Labour's challenge is to show that it has the best plan to control welfare spending

The party needs a "social investment" strategy to reduce the subsidisation of private landlords, low-paying employers and long-term worklessness.

When George Osborne used his new year political message to raise the prospect of a further £12bn of cuts to working age benefits, it confirmed that the Conservatives will put welfare at the centre of their re-election strategy. In a speech at the IPPR today, Rachel Reeves will set out her first response to this challenge as part of a series of interventions from the Labour frontbench to connect their arguments about the "cost of living crisis" to the need for longer term social and economic reform.

Having signed up to the principle of a cap on structural welfare spending, the priority for Labour is to contest the debate about which party has the best strategy for sustainably controlling rises in the benefits bill and squeezing the greatest value from taxpayers' money. This requires a "social investment" strategy to reduce the subsidisation of private landlords, low-paying employers and long-term worklessness. The goal should be, over time, to shift spending from cash transfers and into housebuilding, childcare, apprenticeships and back to work support. As Ed Miliband argued last week, Britain has to earn its way to higher living standards.

A political direction of this kind can also be connected to Labour’s stated interest in reviving the contributory principle within the welfare system. In most of continental Europe, a distinction remains between social insurance (protection from cyclical risks for those who have contributed) and social assistance (means-tested support to those on the lowest incomes). However, over a number of decades, these two functions have been almost entirely conflated in this country. Restoring the distinction would mean aiming to reduce reliance on the state for permanent income replacement wherever possible, while strengthening temporary protection at key moments when earned income drops, like losing a job and having a child.

Marrying social investment and the contributory principle in this way would require a significant re-engineering of social policy, re-orientating of public spending, plus institutional innovation to revive the currently moribund National Insurance system. As part of IPPR’s Condition of Britain programme, we are exploring how such a strategy could be advanced, within the constraints of plausible fiscal scenarios for the next Parliament.

One option is to expand the role of income-contingent loans in providing much more substantial support to those who have contributed into the system if and when they face a drop income due to job loss, on a temporary and repayable basis. Our proposal for National Salary Insurance is one variant on this idea. Another is to provide a higher rate of short-term benefit for those who lose their job after having paid into the system, funded by increasing the number of years of contribution required before this entitlement kicks in. This could be modelled on Statutory Maternity Pay, which pays a much higher rate for the first six weeks – and is only available to those women who worked before having a child.

In the coming months, we will be analysing ideas such as these with a view to setting out practical, costed proposals for shifting to social investment and restoring the contributory principle. This will also include looking at how drawing a clearer distinction between the "social insurance" and "social assistance" tracks could affect the back to work support people receive and their interactions with the welfare system. We also want to explore how the institutional architecture of the National Insurance Fund – which evokes a tradition of mutual protection in this country – could be revived to help this task.

It is clear that the debate about benefits will be at the forefront of the political battleground over the coming year. It is vital that those of us committed to a resilient and effective welfare system advance feasible reforms that can chime with popular values, as well as defending against the worst attacks on vulnerable people.

Graeme Cooke is Research Director at IPPR

Members of the public in north London walk past a poster informing of changes to the benefits and tax system that came into effect in April 2013. Photograph: Getty Images.

Graeme Cooke is Associate Director at IPPR

Photo: Getty Images/AFP
Show Hide image

Is Yvette Cooper surging?

The bookmakers and Westminster are in a flurry. Is Yvette Cooper going to win after all? I'm not convinced. 

Is Yvette Cooper surging? The bookmakers have cut her odds, making her the second favourite after Jeremy Corbyn, and Westminster – and Labour more generally – is abuzz with chatter that it will be her, not Corbyn, who becomes leader on September 12. Are they right? A couple of thoughts:

I wouldn’t trust the bookmakers’ odds as far as I could throw them

When Jeremy Corbyn first entered the race his odds were at 100 to 1. When he secured the endorsement of Unite, Britain’s trade union, his odds were tied with Liz Kendall, who nobody – not even her closest allies – now believes will win the Labour leadership. When I first tipped the Islington North MP for the top job, his odds were still at 3 to 1.

