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Opinion piece by Rt
Hon Iain Duncan
14 August 2011
Compassion: A vision for welfare that frees rather
than traps the poor
given to the Maxim Institute Annual
Sir John Graham Lecture, 22 July 2011.
pleasure to be here in Auckland today, and a privilege to be
speaking at the Annual Sir John Graham Lecture.
that Sir John was not just an outstanding leader on the rugby
also an outstanding leader off it in the pursuit of a freer
and fairer society.
the achievement of a better society that is the topic of my
lecture tonight, and I am immensely grateful to the Maxim
Institute – on whose board John served for many years –
who have been so generous in arranging for me to be here.
Centre for Social Justice – the think tank I set up back in
2004 – has had a close relationship with Maxim going back a
number of years.
that time we have both learnt a great deal from one another
about the importance of basing our work on the fundamental
principles of social justice.
a common vision – a vision of a freer, fairer and more
society of the second chance, where everyone has the
opportunity to be renewed and nobody is written off.
society where responsibility – for yourself, your family,
and your community – is seen as a valuable commodity once
I want to set the UK’s present austerity programme in
context, to show how it is not enough to just squeeze budgets
for a few years, and that we need to deal with the causes of
the crisis if we are to effect long term change.
Monday I am making a second speech in Wellington where I’ll
go into much greater detail on how we’re reforming the
system in three key areas: benefits, work, and sickness and
first explain the backdrop to the situation we find ourselves
the 1970s businesses avoided the UK because of its high taxes,
high strike rates and low productivity.
losing more than 20 million working days a year to labour
disputes, and had a lower rate of productivity growth than any
other country in the G7.
commentators felt that there was little that could be done and
decline was inevitable.
we look back at what was achieved under Margaret Thatcher in a
few short yet turbulent years, it serves as a reminder that
nothing is inevitable and that people can change, just as
some radical reforms, strikes declined, productivity improved
and as tax rates came down, companies started to invest in the
UK once again.
was back in business
these reforms laid the foundation for an unprecedented period
consecutive quarters, uninterrupted…
incomes up and confidence soaring.
an economy where growth was driven by productivity increases
and underscored by good housekeeping…
the last government took this improving economy and fell back
on an unsustainable formula – growth fuelled by debt and
consumption beyond our means.
we were harshly reminded that many of the gains in the last
decade were built on sand.
cannot say that the warning signs weren’t there.
debt had boomed in the years leading up to the recession –
rising from around £700bn in the early 2000s to £1.3
trillion in 2007.
think-tank – the Centre for Social Justice – warned that
these levels of debt were unsustainable in a report published
that same year.
few months later, the British bank Northern Rock went to the
we talk a great deal about the banks when we speak of debt, it
is worth reminding ourselves that the poorest in society
suffer the most when debt gets out of control. An inability to
pay can often lead to violence in many of the most difficult
wasn’t only the British public who spent beyond their means.
government was at it as well – before the recession started
the UK had one of the largest structural deficits in the
result of all of this is that the UK now has an enormous
deficit, adding every day to our outstanding debt…
we are paying £120 million a day just servicing the interest
payments – money that cannot be spent on British schools,
British hospitals or British roads.
why it is vital we get the deficit under control – a process
which is already underway, and one that has allowed us to
maintain low borrowing costs despite an unprecedented budget
a painful economic legacy, and one that we will be dealing
with for many years to come.
these figures aren’t just about a broken economy.
indicate that we had lost direction and had become as one with
this damaging culture.
culture of recklessness and irresponsibility.
culture of live now, pay later.
once families worked hard and saved hard to buy the things
they needed, they now look to unsecured credit and pay-day
once people put money aside and built up assets to provide for
their retirement, we now have 7 million people not saving
enough to provide for themselves in old age.
while there have always been fiscally irresponsible
governments, the way spending was let rip in the course of the
last decade was unprecedented.
culture of recklessness has contributed to the deprivation and
breakdown we see across swathes of our society today.
of worklessness and dependency, often persisting through
generations of the same family.
than 4 million people on out of work benefits, many for 10
years or more.
