The events of the past few weeks have demonstrated both the ambitions and the weaknesses of the coalition Government as it attempts to cut the welfare bill. Most of the concerns expressed so far have been about the proposal to withdraw child benefit from high earners. While the Chancellor's suggested changes were clearly a mess - a poor policy [that attempted to conflate the largely individual-based tax system with the largely household-based benefits system] and poorly handled [announced at the Tory conference without cover of the Lib-Dems; sitting outwith the comprehensive spending programme; and attacking directly those in the hall ], a bigger mess is yet to come as it becomes clear that the government is engaged in a major exercise in social engineering through the levers of policy available to it. The Chancellor wants to set a cap on total benefits that would force families from high cost housing areas such as London, the South East and some other cities such as Edinburgh. The Culture Secretary has suggested that government will not fund parents to make the choice for large families.
The Conservatives have tried this kind social engineering before. The roots of Britain's present troubles can be argued to be as much a consequence of the Conservative approaches to industry, community and benefits in the 1980's as of the economic mismanagement and over-reliance on the financial sector of the last Labour Government. I am no expert on macro-economic issues in international trade, but I note other comments on the absence of an industrial infrastucture in the U.K. and the low level of British ownership of U.K. based companies [in contrast to the position in Germany, Japan, U.S.A. and others]. Rebuilding British capacity to export high value goods seems to be an absolute requirement of the Government's financial strategy. How can they possibly achieve that in five years?
What I did observe directly in the 1980's was the impact of the government's industrial policy. Shipbuilding towns became former shipbuilding towns. Steel towns became former steel towns. Pit villages became former pit villages. No work replaced the heavy industry that had been destroyed. But what about the workers let go from shipbuilding, coal and steel? They just increased the already high unemployment level that was a major political issue in those years. Government policy incentivised for both benefits staff and benefits recipients a shift from unemployment benefit to long-term sickness and invalidity benefits. The incentives worked and a post-industrial cohort moved from employment to unemployment to long-term sickness benefits dependency, sometimes in less than a year. And now they, their families and their neighbours are established in a culture as well as a process of benefits dependency. I was involved in a survey in one former mining village where we found a level of worklessness of 93%. What had been the solution to the problem of high unemployment levels quickly became a major problem in itself of benefits dependency, and the reluctance of the Labour government to even engage with that [as exemplified by the sacking of Frank Field for actually doing what he was asked to do and "thinking the unthinkable"] simply allowed the problem to become entrenched.
The big problem for George Osborne and Ian Duncan Smith is that the culture of dependency is now firmly established and has knowledge, skills and expertise beyond anything imagined by most policy makers. Some within that culture will relish the challenge as the government attempts to act against their interests. I recall one man who had been on invalidity for years with a 'bad back'. He explained that they were beginning to send claimants for tests that would determine whether they did indeed have a disabling condition. He outlined his plan. 'I am going to my GP to cry', he explained, 'I will tell him that I can't cope and don't want to go on. You see, they don't have any test for depression.' Similarly, those who receive benefits because of drug and alcohol dependency feel that they are safe. The government can shift eligibility thresholds and simplify benefits administration but I have little doubt that the research capacity and creativity of the dependency culture is smarter and more effective than almost anything the government can do to contain it. In this they are the precise equivalent of the financial sector. British governments try to control banks and other major financial institutions and the banks run rings around their plans. Similarly, the benefits culture will simply shift as required to continue to be eligible to receive public support. Worrying about what behaviours will become incentivised because of the changes in benefits eligibility is something that should be keeping politicians awake at night.
The government will have to be a lot more sophisticated and strategic in its approach to its change programme than we have seen in the inept announcement on child benefit. But it will also have to deal with the unfinished business from the 1980's of how to restore exporting industry, and what to do about all those communities that have lost the reason for their existence.
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