welfare ‘reform’, the brown premiership and recession

by Chris Grover, Lancaster University

Introduction

Since being elected over a decade ago New Labour has been almost continually involved in a process of welfare ‘reform’. The ‘old’ system of social security is deemed by New Labour to have been too passive, leaving non-employed to flounder for too long on out-of-work benefits. New Labour’s approach has been to make the welfare state more proactive, to break what it describes as the ‘something for nothing society’ or the ‘something for nothing culture’.

New Labour’s approach to welfare ‘reform’ has, as its underpinnings, quite laudable aims: a desire to tackle trenchant economic and social problems that have blighted Britain for many years: high levels of worklessness, child poverty and the social problems, such as crime and disorder, that are associated with such phenomena. However, there has been an arrogance in New Labour’s arguments, especially those forwarded by Gordon Brown, that through social welfare and economic measures capitalism could be tamed. Brown’s proclamation that there would be no more ‘boom and bust’ under New Labour now rings particularly hollow. These observations raise the issue of what direction welfare ‘reform’ are taking in what many economists are predicting will be a long and deep recession?

More of the same?

The main themes of welfare ‘reform’ since Brown took over as Prime Minister are marked by continuity with the preceding 10 years. This should not be surprising as Brown oversaw welfare ‘reform’ when he was Chancellor of the Exchequer and his control of it does not seem to have diminished. While some moves – such as the recent nationalisation of the Northern Rock building society – might suggest to the contrary, there can be little doubt that Brown believes in free markets as being the only economic configuration that can deliver Britain from recession. In this context, he lays the blame for recession in Britain in global economic phenomenon, particularly sub-prime mortgage default in the USA. His argument is essentially that there is nothing wrong with British capitalism, but because of external shocks it needs state intervention to manage the depth and length of the recession it currently faces.

Welfare ‘reform’ is central to such interventions because social welfare policies are important elements in the governance of the economy. So, for example, in introducing the Green Paper, No One Written Off (DWP, 2008a, p. 5), Brown noted that:

…in a globalised world, we simply cannot afford the high price of large numbers of people on benefits. Instead, we need people in work, making the best use of their talents and helping us to compete…we will only create lasting prosperity by ensuring that the talents of our country are fully employed…

In this context, the aim of recent proposals outlined in No One Written Off and the White Paper, Raising expectations and increasing support: reforming welfare for the future (DWP, 2008b) are to reach an employment rate of 80 per cent as the means of tackling child poverty and meeting the financial costs of an ageing population (see DWP, 2005). In pursuit of this aim the proposals include:

  • A simplified system that is likely to eventually involve just one income replacement benefit for working age people. The first development towards this will be the abolition of Income Support (except for carers), leaving working age able-bodied claimants to claim Jobseekers Allowance (JSA), while those deemed sick and/or disabled enough will have to claim the new Employment and Support Allowance (ESA). This means that lone parents will have to claim JSA, although it is currently suggested that there should be a modified version of it for those with children under the age of seven. It was already policy that from 2010 lone parents will have to submit to the full JSA regime when their youngest child is aged seven (until 2008 when it was reduced to age 12, it was 16 or 18 if their child(ren) were in full time employment).
  • A move towards ‘personalised conditionality’. Following Gregg’s (2008) review of conditionality it is proposed that there will be a ‘clear bargain that almost everyone on benefits [will] be expected to take active steps towards to work, but where those expectations are based on individual’s needs and circumstances’ (DWP: 13). In this regard, there will be moves towards identifying three groups of claimants: (i) a ‘work ready group’ who will be governed by a tougher JSA conditionality regime (discussed below). This group will include all able-bodied workless people (except lone parents with children under the age of seven); (ii) a ‘progression to work group’ who are not job-ready because of their health and/or impairment, or their caring responsibilities for lone parents and partners of workless people with children under the age of seven. This group will be required to make plans for getting into paid employment, but will not have to seek it; (iii) a ‘no conditionality group’ of claimants where there is no expectation of engagement with work-related activity. This will be the smallest group, including those receiving the support element of ESA, carers, and lone parents and partners of workless people with very young children (under the age of one).
  • A tougher sanctioning regime for those JSA claimants deemed to be failing in their search for work and/or refusing to take employment, and the piloting of a ‘work for your benefit’ scheme for those JSA claimants who are workless for more than two years.

What themes can be drawn from these proposals? First, there is a clear swelling in the size of the reserve army of labour. The emphasis is upon people who until recently were seen as having legitimate reasons (sickness/impairment and/or the care of children) for being outside of paid employment upon making preparations for paid work and competing for it at an earlier stage of worklessness. As we saw in the words of Brown above an economic case for such developments is made. However, a paternalistic argument is also made; that work is good for the well-being of people (DWP, 2008a). While there is some evidence to suggest that this is the case, the literature is hedged with caveats that suggest the positive effects that paid work has on well-being is closely related to the quality of the work that they do. In brief, work per se is not good for well-being. It is contingent upon the type of work being done (Grover, 2007).

