Almost a century after the modern welfare state was created by Liberal prime minister David Lloyd George, his successors in Britain’s Conservative-Liberal coalition government are hoping to tear it apart completely in a radical act of cost slashing.
In a huge and risky experiment sure to be watched closely by other countries wrestling with public debt, government budget deficits and shrinking work forces, Prime Minister David Cameron’s government Thursday announced sweeping plans to change the lives of 5 million people dependent on government payments in an effort to push hundreds of thousands of people into the work force.
In a week when Britain’s deficit-slashing efforts led to the country’s first acts of rioting (after university tuition fee increases were announced), and after France was paralyzed for weeks for a raise in its retirement age, Mr. Cameron risked even more discord with plans to force all welfare and unemployment recipients to seek work, even unpaid volunteer work, or to risk losing their payments.
The proposals will also unify more than 30 social safety net programs into a single “universal credit,” a move that was welcomed by many observers on the left. And through a “work program,” whose name evokes Britain’s Victorian efforts at reform, the perpetually dependent would be trained to do jobs, however minimal, or risk losing their cheques.
At its core is a far more controversial effort by the Conservative-led government to push a large population of uneducated, perpetually unemployed Britons – who Conservative Work and Pensions
An estimated 2 million children – mostly descendents of the old industrial working class – grow up in households in which nobody has ever worked. Britain, more so than almost any other country in the Western world except the United States, suffers from very high levels of poverty and intergenerational welfare dependency, to an extent not seen in other European countries or in Canada.
It is a perpetual source of frustration to conservatives here that even in the midst of a serious recession there remain 450,000 job vacancies, requiring high levels of immigration to be filled, while there are 1.4 million British working-age people on long-term welfare and unemployment insurance.
“We have to solve the wider social problems associated with worklessness,” Mr. Duncan Smith told the House of Commons yesterday. “We have a group of people who have been left behind even in periods of high growth – millions of people in Britain remain detached from the labour market … work is always the best route out of poverty.”
To perform such an act of extreme social engineering during an economic boom would be difficult. In fact Mr. Duncan Smith’s proposals are essentially elaborations of programs introduced by the earlier Labour Party government, but never fully implemented because of the political difficulty of removing, for instance, hundreds of thousands of officially disabled people from social assistance.
There are 5 million people in Britain claiming unemployment benefits – which have a maximum payout of £65.45, or $106, per week – which, together with housing and disability benefits, cost Britain £87-billion plus £3.5-billion in administration costs each year. This has long been a tempting target for cost savings, but governments have tried and failed to make reforms for 30 years.
As a result, Britain spends almost a quarter of its gross domestic product on social assistance, compared with only 16 per cent in Canada. But it nevertheless has one of the lowest rates of social mobility in the Western world, so the payments are not moving people out of poverty.
It is one of those rare issues where all the parties agree changes must be made. But during a steep economic downturn, clawing back billions in benefits could risk jeopardizing the recovery. Every other country that has managed to reform its welfare program – notably the United States under Bill Clinton’s presidency – has done it during boom times.
Critics said this week that Mr. Duncan Smith faces two fundamental problems: First, he is launching a vast welfare-to-work scheme during a period of layoffs, when there are unlikely to be jobs in the deprived regions where people will be losing their benefits.
Second, the root of Britain’s unique welfare-dependency problem is the large number of people classified as “NEETs” – Not in Education, Employment or Training – most of whom dropped out of secondary school at 16. Very few jobs exist for such people, and fixing this would require big expenditures in the education system, at a moment when the government is cutting it back.
Officials at the British Treasury said in briefings that aggressive welfare reforms are being pursued now because they are the one form of cost cutting whose effects are felt quickly. The welfare cuts will start lowering the deficit within five years, or before the next election; Mr. Cameron’s other cuts won’t have an effect for eight to 10 years.
But the change will not be immediate, or cheap. In fact, the changes will cost Britain an extra £2-billion over the next two years, and that does not factor in the cost of an elaborate new computer system that will be needed to unify the programs. Given that most economists do not expect the labour force to grow significantly as a result, and some fear the cuts could trigger a downturn, there is a chance that the whole exercise could end up costing the country more money.