Last year I got a call from someone at DWP. The call went roughly as follows:
DWP: We’ve got a story for you. Figures show that the benefit cap is working and it hasn’t even been brought in yet.
Me: Really? How do they do that?
DWP: Well the number of people who have come off benefits since we announced the policy is XXX thousand. [I forget the actual number the person used.]
This morning we reported in the FT that bishops in the House of Lords are leading an attempt to exempt children from the below-inflation rise in benefits. This follows on from the comments of Justin Welby, the Archbishop of Canterbury, over the weekend, who said:
By protecting children from the effects of this bill, they can help fulfil their commitment to end child poverty.
But just as interesting as the bishops’ response to government attempts to slash the welfare bill has been the reaction of Tory MPs to the archbishop’s comments. Read more
Labour continues to pile the pressure onto Iain Duncan Smith over reductions in housing benefit to those who have one or more spare bedrooms in their social housing. At DWP questions today, Labour MP after Labour MP stood up to ask a question about what they call the “bedroom tax” (Tories hate the label but their “spare room subsidy” label misses the point).
Amid the barrage of questions, it became clear that DWP is about to offer a concession. IDS told the Lib Dem MP Greg Mulholland that guidance would be going out to councils tomorrow about what they can do for severely disabled children. Read more
Iain Duncan Smith was once more on the attack this morning against critics of the government’s work experience scheme, under which young people are told to sign up to a four-week placement at one of a range of businesses or lose their benefits.
The scheme has been controversial for two reasons. One is that it meant young people who were claiming benefits while looking for a job were not able to do work experience in their own chosen field; instead they had to go on a government-mandated scheme at a company such as Boots, McDonald’s, Argos, Tesco or Primark. The second is it meant some of the countries’ biggest companies profiting from free labour, which is why one activist referred to it this morning as “slavery”.
Writing in the Daily Mail, the work and pensions secretary has dismissed such criticisms however, saying:
Armed with an unjustified sense of superiority and sporting an intellectual sneer, we find a commentating elite which seems determined to belittle and downgrade any opportunity for young people that doesn’t fit their pre-conceived notion of a ‘worthwhile job’.
David Cameron was asked in today’s prime minister’s questions about the critical report from the government’s auditors on the government’s flagship back to work scheme.
The National Audit Office warned that providers of the £5bn Work Programme are working to overly-ambitious targets which they might not meet. They believe that out of the group of people who are easiest to get into work, only just over a quarter will be successfully placed. That compares to government estimates of 40 per cent.
The prime minister tried to brush off the problem during PMQs, sayign the risk was not to the taxpayer, but to the providers themselves:
The basic point is the Work Programme is not putting the taxpayers at risk, it is putting providers at risk. It is about payment by results, it is about getting things the previous government never did.
Unless there is a last minute U-turn in Whitehall tonight, one of the ways which George Osborne will pay for the various jobs and infrastructure schemes in Tuesday’s growth review will be to squeeze tax credits.
This is a result of protracted bargaining – Osborne wanted to freeze benefits, but the combined efforts of the Lib Dems and Iain Duncan Smith put a stop to that. Eventually the compromise was made that credits would come under the axeman’s blade instead.
So who suffers if these are frozen or cut? Read more
We revealed earlier this month that George Osborne was considering slashing the benefits bill by linking them to earnings (which are stagnant), rather than inflation (which is rising fast).
Since then, the chancellor has been locked in a battle, not only with Nick Clegg, but also Iain Duncan Smith, the Tory work and pensions secretary, about whether the government should do this, having previously said benefits would rise in line with CPI.
If Vince Cable is to be believed, it looks like IDS and his Lib Dem allies have won this one. The business secretary told the BBC’s Politics Show: Read more
And now for the big story of the day…
A row has been rumbling since the beginning of the year between cabinet ministers Iain Duncan Smith and Eric Pickles about $4.8bn worth of benefits.
To recap: Last year’s spending review decided the government should localise council tax rebates, giving councils the right to cut rebates for poorer residents and use the money instead on tax cuts or service provision. But that could lead some low-earners paying an effective tax rate of 90 per cent, something IDS worries will undermine the incentive to work that he is trying to create through the single universal credit. IDS wants instead to roll council tax benefits into the universal credit so it reflects claimants’ earning status. Read more
Yes, that headline is right. Labour, half the Lib Dems and some Tories have been calling for the timetable to raise the women’s state pension age to 65 and 66 to be delayed. This would avoid penalising 330,000 women who were expecting to claim their pensions up to two years earlier.
Labour admits this will cost money, so in order to pay for it, Liam Byrne, the shadow work and pensions secretary, has asked whether DWP has looked at bringing forward the dates on which the pension age is due to rise to 67 and 68 by two years.
