Wednesday 9 February 2011
For immediate use
The 21st century welfare state: Radical change is change that sticks - Byrne
Speech to IPPR
Text of a speech given by Liam Byrne MP, Labour's Shadow Work and Pensions Secretary, to the IPPR today.
- CHECK AGAINST DELIVERY -
Nick can I start with a big thanks to you and the IPPR for hosting us this morning.
Since you arrived you have helped create one of the leading centres for fresh thought in politics.
You have brought together some of the best minds in the business.
And you are bringing verve and intellectual excitement to the task of thinking about Britain’s future.
In that future, one of the greatest challenges we confront is reform of the welfare state.
Next week we expect sight of the government’s welfare reform bill.
And so today, I want to set out Labour principles by which we will judge whether the government is taking reform in the right or the wrong direction.
I feel very privileged to be following Douglas Alexander who has set out a thoughtful, careful and intelligent approach.
I shall try my best to follow him.
I think I should start by putting my cards on the table.
My views have been profoundly shaped by the experience of serving these last six years, a community with the second highest unemployment in our country.
I don’t have to tour the country to confront the plight of poverty.
I confront it at work every day.
That experience has inspired my work bringing £133 million of new investment into the constituency. In developing community service in our schools. And, in piloting new approaches to getting people back to work.
That experience is why I passionately believe in radical welfare reform.
And that experience is why I want to argue this morning that the test of a radical welfare reformer is not the faculty to dream some grand new theory.
It is the force and focus to deliver a bold new settlement in practice.
Not on paper. Not in Westminster. But in every corner of our country.
That was the test that Beveridge passed with the foundation of the welfare state.
That was the test new Labour passed with the New Deal and Job Centre Plus and reform of incapacity benefits and job guarantees and Pension Credit and the Turner Commission.
And it is the test the Conservative-led Government must pass as they seek to build on our work.
In the decade before the crash we halved unemployment and cut poverty and got the number of people on Incapacity Benefit falling and got employment up to a record high and the numbers on out of work benefits down by a million.
We didn’t allow unemployment to top three million once, never mind twice as under the Conservatives.
We didn’t watch the numbers on Incapacity Benefit treble, as the Conservatives did.
We didn’t watch social security spending rise; we watched it fall.
So I agree with the man who described our achievements as ‘remarkable’.
That man was of course the government’s very own Welfare Reform minister, Lord Freud.
But, when you look at things from where I stand in Hodge Hill you have to say it wasn’t all perfect.
The business of reform might never have stopped.
But we weren’t driving permanently at top speed.
That is what many of us here today, many of our voters and many of our party members wanted to see.
You know in one private poll we found 85% of Labour Party members supported the measures in our Welfare Reform Bill which cut benefits for those that refused to do the right thing?
On occasion, we needed the same single-minded determination to reform welfare that almost every Labour party member thought was right.
To act on any and every opportunity to ensure that the welfare state was not a way of life, but a way on in life.
When you serve a community like mine; when you see the wasted potential every day; when you work with the children that I serve, then you believe that no other pace of good reform but the very fastest will do.
So that is why I speak from the heart when I say that where the government is acting to put in place radical welfare reform that works, I will support them.
It’s why we will support the principles of Universal Credit because it advances the revolution we pioneered with tax credits, to make sure work pays.
It’s why we will support the principles new Work Programme which advances the revolution of the Flexible New Deal.
And it’s why if the government’s new contracts are delivering and offering value for money, we will not cancel them if we are elected in 2015.
Where this government is wrong, we will offer opposition inspired not by a thirst for political posture, but by a passionate belief that every citizen of this country, young and old alike, can do more, achieve more, be more, if we have a radical welfare reform that gives people the power to lead the life they would choose.
I think the public has a right to know the way we think about the government’s approach. So this morning I want to set out three tests by which we will judge whether this government has got it right.
The first test is perhaps the most important in the circumstances.
The government says it has a plan that is fiscally credible. But is it fiscally deliverable?
Are they in fact presenting us with a list not of economies, but false economies.
My fear is that the government is determined to fail this test by ignoring the most important lesson of New Labour’s era.
That hard work is the secret to national prosperity. There isn’t another way.
Over our years in office, we invested in repairing and renewing Britain’s health, education and police service, and transferring welfare payments to help close the inequality gap.
The result was that while the economy grew, inequality did not rise in the UK, unlike almost every other OECD country.
When the OECD reported on their global survey in 2008, they said the UK was one of just three nations where inequality was falling.
Overwhelmingly this was financed by delivering one of the highest employment rates in the world.
In the years before the crash, tax receipts rose by around £129 billion;
Nearly two thirds of these receipts came from income tax and national insurance contributions – in other words, from people in work paying their taxes.
