Posted by: Jules Birch15/06/2011
When is a u-turn not a u-turn? As the retreats on the Health Bill and weekly bin collections dominate the headlines, it’s tempting to see evidence of similar climbdowns on welfare reform. I’m not so sure.
On Monday the Daily Mail splashed with news of a u-turn on the £26,000 total benefits cap signalled by welfare reform minister Lord Freud. Yesterday it was saying the cap will stay after Freud was ‘slapped down’ by Downing Street.
In fairness to his lordship I’m not sure he’d actually said anything to justify either story. True, he’d told the BBC on Sunday that there would be exemptions ‘where we think there’s something happening that is undesirable’ but that didn’t seem like much had changed since the promises given by ministers at the committee stage to work up the detail in secondary legislation to follow.
And Freud’s boss Iain Duncan Smith was on hand at work and pensions questions on Monday to tell his Labour shadow Liam Byrne ‘not to believe everything he reads in the media’.
The work and pensions secretary went on: ‘The reality is that this policy is not changing because it is a good policy. The reality is that nearly half of those of working age who are working earn less than £26,000 a year, and they pay taxes to see some people on benefits earning much more than that amount.’
Irony number one about the u-turn that it seems never was is that Duncan Smith supposedly does not agree with the policy himself. According to a report in the Financial Times last month it is chancellor George Osborne who is pushing the idea he announced at the Conservative conference. That leaves IDS and his ministers defending a policy that Osborne thinks is a political winner but raises all sorts of practical problems and unintended consequences.
The FT reported on Monday that it was more of a rethink than a u-turn with the DWP working on ways to phase in the cap and help particularly vulnerable families. But will it really be able to find a way to neutralise negative headlines without reducing the £240m a year savings the cap is meant to deliver?
Irony number two is that the policy is based on a complete misconception of the relative positions of people working and people on benefits.
As Tim Leunig put it on his blog for the Lib Dem think-tank CentreForum on Monday: ‘The Department for Work and Pensions continues to pedal the lie that the £26,000 total cap on benefits is necessary to ensure that people in work don’t “earn less than those who are on benefits”. This is simply not true.’
He quotes the example of someone on the minimum wage with a partner and four children working 36 hours a week and living in London. They receive £27,800 in benefits on top of their £9,950 net earnings. If they lose their job their income will already fall by over £5,000 but under the cap they will lose far more.
Far from ensuring that people in work don’t earn less than someone on benefits, the cap means that someone who loses their job in a high-cost area is left with benefits that only cover a fraction of their rent.
CentreForum is not the only coalition-aligned think-tank to criticise the cap. The Social Market Foundation and even IDS’s own Centre for Social Justice have also questioned its value. Hopefully the cap will eventually founder under the weight of its own contradictions and exemptions - but not yet it seems.
Isabel Hardman is reporting on PoliticsHome that neither Labour nor the Lib Dems will attempt to amend the cap when it comes back to the Commons later today but are hoping it will be taken up in the Lords.
I bore all that in mind when I saw reports of another apparent government change of heart, this time on direct payment of housing benefit to social landlords in Monday’s Welfare Reform Bill debate.
Conservative MP Paul Uppal quoted the assurances given by ministers in committee that ‘in some circumstances, direct payments to landlords may be necessary, and the Bill makes provision for that’.
But that seems to add nothing more than what we already knew about a mechanism to retain direct payment to landlords for vulnerable tenants and people in arrears.
And Uppal seems to have come down against direct payment to landlords himself: ‘I have my concerns about the payment of housing benefit, but having sat on the Committee, looked at the findings of the reports and considered the evidence, I have come to the conclusion that if we are sincere about the aim of this Bill of getting people off benefit and into work, the first step is not only getting people into work, but individuals taking responsibility.’
’The DWP line on direct payment is unchanged too: ‘We fully recognise the importance of stable rental income for social landlords to support the delivery of new homes and will develop universal credit in a way that protects their financial position. We will work closely with the devolved administrations, providers and lenders in developing the new system.’
From Inside edge
Housing commentator Jules Birch puts the latest news in context