the highest levels of unsecured personal debt in Western
highest teenage pregnancy rates in Western Europe.
million children growing up in households with parents who are
addicted to drugs or alcohol.
worst thing of all: this was before the recession had even
an entrenched culture of social breakdown even while the
economy was growing.
understand we were not alone in this - as the Ministry of
Social Development statistics indicate, even before the
downturn in New Zealand…
many firms were reporting serious difficulty in finding
workers at all skills levels…
of the working age population were on welfare.
similar trends in the UK labour market.
employment levels rose by some 3 million in the decade leading
up to the recession, more than half of the rise in employment
was accounted for by foreign nationals.
wasn’t as if there weren’t enough people to do the jobs in
over 4 million people sitting on out of work benefits over
to 5 million by the end of the recession
of whom were genuinely sick or disabled, but many of whom were
capable of working.
million have been out of work for 10 years or more.
an issue I discussed when I was speaking in Madrid earlier
it clear then that the number of jobs going to foreign
nationals is – in many ways – a symptom of a problem we
have at home with an unprepared and disaffected workforce.
long these people have been thought beyond redemption…
to maintain on benefits than to help back into work…
so Governments have washed their hands of the challenge,
preferring to keep the economy going by letting labour come in
is an incredibly expensive approach, because it means propping
up whole swathes of people on costly benefits when they could
be in work.
to tackle the problem from the other end – looking at the
root causes of our broken society rather than treating the
Centre for Social Justice
a challenge I was determined to face when I established the
Centre for Social Justice.
than focussing on the symptoms of poverty and social breakdown
we were determined to unearth the root causes.
commissioned two reports into social breakdown, “Breakdown
Britain” and “Breakthrough Britain.” Altogether some 600
pages of in depth analysis. What we found, again and again, as
we visited some of the poorest communities in our country, was
the same five issues at the heart of social breakdown.
are what I call the five pathways to poverty:
pathways to poverty feed on each other in powerful ways, and
can push families into a damaging downward spiral.
family breakdown, where evidence that those growing up in a
broken home are:
more likely to fail at school
more likely to become addicted to drugs
50% more likely to have an alcohol problem
Or addiction, where we found that almost one third of young
people who have been excluded from school have been involved
with substance abuse.
often these pathways had a knock-on effect on further
destructive behaviour, particularly criminal activity.
that 70% of young offenders were from lone parents families…
we estimated that something like half of the UK’s prison
population were problem drug users.
even more interesting, we found that as many as half of all
young people going through the youth justice system had been
in care or had substantial involvement with social services.
interesting because this compares to only around 3% of
children in the general population.
looked at these issues more carefully we unearthed the immense
costs of this breakdown.
the costs of educational underachievement at £18bn per annum.
costs of family breakdown at over £20bn per annum.
cost of crime – so often a product of these pathways to
poverty – at some £60bn per annum.
£100bn – every year – spent on simply treating the
symptoms of social breakdown.
eye-watering figures were a result – at least in part – of
the damaging culture I spoke about before.
culture of short-termism had set in which was more focussed on
chasing headlines than on changing lives.
instead of investing in fundamental changes to the system –
changes which may have taken a number of years to bear fruit
– Governments resorted to reactive but eye-catching tweaks
around the edges.
tweaks were expensive and often ineffective – but because
they were funded by debt it was possible to push the burden of
them further down the line, onto the next generation.
example is the system of tax credits introduced by the
previous Government, ostensibly with the goal of making work
more often than not these tax credits made things more
confusing for claimants, and they created perverse incentives
which encouraged work at just 16 hours – no more and no
played another role as well.
there was a child element, paid in and out of work, tax
credits became a useful tool for tweaking child poverty rates.
few more pounds to tax credits at the annual budget and you
could triumphantly announce that you had pulled thousands of
children out of poverty.
this changed anyone’s life?
made it any more likely that these children would go on to
succeed in school, hold down a job, or form a stable and
case of a family troubled by addiction you may only have made
things worse, with more money simply fuelling the families’
because you haven’t made a permanent change in their life,
you’ll find that before long they will have cycled back
below the poverty line, and you are back where you started.
