The welfare system is a vital part of any modern democracy. The general UK public want people protected from absolute poverty. We invented it – arising from our liberal reformist abhorrence of concurrent poverty and extreme wealth. Unfortunately it became central to big-state socialists’ social engineering policies. It has become a vast industry, with such complexity that its original aims have been all but lost. Amidst the financial crisis it falls to us, its inventors, to overhaul the sprawling system and propose major post-Coalition reforms..
Current Tory reforms aim to reduce complexity and cut the size of the welfare bill – now over 40% of all spending. LibDem ministers have participated in the reforms – to ensure the worst off are protected, and to instil fairness… including the reduction of welfare payments to the affluent.
However the common ground between Labour and the Tories, and the leading ‘public’ aim designed to resonate with the public, relates to moral hazard in the system. Moral hazard was a concern of the welfare system’s original Liberal creators – the potential for some folk just to live off welfare and the general problem of work disincentives. Today’s system however goes way beyond the original social safety net concept. Indeed the last Labour PM was an advocate of welfare benefits way beyond only those in poverty. Coalition reforms have expressed the moral hazard problems in terms of those living completely on welfare not being better off than those in similar circumstances but in work (rather than returning to the original social safety net aims).
The bigger picture, however, is not complete without an appreciation of the more general policy of reducing poverty in the longer term, including inter-generationally – that is, the aim of improving lives so that fewer people are in need of a social safety net.
There are many academic studies of the causes on longer-term and inter-generational poverty. Coherent policy in government however is thin on the ground. Remedies are pan-governmental, multidisciplinary, and stretch beyond the usual political timeframes. There are many policies which contribute to longer term poverty reduction ranging from educational & training to housing policy and SME development, but coordinated policy has been lacking. This is a shame since policies to reduce the need for a social safety net should be the primary counterbalance to moral hazard inevitabilities.
For example, one key difference between the UK’s poor and the UK’s middle classes is ‘assets’ – financial and human capital. Policy towards the poorest however is dominated by welfare policy – a point made by Liberal leader Jo Grimond 40 years ago.
The long-standing Labour Party resistance to long term poverty reduction strategy in this context not only reeks of self-interest (‘keep the poor dependent on the state’), it implies a kind of caste system in the UK….. the middle classes who own assets and vote Tory, and the ‘working class’ who don’t have assets and vote Labour. In much of modern Europe this UK caste system is met with bewilderment.
For the post-2015 period, LibDems have the opportunity to give equal emphasis to longer term poverty reduction, as to welfare reform. I will expand on this point in LDV in the future…
* Paul Reynolds is an independent foreign policy & international economics adviser, who has had senior political roles in Afghanistan, Iraq, and Pakistan, among other countries across the globe.