Why the chancellor’s ‘back to work’ plans won’t work

Fiscal events”, as they’re called, sound like rather grey, technical affairs, delivered more or less in silence to a crowded Commons chamber by a chancellor seeking to display a steely commitment to prudence and responsibility. In reality, they are deeply political affairs, particularly in close proximity to a general election, and red in tooth and claw in their intent.

Jeremy Hunt, a man with a gentle demeanour but a keen sense of political mortality, will be no different when he rises to deliver what will surely be the last autumn statement before the government faces the electors. The autumn statement will be an expression of political choices, and, unfortunately, that looks like putting tax cuts ahead of protecting the most vulnerable in society.

With the old convention of “Budget purdah” now firmly consigned to history, there is no longer any period of Trappist restraint in advance of such announcements – so, via heavy hints and extensive briefings, the country knows what to expect. There will be an easing of taxation on business. The working classes (very broadly defined) will benefit from a snip in national insurance or income tax.

None of these will, in reality, make more than a marginal difference to people’s incomes, especially if Mr Hunt retains the long-term freeze on income tax thresholds – a far bigger, though stealthy, real-terms cut in incomes and living standards.

Far more significant will be the changes in benefits for the long-term sick and the disabled now lined up in the “back to work” plan. Some who will be caught up in the changes face the loss of far more than the odd 1 per cent or so in their already modest social security payments. In the worst-case scenario, they will lose hundreds of pounds a month – and these are the people in society least able to make up the loss. We should learn more about this in the statement, but the indications are that it may not be reassuring.

It is telling, for example, that it is the Treasury and Mr Hunt leading these reforms, rather than the Department for Work and Pensions and its secretary of state, Mel Stride. A decade or so ago, it was George Osborne and his Treasury team that perverted the introduction of universal credit into just another exercise in austerity, and in due course forced the resignation in despair of the minister nominally responsible, Iain Duncan Smith. It is a movie we’ve seen before.

Mr Hunt puts on his most earnest face when he declares that this is all about getting people who happen to be ill and who want to work into jobs, with all the dignity and prospects that implies. He promises support to help with mental health problems, more training and, less convincingly, talks about getting NHS waiting lists down. Perfectly fairly, he points to almost a million vacancies across the economy, and businesses crying out for people with skills.

No less respectable, Mr Hunt is faced with public finances that remain in a parlous state, growth badly constrained by labour shortages and the long-term upward trend in social security payments driven by the UK’s ageing population.

There is, in other words, every reason to get more people back into the labour market. But the countervailing reality is that there are equally good reasons, and often sadly insuperable ones, as to why more people are in genuine long-term illness now.

Covid and, latterly, long Covid had a longer-lasting effect on economic activity than could have been foreseen, and we do not know for how long such effects will linger. There is also the eternal mismatch in the labour market between the types of jobs available and their location, and the location and skills of those who are unemployed. In the case of people with disability and long-term sickness, the disparities are even more stark.

If someone in such a position lives in, say, the North and has mobility issues, little capital and relies on local friends or family for informal support, it is practically impossible for them to move to even moderately well-paid work and afford to live in the South.

That is where the Treasury’s tendency to think in abstract terms collides with someone in a wheelchair – but the person in the wheelchair cannot have their living allowances sanctioned for “refusing to engage” in the labour market. That, then, is the ever-present danger when governments go looking for savings in the payments made to the most vulnerable in society.

The welfare bill may be huge, but as soon as it is examined in any detail, it becomes perfectly apparent why it cannot be significantly reduced – because so much of it is spent on the old-age pension, to look after those unable to work and to top up and incentivise people to enter low-paid employment. Successive ministers in successive governments have generally arrived at the same conclusions when they come to power.

Indeed, even the shadow work and pensions secretary, Liz Kendall, whose policies are not so very different to Mr Hunt’s, will probably have to come to the same conclusion, if and when she takes over this area of government.

The UK benefits system is not unduly generous, and it is not set at a level that deters people from seeking employment. Overwhelmingly, they are on benefits out of necessity rather than as a lifestyle choice. “Back to work” is far easier said than done.