Two different political approaches

Labour and Conservatives are both trying to champion ‘welfare-to-work’.

The Conservatives are attracted by welfare-to-work more as a benefit-cutting policy. They think that people become ‘dependent’ on state handouts. The thrust of policy - in Chancellor Clarke’s charming Budget speech phrase - is to "ensure that those on benefits do not have a more comfortable lifestyle than those who are supporting themselves on modest incomes". As those modest incomes plunge, benefits get cranked downwards to maintain a perverse differential.

Labour however has got quite hooked on a different kind of welfare to work: they say the benefit system must be reformed to smooth the transition from unemployment to work. Labour’s Social Security team launched their attack on the Budget saying the Government had "failed on welfare by failing on work...they have capped work by trapping thousands on benefits". They emphasised the need to "help get people off benefit and into work".

To be fair to the Tories, they also understand that benefit system barriers are obstacles to getting back into work. Indeed, over the last year, the Government has introduced a package of back to work incentives: the housing benefit run-on period, the back to work bonus, the National Insurance Holiday, the expansion of in work benefits. These are welcome because they address real problems. As Matthew Nimmo reports, on page ?, a recent DSS survey found that nearly two thirds of Income Support claimants (including unemployed who are now on means-tested JSA) feel trapped on benefit. Their main fears were being worse-off in work, losing help with rent or mortgage payments, and managing financially for the first few weeks after leaving Income Support.

But making the transition from benefit into work easier is no good if it is combined with penalties for moving from work back to benefit. Why? Because the kind of jobs many of the unemployed can get are short-term and insecure. For someone in this position, moving into temporary or insecure work is a risky business. One has to give up the relative ‘stability’ of out-of-work benefits in return for a period of uncertain income followed by the difficulties of signing on again.

It is no wonder that the same DSS report found that delays and difficulties in moving back on to benefit if a job falls through are a major source of concern to claimants, and actually lower the willingness of the unemployed to take temporary work.

What has the Government done to address this problem? It has implemented one change after another making it harder, not easier, to move on to benefit. Someone returning to unemployment after only three months work has to go through the complexities of applying for JSA and the potential pitfalls of completing a new Job Seeker’s Agreement. If successful, it may be a long time before any money arrives.

At first they will have to endure a ‘waiting period’ during the first 3 days of unemployment. From 1999 this will be extended to a whole week, a measure the Chancellor outrageously justifies as a ‘simplification’. Since October, Housing Benefit has been paid fully in arrears, making the transition to benefit even harder. Delays in receiving one’s first benefit payment are still common: more than one in five claimants interviewed in 1994 waited three weeks or more.

Rather than simplifying the claiming procedure to reduce these delays, the Government has announced that from October next year claims will not be allowed to start until the claimant has produced all the evidence required to establish the claim. Instead of the Benefits Agency taking responsibility for slow processing of claims, the unemployed themselves will be penalised for the complexity of the system.

The Budget announced severe cuts to Housing Benefit and the abolition of Lone Parent Premium and One Parent Benefit, measures which will penalise work. Lone parents will find the financial rewards from moving into work cut by £1 for those eligible for Family Credit, and by over £6 for others. As Harriet Harman has pointed out the Housing Benefit cuts penalise job hunters because after October next year claimants who move into work and then lose their jobs and have to reclaim Housing Benefit could lose their homes.

The Government’s policies are contradictory. On the one hand it has introduced some positive, though piecemeal, back to work incentives. But it has then undermined these incentives by penalising transitions back on to benefit.

The insecure and lower paid sector of the labour market continues to grow. So moving off benefit and into work is a high risk choice for little reward. The large number of claimants who still take this risk is a tribute to the work ethic of the unemployed. But the Government should not rely on this: research suggests that a small but significant minority of the unemployed already prefer the relative security of out-of-work benefits to the perils of trying to live on the combination of two unreliable sources of income: from a ‘flexible’ labour market and an inflexible benefit system.