Help! Refashioning welfare reform to help fight the recession

MPs might as well have today off rather than discuss the Welfare Reform Bill. It promises sanctions for those who refuse to seek work – but those sanctions are toothless and will do little to end the culture of “the right to benefit” among young claimants who have never worked.

Welfare should be an important weapon in the country’s armoury for fighting surging unemployment. The Government’s pioneering New Deal has cost a staggering £75 billion over the past decade. But benefit claimants have fallen by only 400,000, despite the creation of over three million new jobs. The number of foreign workers entering the UK in the past decade – now making up one in nine of the total working population – shows that there are jobs available.

The Government’s approach is wrong for two main reasons. It does not time-limit benefits, and therefore allows claimants to continue receiving welfare while making little or no attempt to find work. It also uses training as a stick; a positive, worthwhile activity is being devalued by being used as a sanction.

Radical reform is urgently needed. There are four key pillars.

First, the only test of a person’s willingness to work is the offer of a job. Claimants who turn down reasonable job offers should have their benefits stopped. Benefits must be time-limited, for young, single people in areas where there have been net job gains. Evidence from around the world shows that, far from driving families into desperate poverty, making benefits restricted and conditional – as Beveridge intended – can be the catalyst for claimants to find employment. Bill Clinton’s 1996 reforms, which limited benefits to a five year period, resulted in a 65 per cent fall in the number of claimants with no increase in poverty; in fact more money could go to those who really needed it.

Second, decisions about who gets benefits and how much they receive should be made locally, by freeing the Jobcentre Plus network from central control. People who know the local job market are best placed to get claimants into work – and to spot benefit fraud.

Third, we must abolish the use of training as a sanction. Young New Deal claimants complain that their attempts to improve their skills are disrupted by a large element who, in Barbara Castle’s words, simply “monkey around”. The value of training must be restored.

Fourth, long term workers who lose their job should have much higher Jobseeker’s Allowance with the benefit dependent on the number of contribution years. Requalifying for benefit should also be made much easier.

Ending “money for nothing” welfare and shifting to a “money for something” system will result in a sustainable welfare programme that actively helps benefit claimants return to the job market. These reforms will allow the UK economy to come out of the recession fighting, and give the workless the chance they deserve to get back on their feet.