Much of the debate over Iain Duncan Smith’s Universal Credit has centred on whether or not there are jobs for the millions of unemployed and whether they have the skills to meet employers’ needs. Iain Duncan Smith insists that many of them could find unskilled jobs and that the main problem is the lack of incentive to work, an issue which the bill could address. Assuming for a moment that he is right, will his reforms actually do what he is claiming?
The approach is double-pronged: strengthen the sanctions against the workshy and make work pay. Jobseekers will be required to apply for jobs and take appropriate job offers or face benefit penalties. Yet while the penalties are being increased, most of the actual requirements – including the compulsion to take job offers – are already in place and so far they don’t seem strong enough to compel people to find employment. Jobseekers who are forced to apply for opportunities may do little more than take thirty minutes to fill out an application and complete a rudimentary CV. More rigorous enforcement could bolster such requirements and Jobcentre staff will soon have the power to impose four-week mandatory work activity. This could help unemployed people to get into a work routine and remove to some degree the ‘leisure aspect’ of living on benefits.
Yet the DWP has indicated that mandatory work will be used sparingly - the White Paper, for example, referred to a ‘small group of recipients’ - and in any case the idea suffers from the same weaknesses as the introduction of new sanctions. Jobcentre staff are severely overstretched as it is, having to deal with roughly twice as many jobseekers as there were before the recession. In 2009, the BBC’s Face the Facts found that in the North West there were 300 claimants per adviser and in some areas the fortnightly check-up interview - one of the main ways to ensure that jobseekers are fulfilling their obligations - is now just four minutes long. The Department of Work and Pensions is facing 40% cuts – how, if they lose more staff, can jobcentres be expected to enforce these changes? If a lack of stick is indeed the main weakness in current welfare policy, then increasing the penalties while cutting the enforcement process does not seem likely to bring about a dramatic change.
But the rhetoric from IDS has not focused on prodding scroungers back to work– the core aim is to ‘make work pay’ by ramping up incentives. The bill will ensure that those moving into work will keep at least 35p of every pound they earn over what they receive in benefits and tax credits (with the remaining 65p taken away in withdrawn welfare). At the moment the complicated multitude of welfare payments make it difficult for jobseekers to see the benefits of going into work, so replacing them with Universal Credit will conceivably show the rewards more clearly.
But there are weaknesses in this approach too. The Institute for Fiscal Studies, for instance, has pointed out that there will be less incentive for second earners within couples to find work or increase their hours than previously. This may not be a significant problem – under current rules second earners generally have more incentive to work than most primary earners, including single adults without children and couples, because they lose less of their benefits and tax credits. Furthermore the number of couples where both members work has been rising in recent years. The most important question is whether 35p out of every extra pound earned will be enough to motivate people on welfare. Only time will tell, but the consensus among many including Mark Littlewood, director general of the Institute for Economic Affairs, and Neil O’Brien, director of Policy Exchange, is that the reform does not go far enough.
Welfare reform is a problem of gargantuan scale. It has dogged governments for decades and requires a mammoth effort to address. Thus, it seems likely that any reform that doesn't:
a) Cost a bomb (spending on benefits will rise by a relatively small £2.6 billion a year)
b) Entail an extremely tough passage through Parliament (despite some opposition even Labour seem fairly sanguine) or
c) Dominate the new government’s agenda
is likely to be ‘a start’ at best. The Conservatives have made their priorities clear – cutting the deficit is main aim for the next three years; intensive welfare reform will have to wait to the next term, if there is one.