the next government to fix this perverse system. They can – and should – bring the private sector into welfare provision more and more, but that's not going to have the effect it could if the benefits trap still remains. Currently, though, the Lib Dems are the only party to pay any real attention to the issue; their proposal is to introduce a "single working-age benefit" to reduce some of the complexity. The government and the Tories still hold radical benefit simplification as an "aim," but one which can be reserved for "after the election". When I asked one Tory why they're holding back for now, the answer came: "It's a matter of putting in the work". Hm, it hardly inspires confidence.
And Iain Duncan Smith? His report puts forward a "dynamic" benefits system intended to make work pay. Fraser has more on it in tomorrow's issue of the magazine, but, for now, let's just hope that it encourages the main parties to debate this crucial issue. As it stands, the government pays people to stay in poverty. That's a moral failure which needs righting.
P.S. Over at his new blog on the Wall Street Journal site, Iain Martin points out that today’s IDS proposals may not "fly" with the Tory leadership because they'll take £3.6 billion to implement, even if they do mean potentially massive savings further down the line. The issue of upfront costs comes up with almost all reform measures – including Michael Gove's Swedish school programme – so the Tories will have to decide which ones they can afford early on in their potential government. Given how much of a drag the current system is on both our economy and public finances, as well as the moral dimension I mention above, benefits reform is certainly something to which David Cameron should devote a great deal of thought.
Previous
Fiona
September 16th, 2009 2:58pm Report this commentover 25 years ago I was caught in the poverty trap where if I worked for more than 16 hours a week I lost 1 pound benefit for every pound I earned - and my housing benefit. so it was effectively a 150% tax on income. I only got out because of family support to get into university. I've never forgotten it. how many others are stuck? I've been out of work for six months in the 20 years since I graduated and paid a fortune in tax - its incedibly short sighted to encourage people to sit on benefits. There has to be an intelligent way to get people earning a wage.
David Lindsay
September 16th, 2009 3:06pm Report this commentIain Duncan Smith is underrated, and was shamefully deposed in a putsch, conducted almost entirely on television, by economically neoliberal and socially liberal foreign policy hawks whose position could not be less conservative on all three points.
IDS has had a significant interest in poverty-related issues for a long time, and is to be congratulated for once again drawing attention to that debate. He has also stated publicly that he doesn't care which party does something about it, so long as it gets done.
Here is a key part of what should be done. All income below national median earnings for full-time work should be tax-free, with a flat rate of income tax thereafter, with no exemptions whatever beyond that personal allowance of national median earnings, and with a unified system called and delivering Social Security in the form of a universal income of half national median earnings.
Brian Sherwood Jones
September 16th, 2009 3:09pm Report this comment3.6 Billion a barrier?
Bankers don't get out of bed for that.
DavidDP
September 16th, 2009 3:09pm Report this comment"The issue of upfront costs comes up with almost all reform measures "
The Fink has made this point repeatedly to Conservative Home and their "Let's cut everything now" agenda.
Ian Walker
September 16th, 2009 3:45pm Report this comment£3.6bn? How's this:
Dear Banks,
We bailed you out when you needed us. Now it's payback time. We've got a £3.6bn programme we need to implement, and you either cough up the money at extremely favourable rates, or we revoke your licenses.
Have a nice day,
Call Me Dave
David
September 16th, 2009 4:25pm Report this commentThere are some savings we cannot afford not to make. The fiscal disaster is not a 1 year or even a 10 year problem. This offers a real chance of moving nearer a balanced budget in years 2,3,4 etc. We cannot afford not to do this, even putting aside the moral arguments. Plus the sheer relief of abolishing 51 benefits, forms, assessments, bureaucracy: how can Tories resist?
strapworld
September 16th, 2009 4:56pm Report this commentOf course it has to be actioned.
Iain Duncan Smith needs to become Secretary of State to implement, in full, this report. The savings will pay back the initial investment and the Conservatives will be able to end the welfare culture created and enhanced by Labour!
