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Welfare wars

The Chancellor's fight with Ed Balls over welfare is a great thing for the Tories. His fight with Iain Duncan Smith may not be

11 January 2014

9:00 AM

11 January 2014

9:00 AM

George Osborne is refreshingly uninterested in his public image, believing that he will be judged by the success (or otherwise) of his economic policies. So when the Chancellor pops up to give a speech, he spends little time trying to mask his underlying aim — which is usually to sock it to Ed Balls, his opposite number. He is a Chancellor-cum-strategist who weighs every policy for the damage it could inflict upon his opponents. And on the issue of welfare, he sees an opportunity to strike.

Introducing a benefits cap has been the single toughest policy introduced by this coalition government. It is also the most popular with the public, and the Chancellor seems to find this intoxicating. Polls show that even a majority of Labour voters support the general principle: that no family on benefits should receive more than the average British family earns. Osborne once went so far as to cross the floor of the Commons to thank Balls for voting against the reform — the shadow chancellor’s opposition gave him clear political advantage. This week Osborne has said he wants to cut another £12 billion from welfare, and challenged Labour to disagree.

Drawing dividing lines is the basic task of any political strategist, but the cleavage now opening up runs through the heart of the Conservative party. Iain Duncan Smith, who is in charge of welfare reform, is appalled at the Chancellor’s apparent relish in imposing the cuts — uncomfortable for Labour, certainly, but even more uncomfortable for those who are affected. To the Work and Pensions Secretary this is about saving lives, rather than saving money — that is the premise on which the Conservatives’ social justice strategy is founded. But Mr Osborne is making clear he sees the matter in a very different way.

Two excellent books on the coalition shed more light on Tory infighting over welfare. Janan Ganesh, Mr Osborne’s biographer, says the Chancellor worries about Universal Credit, the flagship welfare reform, because the ‘Christian conservatives who hover behind the project’ are ‘total advocates and evangelicals’. In It Together by Matthew d’Ancona reveals that Osborne believes Duncan Smith is ‘engaged in a quasi-religious programme of mass redemption’ and complains that ‘he resists every cut I propose’. That’s presumably why Osborne is now presenting further welfare cuts as a fait accompli.


All this raises questions about the purpose of welfare reform, and the welfare budget. The Chancellor is wrong to think that Duncan Smith flinches at the idea of serious welfare reform. The Work and Pensions Secretary can hardly be accused of lacking gumption: his decision to abolish the spare room subsidy (caricatured by critics as a ‘bedroom tax’) has been freighted with political danger. His plans for Universal Credit, aimed at ending the scandal where the poor face effective tax rates of 95 per cent due to sharp benefit withdrawal, involve a massive government computer programme — which brings expensive missteps, violent turf wars and months of bad headlines.

But Osborne is right in thinking that for Duncan Smith, reform is not primarily a cost-cutting exercise. This is about deciding not to ignore the welfare ghettoes, which grew during Labour’s boom years — and deciding that, even in the age of austerity, the government has time and money to help the poor. It is about rejecting Gordon Brown’s approach, which was to ignore those trapped in benefits, and instead rely on immigrants to grow the economy. It has fallen to the modern Conservative party to adopt a new approach.

Or so it seemed. But with every speech the Chancellor makes on welfare, the social justice agenda fades further into the background. Even David Cameron seems to be losing interest in it. Once, he spoke eloquently about how he was just as concerned about tax rates for the poor as high tax rates for the rich. When Universal Credit was drawn up, the Treasury decided that the maximum effective tax rate for the poor would be 65 per cent — not a figure that is quoted very much, as it is still outrageously high. Lowering it would, of course, cost money — and this is money that Osborne believes he doesn’t have.

It’s strange. There seems to be no shortage of money for overseas aid, which Osborne is increasing from £8.5 billion to £11.1 billion. The Chancellor justifies this by saying ‘we should never balance the budget on the backs of the poor’. He only ever uses this phrase when talking about the poor in other countries. The British poor seem to be another matter entirely.

All this calls into question the sincerity with which the Conservative party believes in its own social justice agenda. Is it something that runs through the DNA of the party, as Mr Cameron occasionally says in his speeches? Or is it something that has been ditched, in the hope that taking a tougher line on welfare claimants is a better way of scoring points against the Labour party?

It was Osborne’s idea to bring Duncan Smith back to government, and to ask him to implement the social justice agenda. When Universal Credit was first set up, it was a joint initiative between the two men.

Now, they seem to be at war. It’s a shame: the squabble will make voters wonder if the ‘nasty party’ ever went away

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