Welfare: Clinton's lesson for Blair

When the US sneezes, Europe catches a cold. Will this old economic saw prove true of welfare, as Bill Clinton approves legislation that requires recipients to find work within two years or lose benefits, limits families to a lifetime total of five years on benefit and contains other measures that end Roosevelt's 60-year-old New Deal guarantee of open-ended assistance to the poor? These measures are so draconian that the New York Times described them as "odious" and British welfare groups as "horrendous" and "unbelievable".

The answer is both yes and no. There are parallels in both politics and policy in the UK to what is happening in the US. But there are big differences too. Perhaps the most important parallel is the political. These measures - Republican right-wing measures - have been approved by a Democratic president who was elected in 1992 on a promise to "end welfare as we know it". Until yesterday, however, through a complex mixture of politics and practicality, he had failed to deliver. As a result, he has found himself trapped in a largely right-wing agenda.

Meanwhile, in the UK, we have a Labour leader heading on current form to be Prime Minister who also is promising a big reform of welfare. As yet, it is poorly specified. But a central message from Blair - as it was for Clinton - is that only Labour can be trusted to reform the welfare state. Given the inevitable spending pressures he will face, it is a promise on which he will be required, at least in some measure, to deliver.

The parallels, however, should not be overdrawn. In the US, the federal (or national) programme, which Clinton is cutting, sets the framework (or safety-net minimum) for means-tested welfare and provides the cash for it. It is the individual states that deliver. And they have considerable discretion, both to be more generous - and some are - as well as to seek waivers from the programme to be more mean, or more imaginative, in how they use the cash. Yesterday's package includes greater powers for states to experiment, setting their own conditions on benefit, introducing more discretion, allowing yet greater variation in a system that already displays far greater variation than the UK.

Some of that is beginning to happen here. Benefit is already being made more conditional - witness the new duties on job seeking and job taking enacted in the Jobseeker's Allowance, due in October. Witness also Gordon Brown's insistence for Labour that his jobs and training package for the young will not include the right to refuse to take part and still receive full benefit. Across the party divide - and across the left-right divide within the main parties - there is greater interest in forms of workfare, experiments that would offer, perhaps eventually require, work in return for benefits plus a bit.

Equally, more discretion is slowly creeping into a system that, since the early 1980s, has been heavily rules- based. And, finally, there will be more experiments in social security, and possibly more local variation. Peter Lilley, the Secretary of State for Social Security, has taken powers to allow both (though not, as yet, local variation in existing benefit rates), and he will shortly launch the pilots of Earnings Top-up, a form of family credit for the childless. These are powers a Labour government too would use.

These limited parallels, however, do not mean that time-limited benefits of the sort Clinton has agreed to are on the way to the UK. For, asylum seekers aside, threatening to cut people off without a penny is not on the agenda for even the most radical of the free-market think-tanks. As Masden Pirie, the director of the Adam Smith Institute, put it yesterday, "I don't think that's a goer here; people wouldn't stand for it."

But there is another potential parallel. Clinton's agreement to essentially Republican proposals radically to limit benefits has arisen because his own proposals for welfare reform failed to materialise. And something similar could yet happen to Labour in office. For Labour's own plans for welfare reform as yet remain unclear. Its big ideas include an intention to reduce means-testing, a desire to fully fund pensions, a real wish to get people off welfare and into work, and a toying with Frank Field's radical ideas for hugely increasing spending on social security via compulsory contributions to new forms of insurance through friendly and mutual societies.

Much of this would indeed be bold, and quite probably boldly expensive. If it fails to materialise, Tony Blair will not of course find himself in exactly Clinton's position - a Democratic Prime Minister, so to speak, having to accommodate a Republican House of Commons. British politics does not work like that. But if Labour fails to deliver on its agenda it will mean the ideas that will have triumphed in welfare state reform will be those of the right - which would almost certainly mean more steps down the road that Clinton has now agreed to tread.

Blair will either be left running broadly with the tide that Peter Lilley has set flowing - a cut and squeeze approach to social security spending; or, worse from his point of view, he might find himself faced by a populist Tory party led by a Portillo or a Redwood advocating yet more of the Republican agenda. Faced with that and no deliverable alternative of his own, Blair could find himself, Clinton-like, having to adopt more of these new Conservatives' clothes. He might have to. And after all, he's done it before.