Political

An old Liberal Democrat policy rides again courtesy of Iain Duncan Smith

Unusual political times indeed courtesy of the front page of today’s Times. For a long time a central part of Liberal Democrat welfare policy was to integrate and simplify the tax and benefits system. The policy faded away from the party’s priorities, partly because the details were never that straightforward; for example, how do you integrate a system based on weekly payments and assessments (benefits) with another one based on monthly and annual payments and assessments (tax, particularly income tax and PAYE)?

A large chunk of that policy is now very much back on the political agenda, as ConservativeHome reports:

According to the Times, [George Osborne and Iain Duncan Smith have] now reached a settlement, which marks a “considerable victory” for Duncan Smith –

“Millions of welfare claimants will have their benefits scrapped and replaced with one “universal credit” under a ground-breaking deal secured by Iain Duncan Smith.

“Housing benefit, income support, incapacity benefit and dozens of other payments are set to go after the Work and Pensions Secretary won a months-long dispute with George Osborne, the Chancellor, over whether the reforms were affordable.

“The new system will carry a guarantee that anyone in work will be better off than someone on the dole. Claimants will be allowed to keep more of their benefits when they take a job or increase their hours.”

The plan isn’t finalised: “Details under discussion include how quickly the benefit would be withdrawn when a claimant finds work” …  The Times points out that “Mr Duncan Smith will be allowed to claim up front “a large chunk” of the expected £9 billion of savings which he predicts can be made every year from lower administration costs and reduced fraud.”

Two changes have made this sort of simplification and integration possible in a way that was not previously. The changing taxation IT systems mean that it is moving towards being a system that alters payments or liabilities at a pace which matches that of benefits. The growth too of tax credits means there is a part of the tax system that can more easily be integrated with the benefits system than was the case when this sort of policy was a regular feature in Liberal Democrat speeches.

However, it does all depend on IT systems working and administration savings really being made. Moreover, as Alex Wilcock pointed out to me, the plans also look to require either a substantial increase in benefit for people able to find work or a sharp cut for those unable to work.

The combination of Conservatives and budget deficit means the latter is looking much more likely, though we will have to wait until the details come out to know for sure.

UPDATE: The Wall Street Journal’s Iain Martin credits Nick Clegg with a key role in ensuring that the welfare budget is reformed rather than simply cut. Hat-tip: Olly Grender.

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