A One Nation Plan for Social Security Reform - Ed Miliband's speech

6 June 2013
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Ed Miliband MP, Leader of the Labour Party, said today at Newham Dockside:

It is great to be here in Newham.

Where a Labour Mayor and council are doing so many great things to help get local people back into work.

On Monday, Ed Balls gave a speech about how the next Labour government would control public spending.

The biggest item of expenditure alongside the NHS, is the social security budget.

The next Labour government will have less money to spend.

If we are going to turn our economy round, protect our NHS, and build a stronger country we will have to be laser focused on how we spend every single pound.

Social security spending, vital as it is, cannot be exempt from that discipline.

Now, some people argue that if we want to control social security we have to leave our values at the door.
But today I want to argue the opposite.

Controlling social security spending and putting decent values at the heart of the system are not conflicting priorities.

It is only by reforming social security with the right values that we’ll be able to control costs.

And the system does need reform.

And it is only by controlling costs that we can sustain a decent system for the next generation.

In every generation the world has changed and Britain’s welfare state has to change with it.

We’re no different.

Today we have women at work, not the male world of work that William Beveridge envisaged in the 1940s.

We have persistent worklessness, not the full-employment of the past.

So jobs for everyone who can work and help to make that happen, must be the starting point for social security reform: cutting the costs of worklessness.

Today, people often don’t get paid enough in work to make ends meet.

And the taxpayer is left picking up the bill for low pay.
We must change our economy, so that welfare is not a substitute for good employment and decent jobs.

Today the welfare state, through housing benefit, bears the cost for our failure to build enough homes.

We have to start investing in homes again, not paying for failure.

And, today, people’s faith in social security has been shaken when it appears that some people get something for nothing and other people get nothing for something – no reward for the years of contribution they make.

We have to tackle this too.

Overcoming worklessness, rewarding work and tackling low pay, investing in the future and recognising contribution: these are the Labour ways to reform our social security system.

And what I want to talk to you about today.

And it is very important I do, because there is an extra responsibility on those who believe in the role of social security to show real determination to reform it.
Real long-term reform not the short-term, failing approach of this government.

Which leaves hundreds of thousands of people in long-term idleness.

Hits the low-paid in work and pretends they are skivers.
Forces families into homelessness, driving up bills.
Never truly getting to grips with the root causes of social security spending.

So here is the choice:

Remake social security to make it work better for our country and pass on a fair and sustainable system to the next generation, with the Labour Party.

Or

Take the Conservative way: taking support away from working families and those who need it most, always seeking to divide our country and not tackling the deep causes of rising costs.

Work

Let me start with the importance of work.

As I have said before:

Labour - the party of work - the clue is in the name.
Our party was founded on the principles of work.
We have always been against the denial of opportunity that comes from not having work.

And against the denial of responsibility by those who could work and don’t do so.

This country needs to be a nation where people who can work, do.

Not a country where people who can work are on benefits.
That’s about values.

And it’s also about making social security sustainable for the future.

History teaches us this.

The growth rate of social security spending was higher under the Thatcher and Major governments of 1979 – 1997 than under the New Labour governments of 1997 – 2010.

How can this be?

Given the Conservative governments pared back benefits, year after year.

Whereas the Labour government took action, of which I am proud, to increase tax credits to help make work pay and to address pensioner poverty in a way no previous government had done since the War.

The reason is this:

Because among the biggest drivers of social security spending are the costs of unemployment.

That’s what happened under those Tory governments.
Unemployment went up.

Now we have heard so much from this government, and from Iain Duncan-Smith, about the importance of work.

So surely they’ve promoted it?

The answer is they haven’t.

After only three years, just like the Thatcher government, they have a dirty secret about social security.

Something they don’t want you to know.

Long-term worklessness is now at its highest level for a generation.

From this government, that preaches to us about work.
About people not being on benefits.

Today, there are more men and women - half a million - who have been out of work for over two years than at any time for sixteen years, in fact since the Labour government took office in May 1997.

