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photo credit: Why Tuesday?

I went to a fascinating lecture last week at the Institute of Economic Affairs called “Two Cheers for American Welfare Reform: Lessons Learned, Questions Raised, and Next Steps”. It was given by Prof Douglas J Besharov who was over from the American Enterprise Institute / University of Maryland School of Public Policy.  Professor Besharov talked about the US experience of welfare reform over the last 20 years, and the extent to which politics has crept into and now dominates welfare reform in the US, and our country. This gradual politicisation is particularly so when one examines who is now in receipt of financial support from the government. It is no longer just those living in poverty, but those in middle incomes, those more likely to vote. In the US in 1984 there were 16.5 million people on welfare, today it is nearly 70 million people, which is about a third of American voters. In the UK with similar increases in the numbers now ‘reliant’ on financial support from tax credits, for example, these tools initially aimed to support more people out of poverty are now being used as political bait to entice voters.

The shift in language and tone over the last two decades is also interesting to note as this has paved the way for more radical reforms to move people off benefits into work, which  would not have been possible before. Since the early 1990s, on both sides of the pond, governments have made a concentrated effort to shift welfare recipients, the electorate and the Senate / House of Commons respectively to think that it was no longer acceptable just to be entitled to benefits (even though it is a legal entitlement). Now if you want financial support from government you must be actively seeking or engaged in paid work.

Today this is the accepted position by all political parties that “work pays”, you’re “better off in work”, and that there are corresponding “roles and responsibilities” (all DWP slogans) if you are in receipt of benefits to move into work. Expect to see more of this as the Employment and Support Allowance rolls out in October this year, as government tries to move 1 million people off Incapacity Benefit into work.

There is a correlation between what the government spends, and the numbers moving off welfare into work. The US government increased welfare spend from $32bn in 1993 to $68bn in 1999; and halved the numbers on their unemployment register to 2.5M. More people are now in work and better off, for example, a person working on minimum wage with tax credits was $4.32/hour better off in 1997 than the $1.53/hour they were better off in 1993.

Alongside this increased spend, there are an ever increasing number of changes and refinements being made to these means-tested systems. These lead to increases in complexity and produce consequences (intended and not) within the systems, which in turn can add further disincentives (and traps) for people to leave the safety net which benefits offer. Our recent ‘Interact’ report confirms Professor Besharov’s US findings.

At linksUK, we think that the UK’s benefit and tax credit systems have reached the point where a type of Royal Inquiry or Review Commission is needed. The inquiry or review would start with a blank sheet and examine: what the underpinning values and principles should be; what a 21st Century benefit system should look like and how it would operate; how the proposed changes would be introduced over time; and most importantly how political and societal buy-in and consensus is built in order to enact the changes. Timing is crucial as Thatcher showed in 1979 and Blair in 1997. The country has to be ready for change, as do the politicians and civil servants. Creating and encouraging the climate of change will be the real challenge.