For an honest debate on welfare spending; we need a Department for OAPs

It has been a historic week for our welfare system. Seven million families with at least one person in work, will see their incomes fall after cuts to tax credits; while some of the poorest families in the country face a new levy as high as £25 per week from the ‘bedroom tax’.  Others have exposed the damage that these cuts will wreak far more eloquently than I could – I want to look at what happens next and offer one suggestion on how Labour could change the terms of the debate.

“We spend more on welfare than any other Government department”, is a rallying call from the right that you will be familiar with.  For those with an ideological commitment to reducing welfare spending, it’s an effective sound bite and also happens to be true.  For public spending in 2011/12, the total DWP budget was £166.98bn, with the Department of Health next, on £106.66bn.  For a government determined to slash welfare spending, this is an invaluable statistic.  As long as you can stand-up at a hustings and declare that ‘out of control welfare spending dwarfs the Budget of the NHS’, your argument is a little easier to make.

The reality of what comprises the £166.98bn welfare bill is of course, radically different to the rhetoric.  While the impression wilfully created is that this huge Budget consists mostly of generous payments to ‘scroungers’; the truth is that the largest element of the DWP bill is the state pension. In fact, according to the IFS, 42% of the entire DWP bill in 2011/12 was accounted for by the state pension and additional benefits for those over the age of 60.

With a separate budget of that magnitude, it makes political and logistical sense for Labour to split up the DWP and create a new Department for Older people and Pensions (OAPs). At a stroke, splitting the two Departments would make it clear that ‘welfare spending’ actually consists of far more than the ‘scroungers’ narrative leads people to believe. Moreover, a new Department for OAPs would have advantages in its own right. The issue of pension provision deserves a voice around the Cabinet table; with regard both to the state pension and the crisis in private pension provision that still afflicts the country. More controversially, a Department for OAPs would also prompt renewed (but welcome) debate about the affordability of universal benefits such as the Winter Fuel Allowance.

In turn, what remains of the DWP could be renamed the ‘Department for Work and Social Security’. Under the Secretary of State, I would suggest a Minister of State for Disability, (overseeing the budget assigned to people who are sick, or disabled) a Minister of State for Work (overseeing the tax credit bill) and a Minister of State for Families (overseeing the child tax credits, maternity pay etc).

There is no panacea for those frustrated by a debate on welfare spending that is so often divorced from reality; but I’m convinced that splitting up the DWP would change the terms of the debate and at least allow us a fresh start.