This worklessness, this waste, under these Tories, is totally at odds with the values of the British people.
In 2012 youth unemployment alone cost Britain £5 billion.

And long periods of unemployment store up costs for the future.

This level of unemployment among young men and women means further costs of at least £3 billion per year in the long term in further worklessness and lost tax revenue.

Billions of pounds that could be put to far better use.

There’s nothing in Labour values that says that this is a good way to spend tax-payers’ money.

Britain just can’t afford millions of people out of work.
Now just as there is a minority who should be working and don’t want to, there is a majority who are desperate for work and can’t find it.

I think of the young man I met in Long Eaton recently, out of work for four years, desperate for a job.

The problem is this government’s Work Programme can leave people like him unemployed year after year after year.

We would put a limit on how long anyone who can work, can stay unemployed, without getting and taking a job.

For every young man and woman who has been out of work for more than a year, we would say to every business in the country, we will pay the wages for 25 hours a week, on at least the minimum wage.

Fully funded by a tax on bankers’ bonuses.

The business would provide the training of at least 10 hours a week.

And because it is a compulsory jobs guarantee, young people will have an obligation to take a job after a year or lose their benefits.

And we will do the same for everyone over 25 unemployed for more than two years.

And to those who say the work simply isn’t there, I say with a national mission, led from the top of government, we can get thousands of businesses, tens of thousands, in the country behind the idea.

Businesses and social enterprises that are desperate to give people a chance.

And while the jobs guarantee is national we will make it happen through local action.

The kind of local action I’ve seen here in Newham.

Devolving power and resources to local communities so there can be advice and support suitable for the individual who is looking for work and tailored to the particular needs of businesses in the area.

But we need to go further.

Parents need choices, particularly when their children are very young.

We know the difference stay-at-home mums and dads can make in the earliest period of a child’s life.

But we also know that the ethic of work is an important one to encourage in a household.

We do not want worklessness passed down from one generation to another.

The last Labour government made significant progress in getting parents in workless households back into work.

But the truth is there is still more we can do.

Too many children still live in families without work.

And under the current government too little is being done about this.

At the moment, if both partners in a couple are out of a job, or a lone parent is out of work, they risk completely losing touch with the world of work when their child is under 5.

But all of the evidence is that the longer anyone remains disconnected from the workplace, the more likely they are to stay unemployed for a long period.

Bad for them and bad for the country.

And there is something we can do.

Thanks to the last Labour government, we now have nursery education available for all 3 and 4 year olds, for 15 hours a week.

The very least we should offer and demand is that while their children are at nursery, both partners in a workless household, as well as single parents who aren’t working, should use some of the time to undertake some preparations to help them get ready to go back to work.

Attending regular interviews in the Job Centre, undertaking training, finding out what opportunities exist.

To be clear, under this policy there would be no requirement to go back to work until their youngest child is 5.

But there would be a pathway back into work for them.

We should also support disabled people.
Those who cannot work.

And those who want to work and need help finding it.

Successive governments did not do enough to deal with the rise in people on Incapacity Benefit.

It was a legacy of unemployment from the years Mrs Thatcher was in power.

But the last Labour government should have acted on it sooner.

Towards the end of our time in government, we did introduce tests for the Employment and Support Allowance.

That was the right thing to do.

And we continue to support tests today.

But when over 40% of people win their appeals, it tells you the system isn’t working as it should.

And too often people’s experience of the tests is degrading.
So this test needs to change.

It needs reform so that it can really distinguish between different situations.

Disabled people who cannot work.

Disabled people who need help to get into work.

And people who can work without support.

The test should also be properly focused on helping to identify the real skills of each disabled person and the opportunities they could take up.

I meet so many disabled people desperate to work but who say that the demand that they work is not accompanied by the support they need.

So these tests should be connected to a Work Programme that itself is tested on its ability to get disabled people jobs that work for them.

So the first piece of a One Nation social security system that controls costs begins with the responsibility to work and the responsibility of government to help make it possible.

