Benefits

Here's me about to go on holiday, and the welfare wars seem to be opening up. Neil O'Brien has a piece on it over at the Telegraph website. And Hopi Sen, one of the better leftie bloggers, has written a response to my post yesterday. Partly, he wants to stir: it's not so much that the Treasury want to block IDS's reforms, he says, but rather that they are following Osborne's orders to reduce the deficit. And so it's one part of the government at war with another. By contrast, the Whitehall wars I outlined are hangovers from the Brown days, where the Treasury set policy for all other departments and its instinctive reaction was to destroy any proposal it did not come up with.

There’s been plenty political drama in these past few weeks, but the most crucial agenda – and by some margin – is Iain Duncan Smith’s proposed overhaul of welfare. It doesn’t deserve to be categorised as just another political tussle. As I say in the News of the World today, it is easily the most important issue in Britain, and it is overlooked because of an affliction which most of our political class suffers: that of moral long-sightedness. No one wears wristbands for the British poor, Prime Ministers pledge to “eradicate illiteracy” in Africa yet are strangely indifferent to the illiteracy on our own doorstep.

So, Iain Duncan Smith has set out proposals to comprehensively reform of the welfare system. The goal is to replace 51 benefits with a single and flexible allowance. It has been claimed that this reform would allow people with jobs to retain more of their benefits and ensure that people who work will always be better off than people on benefits.   There are problems with Iain Duncan Smith’s proposals. Fiscal cost is one, and the Work and Pensions Secretary has already clashed with George Osborne over the price of these proposals. Lowering taper rates to make work more rewarding could mean that more people receive more generous assistance – meaning costs go up.

How many incapacity benefit claimants could actually work? Well, we get a sense of the answer with some figures released by the Department for Work and Pensions today. They show that, of the people who have gone through the new Work Capability Assessments so far, some three-quarters are able to look for a job. Scale that up for everyone on incapacity benefits, and it suggests that around 1.8 million claimants could return to the labour market. Although the numbers are eye-catching, they're not entirely surprising: similar figures were published when the WCA was introduced under Labour.  And it could be worth holding fire until the necessary review of those assessment tests has reported back later this year.

Iain Duncan Smith is on a roll, and the roll continues with his interview on Straight Talk with Andrew Neil this weekend. Supporters of welfare reform will hear plenty to encourage them, even if only on a rhetorical level. Duncan Smith discuses how the fiscal climate makes this a "once in a generation opportunity and chance to change [welfare] now," and how Beveridge's original intentions have been subverted by a system which traps people out of work. But the most reassuring segment, by far, is this: "I, well, certainly, you know, I’ll be honest with you, there was certainly a discussion about that, everything was in the discussion, but my view about this is, I think things like freezing benefits across the board is a pointless exercise.

Might the coalition’s emphasis on fairness be making it harder to get people off welfare and into work? Not a question that I can answer with confidence, but certainly one which has been thrown up by the IFS's Budget briefing. Take the government's action on child tax credits, for instance. By increasing it at the lower end of the income distribution, and restricting it at the upper, some claimants now stand to lose more, more quickly, by moving up the income ladder. Or, as the IFS put it, their marginal effective rate of taxation has increased. Of course, this will have been offset by other measures such as the rise in personal allowances. But it does present a conundrum for government policymakers, eager to prove that their measures aren't hitting the poor.

The new and independent Office for Budget Responsibility estimated that interest payments on public debt are set to rise to £67 billion a year by 2014-15. The hole in the public finances is so deep that every cut in spending that can be made should be made. Few commentators have grasped that tinkering around the edges, such as with “efficiency gains,” will not be enough. The only way to eliminate the deficit and to begin the task of repaying public debt is through making deep cuts in spending and for people to take more responsibility for themselves.   Cuts must start with welfare. The UK government spends more on welfare than on anything else.

Contrary to what you might think, it is actually quite hard to find someone on benefits who doesn’t want to work. When you ask a claimant whether they would like to, they will invariably say “Yes, I want a job.” At first, this seems like a strange answer: why do we have nearly 6 million people on benefits when so many of them want to work? The answer is simple when you ask a few more questions: they don’t want just any job. They envisage doing what they used to do or would like to try – but aren’t willing to look for anything else. Getting them to try any job in order to be in employment is the key issue for any party that wants to cut the welfare rolls.