The new ‘champion of progressive ideals’?
Ruth Lister, Fran Bennett
PRESCRIPTION
Cameron’s ‘progressive vision’ centres on ‘a country that is fairer and where opportunity is more equal’ (Cameron, 2009b). While he concedes that such a vision is shared by those of other political persuasions, it has nevertheless fallen to the Conservatives ‘to champion a vision of the good society. Our aim is nothing short of being as radical in social reform as Margaret Thatcher was in economic reform’ (Cameron, 2008a, 1). The creation of the ‘big society’ will require ‘a culture of social responsibility throughout our country’ (Cameron, 2008a, 16). Unlike New Labour’s mantra of ‘rights and responsibilities’, any explicit reference to rights to balance the emphasis on responsibility is conspicuous for its absence in Conservative pronouncements.
Instead of big government, Cameron looks to ‘big society’ (Cameron, 2009b) and in particular ‘the modern mechanisms of civil society’ to tackle ‘the causes of poverty and not just the symptoms’. The state’s role will be ‘to act as an instrument for helping to create a strong society’ (Cameron, 2008b). Few would deny the important role that the institutions of civil society can play as part of any anti-poverty strategy. Indeed, the voluntary sector already plays an important role as partners in Labour’s child poverty strategy. But, as many of those working in the voluntary sector would argue, the sector provides a complement rather than an alternative to the state. It is difficult to see how civil society could have achieved the kind of reduction in child poverty achieved by the Labour government or could be more successful than the state in reducing inequality.
Detailed policy development is very much work in progress. Some of the policies that have been agreed, particularly those designed to promote marriage, are presented as being ‘about the message more than the money’ (Cameron, 2010a). Cameron talks frequently about the need to change ‘the signals’ that policy sends out (for instance Cameron, 2010b), attracting the label of ‘semaphore politician’ (Rentoul, 2010). And George Osborne has teamed up with the exponent of ‘nudge’, Richard Thaler, to signal a commitment to deploy the insights of behavioural economics in government (Osborne and Thaler, 2010). Specific policy proposals also have to be placed in the context of the commitment to huge cuts in public spending (even if the timing of such cuts is unclear), which will undermine any anti-poverty strategy through their impact on public services and jobs.
Promoting marriage and the family
The web-published draft manifesto chapter on ‘Mending our broken society’, in a section on ‘making Britain more family-friendly’, covers reform of the tax and benefit system, early intervention, and balancing lives (as well as other sections on education, crime and ‘the big society’, which we do not discuss here). It argues that strengthening families will enable children to flourish and ‘will also increase social mobility, and play an important part in helping us to work towards our aspiration of ending child poverty by 2020’.
It also condemns Labour for its ‘narrow child-centred approach’, which ‘ignores the importance of strengthening the relationships between all family members’ (Conservative Party, 2010a, 12). In fact, Labour has itself emphasised the need to ‘Think Family’ in its social exclusion strategy. From a slightly different perspective we and others have argued against divorcing child poverty from that experienced by parents, particularly mothers (Women’s Budget Group, 2005).
The central proposals designed to combat the ills of family breakdown are to recognise marriage in the (income) tax system and to abolish the ‘couple penalty’ in Working Tax Credit. These policies draw on the ideas of the Centre for Social Justice, which in turn seem to rely heavily on the analysis of Christian Action, Research and Education (CARE) (Beighton and Draper, 2007; Draper and Beighton, 2008).
Recognising marriage in the (income) tax system
In their draft manifesto, the Conservatives promise to ‘recognise marriage and civil partnerships in the tax system in the next Parliament’ (Conservative Party, 2010, 14). As civil partnerships are rarely mentioned in many analyses on which this proposal draws, the Conservatives should be commended for including them. Apart from that, this is not a new policy for the Tories; the 2001 (though not the 2005) manifesto contained one variant (Kirby, 2009), and another was recommended by Lord Forsyth’s Tax Reform Commission for the party in 2006. This is a recurring theme, therefore – despite the former chancellor Kenneth Clarke branding a tax allowance for married couples ‘an anomaly’, and the fact that a Conservative government was the first to start reducing the value of the married couple’s allowance in the 1990s (Kirby, 2009).
