Tory welfare reform, or social Blitz Krieg?

I was struck by George Osborne’s announcement on benefits cuts, but having moved out into the sticks whilst Slugger Central has a new back wall put to it, I missed the opportunity to blog it. Lee beat me to it, and made on of the points I would have made:

The idea of capping the welfare levels is an interesting one that has a basis in the principle of fairness.  However, you do wonder if it is a means of exporting the unemployed from nice Tory areas of London etc.

Precisely. Though this one was absent from the talking point in Birmingham and did not excite the same amount of attention amongst the liberal chattering classes. Of course, I see the fairness problem it is trying to address.

But it remains to be seen whether it does anything other than push poorer families further into the ghetto society Mr Cameron was supposed to be getting rid of. Of course, it could have the effect of forcing a cap on rental prices for larger properties. In which case, job jobbed.

But I somehow doubt that was the core reasoning. Lee goes on to ask why the Chancellor rather than IDS made the announcement. Well, I doubt either of these two measures was what IDS had in mind when he produced his great welfare reforms. It may well have been Osborne’s neo Thatcherite price for those expensive measures.

One of the more prominent [local – in deference to Briso’s remark below] Conservative candidates in the last General Election, Ian Parsley (there’s also an interesting contextual post which may explain his divergent thinking on his blog) is none to pleased with the curbing of Child Benefit. Not on the fairness principle, but on the basis that the Conservatives blatantly campaigned on the universality priniciple just a few months ago:

“Strictly, the Party Leadership will argue that it has not broken its manifesto pledges because it has not cut or removed child benefits, but rather removed it from a minority of the population. However, for most people that is just semantics. As a candidate in the last General Election I understood the Conservatives’ position to be retention of child benefits as is, and campaigned on that basis – and I suspect the voting public would agree with my understanding.

“I would add that that was also my understanding of Liberal Democrat policy.

“The removal of child benefits from any section of the population may be popular in the short term, but it is against the principle of universality of welfare which Conservatives argued for during the election campaign, and which I believe most Conservatives support. It is an essential principle of the welfare state that everyone has a stake within it.

So was this the first of (many?) Osborne Treasury coups? It seems to me he is one of the most under estimated operators in the Cabinet, as much by party colleagues as by a Labour opposition which may find it more difficult to counter his ground shifting tactics than they currently think.

This is the beginning of the end of the ‘phoney war’… It remains to be seen whether the CSR is the beginning of a Tory Blitz Krieg…

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  • Anon

    The cap is insiduous. Will it keep up with inflation? Will it force poorer families out fo their homes and into ghettoes? What happens exactly, if a family has too many kids? Who gets punished – it isn’t the child’s fault for being born.

    If housing costs are the problem, then buy up social housing stock on the cheap while they are going and build more social housing. Over the long term allow people to buy their council houses as Thatcher did. Link that ability to holding a job and paying taxes if you want; it’s a long run wealth redistribution taht gives people at the bottom the chance of an asset and moving up the ladder.

    Also, on child benefit –m give the demographics, don’t you actually want to incentivise people towards having more kids? This can’t help, at the margins at least.

  • joeCanuck

    More of the usual really. The rich will get richer………

  • Cynic

    Anon

    No it isn’t the child’s fault for being born …but it is the parents responsibility if they create it to take care of it

  • Cynic

    “buy up social housing stock”

    I will say this very slowly….. the country is broke. It has been made so by Labour following stupid policies like the one you suggest. There is no more money

  • Glencoppagagh

    ‘…don’t you actually want to incentivise people towards having more kids?’

    Especially the class of people from whom the benefit is being withdrawn but then I doubt whether the availability of child benefit would greatly influence their decisions on family size.
    As an aside, I’m assuming Westminster measures are not subject to equality impact assessment in NI. It would have been interesting to see whether this one was challenged on that ground.

  • Anon

    I fully agree. But who will get the bruint of this – the child or the parents? It’s far more likely to be the former. This is not a good solution.

  • joeCanuck

    I had this fierce argument with a brother-in-law on this subject when Bill Clinton put a cap on welfare including benefits for single mothers who kept having babies.
    I supported Clinton but b-i-l kept insisting that “you can’t hurt the babies – it’s not their fault”.
    Difficult area to get agreement.

  • Johnny Boy

    I’m all for it; an incentive to get a job and it will put downward pressure on rents.

  • Johnny Boy

    If tax credits are staying I would have went further and scrapped child benefit altogether for all but the unemployed and upped tax credits.

  • joeCanuck

    It should be an imperative of any Government to lift up the poor by providing job training and, of course, helping to create jobs. A program that has been successful here is to continue some benefit payments for a time after people get a minimum wage paying job.

  • HeinzGuderian

    What jobs ??

    The NL Government didn’t lift up the poor !! They continued to pay child benefit to the rich !!

