Reeves has ducked welfare reform and put up taxes – but there is another way

Rachel Reeves attends the annual conference of the Confederation of British Industry
Chancellor Rachel Reeves, pictured at the CBI conference this week, insists her number one priority is growth - Neil Hall/EPA-EFE/Shutterstock

The Chancellor has claimed that there were no alternatives to the damaging tax rises she announced in her Budget last month. These are the tax rises that the Government’s own independent forecaster says will lower growth and reduce the number of people in full-time equivalent employment by 50,000. They have also pushed the farming community into near open rebellion.

For a Government that ludicrously insists that economic growth is its number one priority, you really do hope that it casts the net far and wide looking for a different approach. Based on the welfare reforms announced on Tuesday, it is clear ministers did not look very hard.

Because – despite claiming to have unveiled the “biggest employment reforms in a generation” – it is obvious that the much-anticipated Get Britain Working White Paper will do no such thing. When the main elements of a prime-minister-led announcement are a further review, another consultation, some trailblazers and a paltry £250m, you know the Government has completely and utterly ducked any serious attempt at addressing the issue concerned.

Which is a crying shame and a massive missed opportunity. Because the groundwork for much-needed, serious and fundamental reform of our welfare system has been laid.

When I was at the Treasury, the Back to Work plan we announced had 10 times the amount of money the Government has announced this week. The £2.5bn programme involved a massive expansion of NHS talking therapies and individual placement and support – measures this Government is trying to take credit for – as well as a reformed Restart Scheme.

In a statistical quirk, the same Office for Budget Responsibility (OBR) which forecast that Labour’s tax rises would reduce employment by 50,000 also stated that these welfare reform measures would raise employment by the same.

How many people will the Get Britain Working White Paper get back into work? I have no doubt the OBR will tell us in their next forecast but I am willing to bet the answer will be zero.

More significantly, in what turned out to be one of his last major announcements ahead of the general election, Rishi Sunak unveiled a package of measures that went further still. The fit note system, under which 94pc of people who are signed off are described as “not fit for work”, was set for an overhaul.

Benefits would have been removed entirely from someone who refused to accept a job or comply with other conditions set by their work coach. And the eligibility criteria in the work capability assessment would have been tightened up.

All of these measures seem to have been dropped by the Government and replaced with precisely nothing.

But the biggest omission, the one that really would take courage and the one that would mean tax rises such as Labour’s farm tax could have easily been avoided, is the complete silence on disability benefits.

A consultation on reforming the personal independence payment (PIP) system was published before the election and we had plans to deliver the results of it this autumn. As well as looking at some of the broader eligibility requirements to qualify for PIP, this consultation sought to change the way those with mental health conditions were supported.

It asked tough questions on whether those with low-level conditions would be better off getting help into work rather than being parked on benefits. And the work necessary to implement such changes would easily have been ready in time for the Budget.

I have no doubt it would have been controversial. But it would have resulted in a fairer system for both those who need support and for the taxpayer who is footing the bill for a system that is set to balloon out of control. Depending on the final package, a fairer PIP system could save the taxpayer up to £10bn a year. That would be enough to cancel the farm tax, reinstate the winter fuel payment, scrap the increase in capital gains tax and limit the increase in National Insurance.

For the Chancellor to say there is no alternative is ridiculous. There are plenty. Even if she is determined to increase spending by £75bn a year, there are options available to her to limit the tax rises needed to pay for such a splurge.

What she really means is that there are no alternatives she is prepared to contemplate. That ultimately it is politically easier to have a fight with farmers, family businesses and the Confederation of British Industry than it is to address the knotty issue of welfare reform.

I’m afraid that the Chancellor hasn’t taken the tough decisions as she likes to say – she has avoided them. Because there were plenty of alternatives available, just none that this Government has had the courage to take.