The mechanism by which marriage would be recognised will not be clarified until the actual manifesto is published. As Leonard Beighton and Don Draper point out, this could be done through a married couple’s allowance for all married couples, or a transferable personal (tax) allowance largely for those with one earner (Beighton and Draper, 2007, 15). Recent debates have not always distinguished between these. This should not be surprising, since the rhetorical focus on the family suggests that any privileging of marriage might be limited to those with children (at least initially, if resources are tight); and analysis of the problem frequently conflates the tax treatment of married couples in general with that of one-earner (married) couples with children, under the banner of ‘spousal obligations’ or ‘a taxpayer’s family responsibilities’ (e.g. Draper and Beighton, 2008, 7).
This position draws on the traditional model of a one-earner (usually male breadwinner) family, rather than on marriage as such, to argue that it is unfair for a single-earner couple to have only one tax allowance. But as Robert Chote and others argue: ‘this can be viewed as unfair, but only if the income tax system is viewed from the point of view of the couple: if it is believed that income tax should reflect only the individual’s circumstances, then there is no unfairness in the current arrangement’ (Chote et al, 2007).
The Centre for Social Justice has suggested a Transferable Tax Allowance (TTA) in order to give a signal about the importance of marriage and the ‘practical benefit of supporting and recognising those spouses playing vital, unpaid caring roles’ (Centre for Social Justice, 2009, 8). Some versions of the TTA, or the first (cheaper) phases of its introduction, involve only couples with children, or young children. But Duncan Smith has also said that a TTA for all married couples would make it easier for one partner to ‘do voluntary work in the community, look after elderly or disabled members or manage a home in a way that enables partners and families to have more undivided time together’ (McSmith, 2009).For all married couples, the CSJ cites a cost of £3.2bn; for those with dependent children or getting carer’s allowance only, the cost would be £1.5bn; and for those with children under 6 or under 3, £0.9bn or £0.6bn respectively. A TTA equal to the existing single person’s allowance for married couples and civil partners with children under 5 is costed at £0.8bn, and with children under 16 at £1.6bn (Brewer, Browne and Joyce, 2010).
Criticisms of the proposals have involved several themes. First is the (lack of) affordability of such a tax break at a time of tight resources. (David Davis MP, for example, urged the party to ‘balance the books’ first, as jobless couples will not benefit (Davis, 2010).) This concern lay behind Cameron’s recent ‘flip-flopping’ on the issue, and has resulted in the suggestions for phasing in any changes. As Philip Stephens argues, reducing the debt burden may be popular, but ‘cutting public services to finance lower taxes would be a lot less palatable for voters’, especially if the main beneficiaries were well off (Stephens, 2010). He describes the proposals on marriage and inheritance tax as ‘at best perplexing’. The Economist (6.02.2010) goes further, calling a tax break for married couples ‘an extraordinary proposal’ in the current situation. This is another reason for paring down the proposal to focus on couples with children.
Secondly, it is unclear whether individual partnering (and childbearing) would respond to tax incentives of this size and nature (Brewer, Browne and Joyce, 2010). Proponents’ reaction has been twofold: on the one hand, arguing that small amounts of money mean more in the communities where (lack of) marriage really matters (CSJ, 2009); and on the other, emphasising the ‘signal’ that they send in favour of marriage, rather than their behavioural impact. But there is evidence that ‘second earners’ in couples (usually women) do respond to (dis)incentives, and joint taxation may discourage such earners from re-entering the labour market and/or from earning more; if they have transferred their tax allowance to their spouse, a potential second earner will find their earnings taxed from the first pound (Brewer, Browne and Joyce, 2010). Based on a study of nine European countries, Francesco Figari and others argue that, where it exists, joint taxation does not favour the work incentives of the lower income partner (usually female) (Figari et al, forthcoming). As escape from poverty for couples often involves a second earner, this seems to sit oddly with a concern for child poverty. It also appears to contradict the Conservatives’ concern with incentives.
