The number of rebels on the government’s disability benefit overhaul has now reached a point where passage of the plans depends on ministers winning some of them back. The thrust of the emerging charm offensive seems to be persuading MPs that the plans will encourage more people into work.
The “moral” (as opposed to the financial) case offered by Number 10 is that getting people off benefits and into work is important to their dignity, and true to Labour’s political tradition. A favoured catchphrase is “Labour: the clue is in the name.” The rebels are more inclined to argue that their party’s founder, Keir Hardie, saw the fortunes of the working and the workless as umbilically linked, and embraced one epithet hurled at him—“member for the unemployed”—as a badge of pride.
I don’t want to adjudicate on that political argument here, nor do I want to write about the potential consequences for poverty, which I’ve covered before. Instead, I want to make a few, very specific points about what the cuts will—and won’t—do for work. I will focus on the social security changes, rather than Labour’s proposed offer of extra tailored employment support for sick and disabled people.
Nearly everyone agrees that good work coaching can help at least some additional people find work. Experts have raised concerns that too much of the new advice and coaching is scheduled to arrive only after the benefit cuts have bitten. They have also noted that too many of the resources for it appear to depend on jobcentres achieving unspecified “efficiencies” in other areas. But tweaks and reassurances should be enough to come to an understanding with rebels in this regard.
On the narrow question of the financial incentive to be “work-ready,” the government can make a technical case for the direction of travel it is taking on Universal Credit, which is—in its terms—to rebalance the system. It is sharply reducing the top-up for those deemed unready to prepare for work, from £97 a week to £50 a week, a figure which will then be further eroded by inflation. In parallel, it is very modestly increasing the basic Universal Credit rate—by around £5 a week—available to all low-income people, whether they have health problems or not. The health element is currently awarded on the basis of the notoriously harsh Work Capability Assessment (WCA), so the question of how far incentives matter is very debatable, but in technical terms those incentives will get sharper.
Another change, however, risks passing unnoticed. The WCA will be scrapped, and all health-related benefits will be determined through the currently separate assessment for Personal Independence Payments—or PIP. But the WCA is also currently used to assign a “work allowance” to disabled people—that is, the right to earn as much as £673 a month before Universal Credit starts being reduced. The WCA extends this freedom to some who don’t currently qualify for health-based benefit top-ups, and others who won’t in future. It’s not obvious how eligibility for the work allowance can be assessed for either group in future if the WCA is scrapped. If no fix is found then—for these people—work will actually pay less.
By far the biggest—and highest-profile—planned cut is to restrict eligibility for PIP itself. In future, claimants will need to show they face severe restrictions on one particular criterion affecting their daily living, rather than—as now—being able to tot up milder problems across different areas, such as difficulty cooking, using the toilet independently and washing themselves. On the face of it, the PIP cut has nothing to do with work: this benefit, and will continue to be paid irrespective of whether a claimant is working or not.
There is still a technical argument that cutting PIP could jolt some claimants into working more, although it probably isn’t a case that many politicians would fancy spelling out. This is a mechanism which even economists label with a euphemism, the “income effect”—essentially, that when people get poorer, they decide they can “afford” less “leisure,” and so decide to work more.
The effect here is roughly equivalent to jacking up the state pension age. Just like PIP claimants, seniors can—and many younger pensioners do—work without forfeiting their pension. There is, of course, a lot of difference between getting older and living with a disability. But if the pension age were increased from 66 to (say) 70, then the “less-elderly” would cease to be eligible in the same way that the “less-disabled” will cease to be eligible as the PIP threshold is raised. As they scrambled to maintain their incomes, some of the newly unpensioned 60-somethings would at least try and keep working for longer.
The problem with this as a “making work pay” argument, in the context of PIP and pensions alike, is the heavy losses shouldered by those who are already in employment. A higher pension age would concentrate on losses on those (disproportionately younger) pensioners who are already working today. In much the same way, the PIP cuts look set to fall disproportionately on those PIP claimants who do already work. Private Eye has used a Freedom of Information request to establish that an outright majority of this group will be in line for cuts.
Disability campaigners might be keen on parallels with pensions for the same reason as the Treasury will be keen to avoid them. Yes, the costs of disability benefits has been rising fast, but so too has the pensions bill. And that didn’t preclude the costly recent U-turn on the Winter Fuel Payment.
Nonetheless, if the fiscal judgment really is that the rising cost of disability benefits simply needs to be arrested for the welfare state to be sustained, then it might be better—as well as more persuasive—for the government to concentrate on that rather than trying to shift the discussion to employment.
Taking all the benefit cuts together, the Resolution Foundation has concluded that they could boost employment, but modestly—by around 38,000 to 57,000 by the end of the parliament. That is only 1 to 2 per cent of the 3.2m people that the government’s own analysis has found could see their benefit income drop. Given that imbalance, prevailing with Number 10’s “moral case” could prove to be, well, very hard work indeed.
