Our welfare system is broken, but Labour and the Tories just trade myths

Rather than arguing about policy and practice, both parties encourage a futile debate about motivation and motive.

The first half of this parliamentary term was dominated by an economic argument that, in political terms, Labour lost. That doesn’t mean the Ed Balls's position on the deficit and debt has necessarily been the wrong one. Learned economists share the shadow chancellor’s analysis that premature austerity risks suffocating growth. Balls warned there would be a double-dip recession and there was.

But there has not been much reward for that foresight. Opinion polls show voters still inclined to accept the coalition’s explanations for missed fiscal targets and unscheduled stagnation – a derelict Labour legacy and turbulence washing in from the rest of Europe. The Tories act as if economic misfortune is a force of nature visited upon them rather than the product of their own policy misjudgement. Labour, meanwhile, are marooned between the forward-facing argument about who is best equipped to navigate through the storm and the backward-facing one about whether the storm might have been avoided.

Much of the economic argument in Westminster over the past two years has been predicated on mutually sustaining myths, one Labour and one Conservative. I mean "myth" not as in a malicious falsehood but in the sense of a moral parable that might be rooted in real world observation but whose real purpose is to galvanise tribal faith.

The Tory one is that the only feasible fiscal path immediately after the last election was the one laid out in George Osborne’s "emergency Budget" of June 2010. Any alternative, goes the story, would have led to "Greek-style" catastrophe, a flight of international investors from UK bonds, meltdown, apocalypse.

This was never true. Markets wanted certainty that there would be some determination to address the UK’s fiscal problems. But demonstration of will was what mattered, not acceleration of the austerity timetable. Osborne could have entered the Treasury and promised with the requisite level of portentous ceremony to implement Alastair Darling’s pre-election budget plans. The sky would not have fallen in.

The new Chancellor took a more aggressive path for two political reasons. First, he hoped to cast Labour as the party of reckless profligacy. Second, he wanted to get budget consolidation out of the way faster so as to fight a cash giveaway election in 2015. The first part of the plan worked; the second didn’t.

The Labour myth is that Osborne’s political gamble entirely explains why recovery turned to recession and why there is misery in Britain today. The implication in Balls’s "too far too fast" line is that somewhere in the gap between Darling’s proposed deficit reduction timetable and the one Osborne tried (and failed) to implement, was enough cash stimulus to pump vigour into the economy. There wasn’t. Darling envisaged austerity-lite; it still would have looked and tasted like austerity. It still would have hurt. It is entirely possible that the gentler gradient on Darling’s graph would have made all the difference to growth prospects but, come 2015, that will be an academic hypothesis to exercise economics students. It is not the kind of argument that persuades swing voters.

Now that the Osborne timetable is in tatters, Labour and the Tories are not as far apart on the economy as they seem. Balls has explicitly acknowledged the need for fiscal constraint and Osborne has accepted that austerity alone cannot restore growth to the economy and that investment must be brought forward. Labour are reluctant deficit hawks; the Tories are timid dabblers in Keynesian stimulus. It would be silly to suggest that there is some secret consensus emerging but it has also suited the Chancellor and his shadow to depict each other at polar extremes of an ideological spectrum when in fact they don’t. It has suited public enlightenment and intelligent debate less.

And now, with the forthcoming battle over welfare cuts, a similar pattern is emerging. The second half of the parliament will be dominated by more mythological warfare, this time over the benefits bill.

The Tory myth is that Labour is only interested in handing out money for people to sit around doing nothing; that there is no willingness to reform the welfare system. This is a subset of the fiction that Balls doesn’t intend to reduce the deficit. As senior Labour figures point out whenever they are given the opportunity, the party wants to reduce spending on out-of-work benefits and is unafraid to impose sanctions on those who refuse to take jobs when offered. That was Labour policy by the end of the last government and it is Labour policy now. (How popular it is with the party grass roots is another matter entirely.)

The Labour myth is that Conservatives are motivated entirely by the cynical urge to confiscate money from the poor and that, in cahoots with tabloid newspapers, they wilfully vilify those in receipt on benefits. That ignores the possibility that some Tories might sincerely believe that the welfare system they inherited was riddled with hypocrisies and injustices. They might believe it because it is true. It was ridiculous to funnel taxpayers' money into the pockets of rogue landlords through an unchecked housing benefit budget and it was dishonest, unfair and financially reckless to use incapacity benefit as a cash anaesthetic for people who might have been able to work if given the right training and incentives – positive and negative. (Those observations do not cease to be true just because there are greater injustices in the world and worse policy errors that should command more media/political attention.)

The welfare system is broken, not irredeemably but quite substantially. Labour knew it in office. The Tories know it now. The interesting question is what interventions are most effective in doing something about it. What works in terms of affordability and delivery of a just outcome? How should incentives be calibrated for different labour market conditions? That is not the debate we are likely to have over the next two years.

Instead we will have ever more desperate attempts by each side to force their opponents into the mythological template. Some on the Labour side will unintentionally help the Tories by denying that there is such a thing as cultural dependency on welfare and pretending that the only problem with the system is its lack of largesse. Some on the Tory side will help Labour by spraying indiscriminate spite at anyone who happens to be in receipt of state help and by appearing unmoved by the plight of Britain’s poor.

