Why Lilley may deserve a statue

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Yesterday's furore over cuts in the Department of Social Security's running costs will once again leave Peter Lilley reflecting that life on benefits can be tough.

One moment he is feted as perhaps the Government's most thoughtful member for setting in train sensible, piecemeal reforms. The next, his pounds 3bn reduction in the DSS's operating budget is held up as proof that he has run out of ideas.

In fact, Lilley's cautious approach reflects that of the electorate. Many of us fear dismantling chunks of the social safety net that we may one day rely on ourselves. But there is a growing disinclination to fund new entitlements or more claimants through increased taxes. Lilley has set about tightening up eligibility requirements for a host of benefits and passed new potential claimants, such as those mortgage-payers who find themselves made redundant, on to the private sector. He has also cajoled people into taking out their own second pensions without resorting to the compulsory savings schemes being considered by Labour.

The result is that after nearly four years Lilley has succeeded in reducing the rate of increase in the social security budget from 3 per cent to 1 per cent a year.

This would scarcely seem cause for celebration. Our social security system costs nearly pounds 100bn every year - pounds 15 for every working person each working day. But to cut that total by just pounds 1bn, that is by as little as 1 per cent, would require the equivalent of taking pounds 100 a year away from 10 million people. Set this against the pounds 3bn cutbacks announced yesterday and youunderstand the attraction of efficiency savings.

As many as one household in three is now in receipt of some kind of benefit, and it would require a massive effort of collective abstinence enforced by a government with an overwhelming mandate to reduce greatly the social security budget. Such a dramatic shift in the way we pay for the welfare state would only be brought on by a crisis in the public finances.

Some Conservatives would welcome this, especially if it occurred under Labour and prompted moves towards a system based on private insurance and individually funded contributions.

The paradox of Lilley's time at the DSS is that his gradual approach to reform has made that eventuality far less likely. There have been no riots on the streets over pension provisions, for instance.

A cabinet colleague joked recently that there would one day be a statue of Peter Lilley erected for his achievements. If so, it might be raised by his erstwhile political opponents.

The writer is director of the Social Market Foundation