A return to Blairism could slash billions from our welfare bill

Tony Blair and Gordon Brown
Tony Blair and Gordon Brown

The vast public debt that is holding the country back could be reduced if Keir Starmer simply followed the policies of the last Labour Government. The cost of incapacity and disability benefits alone could be reduced by about £10 billion.

Blair’s New Labour was well aware of benefit fraud and understood the need to double-check claims and require work obligations, but judging by his November white paper, Starmer’s Labour party does not accept that individuals bear any personal responsibility for their situation. All claimants are seen as victims of barriers beyond their control. As a result of this failure, the Office for Budget Responsibility (OBR) forecasts an increase in the benefits bill.

Parties of the left – Labour in the UK and the Democrats in the US – have long defined themselves as the parties of the underdog that set out to transfer wealth from the rich to the poor. The Democrats were the first to recognise that welfare policy had been exploited and that it could undermine the spirit of independence and personal responsibility on which freedom relies. The Personal Responsibility and Work Opportunity Reconciliation Act, passed in 1996 while Clinton was President, introduced policies that significantly cut the welfare bill and allowed millions of Americans to rediscover the dignity of work. It took them a while, but Blair’s Labour party came to see that welfare policy in the UK was in need of similar reform.

Let’s focus on incapacity benefits, which now cost £24.9 billion per year. From 2005, New Labour began planning a major reform and Incapacity Benefit was replaced by Employment and Support Allowance from October 2008. The white paper of 2006 said that the aim was to assess capability for work rather than benefit entitlement and the result was the Work Capability Assessment (WCA). In 2008-09, 6.7 per cent of working-age people (aged 16-64) were claiming an incapacity benefit. By 2017-18 the proportion was 4.9 per cent, a reduction of 27 per cent. The Tories had been in office from 2010 but continued Labour’s policy until they started to phase in Universal Credit from 2016.

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Since then, the caseload has increased substantially. It was 7 per cent of the working-age population by 2024 and was forecast by the OBR to reach 7.9 per cent by 2029.

Today, a 27 per cent reduction in the working-age population claiming incapacity benefits would reduce the bill by £6.8 billion. A reduction in claimants of incapacity benefits will also lead to a fall in disability benefits. Incapacity benefits are designed to replace income, while disability benefits (the Personal Independence Payment and Disability Living Allowance) are intended to cover the additional costs of disability. About two-thirds of incapacity benefit claimants also receive disability benefits, and so a reduction in the number of incapacity benefit claimants will also trigger a fall in disability benefits.

Disability benefits cost £19 billion in 2024, with about £12.5 billion going to recipients of incapacity benefits. A reduction of 27 per cent would save £3.4 billion. This could mean a combined saving of over £10 billion, which is reported to be the “headroom” allowed by the Treasury in the recent budget.

If we look back to the Labour Government before Blair, that of Jim Callaghan, incapacity benefits were being claimed by 3.6 per cent of the working age population in 1978-79, nearly half the current proportion. A 48 per cent reduction today would save around £14.2 billion.

But neither the philosophy of Old Labour nor that of New Labour are in keeping with Starmer’s Labour party. It inhabits a world of victims and their oppressors, whether the issue is welfare reform or identity politics. Personal responsibility is not in their vocabulary. But they don’t need to abandon all commitment to the less fortunate. Less Corbyn and more Blair and Callaghan would do just as well.


David Green is former CEO of Civitas