It becomes painfully obvious how empty Labour’s welfare cupboard is whenever a frontbencher rises to comment on Iain Duncan Smith’s universal credit. The strategy of the work and pensions secretary will historically be judged as inimical to Labour’s beliefs, which have always involved a deep hostility to means testing. So why is it that Labour finds itself signalling qualified admiration for what the Conservative secretary of state proposes?
In part this uncomfortable experience stems from the last government’s record, and in particular the direction in which Gordon Brown took welfare reform. In 1997, Tony Blair gave me the job of minister for welfare reform to develop a strategy based on social insurance. This ran counter to Brown’s reshaping of welfare around a massive extension of means testing flying under the title of tax credits. The then-chancellor, holding the senior position, won.
Duncan Smith’s reforms are the tax credit strategy on speed: a single means test for a super benefit which ensures that work pays. What could be simpler? Of course, the reform is turning out anything but simple, or even a single benefit.
Labour’s discomfort in countering Duncan Smith also stems from the fact that we have no alternative to offer. This gaping political hole in our armoury needs to be rectified urgently. But in doing so don’t let’s underestimate Duncan Smith’s achievement. His strength comes in large part from the fact that, on losing the Conservative party leadership, he was not content to reinvent only himself. He went on to invent the social strategy that now sweeps right across the coalition’s home front.
While there are many variants to the Brown-Duncan Smith means test strategy, there is only one clear alternative, and that centres around a rebuilding of the welfare state on social insurance principles.
Whatever the achievements of the Blair-Brown governments, and these should not be overlooked, some of their policies increasingly divided Labour from its natural supporters. The policies that were seen to attract New Labour voters were not necessarily to the taste of the growing body of traditional Labour voters, especially its stance on welfare and immigration.
How Labour builds an immigration strategy that appeals to both camps requires the qualities, as JH Thomas once remarked, of being able to ride two horses at once. Thomas added that if one could not master that ability, one had no right to be part of the political circus. Rebuilding a welfare strategy holds no such dangers as the values underpinning social insurance are equally attractive to both these camps of Labour voters.
It is the value of fairness, which is implicit in social insurance, that Labour used to cherish and which now needs to come centre-stage again. This task is urgent as the drawbacks to Duncan Smith’s reforms become clearer as MPs try to tease out how this reform will work in practice. As importantly, Labour needs an alternative with which it can begin a serious conversation with the electorate.
Unlike means testing, which offers help only to someone who fails to generate a minimum income, or who adapts their behaviour, or who lies about their circumstances in order to qualify for benefit, social insurance is based on the sure knowledge that, for the vast majority of us, the whole range of events that life’s round throws up, and which can cripple our ability to earn, are those that, in the main, we can only insure against if we do so collectively.
Social insurance’s base assumption is that we are all, genuinely, in this life together, and that the commonsense response is to share life’s risks across the whole community, rather than let them fall individually. By so doing, society is able to offer coverage at less, often far less, than that which the market would charge. Social insurance thereby harnesses our self-interest to the common good.
Again, unlike means tests, social insurance involves no declaration of failure. Citizens draw when life’s circumstances qualify them for the benefit that they have paid for.
Any welfare system has a price tag. Means testing was sold as the cheaper alternative. But after our government spent £150 billion on tax credits, with only modest effects on child poverty, that line now has far less appeal. Social insurance has likewise been invariably presented as the more expensive option. And the costing the government actuary did for me before the 1997 election made that point. How the costs of such a reform are phased in, however, are critical.
If a reformed social insurance is genuinely to bear the strain of globalisation, for example, then costs will be higher, certainly in the short run. But what about the longer term? One of many aims of a refashioned social insurance must be to offer better coverage for the unemployed, making benefit dependent on contributions and not, say, on a partner’s income as under the present household incomes test. There would then be no incentive for low-paid partners to give up work so that benefit for the household can be claimed. Under these circumstances how do we begin to judge the long-term savings?
