Britain on benefits: Getting the cost of welfare down

One of the great achievements of the post-war British government was the founding of the welfare state, in response to the superb Beveridge Report of 1942, which helped to remake British society after the ravages of the Second World War. Over the years since, our social security system has expanded and its costs have risen. This happened under governments of both colours; it may surprise some that the growth rate of social security spending was higher under the Thatcher and Major governments than under New Labour ones.

Today, the way our welfare system operates is unfit for 21st century Britain. Its costs are unsustainably high and public faith in the system is at a low. Welfare costs need to be brought down in a fair way and the system reformed to meet the needs of modern Britain. This can only be achieved if there are radical structural changes alongside a cap on overall spending. Last week, Labour leader Ed Miliband set out the principles on which those changes should be made.

First, everyone who can work, should work. This has to be the most important principle for any system of social security. We can’t be a country in which people who are able to work can choose to be on benefits instead. Labour has proposed limiting the amount of time people can spend out of work through a compulsory jobs guarantee. It will do what it says on the tin: government will ensure there’s a job for every adult who is long-term unemployed and people out of work will be obliged to take those jobs or face losing benefits.

The current government have allowed long-term worklessness to rise to its highest level for a generation. Youth unemployment alone cost Britain a whacking £5 billion last year. This is a grave waste of British talent and wrecks people’s life chances. It’s also completely unsustainable to pay benefits to those who could be working and paying taxes.

Second, the costs of welfare will go down if we tackle the scrouge of low pay. People often don’t get paid enough when they’re in work to make ends meet and the taxpayer is left to fill the gap through tax credits. This needs to change so that welfare spending is no longer a substitute for decent jobs and decent pay.

Third, we need to get the housing benefit bill down. Housing benefit constitutes a high proportion of the overall welfare bill – this is the result of the failure to build enough homes over recent years. When too few homes exist, it is inevitable that tenants end up paying over the odds, which in turn means that housing benefit costs rocket. We simply can’t afford to pay billions to private landlords who can charge ever-rising rents. Instead, we should be building homes, making sure affordable housing is plentifully available. This would be a first order priority of a Labour government in 2015.

Finally, one of the largest problems with the current welfare system is the perception that some people can get ‘something for nothing’ whilst hard-working people aren’t rewarded for paying in and not taking out. This has to change: there should be a link between someone’s contributions and the amount they deserve out if they lose their job. So we need to reward those who have worked for longer, paid into the system and suddenly found themselves out of work. This has to be the right thing to do and Labour are looking at ways to make it happen.

It is only by controlling welfare spending and tackling the underlying causes of dependence on benefits that we’ll be able to ensure that work is rewarded, that the system is fair and sustainable and that welfare costs start – and continue – to fall.