Not so tough, not so fair: The coalition cannot be trusted on welfare reform

Our guest writer is Declan Gaffney

Last May, ministers arrived in Whitehall convinced there were vast savings to be made by cutting exorbitant out-of-work benefit payments.

Knowing without needing to look at the figures that Labour had allowed these benefits to ‘explode’ during its time in office, dazzled by the £200 billion total for welfare expenditure (oblivious to the fact that most of this went on pensioners and children) and enchanted by the prospect of mobilising populist grievances against claimants, they demanded that government statisticians torture official data to produce evidence of Labour’s profligacy and the workshy underclass which had benefited from it.

Week after week over the summer recess, tabloid journalists were briefed with ‘new’ statistics ‘unearthed’ by Chris Grayling showing how Labour had allowed a ‘Shameless’ generation of workless households to flourish – statistics to which the Department of Work and Pensions seemed strangely reluctant to accord an official press release and which were not made available to the general public through its website.

Details of a handful of families and individuals receiving high levels of payment found their way into the public domain and were shamelessly exploited by ministers and their rent-a-quote allies in the Taxpayers’ Alliance. Broadsheet commentators fell into line:

“There must be no sense that one group is exploiting others: the rich the poor, or the poor (through welfare) everyone else.” – Julian Glover in The Guardian (July 4 2010)

The obvious question that hardly ever seems to have been posed was just how much Labour had wasted during its out-of-work benefits spending spree. It is not a difficult question to answer: there is a wealth of detail on benefits expenditure available on the same DWP website which failed to offer a home to Chris Grayling’s more feverish claims about ‘intergenerational worklessness’. This chart summarises the data on how much was spent on the working age client group from DWP’s expenditure tables:

Source: DWP expenditure tables – includes expenditure on in-work benefits such as housing benefit (about £3bn) and Disability Living Allowance as well as other elements which are not out-of-work benefits; does not include child tax credits to out-of-work families but this expenditure (about £4.5 bn) is easily outweighed by the elements which are not out-of-work benefits, so these figures can be taken as a (slightly overstated) proxy for out-of-work expenditure on the working age client group.

Measured as a proportion of GDP, expenditure on the working age group fell sharply under Labour and even with the onset of recession has never recovered even to its 1996/7 level, let alone the peak of 4.5 per cent of GDP it reached during the last recession. Measured in real terms, expenditure is very slightly higher than in 1996/7 – the level in 2009/10 was £1.6bn more, hardly an explosion and roughly equivalent to growth in expenditure on statutory maternity pay and maternity allowance, which are included in these figures.

Rather than representing the mythical ‘one in three of every pound we spend’, working age benefits account at present for 7 per cent of public expenditure. This is the expenditure which George Osborne, Danny Alexander and David Cameron describe as “out of control”.

Over the last 24 hours the shape of the coalition’s approach to welfare reform has become clearer. We now know that Iain Duncan Smith’s proposals for a ‘Universal Credit’ – a policy floated by Labour in government and a logical development out of the last 13 years of welfare reform – will not be implemented this parliament. Instead, we will get George Osborne’s ‘cap’ on benefits.

Payments will be limited to reflect the ‘principle’ that “no family should get more from living on benefits than the average family gets from going out to work”: a populist gesture against a shadowy target appealing, of all things, to the ‘British spirit of fair play’ and delivered with a frankly embarrassing posture of historical destiny:

“Money to families who need it – but not more money than families who go out to work. That is what the British people mean by fair – and we will be the first Government in history to bring it about.” – George Osborne, today

The model for this bizarre claim is presumably Gordon Brown, who was also sometimes given to grand historical claims: but the contrast between aiming to be the first government to end child poverty, a real and massive social problem, and aiming to be the first government to stop benefit recipients from getting more than working families – an artefact constructed out of spite and ignorance-  could  hardly be more striking.

Given the choice between an incremental but challenging reform programme in clear continuity with the policies of its predecessor and a brazen appeal to the politics of grievance, the coalition has made its choice. “We’ve got to be tough but fair,” said the Chancellor today. There is nothing tough about stoking grievances against those with the least opportunity to defend themselves, and nothing fair in trying to implicate those at the sharp end of the coalition’s expenditure cuts in the state of the public finances.

Toughness would be to tell the Conservative party conference, as Keith Joseph did a generation and a half ago, that much of what they believed about the benefit system and its users was nonsense. In the present day, that would mean telling them that there has been no spending spree on out-of-work benefits, that individual cases of high payments tell us nothing about the situation of most claimants or about trends in expenditure, that the UK has a particularly ungenerous system of out-of-work benefits, and admitting that tax credits, the minimum wage and Sure Start have improved labour market outcomes for hundreds of thousands of families.

There are plenty of things to criticise in Labour’s record, but letting out-of-work benefits get ‘out of control’ is not one of them. As long as the coalition continues to allow policy to be guided by mean-spirited fantasies about what has happened to welfare expenditure over the last 13 years, it does not deserve to be trusted on the serious business of welfare reform.