The conference policy paper on “Mending the Safety Net” contains lots of good stuff on a wide range of welfare policy, even if I say so as a member of its working group. But, at Conference and beyond, I think it’s important not to get distracted from the big issue of the £13bn of cuts planned by the Conservatives. Reversing these – and indeed going further – is what will make the biggest difference to people’s lives, to UK inequality and even to the economy (and hopefully win a few votes in the process). Within this, here are three goals that the party should be fighting for.
Increasing working-age benefits in line with inflation – and ultimately earnings
George Osborne announced that most non-pensioner benefits would be frozen at their 2015 levels for 4 more years. Even before the Brexit vote, this was expected to be a massive drag on living standards. But inflation over the next few years is now expected to be higher than previously predicted – driven by rising import prices due to the weaker pound – and unemployment is predicted to rise too. This means the freeze will be even harsher than Osborne intended. And if the economy at any point needs a boost through fiscal policy, cutting the incomes of poorer households would be just about the worst policy you can think of, as The Economist recently noted.
So the party should be pressuring the new Chancellor to scrap the freeze and increase working-age benefits in line with inflation. But the policy paper goes further and argues that benefits should ultimately rise in line with average earnings – alongside a return to some form of housing cost link for Housing Benefit (soon to be part of UC). This would help ensure that when the economy and tax receipts are growing, everyone shares in that and inequality doesn’t widen. It may sound boring, but choices about benefit uprating in the long-term can compound to be more important than almost any other welfare or tax choice for poverty and inequality.
Avoiding the return of the tax credit cuts through Universal Credit
Another big part of the £13bn cuts was a slashing of the amount people can earn before their benefits start to be reduced. These tax credit cuts – averaging over£1,000 a year for 3 million families – were cancelled in the short term. But we can’t forget that they are still being rolled out as part of Universal Credit. UC itself is a good thing – 6 benefits rolled into 1, and created under the Coalition – but post-election it’s now less generous than the system it’s replacing. Lib Dems must continue to fight these cuts for parents and disabled people, which will both hold back living standards for years to come and reduce the incentive to work. The way UC is being slowly rolled out across the country in a postcode lottery (while sensible in itself) may even lend itself to sustained, aggressive campaigning. Why are new parents on low incomes in Lancaster & Morecambe, for example, now eligible for less basic support than identical claimants in most other parts of the country?
Our welfare paper also builds on this by calling for a new allowance in UC for second earners. At present, second earners can lose 65p in benefits for every £1 they earn. On top of childcare, taxes and other costs, this can mean it’s not worth working. A second earner work allowance would reduce this barrier to mothers (and fathers) working. The paper also calls for the work allowance to be increased whenever income tax or National Insurance allowances are increased in future, to ensure those tax cuts aren’t snatched back from poorer households through means-testing.
Stop child poverty rising
All these policies would be a great help for parents. But there’s more to be done to ensure no child’s development is held back by poverty. Another Conservative cut is to scrap the basic amount that goes to low income parents, regardless of the number of children: the Lib Dems would reverse this. What’s more, we would go further and increase this amount by an extra £5 per week.
Then there’s the limiting of support for families with more than 2 children: the policy group decided that it’s wrong to hold back support for a child based only on the number of siblings they have. Child poverty is currently set to rise under Theresa May, and the Lib Dem message must be that this is unacceptable and that there is an alternative.
These policies are costly but – although our paper includes some offsetting cuts such as ending the marriage tax allowance – Lib Dem policy has always been clear that we never signed up to Osborne’s tighter fiscal rule, which the new government has reportedly abandoned in any case.
Full or partial government U-turns on many of these policies are quite possible, and the Lib Dems would not be campaigning alone (the JRF’s new anti-poverty strategy has a lot of overlap with the above, for example). Each campaigning victory would make a big difference to millions of low and middle income families. And each defeat would work against the Tory attempt to appear “One Nation” and “driven not by the interests of the privileged few”, with poorer families’ incomes falling or stagnating due to their cuts.
So, that’s my plea for the above Lib Dem policies to be a priority, and to ensure that neither Lib Dem nor national welfare policy discussion get too distracted by shiny baubles or relatively minor issues. These are the overwhelming welfare challenges for this parliament, where big but sensible change is now distinctly achievable in Westminster, politically useful on the doorstep, and desperately needed in homes across the country.
The paper was accepted as party policy at Lib Dem conference, and an amendment about moving to a Negative Income Tax (one of the aforementioned ‘shiny baubles’) was defeated.