Welfare reform: what should the Lib Dems do?

by Stephen Tall on April 8, 2013

This much I think I know… Cuts to the overall welfare budget are inescapable: it accounts for too large a chunk of of public spending for it to be immune — certainly if the NHS, schools and overseas aid budgets are to be protected at the same time as spending is reduced.

These cuts would be happening whichever party was in power, though doubtless the precise methods would differ. The IFS’s verdict in 2010 on what they termed Labour’s “fiscal drift” was stark: “By the eve of the financial crisis … the UK [had] one of the largest structural budget deficits in the developed world.”

Lib Dem ministers have accepted the Coalition’s reforms: here’s pensions minister Steve Webb last week, for example. Behind the scenes, the party has fought off attempts by Tory ministers to go further, for example ending housing benefit for under-25s or limiting child benefit to the first two children. Even the 1% benefits uprating bill was at least preferable to the Tories’ instinct to freeze it.

The party’s main focus has been on raising the threshold of income tax to benefit low- and middle-income earners. Popular and right thought his is, by its very nature it benefits only those with income. To be fair, the party has also championed the Coalition’s Youth Contract and the major boost to apprenticeships. Steve Webb has also worked hard on the universal credit to try and ensure people are always better off in work than on benefits; while also introducing the ‘triple-lock’ to protect pensioners’ incomes. Meanwhile Paul Burstow, Norman Lamb and others have tried to ensure social care is made affordable for all in the future. In addition, Nick Clegg has put forward a view, with support from party members, to means-test some benefits for wealthy pensioners.

However, Lib Dem party policy is silent on the Coalition’s controversial reform package. You can see a summary of the party’s current policies here.

Many of us (though not all, by any means) have accepted much of the Coalition’s policies to date: partly because we think cuts are inevitable; and partly because we know the cuts would have been so much worse if the Lib Dems had not been able to restrain the Tories.

With public spending restraint looking like it will continue for at least the next five years (and quite possibly beyond) all parties are going to be under increasing pressure to say what we would do. Lots of us argue the ‘bedroom tax’ is the wrong kind of cut. There are areas of spending we would probably prefer to cut — the out-dated and expensive Trident nuclear weapons system is a case in point. There are new taxes we would feel comfortable introducing, such as Vince Cable’s mansion tax. Some, like Tim Farron, will argue for restoring the 50% level of top-rate tax for those earning more than £150k.

We cannot write the manifesto yet: we do not know what state the economy will be in come 2015. But we as a party do need to start saying what we would do on such a charged issue as welfare. What would you do?

* Stephen Tall is Co-Editor of Liberal Democrat Voice, a Research Associate for the liberal think-tank CentreForum, and also writes at his own site, The Collected Stephen Tall.