A fundamental change in welfare policy

Iain Duncan Smith has suggested that his proposals to introduce a Universal Credit to replace many of the current welfare benefits are the most important reforms to welfare provision for 70 years. But are they really that important?

Any civilised society would help those of its members who are in genuine need. But being able to live for free at the expense of others is not the sign of a civilised society. Indeed it is the very opposite: it shows that there is something seriously wrong with our sense of rights and responsibilities. So we also want a welfare system that encourages work and ensures that individuals are responsible for themselves.

We also want a system that is fair to all parties, whether it is those in need of support or those who have to pay the bills. Furthermore, any system has to be sustainable, affordable and should not provide perverse incentives.

We can say that the present system does not meet any of these ideals, but rather encourages worklessness and dependency and makes living on welfare a realistic lifestyle choice.

So what can we say about IDS’s proposals? The first observation is that this is not just tinkering, but is rather a genuine attempt to fundamentally reform the system. The proposals are thoroughly ambitious in their scope and will create considerable change if they are fully implemented. This, I believe, is also shown in the manner in which the reforms are to be introduced: they are to be phased in over a number of years and extra funding is to be provided to ensure that the transition is as smooth as possible.

Second, these reforms show that there has been a fundamental change in thinking with regard to welfare. Instead of seeing poverty as the result of structural inequality or social exclusion, the Universal Credit enshrines the belief that dependency is due to a perverse incentive structure that profoundly affects individual behaviour. This is why the introduction of conditionality and sanctions is so important, even if they might appear rather limited compared with what was introduced in the USA in the 1990s. The use of sanctions for those refusing a reasonable job offer, the introduction of a mandatory work activity, all coupled the capping of benefit levels announced earlier, are important steps in shifting away from the culture of entitlement which currently blights the welfare system in the UK.

It is this change from the idea of structural poverty to a behavioural explanation that is so important, even if some of the actual proposals might not go as far as some would like. What is so important is that we change the intellectual climate around welfare and gain a much wider acceptance that government provision can actually cause as many problems as it might solve. If these proposals can help to shift us from a culture of entitlement to one based on conditionality they will have achieved an enormous amount.

So are they really so important? As George Bush might say, damn right they are!

If the reforms work as hoped, in time they should lead to a big reduction in the annual cost to taxpayers of welfare benefits, stemming from a big fall in the overall level of non-employment.Significant reforms to state provision (or financing) of education and of health will still be necessary to permit a really substantial drop in the overall level of taxation.‘Welfare’ broadly accounts for two-thirds of government spending, so we must cut it in order to reduce taxes much.That remains the real prize for those who value individual freedom, since taxation is coercive not voluntary. With all these reforms we might hope to cut taxes from over 45 per cent to under 30 per cent of GDP.

This approach to benefits should be welcomed because it will affect the point of delivery of benefits. Those assessing claimants will be able to see exactly what they are getting which will iron out many inconsistencies in the current system. It will also help with fraud.
I would like to see the benefits system increase the age of eligibility for the basic state pension of claimants to discourage people from claiming benefits in the first place. I would also venture that those who have been on benefits for some time would have to surrender their passports as foreign travel is inconsistent with needing handouts and looking for a job. Do claimants in urban areas need a driving licence?

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