more subtle, this policy had a longer term effect creating
what Frank Field from the Labour Party referred to as: the
where you earn more through benefits if you live apart than if
you live together.
essence government money has incentivised families to break
up, with all the attendant consequences for children that I
have already mentioned.
than £150bn has been spent on tax credits since 2003, mostly
on families with children.
progress on child poverty has been weak and the last
Government left office with income inequality at a record
those who ask how this has anything to do with income
inequality, they should recall that it is middle income
earners who always carry the heaviest load when governments
raise taxes. It was on their shoulders that the extra spending
fell – small wonder then that over the last few years their
net incomes have remained at best static whilst the richest
have seen theirs rise.
and ineffective, this was an approach for the short-term which
didn’t worry about the consequences for the next generation.
seen this same damaging approach to our retirement system.
expectancy in the UK has increased significantly over the
course of the last century, but we haven’t seen anything
like corresponding increases in the State Pension Age.
that people are living longer is great news, but it does
present us with some difficult decisions about how we fund an
increasingly expensive retirement system.
Governments have found it easier to kick this issue into the
long grass, hoping that someone else will pick up the pieces.
and again that cultural barrier to reform has come crashing
now, pay tomorrow”…
the hard choices have been ducked.
we don’t get this right we risk pushing the burdens onto the
concern is that as my generation heads towards their
retirement it is our children who will bear the greatest
burden and cost in the future.
will have to pay to bring up their own children…
for their pensions…
property in an increasingly tight property market…
the same time as helping to pay for their parents’
unless we do something about the debt, they will have to pay
that off as well.
why the figures show that they are likely to be the first
generation in more than 30 years to have retirement incomes
which will fail to keep up with average earnings in the rest
of the economy.
is an uncertain and insecure future.
if we don’t act now – it could be a future of low incomes,
low expectations and high taxes.
behind the reforms
why we’ve been trying to steer a new course in Government.
my capacity as Secretary of State for Work and Pensions, my
efforts have been particularly focussed on the welfare and
outline the welfare reforms we are undertaking in more detail
when I speak in Wellington next week, but I’d like to use
this opportunity to touch on some of the principles
Beveridge, the man widely credited with creating the modern
welfare state in the UK, was clear that the welfare system
must not be allowed to stifle ‘incentive, opportunity or
welfare system we have today seems more removed from these
values than ever before.
It is a
system that penalises positive behaviours while rewarding
this distortion of those founding values that we are looking
to put right.
we have to get the incentives right, making sure that work
the system we inherited some people were losing more than 90
pence in every pound they earned as they moved into work – a
travesty when most higher rate taxpayers lose just 50 pence
through the income tax system.
assumed that because people on benefits only had one choice
– working or not working – it didn’t matter what rate
you took their money away at.
actually makes a big difference.
all, if you come from a family that has never held work and a
community where few enter the world of work, then being out of
work carries no stigma and is in effect another form of job to
can’t lecture someone in that situation about moral purpose.
the one thing they react to immediately is the notion that it
pays to be in work, and that it pays to do more hours when you
also worth noting that the pattern of work has changed. Most
welfare systems set up in the aftermath of the last war
assumed work was full time but now, with many more women in
the work force, there are more part time jobs. The present
system penalises people who take these part time jobs with
harsh withdrawal rates because it was originally assumed that
someone moving from unemployment would move straight to full
have to have a clearer, simpler system that gets the
second part of our reform programme is about putting in place
a more effective system of employment support.
years support to help people back into work has been failing
to look at people as individuals, more interested in the
numbers of boxes ticked than the number of people helped into
It was a
system more focussed on the type of organisation that
delivered the support, than whether the support they were
delivering actually worked.
organisations delivering support have had little or no
connection with those they had placed in work, meaning too
many churned through the system.
help, many have fallen out of work for the most trivial
have to move towards a relentless focus on what works,
rewarding the best providers not just for getting people into
a job – but also for helping to keep them there.
evidence shows that the difficult part is holding someone who
has been out of work for a while in work until they get the
is critical, and it pays dividends in the longer term.
