The Conservative Welfare Revolution : Now or Never?

The removal of child benefit for parents earning over £44,000 is bolder than anyone imagined before the election, when Conservatives were insisting universal benefits were very important to millions of people and should not be touched.

But the government knows if it doesn’t do the big structural changes it wants now it will never be able to do them.

The small group of men in charge of big decisions believe Tony Blair wasted his opportunity in 1997 to do much more with his mandate. And even though they don’t have anything like the same mandate after failing to win the election outright they have the coalition majority in the Commons to act as though they do. So “Now or never” seems to have become their informal motto – it might as well be “who dares wins”. I leave it to you whether it seems more SAS or Del Boy.

The child benefit move seems to be much more fundamental than people have, on the whole, spotted. The potential to change the welfare state forever has opened up, if the Conservatives want to. At present the Treasury says just the top 15% of taxpayers will stop getting child benefit, but this could be only the first part of a process.

If the 40% tax threshold, or the threshold for when you stop getting child benefit is held at its current level, instead of rising with earnings, more and more people will start paying 40% tax and/or losing their child benefit. Gradually child benefit will be seen by the middle classes as a safety net for those on low incomes rather than a widespread (as opposed to universal) benefit for families. It is also worth wondering for a moment whether this really is about saving money, or about principle. The move only starts to save that one billion a year in 2013. If we need the money now the delay might seem luxurious. If it is about principle it is perhaps perfectly timed.

Already the logic for keeping other universal benefits such as winter fuel payments and free television licences has gone. The only thing stopping their removal for higher rate taxpaying pensioners is that moment in the Prime Ministerial TV Debate where David Cameron demanded an apology from Gordon Brown who was warning these benefits would go under the Tories. In time people will forget that.

The argument for universal benefits, which Conservatives used to make, was that it underpinned support for the welfare state among the middle classes. Giving people something back made them more likely to accept the need for their hard-earned income to be taxed. George Osborne now says it is very hard to justify people on lower incomes paying tax to provide child benefit for those on higher incomes. What if you replace “child benefit” in that sentence with ‘the welfare state”? Although I haven’t heard it suggested by anyone in the Conservative Party so far it doesn’t seem a huge intellectual leap to say if the wealthy should stop getting universal benefits there might be other bits of the welfare state they can start paying for.

If they decided to change the way the NHS is funded to a social insurance scheme it isn’t a massive ideological departure to suggest the richest people should start paying part of their own premiums. The same principle could be applied elsewhere. And of course if the wealthier people chose to use private health services or private schools then they might get some tax cuts in return as the state relinquished responsibility for whole areas of their lives. Far fetched? Yes, maybe. But not completely impossible – this is a government in a hurry.

Barely a week goes by now without the latest major structural reorganisation being revealed. When the government was formed it seemed the Tory policy that we would really notice (in England at least) was going to be education, primarily the introduction of free schools. That has turned out to be more of a slow burn. But within days of the coalition being formed came a total and unexpected reorganisation of the NHS in the form of scrapping Primary Care Trusts and handing 80% of health budgets to GPs.

The introduction of elected police commissioners is a major change to the way forces across the country will tackle crime. And now the amalgamation of various benefits into a new universal credit, and a benefits cap. Individually these are all enormous structural changes, controversial and difficult to deliver. Put together they are almost mind boggling – a huge challenge to the civil service and if things start cutting up rough (each policy is opposed by various powerful groups affected) will require lots of political backing from Downing Street.

But if they are prepared for the political fight there is the momentum of being new in their favour. Tony Blair always said he wished he’d gone further and faster on public service reform right from the start. By the time he tried to put his foot on the accelerator he already had those scars on his back and had lost the backing of many MPs. Perhaps that is David Cameron’s biggest challenge : to get things done before his own side start kicking back.