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| The Iain Duncan Smith legacy? Universal credit will not transform welfare | The Iain Duncan Smith legacy? Universal credit will not transform welfare |
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| In his first budget, in July 2010, George Osborne promised to “balance the books” by 2015. But he did not explain what he would cut. And that presented an immediate problem. The Department for Work and Pensions was by far the largest spending department – but not only had the government, via the “triple lock”, pledged to increase spending on pensioners, but Iain Duncan Smith’s “big idea” – rolling six benefits into one universal credit – meant more spending on low-paid working people, too. | In his first budget, in July 2010, George Osborne promised to “balance the books” by 2015. But he did not explain what he would cut. And that presented an immediate problem. The Department for Work and Pensions was by far the largest spending department – but not only had the government, via the “triple lock”, pledged to increase spending on pensioners, but Iain Duncan Smith’s “big idea” – rolling six benefits into one universal credit – meant more spending on low-paid working people, too. |
| Related: Iain Duncan Smith was being asked to make more cuts for the working poor. It was morally indefensible | Related: Iain Duncan Smith was being asked to make more cuts for the working poor. It was morally indefensible |
| After acrimonious negotiations, a deal was reached. Duncan Smith could have his universal credit. But the trade-off was very large cuts in disability benefits. The roll-out of the employment and support allowance would be accelerated, forcing a million people back to work, while disability living allowance would be replaced with a personal independence payment, cutting spending by 20% compared with DWP projections. | After acrimonious negotiations, a deal was reached. Duncan Smith could have his universal credit. But the trade-off was very large cuts in disability benefits. The roll-out of the employment and support allowance would be accelerated, forcing a million people back to work, while disability living allowance would be replaced with a personal independence payment, cutting spending by 20% compared with DWP projections. |
| It did not take long for the wheels to come off. When Duncan Smith pressed ahead – against the expert advice of his own independent reviewer – with ESA rollout, well-publicised errors and a torrent of appeals meant the system collapsed into expensive chaos. Not only did many genuinely disabled people suffer needlessly, but – more important from George Osborne’s perspective – the savings failed to materialise. Ditto with Pip. There had never been a plan to deliver the promised savings, just an entry in a Treasury spreadsheet. The saving grace, from the Treasury point of view, was universal credit. Duncan Smith’s absurdly ambitious timetable, again in the face of expert advice, repeatedly slipped. This was politically embarrassing, but it did result in some useful budgetary savings. | It did not take long for the wheels to come off. When Duncan Smith pressed ahead – against the expert advice of his own independent reviewer – with ESA rollout, well-publicised errors and a torrent of appeals meant the system collapsed into expensive chaos. Not only did many genuinely disabled people suffer needlessly, but – more important from George Osborne’s perspective – the savings failed to materialise. Ditto with Pip. There had never been a plan to deliver the promised savings, just an entry in a Treasury spreadsheet. The saving grace, from the Treasury point of view, was universal credit. Duncan Smith’s absurdly ambitious timetable, again in the face of expert advice, repeatedly slipped. This was politically embarrassing, but it did result in some useful budgetary savings. |
| Fast forward to the 2015 Tory manifesto. Ignoring the lessons of the previous parliament – don’t promise welfare cuts unless you can deliver – this targeted an arbitrary £12bn of cuts. This was necessary to fund further deficit reduction and £7bn of tax cuts, overwhelmingly benefiting the better-off. | Fast forward to the 2015 Tory manifesto. Ignoring the lessons of the previous parliament – don’t promise welfare cuts unless you can deliver – this targeted an arbitrary £12bn of cuts. This was necessary to fund further deficit reduction and £7bn of tax cuts, overwhelmingly benefiting the better-off. |
| Related: Pique rather than piety pushed Iain Duncan Smith over the edge | Related: Pique rather than piety pushed Iain Duncan Smith over the edge |
| Where was the money coming from this time? After the ESA and Pip fiascos, the Treasury no longer had any confidence in Duncan Smith’s ability to deliver disability benefit cuts. Instead, the focus was on tax credits. But when that, too, went off track, Osborne saw a chance to convert universal credit from a threat to an opportunity. The tax credit cuts have not been cancelled – they have simply been postponed. When universal credit is introduced, mostly from 2018 on, they will be implemented through the back door. Universal credit will by then represent a huge cut. | Where was the money coming from this time? After the ESA and Pip fiascos, the Treasury no longer had any confidence in Duncan Smith’s ability to deliver disability benefit cuts. Instead, the focus was on tax credits. But when that, too, went off track, Osborne saw a chance to convert universal credit from a threat to an opportunity. The tax credit cuts have not been cancelled – they have simply been postponed. When universal credit is introduced, mostly from 2018 on, they will be implemented through the back door. Universal credit will by then represent a huge cut. |
| It is probably this, more than the relatively minor, if very painful for some, cuts to Pip that explains Duncan Smith’s resignation. He is often talked about as a great reformer of the welfare state. But he has no reforms to his credit as yet. It is universally recognised that the disability benefit system he inherited was badly flawed – and that he has made things far worse. The “bedroom tax” and “benefit cap”, whatever you think about their merits, are relatively minor cost-saving measures. His sole purpose for clinging to office was to implement the one genuine, radical measure for which he is truly responsible. But universal credit is no longer, if it ever was, a new system which will transform the functioning of the welfare system. It is just another Treasury cut. | It is probably this, more than the relatively minor, if very painful for some, cuts to Pip that explains Duncan Smith’s resignation. He is often talked about as a great reformer of the welfare state. But he has no reforms to his credit as yet. It is universally recognised that the disability benefit system he inherited was badly flawed – and that he has made things far worse. The “bedroom tax” and “benefit cap”, whatever you think about their merits, are relatively minor cost-saving measures. His sole purpose for clinging to office was to implement the one genuine, radical measure for which he is truly responsible. But universal credit is no longer, if it ever was, a new system which will transform the functioning of the welfare system. It is just another Treasury cut. |