Thirdly, there have been criticisms of the distributional impact of the proposal. These have in part focused on income. Twice the proportion of children in lone-parent families compared to those in couple families live in poverty (House of Commons Hansard, 22.02.2010, cols 237-8W). Tax allowances by their nature do not affect those on the lowest incomes, who are not liable for income tax; and Beighton and Draper (2007) admit that typical couples on both housing and council tax benefit would gain only 15 per cent of the value of any TTA, because of benefit withdrawal. In addition, if it is only single earner couples with children who benefit, many will be among the better off – though not on the highest incomes, as those couples tend to have two earners (Brewer, Browne and Joyce, 2010). The Institute for Fiscal Studies estimates that the same amount (£800m) spent on a TTA for married couples and civil partners with children under 5 would take under 10,000 children out of poverty, compared with some 100,000 for an increase in Working Tax Credit (or over 130,000 for an increase in Child Tax Credit) (Brewer, Browne and Joyce, 2010) (3).
Various objections in terms of family structure have been raised. Cohabiting heterosexual couples would be excluded by design (though the abolition of the couple penalty in tax credits would benefit them – see below). Yet cohabiting couples are likely to have lower incomes, with a higher proportion of children with unmarried parents living in poverty (Chote et al, 2007, 229). Partners who remarry having left their original spouse will benefit, whereas abandoned partners will not (Toynbee, 2010). David Davis MP has argued that widows’ pensions must be altered to make up for the loss of the allowance, and that ‘it should be clear that we do not intend to [reinforce marriage] in a way that compounds the misfortune of the widow, the divorcee, the abandoned mother’ (Davis, 2010).
These may be thought to be fairly fundamental objections. In addition, as a TTA would be paid to the working partner, rather than direct to the partner at home, there would be no guarantee that the person at home would receive the benefit of it. As we argued in response to a previous Conservative Green Paper on personal taxation (Lister and Bennett, 1986), this seems a peculiarly inappropriate way to provide support to those caring at home for children or disabled people, or doing voluntary work in the community; and it was rejected by the Conservatives in the 1990 reform which introduced independent taxation. As Robert Chote and others point out, such extra support to the wage-earner would increase intra-household inequalities (Chote et al, 2007, 229). Some commentators have also noted that a TTA for married couples would signify a move away from independent taxation towards a jointly assessed system such as tax credits (Brewer, Browne and Joyce, 2010). Leaving aside any other considerations, this would seem a puzzling direction to take at a time when self-provision is increasingly being expected of all individual adults.
Reducing the ‘couple penalty’
The other major proposal to combat family breakdown is to ‘end the couple penalty in the tax credit system’ (Conservative Party, 2010, 14). This appears to be limited to Working Tax Credit (WTC). As Chote and others point out, couples without children getting WTC do have a higher basic credit than single childless people (Chote et al, 2007, 226). But where couples with children are concerned, their WTC is calculated using the same basic credit as for lone parents. This has been the case for families with children ever since the first subsidy for low-income families with a wage-earner, family income supplement, was introduced in 1971 by a Conservative government, and survived the change to family credit (under the Conservatives), then working families tax credit, and (since 2003) WTC. It is only recently that this has begun to be labelled a ‘couple penalty’ (with the blame placed on Labour). Nevertheless, it is now a common complaint among those who believe that the current tax/benefits system in the UK is skewed against couples – in particular against single-earner couples, as couples with two earners are much less likely to qualify for WTC (4). The concern not to deter couples from ‘specialisation of roles’ is evident in the section on family law in the CSJ’s Green Paper on the Family (2010, 35).
This debate, like that on taxation, is often quite confused. The ‘couple penalty’ does not mean that couples receive less WTC than lone parents; and Gingerbread points out that there is a range of relativities between the rates for couples and lone parents in different benefits/tax credits (Gingerbread, 2009). Moreover, couples can arguably qualify for the extra element for working thirty hours or more per week more easily. Many references to the ‘couple penalty’ in recent discussions seem to refer to the fact that if a man and a woman (or two same sex civil partners) with or without children decide to live together on means-tested benefits rather than apart, their resources and needs will be aggregated, and their joint benefit rate will be lower than twice the single person’s rate (e.g. CSJ, 2009, 3 and 4). But the aggregation of resources and needs will not be changed unless means testing is abolished (or individualised); and lower benefit rates for couples will continue so long as the economies of scale of living as a couple are taken into account. To change either of these would clearly be very costly and the Conservatives are not proposing to do so. To individualise benefits would also run counter to the direction of change which they propose for the tax and tax credit systems.
