Unlock the digestive of free editor
Roula Khalaf, the FT editor, chooses her favorite stories in this weekly newsletter.
If you are a new government desperately seeking money, then there may be some more attractive objectives than the British well -being system. The only point in the UK history that welfare expenses have been higher than in recent years have been times of severe economic difficulties-the early 1980s and 1990s recessions, the immediate consequences of the financial crisis and caused by the blocking of 2020. adequate, adequate ,.
Strap for reform then? It may not be simple enough to cut – nor to find durable savings.
The purpose of a good welfare system is to protect people from poverty and help them in a form of employment, education or training. But a decade and a half of reform efforts have managed to offer something that largely underestimates compared to 2007 in terms of meeting these goals – while costing more as part of GDP.
Even before the economic circumstances of the United Kingdom, Donald Trump’s second pistachio was exacerbated by NATO demanding an increase in defense spending, Liz Kendall, the UK Welfare Secretary, had a warning of Keir Starmer’s cabinet. Without major changes, its department’s expenses will “eat” its colleagues’ budgets. There are real opportunities to spend less money and get better results, but only if it avoids the mistakes of its predecessors in the role.
Part of the story of how and why the UK welfare system has become an expensive failure is that successive governments have prioritized the provision of title cuttings in the cost of changing the way. One aspect of this continuous failure is the smallest discussed and only the largest line in the welfare system – the state pension.
Triple blocking, which protects the increase in anti -inflation pension and increases in average profits (with a floor of 2.5 percent per year) is the cheapest solution for a double problem: the UK state pension is lower than that of comparable countries and the destruction of the defined benefit pension schemes means that the state receives a more severe pension.
By using this mechanism to gradually increase the value of the pension over time, ministers in the last government avoided any single, forced, significant increase. But now the mechanism risks becoming an ever -increasing obligation as it becomes politically more difficult and harder to get out of.
The amount someone gets if they lose their work in the UK is too low – mostly someone who claims the permitting non -sector can claim is £ 4,700 per year. Compared to 2010 or 2015, the number of people claiming it has not increased significantly. “The Demand Number” is higher because universal loan counts individuals than families as under the old system.
Increasing the benefit invoice has been driven instead by increasing the number of people who claim health -related benefits, many of them young. And this is the product in a part of a simple fact: that the upper limit that one gets into health -related benefits can still be far from generous, but is much more than the benefit of unemployment.
Promotions and consequences are visible. As Kendall himself has noticed, the obsession with the use of the stick (stronger adaptability and best controls) as the only way to prevent congestion has succeeded. But the behavior change has extinguished people in a list of the claimant that they are much more likely to never leave.
It is true that some of the growth of people who claim health -related benefits is the result of true need. And the increase in the age of the state pension (which makes sense given that most of us are living and working longer) has created a new requirement: those two or three years under the new age of state pension they claim because of physical illness.
But there is little reason to believe that raising people of work age now classified as long -term illness is the product of a health problem by uniquely affecting the UK (in other developed economies, levels of health -related benefits have fallen or remain flat) than the product of a poorly designed system.
There is a significant and sustainable savings of the future: moving people in a benefit that allows them to look for-even part-time work without losing, plus finding courses for young people instead of overseeing an increasing number of “NEET” under 25 (those who are not in education, employment or training). In the long run, this can reduce the increasing benefits of the UK.
An additional problem is that the fiscal guards, the budget responsibility office, tends to believe only in secured savings by cutting rights – although in practice this approach has been tested in destruction.
The actual mess is in itself the product of a desire to prioritize the title savings over the design of a well thought out benefit system. This has not even produced.
Work has a real opportunity to build a cheaper and better benefit system by the end of this decade. It is unlikely to reach that point if it ends up boxing in the same hunt for illusory savings that have characterized the last past. But a better result requires the Kendall and Treasury department to agree with a difficult fact: this approach to one of the most complex problems of the UK has not worked. Let’s not ask for the same more.
Stephen.bush@ft.com