| So how should we judge Duncan Smith’s six years as secretary of state? Having an original, consistent vision for the transformation of the benefit system was not a fault, even if not all of us thought it was practical or sensible. But when confronted with evidence or data that challenged his world view, he ignored it or, worse still, twisted and misrepresented the statistics. When his advisers told him to slow down, he refused to listen. When disabled people or charities pointed out the human cost, in suicides or food banks, not only did he not change course, he and his advisers smeared them with off-the-record briefings. Ultimately, it was this refusal to engage with reality that was not only his downfall, but ensures that he leaves little in the way of a positive legacy. | So how should we judge Duncan Smith’s six years as secretary of state? Having an original, consistent vision for the transformation of the benefit system was not a fault, even if not all of us thought it was practical or sensible. But when confronted with evidence or data that challenged his world view, he ignored it or, worse still, twisted and misrepresented the statistics. When his advisers told him to slow down, he refused to listen. When disabled people or charities pointed out the human cost, in suicides or food banks, not only did he not change course, he and his advisers smeared them with off-the-record briefings. Ultimately, it was this refusal to engage with reality that was not only his downfall, but ensures that he leaves little in the way of a positive legacy. |
| Related: If we are not 'all in it together', this is largely due to Duncan Smith | Related: If we are not 'all in it together', this is largely due to Duncan Smith |
| The new secretary of state will inherit several challenges: the delivery of universal credit and other changes, a functioning but demoralised department and, of course, a large budget hole. If I could give Duncan Smith’s successor one piece of advice, it would not be on any specific policy, but instead just to listen. To the experts: the civil servants, the doctors, economists and researchers. And to the people who depend on the welfare system: the disabled, low-income families in and out of work, and the poorest. Then, perhaps, a repetition of his unfortunate fate can be avoided. | The new secretary of state will inherit several challenges: the delivery of universal credit and other changes, a functioning but demoralised department and, of course, a large budget hole. If I could give Duncan Smith’s successor one piece of advice, it would not be on any specific policy, but instead just to listen. To the experts: the civil servants, the doctors, economists and researchers. And to the people who depend on the welfare system: the disabled, low-income families in and out of work, and the poorest. Then, perhaps, a repetition of his unfortunate fate can be avoided. |
| Jonathan Portes is principal research fellow at the National Institute of Economic and Social Research | Jonathan Portes is principal research fellow at the National Institute of Economic and Social Research |
| AT A GLANCE: WELFARE REFORMS UNDER IDS | AT A GLANCE: WELFARE REFORMS UNDER IDS |
| UNIVERSAL CREDIT | UNIVERSAL CREDIT |
| Replaced income support, jobseeker’s allowance, employment and support allowance, housing benefit, child tax credit and working tax credit. Subject to repeated delays, it has been predicted that its costs will balloon to almost £16bn over the course of its lifetime. | |
| BENEFITS CAP | BENEFITS CAP |
| A new limit on the maximum amount that people claiming benefit can receive. Previously capped at £26,000, it was lowered to £23,000 for those in London and £20,000 for those outside. Even before its introduction, Whitehall officials were warning that it would result in an extra 40,000 children being classed as living in poverty. This is considered a conservative estimate. | A new limit on the maximum amount that people claiming benefit can receive. Previously capped at £26,000, it was lowered to £23,000 for those in London and £20,000 for those outside. Even before its introduction, Whitehall officials were warning that it would result in an extra 40,000 children being classed as living in poverty. This is considered a conservative estimate. |
| PERSONAL INDEPENDENCE PAYMENT | PERSONAL INDEPENDENCE PAYMENT |
| Introduced for people of working age to replace disability living allowance. Treasury estimates suggest it will save the government almost £4.5bn between now and 2020. But critics suggest that the savings have been used to fund tax cuts for the well-off. It was his anger over the introduction of Pip that appears to have been the trigger for Iain Duncan Smith’s decision to quit. | Introduced for people of working age to replace disability living allowance. Treasury estimates suggest it will save the government almost £4.5bn between now and 2020. But critics suggest that the savings have been used to fund tax cuts for the well-off. It was his anger over the introduction of Pip that appears to have been the trigger for Iain Duncan Smith’s decision to quit. |
| SINGLE ROOM SUBSIDY (ALSO CALLED THE ‘BEDROOM TAX’) | SINGLE ROOM SUBSIDY (ALSO CALLED THE ‘BEDROOM TAX’) |
| A reduction in benefits for people living in council or housing association accommodation whose property is deemed to be larger than they need. Quickly attracted the anger of anti-poverty campaigners and disability rights groups: two-thirds of individuals affected by the under-occupancy penalty are registered as disabled. | A reduction in benefits for people living in council or housing association accommodation whose property is deemed to be larger than they need. Quickly attracted the anger of anti-poverty campaigners and disability rights groups: two-thirds of individuals affected by the under-occupancy penalty are registered as disabled. |