Tory welfare reforms are misguided

The Universal Credit will make work cost, not pay.

There is much to praise in Iain Duncan Smith's aspirations for welfare reform, outlined in the bill his department has published today. He wants to make it certain that work pays more than benefits and ensure there are clear obligations to work in the welfare system. The theories behind his big ideas – the Universal Credit and the Work Programme – have the potential to make a real difference to people's lives.

However, the problem for the Work and Pensions Secretary is that he gives the impression of thinking that amending taper rates in the benefits system and devising a smart contracting structure for employment support will be a silver bullet for problems as varied and complex as everything from worklessness to poverty to family breakdown. And he tries to pretend his reforms are taking place in isolation from the rest of government policy and the state of the economy. This is why his good intentions could, sadly, run aground.

The first point is the obvious one. It is much harder for people to find jobs when unemployment is rising. To be fair, this point is sometimes overstated. There is vastly greater movement of people in and out of work than the static monthly employment figures suggest (a point all too rarely reflected in public and media debate). For instance, in January, 325,000 people made a new claim for Jobseeker's Allowance and 344,000 left benefit.

Much more worrying is the staggering 93,000 rise in inactivity during the last quarter – these are people who have basically given up looking for work, many choosing to retire early. These people are the equivalent of the "lost generation" that was left on the scrapheap by the recessions of the 1980s and 1990s. And these are the people who need the government to focus its economic policy on job creation (to increase the overall supply of work) and to entrench a job guarantee as a backstop in the welfare state (to ensure no one drifts into long-term unemployment).

The second problem for Duncan Smith is the cuts to support for low- and middle-income families that he was forced to swallow by the Chancellor as the price for winning Treasury support for his reform plans. An £18bn squeeze on the benefits bill would cause any welfare minister a political headache, but the biggest difficulty is that the impact of these reductions directly contradicts his own policy goals. For a start, over £5bn of the cuts hit working families, reducing their living standards and their incentive to continue working.

And it's not just the measures announced in the Budget and on the Spending Review scorecard that are poised to bite. First, the IFS has confirmed that the Universal Credit will weaken the incentive for potential second earners to work, relative to the current system of tax credits. And now it is reported that the "capital limits" (the level of savings you can hold while still receiving state support) that currently apply to out-of-work benefits will be extended to working families in the Universal Credit.

This means that 400,000 families on a low wage will be stripped of the help they get to top up their wages (and make work pay), simply because they have done the right thing and put some money aside. A further 200,000 will be newly subject to a means test on in-work support for the crime of having savings. This measure will save the government shedloads of cash, but it is disastrous for incentives to work and save. In fact it will make work cost, not pay.

A technical change with a palpable impact on low earners. A measure that is slipped in by stealth and not declared openly by the government. A reform whose impact is directly contrary to the stated goals of ministers. Does that remind you of anything?

If the Social Market Foundation analysis is right – that working families with two children, an annual income of £25,000 and savings of over £16,000 could be £2,600 worse off a year – we could be looking at a Tory 10p tax debacle in the run-up to this year's Budget and local elections.

Graeme Cooke is a senior researcher at the Institute for Public Policy Research.

Graeme Cooke is Associate Director at IPPR

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Tony Blair might be a toxic figure - but his influence endures

Politicians at home and abroad are borrowing from the former prime minister's playbook. 

On 24 May at Methodist Central Hall, Westminster, a short distance from where he once governed, Tony Blair resurfaced for a public discussion. Having arrived on an overnight flight, he looked drawn and puffy-eyed but soon warmed to his theme: a robust defence of liberal globalisation. He admitted, however, to bafflement at recent events in the world. "I thought I was pretty good at politics. But I look at politics today and I’m not sure I understand it."

Blair lost power in the summer of 2007. In the ensuing nine years, he lost reputation. His business ventures and alliances with autocrats have made him a pariah among both the public and his party. A YouGov poll published last year found that 61 per cent of voters regarded Blair as an electoral liability, while just 14 per cent viewed him as an asset. In contrast, John Major, whom he defeated by a landslide in 1997, had a neutral net rating of zero. It is ever harder to recall that Blair won not one general election (he is the only living Labour leader to have done so) but three.

