Reversing Conservative cuts remains the big social security challenge

The conference policy paper on “Mending the Safety Net” contains lots of good stuff on a wide range of welfare policy, even if I say so as a member of its working group. But, at Conference and beyond, I think it’s important not to get distracted from the big issue of the £13bn of cuts planned by the Conservatives. Reversing these – and indeed going further – is what will make the biggest difference to people’s lives, to UK inequality and even to the economy (and hopefully win a few votes in the process). Within this, here are three goals that the party should be fighting for.

Increasing working-age benefits in line with inflation – and ultimately earnings

George Osborne announced that most non-pensioner benefits would be frozen at their 2015 levels for 4 more years. Even before the Brexit vote, this was expected to be a massive drag on living standards. But inflation over the next few years is now expected to be higher than previously predicted – driven by rising import prices due to the weaker pound – and unemployment is predicted to rise too. This means the freeze will be even harsher than Osborne intended. And if the economy at any point needs a boost through fiscal policy, cutting the incomes of poorer households would be just about the worst policy you can think of, as The Economist recently noted.

So the party should be pressuring the new Chancellor to scrap the freeze and increase working-age benefits in line with inflation. But the policy paper goes further and argues that benefits should ultimately rise in line with average earnings – alongside a return to some form of housing cost link for Housing Benefit (soon to be part of UC). This would help ensure that when the economy and tax receipts are growing, everyone shares in that and inequality doesn’t widen. It may sound boring, but choices about benefit uprating in the long-term can compound to be more important than almost any other welfare or tax choice for poverty and inequality.

Avoiding the return of the tax credit cuts through Universal Credit

Another big part of the £13bn cuts was a slashing of the amount people can earn before their benefits start to be reduced. These tax credit cuts – averaging over £1,000 a year for 3 million families – were cancelled in the short term. But we can’t forget that they are still being rolled out as part of Universal Credit. UC itself is a good thing – 6 benefits rolled into 1, and created under the Coalition – but post-election it’s now less generous than the system it’s replacing. Lib Dems must continue to fight these cuts for parents and disabled people, which will both hold back living standards for years to come and reduce the incentive to work. The way UC is being slowly rolled out across the country in a postcode lottery (while sensible in itself) may even lend itself to sustained, aggressive campaigning. Why are new parents on low incomes in Lancaster & Morecambe, for example, now eligible for less basic support than identical claimants in most other parts of the country?

Our welfare paper also builds on this by calling for a new allowance in UC for second earners. At present, second earners can lose 65p in benefits for every £1 they earn. On top of childcare, taxes and other costs, this can mean it’s not worth working. A second earner work allowance would reduce this barrier to mothers (and fathers) working. The paper also calls for the work allowance to be increased whenever income tax or National Insurance allowances are increased in future, to ensure those tax cuts aren’t snatched back from poorer households through means-testing.

Stop child poverty rising

All these policies would be a great help for parents. But there’s more to be done to ensure no child’s development is held back by poverty. Another Conservative cut is to scrap the basic amount that goes to low income parents, regardless of the number of children: the Lib Dems would reverse this. What’s more, we would go further and increase this amount by an extra £5 per week.

Then there’s the limiting of support for families with more than 2 children: the policy group decided that it’s wrong to hold back support for a child based only on the number of siblings they have. Child poverty is currently set to rise under Theresa May, and the Lib Dem message must be that this is unacceptable and that there is an alternative.

Conclusion

These policies are costly but – although our paper includes some offsetting cuts such as ending the marriage tax allowance – Lib Dem policy has always been clear that we never signed up to Osborne’s tighter fiscal rule, which the new government has reportedly abandoned in any case.

Full or partial government U-turns on many of these policies are quite possible, and the Lib Dems would not be campaigning alone (the JRF’s new anti-poverty strategy has a lot of overlap with the above, for example). Each campaigning victory would make a big difference to millions of low and middle income families. And each defeat would work against the Tory attempt to appear “One Nation” and “driven not by the interests of the privileged few”, with poorer families’ incomes falling or stagnating due to their cuts.

So, that’s my plea for the above Lib Dem policies to be a priority, and to ensure that neither Lib Dem nor national welfare policy discussion get too distracted by shiny baubles or relatively minor issues. These are the overwhelming welfare challenges for this parliament, where big but sensible change is now distinctly achievable in Westminster, politically useful on the doorstep, and desperately needed in homes across the country.

