The Chancellor’s Autumn Statement revealed more about the Government’s intentions for the next stage of welfare reform, even if it seems there is a bigger appetite amongst Conservatives than Liberal Democrats for a second course. The focus of today’s welfare announcements was youth unemployment, which remains stubbornly high. Much of what was announced had been trailed to some extent in advance, but there are several observations which can be drawn from what we heard today.
1. The tug of war politics which has come to dominate Coalition strategy continues
Although the transferable tax allowance for married couples was a pledge in the original programme for Government, it seemed to end up being pegged to universal free school meals for six and seven-year-olds. Neither policy is widely popular with the other side, but they play well to the proposing side’s backbenchers and party faithful.
2. The cap on annually managed welfare expenditure begins next year
As George Osborne reminded people today, the Coalition has taken £19 billion from the welfare bill during the course of this parliament. Yet under this Government social security spending, including pensions, will total more than £1 trillion in this Parliament. In theory a proportion of that spending, most notably tax credits, income support and housing benefit, can be projected and capped.
So as of next year the Government will introduce a cap on welfare spending. You can read some observations about that cap in a blog I wrote for the Spectator earlier in the year, but the most interesting element on this today was the way the Chancellor framed the policy:
“At the beginning of each Parliament, the Chancellor of the day will set the welfare cap for the coming years and ask the House of Commons for its support. If a cap is breached, they will have to explain why and hold a vote in this House.”
In theory this will set a trap for Oppositions in years to come, especially the Labour party, for whenever a Conservative Chancellor enters office Labour would likely have to endorse the new Government’s welfare spending plans or call for higher benefits spending. Neither would be comfortable, but for very different reasons.
3. The welfare system is changing for young unemployed people
It wasn’t ‘earn or learn’, which has also been trailed this year, but the Chancellor did announce some significant reforms to the support 16 and 17-year-olds leaving school with few qualifications will receive. First, support will now flow through Job Centres focusing on moving that age group into training or apprenticeships. Second, 18 to 21-year-olds who sign on without basic skills will be required to develop them. If in six months they remain unemployed they will have to undertake a traineeship, work experience or a community work placement. If they don’t turn up they will lose their benefits. It is right that benefits come with conditions attached and the aspiration that young people will no longer be allowed to casually drift from school to welfare, is one all political parties should get behind.
I was told today that sensible safeguards will be in place throughout the process, to ensure common sense is applied within the sanctions regime. This will be vital because some young people, who might live chaotic lifestyles, need intense support to build a work habit. But if the Government is investing in them, they must take personal responsibility. That is only fair, and moreover, it’s crucial in preparing them for the world of work.
More fundamentally though, we could improve the way Job Centres operate, which should be part of what political parties plan for after 2015. Read the Centre for Social Justice’s (CSJ) recent paper on Job Centres here.
4. An incentive to employ young people
Another eye-catching commitment was the Coalition’s decision to abolish employer National Insurance contributions (or the ‘jobs tax’ as they call it) on young people under the age of 21. The argument has been made by many, including former CSJ team member Lottie Dexter at the Million Jobs campaign, that this could unlock job opportunities for many. Although it won’t come into effect until April 2015, it could make a genuine supply-side difference.
Alongside this, greater effort needs to be made to keep young people in work. There is a high level of churn in the system – amongst adults and young people. For example DWP data shows that for the adult population on JSA, 40 per cent are back on benefits after six months and 60 per cent after two years. So by all means let’s increase the supply of jobs, which is necessary, but we need to do so at the same time as working for sustained, stable employment.
5. Housing and social mobility
The Autumn Statement announced further measures to build more homes and allow people in social housing to be prioritised on the social housing list if they move to work. Both of these policies could prove important.
Social housing tenants are disproportionately static when compared to the rest of the population. Some 44 per cent of social renters have been in their home for at least 10 years, in contrast to just nine per cent of private renters. 380,000 social renters have been in the same home for more than 30 years. Across the country, one in eight moves is linked with work. However, only a few thousand social tenants each year move home for job-related reasons while remaining as social tenants (even within the same area), out of a total of nearly four million.
Across the country many people move to take work but we seem less able to explore this option for those who could most benefit from a job. The CSJ is beginning to look at housing and social mobility, which will consider what other flexibility can be built into the social housing system for those who would want to go elsewhere for employment. Of course a balance needs to be struck, and nobody is suggesting people should be forced to move if it isn’t suitable for them, but we have to do more to help those who would want the opportunity.