The specific change, as recommended by the Centre for Social Justice, is that the basic credit for couples in WTC should have the same relationship to the credit for lone parents as the ratio that currently exists for income support rates (CSJ, 2010). To the Conservatives’ credit, it seems that this would be done by increasing the amount for couples, rather than reducing lone parents’ WTC. To implement this policy fully is said to cost some £3bn, give 1.8 million couples over £30 per week on average, and lift 300,000 children out of poverty (CSJ, 2010). Unlike the TTA for married couples, it would benefit married and cohabiting couples alike; in this context, it has been argued by supporters of the change that cohabitation is a step on the way to marriage.
The Conservatives’ draft manifesto makes clear that this would be financed by their welfare reform plans. So it would not be introduced until funding flows through from the entry of 600,000 incapacity benefit claimants into work as a result of these reforms. However, the Centre for Social Justice has suggested introducing it in stages (CSJ, 2010).
The policy move is intended to reduce or remove possible financial penalties when a lone parent starts to cohabit. The other apparent motivation is that the official low income statistics assume that larger households need more income to achieve a given standard of living – so having identical basic credits for lone parents and couples with children means that couples need to earn more to escape from poverty. Gingerbread notes that the amount for lone parents may be too high in WTC relative to that for couples (Gingerbread, 2010). On the other hand, Bruce Stafford and Simon Roberts note that couples usually have higher incomes (Stafford and Roberts, 2009, 6); and, as Robert Chote and others point out, the official poverty figures take no account of the benefit that couples may derive from ‘home production’ (by the partner at home) and their lesser need for paid childcare (Chote et al, 2007, 222).
As with the proposal to privilege marriage (or single earner couples) within the income tax system, it is difficult to find strong evidence that partnering behaviour would be affected by such a policy change. A recent review for the government of the impact of financial incentives in welfare systems (including tax credits) on family structure found that ‘on balance the reviewed literature shows that there is no consistent and robust evidence to support claims that the welfare system has a significant impact upon family structure’. Instead ‘factors other than the welfare system have a key role in influencing demographic behaviour’ (Stafford and Roberts, 2009, 5-6).
The other potential impact imputed to the ‘couple penalty’ is that it may affect how people report their living arrangements, rather than those living arrangements themselves. In one policy document, the Conservatives cite the Institute for Fiscal Studies’ finding that ‘there are 200,000 more lone parents claiming tax credits than actually exist’ as ‘strong evidence that people are responding to these perverse incentives’ (Conservative Party, 2008b, 41). However, it was not clear from the IFS study to what extent their finding was due to cohabiting adults deliberately claiming as lone parents (Brewer and Shaw, 2006).
As with the TTA for married couples, there are also concerns about the impact on work incentives. According to the IFS, extra WTC for couples would increase the incentive to have one earner, but reduce the incentive for the second earner to work, and for both partners to earn more (Chote et al, 2007, 238; Brewer, Browne and Joyce, 2010). Lisa Harker, in her report for the government, instead proposed an additional WTC premium for second earners in couples (Harker, 2006).
Whatever is decided about the specific ‘couple penalty’ in tax credits, it is clear that more generally the ‘cohabitation rule’ in means-tested benefits imposes joint assessment on adults when they decide to live together, and it would not be surprising if some people resisted this because they wanted to retain their independence. Family structure is less of an issue the more that benefits can be non-means-tested, and so more easily individualised (but this is not on the Conservatives’ agenda). Child benefit, being both universal and focused on the child, is not implicated in this problem – one reason to welcome the Conservatives’ promise to retain it. In addition, if there is concern about single earner couples with children, measures which would help non-earning partners (usually still women) themselves to enter paid work and/or gain access to other income should be seriously considered.
