‘Benefits Reform – Will a Cap Curb Spiralling Costs?’, by Sheila Lawlor

Benefits Reform – Will a Cap Curb Spiralling Costs?

Sheila Lawlor

Friday 23rd January 2012: Although the rebellion in the House of Lord over capping benefits to families at £500 per week will not lead to big changes in the Welfare Reform Bill, the bishops and Paddy Ashdown are certainly right to worry about the children affected. Not because the total benefit to a family is be capped at £500 per week, but because their parents aren’t working, or are not working enough to feed and house them without help from the taxpayer. They should also be concerned that the welfare state has destroyed the incentive to work and done away with the expectation that parents have a duty to support their children.

This isn’t the first recession Britain’s had and it won’t be the last, but worklessness should not be a pattern of life for those who can work. For those who can’t work, because of disability or illness, strong support must continue. That’s the message the Coalition wants to bring home. It’s a message with which even the critics of the benefits cap agree, in principle if not in practice. The right incentives are needed to make work pay and workless families should not be better off than those in work.

But there’s another side to the problem. The benefit system has reversed its founding principle, one where benefits were paid for by the beneficiary. Beveridge proposed a flat rate weekly sum during times of earning, to cover periods when earning stopped as a result of sickness, bereavement, unemployment. In the case of unemployment benefit, strict time limits were set to the period during which it could be drawn. Benefit, said Beveridge, should be linked to contribution, so that if demand escalated, contributions would have to increase. The system gave people entitlement and meant costs were kept under control.

Today Liberals, Conservatives and, yes, even the Bishops agree that incentives to work matter. They know that tax funding is finite. Unless the UK brings down its tax and public spending levels, the costs of production will become uncompetitive and more families will be without work. One way to strengthen incentives and reduce tax bills is to restore the link between benefit and contribution.

*Dr Sheila Lawlor, Director, Politeia

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