Why did the government botch the benefits bill so badly?

Social security reform cannot pick up the pieces of policy failure elsewhere.

Helen Goodman was a Labour MP from 2005-19 and DWP Minister in Gordon Brown’s government. Helen now chairs Church Action on Poverty and is a Trustee at Z2K.

Just how did the government botch the Benefits Bill so badly? A question many of us have been asking. I think it’s because they’ve been insufficiently strategic. Social security reform cannot pick up the pieces of policy failure elsewhere.

Undoubtedly there are serious problems: the fact that one young person in eight is not in employment, education or training; that the cost of working age disability benefits is doubling in ten years; that the work capability assessment is a process many people find hard to negotiate with a high degree of failure. And the public finances are under strain while growth has stagnated. Treating the sick and disabled with dignity and compassion and rebuilding the public finances both matter, but, at least in the short term, they conflict.

The Chancellor has been emphasising the need to stick to her “fiscal rules”. Critics point to the way Chancellor Merz just increased his commitment to spend on defence, but Germany is in a totally different position from the UK- our government debt is now  100% of GDP- theirs is  60%, So our borrowing costs and interest rates could shoot up if there was a big unfunded relaxation. My 16 years in the Treasury have taught me that markets can turn nasty quickly.

But there’s also a political element to this- Britain has a population of 66m, currently, only 34m of us are in work. Every person in work has to produce enough to keep another person. Will these people continue to willingly pay taxes for the other half of the population- with the pressures on them of inflation and housing costs? Unless action is taken this will  worsen- we have an ageing population: our inactivity levels have not recovered since Covid;  immigration is unpopular with some sectors of the community.  Tackling the underlying problems is a far better way to innoculate people against voting Reform than moving onto their territory.

So, can we reframe the issues to make them easier to resolve? It helps to consider that we have three quite different groups of people. First, 18-24 year olds with mental health problems- they have lost hope, they are out of work, they get depressed. Second we have people in their late 50’s and 60’s who have spent a lifteime doing manual work- the cleaner with arthritis in her knee, the HGV driver with back problems- they’ve always worked and paid in, but now the only work they’re trained to do is impossible. And thirdly we have people with lifelong disabilities and chronic conditions. Surely it doesn’t make sense to shove them all through one system? This is a bureacratic aprroach which seeks to make the people fit the system rather than the system fit the people.

Perhaps we can make more progress taking a holistic approach for each group.

First the young -with them despair and worklessness are intertwined. This matters, because they will carry a scarred youth through their life- the sooner it’s tackled the better. Changing the relative benefit rates and thus incentives between UC and UC plus the health element is surely right and that does mean cutting one to raise the other, but this is only ever going to be a small part of the story.

I don’t understand how much of the newly announced £1bn employment scheme will be spent on this group, but I was astonished to see that last year DWP put only £45m into “pilot” youth guarantee schemes. This is wholly inadequate, perhaps enough for 10,000. The Government should have a much bigger scheme up and running by now. In 2009 the last Labour Government launched a £1 billion Future Jobs Fund- we got it running in 6 months and it created 100,000 opportunities which grew to 200,000 till the Tories axed it. In my opinion the biggest mistake the government has made was the employers’ National Insurance increase, in particular cutting the lower earnings level- the point at which NICs kicked in. At a stroke they increased the costs of employing the lowest earners by 25%! I remain incredulous that they didn’t understand the employment impacts which are now working through as small businesses  stop recruitment, some shed labour and the supermarkets speed up the introduction of those infuriating swipe machines at the checkout. These are the very entry level jobs young people need.

But a holistic approach means more- it means not flinching from regulating social media which draws people into an addiction to spending hours doom scrolling. It means sorting CAMHS-( I know this is underway-it is desperately needed) and it means reversing the horrendous cuts to Further Education. I know everyone thinks we’ve got to keep pouring money into universities’ R&D as the “future”, but we need to think about the 50% of young people who don’t go to university and the huge skills shortages we have in construction; net zero and social care. We need to tie together these missions- into a bigger picture- a bigger story and give informed careers advice

For older manual workers whose bodies can no longer take the strain of physical labour and irregular hours, it might be possible with some careful, supportive tailored help to retrain a proportion of this group, but punishing them with low benefits to incentivise them in communities where vacancies are few is wrong. Ten years ago when the Chancellor was Shadow DWP Secretary , I suggested to her that we restructure the old age pension so that everyone  paid in for the same number of years instead of all retiring at the same age. Thus if you left school at 16 -in which case you’d be far more likely to do manual work- you might work to say 61, but if you had a degree and an office job you’d also work 45 years to 66. This would  map onto the all too familiar health inequalities.  She dismissed this out of hand as completely impractical. I don’t know why. Of course the Government Actuary would have to work out the detail, but it is the system the French operate and seems much fairer to me. Imagine if we had it now – some of what looks in our stats like inactivity would be what it truly is- retirement.

And then we have the third group- the group for whom PIP and was primarily designed- people with disabilities and chronic conditions.  My heart sank when I saw Liz Kendall had employed Prof Paul Gregg as an adviser- for it was he who designed the work capability assessment and the dreaded descriptors in the first place. He was hardly likely to advise junking them and so we came to the inane proposal simply to change the number of points. The Timms review working alongside the disability sector holds far more hope of a good solution. The DWP orthodoxy is that the cost of admin should be minimised so money is spent on claimants-  for example Child Benefit is ideal- one standard payment every year for 18 years. But in the case of people with disabilities a more personalised approach would make sense to assess needs for support whether through income, facilities grants or care, perhaps even coordinating with health and local authorities.  This would cost more upfront, but it might save money in the medium term and it would certainly serve disabled people better.

What I have said here does involve spending money in the short term, I have written elsewhere about how we could shift to taxing capital and raise £35bn, but that is another story.