Supporting parenting
Early intervention and parenting support will be funded from a single budget overseen by a new Early Years Support Team within the Department for Children, Schools and Families. The Conservatives are now committed to keeping Sure Start. But they ‘will take Sure Start back to its original purpose of early intervention, increase its focus on the neediest families, and better involve organisations with a track record in supporting families’ (Conservative Party, 2010a, 14). These organisations will, Cameron explains, be contracted ‘to run children’s centres and reach out to dysfunctional and disadvantaged local families’ (Cameron, 2010a). At the same time the Sure Start outreach budget will be diverted to funding more Sure Start health visitors in order to guarantee support for all parents ‘before and after birth until their child starts school’ (Conservative Party, 2010a, 14).
The commitment to retain Sure Start is welcome, as is the reorientation towards its original focus on early intervention, as Sure Start has increasingly become an adjunct to employment policies. However, while it might sound progressive ‘to increase its focus on the neediest families’, there is a danger that the service will then become residualised and stigmatised (who wants to be branded ‘dysfunctional’?) and therefore less attractive to the very parents it is aimed at. And the issue of user-involvement, which was so important in empowering parents in the early Sure Start Local Programmes, is ignored. Moreover, there is an apparent contradiction between the aspiration to ‘reach out to dysfunctional and disadvantaged’ families and the plan to divert the current outreach budget.
The other main way in which parents will be supported is through helping them to balance paid work and care. Little is said about childcare other than support for ‘the provision of free nursery care for pre-school children … provided by a diverse range of providers’ and a review of how the childcare industry is regulated (Conservative Party, 2010a, 15). In particular, the document does not address the affordability gap identified by organisations such as the Daycare Trust.
The draft manifesto also promises to build on Labour policy by extending ‘the right to request flexible working to every parent with a child under the age of eighteen’ and by introducing ‘a new system of flexible parental leave which lets parents share maternity leave between them, including taking some of the leave simultaneously’ (Conservative Party, 2010, 16). These are positive developments. However, if the aim is to encourage fathers to ‘share the responsibilities of caring for a new baby’ (Cameron, 2010a), there needs to be a firm commitment to adequate payment and a willingness to consider the Nordic model of reserving some of the leave for fathers as their individual entitlement.
Welfare reform
The Conservative Party has published two key policy documents on welfare reform in the past couple of years: Work for Welfare:
Not surprisingly, given the Conservatives’ diagnosis, the central theme of these documents is reducing welfare dependency. It is assumed that reducing dependency = reducing poverty (even though it is acknowledged that paid work is not an automatic route out of poverty). The same assumption drove US welfare reform (and also, albeit to a lesser extent, New Labour’s welfare reform agenda). Yet the problem of US poverty has not been solved as a result of ‘a sharp decline in the welfare rolls’ because ‘welfare policy purports to address poverty and inequality but refuses to deal with the structural causes’ (Handler and Hasenfeld, 2007, 7, 4).
Welfare to work
In place of New Labour’s welfare reform mantra of ‘work for those who can; security for those who cannot’, the Conservatives offer ‘Respect for those who cannot work’ (a very small group of disabled people) and ‘Employment for those who can’ (Conservative Party, 2008a, 8). The latter aim will be operationalised through: a single integrated welfare-to-work programme, contracted out to ‘specialist employment support providers’; a rapid assessment of work capability and readiness; and intensified conditionality (Conservative Party, 2008a, 2009).
Intensified conditionality will be the price paid by those classified as unemployed (including many existing recipients of incapacity benefit whose benefit will be cut as a result) for earlier, personalised, support for finding work – ‘straight away for those with serious barriers to work and at six months for those under 25’ (Conservative Party, 2009, 6). Most controversially, it proposes a workfare scheme, which goes beyond Labour’s plans:
Once the recession has ended, it is our intention that anyone who has been through the new system without finding work and has claimed the Jobseeker’s Allowance for longer than two of the previous three years will be required to join a mandatory long-term community work scheme as a condition of continuing to receive benefits support. There will also be sanctions if people turn down reasonable job offers. (Conservative Party, 2009, 12)
Welfare to work provision will be contracted out to private and voluntary sector providers at an earlier stage of a benefit claim than under current policy. Differential payments to providers will reflect the different levels of help likely to be needed by individuals and will only be made on delivery of ‘sustained employment for a period well beyond the current 26 weeks’ (Conservative Party, 2009, 31).