  • Johnny Boy

    It’s hard to disagree with you, the government should be working towards romoving any obstacle to people being employed, and the current benefit system is one such obstacle IMHO.

  • HeinzGuderian

    To answer the original question………………….it is quite clearly,Coalition Welfare Reform,and I,for one,welcome it !!!

  • Anon

    It’s a bad solution. A better solution is to withdraw cash benefits but provide vouchers or some other mechanism that can only go on things to benefit the child.

  • joeCanuck

    Anon,
    That’s not a bad idea. It could have a few problems like some incorrigible people selling their vouchers to get money for adult things. But that would likely be a minor thing.

  • Pigeon Toes

    Part of the welfare reform is the cap of benefits at £26,000 for families.

    However, in order for a working family to achieve that, they must earn £35,000 before tax.

    Will that £26,000 include free dental treatment, free school meals and all the other “perks” of being on benefits?

    Has anyone also factored in the cost of actually going to work?

  • Seymour Major

    With respect to Ian P, we are in a Coalition where some manifesto pledges have to be broken and the measure is supported by 83% of the population (opinion poll reported on Sky). The measure only affects 11% of the population.

    From a political point of view, Cameron needed to make better off people sound annoyed. All other sections of society are going to take their share of the pain soon.

  • Cynic

    I will run this past you very slowly, the country is not broke, there is plenty of money out there, although admittedly a great deal of it is sitting uselessly in bank accounts, etc. I would not shout to loud it was all Labours fault for as far as the basics of the UK economy [and foreign policy] are concerned, over the last five years or so, you could not get a cigarette paper between how the Tories would have dealt with the crises and how the LP actually did. There voting record and public statements are there for all to see.

    Why give your support to a government whose leader drags out his new born to use as a propaganda tool when the road get a bit bumpy (Darling, can you get whats its name off nanny, and catch the 10:15 to Birmingham, Osborne buggered up again, oh and put a pretty frock on old gal, why Nat and Rupert insist I keep him around is beyond me)

    We are not in a recession because Labour built new schools, hospitals or provided pension credits etc for those living on low incomes, but because the bankers went ape shit and the British political elite conspired, and refused to offer an alternative plan B for dealing with bank failures.

    When the shit hit the fan not once did Cameron say it was wrong to bail the banks out by pouring tax pounds into a black hole, indeed the only reason Ken Clarke is in the Cabinet is because Cameron cannot risk having him on the back benches crying out I know what you did and told you were wrong at the time..

  • Briso

    “One of the more prominent Conservative candidates in the last General Election, Ian Parsley ”

    Aye right hi. Not in the top 400 I would say.

    Time for a change (of party).

  • Reader

    mickhall: I will run this past you very slowly, the country is not broke, there is plenty of money out there, although admittedly a great deal of it is sitting uselessly in bank accounts, etc
    Hardly uselessly. For instance, I have money in a bank account, and I have plans for it. Several children to educate and get settled, for instance. Some work to do on the house too. I strongly suspect that activity will work out as being far better for the economy than having the money confiscated by a passing lefty and used for a bit of Quantitative Easing and a forlorn effort to re-inflate the property bubble.
    And, in case you were wondering, I’m a basic rate tax-payer, so the only reason I have savings and not debt is that I haven’t (yet) spent the money.
    By the way, the bank bailout is peanuts compared with the current account deficit. The problem is that Brown was taxing and spending bubble money. And the bubble has burst.

  • Reader

    If only the city of London’s bankers and David Cameron showed your type of responsibility, the first, despite all that has occurred, intend to reward themselves in the most outrageous fashion and the second intends to use the recession which he failed to warn against for ideological reasons.

    If these figures I googled are anywhere near the mark they cannot be considered peanuts, surely?

    · £850bn bailing out banks… and £107.1m on financial advice
    · £76bn To purchase shares in RBS and Lloyds Banking Group
    · £200bn Indemnify Bank of England against losses incurred in
    providing over £200bn of liquidity support
    · £250bn Guarantee wholesale borrowing by banks to strengthen
    liquidity in the banking system
    · £40bn Provide loans and other funding to Bradford & Bingley
    and the Financial Services Compensation Scheme
    · £280bn Agree in principle to provide insurance for selection
    of bank assets
    · £32.9m Slaughter & May – Commercial legal advice
    · £15.4m Credit Suisse – Financial advice on a range of
    measures, including Bank Recapitalisation and the Asset Protection
    Scheme
    · £11.3m PricewaterhouseCoopers – Advice on APS
    · £8.7m Ernst & Young – Due diligence on APS, Northern Rock
    · £7.7m KPMG – Due diligence on APS
    · £7.4m Blackrock – Valuation advice on APS
    · £5.3m Deutsche Bank – Financial advice on a range of measures
    · £5m Citi Financial – Advice on Aps
    · £4.9m BDO Stoy Hayward – Valuation of Northern Rock
    · £4.5m Goldman Sachs – Financial advice on Northern Rock
    · £1.5m Morgan Stanley – Financial advice on Bradford & Bingley
    · £2.5m Other advisers – Financial advice on a range of measures
    and proposals to revive Britain’s ailing economy.

