Why IDS’s plan is right and why it won’t happen
Iain Duncan Smith’s ideas for a new benefits regime are coherent and progressive but he can’t avoid the fundamental ‘trilemma’ of welfare reform.
In essence, the Duncan Smith plan – which was published on Tuesday – argues for a massively simplified system in which job seekers and the low paid receive universal flat rate benefits. Unlike existing benefits, recipients will keep a large proportion of their payment if they get work or improve their earnings. Thus people have stronger incentives to work, and there is an end to the manifest injustice that it is among the poorest in our society that we see the highest marginal tax rates (the combination of loss of benefit and tax-paying).
I support this approach. Indeed in a perfect world I would go further and advocate a universal citizen income paid to everyone. Yes, this means we give benefits to the rich but the way to address this is through the tax system. But what can’t be disguised is that this system – and even IDS’ more modest version – costs a great deal more.
IDS’ answer is to recognise the cost – which he puts at £2.7 billion a year but to argue that by providing stronger work incentives he will get an extra 600,000 people back to work. By then factoring in the money saved on the health service and law and order as a consequence of having fewer people unemployed, he shows that within a few years the scheme is saving money.
The problems with this are threefold. First, we don’t currently have this kind of money to pay out upfront. Second, his cost and benefit estimates are almost certainly too generous to his scheme. Third, it is in reality very hard to show that upstream measures like benefit reform have downstream effects like increasing employment and reducing ill-health and criminality; there are just too many intervening variables. I say ‘very hard’ because it is not impossible. A few years ago Quebec instituted an ambitious and integrated enhancement of parental leave and child care provision. The figures do seem to show pretty conclusively that this has led to a significant increase in the employment rate of mothers.
In the short and medium term (which is all that the Treasury cares about when it comes to revenue expenditure) IDS has to face up to the welfare trilemma. Which is simply that out of three main objectives for the welfare system – to incentivise work (or saving), to help the poorest most, and to constrain public expenditure – you can achieve any two but never all three.
IDS’ plan is not dissimilar to the framework developed by Frank Field before his short lived time as minister for welfare reform in 1997-8. Field too was viscerally opposed to the means test and its impact on incentives. When officials worked on Field’s plan they too found that the upfront costs were huge. Feeling that he was being blocked by officials and lacking support from his Secretary of State, Harriet Harman, Field was soon briefing against the department and soon after that he left government to resume his role as contrarian back bencher (it was, by the way, this history which lay behind great amusement when Field recently declared that Harriet would be a good replacement for Gordon Brown).
IDS’ radicalism is to be applauded. In the long term I believe a plan like his would work. But in the time frame that Government’s tend to use there is no escape from the welfare trilemma.
‘Email-gate’: changing culture requires taking responsibility
With the promise to post two blogs today – the second about some fascinating new American research on altruism and social capital – I ask my reader for patience as I return to ‘email-gate’…..
I find from The Guardian this morning that I am part of a coordinated Blairite backlash against Downing Street dirty tricks. It’s news to me. Perhaps I shouldn’t have alluded to the time I was the hapless victim of an alleged McBride briefing. I certainly don’t want to add my voice to the pious chorus coming from people like Frank Field (who was, of course, innocent of the constant briefing against Harriet Harman when the two ministers were at war over welfare reform in Blair’s first administration).
There is a subculture of off-colour humour and irresponsible gossip in politics just as there is in most professions or workplaces. In Westminster it is fed by certain types of special advisors, journalists and politicians; the kind who actually enjoy hanging around the bars of Westminster Palace late at night. When I first got involved in national politics I was one of these people, mistaking cynicism for sophistication, gossip for influence. The problem with McBride was that he put this kind of stuff into a Downing Street email and seemed seriously to think that, despite his position and the source of his wages, he could be involved in establishing and feeding an ‘independent’ scurrilous website.
My criticism of the Brown operation is less about its morals than its effectiveness; as I said yesterday it can seem to be all tactics, no strategy. Today there is anotehr example. Political strategy, which was my job after the 2005 election is all about thinking through consequences: ‘if we do this, the opposition will do that’, ‘if we say this, won’t we be asked that?’ etc. I provoked a major debate in Downing Street in the summer of 2006 about whether Tony Blair should name a date for his departure. I was in favour, others strongly against. We all had to argue through a variety of scenarios in front of each other and ultimately the Boss – who, in the end, decided against my position. But does this kind of searching self-critical debate happen in Downing Street today?
I wonder because Children’s Minister Ed Balls was forced this morning to make an obviously contradictory argument. On the one hand, he stuck to the line that no one had any idea either about the McBride email or about attack briefings from the Brown office now or at any time in the past. On the other hand, he took the high road arguing that this was a chance to reform the whole of our political culture.
He’s right about the seocnd part. I was drawn into commenting on this affair becuase it is an opportunity for Labour in particular, and the political class in general, to give up an outdated, failing and discredited poltical culture in favour of something which might genuinely engage the populace in the major dilemmas the country faces. But Balls can’t simultaneously assert that McBride was an isolated maverick and that the problem is the system. When a position doesn’t add up like this people sense it is inauthentic, even if they can’t precisely explain why.
The reason Gordon Brown should go further than expressing regret is that he can only have credibility in arguing for change if he is willing to recognise that he and his generation of politicians and advisors (and yes that includes me) have been complicit in a political culture that is now broken. What’s best for Labour right now is what’s best for the country. This is to level with people about the kind of challenges we face and the impossibility of those being properly addressed, let alone overcome, unless new types of leadership are combined with a willingness by people themselves to be engaged, self sufficient, altruistic citizens.
It is still possible for good to come out of the McBride affair but only if Labour’s leaders accept – as all leaders must – that taking responsibility is the necessary precursor to real cultural change.
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