Welfare reform Mark 2

With (depending on your point of view) neat or cruel irony the number of part-time employees hit a record high within hours of them being identified as a major target for a second round of welfare reform.

Official figures published on Wednesday morning confirmed that unemployment fell by 45,000 to 2.63 million people and the number of people in work rose by 105,000. However, within that total the number of people working part-time because they cannot find full-time work rose to a record high of 1.4 million. There are now eight million part-time employees and 4.2 million self-employed people – both the highest numbers since records began in 1992.

Hours earlier the Telegraph had revealed Conservative plans to make a further £25 billion in welfare cuts including ‘a new crackdown on housing benefit and a “mark two” system of universal credit to help push people off benefits back into full-time, rather than part-time, work’. The proposals are reportedly made in a policy paper signed by Steve Hilton, the outgoing director of implementation and ‘blue-skies thinker’ at No 10, and Iain Duncan Smith, the welfare and pensions secretary. This is in contrast to previous reports that IDS was resisting Treasury calls for £10 billion more in cuts to the welfare bill.

The specifics apparently include stopping young unemployed people from claiming housing benefit when they could live at home and a lower cap on housing benefit for those living outside London.

A Downing Street source tells the Telegraph:

‘There is some really radical thinking going on around welfare, which is the most successful area of government policy so far. Why should people only work part time? Why are young people who are out of work not living at home? Why are we incentivising people to have more children?’

And a government source says:

‘What we are engaged in is the mark-two stage of welfare reform. Its how do you take the universal credit into the next phase… encourage people to work longer hours, not just languish on 10, 15 or 20 hours. “These things are part of a much bigger extended programme from where we are, to take us forward. There are longer term saving by getting more people into work, by giving people greater control of their lives, by making them essentially the masters of their destiny again, we will reap massive rewards and thus massive savings.”

This is not the first time that reports of Welfare Reform Mark 2 have bubbled to the surface. Last month, the Telegraph reported a Downing Street/No 10 plan to cut housing benefit for the under-25s and force them to live at home with mum and dad. As I blogged at the time, it was horribly reminiscent of what happened in 1988 when Conservative cuts in housing benefit for the under-25s and income support for under-18s led to an explosion of youth homelessness. After all, not everyone has a mum and dad, some were not welcome at home, some had been thrown out and some had left for good reasons.

As for the other proposals, it’s clear that Conservative ministers see the cap on benefits at the level of the average salary as one of their most popular policies. As I blogged after the election results, it’s one of the key ways they seek to demonstrate that they are on the side of the ‘strivers’. It’s not hard to see similar arguments being deployed to restrict the cap further (why should people on benefits get even as much as the average worker?) or to regionalise it (Labour wanted a higher London cap in the Welfare Reform Bill debate but what’s to stop a lower, Tory one elsewhere?).

Cutting benefits for part-timers is not a new idea either. From 6 April, more than 200,000 low-income families lost tax credits of up to £73 a week under new rules that require them to work at least 24 hours a week rather than the previous 16. Treasury figures revealed that only 5 per cent of them had managed to persuade their employer to increase their hours by 1 April.

And it’s no surprise to find housing benefit for part-timers in the firing line. Previous government propaganda has justified cuts in housing benefit on the grounds of fairness to ‘hard-working families but research published by the BSHF in March showed that people in work accounted for 93 per cent of the increase in the number of claimants in 2010 and 2011. It suggested that explanations for this included ‘wage freezes or reductions and increasing numbers of “involuntary part-time workers” who are seeking, but unable to find, full-time employment’. As Joe Halewood blogged earlier, new DWP figures show that the number of housing benefit claimants has now passed five million for the first time.

The part-timers may be ‘hard-working families’ – it’s hard to think of anything much harder than a zero hours contract where you have to be constantly available for work that may or may not turn up – but now it seems they are not working hard enough. If the Telegraph report is to be believed, a combination of resentment at Gordon Brown’s tax credits and 1980s thinking about the ‘dependency culture’ now extends to part-timers too.

On top of that, Wednesday’s employment figures also showed that wages are still falling in real terms. Average pay including bonuses is up 0.6 per cent in the last year, the lowest rate for three years, at a time when inflation is 3.5 per cent. With that kind of squeeze, and with plans already in place to detach housing benefit from actual rent levels, it is not hard to predict what the results of Welfare Reform Mark 2 could be.

A reaction set in after the Telegraph story was published, with the Financial Times reporting that Iain Duncan Smith’s department had delivered a ‘stinging rebuke’ to Steve Hilton. A source close to IDS told the paper that the DWP had already cut £18 billion from the welfare bill and that the £25 billion figure was ‘utter nonsense’, ‘ludicrous’ and ‘not been though through. However, according to the FT, IDS is keen to look at ways to encourage part-timers into full-time work ‘among other measures likely to be part of a spending review some time in the next three years’.