The Conservative-Liberal Democrat coalition government has at long last unveiled their ‘welfare reform’ plans, which are already touted as being “the “most significant reform” of the coalition so far”.(1) As expected, the reforms are mainly centered around the Work and Pensions Secretary Duncan-Smith’s pet project, the implementation of a single benefits system. Under this system, all benefits would be put essentially into one ‘package’, the universal credit – with the notable exception of disability benefits – and be immediately linked to the payroll deductions tax database. The advantage would be that doing so would allow the government to no longer have to rely on the old ‘all or nothing’ approach to benefits, and thereby eliminate the possibility of part-time or short-term work causing an actual decrease in overall annual income compared to unemployment. Instead, people under such partial contracts would be allowed to keep part of their universal credit so they would not lose out on the move towards regular work.
Although the proposal has met the expected derision from the Labour opposition, there are some definite positives to the plan. As any unemployed worker will tell you, the loss of dignity, of regularity of life, of social contact and attachment to the world and one’s immediate sorroundings caused by prolonged unemployment are very serious, and it is not likely that many people would choose to stay on unemployment benefits if they had the chance to get a job; but there have been credible complaints that the current benefits system actually costs the poorest part of their income if all they can get is part-time or short-term work, as is often the case for the unskilled. If Duncan-Smith’s proposals manage to overcome that, it will be a very significant improvement on the current benefits system, even if it is from the hands of a Tory Minister. There has been some skepticism about the need for a new computer database and system in order to deal with the universal credit programme, and the UK hardly has a very good reputation in terms of computer systems for major governmental institutions, but this of itself does not constitute a serious rebuttal of the Coalition proposal. Additionally, the fact is that the real meaning of this gap between part-time wages and unemployment benefits has been greatly exaggerated, but precisely bridging that gap by providing extra money during the period of reintegration with the labor market is, on the whole, a better solution than the likely alternative any liberal or conservative government will offer, which is to simply lower such benefits altogether. This is especially true during the current crisis, when neoliberal governments all over Europe are undertaking an assault on public provisions and welfare systems unseen since the days of Lady Thatcher.
What is so baffling then is the schizophrenia that seems to have gotten hold of the Coalition government and its Secretary, Duncan-Smith, when it comes to the question of costs. On the one hand, Duncan-Smith crows that he has managed to make his department the only one that will receive extra money rather than being cut to the bone in an attempt to make the public pay for bailing out capital.(2) On the other hand, not only has the Chancellor of the Exchequer announced he wants to cut an unknown number of billions of pounds from Duncan-Smith’s department, but in the Commons Chancellor Osborne complained that “welfare spending had increased 45% in the past 10 years and the government could not continue to spend one in three pounds of its total budget on welfare.”(3) But here is the schizophrenic part: in order to prevent further expansion of welfare costs, the government seeks to cut the department, while at the same time massively cutting all public services from Ministerial civil servants to the police, thereby assuring a significant increase in unemployment from these cuts alone! And that is not even considering the retrenching effect on the economy and employment generally the enormous reductions in government investment can be expected to have. And what will be the effect of strong increases in unemployment? Precisely, a much expanded welfare bill as all those newly unemployed will have to be provided with the dole.
Precisely this same approach of combining ‘small government’ with savage attacks on employment in the days of the Thatcher government meant that government’s left hand ended up not knowing what the right was doing. With the inevitable result that what could have been a massive windfall from North Sea oil and gas was wasted almost entirely on maintaining large numbers of unnecessarily unemployed people in the North of the country, after the government suppressed the miners’ strike and abandoned British manufacturing. Compare this to the enormous wealth created for the people of Norway by their wise decision to invest their windfall on enriching their population, and one sees what a miserable thing this ‘small government’ society really is. It shows the schizophrenia at the heart of a government which on the one hand wants ‘small government’ and decentralization, and on the other hand clamors for a ‘Big Society’ in which collective support covers for the shortcomings of the state. What it ends up meaning in reality is that the government does nothing where it should act, and where it acts, it wastes its money by having to compensate for its own inaction elsewhere. And then the intellectuals try to tell us that state planning is inefficient and that small government works best?
1) “Welfare benefit reforms unveiled by government”. BBC News (2 Oct., 2010).
2), 3) “Iain Duncan Smith ‘doesn’t recognise’ £4bn welfare cut”. BBC News (15 Sept., 2010).