2 days ago
Kemi Badenoch is right that the welfare system is a fiscal disaster
The leader of the opposition alerted the nation to an alarming statistic last week: 28 million people are working hard and paying taxes to support the livelihoods of another 28 million. Kemi Badenoch argued that Britain is becoming 'a welfare state with an economy attached', such is the vastness of uncontrolled spending on benefits. That might sound like hyperbole, but she has identified one of the most serious issues stifling growth and the country's prospects.
Ms Badenoch's speech was her first notable economic intervention since she became the Conservative party leader last year, and one that was overdue. While few can question her success in campaigning for a national grooming gangs inquiry, or fighting for women's rights, she has had less success in articulating an alternative economic vision to that of the Starmer government or Nigel Farage's Reform UK. Her call for a return to a 'Protestant work ethic' articulated an important theme: the need for economic opportunity.
Although the Tories bear some responsibility for the millions of Britons who are economically inactive, particularly in the wake of the Covid-19 pandemic, the party is the only one willing to state hard truths about the mess of the UK's labour market. Ms Badenoch argued that the word 'disabled' has lost its meaning, with one in four working-age people now classified under the term. With the health and disability benefits bill set to rocket to £100 billion by the end of the decade, she is right that the current situation cannot go on.
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The accusation that the welfare system makes it too easy for people to claim benefits is hard to dispute. So too is the danger that welfare is becoming a lifestyle choice. It is clear that radical reform, not mere tinkering, is required. According to the Centre for Social Justice think tank, a recipient of the highest level of sickness benefits earns £2,500 a year more than someone on the national living wage. It is unsurprising that some will therefore opt for this over a life of work. Ms Badenoch invoked the legacy of Lord Tebbit, the Thatcher-era minister who died last week, to argue that the Tories must remain the party of work. Acknowledging mistakes of the past, she said, 'people should do all that they can to be in work, that is the ethics that I want to be very clear about now'.
The Tories are right to grasp this difficult issue, as their political rivals appear unwilling to. Ms Badenoch dismissed Mr Farage as an 'unserious' figure: 'Jeremy Corbyn with a pint and cigarette'. She would be wise not to underestimate his everyman appeal, something that does not come as naturally to her. Yet she is right that Reform is increasingly and unwisely tilting leftwards when it comes to public spending in its desire to appeal to disenchanted Labour supporters.
After the debacle on the cuts to disability benefits, it is unlikely that the Starmer government will act decisively, or at all, when it comes to welfare reform. Despite the drumbeat from Labour MPs calling on the government to scrap the two-child benefit cap, this is precisely the opposite of what the prime minister should be considering. Instead he should heed the advice of Alan Milburn, former Labour health secretary, who cautioned against any effort to 'run away' from reform. He is right that the costs of sickness benefits are unsustainable, both for the economy and the state of society.
There is an obvious gap in the political market that Ms Badenoch can fill: the cause of fiscal restraint. The Tories should never have given up their belief in a smaller state, but it is welcome to see them return to it. It is ever more likely that the UK is heading for a financial crunch this autumn, as Rachel Reeves's mishandling of the economy risks creating a vast fiscal black hole. The unsustainable welfare bill is at the heart of the problem and voters now appreciate that it must be tackled. The time for hard truths is fast approaching.
