x Abu Dhabi, UAEFriday 21 July 2017

UK has work cut out on welfare reform

With more than 7 million people in the UK relying solely on benefits, a former Tory leader is promising a revolution of reform.

The UK needs to return to a healthy level of economic growth so that new jobs can be created by the private sector.
The UK needs to return to a healthy level of economic growth so that new jobs can be created by the private sector.

More than 7 million people in the UK live in homes that rely solely on benefits, aided by an outdated safety net. A former Tory leader is promising a revolution of reform

I have a friend who was made redundant after 17 years working for the same company. Thirteen months on, 284 job applications down the line, and she is still facing the indignity of having to sign on each fortnight.

Each time she takes along a notebook in which she documents every single job application she has made as proof that she is looking for work. A print-out of the sent-items of her e-mail account was not deemed a sufficiently diligent record.

Most unemployed people in the UK, such as my friend, are desperate to find work and scared of what might happen to them if they do not. They do not need to have their letter-writing style checked by some bureaucrat to keep them on their toes and pouring over the job ads. It's not help, it's humiliation.

But the pervasive feeling among the population at present, and especially among the diligent job hunters, is that there is a hard core of people out there who are taking everyone for a ride.

This month, a revolution in welfare reform to end the gravy train was promised by Iain Duncan Smith, the work and pensions secretary and former Conservative Party leader.

Promising the biggest overhaul of benefits since the 1940s, he wants to simplify a system that has grown out of control and replace up to 50 separate work-related benefits with one simple so-called "universal credit".

The guiding philosophy behind his changes will be that it will always pay more to be in work.

The coalition government argues that millions of people have become trapped by a benefits system that removes help too quickly when work is found and effectively penalises those who try to improve their situation, however little, by taking voluntary or part-time employment.

According to the Office for National Statistics some 7.2 million adults and children in Britain live in homes that rely entirely on benefit and almost 2 million children grow up in workless households - more than almost any other country in Europe.

In some parts of the UK, worklessness is passed on from generation to generation. Children who have never seen their parents work have little knowledge of how to get out of the same trap themselves. Social mobility among the British population has actually decreased in recent years, while the number of people in severe poverty has increased.

Meanwhile, the total welfare budget has risen by nearly 40 per cent since 1996, to £87 billion (Dh510.6bn) last fiscal year. It is a bill the UK can no longer afford.

Labour made a knee-jerk attack on Mr Duncan Smith's proposals last week, but it was half-hearted because in truth the former government had already imposed many conditions and restrictions on benefits such as Job Seekers Allowance and incapacity benefit.

Even the idea of sending "benefit scroungers" to sweep up leaves and pick up litter, for which Mr Duncan Smith was ridiculed, was tried by the last government.

William Beveridge, the founder of the modern welfare system, recognised the danger inherent in the safety-net that he devised. He warned that unemployment benefits would have to be time limited "lest men become habituated to idleness".

The coalition's aims are pragmatic, even laudable, but with five people chasing every job, it is going to be difficult to see them enacted. If they are to have any chance, there must be a rapid return to a healthy level of economic growth so that new jobs can be created by the private sector.

Companies want to hire, but they find it hard to find suitably qualified people with the right skills and work ethic. More than 4 million jobs were created under the Labour administration, but 70 per cent of these went to immigrants.

Employers, particularly small companies, are stymied by regulations and bureaucracy that make hiring new staff extremely risky. If things don't work out, you can end up with an extra unaffordable head on the payroll for months, or even worse, end up in an employment tribunal.

There are plans to lower corporation tax but it will still be, at 24 per cent, almost double the rate that Ireland offers. If the private sector is to play its part in the welfare revolution, then the coalition should move faster to relieve the fiendishly complex net of taxes and responsibilities that prevents employers from creating permanent new posts.

 

business@thenational.ae