Iain Duncan Smith

Iain Duncan Smith: welfare revolutionary

Plans to radically overhaul Britain’s benefits system have been unveiled this week, ahead of the government’s spending review later this month. They were the result of a long-running struggle between the Chancellor George Osborne and the Secretary of State for Work and Pensions, Iain Duncan Smith, with the latter emerging victorious.

According to the government’s budget in June, welfare will cost the taxpayer £194 billion this year, a whopping 27.8% of government spending, and £44 billion more than the government’s income tax receipts. The welfare system is not only expensive, but complicated too. Not only are there multiple payments for the same individual or household, but the rules regarding when the money is withdrawn discourage the unemployed from taking on jobs.

The welfare reform announced this week by Mr Duncan Smith at the Conservative party conference aim to tackle complexity first, cost second. Most of the current benefits will be collated into one super-benefit, with exceptions such as disability living allowance. The money will be withdrawn gradually as people’s incomes rise, encouraging them to work. People who have been unemployed for more than 6 months will also get a government grant to start a business.

The welfare reform package hints at significant start-up costs, which are the grounds of objection by the Treasury, whose aim is to make Britain’s ends meet. After all, any increase in the welfare budget to finance the reform must be met by savings somewhere else. No concrete details have yet emerged on how the reform will be funded, and the Treasury is still insisting on saving some £11 billion from the welfare budget this year.

It is entirely normal for new projects such as the welfare reform package to incur a start-up cost, and completely understandable for the Treasury to be jittery about funding them at a time when the public funding gap is so wide. But welfare reform is essential to placing Britain on a path of better recovery. For many years now the press have been circulating stories of dishonest benefit scroungers who manipulate the system to live off the backs of hardworking taxpayers. Of course, many people who stay trapped on the system may have found it simply uneconomical to take up paid work, and they cannot be blamed. Most people at least agree with welfare reform in principle. Ensuring that the welfare system does not hold people back from taking employment not only helps to repair the nation’s finances in the long run, but it can work magic in many areas in Britain that need reform, because employment provides not only a financial boost to individuals, but a psychological one.

The dispute between the Treasury and the Department for Work and Pensions reveals an important dilemma facing the government as the cuts to public expenditure start to bite: how to transform Britain for the better with less money. The government has so far been careful to ensure that at least outwardly, the poorest are shielded from the worst of the cuts (read: the worst of the cuts, not the cuts itself). Announcing the withdrawal of child benefits from higher-rate taxpayers is a positive move, even though it breaks an election promise by the Conservative party. So is the capping of benefits to average household income and plans to recognise marital commitment in the tax system.

As the cuts to public expenditure begin to bite, there will no doubt be pain to every sector of society. Rants from the Left about the pain being unfair are essentially pointless: nobody in the right mind thinks that pain to themselves is fair. However, such pain is essential for the whole of the country to plug the massive funding gap that Labour party had left with Britain. The country as a whole did not deserve all the benefits it was showered with by Labour during the boom years, since there was no sustainable way of funding them. If it takes big cuts and a revolution to drag the benefits system back into reality, so be it.

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