Would the coalition dare to cut welfare back to Labour levels?

After adjusting for inflation, welfare spending today is an astonishing ten times higher than in 1948, according to figures published in yesterday’s Guardian.

The graph shows that the sharpest rises in welfare spending were both under Conservative administrations (presumably not unconnected with the recessions at those times – 1981-84 and 1991-94 – though the bill rose in all but three of the 18 years of Conservative government).

Only under Churchill and Eden in the 1950s did the welfare bill fall slightly.  Under Macmillan it rose about 50%, and the welfare bill Labour inherited in 1997 was almost double that they’d handed over to Thatcher in 1979.

Under Blair and Brown, the cost of pensions continued to rise as other welfare spending remained pretty stable.

But the Government would have to cut welfare spending by over half – far more than anyone’s proposing – to return it to 1979 levels.  That remains true even if pensions are excluded.

Once pensions are taken out of the picture, the remaining welfare bill has increased eight-fold in real terms since 1948 and has more than doubled since 1979.

I, like most Lib Dems, would argue that much of the increase is positive.  As a society we’re doing a better job of helping those most at need.  Two thirds of welfare spending goes on those of pensionable age and that’s unlikely to fall as the population ages and we all live longer.  Helping those in genuine need and lifting children out poverty are just two of the very worthwhile and necessary purposes of all this spending.

But surely there’s a sensible debate to be had about which elements of this spending – now over £150 billion a year – are providing good value for money.  Which are really improving outcomes and which, when looked at in the cold light of day, really aren’t making much difference at all.

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  • Andrew Suffield 4th Jul '10 - 6:58pm

    My own experience of the system is that it pays for an extremely large amount of bureaucracy, most of which is incompetently administered. We can cut bureaucrats without cutting benefits, so there’s got to be some scope for improvement there. If the bureaucracy simply started examining the competence of their staff and firing the inept ones, they’d get one of those huge “efficiency” improvements.

  • Anthony Aloysius St 4th Jul '10 - 7:37pm

    “We can cut bureaucrats without cutting benefits …”

    That’s a pretty bizarre thing to say, considering that the government has already started cutting benefits.

  • George Kendall 4th Jul '10 - 9:03pm

    This is the issue that most worries me.

    Labour were already going down this path with a steady shift to workfare. Workfare might not be so bad if there were lots of jobs to do, and there were good support. Unfortunately, the first won’t apply for many years, and I can’t see how the government can afford the second. (Most experts reckon that, if support is to be better than useless, it needs to be high quality, and that, in the short term, high quality support will cost more than the benefit it saves)

    I have some respect of Iain Duncan-Smith. He’s spent a lot of time thinking about this subject, and I believe he is motivated to be helpful to those caught in the benefits trap, but he’s going to have to cut budgets, and I can’t see how he’ll have the freedom to invest in the necessary high quality support.

    One obvious answer for cuts is so-called middle class welfare. For example, taxing child-benefit, possibly means-testing it. Those on the left are deeply worried about this option. If middle-class welfare is removed, it’ll result in a very high disincentive to work for those in low to middle income, because, as you earn more, you’ll have more of these benefits withdrawn. Second, as Sunder Katwala, General Secretary of the Fabian Society, said on https://www.libdemvoice.org/opinion-observers-dishonesty-doesnt-disguise-party-challenges-20091.html , middle-class welfare is important for sustaining the conditions for effective anti-inequality policies – in other words, if the middle-class don’t get any welfare, they’ll start voting for it to be cut right back, and we’ll end up with a US-type system.

    One big item of middle-class welfare, the state-funded pension, has been re-linked to earnings, and so cannot be cut. As a result, cuts in the rest of the Department for Work and Pensions will be even heavier.

    I don’t know what will happen. But as the social security is enormous, it’s bound to be hit badly by cuts. Osborne has even suggested that it should bear a disproportionate share of the cuts. I don’t envy Danny Alexander trying to square this with the coalition’s commitment that those with the broadest shoulders should bear the greatest burden.

