Everything this government does sits in the shadow of our need to cut the deficit we inherited from Labour. The simple reality is that we are spending £120m a day servicing the interest on a deficit of the same size as the one run up by Greece.
Yet even if this deficit hadn’t existed, we would have had to do something about our high level of social breakdown. About 1.4 million people spent almost ten years on out-of-work benefits under the last government, while, for an abandoned group of 16-to-17-year-olds no longer in school or college, employment rates declined significantly even before the recession started. Progress on child poverty has been pursued through huge increases in child-related welfare payments, yet improvements in the past decade have been minimal and Labour left office with income inequality at a record high.
At the heart of this is an entrenched worklessness, produced by a welfare system that penalises positive behaviours while rewarding destructive ones. At the Centre for Social Justice, we worked hard to highlight these damaging structures, from the punitive withdrawal rates to the complexity that left people struggling to understand whether they would be better off in employment. Alongside this were myriad complicated work schemes, which too often measured success in terms of processes carried out, rather than numbers helped back
Our response to this broken system is based around two pillars – the universal credit and the Work Programme. The universal credit will simplify the welfare system and make work pay, replacing an array of benefits and tax credits with one payment set at a single taper of around 65 per cent. This will make work worthwhile at any number of hours, rather than clumping support around the 16- and 30-hour points.
Almost 85 per cent of the gains from these reforms will go to those in the bottom 40 per cent of the income distribution, and we expect to pull almost a million adults and children out of poverty.
Linked to the universal credit, and fundamental to its success, is the Work Programme, which will pay the best of the private, public and voluntary sectors for getting people into work and keeping them there. It is worth bearing in mind that, with jobcentre support, 75 per cent of claimants are back in work six months after becoming unemployed and 90 per cent are back after a year. That’s when the Work Programme kicks in to provide specialist support.
The key to the Work Programme is that we will pay for what works, and in so many cases this will be the local expertise brought to bear by voluntary and community groups – almost 300 of which will be involved in delivery of the Work Programme, amounting to a substantial investment in the sector. This is what the “big society” is all about: investing in voluntary organisations when they are the best at what they do.
Alongside these changes, we are also making disability benefits work better by reforming incapacity benefits and the disability living allowance. On the former, we are building on an approach started under the previous government, reassessing all claimants to build a better understanding of who needs support and who may be able to take steps towards work. We are constantly reviewing the assessment criteria with Professor Malcolm Harrington to ensure that they are fair; but the principle remains that disability support should be based on clear, objective and regular assessments of need.
This is a principle we are also applying to disability living allowance, where we are introducing an objective assessment to ensure financial support is getting to those who face the greatest challenges to taking part in daily life. I am pleased that, in many of these areas, there is some all-party support for the changes.
At the same time we are getting to grips with housing benefit, bringing fairness to a system that has run out of control. Under the previous system it was possible for someone to be claiming around £100,000 in housing benefit a year, but to pay such a rent when not on benefits you would have to earn nearly £500,000 a year. This is unfair and unaffordable, and it’s why we are re-forming the system by clarifying limits to the amount of housing benefit a claimant can receive. It isn’t kind to a benefit claimant to put them in a house they couldn’t afford to pay for if not on benefits, only adding to the disincentive for them to take a job. It is also unfair to hard-working families that commute to work and pay for those on housing benefit to have to pick up the spiralling bill, one that has nearly doubled from £11bn to £21.5bn in ten years.
There are two people in this new welfare contract, the taxpayer and the claimant. Taxpayers seek only fairness, accepting their obligation to help when someone falls on hard times, but expecting those on benefits to do their best to move off them and contribute where they can. While they know there are some who are severely sick or disabled, they have become angry at the level of abuse in the system, where some find ways to stay on benefits rather than work.
Claimants must be helped and we will do this through the reforms I have outlined, but on behalf of the taxpayer we have a right to expect full co-operation in return. They must try to break the dependency culture by working with us to prepare for work and take work when it is offered. Failure to co-operate will result in a series of penalties, surely reasonable after so much effort has been made on their behalf? In short, we seek life change for a group in society that has been left behind for too long.
Iain Duncan Smith is Secretary of State for Work and Pensions. He founded the prominent think tank the Centre for Social Justice in 2004