Labour to cut youth benefits and focus on path to work

Labor leader sets out reforms based on training incentives as poll finds 78% of voters think welfare system unfair


Ed Miliband will set out Labor's first plans for cuts to the welfare system, ending out-of-work benefits for roughly 100,000 18-to-21-year-old and replacing them with a less costly means-tested payment dependent on training. The move is designed to symbolize Labor's determination to reform welfare, making it more closely linked to what people pay in, as well as cutting the benefits bill.


"Britain's young people who do not have the skills they need for work should be in training, not on benefits," the Labor leader will say. It is essential to reform welfare to bring down a "wall of scepticism" among voters who don't believe that politicians will make the system fairer, he will argue.


Miliband's move reflects a recognition of anger among some voters that some people are getting "something for nothing" out of the welfare system. A You Gov poll for the Institute for Public Policy Research (IPPR), the leading center-left think tank, published on Thursday, finds that 78% believe that the welfare system is failing to reward people who have worked and contributed to it.


Rachel Reeves, the shadow work and pensions secretary, insisted in an interview with the Today programme on Thursday morning that the policy was not punitive but was designed to get people the skills they needed to secure a job.


She said: "The youth allowance that will replace JSA [job seeker's allowance] will be paid at £57 a week, which is the same as young person's JSA but it will be means tested on parental income. It is tapered off between £20,000 and £42,000.


"It is treating people in further education in the same way as we treat people in higher education. It is not saying all young people are required to go back and get this training; it is if people don't have level 3 qualifications – the equivalent of an A-level."


The removal of JSA for those with skills below level 3 would affect seven out of 10 of the 18-to-21-year-old currently claiming JSA, and initially save £65m. Milib and will reveal further plans to make welfare more conditional by linking benefit payments to national insurance contributions.


Under his plans, people would only be able to claim the higher rate JSA of £71 a week after they have paid National Insurance for five years, instead of the current two. The contributory element of the welfare system has been eroded in Britain and is much smaller than in most European economies.


Labor officials said the switch in spending by abolishing JSA for young people was not designed to be punitive, but to incentive's them to train. The longer qualifying period for higher-rate JSA will mean those who qualify will be able to receive additional help worth as much as £20 to £30 a week, they added.


The Labor leader, struggling with poor personal poll ratings, will be responding to a major report by the IPPR setting out as many as 30 radical measures to rebuild public faith in politics and public institutions in an era of austerity.


Two separate polls sent further dire messages about Miliband's personal standing, with one poll by Ipsos MORI showing a small majority of voters wanting him replaced as party leader, and another by You Gov claiming voters would be more likely to back Labor if it was led by his brother, the former foreign secretary David Milib nd.


Miliband will argue that any reforming politician must deal with doubts about the ability of politics "to address the long-standing pressures on work, family and people's sense of fair play that has been piling up for decades".


He will admit one reason for such scepticism is that "people think the problems are huge, but they don't believe they can be solved because of the financial problems the country faces. Many people think that in hard times, politicians' promises are all hot air."


But big reforms need not require big spending, he will argue. "Our country continues to confront a fiscal situation the like of which we have not seen for generations, the result of a financial crash the like of which none of us has ever seen," he will say.


"We cannot just hope to make do and mend, and we cannot borrow and spend money to paper over the cracks."


Writing in today's Guardian, the IPPR's director, Nick Pearce, goes further, saying: "Gone are the days when economic growth could generate enough resources to redistribute income without making painful choices. Even with a different economic agenda, there is little prospect of any government elected in 2015 spending its way to greater equality."


Pearce urges Labor to reject a business as usual path in which the government "would tax a little more and cut a little less, leaving the architecture of the state untouched and the current framework of services and social security in place".


Miliband will also back proposals for local councils to be given more control of the ballooning housing benefit budget. The report suggests the housing benefit bill will reach £25.4bn, with real terms rises expected for the next five years.


Miliband argues the IPPR report shows that even when there is no money to spend radical reform can be started in the fields of health, child care, welfare, social care and housing. But he is going to be cautious about embracing some of its specific plans drawn up over the past 18 months, including a £2bn child care package, funded through scrapping plans for a marriage tax allowance, freezing child benefit and reducing pension tax reliefs.


The report also argues that there needs to be a switch of government resources from tax transfers and credits to delivering services, something that might require abandoning the expensive target to eliminate child poverty.


It will also propose a radical devolution of power to local councils, including over housing benefit and welfare to work for the disabled. In probably the biggest proposal, the IPPR will argue that the left has to restore the contributory principle in the welfare system. Pearce argues social security for the unemployed has become a liability for social democrats. Turning the issue into a source of strategic strength will require rebuilding the reciprocity that underpins it, restoring the contributory principle and giving new life to the idea of national insurance. "Fiscal constraints should lead us away from means-tested residualisation of welfare, not further towards it".


There is frustration among some Labor policy leaders at Miliband's reluctance to embrace more of the report, designed to show how the left set out a redistributionist agenda in the post-crash world. It has had the support of Jon Cruddas, head of the Labor policy review.