Springboards, safety nets and moving goalposts: the reform of welfare post-referendum

by Ken Gibb

The second report of the expert working group on welfare reported this morning to the Scottish Government. In their report they set out a vision of a future welfare system, they propose short and medium term reform priorities and suggest different longer term routes or choices.

What is striking about this report is that it offers an (albeit incomplete) alternative prospectus for social security, work and welfare that presents a very different perspective to that of DWP. It is remarkable that this is the first such detailed joined-up approach that tries to do this in any kind of comprehensive fashion. I think this is its single biggest plus point. It speaks just as much to the UK as it does to Scotland and it also has much to say to a Scotland continuing in the UK as to one that votes for independence. For that reason alone it should have wide readership and act as an important basis for future debate.

The other thing that strikes one is the completely different tone and approach. It is refreshing to see the working group suggest that things do not need to be like they presently are. And if welfare is to be, as they envision it, personalised, fair and simple (themes that they recognise can be in tension with each other), then aspects of the present reform regime have to go:
– reinstate the uprating of benefits and tax credits with CPI;
– roll back the sanctions and conditionality of the present system with a more humane approach to active labour market policies;
– scrap work capability assessments and replace the work programme with new initiatives to help people find and stay in work;
– abolish the bedroom tax;
– uprate the benefits received by carers so they are on a par with JSA;
– shift the universal credit towards a new social security allowance which looks similar but has housing benefit hived off from it; but this would be paid out according to the wishes of the recipient and if there is a carer the cash would go to them; and
– move the public sector over the life of a parliament to a living wage model and phase in the living wage in the private sector by growing the national minimum wages, paid in part by reduced employer national insurance contributions.

In the medium term the working group argues that policy and debate marshalled by a convention and by a commission both focused on the long term development of social security. The priority is argued to be about better support for the disabled. In the long term, there is a debate to be had over the fundamental direction of welfare benefits – either a contributory principle road or one based on a basic citizen’s income.

A number of things strike me and, it should be stressed, they do so prior to any close reading of the report.

First, the key is the future performance of the labour market, the ability to improve labour market conditions at a local level and address in work poverty for, among others, the 400,000 or so Scots earning less than the living wage. I would like to know much more about the policies and the evidence with which one can marshal arguments that decent paid work can remove those hard to reach from poverty and keep them above the waterline.

Second, while there is a pleasing consistent effort throughout to cost and identify benefits from savings, etc. I still worry about the indirect, second round and behavioural evidence. We have learned for instance from the failure of DWP reforms to have the anticipated effects on the private rented sector (e.g. rents did not fall) though in other cases there is evidence that the consequences of the household benefit cap has induced people into work in London. There is a lot that needs to be done about better understanding behaviour by recipients, people at the margin and employers before racing to reform.

Third, affordable housing looms large as a basic issue. The expert working group makes positive noises about longer standard private tenancies and about holding rent increases back to inflation only increases during the life of tenancies (similar to recent UK Labour proposals). They also want more affordable housing supply that allows investment to reduce rents and hence the social security bill (though this is a re-profiling of net public expenditure between capital spend and social security which may or may not cost more depending on how it is designed). Working age social tenants (and landlords) would be helped furthermore by keeping housing benefit separate from their version of rolled-up cash benefits. This also needs to be seen in the context of ending the iniquitous bedroom tax.

Fourth, the social security allowance proposal chimes with my own view that we need to rebalance the cash benefits and specific personal housing subsidies with, to my mind, relatively more resource going to unrestricted cash benefits and a more affordability-targeted tenure-blind housing allowance being the long term goal.

Fifth, how will this be received by the wider public? How correct are they to say that the Scottish people are more willing to embrace this welcome progressive turn in the direction of welfare benefit policy? What, if anything, does the election of a UKIP MEP tell us that social attitudes survey do not? As I said at the outset the fresh approach on social security outlined by the working group also speaks clearly to the UK reforms of working age benefits and I do hope there is debate over these ideas and principles that goes beyond Scotland and reaches IDS and his team.

Sixth, the working group have suggested that the long term shape of benefits will be the resolution of a struggle between either contributory or non-means tested philosophies. I thought the recent contributions promoting more (modestly) contributory benefits from Demos (Something for Something, June 2013) in part unconvincing – especially proposing to fund it by switching to more private mortgage protection insurance. On the other hand, basic income and negative tax ideas have major funding issues to confront if they are to be adequately provisioned. Many of the basic income proposals being discussed are actually rather modest and do not really scale up to the level that surely they ought to be striving to achieve. But the fact that there might be justifiable scepticism on either side warrants further debate and analysis – perhaps we must start by accepting that the welfare funding required for the good society will cost something in terms of tax or foregone growth but that it is a price well worth paying.

The working group’s report is a useful contribution to the wider welfare reform debate. I am not sure what its impact will be on the referendum, but I hope it will be a positive weapon to shift the often toxic welfare debate in a more positive way that might ultimately matter for those in poverty in or out of work right now across Scotland and the rest of the UK.