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Welfare reforms face tough questions

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The sector is deeply unprepared for sweeping changes to welfare, while experts worry that ‘too much, too soon’ reforms will have unintended effects, as Mark Smulian found at the LGC Civica Question Time debate.

If chair John Humphrys was surprised by the equivocal ‘Question Time’ audience responses to his trademark probing - met with a chorus of ‘don’t knows’ - it was understandable. After all, the topic at Civica’s annual conference debate was the possible impact of benefit system reforms.

More broadly, the event, held in Manchester in January, tackled reforms to the welfare state - and only the brave would claim to be certain of the outcome.

Leading the debate on the heavy-hitting panel were pundits David Blunkett, Daniel Finkelstein, Michael Portillo and Polly Toynbee. Despite their differences, they broadly felt something had to be done to rein in the welfare bill but they would not have done what the government plans to do, or they would not have done it yet. In both cases they feared unpredictable consequences.

The Panel

  • David Blunkett
    Labour MP for Sheffield Brightside and Hillsborough, first elected in 1987 and a former home, education and employment secretary. He also led Sheffield City Council.
  • Danny Finkelstein OBE
    Executive editor of the Times, he is a former adviser to the Conservative party.
  • Michael Portillo
    Now best known for television work, he became Conservative MP for Enfield Southgate in 1984, later becoming local government minister. He was subsequently both employment and defence secretary.
  • Polly Toynbee
    A columnist for the Guardian and a former BBC social affairs editor. She lived undercover on a neglected council estate to research her book Hard Work: Life in Low-Pay Britain.

Mood of uncertainty

The mood of guests in the hall - all provided with voting technology - was one of uncertainty. Asked by Mr Humphrys about their organisation’s preparedness for benefit reforms, just 1% were ready and 6% were not at all ready, with 93% somewhere in the middle.

One reason for this was the amount of reform that was taking place at once: universal credit, council tax benefit localisation, housing benefit changes and further local authority budget cuts.

As Mr Finkelstein said of benefit reforms: “I would not have done it, not because I’m against it but because the government is doing a lot of things at once and you only have a limited amount of political capital and administrative expertise.

“A lot of benefit reform depends on integration of computer systems, which are still a reasonable way down the track, so I would have concentrated on things that will save money in one to 10 years - and this welfare reform won’t.”

Mr Portillo agreed, welcoming the intention of universal credit to break down distinctions between people in and out of work, and between benefits and tax credits. “But in the words of Yes Minister, the government is very brave to do this - (it is) an extraordinary throw of the dice to attempt to do such a big thing,” he commented.

A universal credit-style initiative was considered in 2005, Mr Blunkett admitted, and “we liked the principle but did not have the technology to make it work, and I’m not sure the government has the technology to make it work now,” he said.

“Real pain is being devolved to local government from this April in terms of council tax and housing benefit changes, which punishes people living in the wrong size of house. Those (changes) are going to have the most enormous impact on top of universal credit and all the rest of it.”

Ms Toynbee predicted universal credit was “quite likely to fail”. She thought “welding together HMRC and the benefit system” was “not a bad idea. It makes total sense if you can make it happen. To do it at the same time as huge cuts does not.”

She said “a huge amount of national identity, who we think we are and how we behave towards one another, is bound up in how we spend our social security budget”.

Mr Blunkett took up the point that welfare causes resentment among those contributing to it. He noted that while some 70% of benefits once flowed through national insurance, just 43% did now, with the rest being borne by tax credits.

“That has changed the relationship between those contributing and those receiving,” he said. “We all want reform for somebody else, but do we really want to change the £21bn that goes into pension tax relief, especially for those on 40% tax? If we took that relief down to 20%, we could take £60bn out of the system.”

Scared of pensioners

The government was “scared stiff” of the political clout of the over-65s, added Mr Blunkett, before questioning the validity of universal benefits for those like himself, who were 65 and still working. “Why should I get a winter fuel allowance?” he asked. “Universal benefits are fairer and easier to operate but why not make it part of the tax system?

“If we had an integrated tax and benefit system, you could pay child benefit to mothers instead of the convoluted system they are about to indulge in, which is grossly unfair to low-income families,” he added.