The plan is presented as ‘a completely different approach to Labour’s piecemeal and disjointed policies’ and as ‘a radical departure’ (Conservative Party, 2009, 9). In fact, it does nothing to break out of the policy paradigm established by Labour; it simply takes it further and faster in what has become a process of policy leapfrog. This is hardly surprising given that both parties have been advised by David (now Lord) Freud. While the idea of a single, integrated programme has been welcomed, the loss of some specific programmes, tailored to the needs of particular groups, has been criticised and the further moves down the path of conditionality and associated sanctions and of contracting-out have raised widespread concern (5).
Whilst the evidence on the impact of benefit sanctions on behaviour is ambiguous, there is clearer evidence of the hardship they create, including for people facing multiple barriers (Griggs and Bennett, 2009). For all the warm words about tackling poverty, the approach is essentially punitive and betrays classic signs of ‘blaming the victim’ without addressing underlying structural causes and barriers. An example is the identification of the ‘perpetual jobseeker’ who is allowed ‘to cycle in and out of benefits’ (Conservative Party, 2009, 12). Although this is described as a ‘structural problem’, it is represented as a problem of individuals who attempt to ‘avoid the escalating conditionality requirements expected of longer term claimants’. The solution will be that ‘people will no longer be allowed to cycle through the system. Their continued entitlement to benefits will be contingent on their efforts to find work’ and will be subject to the workfare conditions outlined earlier. In contrast, a Joseph Rowntree Foundation programme which studied recurrent poverty and the ‘low-pay/no-pay cycle’ concludes:
People’s personal characteristics have some impact on the risks of recurrent poverty but structural labour market factors remain the strongest influence, implying that this is where the focus of efforts should lie. Otherwise, the risk remains that welfare-to-work strategies will not provide people and their families with sustainable routes out of poverty. (Goulden, 2010, 11)
An overview of the international evidence on contracting out employment services ‘highlights substantial problems’. It found only ‘limited evidence’ of ‘efficiency gains or cost savings’ and ‘a lack of evidence’ that ‘it offers any better solution’ to the challenge of providing effective support for the ‘hardest to help’ (Wright, 2008, 7). The problem of ‘creaming’ and ‘parking’ jobseekers according to their likelihood of finding work, identified in the study, is addressed by the Conservatives’ proposals. However, doubts have been expressed about how workable their solution is (Financial Times, 6.10.2009). The proposal that payment by results should be based on employment sustained beyond the current twenty-six weeks is positive, but is not in itself sufficient to address the key issue of sustainability and progression in employment.
Reducing disincentives
So far, Conservative social security policy for those out of work is limited to welfare to work. A broader agenda is set out in the CSJ’s Dynamic Benefits report. This, correctly, observes that ‘to date, there has been too little debate about what the benefits system is trying to achieve’. Its own narrow view is that ‘benefits should relieve poverty, while supporting work and independence, in a fair and affordable way’ (Economic Dependency Working Group, 2009, 23, 148). This ignores the multiple functions of social security, which go beyond the relief of poverty to include, for example, redistribution over the life-course and economic security. Having accepted the framework of means-testing, the report’s main preoccupation is with how to reduce the disincentives that means-testing creates. Dynamic Benefits is the latest in a line of schemes which pursue the holy grail of tax-means-tested-benefit integration. Within that narrow paradigm, one of its strengths is to pay proper attention to the disregards applied to casual earnings while on benefit and to the disincentives to take paid work faced by many benefit claimants’ partners.
While Cameron’s promise to study the report ‘very carefully’ has been interpreted as code for ‘don’t expect anything in the near future’ (Morris, 2009), it is quite likely that some of its recommendations would gradually be taken on board by a Conservative government in the same way that some of the proposals made by the Commission for Social Justice were by Labour. Cameron has already asked the shadow Chancellor to work with Theresa May, Shadow Work and Pensions Secretary, and Duncan Smith to develop a solution to the problem of disincentives. More fundamentally, although the Conservatives have been very critical of New Labour’s increased reliance on means-testing (particularly because of its damaging impact on incentives – Conservative Party, 2010c), there is nothing to indicate that they will take measures to reverse this trend, which they themselves set in motion when last in power.
