Labour tinkers at the margins of welfare

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When Christopher Smith the benefit man, was told to think the unthinkable, everyone started to salivate. Something shocking, we wondered, something short and sharp to drive the unemployed back into work and save us all some cash?

Sadly not. At least not in the new policy paper published yesterday, as the first stage on Labour's road to its welfare manifesto. All the Shadow Social Security Minister could offer us yesterday on "welfare to work" were a few reforms to the Benefit Agency, one-stop-shops for benefits and job advice, user-friendly forms to fill in, and greater individual flexibility in the allocation of benefits. Yawn. Such proposals are unthinkable only in their tedium. Mrs Thatcher reformed bureaucracies before breakfast, lunch and dinner.

However, the issues Mr Smith is supposed to be grappling with are immensely important. The "welfare to work" idea is central to new Labour's pitch to the voters. It's a classic case of old Labour values applied to the modern world. The party remains, so we are told, as concerned as ever about the plight of the poor and the underdog, but it no longer sees the solution as greater redistribution through the tax and benefit system. Instead Labour's remedy for the 1990s is to provide the poor and the unemployed with the job and training opportunities to prosper on their own.

"Hand-ups not hand-outs," and "spring-boards not safety nets" - such is the alliterative rhetoric that peppers Labour politicians' speeches. It's a familiar refrain. The US Democrats have been chanting it for years, while the Social Justice Commission framed an entire agenda of policy proposals around the theme two years ago.

There is something substantial behind the rhetoric. Providing short-term palliatives for a problem is a waste, when you can start to tackle the underlying causes instead. And the unemployment problem in Britain has a plethora of tangible underlying causes itching to be dealt with.

Defeatists tend to shrug their shoulders and assume unemployment is just a question of too many people chasing too few jobs. Not so. Some people don't get jobs whatever they do, and however fast the economy booms. The long term unemployed, the young, the unskilled, single women with children, and those whose partners are out of work too, all have particular trouble getting new jobs. Of course there are no cheap and easy answers, but there are certain things the state can do to help.

So the climate is right. The rhetoric is right. But has Labour got the practical policies? Yesterday's announcements sounded badly like tinkering at the margins, rather than radical overhaul.

Many of Mr Smith's proposals are welcome. Tailoring the approach of the unemployment service to the circumstances of each individual is a worthwhile idea, and far more likely to help them swiftly to a job or retraining course that suits them. Moreover, as customer charters have revamped other parts of the public services to respect the consumer, it is about time someone did the same for the sections of the state which deal with the poor.

Yes, it will mean a big shift in the culture of the employment service. Yes, it will require better trained, better motivated and more professional staff. But it can be done, as Australia and California have demonstrated. None of this is especially inspiring, but fortunately yesterday's proposals are not the sum total of Labour's welfare to work plans.

For the young and the long-term unemployed Labour has been prepared to put a substantial amount of cash behind the most ambitious plans yet seen for these groups. Eighteen months ago, the party promised a pounds 75 a week wage subsidy for everyone unemployed over two years. Last year they announced that every under-25 out of work for more than six months would get a choice between a subsidised private sector job, an FE course, voluntary or environmental work - with the proviso that benefits would be cut if all those choices were rejected.

Labour is, therefore, putting money in the same place as mouth for young people and long-term unemployed. But families who are caught in benefit traps are getting no such generosity.

In the long term, getting people off welfare and into work always comes back to the same problems: making people employable and matching them to jobs that pay enough for them, and their families, to live on. Often that will involve providing people with exactly the kinds of support, training and work experience that Labour has proposed. However, if the combination of technology and global competition mean wages at the bottom end of the labour market are just too low, the long-term answer may lie in subsidising wages rather than subsidising unemployment.

The government has already embraced in-work benefits such as Family Credit; they encourage people to take low-wage jobs and at least get a foothold back in the labour market. But expanding them is an expensive proposition, especially when companies can simply cut the wages they pay knowing that the state will make up the difference. Without some kind of floor on wages, in-work benefits are just a blank cheque from the taxpayer to unscrupulous employers. Yet a minimum wage set too high would indeed destroy the very jobs that many of the unemployed need as their first step back into employment. No one should envy the Labour government minister stuck with unenviable task of getting the level right. Better to start low rather than make mistakes.

So there it is. The policy that helps people into work and saves taxpayers' money in the long term could be the very one that the Conservatives claim will cost jobs: a minimum wage. It's almost shocking and unthinkable after all.