Now with growth now stalling, our recovery is in the slow lane.
Without jobs, the challenge for the country is this.
You can make plan all the welfare reform you like.
But you can’t have welfare to work without work.
Without a faster growing economy, the government’s changes won’t push people into a job. They will push them into a corner.
The recession has now been over for more than a year.
Unemployment should be falling.
Instead, you at the IPPR are warning of a double dip in employment.
Instead 5 unemployed people are chasing every job vacancy that is advertised.
Instead, in over 120 constituencies, more than ten unemployed people are chasing every job.
Did you know the OBR has so much confidence in the government’s welfare to work plan that it is predicting the employment rate will fall throughout this parliament.
This failure is costing us a fortune.
An extra £500 million in welfare payments for every 100,000 extra out of work – that’s nearly £1,000 a minute.
Worse, this failure has profound consequences for the contract we expect of citizens in this country.
For over a decade now, Labour’s approach has been clear. If you can work, you should.
That’s why we toughened the contract year by year.
Setting out new responsibilities on people to take a job when one was offered, or face the sanction of a cut in benefits.
This was especially important for young people.
Our deal was simple.
The Future Jobs Fund offered every young person a job if they had been out of work for 6 months.
But we were clear that if young people didn’t take up that chance, they would be no easy life on benefits.
Now that contract is gone.
Back in 1983, Mrs Thatcher, faced with unemployment rocketing up beyond 3 million people, ended the obligation to work if you could.
The result was high unemployment that lingered for years.
Now the government is repeating the mistake.
Because the Tories can’t offer our young people jobs, they have stopped demanding of them any obligation to work.
This isn’t just a worry to young people.
Last Thursday, an older resident of the Bromford estate in my constituency said this to me:
“We worked hard all our lives. We paid our stamp all our lives. We helped make this country great. But if our young people don’t work who’s going to pay for the future? Everything we worked for will be gone.”
So, this is our first test.
Is what you say fiscally credible, actually fiscally deliverable? Will it save us money?
It’s the same test we’ll apply to Housing Benefit reform.
We agree with the need for Housing Benefit reform.
But the way the government wants to take £2 billion out of the system is so clumsy that frankly the costs of homelessness could swallow the money they save.
Last week the National Housing Federation revealed 9 out of 10 landlords won’t cut rents.
And last week, the government slipped out a Parliamentary answer to Douglas which said the cost of housing benefit over this parliament isn’t going to fall. It’s going to rise – by over £1 billion.
That is not what I call sorting out Housing Benefit.
My second test is this. Do your reforms foster ambition, and advance compassion?
That was the New Labour way. We called it social justice, and it was you here at the IPPR that pioneered our approach with your Commission on Social Justice.
An approach that got people into work. Made sure work paid. And supported each of us at times of need.
It helped people stand on their two feet and recognised that all of us have times when we need our neighbours.
My message to the government is simple.
Where your work builds on our record, evolves our approach, we will support you.
That’s why I support Universal Credit because it builds on the revolution we pioneered to make sure work pays.
But I have to say to the government:
You don’t foster ambition to work when you increase by 20,000 the number of people facing marginal deduction rates of 90%.
You don’t foster ambition to work harder when Universal Credit will see 2m workers see an increase in their marginal deduction rate, more than the number who benefit.
You don’t foster ambition when you double the effective marginal tax for 175,000 people who earn £40,000.
And you don’t foster the ambition to save, if as the IFS forecasts, you take Universal Credit from anyone with savings of £16,000 and above.
I’m afraid this government is failing the compassion test too.
Cutting Housing Benefit by 10% if you’ve been out of work for a year is not compassionate; it’s not supportive; it’s a punishment and I call on the government to think again.
It’s not compassionate to cut mobility money for those in residential care
These people are amongst the most vulnerable in our society.
This is not compassionate, is not supportive, it is a punishment for people who need our help.
My final test is what these changes mean for working people, especially those families feeling the squeeze.
We will be the party that stands up for the squeezed middle.
The welfare state in this country is not simply a safety net.
It’s a something for something deal. You pay in good times. And get help when times are tough or needs are great.
It rewards those who do the right thing.
It helps millions of hard-working families with a welcome boost to the pay-packet.
It helps us make sure that work pays.
And it helps families with the costs of the greatest and most important challenge in life; the challenge of being a good parent.
In this way, the welfare state is much more than a safety net; it helps with the way on in life.
It is what helps everyone in our country, no matter their background, stay connected to the economic advances we make as a nation.
It helps puts the mobility into social mobility.
It is what helps a society become a good society.
Yet families today face what the governor of the Bank of England calls the biggest squeeze on living standards since the 1920s.
With few jobs to go round, wages are flat. Yet prices are rising fast.
