At the TPA, we very much appreciate the hard work that Iain Duncan Smith and the rest of the DWP team are doing to try and reform welfare. It was extremely encouraging to see the 21st Century Welfare report endorse radical measures to fix a failing benefit system - with one of the options in the consultation based on TPA research - that is failing the poorest and trapping people in dependency. But I'm starting to tire of all the bleating about how this requires lots more money, and how we need to overcome the resistance of a penny pinching Treasury.
Let's be clear. If welfare reform fails because it is decided that the country can't afford to spend more on benefits, Iain Duncan Smith will bear as much responsibility as George Osborne or any bureaucrat in the Treasury.
It isn't just the Treasury that doesn't want to spend more on the welfare system, after all. Polling for Policy Exchange produced a very helpful graph showing where the public would most support cuts, which I've reproduced to the right. Positive figures are net support for higher spending, negative figures are net support for lower spending.
That graph shows that the top five areas by net support for cuts are the BBC; Culture, media and sport; international aid; benefit spending and tax credits; and courts and legal services.
It is absolutely worth saving money in all of those areas. Culture, media and sport is likely to see significant cuts. We have already seen significant cuts announced in the court and legal services sector. But the the rapid rise in the International Development budget is protected. Can the Government really hope to carry out a politically successful fiscal adjustment whilst leaving the NHS untouched and spending more in two areas where the public most support cuts?
Other policies have lost public support once the cost became apparent. Many of us might dislike identity cards in principle but there is good reason to think the public supported the idea until the attached price tag became clear. For welfare reform to endure it needs to enjoy robust public support. That might not last if it means ordinary working taxpayers, struggling to balance their own budgets following the recession, see more of their money go to benefits claimants.
That's why in the TPA report we looked at how to get radical welfare reform and save money even before the system starts to get people back into work by improving incentives. In our view, the critical obstacle is the 60 per cent of median income poverty line. Trying in vain to meet that standard is meaning that too many people fall through the net - the numbers on less than 40 per cent of median income have risen over the last decade. And it makes it impossible to keep marginal deduction rates down to a sensible level without putting a heavy burden on taxpayers. If we cut the line to 50 per cent of median income we can address all those problems, produce a reliable safety net that doesn't trap people into dependency.
That would mean cutting the amount some families get. It would be a genuinely tough decision. But it would mean that welfare reform could do more to help the poorest, more to improve incentives and enjoy the support of the working British taxpayers who finance it all.
There are other factors that really need more attention, like taper rates for different amounts of time on benefits as well as different levels of income. That could provide another way of improving incentives to work without spending a lot more money. Unfortunately, the section on that issue in our report hasn't yet been taken up by the DWP.
I think that everyone working on this issue has huge respect for how seriously Iain Duncan Smith is taking the vital task of reforming the welfare system. But we can't just blame the Treasury if he expects to spend his way out of making genuinely tough decisions. Fortunately, there is some suggestion in a blog from Ben Brogan today that they might be moving in the right direction:
"It has been suggested to me that a trade-off might involve IDS proposing cuts in benefits (the big taboo) that would then fund the reforms, but that’s just whispering."
We can only hope that we get more than whispers on this vital issue.