The Welfare Reform And Work Bill, July 2015 – The Actual Implications Of Labour’s Abstention

by richardhutton

A lot of media discourse has focused on Labour’s abstention as the Welfare Reform And Work Bill (2015) progressed through its second reading in Parliament; and yet somehow, not enough has been. Moreover, very little has been said about the contents and implications of the Bill itself. This is deeply problematic, in several respects.

First, let’s clarify the actual Parliamentary circumstance here, because it’s been badly misrepresented by many journalists and commentators. The Welfare Reform And Work Bill was receiving its second reading in Parliament – which is the first opportunity for Members of Parliament to debate the main principles of the Bill. As the House of Commons website explains:

“Once second reading is complete the Bill proceeds to committee stage – where each clause (part) and any amendments (proposals for change) to the Bill may be debated.”

For Labour’s part, they did oppose the Bill via tabling a Reasoned Amendment, which failed to pass:

‘this House, whilst affirming its belief that there should be controls on and reforms to the overall costs of social security, that reporting obligations on full employment, apprenticeships and troubled families are welcome, and that a benefits cap and loans for mortgage interest support are necessary changes to the welfare system, declines to give a Second Reading to the Welfare Reform and Work Bill because the Bill will prevent the Government from continuing to pursue an ambition to reduce child poverty in both absolute and relative terms, it effectively repeals the Child Poverty Act 2010 which provides important measures and accountability of government policy in relation to child poverty, and it includes a proposal for the work-related activity component of employment and support allowance which is an unfair approach to people who are sick and disabled”.

The upshot of this was for the Second Reading of the Bill to proceed. It was herein that most Labour MPs abstained; and that the Bill progressed to the Committee Stage, whereby each of its proposals can be debated on their individual merits. Therefore all Labour MPs voted against the Welfare Reform and Work Bill before the Second Reading, via a Reasoned Amendment; whereas 48 Labour MPs voted against the entirety of the Bill during its Second Reading. Moreover, while this latter group has been widely feted, it is again not receiving due scrutiny. The problem herein is that the Welfare Reform and Work Bill contained many proposals – some of which arguably are worth voting for – such as the increased funding for apprenticeships; whilst others warrant being voted against. It is therefore a complete misreading of matters to suggest that the votes on this demonstrate the Labour Party to be devoid of principles, or is somehow in crisis. It is also ultimately immaterial – Labour are not the government; the Conservatives are. It is the Conservatives who have drafted this bill; and they have an absolute majority in the House of Commons – meaning that if all Conservative MPs vote for the Welfare Reform and Work bill, it will be ratified, irrespective of opposition.

This point can be left aside for the time-being. What matters more here is the content of the Bill, and the likely consequences if its more damaging policies are enacted; along with the pretexts cited by the government to justify its proposals – very little of which have received any critical scrutiny from journalists/pundits.

Parliament has provided an overview of the Welfare Reform And Work Bill: it sets out to abolish the Child Poverty Act of 2010, along with the government’s statutory duties to reduce poverty among children. The specific welfare reforms it proposes are as follows:

“Reducing the benefit cap to £20,000, except for £23,000 in Greater London

Freezing certain social security benefits and certain tax credit amounts for four tax years

Limitation in the amount of support provided by the child tax credit for families who become responsible for a child born on or after 6 April 2017

Limiting the child element of universal credit to a maximum of two children and removing the distinction between the first and subsequent children in the rate of the child element

Removing the work-related activity component in employment and support allowance and the limited capability for work element in universal credit

Changes to conditionality for responsible carers in universal credit

Replacing current support for mortgage interest payments for benefit claimants with the offer of a recoverable interest-bearing loan secured as a second charge on claimants’ properties

Changes to social housing rents”

The problems this Bill will cause for those impacted by it are clear. For instance, the government’s own Impact Assessment on reducing the Benefit Cap reports that 330,000 children from low-income families will be affected. The original Benefit Cap resulted in families becoming homeless – extending this will evidently put more at risk. There are a number of agencies which have responded to the government’s proposals, and have outlined their problems in detail – for example, Crisis express their concern about the increased risk of homelessness; whereas the Child Poverty Action Group warn that the Bill’s reforms will not only increase poverty among children, but also limit the government’s ability to properly monitor levels of child poverty throughout the UK.

