The coalition’s welfare reforms will tackle the causes of poverty

The coalition’s welfare reforms will tackle the causes of poverty

15th April 2013

Universal credit is about being ambitious for the poor

Promises to fix Britain’s broken benefits system have been a mainstay of our politics for decades. Successive governments have come to office making grandiose guarantees that they would repair the UK’s welfare structure … all came, all went, all failed. Many of the current administration’s long-awaited reforms are coming into force this month, representing the biggest overhaul for decades.

Some criticism is warranted. A cap on the amount that any one household can receive in benefits would have been fairer had it been done on a regional basis. Many reforms could have been applied to new claimants only. On top of this, universal benefits continue to be handed out to wealthier pensioners, undermining the idea that we are all “in this together”.

The harsh realities of the economic crisis are clear to everyone. And people will think it is strange that precious billions are being poured into new social care reforms that only protect homeowners – not the most vulnerable – and a new childcare scheme that will prioritise couples earning up to a £300,000 a year.

But those who stop there and tear into this government’s programme of change should take a broader look. Root-and-branch welfare reforms will be no magic wand, but they signal a government finally getting to grips with our toxic welfare predicament.

Despite some good intentions, welfare policy in the UK became so perverse that it stripped the poor of their independence and drained the nation’s economy. Some 4.5m people of working age were on out-of-work benefits before the 2008 recession and, of those people, 1.4m had been receiving out-of-work benefits for nine of the past 10 years. The number of households where no one had ever worked almost doubled from 184,000 in 1997 to 352,000 in 2010.

Furthermore, between 2004 and 2010, the government spent more than £170bn on tax credit payments to working households. The welfare system became an unsustainable default for topping up income – at one point, nine out of 10 families qualified for support.

This approach let our poorest citizens down. The Centre for Social Justice has spent almost 10 years working in Britain’s most deprived areas; we have seen countless families in too many communities beached on our dismal and often counter-productive benefits system.

Benefits became an end in themselves without any vision or ambition to help people back into work or to progress up the career ladder. The biggest tragedy of this is it has left a group of people – well intentioned, instinctively industrious, keen to get on in life – stagnating on a scrapheap.

Work became a mug’s game for so many. No wonder: our system ensured that employment made people worse off. Many who would not have been unwilling to work in principle made the rational decision not to seek employment because there was no incentive.

This should make people angry – not at claimants, but towards the politicians that let them down. These challenges should have been tackled in the times of plenty and it is unquestionably more difficult now – especially in certain regions where economies are in crisis and living costs are soaring – but it is happening, finally.

Universal credit, which will start being implemented this month, is about being ambitious for the poorest in society. At the moment we have a situation where some of our poorest people are hit with tax rates of 90 per cent in extreme cases – it would be immoral not to correct this. UC will make work pay and allow people to keep more of their earnings by withdrawing benefits at a single consistent rate, avoiding the cliff edge of the current system.

Weaning the country off welfare dependency is important for society, and our economic prosperity. More importantly, it would be transformational for those who have been written off for so long. The whole of the state – not just the welfare state – should be geared around helping people into work and, ultimately, work that pays well enough that they can become economically independent.

If the government can get this right while also ensuring it gives people the long-lasting skills to take advantage of employment, it could leave a major legacy.

For too long a government’s compassion has been measured by the size of its welfare cheque. That has been found out as counter-productive. These reforms are not easy, but they represent an attempt to tackle the root causes of welfare dependency and poverty. That’s the right thing to do, even now. In fact, especially now.

This article first appeared in the Financial Times on 12 April 2013

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