Promising news on welfare spending as major reforms set for go-ahead

On Friday I mentioned how the old Liberal Democrat policy of integrating and simplifying the tax and benefits systems is getting a revival courtesy of Iain Duncan Smith. The former Conservative leader turned Work and Pensions Secretary has been arguing hard for the funds to introduce a simplified universal benefit that also is more generous than current rules to people in low-paid jobs. This would mean that people who currently find that taking a job makes them worse off, or only marginally better off, than being unemployed thanks to loss of benefits would lose less of their benefits and so not be trapped in a system that encourages them to stay out of work.

One of the risks of simplification is that, particularly in the current budgetary environment, it can be code for cuts. However, the BBC now reports:

Chancellor George Osborne has confirmed there will be a major overhaul of the benefits system with a new universal credit introduced…

The BBC’s political correspondent Robin Brant said the plans were probably the “most significant reform” of the coalition so far.

Some savings are already being made through restrictions in payments such housing benefit. But the overall cost to the government is initially expected to rise after the changes are brought in as people return to work and retain some financial assistance.

There are no specific details on how long it will take for the savings to be realised but it is likely to be 10-15 years, our correspondent added.

If that turns out to be correct – and the savings expected are long term ones from people finding work and moving up the job ladder rather than from short term cash cuts – this could not only be one of the government’s major achievements but also one that Liberal Democrats are happy to have contributed to, courtesy of Nick Clegg having been a key ally of Iain Duncan Smith in the internal debates over the policy. Certainly Steve Webb’s backing for the policies is a promising sign.

There may yet be devil in the detail and the overall state of the economy and the job market is crucial to the plans working. Views of IDS’s ability to manage detail well vary greatly, even amongst Conservatives and civil servants let alone political opponents. Some of the other changes introduced by IDS are also unlikely to grow in popularity with Liberal Democrats (particularly the changes to housing benefits).

However, the combination of universal benefit and the restoration of the link between pensions and earnings may yet rather surprisingly turn welfare into an area of strength rather than embarrassment for Liberal Democrats talking about what has been achieved by the coalition government.