One good thing and two bad things about the government's welfare fiasco

It was a good week for parliamentary democracy - but not for public policy

I have travelling and meeting and entertaining friends in the last week or so, so my reaction to current events is a bit off the boil. But amid the doubts, I did think there was something to celebrate about the government’s fiasco in managing its welfare “reforms”.

That something was parliamentary democracy. There is a school of thought that a government MP’s only real role is to provide a recruitment pool for ministers, and vote for measures proposed by the leadership, however nonsensical they thought them to be. This resembles a presidential system more than a parliamentary one. It’s worse than that as the “president” (i.e. the prime minister) isn’t even selected by democratic means - elections by party insiders don’t count as democratic. So far in this Labour government, the party’s MPs have behaved obediently according to this system, with a few exceptions, who were promptly expelled. But when the government decided to restrict eligibility to disability payments, it was too much.

The wonderful thing about this episode is that the government was forced to explain itself to its MPs, and when their explanations fell short, those MPs were able to change the policy. Wow! Government policy being judged on its merits! Who would have thought that this was possible in modern government? The problem for the government was that they presented a cruel cut to benefits, driven purely by short-term financial pressure, as part of a long term reform to the system. Nobody doubted that the system requires reform - costs seem to be spinning out of control. But, as Stephen Bush of the Financial Times has repeatedly pointed out, these cuts cannot be represented as a serious attempt at reform. The government argument was empty. And for that reason it was forced to retreat. In my books that is a victory for parliamentary democracy.

Alas, that is about as far as the good news goes. The budgetary problem that drove the policy is a real one. The costs of government borrowing have become a very sensitive topic, and the government is in no position to relax its fiscal restraints. It either needs to tax more or spend less. It is already borrowing a lot on the basis of investment. Meanwhile, a worrying narrative is developing for the government - that its MPs are allergic to hard choices over tax and spending. This is an argument developed by the FT’s Janan Ganesh - though Mr Bush does not give it much credence. I have observed Labour developing an obsession that “austerity” is a crime against humanity, following spending cuts in the 2010s. The idea was that cuts to pretty much anything were an evil political choice made by Conservatives and their spineless allies, the Liberal Democrats (then in coalition). Arguments that the spending was needed to stimulate the economy (Keynesianism), that taxes on the rich and wealthy or corporations could fill any gap (promoted by Jeremy Corbyn), or that state borrowing didn’t matter (Modern Monetary Theory), have been deployed variously, and all shown to be flawed as solutions to Britain’s predicament. To be fair, the most convincing part of the public spending review by the Chancellor, Rachel Reeves, was its focus on choices - “Labour choices”. But even she downplayed the negative aspects of those choices. I still don’t see enough Labour MPs focusing on the reality of state spending restraints.

And it gets worse. I don’t think the government is properly engaging with the issue either. Britain’s machinery of government seems to be at a low ebb. There is not enough working across departmental briefs to solve problems. Instead financial pressure is leading to an inward and short-term focus. The welfare cuts were a case in point. Nobody really seems to know what is driving the increase in disability benefit spending, and there seems to be no great effort to find out. Is it an epidemic of ill health keeping people from working? Is it perverse incentives pushing people away from work? Everybody has their favourite explanations. But one factor surely is that financial pressure on the NHS, especially since Covid, has turned attention away from chronic health conditions and towards urgent care. Health strategy needs to be part of welfare strategy. But there is no sign of any such broad thinking.

I think the Labour leadership had hoped that revived economic growth would set in train a virtuous circle of extra tax revenues, allowing them to fix the crisis in public services and benefits - much as seemed to be happening in the early 2000s. For a number of reasons it is clear that won’t happen. There really is no choice but to rethink government - to focus on solving problems at root, rather than fixing departmental budgets. But neither the prime minister, Sir Keir Starmer, nor his chancellor, seem to have a vision for that. Other ministers might, but are being pushed into their departmental boxes. And as government wilts, the public is increasingly tempted to listen to the populist anti-liberal right.

So a win for parliamentary democracy - but a lack of willingness to confront hard choices by the governing party, and a failure by the government to grasp radical reform. Any cheer must be short-lived.