Hit those welfare scroungers

David Cameron today unveiled plans to impose a £25-a-week benefit cut on incapacity benefit claimants who were considered fit for work. The Conservatives want to fund a £600m back-to-work programme with the money saved. They think their “tough and tender” approach will show that they are willing to help victims of the recession with apprenticeships and training and by modernising welfare. Cameron described the measures as “the centrepiece of the Tory conference” and a “big, bold, radical scheme to get millions of people back to work”.

We have been here several times before. In the 1990s they put the unemployed onto incapacity benefit to make the figures look better. Then there was all sorts of attempts to withdraw the benefit when the costs started to balloon out of control. The effect of the crackdown was marginal. Then, the claimants tended to be manual workers who were no longer fit enough to continue doing the jobs they had always done, and had been weeded out when the recession came. Now, claimants tend to be younger and suffering from the stress of the contemporary working environment. In both sets of cases the many of the claimants could probably do some kind of job, but the jobs would have to exist and the employers would have to cater for their limitations.

Where are the jobs supposed to come from? Britain is “in” a recession, rather as one is “in” bed with flu. “Job creation”, which seems to be what the Conservatives are in favour of, was tried in the 1980s.

I saw this from the inside. I was working for Lewisham Council and a colleague was involved in a scheme for refurbishing the railway arches in Deptford. A worthwhile job got done and a few people acquire useful skills. But it was an administrative nightmare. The trainees were a mixed bunch; some were keen, but others were disruptive, which made them hard to manage. One of the supervisors got stabbed by a trainee with a grudge and ended up in intensive care, whilst the assailant received a few months in prison for attempted murder. The client, British Rail Property Board, concluded that the work could have been done more cheaply by letting the scheme out to contract on a commercial basis, which was what happened with later phases of the project. Cameron is spouting nonsensical political rhetoric.

So what should the Tories be proposing? Get out a pocket calculator, pencil and paper. How much would someone get in benefit when out of work? Jobseeker’s allowance, Housing Benefit and all the other things that come free. Now work out how much it would cost an employer to give the same person a job and leave them with the same amount, and that is before the person has to pay the extra costs incurred in going to work, such as travel and meals out.

There is a big difference between the two figures. This used to be called the tax wedge but people who ought to know about it appear to have forgotten, including all the country’s politicians and media commentators.

So if the aim is to minimise unemployment, the first thing to do is to get rid of the tax wedge by raising the thresholds for PAYE and Employers’ and Employees’ National Insurance contributions. Although the shadow Chancellor has dreamt up a short-term fix which would alleviate the problem, it only scratches at the surface. A comprehensive reform is needed. None of which would have the headline-catching appeal of “force the jobless off their arses” but it is actually one of the things that absolutely needs to be done.