However, the rationale offered by the government to justify its benefit cuts herein is significant. It indicates very plainly the various deceptions involved in drafting policies which are liable to increase poverty, and prove harmful to many people. The Secretary of State for Work and Pensions, Ian Duncan Smith’s Parliamentary contributions during the Second Reading are the key ones here, as he is the Minister responsible for implementing these reforms.  His pretexts for them rest upon what he refers to as “three key principles”:

“first, work is the best route out of poverty, and being in work should always pay more than being on benefits; secondly, spending on welfare should be sustainable and fair to the taxpayer while protecting the most vulnerable; and, thirdly, people on benefit should face the same choices as those in work and those not on benefits”.

There are more than three supposed principles advanced here – and none of them withstand any scrutiny. Most people who live in poverty are people who work. The benefit system has always ensured that being in work does pay more than being unemployed – the sleight of hand here is to divide benefits from work; when in fact in-work benefits, such as tax-credits, are precisely the mechanism which guarantees employment of at least 16 hours per week is financially more rewarding than being unemployed. Sustainability is difficult to address as a principle, because its meaning isn’t defined. However, a possible measure of sustainability would be expenditure on benefits, as a proportion of national financial resources – that is, Gross Domestic Product. The Institute for Fiscal Studies measure ‘Spending on benefits in cash terms and real terms (2011–12 prices), real increases and spending as a share of GDP’, from 1948-2012 (p. 72). Readers can make their own minds up about the trends therein. Moreover, by far the largest bulk of benefits-expenditure is on pensions: these are not being reduced; so even if the principle herein was valid, the method of attaining it is not. “Protecting the most vulnerable” is the opposite outcome of this bill, because it will reduce the financial support awarded to people in the work-related activity group. In other words, it will increase poverty among people who are physically sick, and/or mentally ill, and have been found incapable of working.

The more specific claims Smith makes are equally untruthful. For example:

“The £26,000 cap we introduced in 2013 has been a huge success…in getting people back to work and reintroducing fairness to the welfare system. Capped households are more than 40% more likely to go into work after a year than similar uncapped households”.

This is divorced from reality. As CPAG explain, the principle of the Benefit Cap is based on a false comparison:

” between an out-of-work family’s income and an in-work family’s earnings, ignoring in the process the various top-ups from the state that those in work may also receive, such as child benefit, working tax credit and housing benefit” (p. 9).

However, is it true to suggest – as Smith does – that the Cap has been “getting people back to work”; and that people subject to the Benefit Cap are “more than 40% more likely to go into work after a year than similar uncapped households”? No. The data in question was published by the DWP in May 2015; and the report notes that as of February 2015:

“35.6 thousand households (61%) who have (previously) been capped are no longer subject to the cap as at February 2015. Of these, 14.4 thousand households are exempt with an open Working Tax Credit claim, which is 41% of those no longer subject to the cap”.

This evidently does not indicate cause and effect; nor demonstrate any disparity between households capped/uncapped gaining employment. Given that no evidence appears to exist which would support Smith’s claims, the point can probably be left there – however, Full-Fact have taken issue with the way government officials have misused this data, should further explanation be necessary. As they note:

“The Department for Work and Pensions has previously been reprimanded by the UK Statistics Authority for suggesting that having benefits capped was the cause of all instances of a household member moving into employment.”

The DWP has clearly not taken this reproach on board.

