Defence and Welfare - October 2010

The two departments of  state still battling it out most vigorously against the Treasury in the run up to the comprehensive spending review are Work and Pensions, and Defence.  This comes as no surprise. First, let’s take Work and Pensions, the title is misleading: it ought to be about work, but the ballooning budget is consumed by welfare. It accounts for one in every three pounds that government spends. There is a growing consensus that this addiction to benefits is undermining the fabric of society:  indolence appears to be rewarded.  So many people find that they are effectively ‘trapped’ on benefits because their income would fall if they took a job. Others would be so little better off that it would not repay the effort of going to work.

This explains the fact that during the boom years the number of UK nationals working in the private sector actually fell: migrants took the jobs that our own people couldn’t or wouldn’t do.  
The decision to simplify benefits will certainly help. One way of mitigating the unemployment trap is to wean people off benefits slowly so that when you take a job you do not lose benefits immediately. The problem is that this ‘carrot’ is expensive at a time when the country has run out of money, it means paying benefits for longer. Many of my correspondents want to see more ‘stick’ involved when it comes to discouraging welfare dependency:  they want the unemployed to do useful work in return for benefits.  I think many of the unemployed would prefer that too.

On defence, there is understandably great anxiety at the prospect of cuts at a time when we are at war in Afghanistan and when we face so many threats and uncertainties in the world.  I am anxious too, but I do not believe that defence expenditure can be shielded from the economic realities that we face. It is precisely because defence is so important that we have to be certain that we are spending wisely. The Ministry of Defence is notorious for commissioning equipment that is vastly over budget and delivered years late. It already has an overspend of £38 billion. We find ourselves stuck with enormously expensive projects which are no longer suited to our needs, whilst our armed forces are still largely configured to respond to a massive Soviet attack, years after that threat disappeared.  Correcting these imbalances is vital but expensive. We cannot predict the nature of the threats that will arise in years to come but we have to configure our armed forces so that they retain the capability to respond swiftly and flexibly to those threats whatever they are.  Doing this at a time when we need to cut expenditure makes it doubly difficult. Of course, if we spend less on welfare benefits we will have more to spend on defence.