Mr Finkelstein called for “enough conditionality” - benefits are given only in tightly defined circumstances - “that taxpayers trust the benefit system and so support the welfare state”.

The only way to engender public support for the welfare system was to rebuild the notion that people “earned entitlement”, and to develop a “contributory system where people genuinely feel they are building something that they can then draw down on”, Mr Blunkett suggested.

Turning to housing benefit changes, the panel feared that whatever ministers’ intentions, the results could harm both claimants and local authorities.

Ms Toynbee said the housing benefit bill had risen rapidly because of “the soaring increase in the value of property and therefore of rents”. It had “soared enormously at huge cost to the taxpayers”, she continued, but not through any fault of claimants.

Paying housing benefit to tenants rather than landlords, as the government intends, was “well intentioned but very tricky”, Mr Portillo said.

“People should be given money to budget and hand over to landlords,” he explained. “It is treating people like adults but it’s likely to lead to some practical difficulties if people don’t budget or don’t hand it over to the landlord.”

Mr Blunkett said paying rent money to tenants was laudable but feared “perverse outcomes” if people fell behind with rents at the same time as they had to pay council tax for the first time under localisation reforms.

“You then end up like poll tax with an inability to collect the damn thing,” he said, adding that unpaid landlords might pull their homes out of the sector, resulting in “a real mess on our hands”.

Early results from pilots showed, according to Ms Toynbee, that at least 10% would fail to cope with paying rent. “Private landlords, housing associations and local authorities will evict these people, especially if the same people are not paying their council tax,” she argued.

“Those evictions will end up costing the state in general a lot more money in caring for those families, as homelessness is not cheap.”

Mr Finkelstein believed that, as with universal credit, housing benefit reform was “a good thing to do” but questioned the rationale for doing it now, when intellectual and political attention should be focused on rapid savings.

Despite these myriad problems, Mr Portillo thought the public supported efforts to limit public spending, unlike in the past.

Welfare reform in the 1980s had provoked “fanatically hostile media, vigorous debate in the Commons, demonstrations and riots”, he recalled. “The government has taken on reforming the welfare state, and also health and schools, and an extraordinary range of measures seem to be met broadly by apathy. I am surprised at the extent (to which) government is getting away with it,” he said.

“There is a general feeling that the world has changed and welfare spending needs tackling.”

Mr Finkelstein felt the public blamed neither this government nor the previous Labour one for economic problems that were global in origin. People had unrealistic expectations that cutting spending on bureaucrats or MPs’ expenses could make a material difference to the economy but they “know that the government has to do something about it”.

On the general question of public spending, the audience was asked whether it felt the local government settlement of December 2012 was better or worse than planned for. Only 4% answered ‘better’, while 26% said ‘worse’, 23% ‘the same’ and in another triumph for the ‘don’t knows’, nearly half (47%) were undecided.

In an intervention, Gloucester City Council chief executive Julian Wain said: “The fact we planned for it doesn’t stop the settlement being very difficult.

“We are facing significant reductions, which make welfare cuts harder to deal with because we won’t have the bodies on the ground to deal with homelessness or whatever comes.”

Mr Portillo thought the sector was overdoing the misery. Public spending would revert to mid-2000s levels, “when the modern welfare state functioned well”, he stated.

“In recent years, local government has been flooded with money, so have the NHS and police, and they have all become correspondingly less efficient,” argued Mr Portillo.

“So it’s all very well talking about cuts when you choose your own base year, but you are going back to levels you coped with a few years ago - and after a period when vast amounts of money pumped into public services.”

Mr Blunkett called this point absurd, noting that halving the number of NHS doctors would appear to increase productivity on the face of it, but would not give a better service.

The reforms’ shape and speed will boil down to what the government can afford, both financially and politically. But the feeling was local government is taking an unfair hit. Relaying a texted audience question, Mr Humphrys asked: “Why does central government cut local government (spending), when applying local government unit costs to central government would save more?”

Mr Blunkett offered the inevitable reply: “So you get the blame and they don’t!”

 

This article has been published in association with Civica. The report on this event was written by LGC. For more information, see LGCplus.com/Guidelines

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Welfare reforms face tough questions

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