Coffee House

Spending cuts must start with welfare

16 June 2010

The new and independent Office
for Budget Responsibility
estimated that interest payments on public debt are set to rise to £67 billion a year by 2014-15. The hole in the public finances is so deep that every cut in
spending that can be made should be made. Few commentators have grasped that tinkering around the edges, such as with “efficiency gains,” will not be enough. The only way to eliminate
the deficit and to begin the task of repaying public debt is through making deep cuts in spending and for people to take more responsibility for themselves.
Cuts must start with welfare. The UK government spends more on welfare than on anything else. Welfare spending has increased in good times as well as in bad, with the total bill doubling in real
terms to around £200 billion since 1988.
The government has received little bang for its buck from this increase in spending. International research shows that the UK not only has one of the most expensive welfare systems in the world but
is also one of the worst performing, with low living standards for children and high rates of inactivity among young people, substance abuse, teen pregnancy and sole parenthood. Welfare spending
does not need to increase; it needs to improve.
In an alternative Budget released today, Taking the tough choices, Reform identifies two ways to improve welfare spending.
The first way is to move from politically-motivated child poverty targets based on relative annual income and to instead focus on improving the performance of the poorest families in the school
system, on ‘welfare to work’ and on reducing the mobility blocks in welfare. By expressing the government target in terms of relative poverty governments have been encouraged to
continually increase benefit spending, when the better route would be to pursue a high and more even spread of skills.
The second way is to cut the tens of billions of pounds in benefits paid to well-off families (‘middle class welfare’). Since Reform first proposed cutting middle class welfare in April last year there has been a growing
consensus that these cuts are the right thing to do. Frank Field, the new Poverty Tsar, has suggested that the
Child Benefit should be taxed or no longer provided to families with older children. Evidence shows that middle class welfare provides few real benefits, with close to 90 per cent of spending on
the Winter Fuel Allowance, for example, going to families who are not in fuel poverty.
The cost of all middle class welfare, which Reform estimated at £31 billion a year, also means that taxes need
to be higher and fewer resources are available to help the poor. The temptation to attract votes means that benefits for middle class voters become more generous while poor families are left with
scraps. Benefits paid to working families now account for nearly twice as much of the welfare budget as benefits to families out of work.
One concern with cutting middle class welfare is that lower income families who receive programmes like the universal Child Benefit would lose out. But these families could easily be compensated,
such as by increasing the Family Element of the Child Tax Credit. Some commentators misleadingly argue that that the take up of these other programmes is poor among low income families but this is
not the case. Among families out of work, for example, the take up of the Child Tax Credit is a high 97 per cent, which is the same as the overall rate for the Child Benefit. Where there are
concerns take up can be increased through improving administration, such as having simpler application forms.
The key is to make means-testing work, not to give tens of billions of pounds to well-off families.

Patrick Nolan is a consultant at Reform

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Show comments
  • kevin taylor

    Welfare reform totally agree However forcing people into rubbish low paid jobs is not the way nor sadly for it is a good idea in principal is the Big Society Volunteerswill be taken advantage off left right and centre i am a fifty year old disabled person whom has the bitter experience off such advantage taking and will not accept punitive starve them back to work legislation proper reform lead by and with the disabled peole on board will have more chance off success than some plan forced throught by Cameron and Clegg

  • Verity

    John Richardson is absolutely correct. This topsy-turvy lunatic system did not happen by accident. It was sheer malice and spite. I said about ten years ago that the Fifth Column was actually the British Government. Its goal was to tear the country apart.

    Unfortunately, we do not currently have a politically right, sane, astute Conservative government to redress the wreckage. Just more leftist stupidity, although possibly without the malice of Blair, Straw et Cie.

  • Dorothy Wilson

    John Richardson: I don’t read the Sun! However, I do know the story you are reminding us of.

    I was merely recounting my knowledge of a situation in a small village. I accept there are countless others, and many worse, against the country. However, that does excuse the examples I gave and does not mean the people I happen to know should be allowed to get away with it.

  • John Richardson

    Dorothy Wilson.