Rewarding Work

But it is not just about work.

It is also about the kind of work that can properly support people and their families.

Today in Britain almost three million men and women and almost one and half million children live in families that are going to work and are still not able to escape poverty.

People doing the right thing, trying to support themselves and their children.

The last Labour government took action on this, and was right to provide tax credits for those in work.

But we didn’t do enough to tackle Britain’s low wage economy, a low wage economy that just leaves the taxpayer facing greater and greater costs subsidising employers.

To tackle the problem of poverty at work and to control costs we need to create an economy that genuinely works for working people.

I want to teach my kids that it is wrong to be idle on benefits, when you can work.

But I also want to teach them that the people in this country who work 40 or 50 or 60 hours a week, do two or even three jobs, should be able to bring up their families without fear of where the next pound is coming from.

That’s as much an issue as the responsibility to work.

Of course, this government has nothing to say about this.

Worse than that, they are taking our country in the wrong direction.

Their failure on the economy means that real wages have fallen £1,900 since this government came to office.

We know that this government will never stand up for low and middle-income working people.

But our approach for the future needs to make good on what the last Labour government did not achieve.

As William Beveridge envisaged seventy years ago when he founded the social security system we need to understand that there are three sets of people with responsibilities:
Government.

Individuals.

And the private sector, including employers.

That’s what One Nation is all about.

Responsibility being borne by all.

For too many people in Britain the workplace is nasty, brutish and unfair.

The exploitation of zero hours contracts to keep people insecure.

Using agency workers to unfairly avoid giving people the pay and conditions offered to permanent staff.

Recruitment agencies hiring just from overseas.

And some employers not paying the minimum wage.

These issues too are about our responsibilities to each other.

About the failure of government to set the right rules and the failure of a minority of employers.

Be in no doubt: all of this is on the agenda of the next Labour government.

So, for example, we will change the law to stop employment agencies using loopholes to undermine the pay of what are effectively full-time employees.

And we will do everything in our power to promote the living wage.

If local councils can say if you want a contract with the council then you need to pay the living wage, then central government should look at doing that too.

And for every pound that employers pay above the minimum wage towards a living wage, government would save 50 pence in lower tax credits and benefits and higher revenues.

We should look at offering some of these savings back to those employers to persuade them to do the right thing and pay the living wage.

It will be tougher to tackle big issues facing our society like child poverty in the next Parliament.

But I still think we can make progress if everyone pulls their weight.

And it starts with tackling child poverty among families in work, as part of a long-term goal that no-one should have to work for their poverty.

So the second plank of our approach is about an economy that works for working people so that we can both keep social security costs under control and work towards a fairer society.

Investing for the Future

The third plank of our approach is wherever possible we should be investing for the future, not paying for the costs of failure.

It is why it is far better to be investing in putting people back to work than paying for them to be idle.
It is why it is so important to invest in childcare so we support families as they struggle to balance work and the needs of family life.

And the same is true when it comes to one of the biggest drivers of the growth of social security spending in recent decades: housing benefit.

We can’t afford to pay billions on ever-rising rents, when we should be building homes to bring down the bill.

Thirty years ago for every £100 we spent on housing, £80 was invested in bricks and mortar and £20 was spent on housing benefit.

Today, for every £100 we spend on housing, just £5 is invested in bricks and mortar and £95 goes on housing benefit.

There’s nothing to be celebrated in that.

And as a consequence we are left with a housing benefit bill that goes up higher and higher.

For the simple reason, that we have built too few homes in this country and therefore we see higher and higher prices, particularly in the private sector.

Now, this government talks a lot about getting housing benefit under control.

But let me be clear: any attempt to control housing benefit costs which fails to build more homes is destined to fail.

For all the cuts this government has made to housing benefit, it is still rising and it is forecast to carry on rising too.

Of course, there is an issue of values here too.
In 2011, there were 10 cases where £100,000 a year was spent on housing benefit for individual families.