His standing is likely to diminish further when the Iraq inquiry report is published on 6 July. Advance leaks to the Sunday Times suggest that he will be censured for allegedly guaranteeing British military support to the US a year before the invasion. Few minds on either side will be changed by the 2.6 million-word document. Yet its publication will help enshrine Iraq as the defining feature of a legacy that also includes the minimum wage, tax credits, Sure Start, devolution and civil partnerships.

Former leaders can ordinarily rely on their parties to act as a last line of defence. In Blair’s case, however, much of the greatest opprobrium comes from his own side. Jeremy Corbyn inclines to the view that Iraq was not merely a blunder but a crime. In last year’s Labour leadership election, Liz Kendall, the most Blair-esque candidate, was rewarded with 4.5 per cent of the vote. The former prime minister’s imprimatur has become the political equivalent of the black spot.

Yet outside of the Labour leadership, Blairism endures in notable and often surprising forms. Sadiq Khan won the party’s London mayoral selection by running to the left of Tessa Jowell, one of Tony Blair’s closest allies. But his successful campaign against Zac Goldsmith drew lessons from Blair’s election triumphs. Khan relentlessly presented himself as “pro-business” and reached out beyond Labour’s core vote. After his victory, he was liberated to use the B-word, contrasting what “Tony Blair did [in opposition]” with Corbyn’s approach.

In their defence of the UK’s EU membership, David Cameron and George Osborne have deployed arguments once advanced by New Labour. The strategically minded Chancellor has forged an unlikely friendship with his former nemesis Peter Mandelson. In the domestic sphere, through equal marriage, the National Living Wage and the 0.7 per cent overseas aid target, the Conservatives have built on, rather than dismantled, significant Labour achievements."They just swallowed the entire manual," Mandelson declared at a recent King’s College seminar. "They didn’t just read the executive summary, they are following the whole thing to the letter."

Among SNP supporters, "Blairite" is the pejorative of choice. But the parallels between their party and New Labour are more suggestive than they would wish. Like Blair, Alex Salmond and Nicola Sturgeon have avoided income tax rises in order to retain the support of middle-class Scottish conservatives. In a speech last August on education, Sturgeon echoed the Blairite mantra that "what matters is what works".

Beyond British shores, political leaders are similarly inspired by Blair – and less reticent about acknowledging as much. Matteo Renzi, the 41-year-old centre-left Italian prime minister, is a long-standing admirer. "I adore one of his sayings,” he remarked in 2013. “I love all the traditions of my party, except one: that of losing elections."

In France, the reform-minded prime minister, Manuel Valls, and the minister of economy, Emmanuel Macron, are also self-described Blairites. Macron, who in April launched his own political movement, En Marche!, will shortly decide whether to challenge for the presidency next year. When he was compared to Blair by the TV presenter Andrew Marr, his response reflected the former prime minister’s diminished domestic reputation: “I don’t know if, in your mouth, that is a promise or a threat.”

The continuing attraction of Blair’s “third way” to European politicians reflects the failure of the project’s social-democratic critics to construct an alternative. Those who have sought to do so have struggled both in office (François Hollande) and out of it (Ed Miliband). The left is increasingly polarised between reformers and radicals (Corbyn, Syriza, Podemos), with those in between straining for relevance.

Despite his long absences from Britain, Blair’s friends say that he remains immersed in the intricacies of Labour politics. He has privately warned MPs that any attempt to keep Corbyn off the ballot in the event of a leadership challenge would be overruled by the National Executive Committee. At Methodist Central Hall, he said of Corbyn’s supporters: “It’s clear they can take over a political party. What’s not clear to me is whether they can take over a country.”

It was Blair’s insufficient devotion to the former task that enabled the revival of the left. As Alastair Campbell recently acknowledged: “We failed to develop talent, failed to cement organisational and cultural change in the party and failed to secure our legacy.” Rather than effecting a permanent realignment, as the right of the party hoped and the left feared, New Labour failed to outlive its creators.

It instead endures in a fragmented form as politicians at home and abroad co-opt its defining features: its pro-business pragmatism, its big-tent electoralism, its presentational nous. Some of Corbyn’s ­allies privately fear that Labour will one day re-embrace Blairism. But its new adherents would never dare to use that name.

George Eaton is political editor of the New Statesman.

This article first appeared in the 26 May 2016 issue of the New Statesman, The Brexit odd squad