How to spring the benefits trap

16 September 2009

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Fraser Nelson reports on how a revamp of the benefits system could finally end the scourge of Britain’s mass and hidden unemployment

Changing these incentives is difficult, politically. It means taking welfare away from some people, at a time of rising unemployment — and facing the protests. This, the cost of fixing the system, is one that has been seen as too high by successive governments. Tony Blair was one of many new prime ministers who vowed to change the system. When disabled people chained themselves to the railings of the House of Commons, he gave up. The penalties for failing to reform welfare are heartbreakingly weak.

But this time, momentum is building. The lunacy of the welfare trap is now becoming a national scandal — and one important enough to justify a three-part prime-time television documentary. A Commons committee has also called for benefit simplification. The Centre for Policy Studies made its own devastating report in June. The CSJ’s contribution could well give this cause critical mass. All it requires is for the Conservatives to make dynamic benefits the centrepiece of what is likely to be a new Department of Social Justice.

As this agenda fits so perfectly with Mr Cameron’s narrative of a broken society, it is hard to see any opposition. But momentum is everything — and there is alarmingly little sign of that Theresa May, who succeeded the workaholic Chris Grayling as shadow welfare secretary. She is thought to regard dynamic benefit modelling as an interesting idea, to be examined once in government. This, again, hints at the lack of urgency which has sunk all previous attempts to reform.

Friends of Tony Blair say that one of his biggest regrets is not tackling welfare at the very start of his premiership, when he had political capital to spend. The same will be true for Mr Cameron. His shift can be a simple one: all benefits will be merged. They should be judged by how well they incentivise extra work. The basic equation — more work means more money — should be as true for the poor as it is for the rich. It is not so much economics as a basic issue of fairness.