That’s 10 too many.

And it is one of the reasons why Labour has said we would support a cap on overall benefits.

As Ed Balls said on Monday, an independent body should advise government on how best to design this cap to avoid it pushing people into homelssness and costing more.

But the real, long-term solution is clear: we have to do what hasn’t been done for three decades and to move from benefits to building.

Currently Britain is building fewer new homes than at any time since the 1920s.

Ed Balls talked on Monday about how we invest for the future of our country.

Clearly, the building of homes is high on that list.
This will be a priority of the next Labour government.

But just like tackling worklessness, we can’t do it from central government alone.

We will need every local authority in Britain to be part of this effort.

At the moment, we expect individual families to negotiate with their landlords.

In these circumstances, it is almost inevitable that tenants end up paying over the odds.

And so does the taxpayer, in the housing benefit bill.

It’s time to tackle this problem at source.

So a Labour government would seek a radical devolution to local authorities.

And Labour councils in Lewisham, Liverpool, Leeds, Manchester, Sheffield and Birmingham have all come to us and said that if they had power to negotiate on behalf of tenants on housing benefit, they could get far greater savings than the individual on their own.

So a Labour government would give councils this power.

Bringing the cost of housing benefit down.

And what is more, we would let them keep some of the savings they make on the condition that they invested that money in helping build new homes.

This is the way we can start to bring about the shift from benefits to building.

Bringing the housing benefit bill down for the long-term too.

And it is a One Nation solution: enforcing the responsibilities of government and private landlords.

So the third plank of a One Nation social security system is to invest in the future, not to pay for failure.

Recognising Contribution

The fourth and final plank is around recognising contribution.

We do that by recognising the importance of supporting families, through maternity and paternity leave and pay, child benefit and child tax credit.

We do that by providing support to people with disabilities, both those who cannot work and also to those who can work, but whose extra needs it is right to recognise.

Of course, it is right to make sure that we have the right tests in this area too.

Which is why we support tests for Personal Independence Payments, but again they must be done in the right way.

We also recognise contribution by supporting elderly women and men who have contributed to our country throughout their lives.

On pensions, we know we have a rising elderly population and a rising budget.

The way to make this sustainable is to ensure that we increase the number of people in the working population supporting our elderly.

And therefore to show a willingness to adjust the retirement age.

Of course, there needs to be proper notice, but as people live longer, the age at which people retire will have to increase.

All of Britain’s elderly men and women deserve dignity in retirement, after a lifetime of contribution to our country.

That’s why there will always be a place for universal support at the heart of our welfare system.

Like an NHS for all.

A proper basic state pension for all those who’ve paid in.
But whether it is relation to pensioners or children there is always a balance that has to be struck between universal, contributory and means-tested benefits.

With so many difficult choices facing the next Labour government, we have to be realistic about what we can afford.

So it doesn’t make sense to continue sending a cheque every year for Winter Fuel Allowance to the richest pensioners in the country.

Equally, when it comes to the decisions of the next Labour government it won’t be our biggest priority to overturn the decisions this government has made on taking child benefit away from families earning over £50,000 a year.

But in one important respect our social security system fails to recognise contribution: the service of those currently of working age.

Last week, I met somebody who had worked all his life, for 40 years, in the scaffolding business.

What does the social security system offer him if he falls out of work?

It’s the same as someone who has been working for just a couple of years.

That can’t be right.

I can’t promise to turn the clock back to Beveridge and nor do I want to.

Our society isn’t the same as it was back then, with most men at work and women at home.

But the idea that people should get something back for all they’ve put in is a value deeply felt by the British people.

So I believe we should look at the support that is offered to those who fall out of work and the contribution on which it is based.

Currently, after two years of work, someone is entitled to “Contributory Jobseeker’s Allowance” without a means test for six months.

They get £72 per week.

Whether they’ve worked for two years or forty years.
Two years of work is a short period to gain entitlement to extra help.