Clearly any new scheme must be differently owned. Work I did in preparation for the Blair government outlined how we could run a national scheme that was owned by the entire membership, which allowed itself to act as a milk cow for the Treasury. Reforming welfare along these lines therefore offers us the chance to reform a link to citizenship. We would be moving from one governed by natural rights to one based on the rights that are earned. And it is the earning of rights that is crucial to Labour voters’ sense of fairness.
The one certainty is that the electorate are up for such a wide-ranging reform, as it fits easily into what so many voters believe as both commonsense and fair. Is Labour up to the challenge of confronting the status quo that has powerful defendants, not least in the Treasury? Ed Miliband will soon have to set out a new direction for the party, and we shall then know.
Frank, as I have said time and again, Labour has to be the ultimate Insurance provider for a great many things. Thus making it applicable to the lives of the majority. This is the best idea proposed in the creative vacuum that is Westminster. There is really a two tier approach to welfare that can address the two main concerns over it. I for one am very suspicious of all the “ideas” given by the whole lot of you so far. The greatest deception in politics has always been if you are a good citizen and you pay your high taxes and National Insurance the State will look after you later. Well it won’t will it, nor will the private finance sector either? My only suggestion (I am keeping my ideas thanks) is that when you write your next manifesto (at the moment my money is (on an objective assessment) a Tory victory – but we will see, I suggest you put your idea of an Insurance based system under the title “Security for you and your family, now and for the future”. You’ll need stuff like that to address or at least begin to address peoples concerns. Whether they believe it or not depends on whether they are ready to hear what you and your colleagues have to say, and that depends on whether they trust you. Do they trust you? Are you and your colleagues in Parliament worth trusting? After what has happened in the last two years do you all even understand how people have been affected by the things you and your colleagues have done? Do you even understand how to regain or develop public attention and trust. There is after all a good reason the Newspapers are no longer interested in you. The public are no longer interested in you and they do not even perceive you as a competant opposition never mind a party in waiting to run the country. I’m sorry I wish it was good news but it is very clear to the majority of peope who are not blindly loyal to the Party precisely what is occuring and amidst all the cheap and tawdry deceptions and false images sold by the PLP Westminster third class elites are only being taken in by the most naive of people. Once bitten twice shy. You all have a lot of work to do. It is good to see some half baked ideas from somewhere though and the lack of ideas occurs when people from very comfortable lives who can perceive no ill fail to understand the need for change. Its that sense of injustice of a realisation of the rough end of life that fules the emtive and intellectual drive towards change. You have all become Tories if not in name certainly in attitude and are promoters of the status quo. Not necessarily because you are all cold and ruthless but because you have too comfortable a time of it. You have all lost touch (those of you who ever had it) with reality. Even at a time as woeful as this the great Labour party aristocracy exists for its own sakes, a product of power and no idea why or what to do with it. But on a positive note I would like to thank you all. You have between you all truly found your middle way, it just happens to be lightyears from the rest of society, the communities and people of the United Kingdom. Politics means a great deal to the vast majority of people they are not apathetic, it is simply the case that the Parties have become as unpolitical as possible avoiding issues and settling on a park side picnic in avoiding bad media coverage for next weeks poll stats. The Labour Party in Parliament is more concerned with etiquette than policy, more concerned (I have witnessed first hand with your future sinking wonk-candidates) with the cosmetics and scenary at Tory conference than the trash polices emanating from Camerons maw (because they agree with him and want to be like him), and so on welfare the primacy of concern as displayed in both Westminster Houses has always been based upon that of MPs and their future drones. I reckon you’ll all still be sitting there arguing about Blue Labour or a Purple Book long after labour vanishes from the electoral map totally unaware and detached from what remaining realities exist in the very limited Universe of the mind that is the PLP and their prize sycophants.
Solutions only come from people and places where they are badly needed the recognition of such a need comes from experiencing it. It is the difference between being the General Melchett behind a desk and the Captian Blackadder dealing with the frightful reality, one celebrating the small pointless to scale patch of mud gained at cost and effort of the majority who keep the war going.