The Conservatives have had a change of fortune of late. With the latest YouGov polls suggesting that the Tories have pulled neck-and-neck with Reform, even the most sceptical must acknowledge there has been a ‘Kemi bounce’. PMQs is often touted by SW1ers as a cause of this, but having Starmer, and now Burnham, it is hard to suggest Badenoch’s shooting at anything but an open goal.
Instead, I would put it down to a good reshuffle and, importantly, to good policy announcements. The abolition of stamp duty and inheritance tax will have undoubtedly endeared the party with their traditional voters concerned with whether to pivot towards their teal-coloured competitors.
Shadow work and pensions secretary Helen Whately’s latest policy announcement certainly fits this trend. The Conservatives plan to issue about 350,000 long-term unemployed Universal Credit (UC) claimants with pre-loaded ‘back-to-work’ cards, preventing them from using their benefits to purchase alcohol or cigarettes, put a flutter on the horses or withdraw cash. After six months, those without a sufficient record of prior contributions would see their standard UC allowance cut by a third to a new ‘subsistence allowance’. The estimated savings from such reforms is £538 million a year. Not bad for a fairly classic ‘tough on scroungers’ type policy.
Politicians should focus on what they can control
Politically, also, it’s not difficult to see the attraction. UC claimants are not obvious Tory voters and there has been a pervasive suspicion that the welfare system has become far too generous to those who could work but choose not to. If you are working 40-odd hours a week, paying high levels of tax and watching your neighbour collect his cheque before trundling down to the local bookies, it’s not unreasonable to question whether the system has its priorities back-to-front.
However, the idea of a pre-paid card is not an entirely novel idea. The Australians tried it back in 2016, and it didn’t particularly go to plan.
The Australian government introduced a ‘cashless debit card’, placing a portion of welfare payments onto a restricted card which could not be used to purchase particular goods – broadly the same as the above: alcohol, gambling products etc. – or withdraw cash. The intention was remarkably similar to the Conservative proposal: restrict the way welfare payments can be spent and encourage, with a paternalistic hand, more responsible behaviour.
By 2022, the cashless debit card had been abolished. The Australian National Audit Office found that the government had failed to convincingly establish that the scheme was achieving its intended objective. There was weak evidence of a reduction in gambling (about 3.5 per cent in trial site areas), but there were no means to attribute this to the card itself. In employment – arguably the most important metric – there was also insufficient evidence. Perhaps most awkwardly for fiscally prudent Conservatives, the estimated benefits were judged to have been outweighed by the costs. The programme cost the Australian Department of Social Services, the card providers and participants AUD68.3 million (£34 million) between 2015-16 and 2019-20.
Of course, the same overused line of ‘none of this proves that a British version would fail’ has been wheeled out. Australia is not Britain, and a better-designed scheme might produce better results. We’ve heard this all before, most recently with the ban on social media for under-16s. But just like that ban, there are notable workarounds of such policies, also with evidence from abroad.
The United States’ Supplemental Nutrition Assistance Program (SNAP) has offered decades of experience with restricted welfare benefits delivered through electronic cards and the difficulty state actors have in preventing claimants from acquiring cash outside of the official system. ‘SNAP trafficking’ – exchanging benefits for cash or prohibited goods – remains an issue, with a USDA estimate putting the dollar value trafficking rate at 1.5 per cent, about $1 billion (£756 million). This might sound like a small percentage, but these will likely be exactly the problem individuals the programme is intending to deal with. Money, ultimately, will always find a way around restrictions.
The other half of Whately’s announcement, however, deserves rather more attention, tackling the problem from a different direction. Reducing benefits after six months for those who are capable of working changes the financial calculation between remaining unemployed or going and finding a job. Rather than telling a claimant what they can and can’t purchase, this is a far more sensible place to start.
Under the proposals, people who have been contributing into the system for more years will retain their access to the full UC rate for longer (an extra year for every two years worked). Meanwhile, those without a substantial record of contribution will eventually move to the lower subsistence allowance, a drop of about a third.
Politicians should focus on what they can control. The government can control the generosity of welfare and the various incentives it may create. It cannot micromanage every packet of cigarettes, pint-can of beer or bet purchased thereafter. The evidence from Australia tends to suggest that prepaid benefit cards are a damp squib. If the Tories want welfare reform that fundamentally changes behaviour, they ought to focus on incentivising the jobless into work, not what they purchase in the local ‘offie’.
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