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Open up a totally new welfare reform front to battle benefit dependency – Frank Field

  • Department for Business, Innovation and Skills should take a lead role in tackling the dependence of employers and landlords, whose subsidies in the form of tax credits and Housing Benefit have grown exponentially, by raising wages and productivity

Opening up the next front in welfare reform will see a fundamental switch from the Department for Work and Pensions – historically always responsible for welfare reform – to the Department for Business, Innovation and Skills, reflecting the new reform agenda called for today by the MP Frank Field in a new pamphlet for the cross-party think tank Civitas.

Efforts to get people off out-of-work benefits up to now have produced considerable successes, but two new fronts need to be opened in the battle against benefit dependency, Field and his co-author Andrew Forsey argue in ‘Fixing Broken Britain? An audit of working-age welfare reform since 2010’.

The first involves a renewed drive to help those who have not yet been found a job under the Work Programme – principally the over-50s and the disabled. This should involve weighting the payment-by-results systems further in favour of those claimants facing the steepest barriers to work. This major task, and the prompt and efficient payment of benefits, should be the primary objective of the Department for Work and Pensions.

‘We believe the payment-by-results system the government introduced now requires a significant recalibration to give the most disadvantaged participants a fighting chance of getting and keeping a job’, Field and Forsey write.

Field and Forsey also recommend identifying claimants’ strengths and difficulties as early as possible once they begin claiming benefit; early referrals to the new Work and Health Programme for those on any benefit in most need of support; and lifting the cap on numbers who can enrol on the voluntary welfare-to-work programme for claimants with disabilities, and extending the time for which they can participate.

Preventing yesterday’s workless poor becoming today’s working poor

A second major new front against benefit dependency involves raising the earnings of low-paid workers, which requires a national productivity strategy that can be built around the new National Living Wage. The major objective here is to prevent yesterday’s workless poor becoming today’s working poor.

Field and Forsey say, ‘The conditionality attached to the receipt of benefit may have made work an easier option, but real wage growth at the bottom end of the labour market has been the missing piece of the government’s welfare reform puzzle.

‘In order to enshrine work as the best route out of poverty, the next front in welfare reform must build upon the National Living Wage to deliver the higher productivity that can sustain rising real incomes across the board. This policy needs to be driven by the Secretary of State for Business, Innovation and Skills.’

Universal Credit, if it is ever rolled out nationally, will not incentivise work

In their forensic audit, Field and Forsey say that Universal Credit will not incentivise work as initially conceived.

The government’s flagship welfare scheme will only deliver a lower marginal tax rate for certain groups of claimants and even for them it will be undermined by Universal Credit’s failure to encompass council tax support and free school meals.

‘Because of Universal Credit’s higher taper rate for many claimants the strategy of fixing “broken Britain” by offering lower withdrawal rates than the current system lies in ruins.’

‘If creating an incentive to work is the goal the present system for the vast majority of claimants meets that goal more effectively. Any reduction in the marginal tax rate will only come for particular groups of Universal Credit claimants should the benefit be introduced.

‘But then, the failure of Universal Credit to encompass also Council Tax support and free school meals will throw all of these calculations into a mild chaos, to put it at its gentlest.’

A five-point plan for the reform of in-work benefits between now and 2020

Field and Forsey argue that because there is little prospect of Universal Credit being rolled out in full by 2020, Chancellor George Osborne should act now to protect lower-paid families with children within the framework of the welfare cuts he is planning.

The authors set out a five-point plan for in-work benefit reform in the current parliament:

  • The tax credit system should be centred on lower-paid workers with children, with entitlements to families earning up to twice the level of the National Living Wage, a ceiling of £32,000.
  • By 2020, childless couples and single workers without children should no longer be eligible for support from the tax credit system.
  • Jobcentre Plus should be revamped so that staff have the skills to help claimants in work increase their hours and/or pay, either in their current job or by finding a new one.
  • Tax credit claimants should be allowed to increase their earnings by up to £5,000 in any 18-month period without any clawback of entitlement, so that they do not lose large chunks of income for working more or for better pay.
  • Vulnerable workers who cannot currently work a full week should be allowed to work up to 24 hours a week and claim Jobseeker’s Allowance or Employment and Support Allowance, rather than the current 16-hour maximum.

Field and Forsey write: ‘These five reforms would be much more effective in protecting those in work on modest earnings than anything the government is proposing. They build around the revolutionary idea the chancellor has introduced into British politics, particularly welfare reform, namely of introducing a National Living Wage.

‘This move begins the process of transferring the responsibility for lower earners’ welfare to employers and the Department for Business, Innovation and Skills, and away from the Department for Work and Pensions and Her Majesty’s Revenue and Customs.’

Notes

Frank Field has served as Member of Parliament for Birkenhead since 1979. In 1990 he took up the chairmanship of the Social Security Select Committee and continued in this role up to 1997. In that year he accepted the position of Minister for Welfare Reform in Tony Blairs first government. He then served as a member of the Public Accounts Committee between 2002 and 2005. In 2010 he was appointed by David Cameron to lead the Independent Review on Poverty and Life Chances. Frank co-chaired last years All-Party Parliamentary Inquiry into Hunger in the United Kingdom and he currently chairs the Work and Pensions Select Committee.

Andrew Forsey is head of Frank Field’s parliamentary office, having joined in 2013. In 2014 he served as Secretary to the All-Party Parliamentary Inquiry into Hunger in the United Kingdom. Andrew then wrote the inquirys two follow-up reports in 2015, focusing on the extent and causes of hunger in this country.

For further information contact:

Andrew Forsey

T: 0207 219 6636

M: 07951 821304

Jack Mason

T: 0207 799 6677

E: jack.mason@civitas.org.uk

Civitas: Institute for the Study of Civil Society is an independent, cross-party think tank that facilitates informed public debate on important issues of the day. It is not affiliated to any political party and receives no state funding

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Fixing Broken Britain? An audit of working-age welfare reform since 2010

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