contribution by Richard Exell

Yesterday’s Observer reports that the Treasury has told the Department for Work and Pensions to “do its sums” because Iain Duncan Smith’s plans for welfare reform would either cost too much or disadvantage too many people.

Last month, I pointed out that the DWP’s options for major reform necessarily involve a choice between cutting the benefits of current claimants (including many who will suffer real hardship as a result) and spending more money – £3.6 billion to implement the ‘Dynamic Benefits’ proposals the Secretary of State developed when he was in Opposition.

The outlines of the Welfare Reform Bill suggests that the Department is steaming ahead with reforms based on ‘Dynamic Benefits’ – there’s plenty of talk about simplifying benefits to increase work incentives, which certainly mirrors the IDS proposals.

If there are no resources to pay for simplification – and the Chancellor’s Budget Speech suggested that he sees DWP as a source of savings, not a candidate for investment – then cuts will be unavoidable.

But then we come up against the Coalition Agreement’s promise to “protect those on low incomes.”

Just about the only way I can see of squaring this circle is for the government to means-test universal benefits – and, sure enough, the story in The Observer reports that Mr Duncan-Smith has gone to the Prime Minister with plans to means-test Child Benefit.

Conservative and Liberal Democrat circles have discussed such an approach for some time, but before the election both Parties always concluded by dismissing the idea and it did not appear in either’s manifesto.

Taking money away from the social group that includes most of their supporters is risky in electoral terms and may well attract criticism from usually pro-Conservative quarters.

After last month’s Budget froze Child Benefit and cut tax credits the Daily Mail headlined the move as a ‘Brutal shock’ – means-testing these payments away may well provoke a more serious assault.

There are plenty of arguments against means-testing Child Benefit (see, for instance, these excellent articles by Kate Green and the Child Poverty Action Group) but the one that has always appealed most to me is essentially political: universalism encourages voters to support a generous benefit for children.

We should have more detail about the Welfare Reform Bill soon when a White Paper is published, and we should have learned by then how the tensions between DWP and the Treasury have been resolved. But that will only be the start of the debate – will the coalition be true to its own promises? And will it be fair to middle-income families?

Reader comments

1. Liberal Conspiracy

   Will Iain Duncan Smith lose his fight with Osborne? http://bit.ly/dbVS7S

2. Dirk vom Lehn

   RT @libcon: Will Iain Duncan Smith lose his fight with Osborne? http://bit.ly/dbVS7S

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