Here we go again. A Chancellor is threatening to cut billions from the welfare budget, including disability benefits. The bill is too big already, and is forecast to become even more unaffordable, but no one really agrees on how to cut it. Everyone knows, though, that whichever way it gets sliced will be painful.
Welfare reform is one of many unfinished projects in British politics. The Tories made a lot of noise about cutting benefits when they were in government, and did make huge changes to the overall system. But they failed to meet even their own targets for savings, and the bill has been on the way back up again for a number of years. It’s almost as though the reforms that caused such a lot of fuss under the Conservatives didn’t achieve their stated aim of making the welfare state affordable and fit for the 21st century.
This time around, Rachel Reeves is trying to cut several billion from the Department of Work and Pensions budget, with a green paper on reforming benefits due in the coming weeks. That sentence alone sets out why welfare reform never really realises its ambition: so often, it is accompanied by cuts that are driven out of economic necessity rather than a long-term plan to make welfare work. In fact, reform is not so much accompanied by cuts as it is totally undermined by them.
The Conservatives had exactly this impossible tension in their approach to benefits. At one end, there was Iain Duncan Smith with his “moral mission” to overhaul and simplify the benefits system into universal credit so that people didn’t lose out when they went back into work. And at the other, there was George Osborne, who needed to cut public spending, and also didn’t trust or respect IDS.
After the 2015 election, in which they had promised voters they would cut £12bn from the welfare budget, the taper rate for universal credit was butchered, the overall amount of money available for the upfront spend slashed, and then the Conservatives embarked on a further cutting exercise. Their voters and MPs were largely on board, but even the Tories had to row back from reductions to tax credits, for instance, and in the end failed to cut £4bn of that target.
Welfare reform is often seen as being difficult because it is emotive, and that is true. It affects the lives of the most vulnerable people in Britain, and for Labour it is part of the party’s identity and heritage. But it is also difficult because there is this tension between the imperative to cut quickly, and the long-term need to reform the system so that the bill does not end up rising again. Perhaps Reeves would be having to make these difficult cuts even if the Tories had achieved their aims on welfare reform. But it seems unlikely.
DWP sources say that this iteration of welfare reform is different because the Conservatives were so focused on making sure that universal credit survived, they never got around to the other essential reforms on making job centres work properly to get benefit claimants back into meaningful, long-term employment. There is now much more of a focus on helping work coaches.
Work and Pensions Secretary Liz Kendall has spoken powerfully about the drivers of the benefits bill, including mental ill health among young people, and the tendency of work coaches to be pushed into being merely benefits administrators rather than genuinely supporting people into work. But despite a great deal of research from a number of organisations, nobody really knows why the bill for out-of-work and disability benefits is rising to the extent that it is.
This makes it even harder to cut appropriately or reform in a lasting way, because all those policies could be based on assumptions that turn out to be totally wrong.
The green paper should precede the Budget, meaning that even though welfare reform and benefit cuts are not the same thing at all, they will be inextricably linked for Labour MPs and their voters. This will make it much harder to sell the genuinely good reforms, as there will always be a suspicion that they are part of a much blunter and more brutal Treasury cost-cutting exercise. And given the Tories’ own muddled reforms are so recent, it is even harder for Labour to argue that they are doing things so very differently when the same tense combination of cuts and reform is there.
Even if Reeves does actually achieve – rather than just announce – the savings that she wants, without proper reform, there will have to be another round of cuts at some point, as the drivers behind the bill rising have not been addressed. There will have been a lot of pain, far less gain, and then someone else will have to do it again.
Isabel Hardman is assistant editor of The Spectator