Faith in simple reform is damaging the welfare state
With an annual budget last year of more than £220 billion, stewardship of social security is one of any government's greatest responsibilities. Many things could be said about how the Coalition has discharged this responsibility but Osborne's announcement on Monday of further deep cuts after the next election, targeted to begin with at under 25s, provokes.
The first is why the government wants to target young adults. It is certainly not based on an analysis of where the real budgetary problems lie. As the graph below shows, £100bn of that £220bn (45%) went on pensioner incomes. As a share of the growth over the previous ten years, pensioners had fully half.
The second is the pretence that there are easy answers. This is not new. Since 2010, each big cut in social security provision has been presented as remedying an obvious unfairness. On Monday it was housing benefit for under 25s. There is rarely if ever any thought for the wider consequences. The fact that such cuts tend to get announced by the Chancellor (whose interest is restricted to spending) rather than the responsible department, is telling.
If this faith in easy answers is bad enough when it comes to cuts, it is disastrous when it comes to a highly ambitious reform. Duncan Smith’s universal credit is intended to replace a system of six benefits and tax credits (three out-of-work, two in-work and one for housing). Roughly speaking, this old system is an amalgam of the sweeping reforms brought in by the Conservatives’ 1986 Social Security Act and Labour’s post 2003 system of tax credits. That reform and simplification were required is not in dispute. That it could all be done by a single benefit, built around a few simple principles, was a fantasy.
For what it is worth, our hunch is that universal credit will eventually be abandoned, at least in substance if not name. The challenge of clearing up the mess will certainly be one of the next government’s greatest responsibilities.