Everyone will be in favour of reform. But Labour will struggle to persuade the public that they have the courage to see it through and the Tories will struggle to convince anyone that they are compassionate enough to do it right. The argument will be about motivation and motive instead of policy and practice.

An important difference between this argument and the economic one that dominated the first half of the parliament is that the coalition parties have already spent much of their political capital. Osborne stole a march on Labour in June 2010. The Chancellor had the benefit of the doubt on his side - and the then still trusted Lib Dems cheerleading for him. The opposition was  reeling from defeat and only embarking on the process of electing a new leader. Now Ed Miliband leads a united party and has more political combat experience under his belt. 

It is, of course, quite possible for both sides to lose this argument. Labour could fail to shake off a reputation for throwing public money at people who are judged not to deserve it; the Tories could thoroughly restore their status as the party that sneers in the face of social destitution. How do we implement a social security system that provides for those in need, supports people out of work in their hunt for a job, doesn’t create perverse incentives to depend on the state for life, rewards enterprise, doesn’t stigmatise disadvantage, is fair and compassionate while also financially sustainable? To find the answer, look away from British politics now.

Goal posts stand in a children's park in the Gorton area of Manchester. Photograph: Getty Images.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

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Will Euroscepticism prove an unbeatable advantage in the Conservative leadership race?

Conservative members who are eager for Brexit are still searching for a heavyweight champion - and they could yet inherit the earth.

Put your money on Liam Fox? The former Defence Secretary has been given a boost by the news that ConservativeHome’s rolling survey of party members preferences for the next Conservative leader. Jeremy Wilson at BusinessInsider and James Millar at the Sunday Post have both tipped Fox for the top job.

Are they right? The expectation among Conservative MPs is that there will be several candidates from the Tory right: Dominic Raab, Priti Patel and potentially Owen Paterson could all be candidates, while Boris Johnson, in the words of one: “rides both horses – is he the candidate of the left, of the right, or both?”

MPs will whittle down the field of candidates to a top two, who will then be voted on by the membership.  (As Graham Brady, chair of the 1922 Committee, notes in his interview with my colleague George Eaton, Conservative MPs could choose to offer a wider field if they so desired, but would be unlikely to surrender more power to party activists.)

The extreme likelihood is that that contest will be between two candidates: George Osborne and not-George Osborne.  “We know that the Chancellor has a bye to the final,” one minister observes, “But once you’re in the final – well, then it’s anyone’s game.”

Could “not-George Osborne” be Liam Fox? Well, the difficulty, as one MP observes, is we don’t really know what the Conservative leadership election is about:

“We don’t even know what the questions are to which the candidates will attempt to present themselves as the answer. Usually, that question would be: who can win us the election? But now that Labour have Corbyn, that question is taken care of.”

So what’s the question that MPs will be asking? We simply don’t know – and it may be that they come to a very different conclusion to their members, just as in 2001, when Ken Clarke won among MPs – before being defeated in a landslide by Conservative activists.

Much depends not only on the outcome of the European referendum, but also on its conduct. If the contest is particularly bruising, it may be that MPs are looking for a candidate who will “heal and settle”, in the words of one. That would disadvantage Fox, who will likely be a combative presence in the European referendum, and could benefit Boris Johnson, who, as one MP put it, “rides both horses” and will be less intimately linked with the referendum and its outcome than Osborne.

But equally, it could be that Euroscepticism proves to be a less powerful card than we currently expect. Ignoring the not inconsiderable organisational hurdles that have to be cleared to beat Theresa May, Boris Johnson, and potentially any or all of the “next generation” of Sajid Javid, Nicky Morgan or Stephen Crabb, we simply don’t know what the reaction of Conservative members to the In-Out referendum will be.

Firstly, there’s a non-trivial possibility that Leave could still win, despite its difficulties at centre-forward. The incentive to “reward” an Outer will be smaller. But if Britain votes to Remain – and if that vote is seen by Conservative members as the result of “dirty tricks” by the Conservative leadership – it could be that many members, far from sticking around for another three to four years to vote in the election, simply decide to leave. The last time that Cameron went against the dearest instincts of many of his party grassroots, the result was victory for the Prime Minister – and an activist base that, as the result of defections to Ukip and cancelled membership fees, is more socially liberal and more sympathetic to Cameron than it was before. Don’t forget that, for all the worry about “entryism” in the Labour leadership, it was “exitism” – of Labour members who supported David Miliband and liked the New Labour years  - that shifted that party towards Jeremy Corbyn.

It could be that if – as Brady predicts in this week’s New Statesman – the final two is an Inner and an Outer, the Eurosceptic candidate finds that the members who might have backed them are simply no longer around.

It comes back to the biggest known unknown in the race to succeed Cameron: Conservative members. For the first time in British political history, a Prime Minister will be chosen, not by MPs with an electoral mandate of their own or by voters at a general election but by an entirelyself-selecting group: party members. And we simply don't know enough about what they feel - yet. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.