  • Johnny Boy

    I believe your £850bn is an amount put at risk rather than used.

  • pippakin

    It is a serious problem and it is right to drop the whole idea of ‘universal benefits’ it’s absolutely ridiculous to pay child benefit to families on high incomes.

    The second and imo more serious problem is whilst everyone wants to protect the children, there has to be a way of making foolish young people realise they cannot rely on state help for very serious mistakes.

    No one should bring a child into the world through sheer negligence or even ignorance. In todays world there is no excuse, many children raised in poverty stay in poverty and perpetuate the cycle.

  • joeCanuck

    ..through sheer negligence or even ignorance…

    Pippakin,

    There is another category; those that deliberately get pregnant in order to get the State to support them and their child/children. They may be a small part but those were the ones that Bill Clinton’s reforms targeted. I believe that the cut off was 2 children. No State money for any more.
    And there was a lifetime maximum number of years you could receive welfare; less than 10 years as I recall.

  • pippakin

    joe

    Yes there are a few who do that deliberately, and it works! Not sure Clinton was right about the maximum no of years for welfare. It sounds to me as though that could leave too many young children worse off than ever.

    I don’t know what the answer is, sooner or later governments are going to get tough and in todays financial climate that day may be sooner than we think.

  • Cynic

    …and the Government spent and spent and spent and wasted billions upon billions

    …and the Government allowed an asset price bubble to inflate

    … and the Government failed to regulate the Financial sector efficiently

    … and the big bad Banks forced all those poor members of the public to take out huge mortgages on the barking mad premise that their houses were worth twice as much as the average over the last 10 years and they could afford a mortgage of 7 times their annual income

    Now I do that the money is still out there. The problem is that we don’t own it anymore – it mostly belongs to the Chinese and other people who were more prudent – so the country is broke Mick – just not as broke as Ireland

  • Reader

    Mickhall: If these figures I googled are anywhere near the mark they cannot be considered peanuts, surely?
    The country will be getting most of those billions back, since they are guarantees, loans and shares. The million sums were paid to New Labour’s favourite suits, and for a country that is going deeper into debt at the rate of 300 million pounds per *day*, those sums are indeed peanuts in comparison.
    Confiscatory taxes on a few hundred filthy rich bankers just isn’t going to solve that problem for very long.

  • joeCanuck

    …isn’t going to solve that problem for very long…

    Yes, but that is not a reason not to tax the bounders to the hilt.

  • Seymour Major

    The Welfare cap of £26,000 and the curbing of child benefit for higher earners are not same-purpose reforms. The latter is revenue-raising measure and nothing more.

    The £26,000 cap is a genuinely reforming measure. It is pioneering and therefore unlikely to be the finished article.

    “Though this one was absent from the talking point in Birmingham and did not excite the same amount of attention amongst the liberal chattering classes.”

    I’m not surprised. It did not excite me either because the notion is nonsense.

    Ian Parsley’s point is fair comment. Interestingly, an opinion poll (reported on Sky) showed that 83% supported the measure. Hardly surprising since those 83% are unlikely to be effected. It benefits the Conservatives in that people can appreciate that the austere measures are going to be shared.

  • Big Bad Bob

    Seymour,

    Sensible comment as always.

    I think Parsley’s point, however, is that if the Conservatives campaigned against this and the LibDems campaigned against this, how come the Coalition has decided for it?!

    In England I agree with you, it will play well. But in NI, where people are already distrusting of the Tories, we will wonder what’s coming next. Which I guess is your own point!

  • Mick Fealty

    Amended… (done as I was being called for the plane)…

  • Mick Fealty

    “Hardly surprising since those 83% are unlikely to be effected [sic].”

    Exactly right. And I further suspect many of them don’t vote for any party. For now, I have an open mind on how it will work out.

    But it’s the ‘rack renters’ rather than the ‘benefit junkies’ that ought to be the target of any initiative in this regard.

    My feeling is that this is a fiscal deal first and foremost, and a social reform afterwards. Let’s see if IDS can work on an effective secondary response to deal with any regressive unintended consequences.

  • Seymour Major

    BBB

    I am not surprised by this apparent “U” turn by either party.

    One of the things that is impressing me about this coalition is the sheer will and determination of the leaders to make it succeed. The Cons and Lib Dems are on a joint mission to cut the deficit. That is a paramount national objective. Unfortunately, there is not a huge amount of political manoeuvre. Some sacred cows have to be killed and eaten. It will not surprise me if there are more of them.