are the twin principles for reinvigorating our labour force
– getting the incentives right and getting people work
there is a third change we have to make if we are to enable
all households to benefit from work.
to reform our system of support for those groups that have
been written off on inactive benefits for too long –
labelled as too difficult to help.
needs to start with reforms to the support we provide to sick
and disabled people.
whole culture around these benefits has been about looking at
people as helpless and incapable – the name of the main
income-replacement benefit said it all: ‘Incapacity
know that there are many sick and disabled people who can work
and want to do so, and it is completely unacceptable to leave
them written off on benefits.
why we’re moving to a model that is about asking what people
can do, rather than focussing on what they can’t, with
regular objective assessments to assess changing conditions.
other group we have to re-engage is lone parents.
post-war decades too many single parents were written off
simply because they had a child.
distinction was made between those whose caring
responsibilities precluded them from doing any work at all,
and those who were able to work within certain parameters.
little effort was made to keep lone parents engaged with the
labour market, even before they were ready to take up
longer you spend out of work the more alien the processes and
practices of the jobs market become – no wonder some lone
parents found it impossible to re-engage when they’d been
detached from the labour market for more than a decade.
very recently [November 2008] lone parents could claim an
inactive benefit – known as Income Support – until their
youngest child reached 16.
there has been a process of change underway for a few years on
the age falling progressively to 12, 10 and then 7.
are building on these reforms, ensuring that parents are
accessing support to move into work…
their youngest child has reached the age of five.
households into work
is important that we continue with these reforms.
cannot be right that so many households in my country continue
to be without work – some 1 in 5 – when we know that there
are many people who could work with the right support.
isn’t about lecturing or hectoring.
about recognising the incredible value that work can bring to
households – beyond the monetary value of higher incomes.
Through work people develop hugely in character, by taking
responsibility and making decisions. Furthermore people
develop networks of friends and acquaintances that help extend
their sense of community and self.
is households that are critical here.
focus on debates about distribution of income in our society
without thinking about the distribution of work.
Government maintained that they had got more people doing more
trouble was that they were too often the same people working
more hours and doing more jobs.
while, far too many of those who were unemployed stayed out of
work, and we reached the stage where one in five of all
households had nobody in work.
household where somebody is already working gets another
member into work, it can be hugely beneficial.
But if a
workless household gets someone into work it can change that
whole family’s life.
why in any reform we shouldn’t spend all our time focussing
on different family types who have work…
…but should instead concentrate more on whether a household
has work. This requires that the first person into work sees
that work pays.
are not always easy choices we are making, but I believe they
are the right ones.
‘hard to help’ groups maintained on welfare was a decision
taken for the short term – with the social and economic
costs pushed onto the next generation.
to start taking the long view once more, understanding how we
can change people’s lives rather than maintaining them.
is the long view that we are trying to take to our retirement
system as well, where we have a brewing crisis of
affordability in the UK.
taken the difficult decision to accelerate increases in the
State Pension Age, asking people to work for slightly longer
before they receive their state pension.
emphasise strongly enough how important this reform is for the
UK – it would have been easy to duck the decision and push
the consequences further down the line, even onto another
would have cost an extra £30 billion between 2016-17 and
2025-26 – an unacceptable burden on the taxpayer at a time
when we are grappling with difficult public finances.
this illustrates the point that I’m trying to get across
reforms are long-term investments.
sometimes hard decisions, but that is because we are trying to
face up to the challenges of tomorrow.
a welfare system that renews people, and doesn’t write them
welfare system that promotes responsibility, not destructive
requires far-reaching reform – not just eye-catching schemes
or tweaks to welfare payments.
same time, we want a retirement system that gets people
thinking about tomorrow, not just today.
that shares the costs of ageing more fairly between the
that is sustainable for the future.
all, I want a system that rewards and incentivises positive
behaviour, and in so doing actually helps improve lives by
driving a cultural change through our society.
this, we can once again give young people – who may have
come to believe that their lives would at best mirror those of
their parents, but never exceed them – a chance to aspire
say these are high hopes.
hopes – perhaps.
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