Hello radicalism, goodbye red lines?

6 July 2015

The beginning of the Parliament is the time to be radical, when a Government’s political capital is at its highest and its mandate clearest. It helps a Government even more when an Opposition is conducting a leadership contest during the first few months. The granting of independence to the Bank of England immediately after the 1997 General Election was a classic example.

So far the mood of the new Government has been “steady as she goes”, for example by keeping nearly all Ministers in post. Perhaps the new administration has been saving it all up for this week’s Budget.

If the reports are right, the Government’s support for free TV licenses for people aged over 75 will go (with the BBC taking the responsibility to fund them). While the free licenses would remain in existence, it is a real change in policy because direct public financial support for this pensioner benefit would end. It places a question over the Prime Minister’s pledge to protect pensioner benefits in the run-up to the Election. It is analogous to the radical decision to means-test Child Benefit after the 2010 General Election (which also broke a manifesto pledge). In both cases the policies are good because they stop the transfer of public funds to those who don’t need them, freeing up resources to help those in genuine need.

As Charlotte Pickles, Senior Research Director at Reform pointed out this morning, the Budget may hint at an even more radical policy. Yesterday the Chancellor suggested that the “welfare cap” (i.e. the maximum amount of benefits that a family can receive per year) should vary between London and the rest of the country. The idea of regional variations in benefits is one that has been discussed before. The logic is that different regions have different labour market conditions which benefit rates should reflect. It always been dismissed as too difficult.  It may be different this time because of the drive for welfare savings and the push for devolution starting with the “northern powerhouse”.

One of Reform’s core arguments is that the protective “red lines” around government budgets make reform much, much more difficult. Well, in this Parliament the real terms protection of the schools budget has gone, and arguably now the protection of one of the key pensioner benefits will go too. The red lines around the NHS budget and the State Pension remain, which are the big budgets, but even on the NHS the new Government has found a new pro-reform voice.



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