Political Commentary: The axe hovers at Social Security

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GUESS the author: 'We need some fresh thinking about welfare benefits. I favour an examination of the ineffective system of universal entitlements, perhaps . . . a more flexible and dynamic programme that offers individuals pathways out of poverty . . . If there is a continuing need to satisfy the principle of universality we could have a universal minimum floor set at a much lower level than at present . . . with additional payments for those who actually need it.'

Keith Joseph? George Bush? Milton Friedman? No, it's Bill Morris, general secretary of the Transport and General Workers' Union, writing, mainly about child benefit, in the New Statesman on 17 July. There is probably very little that Peter Lilley, the present Secretary of State for Social Security disagrees with in those remarks; yet it is a nice irony that, unlike Mr Morris, he could not say it without committing political suicide. It is difficult to imagine anything more calculated to incur the wrath of the Tory left, for whom universal child benefit is a totem, now back in place as a result of Margaret Thatcher's deposition.

John Major's appointment of Mr Lilley, a Thatcherite, to the social security job, remains one of the enigmas of his post-election reshuffle. But some caveats are needed. For one thing, whatever it was, it wasn't a fiendish Major plot. According to one well-

informed account, Mr Lilley was originally offered, and refused, the Citizen's Charter department now run by William Waldegrave.

The obvious comparison - a free-market right winger in a 'caring' department - is with John Moore. But Mr Moore had scarcely arrived in 1987 at what was then the Department of Health and Social Security when he started making grand speeches about reforming the benefits system. It is worth repeating that when a portentous paper by Mr Moore called The End of Poverty was circulated to the whips' office, the then Deputy Chief Whip Tristan Garel-Jones, took his pen out, deleted the last word of the title, and prophetically substituted the words 'John Moore'.

Mr Lilley does not have the ambition of Mr Moore, who after the 1987 election was widely seen as Mrs Thatcher's heir apparent on the right. For that reason, while he may not be famous for having close Cabinet allies, he does not have any deadly rivals either, certainly not one as formidable as John Major was to Mr Moore. As Chief Secretary, Mr Major twice worsted Mr Moore over public spending. But the end came when Mr Major and his boss, Nigel Lawson, mercilessly tore some Moore proposals on pensions to shreds at a Downing Street meeting chaired by Mrs Thatcher, and she decided Moore was not up to the job. Mr Lilley is both cleverer and more cautious than Mr Moore.

His advisers, patiently fielding persistent questions about his long-term intentions, insist that his aims are modest and incremental. Yes, they say, of course he has read - several times - Losing Ground by Charles Murray, influential American scourge of the dependency culture. But he finds it long on analysis, short on prescriptions. Yes, he worries that the benefit system may be actively promoting social problems by providing an economic incentive to teenage girls to become pregnant - but how can you stop that happening without unfairly penalising the children? Mr Lilley is mercifully intelligent enough to realise that it is no good being pious about this.

More prosaically, his colleagues insist that until 1995 or so, pensions will be quite enough to keep him busy: preventing repeats of the Maxwell theft, equalising the state retirement age for men and women, and amending the law on private pensions.

It is hard to banish the idea that Mr Lilley has, or will develop, a hidden agenda for the social security system. Even in the short term, there are powerful incentives to do so, the most powerful being constraints on public spending. Hence, for example, the persistent reports that he intends to cut back the period of unemployment benefit from a year to six months. The difficulties of this have been under-

reported; it would require primary legislation and a bill just might not get through; if it did it would probably make little impact on spending in 1993-4. But it is certainly under consideration. And since a number of ministers made it clear at last month's Cabinet meeting on public expenditure that cuts in capital spending should be resisted because of their recessionary effect, the pressure on non-capital expenditure, like benefits, becomes all the greater.

Nevertheless Mr Lilley faces considerable constraints, not least the manifesto commitments to maintaining the value of universal child benefit and the state pension. Deep down Mr Lilley may question the wisdom of such commitments. But he has made it repeatedly clear to officials in his department that he regards them as sacrosanct. The second constraint is the suspicion in which, as a Thatcherite like John Moore, he would be held if he attempted a wholesale shake-up of the benefits system.

Which is where the Labour Party comes in. The most creative idea to emerge from the post- election leadership contest was a new commission which would examine poverty, tax, benefits and their inter-relationship. Its real task is to solve the one outstanding, and perhaps most intractable conundrum for Labour: how to finance a programme of social justice without imposing a prohibitively heavy burden on middle- income voters. This could be a mere offshoot of the party machine, staffed by apparatchiks; or it could be kept at arm's length, with an open remit and composed in large part of serious academics and even businessmen, as well as politicians. Gordon Brown, the shadow Chancellor, is said to incline to the latter; and Mr Smith will be well served by Donald Dewar, his social security spokesman, a shrewd and, in England, rather underrated politician, who is unlikely to saddle the party with the blanket commitments on uprating child benefit and pensions which so hampered Labour in the 1992 election.

The targeting of benefits boldly alluded to by Mr Morris is one issue which a commission would consider. Another is 'workfare'; the idea that it is more humanising for people to work than receive benefit for nothing, appealed to the American right because of its compulsory element. Yet it has met serious opposition within the Tory Government, not least because the Treasury believes it is cheaper and less interventionist to pay benefit. And it has its supporters on the centre left, including Frank Field, the Labour chairman of the Commons social services committee.

Mr Field has a pretty important role to play in this exercise, even if he cannot chair the commission (which is not such an outlandish idea as some of his colleagues appear to think). He probably knows more about the social security system than any other MP. He fizzes with ideas - some controversial within the left, some much less so. He has a reputation as a maverick yet no select committee has more consistently or devastatingly criticised government policy than his. And he believes in full employment.

But whatever the composition of the commission, the paradox is that the Labour Party finds itself freer to think afresh about these questions than the Tory Party; if Mr Smith's commission meets the challenge, it could make as big a mark on our times as Rowntree and Beveridge did on theirs.