Keir Starmer has already folded on the winter fuel payment, promising a partial reversal of the policy by reinstating it for pensioners in receipt of pension credit. How much longer before the proposed £4.8 billion cuts to welfare benefits go the same way?
This morning, the Health Foundation think tank has issued a pronouncement that will be a red rag to critics of Labour’s welfare cuts: that the effect of Starmer’s reform of disability benefits will be four times as great as changes proposed by the Conservatives before the election and on a similar scale to George Osborne’s benefits cuts of 2015. Those cuts, announced in Osborne’s July budget of that year, after the Conservatives had unexpectedly been returned with a 15-seat majority, ending the coalition with the Lib Dems, were designed to save £9 billion over four years.
While Osborne made benefits a little less generous, he did nothing to curtail demand from people claiming them
Osborne’s benefits cap, which was supposed to limit the amount any household could receive in benefits to £26,000, was cut to £23,000 in London and £20,000 elsewhere. Working-age benefits were frozen for four years, Employment and Support Allowance for people with disabilities was cut by £30 a week and the under-21s were to be stopped from claiming housing benefit. The policies didn’t just upset opposition MPs, however; they set in train the resignation of then work and pensions secretary Ian Duncan Smith the following March, who declared that for him to vote for a further round of cuts would be a ‘compromise too far’.
If there is one thing Labour MPs will not want to hear, it is their own government compared with what many regard as evil ‘Tory austerity’. You don’t have to be a mind reader to detect that many are already feeling a bit like Duncan Smith did in 2016: they fear it is demeaning their principles to support their government’s welfare cuts, however much they might want to be, as Duncan Smith put it, a ‘team player’.
But here is the thing. While Osborne’s welfare cuts were damned by the opposition and even some within his own party, in the event they did nothing to cut the welfare bill. In fact, the benefits bill failed to save very much at all. Taking 2019 prices, welfare spending fell moderately from £137.5 billion in 2015 to £128.2 billion in 2019 before rebounding to record levels of £152.7 billion this year.
While Osborne may have made benefits a little less generous, he did nothing to curtail demand from people claiming them. On the contrary, the switch to Duncan Smith’s Universal Credit system seems to have encouraged claims. The numbers of people on out-of-work benefits reached a low of 3.6 million in August 2017 before rebounding (before the pandemic) to reach 5.95 million now. Disability benefits grew from just over 1 per cent of GDP then to over 1.5 per cent now.
If it is politically impossible for a government to trim a modest £4.8 billion from a budget which the OBR expects to reach over £100 billion by the end of this Parliament, what hope is there of any government keeping a lid on welfare? It is easy enough for an advocacy group like the Health Foundation to preach about the iniquities of benefits cuts, but then it doesn’t have to draw up a public budget or manage a deficit which is running at £150 billion a year.
No one should be surprised if Starmer backtracks on the £4.8 billion of cuts to Personal Independence Payments (PIP) and others; that is looking more likely by the day. But it will be yet one more hammer blow for fiscal responsibility and yet one more step down the road to national bankruptcy.
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