    Although I’ve extremely worried about this, it’s no good just blaming the government.

    One criticism of the coalition is that its defenders keep saying that there is no alternative. That would be a very good criticism, if opponents of the coalition were engaging in the detail, and suggesting specific ways the coalition should balance the deficit. In other words, if those critics were suggesting an alternative.

    All I’ve heard is calls for the rate the deficit is reduced to be slowed down – I’ve even suggested it myself. But slowing down the deficit reduction doesn’t free us from hard decisions. It may just mean those hard decisions have to be taken in five years, instead of three.

  • George Kendall 4th Jul '10 - 9:16pm

    Geoffrey Payne: “I accept it is very hard to make cuts, but instead of hitting the poor we should target the rich with tax increases instead. That too may be hard to do. All the more reason to have a high pay commission to look at the best ways of doing this.”

    Good for you, Geoffrey in suggesting an alternative.

    On the surface, targeting the rich is an attractive option. And it’s one that the party has long agonised over. Unfortunately, the expert advice is that it doesn’t work. See: http://www.ifs.org.uk/bns/bn84.pdf

    I’m afraid the only way to raise very large amounts of tax revenue is to hit middle-income households.

  • David Allen 4th Jul '10 - 10:55pm

    “I’m afraid the only way to raise very large amounts of tax revenue is to hit middle-income households.”

    Then let us consider hitting the rich hard, the fairly rich fairly hard, and the middle-income household to a lesser extent.

    Let’s remember that welfare is not true government spending, in the sense that government money dictates the allocation of national resources towards government objectives (road building, missiles, teachers, or whatever). It is merely a state-organised transfer payment. It is “Bill, pay me some tax, so that I can hand the money to Jim.” It follows that, if we need to cut the deficit, and we think we need to consider welfare in that respect, we have a free choice. We can make Bill pay more, or we can make Jim receive less.

    Harold Wilson used to say that when times were hard, the strongest backs should bear the heaviest burden. I agree. Should I be expelled from the NuLibDems?

  • Anthony Aloysius St 5th Jul '10 - 8:51am

    “I’m afraid the only way to raise very large amounts of tax revenue is to hit middle-income households.”

    Sounds like an alternative to me.

  • Anthony Aloysius St 5th Jul '10 - 9:23am

    And here’s news of a poll on spending cuts from the BBC:
    “NHS managers, quangos and overseas aid would be among the public’s top priorities for spending cuts, a poll carried out for councils suggests.”

    Instead, the public would give priority to street cleaning and rubbish collections (oh – and care for the elderly, to be fair).

  • John Fraser 6th Jul '10 - 12:03am

    A slightly cowardly article which says we should look for ways to make cuts in welfare without explicitly saying where he thinks the wastefull spending comes from.

    Or is the writer taking another swipe at the unemployed as being feckless lay abouts who deserve little or nothing.

    I truly hope not… please clarify Iain ??

  • I don’t think it makes much sense to look at expenditure without looking at the number of pensioners, the number of children, the number of households without work, etc.

  • Andrew Wimble 9th Jul '10 - 12:50pm

    There are ways to reduce welfare spending without badly hurting the most vulnerable, but they are not going to produce the kind of cuts that some people want.

    Some poorly targetted benefits could be better targetted so that welfare only goes to those who actually need it. Child benifit comes to mind but I am not sure how much of a saving that would actually be

    People who cannot work full time for whatever reason could be encouraged to work part time, both by ensuring they see a genuine financial benifit for doing so and by encoraging employees to offer more part time and flexible hours opportunities,. Any savengs though are constrained by the oportunities available. There is not point telling people they should work part time and claim less benefits, if suitable part time work is not available.

    Finally people could be encouraged to make more provisions for their retirement, bot personally and through their employment. Any savig from this though would be many years in the future.

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