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The best solution to the infernal complexities of the benefits system, as any good socialist knows, is to make work more attractive to claimants
Anybody who tries to understand the benefits system is likely to get a sizeable headache. Reading David Freud's 144-page welfare report for the Department for Work and Pensions, published last Monday, gave me one that lasted all day. For example, lone parents, in order to get income support, must answer 169 questions. Why must benefits be so infernally complicated? Freud has the answer: "The system is complicated because its objectives, and their application, are complicated."
Well, let's rephrase the question: do the objectives have to be so complicated? New Labour set two targets relevant to the benefits system. The first was to reduce child poverty, halving it by 2010 and eradicating it by 2020. The second, which didn't involve any dates, was to increase "economic activity", as it is rather soullessly called, to 80 per cent of the working-age population. The government has made some progress towards both. It has lifted 700,000 children out of poverty; but 3.4 million remain there, and on present policies, child poverty, far from being extinct in 2020, will have been cut by only a quarter. Economic activity has risen to 74.5 per cent but, if it is to reach 80 per cent, the 3.1 million people on benefits (chiefly incapacity benefits) for more than a year will need to be cut by 42 per cent.
As a report last year by researchers at the Institute for Fiscal Studies (The Poverty Trade-off by Stuart Adam, Mike Brewer and Andrew Shephard) showed, ministers can make only partial progress towards these aims because, to a large extent, they are in conflict. Pretending they are not is a typical piece of new Labour evasion. It's true that, in the long run, work is the best route out of poverty. But it ought to be obvious that the higher the level of benefits, the fewer the short-term incentives to move into employment or, once in employment, to work more hours, seek promotion or travel to a new job. More than two million working adults pay effective marginal tax rates of over 50 per cent, and 400,000 over 80 per cent - and those figures exclude the over-55s and the disabled.
Piling on disadvantages
The disincentives apply mainly to parents and particularly to lone parents, for whom the average marginal tax rate is 57 per cent. Even that ignores childcare costs. But if we make it more attractive for parents to work, do we risk children being drawn into street culture, which may involve drugs, crime and truancy? If, as some politicians argue, children thrive most in two-parent families, should we pile further disadvantages on those in lone-parent families by reducing benefits? Conversely, do we risk creating incentives for women to become lone parents if we offer sufficient benefits to keep their children out of poverty? Middle-class liberals scoff at the idea that teenage girls have babies in order to get a council home and receive what to them may seem a decent independent income. But it is a widely held belief in working-class areas and it strains credulity that some teenagers do not act on it.
Here's another conundrum. If the Tories want to encourage marriage they should, while introducing the concept of a couple to the tax system, remove it from the benefit system. At present, a couple on income support get a joint personal allowance of £90.10 a week, more than 20 per cent less than if they were to claim as two single people. But to change this would cost at least £2bn and, again, reduce incentives to work.
Advisers for skivers
Welfare to Work, as ministers see it, is the only way to square these circles. You can reduce general benefits so much that there's no temptation to skive, but that would damage poverty targets. The alternative, as Freud proposes, is to stamp out the skivers by giving them "personal advisers" from private sector firms who can recommend benefit withdrawals, particularly from lone parents of children aged 11 or over.
But the best solution, as any good socialist knows, is to make work more attractive, rather than benefit less so. This could be done by substantially raising the minimum wage, or raising benefits to levels that force employers to pay more. This, it is said, would destroy jobs, but it would probably destroy only jobs which don't in fact offer a long-term route out of poverty. I suspect many benefit claimants understand that perfectly well.
Freud argues that, if the government fails to "engage" (a marvellous euphemism) with benefit claimants, it could be accused of "dereliction". Perhaps it should engage a little more with employers who offer low wages and dreadful conditions. And having given me a headache ploughing through a report on welfare and the undeserving poor, perhaps Freud could give me another one by producing a report on tax evasion and the undeserving rich. That headache I would gladly suffer.
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