Ross Clark

Iain Duncan Smith assesses the government’s welfare record

Iain Duncan Smith assesses the government's welfare record
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When the Conservatives returned to power in 2010, in coalition with the Lib Dems, lifting people out of poverty was one of their signature policies. It would be hard to say that now. Theresa May has shown more interest in devoting time and energy to the ‘just about managing’ classes further up the socio-economic spectrum. Iain Duncan Smith, who as work and pensions secretary set the poverty agenda, is no longer a minister – while Brexit has come to dominate the agenda of a weakened government.

So what was achieved during what looks like a brief flirtation with social justice – and what, if anything, happens now? The most obvious achievement, Iain Duncan Smith told a Spectator event, held in association with the Joseph Rowntree Foundation, is the increase in employment over the past seven years. There are now 2 million more people in work than there were in 2010. People who have become subject to the benefit cap (which for a couple is £23,000 in London; and £20,000 outside) are 42 per cent more likely to be in work now than they were in 2010 – suggesting that this element of the reforms has succeeded in incentivising the search for employment.

The main instrument of the Conservatives’ welfare reforms, however, has been Universal Credit. This wraps six benefits into a single payment, simplifying claims and reducing the disincentive for people who have been on benefits from taking up employment, or for people in part-time employment to work extra hours. Previously, someone earning £16,000 a year had little reason to increase their hours. If they did so, their benefits would be withdrawn at such a rate that they could find their net income rising by just 5 pence for every extra pound they earned. Under Universal Credit, they will keep 35 pence, set to rise to 37 pence.

Universal Credit is being rolled out on a ‘test and learn’ basis and will not be fully operational until March 2021. But its architect is no longer there to guide it on its way: Duncan Smith resigned in March 2016 in protest at George Osborne’s cuts to Personal Independence Payments (PIP). Attitudes among Conservatives towards welfare reforms varied, with Osborne seeing them as an opportunity to save money in the short term and Duncan Smith seeing them as something which would save money in years to come but which might actually increase costs in the near future.

IDS has other criticisms of the government’s record on welfare. He says it should get on and introduce the Fit for Work programme that he wanted to introduce – a scheme to encourage employers to retain employees who have fallen sick. 'We have one of the worst records in Europe of keeping people in work if they fall sick', he says. 'Firms tend to let people slip onto statutory sick pay and into benefits'. IDS also identifies housing as a weak point in Conservative policy. He would like to see more low-cost housing, with the occupants able to build up equity in their homes – while also gaining responsibility for some of the maintenance costs.      

The Conservatives have succeeded in getting more people into work, says Katie Schmuecker, head of policy at the Joseph Rowntree Foundation, but people are failing to progress from low-paid jobs. The new face of poverty, she says, is people who are in work but who are nevertheless struggling to keep up with living costs, housing costs especially. The Conservatives’ blind spot, she says, is housing. It isn’t just that it is unaffordable to buy; for many it is unaffordable to rent, too, with many families spending 30 per cent of their income on rent. The Local Housing Allowance (LHA) – which links housing benefit to rents in the local area – has not kept pace with rents, according to the Joseph Rowntree Foundation’s chief executive Campbell Robb.    

Yet there was a good reason why the LHA had to be pegged back. Introduced by the Brown government, LHA was originally set at 50 per cent of local rents, later cut to 30 per cent. The problem was, in areas where large numbers of properties were let to tenants receiving housing benefit, the benefit was helping to drive up rents, as landlord’s reset their rents according to the published rates of LHA.

For all the Conservatives’ reforms, says Katie Schmuecker, one in five people still experience poverty – exactly the same proportion as in 2010 – and with inflation at nearly 3 per cent they are facing a further squeeze. But does the official measure of poverty really mean anything? As Edward Boyd, managing director of the Centre for Social Justice, points out, the official measure of poverty in Britain is really a measure of relative poverty – the poverty line is defined as 60 per cent of median household income. This leads to some perverse outcomes. In 2010, the number in official poverty fell – not because those at the bottom were better off but because those in the middle were suffering from the recession. As the economy recovered the number of people in poverty apparently rose again.

Matthew Oakley, senior researcher at the Social Market Foundation, begs to differ. 'We have consulted on how we should measure poverty and people do consider relative poverty to be important'. People do tend to measure their financial wellbeing by comparing themselves to others around them, he adds, not just on whether they can afford to put bread on the table.    

Either way, those at the very bottom appear to have been the biggest losers from Conservative reforms. 'Those who have really lost out are those who are still out of work', says Deven Ghelani, CEO of consultancy Policy in Practice, who previously worked on Universal Credit at the Centre for Social Justice. 'Benefit cuts are really going to hurt them'. Another complaint he has about the implementation of UC is that it takes too long to receive payments. The government likes to present going on to UC as being given a kind of employment – the job being to find a job – but it takes longer to receive credits under UC than it does to receive a first paycheck if you are in employment.

Generally, families with children have borne the brunt of benefit cuts. According to a study by Sheffield Hallam University and the Joseph Rowntree Foundation, looking at the overall impact of all welfare changes made an due to be made between 2010 and 2020, students are no better off and no worse off. Pensioner households are £40 a year worse off. However, couples with two or more children are £1,450 a year worse off and lone parents with children £1,750 a year worse off. Ghelani is among those who have criticised George Osborne’s decision to restrict child benefit to the first two children.        

Another area where Conservative welfare reforms have been widely criticised is with the disabled. Work Capability Assessments – the tests which must be undertaken before anyone can claim Employment Support Allowance, the benefit which has replaced Incapacity Benefit – have been widely condemned. Those who have taken them have complained they are far too prescriptive, based on such things as whether a claimant can walk 50 metres -- while overlooking other reasons why they might not be able to work.    

It is true, says Duncan Smith, that Work Capability Assessments were too narrow. Yet they were not his invention – they, too, were a hangover from the Brown years. 'We undertook five reviews in order to soften them'. Yet still there is something unsatisfactory about them. They still produce a ‘cliff edge’ which is against the spirit of the Conservative reforms. People undertaking the tests are classified either as fit to work or not fit to work – making the tests themselves more critical than they should be.

Welfare reform, he adds, is a still a work in process. 'My party should not lose sight of reforming social policy. We have to complete the process, otherwise we will be only halfway there.' Which begs the question: why did Iain Duncan Smith resign from the government when the work was only half done?