    You call that abuse ?
    You call that Welfare Britain ?


    [Those of a delicate disposition should stop reading NOW]

    How about……

    ‘Somali Single Mother of Six Lives In £2.6 Million Mansion, Rent £1500 pw’

    “A defiant Miss Walker, 34, insists that she and her children aged from six to 16 are completely justified in living there as the council could not find them a big enough home. “

    Miss Wilson, the above was front page of ‘The Sun’.
    Front page.
    I apologise I could not find the date, though it was about eight months ago from memory.

    Google it for more details if you wish.
    It’s very easy to check if you chose to, but it’s easier to ignore….

    There are lots of other examples.

    Lots. Mostly foreigners. Huge detached luxury houses with massive plasma screen televisions, I remember seeing the photographs.
    All the details are on on-line archives if you search.


    This is delibarate .
    This is not an accident.
    There will be no ‘Benefit Crackdown’.
    There will be zero ‘compulsion’ to work for anyone.
    As for the above ? More will arrive, not less.
    You will pay for more foreigners to live in luxury.

    This is not an accident.

    Pretending we do not know will not help.

  • Naomi Muse

    @Rhoda Klapp
    Sorry to have been so long in reading this. I think your taking things back to the analysis of the issues, preferably without politicospeak is essential.

    I’ve read @Snowman’s comments too and think these thoughts are possibly true, but not necessarily. For I have hope that if we do what Rhoda has suggested, we might get a better picture of what the problem really is and then we can see what to do about it.

    So, Poverty. Poverty is not just shortage of money and commodities. Rhoda puts it clearly that just because Bill Gates has loadzamoney doesn’t mean she’s short of what she needs.

    Poverty is poverty of attitude, aspiration, vision, potential to do or change. Poverty can be the inability to express oneself which means that aspirations elude you. Poverty is a very solid ceiling and a set of walls and a floor that stop you from being able to move from poverty.

    As with famine, where people are starving, the nations collect money together to send aid, but the most successful thing is to help them to have a good water supply so that their crops will grow and they can look after themselves. To keep feeding people aid makes them dependent on aid and then they remain in poverty.

    Assuming that my analysis augments that begun by Rhoda, does giving people welfare rather than the means to get themselves out of poverty, reduce their aspiration and potential to change?

    Does the same apply

  • Timbo

    A straightforward truth is that you cannot take money from people who don’t have it.

    Tax rises for those who can afford it must be the first choice. Patriotic Brits who did well in the boom and are still doing well will not mind giving up a second or third home, or one of their 3 or 4 foreign holidays a year to stop the poorest getting poorer, or to keep people in work in key services.

    The welfare bill is mainly pensions. There is not much slack elsewhere. But the grey vote is powerful and the baby boomers are about to retire. Does Reform really dare to take them on?

  • Noa

    Surely a top down approach needs to be taken to determine what we can afford to spend, rather than what we want to spend it on?
    Tax revenues should be used firstly to pay off the interest, then the deficit, and next to reduce the debt within a set period. Is 10 years reasonable, is 15?

    After that government expenditure can be prioritised.
    Welfare may be a priority to many, but it should provide simple, defined and time limited support based on contributions, citizenship and need.
    Rhoda is right, the rich don’t need help, as is Verity, the public purse should a safety net, not drugs, alcohol and tobacco.
    In addition to direct savings through welfare reductions, indirect saving should arise through general management & overhead reductions.

  • Dorothy Wilson

    Like PayDirt I’ve stood at the chemists’ counter and watched as someone who didn’t speak English collected a bag full of prescription drugs.

    Also, in this village we have a woman in her thirties who, a few years ago, returned to this country from working in America. She had been thrown out from there because she didn’t have a Green Card. Presumably though whilst there she didn’t pay any NI contributions.

    Soon after returning to the UK she became pregnant. Although, officially, she does not work she is now living in a barn conversion, the rental for which is likely to be around £1000 a month and she has recently acquired a four wheel drive 2010 reg car.

