Welfare reform : the end of dependency culture?

May 16, 2011, 1:08 AM UTC

What does a young Conservative Party leader do when he fails to make a mark, is removed by his colleagues from his job but still wants a life in politics? It’s not a question you’re likely to have to face yourself but it confronted Iain Duncan Smith when he was turfed out of the Tory leadership in 2003 without even ever having led his party into a general election. His answer was to become interested in the poor.

This week, as work and pensions secretary in David Cameron’s coalition government, he published his plans for welfare reform which he has spent the last seven years developing. Initially inspired by close involvement with the life of a deprived housing estate in Glasgow, he has come to the view that the welfare system itself is trapping people in a life of poverty and misery and creating a culture in which the ethos of living on benefit is simply passed down the generations.

For many of the people trapped in this culture of dependency it is not simply that they are willful layabouts but rather that the system makes it not worth their while to work so, quite rationally, they decide not to. Only by making work pay can such people be rescued from their prison.

This is not in itself an original view. Gordon Brown believed strongly in the work ethic and endlessly tinkered with the welfare system in order to try to increase incentives to work. What is different about Mr Duncan Smith’s approach is his radicalism in wanting to rip up the whole system and start again. He said: 'Successive governments have ignored the need for fundamental welfare reform, not because they didn’t think that reform was needed but because they thought it too difficult to achieve.' But will that prove the case now?

In essence he wants to tear up a system that has become not only almost incomprehensible in its complexity and expensive to administer but, most of all, punitive in the rate at which it withdraws benefit from people as they move into work. For some people the way the current system works means that they lose 96% of any money they might earn by taking a job.

This is what has created the dependency culture which, he says, has led 1.5 million people to have been in receipt of out-of-work benefits for nine out of the last ten years. During the fifteen years of continuous growth before the recession 4.5 million people remained on out-of-work benefits while 70% of the new jobs created were taken by people from abroad because, according to him, those on benefit 'weren’t capable or able' to take them.

Mr Duncan Smith’s plan involves, from 2013 onwards, combining all out-of-work benefits and in-work support payments into a single universal benefit, probably to be paid monthly not fortnightly (as now) to bring it in line with the payment of monthly salaries. The aim is to allow those who go into work to keep far more of their increased income so giving them the incentive to do so. He said: 'Our guarantee is crystal clear: if you take a job you will receive more income.' He estimates that 2.5 million households will get higher entitlements, taking 350,000 children and 500,000 adults out of poverty.

During this parliament it will cost the Government £2bn to bring in the new system, money he has secured from the Treasury only after long battles during the recent discussions over cutting government spending. But the new plan does not involve just a big handout. There are sticks as well as carrots in the proposals. Benefit recipients who repeatedly refuse offers of a job or work in the community could lose their benefits for three years. Others may be required to do a month’s community work without pay in order to reacquaint them with the culture of work. And money currently paid out from the hardship fund may take the form of loans not grants in future.

In its broad outline, Mr Duncan Smith’s plans have received a good response, even from the Labour opposition which was beginning to think along these lines itself. But there are several reasons for thinking that the initial consensus of support could easily break down.

First, much of the detail has still to be worked out and these details could well lead to criticism that the plans either won’t work or won’t be fair. Already the claim that no one will be worse off is being viewed with some scepticism. Even though the new system involves what is being called a 'single, universal' benefit, it doesn’t in fact embrace all benefits within the broader welfare system. Mr Duncan Smith’s wider budget is being severely pruned over the next few years and housing benefit, in particular, is facing sharp cuts. Stories of how individuals and families are facing increased hardship as a result of the government’s wider policies are bound to provide ammunition for the government’s opponents keen to disprove its claim that no one will be worse off under its plans.

Secondly, the new plan will depend on the setting up of a new IT system to calculate what benefit individuals should be entitled to given their very varied circumstances. The record of governments’ installing of complex IT systems is not one likely to inspire confidence.

But the greatest worry of all must be the timing of this reform. It is one thing to create a new welfare system designed to get people off benefit and into work when the economy is booming and there are plenty of jobs; quite another to do it when the recovery is faltering and when many economic commentators fear that the government’s own austerity measures may choke that recovery and threaten the creation of jobs. We could end up with a system that has proved expensive to introduce, that is attacked as unfair but which still leaves far too many people dependent on welfare simply because there aren’t enough jobs for them to apply for.

The ambivalence of the response to Mr Duncan Smith’s plans was perhaps best summed up in a joke made by the shadow chancellor, Alan Johnson. He said: 'He’s the right man in the right job at the wrong time in the wrong government.' No doubt Mr Duncan Smith would reply simply that in politics you just have to seize your opportunity when you can. If not now, when?

What’s your view?

  • Do you support or not the broad aim of the welfare reform, to end the dependency culture and make it pay for more people to work?
  • Do you think it is the system itself that has prevented people who wanted to work from doing so, or do you think it was more that too many simply don’t want to work?
  • What do you think of the ‘sticks’ in the new proposals, especially denying benefit to those who repeatedly refuse job offers, or requiring some benefit claimants to do a month’s community work without extra pay?
  • What do you think about the cuts in other parts of the welfare budget, such as housing benefit?
  • How much do you think the new plan is likely to be weakened by the unavailability of jobs in the economy?
  • And what reforms to the welfare system would you want to see if you were given a free hand?