Labour must go for contributory welfare, not more means testing

4th June, 2013 5:30 pm

£100 million may not be an awful lot of money in the scheme of things – around 0.05% of the welfare budget – but Ed Balls’ announcement yesterday that Labour would means-test the winter fuel allowance was an important political moment.

First the good news. Putting pensioners’ benefits up for discussion is a positive step. David Cameron was wrong to promise to protect them all, regardless of circumstances, at the last election and Gordon Brown was wrong to back Cameron into a corner in the live debates. Pensioner benefits account for around 40% of all welfare spending, so protecting them has put huge pressure on the working age welfare budget to bear the burden of austerity.

The bad news is there are problems with means testing both in principle and in practice. In principle, we should aim for a welfare system that helps people in need, but also encourages honesty and rewards work and saving. This is what Maurice Glasman calls ‘incentives to virtue’. Means testing tends to do the opposite of these things and is unpopular as a result.

In practice means testing complicates the system and requires more bureaucracy to check exactly who is entitled to what. All for just £100 million. The real reason pensioner benefits are so expensive is that we are all living longer. So the question we should be asking is whether it is right that people can claim the winter fuel allowance as early as age 62, not whether means testing could save a small fraction of the overall spend.

More generally, Labour needs to get its story straight on welfare. What is the big idea? Focusing scarce resources on the most needy, as yesterday’s announcement suggests, or strengthening ‘the old principle of contribution’ as Liam Byrne promised not so long ago? Labour would do well to focus more the second of these two approaches, especially if it wishes to restore the public’s faith in working age welfare. The international evidence shows that the most generous welfare states are also those with stronger contributory elements.

This week Demos publishes proposals on how to do this. The government could create a two-tier system, with higher benefits for those with strong work records – around £95 per week job seekers allowance, compared to the £71.70 that everyone gets at the moment, regardless of their employment record. This would be paid for by cutting spending on Support for Mortgage Interest (SMI). SMI is a benefit specifically for homeowners: it covers the interest on up to £200,000 of loans or mortgages when people are out of work.

There is a principle behind this proposal: taking on a mortgage is a choice – and people should take responsibility for insuring themselves against the risks associated with that choice. To that end, people should be automatically enrolled into mortgage payment protection insurance (MPPI), providing those customers with the chance to opt out of such insurance. This would mean that anyone not insured against their mortgage interest costs would have actively made that choice. All others would be insured at a maximum cost of around £33 per month, less than the average phone bill.

Making these changes would help Labour reclaim the mantle of personal responsibility, with homeowners insuring themselves against risks incurred by their own choices. It would encourage greater social solidarity, by reassuring people that those who have contributed to the welfare system will get the most out of it. And it would not cost a penny more than the current approach.

On Thursday Ed Miliband will make the second big Labour speech of the week, focusing on welfare. Here’s hoping the contributory principle is at the heart of it.

Duncan O’Leary is Deputy Director of Demos 

  • AlanGiles

    ” This is what Maurice Glasman calls ‘incentives to virtue’”

    Thats fine – just as long as their Lordships MacKenzie and Cunningham, and MPs become as virtuous as the people they lecture.

  • i_bid

    So home-ownership is a ‘choice’ and not a right now, and do these proposals include regulating our exploitative and unaffordable renting sector? What do these ‘strong work records’ mean? Living in an area that has been hit hard firstly by de-industrialisation, and now public sector job losses, whilst starved of investment caused by an absurdly distorted economy towards the London South East – it sounds remarkably like heartland Labour territory like this would be punished under these proposals ignoring the scarcity of jobs through no fault of our own.

  • Monkey_Bach

    Whenever anybody is needed to invent a scheme, scam, or ruse to enable Labour to snatch defeat from the jaws of victory Liam Byrne and/or DEMOS are always willing step forward and oblige.

    Eeek.

  • Quiet_Sceptic

    So homeowners have to insure themselves but what about those renting?

    Your argument seems to be that people who buy have a responsibility to insure themselves against homelessness but those who rent should be insured by the state through the housing benefit. system. Why the inconsistency?

    There’s no logic or reason to it, why should the state favour tenants over owners, in effect providing a subsidy to the rental sector?

    What the state ought to do is provide the same level of support regardless of housing type, the owner can use it to pay their mortgage interest, the renter can put it to their rent. Fair and equal treatment of both.

  • Mike Homfray

    I’m not sure if it would be possible at the moment. The reason brown rejected Frank Field’s relatively modest ideas based on contribution in 97 was the sheer cost of establishing the initial level playing field which has to exist to make it at all fair.

    Means testing has many built in problems but I don’t see a very easy escape from it

Latest

  • Featured Local Government News Campaign round-up: four days to go

    Campaign round-up: four days to go

    It’s four days until voters go to the polls – here’s a quick look at how the elections are shaping up across the country. Quote of the day   “Everybody needs to calm down, get behind the leader, and deal with issues, whether it is anti-Semitism or anything else that come up, in an appropriate manner without jumping to the tune of people who are our enemies” – Len McCluskey, General Secretary of Unite, gives Pienaar’s Politics his view on the […]

    Read more →
  • Featured Local Government News Livingstone row will hit Labour vote, Sadiq Khan admits

    Livingstone row will hit Labour vote, Sadiq Khan admits

    Sadiq Khan has admitted Labour’s anti-Semitism row is hitting his chances of winning the London mayoralty. Labour’s candidate said Ken Livingstone’s comments about Hitler and Zionism made it more difficult for London’s Jewish population to give him their support. Khan, the Muslim son of a bus driver, has run an upbeat campaign in which he has been open about his faith and repeatedly stressed his commitment to tolerance and fighting prejudice. A series of polls have shown him increasing his […]

    Read more →
  • Featured News Israeli ambassador attacks left’s “denial” over anti-Semitism… but Diane Abbott fights back against “smears”

    Israeli ambassador attacks left’s “denial” over anti-Semitism… but Diane Abbott fights back against “smears”

    The anti-Semitism row engulfing Labour took a new turn today when Israel’s ambassador to Britain said some elements of the left are “in denial” about prejudice against Jews. Mark Regev said the language used in the past two weeks had been “very concerning” and said some Labour figures had crossed from simply being critical of the Israeli government to “demonising and vilifying” the Jewish state, and perpetuating racist stereotypes. His intervention came as Diane Abbott came out fighting against “smears” against […]

    Read more →
  • News Campaign round-up: Five days to go

    Campaign round-up: Five days to go

    It’s five days until voters go to the polls – here’s a quick look at how the elections are shaping up across the country. Quote of the Day Sadiq Khan lays out how he will tackle anti-Semitism as Mayor in Jewish News: I will always protect communities whose beliefs and practices attract the inexplicable hostility of others, and I’ll get to grips with religious hate crimes. I’ll make tackling hate crimes a far higher priority for the Metropolitan police, and […]

    Read more →
  • Featured News Corbyn launches anti-Semitism action plan – but Ken blames row on “embittered old Blairites”

    Corbyn launches anti-Semitism action plan – but Ken blames row on “embittered old Blairites”

    Jeremy Corbyn has revealed he is launching an action plan to deal with anti-Semitism in the Labour Party, while Ken Livingstone has attempted to play down allegations, accusing “embittered old Blairites” of whipping up the storm in an attempt to get rid of Corbyn. In further developments, the chairman of the Israeli Labour Party has written to Corbyn to say he is “appalled and outraged” by recent examples of anti-Semitism in Labour, while 80 Jewish party members have put their names to […]

    Read more →
Share with your friends










Submit