Purnell offers Labour a way forward on welfare

Purnell's vision of a narrower but deeper welfare state deserves attention from Miliband.

James Purnell has long been one of Labour's brightest and best thinkers, so it is right that his intervention on welfare policy has received significant attention. The former work and pensions secretary followed up his Times article (£) with a film for last night's Newsnight in which he outlined his proposal to recast the welfare state as a "protection state".

If people are to "fall back in love" with the welfare state, he said, it must offer benefits that they actually value. To this end, Purnell suggested a job guarantee for those unemployed for more than a year (those who refuse to work will lose their benefits), wage protection - the unemployed could receive up to 70 per cent of previous earnings for up to six months - and free childcare. To pay for all it, we should cut back on those benefits - free bus passes, free TV licences, the winter fuel allowance - that many, not least the well off, do not value. Even universal child benefit, Purnell says, should no longer be considered sacred. Alongside this, he argues, we should reassert the contributory principle by, for instance, ensuring that those who pay in receive a higher pension than those who do not.

After all, it was Beveridge who declared in his 1942 report: "The correlative of the state's undertaking to ensure adequate benefit for unavoidable interruption of earnings is enforcement of the citizen's obligation to seek and accept all reasonable opportunities of work."

The real question, as the Spectator's Peter Hoskin suggested yesterday, is whether any of Purnell's ideas will be taken up by the Labour leadership. Ed Miliband has long defended "middle class benefits" on the grounds that, as Richard Titmuss put it, "services for the poor will always be poor services". He opposed the government's decision to withdraw child benefit from higher-rate taxpayers and warned it not to cut the winter fuel allowance. By contrast, Purnell declares: "I have never bought the argument that universal benefits bind the middle classes in. It feels too much like taxing with one hand to give back with another."

It is Miliband who is closest to his party's centre of gravity. Most Labour activists are dismayed by the thought of cutting back the benefits that Blair and Brown championed for so long. Ken Livingstone, one suspects, spoke for many when he tweeted last night: "James Purnell on Newsnight saying maybe we shld end free bus passes. Must be fought all the way. It is a political dead end for Labour."

Miliband has, however, shown an interest in reviving the contributory principle. In his speech on responsibility last month, he argued that services such as housing should not only prioritise those in the greatest need but also those who contribute the most to their communities, be it through volunteering or employment. Whether he will consider some of Purnell's more heretical proposals remains to be seen. But there is no doubt that, as Liam Byrne, the shadow work and pensions secretary, observed, "Labour is behind on welfare reform. It must get back in front". Purnell's vision of a narrower but deeper welfare state offers one way to do so.

George Eaton is political editor of the New Statesman.

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.