* Adam Corlett is an economic analyst and Lib Dem member

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12 Comments

  • George Potter 9th Sep '16 - 1:09pm

    Adam is quite right that those are three good policies contained within the policy paper.

    However, politically they are useless.

    Two of them basically just amount to not cutting benefits payments in real terms. The other is basically £5 a week extra for families on universal credit.

    Nobody will be inspired or grateful to the Liberal Democrats just because we promise not to make their lives any worse. Nor will many people be inspired or grateful to us if we give them an extra £5 a week to help make up for increased living costs elsewhere.

    More to the point, nothing above is distinctively a Liberal Democrat policy. Any other party could promise the same things and none of what Adam mentions is big or exciting enough to shout about as a headline policy for the party.

    And that’s largely the whole problem with the social security paper – it gives the party very little to shout about.

  • Adam Corlett 9th Sep '16 - 1:26pm

    Thanks George but, unsurprisingly, I disagree. To restate my points:
    1) If our starting point is that we need to find a sexy new welfare policy that’s completely different to what everyone else is talking about, I think that will lead us to poor policy and away from the big issues that really matter to people’s lives.
    2) A headline policy would be “the Tories are slashing incomes for millions of families; the Lib Dems want to stop that”. Not only do I think that’s definitely something to keep shouting about, it has the advantage of being a simple message that goes with the grain of what voters already think (about the Tories at least) and – again – reflects the big issues. The policies I know you prefer, about removing all job-seeking requirements or completely replacing the tax and benefit system may be more inspiring for a few policy wonks (like me) but would actually be much harder messages to get across in the real world.

  • It certainly needs to stop. The current policies are creating homelessness and ultimately take money out of the day to day economy. Also, I really think it is a moral duty to ensure that groups like the disabled are comfortable enough economically to have decent lives rather than facing the spectre of poverty and constant uncertainty.

  • Sue Sutherland 9th Sep '16 - 4:28pm

    I have a problem. I think George and Adam are both right. We do need to put forward our vision for the country and not just respond to existing Tory policy, tinkering around at the edges. What sort of social security system do we need to create the kind of society we want to see based on our Lib Dem principles? Well, one thing I’m certain of…we wouldn’t have started from here, with the most vulnerable paying the price for others extreme wealth. Second earners are effectively being taxed at 65 p in the pound and yet the wealthy mustn’t pay any more than 50p(I think that’s still the current figure) otherwise they will lose motivation, it won’t be cost effective and they’ll leave the country. This is not equitable.
    Why are there sanctions against benefit fraudsters when global companies pay a pittance in tax? What happened to cost effectiveness? Would Universal Income sort this out? I’m not totally convinced but we shouldn’t ignore it. Why can’t we have a policy of running pilots and trying it out for cost effectiveness, de incentivising people from working and the other criticisms? It would certainly help with structural unemployment and rebuilding impoverished communities neither of which have been a concern of Labour and Tories, but which Lib Dem principles should force us to address.
    Of course we have to have sound economic policies to back up our vision, but I don’t think anyone is going to rally to the resounding cry of ” the Tories are slashing incomes for millions of families; the Lib Dems want to stop that”. We have to shout about what WE want to do not a feeble wanting to stop something someone else has come up with. If we don’t step up and meet the present challenges to a cohesive society our country will be torn apart by extremists. Austerity and Thatcherite economics have had their day, or rather nearly forty years of failure.
    We were prepared to be destroyed as a party by entering Coalition. We are at a point where being quietly reasonable will finish us off. Let’s carry on with the bravery we showed in 2010 and be loudly unreasonable when our principles require it. We have very little to lose and our country has much to gain.

  • @ Sue Sutherland “We do need to put forward our vision for the country and not just respond to existing Tory policy, tinkering around at the edges.”

    Exactly!

  • Stevan Rose 9th Sep '16 - 9:38pm

    There’s a lot to this and it is near impossible to get it right. We are seen as wishy washy on this subject, soft on and / or in denial of benefit abuse. There is a significant minority of people who think others owe them a living and abuse the system, others that ride the system in a more casual way, and those who have fallen on hard times through no fault of their own and need help to get them back on their feet before they contribute again. And a small number who need and will always need care and support. Trying, in a humanitarian way, to separate hardcore abusers from the deserving cases is fraught with risk because every case is unique.