Absolute first class report. Anna Raccoon has a especial take on this!
chris as usual
September 16th, 2009 6:31pm Report this commentI am with you on this but don't forget there ARE people who are in need, through no fault of their own, and depend on the state to provide some income to help them, and to go some way to relieve the terrible lifestyles of some of their parents and carers.
Yes, it would be nice if they did not have to depend on the state, but private charity, if that is the alternative (and should it be?) is not so abundant as you may think.
niall
September 16th, 2009 8:32pm Report this commentYes there are people in need, and a minority who are probably vulnerable/incapable, but they should be obvious to a sanguine, simplified system. There are people who are scared - taking work is a risk - the 150% tax punishment of taking new job is scary. This intiative should help them, ease the transition.
It's those people who have been on the brew for 10 years after they 'got a bad back' from picking up the Grattan catelogue a bit quickly that will be hardest. Those who knowingly work the system. The current regime appears not to differentiate between anyone - so it's got to change.
Susan Hill
September 16th, 2009 10:02pm Report this commentBut what is the point of talking about getting people into jobs when there are no jobs
Verity
September 17th, 2009 12:01am Report this commentSusan Hill, yes.
Strapworld, also yes to whatever you said. I remember I agreed with you, but when I tried to refer back, I was greeted with a page of heavy grey with some indecipherable black type. It was something to do with IDS.
I think, without being able to refer back to your comment under this Heath Robinson posting contraption, I intended to agree with you, and IDS should be Home Secretary under the next Conservative Government. One hopes the Government following the dog and pony show currently touring Westminster will be a hung Parliament, which will tend to concentrate people's minds.
Praguetory
September 17th, 2009 2:21am Report this commentIn the future the current A-ZZ of benefits will be seen as an historical aberration.
Peter From Maidstone
September 17th, 2009 8:18am Report this commentIf there are millions of Europeans living and working here temporarily then there are millions of jobs which they are doing, and preventing British people from doing. (I am not blaming them for wishing to take advantage of the socially destructive policy of open immigration we have here). If the numbers were restricted then there would be plenty of jobs for British people. They might not be jobs people always want to do, but as the Scripture teaches - he who does no work shall not eat. There are lots of socially positive meanings which can be linked to 'work'. It need not always mean paid employment, but it does surely exclude doing nothing for your whole life and being paid to do so.
I have been made redundant twice. The first time I was applying even to places like Toys-R-Us because some work was better than no work. Thankfully, the day I was offered a job at Toys-R-Us I was also offered a job by the company I was with for 18 years. Most recently I have been made redundant and have started my own business having taken time to learn new skills.
There are plenty of jobs, but they are filled by people who were not born here, and do not intend to stay here very long.
Aidan
September 17th, 2009 8:51am Report this commentSusan - there are jobs. They may not be well-paid but they exist and they are being done by immigrants. My local coffee bar is managed very competently by a Brazilian lady. Her assistant manager is Indian and the two other staff are French and Portuguese. The salad bar where I go for lunch is managed by a Colombian.
Hysteria
September 17th, 2009 9:37am Report this commentsafety nets - not hammocks.
the fact that temporary immigrant labour fills worthwhile jobs is not the fault of those individuals - but we need to bring that under control and get our own people working again.
Harry B
September 17th, 2009 11:35am Report this commentIDS is absolutely right to pick up on this issue. We had a single mother working for us in sales. She resigned to go to a lower paid job once she started performing because her comission meant that she was earning less than the lower paid job!
Barry Evans`
July 31st, 2010 9:21pm Report this commentDo not be fooled!. IDS like all thatcherites want high unemployment to keep wages down. If he can cut benefits then low pay will look better. He has an unhealthy interest in council house tenants and should firstly consider if some wages are too low and if employers really need to employ people for only a few hours per week. what the economy needs is real jobs paying a wage that people can live off. I agree there are long term unemployed due to the last administration that IDS was invoved in. However we must evaluate if these people are employerble and if the country can afford the training involved to make these people employerble.
Back to top