If Welfare Is to Work, Morality Matters

This week the battle over the morality of benefit reform took a new twist. Labour's leader, Ed Miliband, was warned by one of his MPs that Labour should be far tougher on benefits reform.

This week the battle over the morality of benefit reform took a new twist. Labour's leader, Ed Miliband, was warned by one of his MPs that Labour should be far tougher on benefits reform. Politics that allow endless benefits spending is 'too comfortable, too easy for people on the Left', says Simon Danczuk, MP. 'Where's the money going to come from? I know people who won't work and should work', he added. Meanwhile, George Carey, former Archbishop of Canterbury, took the bishops of England to task. As 27 Anglican bishops warned that politicians had a 'moral imperative' to make sure the welfare system offered an essential safety net from hunger and Vincent Nichols, Archbishop of Westminster, claimed the safety net was being 'torn apart' and the numbers relying on food banks had increased, Carey warned that was too simplistic: factors other than the cuts were at play. Dysfunctional communities had problems more complex than could be reflected by simplistic moral judgements.

Morality does matter in the framing and operation of the law in general, and the welfare system in particular, but not in the way the critics of reform suggest. The point is not whether Britain's welfare system provides a safety net for those on low or no income. It does. It allows some households to draw up to £26,000 a year in benefit (the equivalent of a 34K salary) and many individuals to have income support or job seekers allowance, housing benefit and associated costs, extra help for special circumstances or extra costs e.g. for disability, for children. Rather the moral duty, as the architect of Britain's welfare state Sir William Beveridge explained, falls on the state to frame the system so that it can be afforded and people are better off earning than out of work. The money must 'come from' somewhere, and people who won't but should work, do work.

For that to happen, Beveridge intended that the money needed for benefits would come from people themselves, their employers and the tax payer, a three way contribution, paid when in work to cover for benefit if work stopped. Each family would have a breadwinner. Where people did not work, or earn (or earn enough) they would be given a smaller 'subsistence' sum, to cover for food and the basic necessities of life, funded from general tax at a less generous rate than the benefit paid from contribution. This system would give people the incentive to work and earn and pay their way; it would mean working people were better of than those who did not work; and it would keep the size and cost of the state small.

Such principles disappeared from Britain's welfare state as politicians abandoned the rules to award benefits for which people had not paid, or paid enough. It began in the 1950s, with the pensioners who wanted full pension without paying full contribution; moved to the more ambitious schemes to cover the full cost of workless households, often headed by a lone parent for whom the state became breadwinner, and extended to disproportionately high numbers of claimants with changing rules and eligibility for a variety of existing or new benefits, what economists call 'rent groups'. Those who worked and contributed were increasingly squeezed to pay for those who did not. The signal went out that the state would become the surrogate breadwinner and in many cases it did. And so taxpayers and NIC payers of today and tomorrow will be left to pay the bills.

The problem the UK now faces is not the absence of a safety net - though the bureaucracy can be insensitive to those for whom there should be support but do not 'fit' the boxes. The real problem is of a different order: instead of benefit dependent on contributions, there can be full benefit with no (or too little) contribution, and too much dependency with too big a state.

No effective mechanism exists to curb dependency or its escalating cost to the public finances. The consequences for economic recovery and the jobs that depend on it are grave. Although some progress is being made and the latest UK employment figures indicate more jobs are being created (424,000 more last year), UK unemployment at 7.2 per cent is still too high. Nonetheless there is no ambiguity about the economic evidence: lower tax economies, smaller public spending states have more dynamic labour markets where people can find jobs and entrepreneurs set up businesses and give employment.

Government has a long way to go to restore the morality to a system so the cost of the state goes down and people's chances in life go up. A start could be made by restoring the link between NI contributions and benefit, with the aim moving the system to individually owned 'pots' managed independently of the state, as recently proposed by Labour's former Welfare Reform minister, Frank Field. That would leave the state free to concentrate on how best to help those who do not work or contribute or whose family systems have collapsed. A reform on these lines, in the spirit of the initial welfare state, would also signal that a smaller state can be a reality. That smaller state, with lower tax on business and individuals must come, if the UK is to be set free to compete. In a world economy with ever greater competition for markets and products and the jobs that depend on these globally, that is the moral imperative. Such morality appears to have little appeal to bishops or politicians who denounce attempts to reform a system that has sold those who suffer short.

Dr Sheila Lawlor is Director of Politeia

Before You Go