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How Labour got welfare wrong - and how it can put it right

Labour opened the welfare system up to profiteering and unaccountable corporate power and confused t

The speeches by Ed Miliband and Liam Byrne begin to frame Labour's approach to a new social settlement. Within Labour there is a growing debate about how the party got welfare wrong while in government. The assumption is that it wasn't conditional enough. As the debate develops about the kind of social settlement Labour wants for the future there are three problems with the welfare reforms that Labour in government implemented that need to be addressed. Labour has to first get a hearing in the country and then crucially it has to transform the terms of debate about welfare.To do this requires confronting some home truths.

First, the methodologies which underpinned much of Labour's argument about welfare reform are questionable. In 2008 David Freud was interviewed by the Telegraph weeks after he'd started as an adviser on welfare reform to the DWP, a subject he admitted he knew nothing about. Despite this, Freud claimed: "There are about 3.1 million people not working, I think we can get about 1.4 million back to work". The number appears to have been plucked out of thin air. It was never corrected in public but it was eventually reduced to 1m. This new figure was the product of research at Sheffield Hallam University. In a 2010 paper the researchers explained their methodology which led to their claim that approximately one million on incapacity benefit were "hidden unemployed". The majority live in former industrial areas and poor working class areas of the country. How did they arrive at this figure?

They claimed that this figure is the number of IB Claimants who might reasonably be expected to have been in work in a genuinely fully employed economy. They are not shirking. "Their benefit claims are legitimate and their health problems and disabilities are real." But if they had lived for example in Surrey they would certainly be in work.

How do the researchers know that this would be the case? The answer is that they don't know, because the research does not address the issue of health. It takes no account of regional and class inequalities in health. It ignores the evidence that inequality creates illness and it ignores the detrimental impact of poverty on mental and physical health. It also fails to take into account the high numbers of people with limiting long term illness. The figure of 1 million fit to work is unproven.

The first problem with Labour's welfare reforms was that they effectively removed the issue of limiting long term illnesses from the debate in favour of the spurious concept of a "dependency culture". Labour's welfare reform which is being implemented by the coalition misjudges the levels of chronic illness that actually exist. Not only is it causing considerable suffering, it is also going to be very expensive as people who are unfit to work are pushed off IB onto Job Seekers Allowance where they will either fall by the wayside, be caught in a revolving door of employment and unemployment or end up claiming ESA again.

Second, the Work Capability Assessment (WCA) introduced by the 2009 Welfare Reform Bill is poorly designed and does not accurately assess a claimants everyday incapacity over time. People who are mentally ill, parents of adult children with an Autism Spectrum Condition, and literally hundreds of thousands of others with complex and intermittent illnesses who want to work but know that they cannot in the way expected of them by employers and the state, know the WCA is not fit for purpose. Medical expertise is not central to its functioning and decision making. It is a tick box computer programme run by ATOS employees which lacks the capacity to pick up complex illnesses, particularly mental health issues and Autism Spectrum Conditions.

Policy consultant Steve Griffiths has used tribunal data and estimates that since the introduction of Incapacity Benefit in 1995, "at a very conservative estimate" 500,000 people have been wrongly disallowed Incapacity Benefit, or more recently ESA. More than 300,000 have had their benefit restored at huge cost to the tax payer. Many never reach a tribunal. Richard Thomas, Chair of the Administrative Justice and Tribunals Council has said that the cases heard by tribunals are probably the "tip of the iceberg".

The second problem, which was a consequence of the first, is that Labour ended up with a harsh and punitive approach to people who were sick and disabled.

Third, Labour has opened the door to the private sector and so introduced into the welfare system the commodification of people who are sick and disabled. It will prove to be a costly mistake. The Work Capability Assessment is a case in point.

In 1992 the giant US insurance company Unumprovident was brought in by the then Secretary of State for Social Security, Peter Lilley to help tighten up access to Invalidity Benefit. In April 1997, when the new All Work Test was introduced, the company launched an expensive campaign. One ad ran: "April 13, unlucky for some. Because tomorrow the new rules on state incapacity benefit announced in the 1993 autumn budget come into effect. Which means that if you fall ill and have to rely on state incapacity benefit, you could be in serious trouble." At the time Private Eye pointed out the conflict of interest involved in the company's advertising campaign. The company denied it but its chairman, Ward E. Graffam, did acknowledge the "exciting developments" in Britain: "The impending changes to the State ill-health benefits system will create unique sales opportunities across the entire disability market and we will be launching a concerted effort to harness the potential in these."

Meanwhile in the US the company was involved in large scale malpractice and was subject to investigation and an increasing number of class actions. It changed its name to Unum and here in the UK retained its connection to the DWP. It continued to help shape the argument for welfare reform, sponsoring conferences, paying for research, funding a centre at Cardiff University where former DWP senior personnel wrote the framework for the Green Paper for the 2009 Welfare Reform Act.

Unum has been a principal mover in constructing a new market in income protection through its lobbying activity and involvement in tightening up the various tests. It has been a long term strategy that it is now exploiting. And it clearly has longer term ambitions to see the wholesale marketisation of health and welfare. When the national roll out of the new ESA began in April, Zurich insurance company was advertising its income protection scheme. Zurich's income protection business is owned by Unum.

The third problem was that Labour opened the welfare system up to profiteering and unaccountable corporate power.

The old system of welfare could not cope with the social catastrophe created by Thatcherism, deindustrialisation and globalisation. But Labour confused the sick and disabled with the unemployed. It underestimated the enormous difficulty getting people people who are chronically sick into a worthwhile occupation. It was naive about the corporate interests that are staking out new markets. The Coalition is now implementing Labour's welfare reforms and they are a social policy disaster in the making.

Labour has to face this and acknowledge what it got wrong and then it needs construct a more democratic, compassionate and relational approach to welfare. A covenant around welfare begins with a contributory insurance principle that protects everyone against the risks of unemployment, illness, disability. It is the best chance of sustaining a public universal welfare system in which everyone has a stake. It has to be a system that is based on responsibility and compassion and it must support those who are unable to contribute due to disability or long term illness without subjecting them to a punitive regime of endless testing and sanctions. A social insurance system does not resolve the massive inequalities in income, wealth and opportunity that divides the country and so a new welfare settlement has to be part of much broader economic reforms that distribute capital, decent jobs and productive wealth creation across the whole country.

Ed Miliband's speech points in this direction and it is the way we need to go.

 

Jonathan Rutherford is a co-author of The Labour Tradition and the Politics of Paradox, along with Maurice Glasman, Marc Stears and Stuart White.