The rationale for reducing financial support to people in the ESA work-related activity group is equally disingenuous. Smith proposes to “end the disparity between what people receive on the work-related activity component of ESA and on jobseeker’s allowance”; adding that:

“We know that the majority of people receiving work-related activity ESA payments want to work, but the current system discourages claimants from making the transition into work. People on ESA receive £30 a week more than those with a health condition on JSA, but they receive far less support in finding work: people on JSA can expect about 11 hours of work coach time per year, whereas those on ESA typically receive only about two hours per year”.

This is simply nonsense. The people in question have been subject to a work capability assessment, and deemed incapable of working. ‘Finding work’ is immaterial – they have been found by the government itself to be unable to gain or retain employment. These are people who have debilitating health problems, either physical or mental – as indicated by a departmental release discussing sanctions applied to them; and who are now going to be treated as if they were without these conditions, in order to justify reducing their financial support, and making them live in poverty. This demonstrates precisely how hollow it is to claim that these measures will continue to “protect the most vulnerable”. They will harm the self-same. The excuse for this policy is that cutting benefits for people who are too ill to work will galvanise them into gaining employment. This ignores the manifold problems experienced by people placed in the work-related activity group. The lived reality of the government’s approach here has been borne-out in numerous reported instances of people dying, or committing suicide, after their benefits were cut.

The rest of Smith’s claims about social security expenditure can be disproven in a more straightforward manner. For instance, he contends that “in 1980 working-age welfare accounted for 8% of all public spending, but by 2010 it had risen to nearly 13%, which is over £200 billion”; which suggests a continual increase across this period, ignores the effects of the financial crash in 2008, and implies that ‘working-age welfare’ costs the UK £200 billion – none of which has any basis in fact. As the Office for Budget Responsibility have previously noted:

“Over the past 30 years, welfare spending has risen steadily in cash and real terms, but on average that increase has been broadly in line with growth in the economy. So the proportion of national income devoted to welfare spending has not shown a significant upward or downward trend over time. Welfare spending has, however, fluctuated significantly with the economic cycle” (p. 5).

As they go on to outline, welfare expenditure over this period has been cyclical, rising and falling, as economic circumstances differed – not least of all during periods of recession or economic growth, respectively. Channel 4’s Fact-Check explains the factors behind welfare-expenditure trends since 2008:

“it is true that the share of welfare spending has gone up after 2007/08 – to 13.3 per cent in 2012/13. But this has happened for two reasons. First, the recession has caused unemployment to go up. Second, the recession has caused national income to shrink. It’s not obvious that either of these things constitute welfare spending going out of control. They are a result of the fact that the UK has experienced its sharpest post-war recession”.

Smith’s claim here, however, was being cited as a pretext for taking financial support away from many families, by cutting child tax credit:

“Nine in 10 families with children were eligible for tax credits when we came into government…as a result of our reforms, five in 10 families with children will be eligible for tax credits, bringing greater balance to the welfare budget”.

The supposed justification for this policy is to ensure that:

“people on benefits face the same choices as those in work and those not on benefits. Families in work have to make careful choices about what lifestyle the money they earn can support and what their income can provide for. In that context, it is right that people who receive child tax credit should make the same financial choices about having children as those who are supporting themselves through work”.

Suffice to say, child tax credit is universal, and therefore available to parents whether they are in work, or not. Both sets of people will be affected by this reform. People ‘on benefits’ already face the same choices as people who work – many are one and the same; many live in poverty. This circumstance is set to worsen as a consequence of these policies.

As with previous welfare reforms, the government is encouraging and exploiting popular misconceptions about the benefit system, in order to justify dismantling its protections. The Secretary of State’s rationale comprises a series of false statistics, sleights of hand, data taken out of context, and ultimately telling lies. The Bill in question is set to increase poverty for many people – including children. Far from ‘protecting the most vulnerable’, it actively targets them by reducing the support people known to be incapable of working will receive. It is extremely troubling that the media response to this Bill has focused almost exclusively on the Labour party’s travails – and not on what they were trying to prevent being turned into policy.