Yesterday the Prime Minister gave an excellent speech about possible further reforms to the welfare system so that society is on the side of people who work hard and want to get on in life. If you've got time, it's well worth a read but for those who haven't, here are a few extracts which contain his key message:
"Today, almost one pound in every three spent by the Government goes on welfare. The system we inherited was not only unaffordable, it also trapped people in poverty and encouraged irresponsibility.
"Take a couple living outside London. He’s a hospital porter, she’s a care-worker. They’re both working full-time and together they take home £24,000 after tax. They’d love to start having children - and they know they’d get some help from the state if they did so - but with the mortgage and the bills to pay, they feel they should keep saving up for a few more years. But the couple down the road, who have four children, haven’t worked for a number of years. Each week they get £112 in income support, £61 in child benefit, £217 in tax credits and £141 in housing benefit - more than £27,000 a year. Even after the £26,000 benefit cap is introduced, they’ll still take home more than their neighbours who go out to work every day. Can we really say that’s fair?
"Next there’s the situation with young people who want to leave home. Take two young women living on the same street in London. One studied hard at college for three years and found herself a full-time job - say as a receptionist - on £18,000 a year, or about £1200 take-home pay a month. She’d love to get her own place with a friend - but with high rents in her area, the petrol to get to work and all the bills, she just can’t afford it. So she’s living at home with her mum and dad and is saving up desperately to move out. Then there’s another woman living down the street. She’s only 19 years old and doesn’t have a job but is already living in a house with her friends. How? Because when she left college and went down to the Job Centre to sign on for Job Seeker’s Allowance, she found out that if she moved out of her parents’ place, she was automatically entitled to Housing Benefit. So that’s exactly what she did. Again, is this really fair?
"The time has come to go back to first principles; to have a real national debate and ask some fundamental, searching questions about working-age welfare. What it is actually for? Who should receive it? What the limits of state provision should be and what kind of contribution we should expect from those receiving benefits?
"There are currently 210,000 people aged 16-24 who are social housing tenants...And this is...when there is a growing phenomenon of young people living with their parents into their 30s because they can’t afford their own place - almost 3 million between the ages of 20 and 34. So for literally millions, the passage to independence is several years living in their childhood bedroom as they save up to move out. While for many others, it’s a trip to the council where they can get housing benefit at 18 or 19 - even if they’re not actively seeking work...I want to stress that a lot of these young people will genuinely need a roof over their head. But there are many who will have a parental home and somewhere to stay. So we have to ask: up to what age should we expect people to be living at home?
"This year we increased benefits by 5.2 per cent. That was in line with the inflation rate last September. But it was almost twice as much as the average wage increase. Given that so many working people are struggling to make ends meet we have to ask whether this is the right approach.
"There’s also a whole debate about how long the state should provide at a particular rate...We could perhaps revise the levels of benefits people receive if they are out of work for literally years on end. It is extraordinary that there are 1.4 million people in this country who have been out of work for at least nine of the past 10 years. So softer time-limits - that increase the incentive to work, that stop people getting stuck in that welfare trap - could be something we consider.
“[Even after the cap on benefits we’ve introduced] people can still seek support for housing up to a rate of £20,000 a year. Just think what that figure means. What would someone in work have to be earning to afford rent of £20,000 a year? If rent is typically about a third of post-tax income, they’d have to be on a salary of at least £80,000. That is in the top five per cent of the population. Those who work in expensive postcodes who aren’t on benefits typically have to move further out and commute in to work. So this is a question that needs to be asked: should those on benefits be financially helped to live exactly where they want to?
“We have yet to introduce a system whereby after a certain period on benefits, everyone who was physically able to would be expected to do some form of full-time work helping the community, like tidying up the local park. But wouldn’t this be a perfectly reasonable thing to expect?
“There is an argument to be made for recognising and rewarding those who have paid into the system for years. Today we treat the man who’s never worked in the same way as the guy who’s worked twenty years in the local car plant, lost his job and now needs the safety net. So here we could ask whether your reward for paying in is that you won’t have to face all the tough conditions that we’re imposing on those who haven’t paid anything into the system at all.
“Raising big questions on welfare, as I have today - it might not win the government support. Frankly a lot of it might rub people up the wrong way. But as I’ve argued, the reform of welfare isn’t some technocratic issue...It’s about the kind of country we want to be - who we back, who we reward, what we expect of people, the kind of signals we send to the next generation”.