Make work pay – for all

Stephen Brien

13 March 2010

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Stephen Brien explains how Britain’s welfare system must change

Welfare dependency is one of the most pernicious problems facing modern Britain and its deprived communities. When William Beveridge was planning the welfare state, he spoke about the giant evil of idleness: not just a waste of economic potential, but of human potential too.

The tragedy is that his welfare system has gone on to incubate the very problem it was designed to eradicate. It was intended to support those who were unable to work, or for whom there were no jobs. But the benefits system now actively discourages people from taking a job, or working more hours. For millions, welfare dependency is now a way of life. This destruction of aspiration has never been morally acceptable. Moreover, it is now financially unaffordable.

To tackle this problem, we must ask: what is the root cause? Why did a million people spend all of the New Labour years on benefits of some kind? The answer, quite simply, is that we paid them to. If welfare pays more than work, why work? Welfare payments, augmented by housing benefits, represent a much more secure cash-flow than slogging it out on the minimum wage. Yet this traps claimants and robs them of the dignity of working. It deprives children of an employed role model. And the rest of society must shoulder the financial burden. What is remarkable, however, is that there are some simple reforms we can undertake to release them from this trap. Here are four.

Cut through the paperwork

Britain’s benefits system is dizzyingly complex. There are, in total, 52 different benefits available, with different payment rates, earnings disregards, withdrawal rates, capital limits, conditions and overlapping premiums. Right now, the government is unable to say how these all interact in the benefits market and how they discourage people from moving into the labour market. There is, for instance, a widely held (and partially justified) belief that taking a job puts your home at risk. Analysing these perverse incentives, in black-and-white and regularly, should be the first step towards combating them.

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