We now risk a third of our families falling further and further behind the average national progress in the decade ahead.
This is why the future of the welfare state is so crucial to the kind of nation that is forged in the years ahead.
So you might expect the government to step in to help.
Not a bit of it.
This April will bring 10 Tory raids on family budgets – more than half on help with raising children.
And that’s before the increase in VAT.
Let’s be clear – we support the need for welfare savings to get the deficit down.
We don’t oppose over three-quarters of the principled and burden-sharing welfare savings and efficiencies the government is making next year.
The switch in up-rating from RPI to CPI helps diffuse savings from across the system – but it shouldn’t be forever.
I don’t think a one year cut-off to contributory ESA is right – that could hit people recovering from cancer.
But a two year limit could work; and DLA reform is needed – but very careful change is the right approach.
A carefully designed new gateway for DLA could make sense.
But reform driven by a top-down cuts target risks denying support for those in search of a more independent life.
Yet, let’s be clear.
This government likes to say it’s balancing the books by slashing welfare.
George Osborne boasted of his £18 billion cut.
He’s likes to pretend he’s punishing ‘shirkers not workers’.
Nothing could be further from the truth.
As you’ve pointed out here at the IPPR once you factor out the change in uprating, over half of George Osborne’s welfare cut hit the pay packets of the people in work.
This government is squeezing the middle of our country like there’s no tomorrow.
£3 billion pounds will come off support for working families; starting with a £1 billion raid on pay packets starting in April.
Yet, do you know that two-thirds of that raid is to pay for unemployment being higher than the OBR expected under Labour?
The government has put the recovery in the slow lane and the squeezed middle is paying for it.
And that’s before the raids on children.
By the end of the parliament, the government will have slashed the support for families with children by nearly £3.4 billion.
That is a billion pounds more than the special tax on bankers.
Let me ask you, what kind of government takes a billion pounds more off children than bankers?
For some, that squeeze is almost unbelievably unfair. Women in their late 50s are being told they’ve got to work an extra two years without a pension. How do they get the extra savings together?
A deputy head with a partner working part-time now faces paying a new higher rate of tax, and then the loss of their child benefit. How do they save for their children’s higher education?
A young family with a modest income but degrees under their belts are losing tax credits, child tax credits, and child trust funds. How do they now save for a deposit?
A retired couple on occupational pensions are watching inflation erode their savings, VAT eat their weekly budget and now prices are rising faster than their state pension. How do they afford the retirement they worked so hard to enjoy?
These are the people we will stand up for. These are the people paying for this government’s economic policy. And we will seek to defend them.
So these are our tests for Iain Duncan Smith:
Are your plans real economies or false economies? Without work, without jobs, we fear the worst.
Will your plans foster ambition and advance compassion? Where they do, we will support you.
And what are you doing to stand up to the Chancellor who seems hell bent on squeezing the hard-working majority of our country until the pips squeak?
Unless the government meets the tests I set out today, it will not pass muster as radical welfare reformers.
But nor will Labour win back that mantle by sitting as armchair critics.
We lost 5 million votes between 1997 and 2010.
I believe many were lost because people thought we had lost our edge as radical welfare reformers.
So this year, the fight for jobs will distinguish our election campaign.
But we must answer bigger questions for the future.
Next week I plan to set out the detail of our policy review on delivering full employment, re-forging the welfare state for the 21st century and delivering justice, fairness and security for those in old age.
We aim to report in June as part of the policy review I am coordinating for Ed Miliband.
Let me conclude with this.
If my experience of working in Hodge Hill has taught me one thing, it is that too many parts of our country face the challenge of a failure of power.
The absence of power that stops a neighbour walking where they like for fear of crime.
The absence of power that stops a young student going to college even though she has the grades.
The absence of power that stops someone getting a job, even though they too like the rest of us, thirst for a better life.
Labour’s vision for radical welfare reform must be to to fix those power failures.
At its best, politics in Britain has defined the big challenges we face on the road ahead – and been bold in the answers we’ve delivered.
At its worst, politicians talk big, and then tinker around the edges.
Nowhere is this more true than the welfare state.
There are few better examples than the welfare state of how by acting together we help ensure that each of us achieves more than we can alone.
The big challenge is to flourish in the new global economy that today links 6 billion of the world’s 7 billion people.
And to ensure that all of our citizens, not just the lucky ones, share in the new wealth that it is possible to create.
My ambition is that it will be the Labour party that once again sets the terms of debate; defines the change we need; and shows how we make that change stick.
That would earn us once again, the mantle of radical welfare reformers.
Secretary Clinton traveled to Munich, Germany, February 4 to 6, to participate in the Munich Security Conference where she conducted a series of bilateral meetings and gave remarks highlighting the importance of the transatlantic security relationship.