This week saw Labour’s key benefits reforms come into force. Ministers and their outriders in the press and social media have been arguing that measures like abolishing the two-child benefit cap will cut poverty. But everybody else sees people who work paying higher taxes to fund benefits for those who don’t, with senior journalists like Andrew Neil arguing the Labour Party should be renamed the Welfare Party instead.
The criticism is biting and right, but what’s the alternative? Reversing Labour’s changes would put much-needed cash back into working families’ pockets, but push officially-reported poverty back up again too. So we need a different kind of benefits reform instead, which cuts poverty by helping people stand on their own two feet, and equips them to live proudly independent lives without needing so much help from the state.
The first step on this journey will be to launch a new official government definition of poverty based on people’s real standard of living (for example whether they have enough food, housing and clothes) and to update our laws, policies and statistics to use the new version instead.
This reform will fundamentally reframe our understanding of what poverty is and how to cure it. Our current, deeply flawed approach assumes anyone on less than 60% of national median earnings must be poverty-stricken, which embeds a powerful income-equality ratchet into the heart of Britain’s welfare state and means the true intention of our benefits system is really to redistribute wealth rather than to solve poverty. It means we bandage its symptom – not enough money – rather than fixing its causes, which are things like addiction, low skills, weak ambition or poor health. It’s the reason why reported poverty has hardly changed in the last 40 years in spite of benefits payments which cost taxpayers billions, even though real living standards have improved.
Step two will be to reset our benefits system’s central mission for working-age claimants, making its top priority to equip them with whatever skills, attitudes or physical aids they are currently missing to live fully independent lives as soon as possible. This new focus will usher in some simple-but-profound changes which CapX has covered in the last few months, like tougher and more honest evaluations of whether DWP back-to-work schemes work well or badly, so successful programmes are systematically spotted and expanded, while failures are reformed or closed. And ending poverty traps, by making sure it always pays to take a job through ending work disincentives in the benefits system too.
Step three will be to make sure the benefits system keeps providing temporary support for working-age claimants to stay above the poverty line until they can fend for themselves. This will mean regular face to face interviews for every claimant, partly to make sure anyone with unacceptably low living standards is getting all the money they’re entitled to, while reducing the number of inaccurate claims which shouldn’t be approved, and partly to upgrade support programmes for any claimants whose progress towards independent living is too slow.
And it will mean fixing the infamous ‘five week wait’ before the first payment of a new Universal Credit claim, which can push claimants without enough savings into poverty. In those cases the initial payments will start at the same frequency as each claimant was previously paid, whether it was daily, weekly or fortnightly, with the frequency being steadily lengthened in manageable steps until it becomes monthly like everybody else.
These three simple but fundamental steps will create a different kind of benefits system. One that treats poverty as an affliction which can be genuinely cured, instead of an indefinite excuse to redistribute other people’s money instead. One where joblessness, benefits bills, taxes and poverty rates will all fall as we shrink the need for key parts of the welfare state, by equipping more people to live proudly independent lives.
Most important of all, we will stop pretending we can solve poverty by making everyone’s pay more equal. It’s an approach which hasn’t worked since the welfare state was invented in the last century, and no-one expects it to in the next century either. We’ve created an endless, hopeless, immoral treadmill for ourselves, and it’s time we got off.
This article is the latest in a fortnightly series of policy proposals by John Penrose and the Centre for Small State Conservatives, published in CapX
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