Scandal of 5m on Benefits

Worth A Look, Poverty, Frank Field

Life on benefits, without cheating, can be unbelievably dreary. Michael, who has been on benefit for as long as I have known him, faces a crisis every time there is a big extra item of expenditure.

Big here means no more than repairing a pair of shoes. The cost of buying a new pair from Michael’s £78.50 weekly income impacts like a tidal wave on his household budget. He wants to work, but the rules cement him into the benefit system.

Alongside people like Michael there is a mass of other claimants whose key objective has been to graduate onto incapacity benefit (IB). Here claimants unable to work gain benefit £20 above the jobseeker’s allowance rate. A third group are fraudulently claiming benefit and working.

The test of any successful welfare reform agenda is how to offer a hand up for Michael’s group while applying pressure to the other two groups to get a job. As Nicholas Boys Smith’s work Reforming Welfare shows, Labour’s hugely expensive welfare reform programme has largely failed. Labour’s story should have been so different.

The economy has continued to deliver a record number of new jobs and has been growing strongly since late 1992. Britain’s longest ever economic boom added an extra 1m jobs up to the 1997 election, and a further 2m since. On top of an annual benefit bill of £70 billion, the chancellor has spent £60 billion to make work the gateway to freedom. Yet the number of working age claimants has fallen by a mere quarter of a million, from 5.65m to 5.4m.

Reforming Welfare is strong on what has gone wrong with Labour’s reform programme. Take its biggest innovation, christened the New Deal.

Four out of each nine places on the New Deal for young unemployed claimants now go to individuals who are “retreads”, having been on the programme before, some on four or more occasions. Such a programme fails those genuinely looking for work. It is no check on those who have little intention of getting a job. Not surprisingly youth unemployment is on the rise again. Two out of five places on New Deal for the over-25s are filled by people who have been there before.

Much of Labour’s welfare reform strategy was imported from across the Atlantic, from the court of President Clinton, although the names were changed. But there is one part of Bill Clinton’s welfare reform strategy that the government has so far refused to implement, namely limiting benefit to a five-year period.

Critics on both sides of the Atlantic were incandescent when Clinton signed his welfare reform bill to abolish welfare as the US had known it. There would be armies of destitute claimants scavenging for food. The talk was of bulldozing a million children into poverty. It was dubbed harsh, cruel and mean-spirited.

Even the Catholic bishops weighed in, and joining them was the then Senator Daniel Patrick Moynihan, whose record on welfare few could equal. He argued that “No one believes the mothers and grandmothers of these children will find work.”

Well for once Senator Moynihan was proved wrong. None of the research projects published on this revolutionary welfare change has been able to stand up these scare stories. The reverse is true: limiting welfare payments to five years, even for claimants with young children, has resulted in a mass migration from benefit to work. The welfare rolls have fallen by 60%, the first sustained decline since the programme began in 1935.

Clinton puts the success of his reforms down to the co-ordinated attack he brought on poverty. Benefits were time limited, the earned income tax relief and child support payments were doubled, child care was made more available, and communities were given money to plan innovative transport initiatives to help claimants travel to new jobs. Britain has a similar package of help, or such help is planned. But, unlike in America, Britain has yet to time-limit benefits.

Opening up a debate on this issue, which is a real test of the government’s radical renewal, must be accompanied by three other significant reforms. First, spending the welfare budget must be devolved to local offices. This would not simply result in big savings, as officers, who know what is really going on in their locality, enforce the law. It would transform staff into social entrepreneurs as they use savings to tailor-make programmes to give extra help to claimants to begin new lives in work.

Second, two urgent reforms to incapacity benefit must be enacted so that claimants are safely delivered back into work. Incapacity benefit recipients are by far the largest group of working aged claimants. Yet those claiming IB for two years have a greater chance of dying on benefit, or transferring to the retirement pension, than working again. Existing claimants should be told that if they get a part-time job, they can keep all their benefits for a year. The local office would then help them into full-time work.

The rules for judging whether a person is unable to work must also be turned upside down. Local officers should decide whether each person’s age, qualification and disability classifies them as a person who should be seeking work.

Lastly, none of these welfare reforms can work in the interests of claimants unless they are accompanied by a managed migration policy. What hope is there for many of the 5.4m claimants of working age if the government allows, as it has done over the past two years, an extra 1.3m people into the country? Combining these three reforms would bring about a transformation in Britain; and the sum of human happiness, as a social life of work is spread, will be increased. Welfare reform is too important a topic not to come centre stage again.

Frank Field is Labour MP for Birkenhead