Leading article: Welfare reform and the danger of unrealistic expectations

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It is increasingly common to hear the cost of social welfare described as the "bills of social failure".

But there will always be such bills, and quite right too. The social safety net is one of the hallmarks of a civilised society. There will always be people who are sick, disabled or who, through no fault of their own, find their jobs disappear. They should be able access help from the state.

Yet reform of the benefits system is needed. One does not have to believe all the horror stories of abuse of the system generated by the right-wing press to grasp that the benefits trap is real and damaging. There are clear disincentives for a person on benefits to take a job if it means their income would fall, or increase only very slightly (as is the case for an estimated 1.9 million people). The solution is to make work pay better, perhaps by continuing to pay benefits for a period after a claimant begins a job, one of the most sensible ideas in the consultation paper released by the Department for Work and Pensions yesterday.

But there are serious dangers in the Government's overall approach to benefits reform. The Chancellor, George Osborne, has said that he is looking for benefit reform to save considerable sums of money which can then be used to ease the burden on other government departments. But removing disincentives is likely to entail hefty up-front costs. And if it is done on the cheap, the most vulnerable are likely to suffer.

The Work and Pensions Secretary, Iain Duncan Smith, has also said that he is looking for a radically less complex system than Gordon Brown's tax credits. He believes there are billions of pounds of savings to be made by cutting bureaucracy and eliminating fraud. But he is in danger of over-promising. Some of the complexity and means-testing in the present system is there for a reason, namely to target help for those, who are most in need, such as single parents with young children. If Mr Duncan Smith can reduce the complexity of the tax credits system without penalising the most vulnerable, that would be welcome. But he should not presume success. And it would be quite irresponsible for him to count on such efforts producing significant savings.

The other problem lies in the timing. Attempting benefits reform in the context of a weak economy and high unemployment will prove an immense challenge. If the Government's faith that its drastic fiscal retrenchment will be accompanied by unprecedented job creation in the private sector proves unfounded, as is perfectly possible, the overall welfare bill is likely to increase. And the number of individuals in long-term unemployment, which Mr Duncan Smith rightly identifies as the most insidious kind of joblesness, will also grow. It will become increasingly difficult to differentiate between those trapped in spirit-sapping welfare dependency and those who have simply been the victims of a weak economy.

Welfare reform is unquestionably necessary. A sizeable proportion of the £87bn welfare budget is indeed a bill for failure; namely the failure of successive governments to deal with the benefits trap. And this benefits trap does create social misery and helplessness which can span generations. But it needs to be tackled with a long-term perspective. Without greater realism from the Government about how much can be achieved, how much it will cost and how soon it can be delivered, ministers are setting themselves up for a painful fall.

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