Friday, October 8, 2010

Welfare reform in hard times

The debate around the proposed welfare cap gets more surreal by the minute. Everyone (just about) can agree that there is something absurd in welfare recipients getting more than an average family's income from paid work. But the moment you look into the details, the whole thing falls apart. Essentially, the only reason anyone can receive large amounts of welfare benefits is if they have several children to look after. So the 'undeserving' poor can only be punished (or incentivized) by effectively withdrawing financial support aimed at their children. Who of course, cannot be blamed for their predicament.

As a result, the coalition is in a big mess over this. Lord Steel, this morning on the Today programme, was cornered by Evan Davis into suggesting that the cap would not apply 'retrospectively' - ie to people who already have children. This is clearly not what the government is planning. However the only way a Liberal Democrat (or indeed anyone in possession of human empathy) can make sense of the policy is to deny that it will actually involve removing welfare support from real live children. So, like the child benefit cut, the coalition will probably end up cack-handedly finessing the policy so that it doesn't have the intended effect. So, no money saved, no reform.

The academic literature on welfare states has generally stressed how 'sticky' welfare institutions are and how difficult it is to cut back on spending. After all, the pioneer of the 'new politics' thesis in welfare state studies - Paul Pierson of Berkeley - developed his argument by studying the US and the UK in the 1980s, where determined efforts to cut the welfare bill were actually made. If Mrs Thatcher couldn't reform housing benefit or remove the poor's incentives to have children rather than work, why should we think that touchy-feely Cameron and Clegg will manage it?

The government looks like it doesn't know what it is doing. After all, IDS does not give the impression of being a man who has seriously analyzed the causes and dynamics of poverty in Britain. So what will happen? Well, probably a few high profile changes which sound impressive but only have marginal effects. Either that, or rioting in the streets.