  • Seymour Major

    Spare a thought for Michelle Gildernew.

    As an MP, she has a salaray of £65,000 and is thus a 50% tax payer. She has 3 young children and will not be entitled to child benefit when the new measures come into effect.

    Sinn Fein takes a levy out of their MPs salaries which goes towards party funding. So will her party reduce the allowance to compensate for the loss of the child benefit?

  • Neville Bagnall

    There is a real risk in dropping “universal benefits”.

    When a benefit is for someone else, and not for you, its a lot easier to accept cuts in it. The reaction to the two cuts could not highlight this better.

    One involved an income cap at about £500 for unemployed, irrespective of family size. The other a cut of £20 per child for someone with an income of £600 minimum.

    Which one benefits more people? Which one will have the greater real effect? Which one got the big reaction?

    Now I’m not arguing the merits of benefit caps or benefit clawback. I’m just saying that cuts in universal benefits get the attention of self-interest. Cuts in targeted benefits only get the attention of empathy.

    Empathy that could be affected by, for example, a press campaign against benefit scroungers.

    For all the talk of the Big Society, the Tories so far seem to be following the old pattern of balkenising UK society into small self-interested and self-reliant communities and individuals. Thats understandable given their philosophy.

    It just strikes me that some of the UK’s greatest achievements occurred when there was a combined national effort and reward and a sense of unity and broad community.

  • Neville Bagnall

    Which one benefits more people? – scratch that, should be:
    Which one affects more people?

  • Neville

    Spot on. Child benefit cuts are typical Thatcherite politics, divide and rule, in Camerons big society it seems some will be allowed in and some not, it all depends on how high you tip your cap.

    Nothings new about Cameron, as Turgon reminded me, his politics are nothing more than echoes of the 19th century, I would add with a 21st century splash of a media publicist’s paint. He really is a nasty piece of work as behind all the crap he is engaged in a class war which will only benefit the upper middle class.

  • The Raven

    Mick

    Think there’s room for a little civil unrest not too far down the road?

    Just wondering what your opinion of that is. A very left-leaning and much older friend of mine who was an active participant in the Poll Tax riots feels that we’re in a similar “mood” to the times that were then.

    I have no opinion either way, other than to say, I don’t feel it’s powderkeg time out there, but the correct long trail of gunpowder and an errant match….who knows…

  • “Exactly right. And I further suspect many of them don’t vote for any party. For now, I have an open mind on how it will work out.”

    Mick F,

    Oh what little faith you have in humanity, as to IDS having any say in benefit reform, no chance, he makes mood music, that is all, as all secretary of State for works and pensions have over the last decade or so, (Or whatever the department is called these days.) The scale of the ignorance about the economically disadvantaged in the UK is staggering, as too is there demonisation.

    Cameron’s great hero Thatcher ‘deliberately’ created this section of society and new exactly what she was doing, now her successor as PM is to penalise them for their ignorance. Shameful is not a strong enough word, if the Coalition was serious about dealing with this unacceptable situation they could, but that would cost money, and we know they are determined to crush them further with cuts; and where will that leave us, more wasted, stifled, or lost lives and a larger penal system, I am tempted to say, been there done that, or the USA has, there you are I said it:)

    Best regards

  • Seymour Major

    and we know they are determined to crush them further with cuts

    No you dont. Your words are naked prejudice

  • Seymour

    Don’t I, so the cuts to housing benefit were meant to improve peoples lives were they. If the government was serious about bringing down rents in cities like London they could have introduced a city wide fair rent act, but no, blame the economically disadvantaged and ship them elsewhere. If only they could reinvent the £10 pom, or create a penal colony in some god forsaken hell hole.

    As to naked prejudice, dam right I am, not least because the Cameron coalition is awash with class prejudice of the most nasty kind. If you wish to deal with some of the issues I raised fine, but in my world when people cry cuts, cuts, cuts, I tend to take them at their word.

  • Seymour Major

    Although this post is now a couple of weeks old, I thought I would comment on it again, since some Conservatives are now having second thoughts about the proposed capping of housing benefit.

    Boris Johnston, Mayor of London, is amongst those arguing for a rethink. As reported in the Guardian

    Ministers are locked in negotiations with the mayor of London’s office searching for policies to soften the impact of the government’s changes to housing benefit on the capital

    http://www.guardian.co.uk/society/2010/oct/27/ministers-negotiate-housing-benefit-cuts

    Any changes are likely to be of form, such as making the benefit payable direct to the Landlord, rather than substance.

    Altogether, ministers are standing firm. The Daily Telegraph, meanwhile, urges David Cameron to stick to his guns. It argues that the cuts are beneficial – not brutal

    http://www.telegraph.co.uk/comment/telegraph-view/8091225/Housing-benefit-reform-beneficial-not-brutal.html