- By Monimbo
Welfare reform is driven by ‘ideology and electoral calculation’. Its function is to turn the not-very-well-off but not-really-poor against the really poor. Red Brick readers may not regularly look to the London Review of Books for their political analysis, but if they don’t they’ll miss Ross McKibbin’s regular pithy commentaries on the current political scene. His latest full article is a succinct summary of why and how the Tories are attacking the welfare state, and it should be cut out and pasted on Liam Byrne’s noticeboard. He’s updated it in light of the recent speeches by Ed Balls and Ed Miliband.
McKibbin argues that ‘welfare reform’ has little to do with defects in the system. Yes it’s true that it’s very complex, and a unified system would in theory be better. But while its complexity is a result of various new bits being bolted on over the decades, the reason for them was that they responded to new problems and recognised a vast range of different needs. Universal credit won’t work as the means to reconcile these conflicts because it’s poorly designed, inadequately tested, flawed by its reliance on online claims by groups that often aren’t computer literate or rely on one-to-one advice, uses contractors whose role is to force people to work even when they can’t, and to save money is being artificially constrained by benefit caps and other limitations.
The government’s main argument for change – that the system is massively exploited by scroungers – is simply not supported by the facts. McKibbin argues that the drivers are ideological and political – hatred of the system and belief that change will benefit the Tory party by attracting votes from the sections of the working class who can be persuaded that the main source of their problems is other, slightly poorer, sections of the same class. In other words, the changes won’t end ‘scrounging’ because it isn’t a significant problem and reducing it to zero is impossible anyway.
But the changes might just deliver enough working class votes to win the next election for the Tories. The evidence for this is in the opinion polls: not the ones on party support but the polls on people’s attitudes to welfare. McKibbin points out that people typically think 41% of welfare spending goes to the unemployed whereas the true figure is 3%; people think 27% of spending goes in fraudulent claims whereas the government says it’s 0.7% (I haven’t checked his figures, but they sound right). McKibbin argues that for Labour to largely accept the Tory reforms would both be morally wrong and bad economics, even though changing these perceptions is a huge challenge.
As Red Brick pointed out, Ed Miliband’s recent speech was a welcome start in trying to shift the debate, for example in its focus on worklessness and low wages. But Labour has to do much more to drive home the message that it’s not the welfare state that’s out of control, it’s the government’s economic failure, lack of jobs, low wages and unaffordable housing that are combining to put so much pressure on the welfare system. Cutting welfare can never work in this environment – the government’s own figures show housing benefit costs are projected to grow by a further £2 billion over the next four years, even with all the planned ‘reforms’, and this is very likely to be an underestimate.
Another little-noticed effect of government’s plans for universal credit, highlighted in the CIH’s new UK Housing Review Briefing Paper, is that it draws far more people into the benefits/credits system. This is because it withdraws benefits/credits more slowly from working tenants. A typical family in the private rented sector (couple with two children; rent of £100 per week) will drop out of the housing benefit system when their gross earnings rise to about £480 per week, and tax credits at about £620 per week. But they’ll soon be able to continue drawing universal credit until they earn as much as £725. Their rent would only have to be £130 for them to be simultaneously eligible for universal credit and caught by the higher (40 per cent) tax rate.
Government figures project that two thirds of working families with children will be better off under universal credit – and many will become benefit/credit recipients for the first time. Labour can use this as a stick to beat the Tory arguments: look, even your own system recognises that more people need government help, and that’s because wages are too low and rents too high to enable ordinary working households to earn enough to live on without state assistance. A big part of the need for welfare reform is that the economy is failing those on moderate wages – and the Tories’ own projections for universal credit are the proof that this is so, and getting worse.