And £72 is in no sense a proper recognition of how much somebody who has worked for many decades has paid into the system.

As so many people have told me: “I have worked all my life, I have never had a day on benefits, and no real help is there when I needed it.”

So I have asked our Policy Review to look at whether, without spending extra money, we can change the system.
Asking people to work longer – say 5 years instead of 2 - before they qualify for extra support.

But at the same time making that extra support more generous to better reward contribution.

This is particularly important for older workers who find it harder to get back into work at a level similar to their previous occupation.

And we will look at accompanying this with extra help back into work for older workers who lose their jobs.

And as we look to reform this contributory part of our welfare system, we should also examine ways to take account of some of the other kinds of contribution people make, like mums looking after very young children and children looking after their elderly parents.

Because we want to send a signal about the real importance that the next Labour government attaches to recognising contribution.

Planning the Budget

So the four building blocks of a One Nation social security system are: work, rewarding work, investing for the future not paying for failure, and recognising contribution.
A system that is sustainable.

And one which reflects the values of the British people.
But I believe we need to do more in these tough times in how we plan social security spending.

In Labour’s last period in office we introduced the three-year spending review.

Enabling Departments, like any business, to properly plan three years ahead.

Throughout previous generations, there had been an annual spending round, rows between ministers, arguments between Departments, leaks to the newspapers.

A bit like now really under this government.

It makes much more sense to plan ahead.

I believe we should extend this approach from Departmental spending to social security spending.

So that planning social security over three years should become a central part of each spending review.

And I also believe that a cap on social security spending should be part of that planning process.

Because what governments should be doing is looking three years ahead and setting a clear limit within which social security would have to operate.

Now, clearly there are detailed issues that need to be worked on to make any cap sensible.

The government has also talked about a cap on social security.

And we will look at their proposals.

In particular, they are right we need to be able to separate the short-term costs of social security - those that come from immediate downturns in the economy - from the big, long-term causes of rising spending that should be within a cap, like housing costs and structural unemployment.

And we need also to consider how to cope year to year with higher than expected inflation and how to treat the impact of an ageing population.

The starting point for the next Labour government will be that in 2015 – 2016 we would inherit plans for social security spending from this government.

Any changes from those plans will need to be fully funded.
For example, if we were in government today we would be reversing the millionaire’s tax cut to help make work pay through tax credits.

Today I am delivering a clear statement about One Nation Labour’s principles for social security spending:

The next Labour government will use a 3-year cap on structural welfare spending to help control costs.

Such a cap will alert the next Labour government to problems coming down the track.

And ensure that we make policy to keep the social security budget in limits.

Introducing greater discipline, as ministers from across Departments will be led to control the big drivers of spending.

Conclusion

So here is the choice that people will face at the general election.

I have set out how we can control the social security budget.

Not in anecdote or as part of a political game or as a way of dividing the country.

But as a way to reform the system so that it meets the values of the British people.

I have set out the values that would drive a One Nation social security system in government.

But there is another choice on offer from David Cameron.
I will tell you that there is a minority who don’t work but should.

He will tell you anyone looking for work is a skiver.
I will tell you that we need to protect the dignity of work and make work pay.

He will hit the low-paid in work.

I will tell you that we do need to get the housing benefit bill down with a cap that works, but crucially by investing in homes and tackling private landlords.

He will make the problem worse by making people homeless and driving up the bill.

I will tell you that we always need to value contribution in the system

He will hit people who work hard and do the right thing.

We will tackle the deep, long-term causes of social security spending and tackle the costs of failure like housing benefit, worklessness and the problem of low pay.

They will not.

We must pass on to our children a social security system that is sustainable.

And a system that works and is supported.

We can use the talents of everyone.
Demand responsibility.

And seek to move forward as a united country.
Or we can have politicians who seek to use every opportunity to divide this country and set one group of people against another.

I believe this country is always at its best when it is united.

One Nation.

Everyone playing their part.

That is the social security system I want to build.

That’s the future I want to build for Britain.