Welfare reform – repeating the mistakes of the past

23rd June 2015

After weeks of briefing, on Monday we got the clearest indication yet that tax credits are going to bear the brunt of next month’s welfare cuts. In more ways than one, it looks like the 2015 Budget will relive the mistakes of 2010.


There is now a remarkable consensus across right and left that cuts to tax credits is a solution seeking a problem. Both the Institute for Economic Affairs and Adam Smith Institute have set out that tax credits don’t ‘subsidise’ bad employers; the TUC that tax credits are well-targeted on low income working households; and the Institute for Fiscal Studies that cutting tax credits will increase child poverty. And it is inescapable that making people worse off in work, and worse off with more work, will do nothing to address the challenges of low participation and low pay that this government – to its great credit – says that it wants to address. If anything, it will make those problems worse.


Back in 2010, as we have shown in work for the Local Government Association, tax credits made up the largest part of the planned £16 billion annual cuts in welfare. I was in government around that time, and then as now there was no grand plan for welfare reform. Then as now, officials were set arbitrary deadlines to come up with arbitrary cuts that could be ‘scored’ in order to meet an arbitrary target. There was no secret plan, no silent conspiracy – just the numbers and the dates.


So this time no doubt, DWP’s Housing Benefit division will have been told to find £3bn (answer: cut the Local Housing Allowance a bit more, lower the HB caps); HMT’s Tax Credits team will have been told to find £5bn (cut everything); and the rest will have been told to squeeze the pips some more – freeze benefits, cut Universal Credit work allowances, lower the benefit cap, cut the few remaining discretionary grants, get a bit off passported benefits.


The consequence – then as now – is incoherence and contradiction.  In our impact assessment from 2013, we showed that the large majority of the cuts in the last Parliament fell on households where someone worked. By once again going after tax credits – where three quarters of spending goes to working families – those impacts on working families will be far worse.


Last summer, we set out our take for the TUC on what ‘full employment’ should mean and what we need to do to get there. We followed this up with our ‘Fit for Purpose’ project on how we transform support for disabled people and those with health conditions. The year before, we set out in work for Trust for London a framework for improving in-work progression for the low paid. Across all of these areas, there is a common theme: the need to match good intentions with the right support – to prepare for work, to find work, to increase earnings, to progress.


And this is the other area where we risk repeating the mistakes of the past. In 2010, as now, all of the focus was on what benefits should be cut rather than what support those households might then need – to find work, to increase their income or to move home. The detail of the Prime Minister’s speech on Monday bears this out: when you get to the bit about employment, the only meat on the bones is more apprenticeships (ring-fenced for the young, and almost always those not on benefit) and a bizarre reference to social impact bonds – despite there never having been a single bond for employment.


On Monday, we published our latest local assessment of the impacts of welfare reform, for Brighton & Hove City Council.  This research shows not only the significant and cumulative impacts on residents, but also the extent to which those in crisis and at risk of crisis simply didn’t have the means to address their underlying issues around housing and particularly employment. We found the same things in research last year in Oxford City and in Tower Hamlets. Residents often receive excellent support in dealing with their crises, with services and agencies achieving more and more for less and less. But both agencies and claimants conceive of their needs in the short term. Despite most of those interviewed wanting to work or to increase their incomes, the support to do so is simply not there.


In our view, then, any debate about welfare cuts needs to be matched with one about how we extend, improve and align our support to those residents to find work and to increase their incomes.


In practical terms, this means ensuring that future employment programmes (whatever comes after the Work Programme) are better integrated with local services and include voluntary access for those that want it.


It means greater co-location of Jobcentre Plus and Council services, and then stronger partnerships with those services that are helping residents to deal with crises.


It means ending the arbitrary rules that prevent most of those impacted by welfare reforms from accessing the intensive family and employment services being run through ‘Troubled Families’ programmes.


It means ensuring that our European Social Fund investment – through which hundreds of millions of pounds is being targeted at supporting the most disadvantaged – is geared towards those affected by welfare reforms.


And it means developing those ‘invest to save’ models that the Prime Minister thinks already exist.


Doing all of this would go some way to addressing the mistakes of the last Parliament and preparing people for what is to come.  And what is more, it would cost the government nothing.