On Wednesday Sue Marsh reviewed ‘2030 Vision’ and called into question the approach the Fabian commission took to supporting disabled people.
Our report has two time frames: it looked at the first few years of the next parliament; and at the next twenty years. On the latter, the commission’s conclusions are very clearly focused on improving the wellbeing of disabled people and others who particularly rely on public services and social security.
A new approach to social security
‘2030 Vision’ makes the case for public spending to rise as a share of national income over the next two decades, funded by rising taxation. Disabled people would be key beneficiaries: we argue that spending more on health and social care as a proportion of GDP is essential; and, more controversially, we also say that we need a new approach to working-age social security.
We introduced our chapter on social security with these words:
“Both the design and overall generosity of social security are key ingredients in securing rising living standards for low and middle income households. Governments of all parties have made strenuous efforts to reform social security to improve incentives to work and save; but they have engaged less with the overall generosity of working-age social security. Ideally we hope economic reforms will help tackle inequality, but if market inequalities remain at present levels then current social security policies will be neither fair nor sustainable over the long term. This is because most non pension benefits are indexed to prices, which means that living standards for working-age social security recipients will fall progressively relative to typical incomes. While deficit reduction continues, revising this policy is not affordable, but a change in long-term approach should be considered afterwards.”
The idea of linking the major working-age social security entitlements to earnings is nowhere near mainstream political debate. It is not discussed today and it was not considered by Labour in government.
The longer term view
So the commission was breaking with received wisdom by arguing the status quo is untenable. And over the long term, our proposals are the only way to secure good living standards for the many disabled people under pension age who are not in a position to work. I hope campaigners will unite around our analysis and prescription for the long term.
Critics like Sue are more exercised by our short term conclusions, set in the context of further years of huge financial pressures after 2015. We do not know how tight the public finances will be after the election, but the purpose of our work was to consider how a future government might make hard trade-offs. We looked at how the public spending ‘cake’ might be cut under two scenarios: where a future government is able to spend either £20bn or £34bn more than the coalition plans to by 2017.
Signing-up to these plans would be politically controversial and would probably require significant tax rises, but even under these scenarios we could not see how it would be possible to finance significant reversals to the recent social security cuts. Under the £34bn option we thought it would be possible to maintain planned levels of social security spending; and under the £20bn option we thought a little more might need to be shaved, compared to existing projections.
This sounds odd, given that we envisage overall spending being significantly higher than under coalition plans. But it is because the government is planning totally unacceptable cuts to public services for after the next election – including public provision of huge benefit to disabled people and other social security recipients. We concluded that the first priority would have to be to prevent another round of impossible public service cuts.
As a result, we did not allocate any money to reversing coalition social security policies, except when funded from savings to social security elsewhere. We endorsed relatively cheap options like scrapping the bedroom tax. But we reluctantly concluded that the £2bn required to reverse the coalition’s one year time-limit on contributory employment and support allowance (ESA) could not be an early priority. Similarly, we assumed that personal independence payment (PIP) would be implemented on roughly its current lines, although that does not rule out significant reforms to the terrible assessment process currently being rolled out.
When it came to thinking about the possibility of further social security cuts, our starting point was to protect the living standards of the most disadvantaged and to avoid the complete destruction of the universal principle. Finding any savings that did not breach these two principles was very tough. But we concluded that if any cuts did need to be made, the place to start was with high and middle income older people, who have been protected from almost all cuts during this parliament.
The commissioners did not make definitive recommendations but we identified four possible ways to reduce entitlements in a way that would primarily affect this group.
We suggested replacing the ‘triple lock’ on the state pension with earnings indexation; and means-testing entitlements like winter fuel payment. But we also floated two ideas for reducing the £10bn spent on disability benefits for pensioners (while also avoiding the means-testing of these benefits, which some have proposed). First we suggested that disability benefits should be treated as taxable income, just like the state pension. This would raise £1bn, mainly from older people with middle and high incomes.
We also suggested that the eligibility rules for PIP should in due course be extended to older people. This is not to endorse the detail of the current assessment: but if we are to have a new test for working-age disabled people, it is hard to justify having a different, more generous one for older people.
Reaching conclusions which might perpetuate the suffering and unfairness caused by the decisions of this government gave us no pleasure. But our work showed that a future government will need to make incredibly tough choices, even if it spends a good deal more than the coalition plans to.
Some may say there should be no limit on spending, that no deserving claim should go unanswered, but this just doesn’t reflect the reality of governing since the financial crisis. In today’s world restoring every coalition benefit cut would be to rob Peter to pay Paul: spending more on social security will just mean deeper cuts to public services.
In writing our report we knew we wouldn’t be able to please everyone. But we sought to apply the values of the left to a truly terrifying fiscal legacy. Hopefully our conclusions will at least spark debate on how difficult compromises might be made.
’2030 Vision: The final report of the Fabian Society Commission on Future Spending Choices’ is available to download here.