    A couple of years or so ago she was sent on a hairdressing course – no doubt to give her work skills. True, she now does some freelance mobile hairdressing but, to quote her stepfather, “G… goes around doing some hairdressing but she has to be careful so the Social don’t find out”.

    Her nephew, who left school three years ago hasn’t done a day’s work since and, seems to spend his time, to use a local phrase, “orming” about. If someone doesn’t sort him out soon that will be the pattern for the rest of his life.

    These are the kind of abuses that need to be stopped. And the real tragedy of them is that people who abuse the system in this way drain money away from those in real need.

  • Verity

    The Exchequer could raise large amounts of money by selling off council houses again, removing all but the elderly on pensions from their tenancies.

    Thinking like Maggie, that allows the young and ambitious to get on the housing ladder and encourages a brisk trade in lower cost privately owned homes. These buyers will all be paying local council taxes.

    The current tenants, save the elderly, will be offered hostel accommodation. These would be private bedrooms and bathrooms. Common areas would be lounges with TV and kitchens and laundry centres.

    “Benefit” – what a silly word for charity money; it certainly doesn’t benefit those revenue producers forced to pay it – would be distributed in the form of food stamps or ration books. There would be tokens that could be spent on non-food items like toothpaste, soap, shampoo, etc.

    Sadly, these tokens would not be valid currency for ciggies, beer or lottery tickets. We could learn a lesson from the US in how to treat stores and shops that sold non-valid items for food stamps or hygeine token. In the US, it’s a term in the federal penetentiary, and if it’s a store that cheated (rather than an individual), it gets its licence to accept food stamps removed. In some areas, stores exist solely on income from food stamps, and it would be the same in Britain, so fear of discovery motivates stores to stay on the straight and narrow.

    Some of the tenants of the hostels could earn a small amount as cleaners and handymen on the premises, thus engaging in the novel experience of work for a reward.


    Cutting welfare needs to be done with caution, there are those who will always find a way to beat the system whilst others less fortunaate will suffer.

    If reducing the welfare budget is the starting point, George Osborne should make repayment for the bank bail-out second. The banking sector seem to be able to make vast profits and bonuses that would clear the counties debts in a very short time. They should be made to play their part and not leave the deficit to the taxpayer.

  • Wily Trout

    Work should pay. Idleness should not pay more than work. Everyone of working age should have to contribute to the state in some way or another: if not by paying taxes, then by effort. No-one should be able to live off the state as a ‘lifestyle choice’, which seems to be the attitude we must now take in place of the old ‘judgemental’ views. We must abandon the idea that everyone, regardless how well off, should have a handout. We should be proud of self-reliance – that self-respect has also been lost somewhere in the last two or three decades.

  • Rhoda Klapp

    Somewhere some unlucky bugger is having £250 removed from their sub-median wages, so HMG will be able to send that sum to me (double median, say) for Christmas disguised as a winter fuel allowance. Anyone know why? Anyone know why taking that entitlement off me is anything but entirely reasonable? The debate should not be about the money which decently-off people get given. All benefits which do not actually go to poor people ought to be beyond debate.

  • michael

    Average cost of an employee in the state sector is around 50K in the private sector its probably around 25K the difference … 25K times the 6 million state employees… equals the deficit…or near enough.

  • PayDirt

    Sooner or later there will be a National Insurance scheme that actually works and demonstrates accountability. An annual statement of account for all in the scheme, the amount of NI contributions in pounds and the amount of services used in some reasonable measure, eg pensions and welfare benefits in pounds, NHS use in some sort of NHS currency. Cumulatives to be added to the citizen’s NI card annually. The NHS stays free at the point of delivery, but checks will be possible. Those people who are in credit to be allowed expensive medicines currently forbidden by NICE for example. Those people much in debt to be checked and if abusing the scheme, then such people to be given emergency care only. Something like that, so tax-payers who are contributing can finally know that it is all worthwhile.