It is a smart move in one way, as it avoids the accusation that Labour are full of uncosted economic policies. But it nullifies their argument that changing the system is unfair to those who suddenly see the goalposts move and their planned retirement fade into the distance. DWP officials say such a change could affect millions of people, not just the 330,000 hit by Iain Duncan Smith’s proposals. Read more
We revealed this morning that Iain Duncan Smith is less steadfast than he might appear on when the controversial changes to women’s state pension might take effect. Under current plans in the government’s pensions bill, it will gradually rise to 65 by 2018 and 66 in 2020.
The bill is back in the Commons today, where the work and pensions secretary will say:
We’re heading towards an unprecedented burden being placed on the next generation who will have to pay for their parent’s retirement on top of paying for the national debt. It’s not fair. This bill will address the realities of our increasing longevity by sharing the costs between the generations.
We will stand by the 2018 and 2020 timetable.
Iain Duncan Smith declared this morning that “nobody will be worse off” under Universal Credit.
That is quite a claim, particularly given 1.7m households will lose out, at least in terms of their notional entitlement to benefit.
He was referring, of course, to the protection that will be provided so no family loses in cash terms at the point of transition.
This promise is both the midwife to this dramatic reform plan, and one of the most tricky measures to implement. Read more
Here are some of the highlights from the DWP impact assessment:
1) Higher bill: The reforms in total will add £2.6bn to the welfare bill overall. There could be other “dynamic benefits” not included in the model. Read more
A new means test. A savers penalty. A hit in income for 600,000 prudent households. Is this really Tory policy?
Buried in the welfare reform bill, published tomorrow, is a new rule that will achieve just that. You have to wonder whether it will survive in its current form.
Iain Duncan Smith’s ambitious plan to create a new Universal Credit will extend a savings means test — applied to those on out of work benefits — to working families that would currently be eligible for tax credits.
This will mean any working family with savings of more than £16,000 will have no entitlement to universal credit, once the system is in place.
That affects around 400,000 working households, taking in some cases more than £100 a week from their wallets. Read more
Here is a link to the full ft.com story if you are interested. But the key points of this morning’s report by the Institute of Fiscal Studies – on the impact of IDS’s universal credit – is:
There’s been lots of speculation over the Treasury’s plans on sickness benefit. The Times flagged up a proposal to “means test”, while the Observer has a letter pointing to £2.5bn of incapacity benefit savings from an unspecified reform.
No final decisions have been taken. But reading between the lines, it sounds like moves are afoot to scale back “contributory incapacity benefit” (which I’ll explain in a second).
If so, it blows a rather big hole in George Osborne’s claim that a he’ll be finding savings from ending the “lifestyle choice” of those determined to “pull down the blinds” and scrounge on benefits. These reforms largely take money from people who have worked and fallen ill, rather than those who’ve allegedly chosen a life on the “sickie”. Read more
The axe is hovering over the £2.7bn winter fuel payments. But cutting this bung to the over-60s is harder than it seems. Even if Osborne decided, say, to pay out £600m less than Gordon Brown, it would make no contribution at all to cutting the deficit.
How so? The Labour wheeze was to top-off the winter fuel payment with a one-off bonus each year, which was presented as a Gordon’s munificent Christmas gift. Last year it amounted to £600m. The Budget books doesn’t expect this bonus to be repeated, so the future winter fuel payments are only scored as £2.1bn in 2010, not the £2.7bn actually spent in 2009.
The dilemma for Osborne is:
– Find an extra £600m from savings or increasing debt to pay out as much as Brown in 2009, or
– Take the political hit from withdrawing £50 off all pensioners (and £100 off all those over 80), without any upside in terms of deficit reduction.
No one can question the decency of Iain Duncan Smith’s vision for overhauling the welfare state. His message of “making work pay” is winning plenty of disciples. It is a revolution to simplify a fiendishly complex system and make the benefits of employment clear. To some, it is the only way of ending the welfare dependency blighting British cities.
But conservatives should be on guard. Grand schemes are intoxicating. The allure of sweeping change can overpower. The IDS reforms require real, unavoidable sacrifices, even if George Osborne pays billions of pounds upfront. This is not a case of hidebound Treasury bureaucrats blocking change to keep the poor tethered to the state. If the overhaul goes ahead, the risks and trade-offs are considerable.
Here are some of the hurdles that I’ve identified from speaking to people in Whitehall and Ian Mulheirn, an expert on this area at the Social Market Foundation. They prompt two questions. Is it worth it? And is there a simpler way?
Winners and losers Without additional funding, the IDS plan involves raising the tax rate on millions of workers. To “make work pay” for the few he will need to make work pay less for the many. Read more
You may have noted the mock horror from Labour about IDS’s comments to the Sunday Telegraph yesterday that those on benefits may need to travel to work. It’s described by the Labour-supporting Mirror as an “extreme Norman Tebbit-style ‘on yer bike’ policy“.
Here is a link to the interview when Caroline Flint two years ago suggested that unemployed people getting housing benefit should, in effect, be turfed out. She was, of course, the Labour housing minister. It appears to be exactly the same policy. What goes around comes around. Read more
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. Read more