Remember bookmakers aren’t trying to predict the future, they’re trying to turn a profit. (As are experienced betters – when Cooper’s odds were long, it was good sense to chuck some money on there, just to secure a win-win scenario. I wouldn’t be surprised if Burnham’s odds improve a bit as some people hedge for a surprise win for the shadow health secretary, too.)

I still don’t think that there is a plausible path to victory for Yvette Cooper

There is a lively debate playing out – much of it in on The Staggers – about which one of Cooper or Burnham is best-placed to stop Corbyn. Team Cooper say that their data shows that their candidate is the one to stop Corbyn. Team Burnham, unsurprisingly, say the reverse. But Team Kendall, the mayoral campaigns, and the Corbyn team also believe that it is Burnham, not Cooper, who can stop Corbyn.

They think that the shadow health secretary is a “bad bank”: full of second preferences for Corbyn. One senior Blairite, who loathes Burnham with a passion, told me that “only Andy can stop Corbyn, it’s as simple as that”.

I haven’t seen a complete breakdown of every CLP nomination – but I have seen around 40, and they support that argument. Luke Akehurst, a cheerleader for Cooper, published figures that support the “bad bank” theory as well.   Both YouGov polls show a larger pool of Corbyn second preferences among Burnham’s votes than Cooper’s.

But it doesn’t matter, because Andy Burnham can’t make the final round anyway

The “bad bank” row, while souring relations between Burnhamettes and Cooperinos even further, is interesting but academic.  Either Jeremy Corbyn will win outright or he will face Cooper in the final round. If Liz Kendall is eliminated, her second preferences will go to Cooper by an overwhelming margin.

Yes, large numbers of Kendall-supporting MPs are throwing their weight behind Burnham. But Kendall’s supporters are overwhelmingly giving their second preferences to Cooper regardless. My estimate, from both looking at CLP nominations and speaking to party members, is that around 80 to 90 per cent of Kendall’s second preferences will go to Cooper. Burnham’s gaffes – his “when it’s time” remark about Labour having a woman leader, that he appears to have a clapometer instead of a moral compass – have discredited him in him the eyes of many. While Burnham has shrunk, Cooper has grown. And for others, who can’t distinguish between Burnham and Cooper, they’d prefer to have “a crap woman rather than another crap man” in the words of one.

This holds even for Kendall backers who believe that Burnham is a bad bank. A repeated refrain from her supporters is that they simply couldn’t bring themselves to give Burnham their 2nd preference over Cooper. One senior insider, who has been telling his friends that they have to opt for Burnham over Cooper, told me that “faced with my own paper, I can’t vote for that man”.

Interventions from past leaders fall on deaf ears

A lot has happened to change the Labour party in recent years, but one often neglected aspect is this: the Labour right has lost two elections on the bounce. Yes, Ed Miliband may have rejected most of New Labour’s legacy and approach, but he was still a protégé of Gordon Brown and included figures like Rachel Reeves, Ed Balls and Jim Murphy in his shadow cabinet.  Yvette Cooper and Andy Burnham were senior figures during both defeats. And the same MPs who are now warning that Corbyn will doom the Labour Party to defeat were, just months ago, saying that Miliband was destined for Downing Street and only five years ago were saying that Gordon Brown was going to stay there.

Labour members don’t trust the press

A sizeable number of Labour party activists believe that the media is against them and will always have it in for them. They are not listening to articles about Jeremy Corbyn’s past associations or reading analyses of why Labour lost. Those big, gamechanging moments in the last month? Didn’t change anything.

100,000 people didn’t join the Labour party on deadline day to vote against Jeremy Corbyn

On the last day of registration, so many people tried to register to vote in the Labour leadership election that they broke the website. They weren’t doing so on the off-chance that the day after, Yvette Cooper would deliver the speech of her life. Yes, some of those sign-ups were duplicates, and 3,000 of them have been “purged”.  That still leaves an overwhelmingly large number of sign-ups who are going to go for Corbyn.

It doesn’t look as if anyone is turning off Corbyn

Yes, Sky News’ self-selecting poll is not representative of anything other than enthusiasm. But, equally, if Yvette Cooper is really going to beat Jeremy Corbyn, surely, surely, she wouldn’t be in third place behind Liz Kendall according to Sky’s post-debate poll. Surely she wouldn’t have been the winner according to just 6.1 per cent of viewers against Corbyn’s 80.7 per cent. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.