  • Snowman

    Rhoda Klapp @ 9.56:

    excellent structure for examining the issue, well crafted even without the use of the spellchecker on newspeak, superb as it goes, yet it doesn’t go to the core of the problem, I fear. Even if we were to define poverty well, am unsure we can ever agree though, I bet you top dollar that the pseudo-liberal fruitcakes will insist on a solution that ain’t at all different from what they’re pushing now.

    the core of our problem, not only on spending cuts but in every aspect of our lives, lies in the philosophy that underpins both the definitions of whatever one examines, and the subsequent solutions to any problem identified.

    one would have to start ideally deciding on either of the two key propositions that matter. Each of us are either fully ‘free agents’, and the State provides only what cannot be provided by any of us individually or not, hence the State has to provide for what any one of us is incapable to provide for himself, for whatever reasons.

    the best ‘living’ example of the two distinct philosophical schools of thought has been the recent case of the Chinese. Up to about twenty years ago, they were stuck with the latter philosophy emulating the Red Menace’s Marxist approach to the societal arrangement on social issues, and also the one that the pseudo-liberal nutters have succeeded in installing here; since then, the philosophy underpinning their societal model has morphed. The results speak for themselves.

    fear we‘ve gone far too far into the trap of the State involvement, nothing short of a derivative of the Cultural Revolution will turn us away from its eventual implosion, and the necessary replacement of the philosophy that sustains it.

  • TomTom

    Trying to get tradesmen to turn up when arranged is problematic. Getting a commercial edge into people so they do what they are paid for and turn up when pledged is essential for revival. I sometimes wonder if what they don’t earn through work is made up in tax credits and motivation is weak

  • Cuffleyburgers

    I’d like to point out the absurdity of the term “poverty tsar”.

    Frank Field of course good man by all accounts

  • Yam Yam

    Jesus once said ‘you will always have the poor amongst you’. By employing relative poverty as the measure of its success, New Labour more or less guaranteed the same thing – regardless of how much money the welfare budget gobbled up.

  • Peter A

    @ Paydirt.
    A visit to any large city hospital will confirm your suspicions that something not quite right is going on with the treatment offered to people from overseas.Health tourism must be at the very top of the list for cutting health spending.It is one thing that we have got ourselves into a situation where we are so dependent on immigrants to staff our hospital but quite another that we should treat the infirm from all over the world.

  • Lady Amelia

    Means testing penalises those at the upper edge of the lower side, and the lower edge of the upper side, of the cutoff point. So its again the middle income earners who are penalised the most. There has to be a better way of ensuring that only those who genuinely need support get it.

    My first suggestion would be to look at where the increases have been made in welfare spending in the last 13 years and begin to roll them back as a priority.

    don’t means test higher education or you trap people in poverty and ensure that they cannot climb out of the poverty trap

    and take a hard, hard look at the barriers to climbing out of poverty – the allowances that are immediately removed when you try to get any kind of a job, making it more financially beneficial to stay on benefits.

    the incentive to baby-farm for benefits.

    we should care only for the very old, the very infirm and the very young. we should invest in vocational education and real education to a high standard.

    young people on long term unemployment benefits should have to do real community work to get payment.

    and get rid of tax credits. its the most long winded, beaurocratic way of taking money away only to give some of it back.

    this only takes some common sense and a bit of determination, and a sharp knife through red tape…. (has anyone else noticed the delightful irony in the phrase “Gordian knot”?)

  • Liberty

    Replace means testing with time limited benefits. It is superficially attractive to withhold benefits to the rich but doing so is far less efficient because it requires means testing which is labour intensive, over-complex, prone to fraud, unfair at the edges, creates a poverty trap, and is a disincentive to self provision and working. Time limited benefits on the other hand have many advantages.
    There are more than 50 benefits with considerable overlap and many conditional on the others. Consolidate benefits into four. Don’t pay them before the person has worked for two years full time or equivalent. Teenagers should be in education, work, living at home or a hostel and if they have children they can stay home or live in a hostel.
    If unemployment is due to change then it should be limited to five years in a lifetime, payable at half or quarter rate to ease people back to work or get training. That is enough for anyone but it prevents the career parasite.
    The disabled should have benefits on a points based system according to the cost of their disability, getting to work and to be independent if possible.
    Illness to be 0 rated for the first three days per year, paid by the employer for the next three days and insurance thereafter. This can be privatised. The average number of sickness days annually is five days.
    Either parent to have child benefit payable for 15 years from the birth of their last child. The main cost of parenting is not being able to work and they can go to work when the youngest is 15. Not being means tested means that it is cheaper for parents to live together and there is no need for separate marriage benefit.
    Paying benefits to the rich is a small price to pay. The incentive to return to work is greater the richer one is because unemployment benefit is not nearly enough for them. There will be an incentive for women to seek a good man to father their children who can provide for her and eliminate the incentive to have children alone – and have too many.

