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Iain Duncan Smith’s Plans to ‘Make Work Pay’ Could Be a Costly Failure

The proposals in ’21st Century Welfare’ are the product of two inconsistent philosophical perspectives: one that stresses ‘welfare rights’ and another that focuses on ‘mutual obligation’. As a result, the proposals are unlikely to achieve the significant reduction in welfare dependency that is hoped for. Moreover, there is a strong risk of repeating the mistakes of American welfare reforms before the mid-1990s.

The main thrust of the DWP’s report is to ‘make work pay’. There is also a significant emphasis on ‘conditionality’ but it is discussed in a chapter entitled ‘Other areas of reform’, when it should be the primary concern. The most successful welfare strategy to date has been Wisconsin-style workfare. It was based on a rejection of the ‘make work pay’ policies of the previous twenty years of American welfare reform and aimed at self-support through work.

It is highly unlikely that reductions in the dependency comparable to the American achievement after 1996 will be achieved. The total number of recipients of Aid To Families With Dependent Children (AFDC) in 1995 was 13.7m. By 1999 there were only 6.8m recipients of the successor benefit, Temporary Assistance For Needy Families (TANF), and by early 2010 only 4.3m.

The plans lack fiscal and economic realism

The DWP’s proposals also fall short of the fiscal and economic realism now urgently needed. Welfare dependency is a problem because if we are to escape our current economic predicament we need all able-bodied people of working age to add their bit to economic output. Welfare beneficiaries do not make a net contribution to output. Instead they receive transfers from other people’s earnings. In recent times there has been a large growth in partial welfare dependency – that is people doing some part-time work to which in-work benefits are attached. The DWP’s proposals are likely to lead to an increase in this trend, when the aim should be self-sufficiency through work for everyone capable of it. A major disadvantage of ‘making work pay’ is that there will be an initial increase in the costs of welfare, which the DWP thinks will be recovered in future years. The Centre for Social Justice’s report of September 2009, which inspired the DWP scheme, estimated that an additional £2.7bn would have to be spent. There is a grave danger that the initial cost will merely add to the welfare bill without achieving any corresponding reduction.

The reforms are based on ‘welfare rights’ not ‘mutual obligation’

As they stand, the DWP’s policies are not compatible with the ideal of mutual obligation. The department assumes that poverty is the result of worklessness caused by barriers outside individual control. Chris Grayling, minister of state in the DWP, in his Merseyside speech of 1 July 2010 said: ‘Just a short journey from the prosperous centres there are whole areas, whole streets, whole families out of work. It is like a glass wall has been put up around them and they can’t get out. On the other side is a decent education, training, jobs but they can’t reach it.’ This approach implies that the solution is to remove the barriers and create incentives to work – to make work pay. In Iain Duncan Smith’s first speech as secretary of state he explained how he could understand why work was not ‘the most financially sensible option’ and the consultation paper says that working ‘is not a rational choice for many poor people’.

Imagine that the only help available for a person losing his job was from a family member. Your brother or sister says ‘OK I will pay you £300 a week until you get back on your feet’. A month later you are asked how the job search is going and reply, ‘Well I found a job for £310 a week but it’s not worth taking because I will lose the £300 you give me. In effect I will be working for only £10 a week.’ The kindest of siblings might find this a little selfish. But this is exactly the attitude being taken by people on benefits who will not work because it does not pay. The fact that the money comes from the anonymous taxpayer seems to suspend the normal moral obligations we feel. The Coalition’s proposals do not challenge these entrenched assumptions.

Work should be a civic obligation

The Wisconsin scheme aimed at self-sufficiency. Welfare recipients were offered a market job as the first priority. If no employer was willing to take on a particular person, then subsidised jobs were found for them so that they could acquire workplace skills. If there were no market or subsidised jobs then work on a government task force was required. If an individual was not ready to take on a full-time job, then job-preparation programmes were provided. Training was not a substitute for a job; earning a living was the first priority.

For more information contact:

Nick Cowen at Civitas on: 020 7799 6677
David Green on 020 7799 6677

Notes for Editors

i. Civitas is an independent think tank. Its research programme receives no state funding and it has no links to any political party.

ii. This release is based on the response by Dr David Green, Director of Civitas to the DWP consultation document, 21st Century Welfare. The full response can be found below.

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