‘Dynamic benefits: Towards welfare that works’ – a typically vast report from Iain Duncan Smith’s Centre for Social Justice – begins with the announcement that ‘Our benefits system is broken’ and concludes that ‘To address Britain’s unacceptable levels of poverty… we need to redesign the benefits system to boost employment and earnings over the long term.’ It is heartening to have a major Conservative policy document starting with a trenchant condemnation of poverty. But does the analysis add up, and will the proposals help reduce child poverty?
‘Dynamic Benefits’ raises two issues which need to be addressed. An inadequate, complex, means-tested benefit and tax credit system which is costly to administer, condemns too many families to live in poverty. And, despite a national minimum wage and support for low income earners via the tax credit system, nearly 60% of children living in poverty are in working families. But while in a previous report Iain Duncan Smith articulated his concerns that focusing on ’encouraging the highest possible labour market participation for mothers (in the interests of alleviating child poverty) have not adequately considered the deleterious impact on families and relationships…’ this report focuses heavily on work as the main route out of poverty.
Nevertheless, it engages with some important issues. The way in which benefits interact with employment creates financial penalties which render moving into work financially risky, and often leave low earners little better off. Increasing the level at which benefits begin to be withdrawn (the so called ‘earnings disregard’) and introducing a more gradual taper for the removal of benefit when people’s incomes rise will help make work pay. The abrupt loss of passported benefits such as free school meals and prescriptions when a family moves into work saps inadequate incomes, damaging poor children – hardly the intention of policies designed to get more families into paid employment.
But while the creation of a ‘universal work benefit’ and a ‘universal life benefit’ sounds attractive, the present system is complicated for good reasons, and it’s important to avoid creating a system that fails to reflect and address variable and complex needs. Proposals which reduce family income for modest earners are likely to generate hardship. It is hard to see why families living a little above the poverty line should be the first to pay for support for those even worse off than themselves. Targeting and taxing high paid earners might be a better and more egalitarian way forward.
The report also fails to adequately recognize other barriers to work – lack of jobs, lack of appropriate, high quality childcare, inflexible employment practices, low pay and discrimination.
Last but not least, the report’s focus on redesigning the benefit system ‘to boost employment and earnings over the long term’ ignores the fact that the social security system is there to protect all of us in times of ill health, disability or when we need to prioritise caring responsibilities. So while it makes sense to ensure that the system helps to facilitate employment, that must go hand in hand with its equally important social protection role. Reducing in-work poverty is crucial if child poverty is to be eradicated, but there will always be people who are unable to work. Without increasing support for families in workless families, child poverty will never be eradicated.