Second, and related, there is clear evidence in the proposals that what is described by Peck and Theodore (1999) as the ‘supply-side fundamentalism’ of New Labour continues, for there is little in them that suggests the demand for labour is problematic. In contrast, the predominate discourse that frames the proposals is that worklessness is the consequence of the character or characteristics of people not in work: they do not have the right attitude to work; they do have the right skills; they are sick and/or disabled. This is reflected in the shift to ‘personalised’ employment services that is also outlined in the proposals. ‘Personalised’ employment services are described by Brown as ‘services tailored to individual needs’ (DWP, 2008a: 5). However, what personalisation actually means is that barriers to employment are explained by reference to the individual, rather than to economic and social structures, such as a lack of demand for workers and the attitudes of employers.

Third, the proposals can be located in a tradition in social welfare policy that suggests that working class people will only work on the threat of poverty. This can be seen in the proposed extension of benefit conditionality and was made clear in the Gregg (2008: 4) review of conditionality that argued:

The Review believes an effective sanctions regime is one that drives behaviour to increase the chances of finding work, and penalises non-compliance without creating excessive hardship.

The important part of this quote is: ‘without creating excessive hardship’. The view of Gregg – the findings of which were incorporated into Raising expectations and increasing support (DWP, 2008b) – was that the commitment of workless people to paid work must be maintained by the threat and imposition of benefit sanctions that are perfectly acceptable if they cause hardship, as long as it is not ‘excessive’. This is merely a restatement of the classic political economic argument that it is the threat of poverty that provides the spur to paid work.

So far the argument has been that the focus of recent welfare ‘reform’ has been on the supply side. However, with talk of a return to Keynesianism, there has been a shorter-term focus, particularly in the 2008 pre-budget report (see HM Treasury, 2008), upon measure that might stimulate demand. These measures include adjustments to the tax/benefit system, most notably a cut in the higher rate of Valued Added Tax (VAT); making permanent and increasing the increase in income tax personal allowances announced in May 2008; bringing forward increases in various state benefits for children and retirement pensioners, and increasing many means-tested benefits at a rate above the relevant measure of inflation (6.2% compared to 5%). In addition, £3 billion of capital spending is to be brought forward from 2010-11 financial year.

However, such changes are economically and politically expedient, rather than being concerned with the well-being of poorer people. VAT is a regressive tax, but its reduction is small and temporary. Changes to personal taxation were the consequence of the abolition of the 10 pence tax band, and, even after the pre-budget report proposals, do not compensate all those lower paid workers who economically suffered from its abolition, and the above-inflation increase in benefits merely acts to expose their scandalously low level. A single person under the age of 25 will still only get JSA, provided they are not sanctioned, of £50.65 per week from April 2009, well short of the amount (£112 per week, after housing costs) required to meet the government’s own measure of poverty (60 per cent of the median income). In addition, in the wider context, particularly the eye-watering amount of financial assistance that has been made available to the banks, such developments are embarrassingly modest for a government that, even before the current economic crisis, was failing to meet its own targets on reducing child poverty, fuel poverty and who had apparently given little consideration to the poverty of single adults and childless couples.

Conclusion

The British government is of the opinion that in a period of economic recession it needs to continue with its plans for welfare ‘reform’. While predictions suggest that, on average, 20,000 people per week will be made redundant in Britain over the forthcoming year, the government is trapped in an analysis that suggests that worklessness is the consequence supply-side factors. Time and again the same argument is rolled out; that there are hundreds of thousands of jobs available if only people were willing to do them. What is not acknowledged is that worklessness and poverty (both in and out of work) are consequences of the operation of capitalism. They are the lubricant of capitalist economic growth, and the proposals for welfare ‘reform’ under Brown are likely to reproduce poverty and inequality in the hope of tacking worklessness, something that the current recession tells us is not possible under capitalism.

References

    DWP (2005) Department for Work and Pensions Five Year Strategy Opportunity and security throughout life, Cm 6447, London, TSO.
    DWP (2008a) No one written off: reforming welfare to reward responsibility, Cm 7363, Norwich, TSO.
    DWP (2008b) Raising expectations and increasing support: reforming welfare for the future, Cm 7506, Norwich, TSO.
    Gregg, P. (2008) Realising Potential: A Vision for Personalised Conditionality and Support, Norwich, TSO
    Grover, C. (2007) ‘The Freud Report on the Future of Welfare to Work: some critical reflections’, Critical Social Policy, 27(4): 534-545.
    HM Treasury (2008) Facing global challenges: Supporting people through difficult times Pre-Budget Report, Cm 7484, Norwich, TSO.
    Peck, J. and Theodore, N. (2000), “Beyond ‘Employability”, Cambridge Journal of Economics, 24: 729-749.

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