Last week, the Government suffered a historic defeat after peers in the House of Lords voted down plans to cut tax credits until such a time as the Chancellor, George Osborne, can come up with a way of softening their impact on the lowest paid workers. Opposition to the plans came, as expected, from Labour and Liberal Democrat MPs and peers and the Church of England bishops. More surprisingly Tory backbenchers also began expressing disquiet with the scale of the cuts. Andrew Percy, MP for Brigg and Goole, stated his view that ‘the changes cannot go ahead next April and that any mitigation should be full mitigation’, while Stephen McPartland, MP for Stevenage argued that though ‘there are huge issues with the tax credit system […] the problem is the impact the proposed changes would have had on those families with the lowest incomes’.
Cuts to the Department for Work and Pensions budget have been a major element of spending cuts overall: prior to the election, the Conservatives pledged to remove a further £12bn from the welfare budget, on top of the £18bn cut under the Coalition. As one of the largest elements of spending beside the state pension, it was always doubtful that this could be accomplished without major changes to tax credits, despite David Cameron’s statements to the contrary prior to the election.
Conservative MPs have up until now seen their approach to welfare reform as one of their key electoral strengths, with Osborne himself placing great emphasis on his party’s approach to this in his role as party strategist. The defeat, and surrounding dissatisfaction, is therefore a blow not just to the Government, but to Conservative strategic assumptions more widely.
Given public perspectives and attitudes around welfare, cutting money from the welfare budget can seem like an easy win politically. The latest British Social Attitudes survey shows that public support for welfare spending overall has been in long-term decline, and support for more spending on social security benefits for the poor has dropped from 61% in 1989 to just 30% in 2014.
Moreover, while support for some individual benefits remains quite high (for example, at upwards of 60 per cent for both disabled peoples’ benefits and for spending on pensioners), just 13% of respondents felt that increasing benefits for unemployed people should be a policy priority. Tax credits are, of course, not unemployment benefits, but the Conservative narrative on welfare has done much to link their receipt with unemployment or voluntary under-employment. Conservatives have repeatedly returned to the idea of tax credit receipt ‘trapping’ claimants in a position of dependency, creating conditions that dis-incentivise working or taking on more hours.
These beliefs are reflected by Conservative supporters, 71 per cent of whom believe that benefits are ‘too high and discourage work’. However, this is not solely a Conservative perspective: 38 per cent of Labour voters believe the same. At their more extreme edges, such feelings are reflected in vitriol against ‘benefit scroungers’and suspicions of rampant fraud within the benefit system.
From figures such as this, it is not difficult to see why there is a powerful political incentive to be seen to be taking a tough approach to the welfare budget. Yet other evidence suggests a widespread lack of knowledge about the sources and drivers of welfare spending. Public perceptions of the amount of money spent on those viewed as less deserving of support (and therefore the extent to which spending could be reduced by cutting spending on these groups) are considerably out of kilter with the reality.
This leads to a dilemma for politicians looking to reduce spending and bolster support for their parties by cutting welfare. In order to achieve savings of the magnitude that the Conservative Party promised before the election, it was inevitable that cuts would end up hitting those who – in David Cameron’s words – ‘work hard and do the right thing’, even when they are very poorly paid for doing so. In some cases, these will be people who voted for the Conservatives in May without realising what was to come, as Secretary of State for Energy and Climate Change, Amber Rudd’s recent appearance on Question Time demonstrated. They will certainly be people whose support the Conservative Party needs to maintain and build upon if it is to stay in government in future.
To some extent, the Conservative Party has recognised this and taken steps that it argues will mitigate against the impact of cuts: notably introducing the new ‘National Living Wage’ (in reality, a relatively large increase to the National Minimum Wage). Yet this will not be sufficient. Firstly, the full increase to £9 per hour will not come into effect until 2020: the tax credit cuts would have been implemented in full in April 2016. Secondly, and more fundamentally, minimum wages and tax credits are intended to address different problems. The Conservative appeal for a ‘high wage, low tax, low welfare society’ may be appealing to some, but low pay and insufficient household income are not the same issue. Even if the Minimum Wage was set at such a level as to substantially alleviate the former, tax credits remain an important protection against the latter.
Following the events of last week, the Chancellor has committed to taking measures to soften the impact of the proposed cuts. This suggests that at least something of a U-turn is on the cards, but the exact steps that the Conservative leadership will take to address the concerns of peers, MPs and its backbenchers remain to be seen. What has become much clearer already is that there are no straightforward solutions to substantially cutting welfare spending. What might have seemed before the election to offer an easy political win has, unsurprisingly, proven to be considerably more challenging in practice.
Libby McEnhill is a Researcher at The Work Foundation, Lancaster University. She tweets @LibbyMcEnhill.