    Every attempt, well intentioned or not depending on your party allegiance, to get the distinction right has failed to date and inevitably disadvantages those who can’t or won’t play the system. You can’t solve that in a blog post or a weighty paper. It needs an all-party (to try and get consensus for the long-term) enquiry / standing conference that takes its time to get every detail right. It must have a remit to put in place a fair and just solution, not one designed to reduce the bill. Set how much we want to pay and work within that.

    I would suggest 3 easy headlines for us to start with.

    1. State pensions are not benefits, pensions have been paid for via NI contributions.

    2. Everyone without exception has a basic right to a roof, sufficient food, warmth, and appropriate care when in need.

    3. No-one who has fallen on hard times through illness or injury or [add condition] shall lose their home as a result. (State loans not handouts).

    I agree with George that what is being proposed at the moment is politically useless.

  • Gordon Lishman 10th Sep '16 - 11:40am

    The crucial thought is: “don’t start from here”! The Tories have won the big underlying battle: to define the question as about “Skivers and strivers”. That’s a ludicrous distortion of the facts about welfare spending. Liberal Democrats’ big challenge is to fight back on that single, basic issue. That may mean a complete new approach; it may involve some tinkering with what we’ve got. Either way, unless we can win the big battle, welfare and social security spending will continue to be mean, carping, aggressive and misguided. Our theme needs to be the re-creation of the social solidarity on which any policy should be based.

  • Stevan Rose 10th Sep '16 - 2:06pm

    ” That’s a ludicrous distortion of the facts about welfare spending. ”

    Are you saying there are no skivers abusing the system? If you can solve the problem of separating them from genuine claimants you can change opinions. Otherwise the Tories and the Press will find stories of welfare abuse that tar all claimants. You’ve got your work cut out there; no-one has found the magic solution yet.

  • Stevan Rose 10th Sep ’16 – 2:06pm…………Are you saying there are no skivers abusing the system? If you can solve the problem of separating them from genuine claimants you can change opinions. Otherwise the Tories and the Press will find stories of welfare abuse that tar all claimants. You’ve got your work cut out there; no-one has found the magic solution yet……….

    There are, of course, skivers….However, they are a tiny minority and ‘using a sledgehammer to crack that tiny nut’ results in miserey for the majority who do not…

    As for the “Tories and the Press” finding cases of abuse??????? If there was only one abuser they’d find fault with the system….

  • Lorenzo Cherin 10th Sep '16 - 3:45pm

    We need to be both radical and practical, and we can. If a basic income , whether in the EU or out , could be for citizens only, and their spouses ,who are permanent residents who rightly do not see residing and loving it ,here need mean renouncing your country of origin, I would support it. But not for everyone , as a magnet and an electoral disaster!

    We cannot face all ways . Absolutism is worse than nothingness, nearly always, but fanaticism is combined with sogginess, here now. We cannot say yes to all things EU and expect to do radical things our own way. That was the most compelling argument for Brexit , and the one I reckon Tony Benn would have put. We should have , but rarely did, put it for reform of the EU and of benefits !

  • Peter Davies 11th Sep '16 - 10:18pm

    The proposal for a second earners’ allowance notes that some second earners face a marginal rate of 65%. In fact most second earners face a 0% rate usually immediately or after benefit runs out (typically after only a few hours). First earners on the other hand face a 65% rate on most of their income until they hit NI and then Income tax when their marginal rate hits 76.2%. There is an assumption here that couples dividing the paid work equally is a morally superior choice which should be rewarded. I find that as offensive as the opposite assumption among conservatives.

  • there is NOTHING good or unintended about universal credit and that consensus of usefull idiots must be challanged. the idea its based on that the poor are responsible for being poor and should just be forced to work harder is pure hard right neoliberal cruelty. after 3 years in the north west uc has caused mass homelessness,destitution and workers have even lost jobs after the jobcentre made them attend appoinments instead of go to work, or the endless wait for payment left them unable to afford rent or the fare to work. 89% are in rent arrears. claiments are bullied off for stupid reasons or the I.T crashes the claim. its working exactly as intended. punishing the poor and off flow by any means. read the interview with professor dwyer “the looking glass world of work” in the big issue. people so hungry after months waiting for payments that never arrive thay are driven to shoplift food. there are no glitches that need ironing out.Its cruelty is intentional and built in. its the next poll tax riot for anyone dumb enought to keep supporting it. uc MUST be ditched

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