To be fair to the chancellor and her close colleague Liz Kendall, secretary of state for work and pensions, this cannot be what either of them joined the Labour Party to do – and it was clearly not why their party won the general election last July.
Yet all the signs are that the social security budget is simply too large a target for it to be ignored as the Treasury looks for savings in government expenditure. The briefings from government have been unmistakable and fairly obvious attempts to “roll the pitch” for cuts. Ms Kendall has for some months been talking about getting people on long-term sickness and disability benefits back to work.
Rachel Reeves has been making similar noises. Lest there be much remaining doubt about their intentions, the DWP has, by interesting coincidence, published a series of “impact assessments” of how effective plans to move people off benefits and into work can be. On the morning media round, the justice secretary, Shabana Mahmood, deployed the same spin as Ms Kendall has been developing for some time – “there is a moral case for making sure that people who can work are able to work”. The disturbing implication is that there are great numbers of people preferring to live on the pittance the state provides instead of taking a job. It is a dangerous assumption.
It is in this context that, according to authoritative accounts, Ms Reeves is formally to present her plans for social security to the Office for Budget Responsibility (OBR). It will be for them to assess whether her plans will, realistically, help her to meet her fiscal rules, by reducing the cost and by boosting the national income by growing the workforce.
Perhaps she can, but the OBR – and the country – should be wary of taking certain easy assumptions at face value. Two of these are especially questionable. The first is the notion, fashionable in some circles, that long Covid, which has affected many thousands of people, is not real. The second, equally difficult to accept for anyone with knowledge or experience in the area, is that the increase in mental health issues, a trend the pandemic exacerbated among the young, is just an unwillingness to face up to the trials of life.
It could be that the scale of these health issues has been exaggerated. Some claimants, as is inevitable, will be swinging the lead; but, equally, there is no reason to suppose that suddenly, in 2020-21, much of the nation decided to start malingering. The OBR should therefore cast a sceptical eye across the research Ms Kendall has produced to back Ms Reeves’s proposals, and ask the chancellor some tricky questions about how confident she is that she can so readily find billions in savings. Her fellow MPs and the voters will also be concerned that restructuring the benefits system doesn’t cause undue distress and suffering.
Are there alternatives? About half of the social security budget goes on the old age pension and associated benefits. The “triple lock” protecting the value of the pension is a valuable safeguard against pensioner poverty, and has been guaranteed by Labour. The “grey vote” is a powerful bloc in any election.
Although she undoubtedly inherited a difficult, if not outright dishonest, set of spending plans from her Conservative predecessors, it is fair to say that Rachel Reeves has made her own share of mistakes since she became chancellor some eight months ago (though to her it may feel longer). Not the least of those, in economic terms, was the hike in employer national insurance contributions, which will come into force imminently. They will raise around £25bn a year, but by the same token will add that to the cost of employing workers, and businesses will suffer.
A combination of other high-profile rises and some spectacularly gloomy rhetoric have conspired to shove the British economy towards recession. Growth is going to be even more anaemic than Ms Reeves and the OBR assumed at her October Budget, and since then the prospect of a global trade war has depressed matters further. The prospect of a real war in Europe means that increase in defence spending is now imperative, and behind the extra provision funded by cuts to overseas aid.
The governor of the Bank of England, Andrew Bailey, confirmed in his latest evidence to MPs the difficult environment for policymakers, highlighting a pick-up in inflation and correspondingly less scope for cuts in interest rates.
So there’s not much money around. Yet even in a tight corner, any chancellor has the power to make choices, even if they are between the bad, the very bad and the so-bad-I’d-rather-quit variety. Ms Reeves has not yet made the case that attacking social security is the least worst solution available to her.
