How Labour can offer something for something on welfare

A two-tier system of benefits for job seekers, with higher entitlements for those with strong work records, could be funded by reducing spending on mortgage interest.

This is set to be a big week for Labour. Today Ed Balls launched a foray into pensioner benefits, later this week Ed Miliband is set to address the question of working age welfare. The question is what principle (or combination of principles) should underpin any new approach. The shadow chancellor’s announcement today points towards more means-testing but in January, Miliband defended universal benefits and since then Liam Byrne has promised that Labour would "strengthen the old principle of contribution". 

Means-testing and the contributory principle are, of course, uneasy bedfellows; one judges eligibility by what people need to take out of a system, the other by what people have put in. Labour should plump for more emphasis on the latter. This matters most for working age welfare, which has been haemorrhaging support in recent years. International evidence shows that the UK has one of the least generous welfare systems for the unemployed –and one of those with the weakest relationship between what people have paid in and what they get out. The two are linked: people tend to support systems with a stronger contributory element.

In a paper published today Demos argues that the government should create a two-tier system of benefits for job seekers, with higher entitlements for those with strong work records. This would end the ‘nothing for something’ system, in which many people contribute over a number of years, only to find themselves entitled to very little when they require help. This would be paid for by reducing spending on the Support for Mortgage Interest (SMI) scheme, which currently covers the interest on up to £200,000 of loans or mortgages for homeowners out of work, up to a maximum of two years.

The principle behind this is that if people make the choice to take on a mortgage, they should also insure themselves against the associated risks. Homeowners losing their entitlement to SMI would instead be auto-enrolled into mortgage payment protection insurance, leaving them to choose to not cover themselves or to purchase insurance for mortgage interest payments at a cost of £33 a month at most - less than the price of an average mobile phone bill. The money saved from this change would allow for a higher payments for those with strong work records – roughly £95 a week compared to the £71.70 that all job seekers currently get for at least six months.

These changes would promote personal responsibility, through homeowners insuring themselves against risk incurred by their own choices. They would engender reciprocity, through a system which rewarding contribution. And they would avoid increasing the deficit by reallocating existing spending, rather than adding new commitments. 

Duncan O'Leary is deputy director of Demos

A street cleaner passes the Jobcentre Plus office on January 18, 2012 in Bath, England. Photograph: Getty Images.

Duncan O’Leary is deputy director of Demos

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“We can’t do this again”: Labour conference reactions to Jeremy Corbyn’s second victory

Overjoyed members, determined allies and concerned MPs are divided on how to unite.

“I tell you what, I want to know who those 193,229 people are.” This was the reaction of one Labour member a few rows from the front of the stage, following the announcement of Jeremy Corbyn’s victory at the Labour party conference. She was referring to support received by his defeated contender, Owen Smith, who won 38.2 per cent of the vote (to Corbyn’s 61.8 per cent).

But it’s this focus on the leader’s critics – so vehement among many (and there are a lot of them) of his fans – that many politicians, of either side, who were watching his victory speech in the conference hall want to put an end to.

“It’s about unity and bringing us all together – I think that’s what has to come out of this,” says shadow cabinet member and MP for Edmonton Kate Osamor. “It shouldn’t be about the figures, and how many votes, and his percentage, because that will just cause more animosity.”

Osamor, who is supportive of Corbyn’s leadership, is not alone in urging her colleagues who resigned from the shadow cabinet to “remember the door is never shut”.

Shadow minister and member of Labour’s National Executive Committee (NEC) Jon Ashworth – not a Corbyn loyalist, but focusing on making the shadow cabinet work together – shares the sentiment.

Standing pensively in front of the now-empty stage, he tells me he backs shadow cabinet elections (though not for every post) – a change to party rules that has not yet been decided by the NEC. “[It] would be a good way of bringing people back,” he says. “I’ve been involved in discussions behind the scenes this week and I hope we can get some resolution on the issue.”

He adds: “Jeremy’s won, he has to recognise a number of people didn’t vote for him, so we’ve got to unite.”

The former Foreign Secretary Margaret Beckett, another MP on the NEC, is sitting in the audience, looking over some documents. She warns that “it’s impossible to tell” whether those who resigned from Corbyn’s shadow cabinet would be willing to return, and is concerned about talent being wasted.

“We have a lot of excellent people in the party; there are new people now in the shadow cabinet who have had a chance to show their mettle but you need experience as well as ability,” she says.

Beckett, who has urged Corbyn to stand down in the past, hopes “everybody’s listening” to his call for unity, but questions how that will be achieved.

“How much bad blood there is among people who were told that there was plotting [against Corbyn], it’s impossible to tell, but obviously that doesn’t make for a very good atmosphere,” she says. “But Jeremy says we’ll wipe the slate clean, so let’s hope everybody will wipe the slate clean.”

It doesn’t look that way yet. Socialist veteran Dennis Skinner is prowling around the party conference space outside the hall, barking with glee about Corbyn’s defeated foes. “He’s trebled the membership,” he cries. “A figure that Blair, Brown and Prescott could only dream about. On average there’s more than a thousand of them [new members] in every constituency. Right-wing members of the parliamentary Labour party need to get on board!”

A call that may go unheeded, with fervent Corbyn allies and critics alike already straying from the unity message. The shadow justice secretary Richard Burgon is reminding the PLP that, “Jeremy’s won by a bigger margin this time”, and telling journalists after the speech that he is “relaxed” about how the shadow cabinet is recruited (not a rallying cry for shadow cabinet elections).

“If Jeremy wants to hold out an olive branch to the PLP, work with MPs more closely, he has to look very seriously at that [shadow cabinet elections]; it’s gone to the NEC but no decision has been made,” says Louise Ellman, the Liverpool MP and transport committee chair who has been critical of Corbyn’s leadership. “That might not be the only way. I think he has to find a way of working with MPs, because we’re all elected by millions of people – the general public – and he seems to dismiss that.”

“If he sees it [his victory] as an endorsement of how he’s been operating up until now, the problems which led to the election being called will remain,” Ellman warns. “If we’re going to be a credible party of government, we’ve got to reach out to the general electorate. He didn’t say anything about that in his speech, but I hope that perhaps now he might feel more confident to be able to change direction.”

Corbyn may have called for cooperation, but his increased mandate (up from his last stonking victory with 59.5 per cent of the vote) is the starkest illustration yet of the gulf between his popularity in Parliament and among members.

The fact that one attempt at a ceasefire in the party’s civil war – by allowing MPs to vote for some shadow cabinet posts – is in contention suggests this gulf is in danger of increasing.

And then where could the party be this time next year? As Osamor warns: “We should not be looking at our differences, because when we do that, we end up thinking it’s a good thing to spend our summer having another contest. And we can’t. We can’t do this again.”

Anoosh Chakelian is deputy web editor at the New Statesman.