Welfare reform – back to the future?

In Opposition Gordon Brown came up with a sensible economic policy which was attractive to moderate conservatives and moderate socialists. He said:

1. Cut the costs of welfare by getting more people back to work. He called welfare expenditure the “costs of economic failure”
2. Cut the costs of interest charges by reducing government debt.
3. Spend more of the money on schools and hospitals
4. Freeze tax rates at Conservative levels.

I agreed with all of this. I would have added cut bureaucracy and undesirable government programmes (like embryo unelected regional government and related quangos) more so tax rates could also be reduced. I was always sceptical about whether Labour would do it as well as say it.

The Blair/Brown programme was attractive in 1997 and they got a good vote and large majority to carry it out. In the first Parliament they did repay some debt, in line with 2. They failed to reform welfare in line with 1. They did keep tax rates down, but started to introduce some Stealth taxes against the spirit of 4. They began to accelerate spending the Health and Education departments. In 2001 they were re-elected, but with many fewer votes. The public put them on probation, with many floating voters still wanting the original prospectus.

From 2001 onwards they ditched virtually the whole programme. They not only failed to reform welfare, but the bills shot up, with many more people being offered a range of new benefits instead of working. Over 5 million people of working age are now on benefits. They started to borrow again, and now are out to break the all countries borrowing record at huge future cost to taxpayers. They greatly increased spending on Health and Education, but too much of this was spent on central and regional management and interference, too little in the schools and hospitals themselves. They did spend on some new buildings and higher pay, but we have ended up very short of beds, short of certain specialities in hospitals, and short of places at high performing state schools. They accelerated the Stealth taxes, and finally propose a hike in the Income Tax rate on higher earners.

Labour’s vote plunged in the 2005 election to disastrous levels, polling less even than the Conservatives in England when the Conservatives had another very bad year. The public no longer believed the government would do what it promised in 1997.

Today we learn that Mr Brown now wants another go at Item 1. I welcome that. The Opposition is likely to support the changes. I will want reassurance that severely disabled people are not going to be put under pressure or treated meanly, and reassurance that the rest of the reform is serious and not just more spin and window dressing. It is not the best of times to launch such a project when many people in work are having to battle to keep their jobs and when new vacancies are plunging, but there is no need to delay. We do need to tackle it and need to take the state of the job market into account when evaluating early results.

If Mr Brown is a “serious” politician rather than just another spinner from the spin era, he would also take up his other three policies which made sense and were popular in 1997 and could make sense again today. Of course there will be some increase in borrowing owing to the recession, but there should be nothing like the irresponsible surge he is currently undertaking. He does need to have some discipline in the debt programme. He needs to redirect more of the large budgets into the schools and hospitals themselves and buy us more places at good schools and more beds and consultants in hospitals. He needs to reverse his proposed Income Tax rate hike, and end the VAT reduction. Any tax reductions this year should be Income Tax reductions helping the lower paid.

Meanwhile the Conservatives have put in place many of the ingredients for a good economic strategy. The Leader’s attack on excess borrowing, his wish to curb wasteful spending, his opposition to the VAT reduction, his wish to revisit the banking support package and his wish to concentrate more of the present public spending in the schools, hospitals and other local facilities all makes sense. Mr Brown needs to be careful. He could find at the next election the Conservatives adopting a lot of his late 1990s strategy, backed by the wish and the ability to see it through. The pity with the PM is either he did not mean it when he set it out more than a decade ago, or he was incapable of implementing it.

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10 Comments

  1. Lola
    Posted December 10, 2008 at 11:38 am | Permalink

    “The pity with the PM is either he did not mean it when he set it out more than a decade ago, or he was incapable of implementing it.” – or both

  2. Bazman
    Posted December 10, 2008 at 4:47 pm | Permalink

    The problem is getting anyone on benefits back to work. In a lot of cases they are not working due to previous governments policies. How is someone who has been long term unemployed/sick, often the same ailment, going to compete with a person who is fit and works every day? There is not enough jobs in the areas where the unemployed are. That is why they are unemployed. It’s not really possible to move to another part of the country and support another home on low wages, so there is no point in leaving the area where the unemployed are at.The East Europeans are often young and fit with a sense of adventure and fun and due to the often harsh realities in their own countries, take Britain on the nose and then return home.The danger is that cutting the benefits just leads to more desperate people. That is not to say they should be left to rot.

