Peter Hoskin

A report that should influence welfare reform for years to come

A report that should influence welfare reform for years to come
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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.