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Nick Clegg: Our welfare system is broken

Thu, 16 Sep 2010

One of my predecessors as party leader, Jo Grimond, argued 30 years ago that a centralised, bureaucratic "welfare State", treating people as passive recipients of benefits, had to be replaced by a "welfare society", in which people engaged as active citizens in promoting their own welfare, and the welfare of others. This vision is long overdue.

Our welfare system is broken — and everyone knows it. The people trapped on benefits year after year with little hope of moving on know it. The frontline staff struggling to administer no fewer than 30 benefits know it. And the taxpayers funding a welfare system that encourages dependency know it, too.

These problems did not emerge overnight. They are the legacy of years of neglect and political cowardice. Labour came to power in 1997 promising to "cut the bills of social failure", to ensure that benefits offered "a hand up, not a hand out", and "to make work pay". These were the right aspirations. But Labour failed to meet them.

Far from cutting the costs of social failure, the bills have simply mounted up — even in time of economic plenty. In May 1997, the benefits bill in today’s money was £63 billion. By the time Labour left office the cost of welfare was £87 billion — an increase, in real terms, of 40 per cent.

Instead of turning the system from a "safety net" into a "trampoline", as Labour promised, people have been stuck on benefits year-in, year-out. One and a half million people have been receiving out-of-work benefits for at least nine out of the past ten years. Almost two million children are growing up in households where no one is in work.

Labour presided over a shambolic tax credit system that left too many people receiving paltry rewards for making the brave leap into work. More than half a million people face an effective tax rate of more than 90 pence in the pound, as benefits are withdrawn and tax kicks in.

While there have been cries of pain about the effect on work incentives of the new 50p tax rate, there has for too long been an unforgivable silence on the rates paid at the other end of the income scale.

Labour failed to act even when there was money in the bank. If we want taxpayers to continue to pay for welfare in these straitened times, we must ensure that the system is providing fairness and opportunity. Welfare needs to become an engine of mobility, changing people’s lives for the better, rather than a giant cheque written by the State to compensate the poor for their predicament.

Welfare reform is not easy and bringing a semblance of sanity to the system inevitably creates losers as well as winners. But the Coalition Government will succeed where Labour failed. In this tough fiscal climate, cuts to the welfare budget are unavoidable. But at the same time, we will be simplifying the current Byzantine benefits system and providing real incentives for people to move off benefits and into work. We are not willing to simply cut back a failed welfare system — it needs root and branch reform.

The welfare reforms that will be brought forward by a Conservative Cabinet Minister in our Coalition Government are profoundly liberal in intent and effect and underpinned by three liberal beliefs.

First, the liberal notion of fairness implies social mobility. A fair society is not one in which money is simply transferred by the central State from one group to another. It is a society in which people are able to make a better life for themselves, with support from government and the broader community. This does not mean rolling back the State. It means reshaping the State to give people more power and better prospects.

Second, liberals believe that people should be in charge of their own lives. Independence is a central liberal value. Dependency of any kind offends against this unwavering liberal commitment to self-reliance: and welfare dependency is no exception. Making work pay has been a liberal imperative for decades, and the increase in the income tax threshold announced in the Budget — the first step towards a reformed tax system — complements our plans for welfare.

Third, the liberal attitude to the distribution of power is in stark contrast to the present model of welfare — based entirely on centralised, top-down solutions.

Our welfare reforms will put more power into the hands of benefit recipients and local communities.

One of my predecessors as party leader, Jo Grimond, argued 30 years ago that a centralised, bureaucratic "welfare State", treating people as passive recipients of benefits, had to be replaced by a "welfare society", in which people engaged as active citizens in promoting their own welfare, and the welfare of others.

This vision is long overdue.

Click here to read the original Times article