Back in 1997 Tony Blair famously told Frank Field to “think the unthinkable” in the effort to reduce poverty, rationalise welfare benefits and improve work incentives. When Field returned to Downing Street some time later clutching a plan to overhaul the system, he found his ideas rebuffed. The Treasury had deemed them to be, well, unthinkable. Gordon Brown had his own ideas.
So old Whitehall hands could be forgiven a sense of deja vu when Iain Duncan Smith unveiled the latest project to reform a system that grew still more expensive and complex during 13 years of Labour rule. No one could quarrel with Duncan Smith’s analysis – the present system is riddled with disincentives, unfairnesses and complexities, and the costs are still spiralling. A much simpler system, with fewer benefits and much lower withdrawal rates, would ultimately help more people back into work and reduce the overall bill.
The trouble is that simplifying the system is, sad to say, a fiendishly complex enterprise. It would require, for example, a massive programme of new IT investment by both central and local government. It would be even more expensive in other ways: the purpose of high withdrawal rates is to save money. And it would make benefits less sensitive to the individual circumstances of claimants.
None of this is to say that Duncan Smith should abandon his ambition. Rather he must make the case that savings elsewhere could finance the change. Billions, for example, could be saved by means-testing child benefit and billions more by withdrawing from the middle classes winter fuel allowances, free bus passes and other such perks. But hasn’t David Cameron intimated these politically sensitive benefits are protected?
We’ll see in the Budget, but meanwhile the Treasury seems uninterested in reform. The way to save money and tackle the budget deficit the mandarins are telling George Osborne is to freeze benefit rates and put up taxes. The rest can go in a file marked “unthinkable”.
Jim Pickard
Kiran Stacey