Would Ed Miliband’s social security plans work?

Mr Miliband (video above) offered people a “choice” between two futures: passing a “fair and sustainable” system onto future generations under a Labour government, or the system under the Conservatives which, he said, seeks to “divide our country” and does not tackle “the deep causes of rising costs”.

He said that a Labour government from 2015 would have less money for welfare, but said that, despite what “some people argue”, curbing social security spending would not mean “leaving our values at the door”.

I have set out… a way to reform the system so it meets the values of the British people. Ed Miliband

Mr Miliband outlined a number of proposals to cut the amount that is spent on social security benefits, such as Job Seeker’s Allowance, tax credits and incapacity benefit,

Much of the policy on offer has been touted, in some form or other, by various thinktanks, from the centre left Institute for Public Policy Research to the more Conservative-aligned Policy Exchange.

Nick Pearce, a director at the Insititute for Public Policy Research, said the purpose of the speech was twofold: shoring up Labour’s position on the welfare state, and getting ahead of George Osborne, who is expected to announce a new cap on social security spending in his forthcoming spending review.

Policies outlined by Mr Miliband included:

A limit to how long someone can stay unemployed. The government will offer to pay the wages, for 25 hours of work a week, of anyone under 25 who has been unemployed for more than a year. Mr Miliband said this would be fully funded by a tax on bankers' bonuses. He added that the policy would also apply for people over 25 who have been unemployed for more than two years.

Require unemployed parents of children who benefit from 15 hours a week of free childcare to use the time when children are in childcare to "undertake preparations" for getting back into work.

Make tests for the Employment and Support Alowance disability benefit connected to a work programme, that is "itself tested on its ability to get disabled people jobs that work for them".

Offer to give employers who pay above the minimum wage some of the savings that the government would make from lower tax credits and higher revenues, back to the company.

Give power to local authorities to negotiate with landlords on behalf of tenants who receive housing benefits in order to bring the cost of rents down, and therefore reduce the housing benefit bill.

Matthew Oakley, head of economics and social policy at Policy Exchange, said there was much in what Mr Miliband said that the thinktank had previously written about, and therefore there was much he agreed with.

However he said that a lack of detail, and some “generous assumptions” over costs, could create problems for such policies.

Specifically, he cast doubt Mr Miliband’s plan to pay the wages of young people who have been unemployed for more than a year, saying: “They (Labour) have previously put a cost of about £1bn on this. Our view is it will cost quite a bit more.

“Ultimately, when you are talking about creating this many jobs, you have to ask where the jobs are going to come from?”

He said there are various schemes in place at the moment to find work for people, including apprenticeships and schemes through Job Centre Plus, but these were struggling.

“We saw with the Future Jobs Fund, introduced by the last Labour government, that most of the jobs created were in the public sector. It seems odd that at a time when we are trying to reduce the size of the public sector, that this would probably be just a massive public sector job creation scheme.”

Childcare and housing

On the childcare scheme, Mr Oakley was more generous. “The principle is right,” he told Channel 4 News. “But obviously the details will be important.

“Are we expecting people to go on courses? Or to volunteer? What are the consequences of not taking part in terms of penalties? Would people have their benefits taken away?

“Personally I think that would be appropiate, but I imagine Labour would balk at that.”

This was not a defensive or tactical speech, but one that creates political space for new ideas and energy on the centre-left. Nick Pearce, Institute for Public Policy Research

On the policy of giving local councils more power over landlord tenant negotiations, Alex Morton, head of housing, planning and urban policy at Policy Exchange, said: “This assumes that landlords are happy to accept lower rents for housing benefit claimants. But why would they?

“Trying to push down rents on an individual basis will fail. Landlords will simply not take on housing benefit claimants. This is a poorly thought through solution when the real solution is building enough homes to stop rents continuing to soar.”

Mr Miliband did also say in his speech that building more homes would be a Labour priority, but did not elaborate on specific polciies that would achieve this.

‘Big moment’

Nick Pearce, a director at the Insititute for Public Policy Research, said Thursday’s speech was a “big moment for the Labour leader.”

“This was not a defensive or tactical speech, but one that creates political space for new ideas and energy on the centre-left,” he said. “Labour’s task now is embrace the arguments it has made this week, not resile from them in the coming weeks, and move forward on other key fronts, in particular on education, childcare and other key public services where it still lacks strategic direction and strong policy definition.

Having got us into this mess, today’s speech told us nothing about how he would get us out. Iain Duncan Smith

“The political lesson of the last year is that it has to sustain momentum from its set-piece moments, rather than allowing drift to undermine the advances it makes.

“This has been a week in which Labour has finally and firmly pivoted its politics towards the next general election – the key question is whether it can stay the course.”

‘No answer’

However, Works and Pensions Secretary Iain Duncan Smith dismissed Mr Miliband’s speech as “vacuous”.

He told Sky News: “Having got us into this mess, today’s speech told us nothing about how he would get us out. We have no idea what he will cut, because he has opposed £80bn of cuts.

“What is it actually that they are going to reverse? Are they going to reverse the cap, are they going to reverse the housing benefit changes, are they going to reverse the changes on tax credits? Not an answer today.”