The government is right to move from tender to tough on welfare reform

Editorial: The already unpopular Starmer government will doubtless make more enemies during this process. But it needs to bite this bullet

In an unfortunate if avoidable case of bad timing, the government is launching a white paper called Get Britain Working, just 24 hours after business leaders at the CBI’s annual conference warned that last month’s Budget would deter companies from hiring workers and going ahead with investment projects.

Ministers will need business onside if they are to achieve their ambitious – some would say almost impossible – target of an 80 per cent employment rate, a big leap from the current 75 per cent.

But after successfully wooing business leaders before July’s election, Labour has alienated many of them by increasing national insurance contributions from employers, hiking the national minimum wage and announcing a radical extension of workers’ rights.

However, the government is right to tackle welfare reform, an issue on which most previous administrations have talked a good game but failed to halt the rising cost to taxpayers.

Ministers insist they are trying a different approach to the previous Conservative government. Labour’s could be summarised as “less stick, more carrot”. Sir Keir Starmer promises the reforms will “put an end to the culture of blaming and shaming people who for too long haven’t been getting the support they need to get back to work.”

Liz Kendall, the work and pensions secretary, wants to end a “tick box” approach at jobcentres in which the priority is to limit benefit claims. Instead, staff will offer a more personalised service, while mayors and local authorities will be empowered to “join up” work, health and skills support to meet the needs of their areas.

Ms Kendall will introduce a “youth guarantee” under which all 18 to 21-year-olds in England will be offered an apprenticeship, training or education, and will lose benefits if they refuse to engage. Although these changes are welcome, they are the low-hanging fruit of welfare reform.

Monday’s white paper puts off until next spring the $64,000 question: what to do about the huge rise in benefits claimed by the sick and disabled. The document admits the UK is the only major economy that has seen its employment rate fall over the past five years, driven largely by a significant rise in the number out of work due to long-term ill health.

Comparable countries have seen levels return to pre-pandemic levels but not the UK. This conundrum is puzzling the experts but Ms Kendall confirmed at the weekend that a growing number of claims for mental health conditions are part of the picture.

“There is a genuine problem with mental health in this country,” she said. She has vowed to deliver the £12bn a year of welfare savings the Tories promised by the end of the current five-year parliament. She will reform the much-criticised “work capability assessment” on people’s fitness to work, but in a different way to that planned by the Tories.

The government will review what business can do to employ more disabled people and is promising to consult the disabled before overhauling the benefits they claim. It is right to prepare the ground in a way Rachel Reeves conspicuously failed to do before means-testing the pensioners’ winter fuel allowance and changing inheritance tax rules for farmers. The government is paying a heavy political price as a result.

However, ministers will eventually need to move from tender to tough on welfare – and from headline-grabbing rhetoric about reform to difficult decisions that will surely prove controversial for disabled groups and some Labour backbenchers.

The number of people claiming incapacity benefits is forecast to increase from 2.5 million in 2019 to 4.19 million by 2029, with the cost rising from about £17bn a year to £35.5bn over the same period. Given the pressures for higher spending in areas such as the NHS, social care and defence, to name but a few, no government could allow such an unsustainable rise to go unchecked.

Curbing the welfare bill will not be easy; previous attempts to reform disability benefits ended up costing much more than expected. The already unpopular Starmer government will doubtless make more enemies during this process. But it needs to bite this bullet.