Help Purnell
It is one of the oddities of politics that a Labour government can sometimes get away with announcing policies which, had they come from the mouth of a Conservative minister, would have provoked howls of anger.
So it is with welfare reform. Whenever Mrs Thatcher’s government proposed to make benefit claimants actually do something for their handouts rather than languish in bedsits in Hastings and Margate, as was the common practice in the 1980s, the resulting rage and charges of heartlessness smothered serious reform — with dreadful consequences. In pockets of the country unemployment has become hereditary, and the idea of working for a living an entirely alien concept.
The publication of the government’s white paper on welfare reform on Wednesday, then, ought to be an ideal opportunity to tackle once and for all the culture of welfare dependency. Aside from a few objections from Labour’s backbenches the proposals have been welcomed as a concerted attempt to solve a serious problem: so they are. It is only common sense that claimants of unemployment benefits should have to prove that they are looking for work, and should have their payments suspended if they do not meet this minimal requirement. Indeed, it now seems bizarre that any other view should ever have prevailed. James Purnell, the enterprising Work and Pensions Secretary, deserves credit for his robust approach: he is right to link the wasting of taxpayers’ money with the wasting of talent. It is good to see that at least one member of Gordon Brown’s Cabinet is still taking seriously the task of public-service and welfare reform.
That said, we have doubts about whether the white paper is enough in itself. Already, questions have been raised as to the meaningfulness of the new demands which will be placed upon benefit-claimants: it has been suggested, for example, that unemployed parents might be able to satisfy the Department for Work and Pensions that they were embarked on a ‘progression to work’ merely by showing they had looked up ‘babysitting services’ in the Yellow Pages.
The white paper also only addresses half the problem. The government is never going to end welfare dependency by toughening the rules on benefits alone. This will only ever be achieved if work is shown to pay. Too often benefit claimants find themselves caught in a welfare trap, where getting a job will actually make them worse off. Try as the government might to force them to look for work, there remains a powerful incentive to stay jobless.
Mr Purnell’s task has not been made easier by his boss. Gordon Brown’s abolition of the 10 pence starting rate on income tax, for instance, has doubled the marginal tax rate for low-income workers. As chancellor, Mr Brown raised national insurance contributions — a straightforward tax on jobs — by one penny in the pound and now his successor proposes to raise them by another halfpenny.
Supposed reforms to housing benefits last April have given rise to bizarre cases of unemployed families living in opulence — at a time when the housing crisis for lowincome workers has never been greater. In one case, a single mother of seven was found to be living in a seven bedroom villa in Ealing at a cost of £12,458 a month in housing benefit. How is the government proposing to persuade claimants like her to go back to work when, by doing so, they know they would make themselves ineligible for housing benefit and join other low-paid workers in the search for an affordable two-bedroom flat?
The government’s system of tax credits has hugely complicated the situation for low-income workers seeking casual work. They must now inform the authorities whenever there is any change to their income — which for casual and self-employed workers happens on a daily basis. It is impossible for such people to keep inside the rules — and provides a strong incentive not to seek work. Gordon Brown has always defended tax credits by saying they are a way to target help for needy groups such as families with young children. Yet the same could be achieved in a far simpler way, without creating a massive bureaucracy: why doesn’t the government simply raise the tax-free allowance, giving an extra allowance still to parents with young children? It is bizarre that we are taxing families on £10,000 a year, then giving some of the money back — minus a hefty slice for the bureaucratic costs. Low-income workers should be taken out of the tax system altogether and given a powerful message: if you help yourself, you can keep every penny you earn up to £10,000.
The tragedy is that New Labour began with such apparently good intentions. In 1997, Tony Blair showed he was serious about tackling welfarism by appointing Frank Field, who had been campaigning on the issue for years, to a ministerial job and inviting him to ‘think the unthinkable’. He lasted only a year in the job, before returning to the backbenches to carry on campaigning on the subject. As he has tirelessly pointed out, you can’t tackle welfarism only by focussing on dole-claimants — or ‘job-seekers’ as the government has rebranded them. The bigger scandal is the 2.7 million now on incapacity benefit. Is it really the case that nearly one in ten of the working population is too ill to hold down a job — or is it that the government has created a perverse incentive for claimants to feign illness because the incapacitated automatically qualify for extra benefits, regardless of any assessment of their needs?
Mr Purnell is undoubtedly on the right side of the argument and it is no surprise that his proposals have the Tories worried. But one Cabinet minister alone cannot transform a national culture. If ever there was a time for ‘joined-up government’, this is it.
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