  3. Jon Taylor
    Posted December 10, 2008 at 5:58 pm | Permalink

    Gordon Brown / old Lab …. like a hamster running on the wheel … hectic & busy ~ getting nowhere

  4. mikestallard
    Posted December 10, 2008 at 6:05 pm | Permalink

    Just as the banks have absolutely no idea who is lending and borrowing from them – it’s all money and computer figures at the top – so the Social Services have absolutely no idea who is a bludger and who is a genuinely sick/needy person. It is all figures.
    By Social Services, I mean everyone who runs the Welfare State in which we live.
    I suspect that the people who take the decisions in both banks and Social Services live miles and miles away from the people they support and that they secretly despise the people who still sit, poorly paid, behind their desks at the Dole Offices or in the (fat cat) doctors’ surgeries.

    Now they both face the same sort of problem: in the banks’ case it is toxic debt. In the Social Service case it is serial bludgers.

    Is there any chance of bringing back welfare stamps? Please do not accuse me of being heartless. With more people over 65 than 16 years old it is imperative that we get to grips with this ASAP.

    And, of course, (whisper it softly) the Churches are really in touch with what is going on.

  5. marksany
    Posted December 10, 2008 at 10:22 pm | Permalink

    Purnell’s white paper is just Spin. They aren’t actually going to take money off people. But it sounds like they are being hard, and giving Tories less space to work in.

    “The real point is that welfare claimants’ have no strong motivation to find a job because they lose more in benefits than they can earn in net wages. Until the Powers That Be grasp this simple fact, all this tinkering achieves nothing.” M Wadsworth today.

  6. MT's Pet Piranha
    Posted December 10, 2008 at 11:09 pm | Permalink

    “There is not enough jobs in the areas where the unemployed are. That is why they are unemployed.”

    *Important to remember that lack of demand for employment isn’t the only cause of unemployment. (you may not have meant this, but the above sentence gave me that impression)

    The answer to the lack of labour mobility, is not to maintain high benefit rates just because it’s too late, but to facilitate the movement of labour so that those who wish to work can do so.

  7. MT's Pet Piranha
    Posted December 10, 2008 at 11:12 pm | Permalink

    John,

    I realise this is a touchy subject politically and I don’t want to get you into trouble, but do you not think re-visiting our support of the minimum wage could not only help the recession but also help alleviate the welfare problem at the same time?

    reply: No, the Minimum wage did destroy some low paid jobs when it came in. We have no wish to revisit it now. There are many more important causes that could help get us out of this mess.

  8. Paul
    Posted December 11, 2008 at 10:56 pm | Permalink

    Bazman, I used to work in an area with 10% unemployment. I had jobs available, any age 16-65, no qualifications needed, chance for training and development. I put the jobs in the local job centre. In three years I had precisely one applicant via there who gave it up after a fortnight.

    The jobs are there. They are too 'fussy'. Odd that migrants, who can't get benefits (I believe), seem to find employment.

    • Bazman
      Posted December 13, 2008 at 8:55 am | Permalink

      Yes Paul migrants do living five to room going to work for any pay in any conditions five in a car and eating the cheapest food. Often working illegally and living in illegal conditions. Your any age 16-65, no qualifications needed, and chance for training and development. I bet had 'negotiable' wages that where the going rate. The 'going rate' is the market rate, not yours or the workers rate. If you had paid £20 an hour you would have had to many applicants, telling us the problem is that its not a shortage of workers, but a shortage of money. Your business is not anyone else's business. Further leading to the conclusion that your business was not viable on the rates of pay needed for the workers and the country.
      Well done that man for lasting two weeks! I would have not even spent two seconds looking at your ad.
      British workers are not desperate enough is what you are saying. They may be thick, but not thick enough to work for the likes of you.

      • Paul
        Posted December 13, 2008 at 6:31 pm | Permalink

        The job in question could lead to a job paying £30k+ ; we trained more than one person to that level.

        Why one should pay £20 / hour (about £40,000 a year if you do 7.5 hours a day 5 days a week) to anyone with no qualifications, skills or experience, or indeed why anyone is naive enough to expect that is beyond me.

        People who think like this (economic illiteracy) are the reason the country is in such a mess.

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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