The Labour Right and welfare reform: living in the past

This morning on LabourList Owen Jones tore Liam Byrne MP to shreds over welfare reform. Byrne had argued that the “evil of idleness”, reinforced by the welfare state, was to blame for high unemployment.

He suggested that the way to correct this would be to punish those who rejected work, and have the government take steps to place them with training or employment.

Owen’s deconstruction was compelling. But I’ll add something else: this is not a new idea. Labour already pursued such a policy in 1998. Then, it was referred to as the “New Deal”.

The New Deal’s architects successfully identified a new problem for the welfare state as it existed – that full employment, which Britain had enjoyed since 1945, was dead. The neoliberal reforms of the 80s had ended the period of low unemployment in favour of a ‘flexible labour market’.

uk unemployment.png

(source: House of Commons Library)

Like Byrne today, the Labour ministers at the time hypothesised that the welfare system was now getting the way of people finding employment.

Labour’s new policy introduced two core changes. The first was the ability to withdraw benefits from those who “refused reasonable employment.” And the second was introduction of training schemes and placements to try and help the unemployed become more suitable for employment.

In both cases the onus of reforms was on the unemployed individual – either the lazy individual or the unprepared-for-the-new-economy individual. Depending on what their problem was the policy would either stop rewarding them for their laziness, or give them the tools they needed to compete in the new economy.

And as the Labour manifestos of 1997, 2001 and 2005 pledged, Labour would restore full employment – not by providing jobs, but by fixing the problems of the lazy, or unprepared individual.

But the policy failed dramatically. Labour’s reforms never returned unemployment figures anywhere near their social democratic low. The closest they got was to bring the figure down to what it was in the late 1970s, when this poster brought Margaret Thatcher to power:


Here are the unemployment figures for 1980 to 2011:


The withdrawal of benefits from the unemployed succeeded in decoupling the claimant count from the actual unemployed figure – leaving many people unemployed but unable to receive subsistence benefits because they no longer qualified for them.

But as the above graph shows, despite the extension of the policy to all adults from 2002 unemployment was roughly flat from the turn of the century until the 2008 recession – when it rocketed.

The New Deal was a well-conceived and well-intentioned policy – in 1998. But it misunderstood the causes of the problem it sought to address, assuming that the unemployment was caused by individual failings of workers rather than the simple fact that there were not enough jobs to go around.

Three successive Labour majority governments enthusiastically pursued what Byrne is suggesting as a priority, to no avail. We have nothing but evidence that there are fundamental problems with their hypothesis about what causes unemployment.

And yet we get this old, out of date idea from the man in charge of Labour’s policy review – well over a decade behind the evidence.

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