Labour’s dance on welfare reform needs tempo

As with Europe, so on welfare reform: the prime minister and his chancellor are perhaps not of the same mind. It became plain last week that Andy Burnham and John Healey differ on the desirability, as well as the practicality, of Britain embracing freedom of movement of labour with the European Union: Healey cleaves to a more sceptical stance; Burnham is more starry-eyed. But that split can be delineated with some clarity. In the case of welfare reform, the picture is more confusing. Indeed, at times both men seem unable even to agree with themselves, according to The independent.

As the Treasury man, Healey might be expected to want swifter action to put the public finances on a sustainable footing. In his latest intervention, Healey sends mixed messages via the BBC’s Laura Kuenssberg. One minute the chancellor reassures markets: “We will bring the benefits bill down... the overall bill must come down. There’s nothing progressive in a bigger and bigger benefits bill. That’s an economic duty, but it’s also a moral duty.”

But when pressed, Healey retreats from his Gladstonian rectitude towards a more ambiguous “vibe” usually preferred by the prime minister, by adding that reform has to be “in a way that reflects our values” — reviving a messy neo-corporatist approach involving the trade unions and employers. Burnham, for his part, has made a point of rejecting “crude cuts” but has also sounded a contradictory note of urgency, saying that he also wants the bill to come down “as soon as possible”.

Crucially, the chancellor indicated that spending on social security will be on a downward trajectory by the time of the next general election (assuming the election is in 2029, not next Spring), only for Number 10 to “clarify” that while the government is working “flat out” on this, the prime minister will not commit himself to a specific timetable. Healey and Burnham seem to agree only that something must be done, not necessarily when or how it is to be done.

This is far from reassuring, and the upshot is that the Office for Budget Responsibility’s current projections for welfare spending envisage it rising from £353bn this year to some £431bn by 2032. The OBR must base its predictions on existing policies; it cannot second-guess what ministers might like to do in future.

Britain’s underlying demographic trend is also worrying: an ageing population living longer but in declining health. In the context of welfare reform, it must always be stressed that almost half of the cost is accounted for by the state pension and associated subsidies, which means the “triple-lock” policy promise exerts a powerful influence on the future path of overall public spending. Burnham has indicated a wish to reform that policy, leaving it less generous in order to fund his proposed National Care Service, but again there is no detail, and it wouldn’t reduce the overall deficit.

Into the mix will soon be added a succession of reports and reviews commissioned by Sir Keir Starmer and Burnham: the final chapter of the Milburn report into young people not learning or earning, Baroness Casey on adult social care, the Timms panel on personal independence payments, plus the 2027 spending review. These will be added to the recent, rather inconclusive work by Professor Peter Fonagy into the vexed question of “over-diagnosis” of mental health conditions such as ADHD, anxiety and autism, especially in the young. At some point, a welfare policy on which the cabinet can agree – and which the parliamentary Labour Party will vote for – will emerge; voters and international investors will perhaps then have the clarity they yearn for.

Burnham’s relatively leisurely approach on welfare works up to a point. But Britain suffers from uncomfortably high market interest rates because purchasers of gilts demand a risk premium for lending the government the cash it needs to keep going; opinion polls also point to voter concern on welfare; Labour is vulnerable to attack from the Conservatives and Reform that is the “welfare party” and doesn’t represent working people (something privately felt by some of Burnham’s backbenchers in the so-called Red Wall seats).