Cuts
Two specific cuts have been mooted in the income maintenance system. These involve tax credits and asset-based welfare and affect families with children (though they are not mentioned in the draft manifesto section on families).
Having for some time appeared critical of tax credits the Conservatives are now pledged to support them, although Cameron has also said that ‘we have surely learnt that it is not enough merely to keep funding more and more generous tax credits’ (Cameron, 2010a). In a speech on ideas for cuts in public spending, George Osborne repeated the proposal made at the 2009 party conference that Child Tax Credit (
There is a degree of confusion around the plans to cut
Osborne also proposed in his speech in January to remove the Child Trust Fund (CTF) from the ‘richest two-thirds’ of families. The CTF is an asset-based welfare scheme introduced by Labour, giving all families an asset for each child, but adding payments for poorer families (and, from April, disabled children as well). Osborne’s description of those affected may be seen as somewhat of a misnomer, since the cut involves anyone not on certain means-tested benefits and with income of over £16,040 per year (6). This will save an estimated £300m, and is clearly a fundamental change to the nature of the scheme, which will lose its ‘progressive universalism’ and become just another means-tested system.
These two cuts are the first ‘in-year’ savings for 2010/11 that the Tories have pledged – other than uncosted cuts in programmes that ‘represent poor value for money’, and ‘excess spending’ on consultants etc. It is notable that they affect only families with children. Moreover, whilst the proposals to recognise marriage in the income tax system, and to remove the ‘couple penalty’ in Working Tax Credit, would be phased in – with no definite dates as yet, apart from the commitment to introduce a marriage tax break during the next parliament – these cuts for families would be implemented immediately. This is hardly consistent with Cameron’s promise of ‘the most family-friendly manifesto that any party has produced in British political history’ (Cameron, 2010c); and it would mean that it is families with children who would be bearing the cost of reducing the deficit straight away.
The CTF cut would affect many families on lower incomes, including those married and traditional couples who are intended to be helped by other policies. So a modest asset is to be withdrawn from families on low incomes, whilst simultaneously the proposals on inheritance tax would help some of the very wealthiest estates to escape paying tax on assets worth up to £1m (or more for couples); it is hard to think of a more dramatic way of shifting ‘asset-based welfare’ from one end of the distributional scale to the other.
The less than universal nature of CTCs was of course introduced initially by Labour, which restricted entitlement to the full family element to those with incomes of £50,000 or lower; Theresa May MP also describes tax credits as ‘designed to help families on low incomes’ (May, 2010). Although the cuts in
The only other clues regarding possible changes in income maintenance policy are alarming to say the least. The first was provided by Theresa May in an interview with the Financial Times (Barker and Timmins, 2009). Apart from endorsement of Labour’s plan to restore the earnings link with pensions by 2015 (confirmed as a pledge by Cameron at the party’s Spring conference), she ‘refused five opportunities to guarantee that benefits and pensions would still increase with inflation under a Tory government’. This takes us back to the battles of the 1980s around the up-rating of a number of benefits.
The other clue potentially takes us back to the Poor Law. Last year, kite-flying in the media indicated that the Tories were considering handing control of welfare benefit levels and eligibility criteria to local government (Wintour, 2009; Helm, 2009). In a speech to the New Local Government Network, Phillip Hammond, Shadow Chief Secretary to the Treasury, asked whether a Conservative government would be able to persuade people that ‘they would rather see the management of workless benefits in the hands of a local authority than in the hands of a national government setting standards nationally?’ (Phibbs, 2010). Given local government’s record in the administration of Housing Benefit, the answer from recipients is unlikely to be in the affirmative. Indeed, the proposed reform is unlikely to be cost-effective from an administrative point of view. More importantly, the destruction of the national safety-net would be likely to lead to a race to the bottom, as councils try to save money and discourage those out of work from living in their areas, particularly at a time of massive budget cuts (7). Experience in the US, which has inspired the idea, is not promising.
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