  • Neil Wilson

    Means testing is a stupid system that just employs armies of administrators to decimate forests in the name of ‘fairness’.

    The simplest system is the universal pension – paid to all at an hourly rate with certification from an employer to the number of hours worked, and to those over pension age/disabled as though they had worked a full week.

    The you have income tax rates at 70% up to median wage (the claw back level) and 40%/50% thereafter.

    In addition the costs of being employed – travel, childcare, student loans, etc are offsetable against tax.

    Then you scrap everything else – retirement pension, unemployment benefit, child benefit, national insurance, personal allowances and the minimum wage.

    The result is that everybody gets a minimum level of income as long as they work. They get 30p in the pound on their wage so that work always pays. And idle people get nothing.

    Means testing is stupid make work bureaucracy.

  • Richard

    A large proportion of the welfare bill is the payment of state pensions. George Osborne seems determined to protect the elderly from the fiscal rentrenchment we are all going to have to pay for. While benefits will be frozen or updated by inflation the state pension will be updated by earnings, and economically mad benefits like universal bus passes and winter fuel allowances protected.

  • PayDirt

    While waiting at Boots’ counter for a prescription medicine for which I pay the nominal charge, the man in front, I guess Algerian, was waiting for his bagfull of medicines, he chattered away in French on his mobile phone while we waited. About six boxes of stuff were removed from the shelf and finally the assistant asked about the payment status. He said “oh, don’t you recognise me? I come here every two weeks for this lot”.
    And where is the welfare money going? Is it not obvious people from around the world will come here to sign up for free medicines and whatever else?

  • Rhoda Klapp

    This is not a bad article as far as it goes, but it made me think that our approach to the problem is constrained by the language of modern politics, the newspeak which only allows us a limited set of options.

    All this poverty vocabulary, tax credits, lower income families, teen pregnancy, fuel poverty and so on is stopping us from looking at the real problem.

    The first step to solving a problem is to define it. We have not done this in terms of what the benefit system is for, or indeed what actual poverty is, and whether it is a problem to be solved by the collective, whether it be the nation or local government or even ‘the community’.

    So, what’s the problem you want to fix? Poverty? In that case, one at a time please, we can deal with substance abuse or teen pregnancy or single parenthood separately. They may be symptoms of poverty, but they are not inevitably linked to it.

    So, poverty. What’s the problem about that? Obvious, isn’t it? At this point a socialist will know that this is so. The open-minded should look further. First off, let us be done with this relative nonsense. Someone being rich does not make others poorer. If Bill Gates makes an extra dollar, or even a billion dollars, it does not make me poorer in any way. Not because he can buy things not available to me, and not because he has somehow taken my share of a limited pie. Relative poverty has no logical basis. Absolute poverty, then. This is evidently a problem where it exists, but in this country it is rare and where people find themselves without food and shelter and health care because of lack of money there are provisions in place to help them. These provisions are not perfect, but neither are they usually considered to be totally inadequate either.

    I had in mind to write further, defining poverty as I see it. I now intend to leave that for later, and to invite the help of my fellow coffee-housers to define the problem of poverty, not in newspeak* terms, but in an open-minded way to complete the first step to any proposal for a proper solution.

    * My spell checker did not recognise newspeak. Ironic? Bill Gates seeking to limit my range of expression by limiting vocabulary?

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