The Good, Bad & Ugly of Welfare Reform

The Welfare Reform Bill is the most radical reform of the tax-benefit system since Beveridge. It is a mixture of the good, the bad and the very ugly.

At its best it recognizes the problem. It recognizes that the current system creates fears, burdens, taxes and bureaucracy for the very people who need the most support. This marks a break-through admission by the political system.

Unfortunately the solutions proposed are poorly designed. Universal Credit aims to provide a framework for integrating tax and benefits in order to engineer the required incentives. However this system will lead to increased confusion and uncertainty, especially as the necessary information technology systems are lacking.

The second proposal is to abandon Disability Living Allowance (DLA) and replace it with a more restricted benefit - Personal Independence Payments (PIP). This is despite the fact that DLA has been a highly successful benefit, subject to no significant abuse, creating no disincentives to work, and is vitally important to many disabled people.

What is truly ugly about these reforms is the way in which they are being used to drive down the cost of benefits. The government’s intention is to cut benefits by £18 billion, 20% of the whole budget. This will only increase income inequality in the UK, already the third most unequal developed country in the world.

There is a real problem in the benefit system; but these mean-spirited proposals are not the right solution. Instead we need both positive incentives and real securities.

This article was originally published in The House Magazine on the 19th January 2012.