Benefit reform? That is always a tricky subject for any government. For a Labour government, less than a year in office, it is the stuff of nightmares.
Already the Government has got into a muddle on this difficult issue. The attempt to remove the winter fuel payment was, frankly, a political debacle. It has cost the Government a great deal of political capital, as was seen at the local elections in May this year.
Anecdotally, this was the most salient issue on the doorstep.
To recap, the Labour Government announced last summer that they would take away the £300 winter fuel payment from millions of pensioners. They spent 10 months defending the policy on prudent fiscal grounds. They then unceremoniously ditched the plan a few weeks ago.
Of course, the damage had already been done. The policy was jettisoned not to win back voters, but to stop the bleeding, to staunch the draining of support, at subsequent elections this parliament. Continuing the policy threatened further disaster at the Scottish and Welsh Assembly elections next year.
Reform UK, an amorphous insurgent political party, annihilated the Conservatives and the Government in the local elections in May. They are now comfortably ahead in most opinion polls. They are cynically trying to outflank Labour from the Left on this issue. They have even pledged to reverse the two-child cap on child benefits, a move Labour itself is not committed to.
After U-turns in general, governments start to look weak. In this particular case, with respect to reducing public spending and pursuing reform of welfare benefits, this Government, despite its large majority, is starting to look like it doesn’t have the stomach for a fight.
The cost to the public purse of benefits is, according to the Government’s own sources, set to increase by £18bn in the next four years to reach £70bn a year.
The Government is briefing against any potential backbench rebellion by the usual leaks to the press. We read that a “Whitehall source” said the increase in spending meant that reform is necessary. “These figures show,” said the source, “that the current welfare system is unsustainable.”
Sir Keir Starmer and Chancellor Rachel Reeves are surely right about this. They know that, without reform, the cost of benefits will rise inexorably. That would lead, as surely as night follows day, to higher taxes which would harm economic growth. Higher taxes to pay for welfare payments would also end up harming the very people Labour claim to support, ordinary hard-working people.
The problem, as is often the case, is one of internal party management. For all my time in parliament, it was surprising how many of the political problems prime ministers faced revolved around dealing with awkward government backbenchers, who nominally, at least, were supposed to back the prime minister’s team.
We all know about David Cameron and Theresa May. They had to deal with the European Research Group and other assorted bands of anti-EU zealots. Their time in office was terminated by this conflict.
Labour leaders have always, conversely, had to deal with recalcitrant backbenchers on the Left, for whom no amount of public spending is ever enough to pay for their quest for social justice and greater equality.
The rebels will argue that the mere act of reducing benefits will harm the most vulnerable. They will collectively say, “We did not become Labour MPs to reduce welfare payments to the poorest in society”.
This sounds laudable, but what is the alternative? To pay for ever greater benefits handouts through ever-increasing taxes? That really would be unsustainable, as the Whitehall source said. Giving in to rebels now would rightly be judged to be a sign of weakness.
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Such a retreat would embolden the Left of the parliamentary party. The awkward squad would rebel even more frequently, in the confident expectation that the Government would yield even more ground.
The alternative is fraught with political danger. We should be aware of that. Indeed, the disaster which enveloped the winter fuel payment question shows how susceptible a Labour government is to accusations of “betrayal”, whenever they try to reduce benefits.
Pushing through reform could increase the split within the Labour Party. Already we can see how the hardcore Left and more pragmatic voices are divided. It could, if badly handled, lead to further alienation of some of Labour’s core support in the country.
Yet benefit reform would be the right course of action for the country. And who knows? The Government could, ultimately, be rewarded by the wider electorate at the next General Election.
Kwasi Kwarteng is a former Conservative MP. He served as chancellor between September and October 2022 under Liz Truss
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