A new welfare bargain

Welfare is Labour’s toxic issue. Recent evidence comes from a YouGov poll for Prospect: 74 per cent agree that ‘Government pays out too much in benefits; welfare levels overall should be reduced’.

Ed Miliband has recognised that Labour must be “a party that rewards contribution, not worklessness … We must be once again the party of the grafters.” But the answer must not and cannot simply be to retreat to a reactive and populist stance. Under the last three Labour governments, the conditionality of benefits was significantly tightened, fraud fell sharply, and, until the 2008 financial crash, unemployment and worklessness reduced. Those who argue that Labour must re-establish a reputation for toughness miss the essential point. If 13 years of toughening rhetoric, and the policies to match it, haven’t persuaded public opinion, it’s unlikely more of the same will produce a different result.

And although the politics are challenging, we shouldn’t assume outright public hostility. The picture’s much more nuanced. There is public concern that the social security system apparently allows people to claim benefits when they ought to be in work. The YouGov polling found that around two thirds of people believe that a substantial minority of benefit claimants ‘lie about their circumstances in order to obtain higher welfare benefits or deliberately refuse to take work where suitable jobs are available.’ These estimates are clearly inaccurate – for example, only 1.3 per cent of calls to the Benefit Fraud Hotline result in a prosecution. But perceptions about the level of ‘scrounging’ may lead to the high levels of support found for cutting benefits to unemployed people or to ‘unmarried single mothers’ (of course the benefit system makes no distinction as to whether single parents have been married or not).

Yet when it comes to other groups, support for cutting benefits is weak. Only 11 per cent think that disability living allowance should be cut, and there are “minorities ranging from 9 per cent to 23 per cent in favour of cutting pensioners’ benefits, benefits to the low paid, and child benefit for families paying standard rate income tax.”

Public attitudes look remarkably in line with the mantra ‘work for those who can, security for those who can’t’, which proved a winning combination in 1997. There’s no reason to think that if the public actually believed Labour would deliver it, it would be any different today. The question is how we can convince them that we can do this while maintaining core values of fairness and autonomy.

Developing convincing policy to ensure ‘work for those who can’ requires us first to understand why people aren’t working. Current levels of worklessness are primarily an economic problem – not one caused by benefits that are too high, or ‘a culture of benefit dependency’. So creating jobs and facilitating employment must lie at the heart of our welfare reforms. Changing demographics make the problem all the more significant: we will only be able to support an ageing population if we maximise the labour market participation of working age people. Women, young people, disabled people, those from BME communities, older people themselves, are all working below capacity.

But even when jobs were plentiful, and Labour was on track to achieve its goal of ‘full employment’, the gains from work were not sufficient. Employment that fails to deliver fairness at work and which doesn’t offer adequate rewards is unlikely to prove sustainable. As Ed Miliband has argued, models of responsible capitalism place social justice and economic efficiency hand in hand. So we need a strategy to embed decent gains from work, especially for those who currently fare least well in employment. This in turn could deliver improved business performance.

While policies such as better linking the education and skills systems with employment or tackling segregation in the labour market may fall outside the scope of welfare reform directly, the politics require us explicitly to link the two. A new form of ‘welfare bargain’ could therefore encompass the requirement to take up suitable employment with minimum guarantees of a job, plus wider support and entitlement, both for those looking for work and those in work..

There is a second element of the welfare bargain: adequate social protection for those temporarily out of work, or unlikely to be able to work in the near or long-term future.

The problem at present is double edged. On the one hand, there’s a perception that people are getting ‘something for nothing.’ Yet for too many people at present the system offers very nearly ‘nothing for something’, with very low levels of out of work benefits, even for those who have paid contributions.

This analysis is driving new interest in models of contribution, which could offer the prospect of more generous out of work benefits and reinvigorate the concept of social insurance, while reflecting the public desire that what you get out reflects what you put in. This is fertile territory for Labour. Further work is needed on affordability, but effective contribution models both promote and have as a prerequisite for their success improved labour market participation and higher rewards from work.

At the same time, we need to highlight the social justice case for benefits that help to meet additional costs, and the benefits to society as a whole from facilitating and recognising the social participation of those for whom labour market participation is impossible or curtailed.

Building popular support for welfare reform policies requires fair treatment both for those who are currently receiving benefits AND those who are not.

Convincing the public that the system is fair is a tough ask. Hostile messages, combined with policies that appear to address perceived unfairnesses but which don’t address the true drivers of worklessness, will prove ineffective and unsustainable, and deepen public scepticism. Instead, it’s possible that gains could be made by promoting a message of good work for those who can, and real security for those who cannot, alongside shifting the emphasis to the obligations that rest not just on individuals alone, but also on the wider economic actors who play a part in delivering this.

One way to make the case about fairness would be to shape the rhetoric around a welfare state – and employment system – that promotes independence and autonomy, providing a positive challenge to the government’s preferred language of ‘dependency’.

Progressives who hope for a silver bullet of welfare reform that conforms to our values, brings public opinion onside, and comes without effort, may be disappointed by this prescription. But these are complex issues that require complex solutions. While this doesn’t easily translate to soundbite politics, the tone of debate and political rhetoric are important. The Labour narrative needs to move away from any attempt to out-tough the Tories to one that speaks of the dignity of work and participation.

This an extract from the new Fabian Society/FEPS publication “The Shape of Things to Come: Labour’s New Thinking” edited by John Denham