Liberal Democrats in coalition: social security Overview: social security policy under the coalition Peter Sloman ince the social security budget accounts the implementation of Universal Credit has been Steve Webb and Iain for more than a quarter of government fraught with difficulty, these two policies look Duncan Smith during Sspending, the Department of Work and likely to define the architecture of the welfare the 2015 election Pensions was always likely to be at the forefront state for a generation. campaign. of the coalition’s efforts to eliminate the struc- Like the Department of Health, the DWP tural deficit.1 Though it was never far from con- benefited from a clear division of labour between troversy, the DWP turned out to be one of the Conservative and Liberal Democrat ministers: more successful coalition departments. Iain Dun- Duncan Smith oversaw the development of Uni- can Smith and Steve Webb formed an unlikely versal Credit and other changes to working-age but effective partnership, and remained in post for benefits, whilst Webb took the lead on pen- the full five years of the coalition – a stark con- sions. As a welfare economist who had worked trast with the nine Secretaries of State and nine at the Institute for Fiscal Studies before shadow- Ministers of State for Pensions who held office ing the department during the Blair and Brown under New Labour. Moreover, alongside a series years, Webb was well placed to make a distinctive of benefit cuts – many of them initiated by the impact. The first Liberal Democrat contribution Treasury – Duncan Smith and Webb launched the came in the coalition agreement, which promised biggest structural reforms to the social security to raise the state pension by prices, earnings, or system since the 1980s, in the shape of Universal 2.5 per cent a year – whichever was highest. This Credit and the single-tier state pension. Although ‘triple lock’ meant that the basic state pension for Journal of Liberal History 92 Autumn 2016 31 Liberal Democrats in coalition: social security a single person rose from 16.3 per cent of average unlikely that a Conservative government would earnings in April 2010 to 18.2 per cent in April have legislated for a single state pension.’10 The 2014, partially reversing a decline which had quid pro quo for this success, however, was that begun under Margaret Thatcher.2 Where New the Liberal Democrats had much less impact Labour had targeted resources on the poorest pen- on working-age welfare reform. In a way this sioners through the means-tested Pension Credit, was unsurprising, since the 2010 manifesto said the coalition shifted the emphasis back towards almost nothing about working-age benefits apart the basic state pension, building on the recom- from a general criticism of Labour’s ‘hugely com- mendations of Adair Turner’s Pensions Commis- plex and unfair benefits system’ and a proposal sion (2002–6).3 By 2014/15 National Insurance to remove child tax credits from middle-income benefits accounted for 76 per cent of all payments families.11 Iain Duncan Smith – who did have to pensioners, up from 70 per cent in 2009/10 and a vision for welfare reform – was able to set the the highest level since the late 1980s.4 The ‘triple agenda, and the Liberal Democrats’ main contri- lock’ was unsurprisingly expensive – costing an bution here seems to have come not from Webb extra £1.5 billion a year by the end of the parlia- but from Nick Clegg, who supported Duncan ment – though the cost will be offset over time by Smith in a series of battles with the Treasury. The the coalition’s decision to accelerate increases in deputy prime minister helped ensure that Uni- the state pension age.5 versal Credit went ahead, and also vetoed a num- Webb was keen to reinvigorate William Bev- ber of cuts proposed by Duncan Smith himself, eridge’s vision of a flat-rate basic state pension set including the removal of housing benefit from at or near subsistence level, partly because of the the under-25s and the limitation of child benefit perceived stigma attached to means-tested bene- to two children.12 Yet since the Liberal Demo- fits and partly because they acted as a disincentive crats had signed up to Osborne’s deficit-reduc- to saving. Indeed, as Liberal Democrat pensions tion targets, they could hardly protect the whole spokesman in the early 2000s, he had commit- Nicholas Timmins welfare budget. In particular, the party’s minis- ted the party to the long-term goal of abolishing rightly sees this ters supported the government’s benefit cap for National Insurance contribution requirements working-age claimants, real-terms cuts to child and creating a ‘citizen’s pension’ based on resi- pensions revo- benefit and tax credits, the replacement of Disa- dence.6 Once in government, he persuaded the bility Living Allowance with Personal Independ- Treasury that it could raise the basic state pen- lution as a clear ence Payments, and the controversial ‘bedroom sion to the level of Pension Credit – an increase of tax’ on social housing tenants. more than one-third – if it closed the earnings- example of a The Liberal Democrats’ complicity in ben- related State Second Pension and abolished the efit cuts led to severe criticism from the ‘pov- National Insurance rebates for employers who coalition effect: erty lobby’, disability campaigners, and some contracted out of it.7 Indeed, the overall package party activists, who accused Clegg of betray- would save the government money in the long ‘Without the Lib- ing his pledge not to ‘balance the budget on the term. The Pensions Act 2014 provided for Webb’s eral Democrats, it backs of the poor’. Though ministers stressed new single-tier pension to come into effect from the need to maintain coalition unity and take April 2016, though the contributory qualifica- is highly unlikely ‘tough decisions’, much of the party was clearly tion has been retained for budgetary reasons: only uncomfortable with the government’s assault on those who have made or been credited with at that a Conserva- working-age benefits on both moral and practi- least thirty-five years of National Insurance con- cal grounds. The autumn 2012 conference passed tributions are eligible for the full pension.8 tive government a resolution opposing any further welfare cuts The decision to introduce the single-tier pen- which fell ‘disproportionately’ on disabled peo- sion had two spin-off benefits for the coalition’s would have legis- ple, and the autumn 2013 conference overwhelm- wider pensions policy. Firstly, it smoothed the ingly demanded a review of how the ‘bedroom introduction of automatic enrolment – which the lated for a single tax’ was working in practice.13 The party leader- Brown government had legislated for in 2008 – state pension.’ ship also faced a series of backbench rebellions, by ensuring that workers had a real incentive to with nine Liberal Democrat MPs supporting an save for their retirement: the extra income gained The quid pro quo attempt to water down the ‘bedroom tax’ in Feb- from occupational pensions would not be eroded ruary 2012 and two (Andrew George and Tim through means-testing. Secondly, it made pos- for this success, Farron) backing a Labour opposition day motion sible the liberalisation of money purchase pen- on the issue in November 2013.14 The final two sions which George Osborne announced in his however, was that years of the coalition thus saw a rather clumsy 2014 Budget, removing the requirement to buy attempt at differentiation over the ‘bedroom tax’, an annuity at the age of 75. (Webb famously the Liberal Demo- as the party leadership backed away from the pol- sparked controversy by telling the BBC that he icy and proposed that claimants should only be was ‘relaxed’ at the possibility that people would crats had much docked benefit if they refused suitable alternative spend their pension pots on a Lamborghini and less impact on accommodation. As Libby McEnhill has pointed ‘end up on the state pension’.9) out, this left Liberal Democrat ministers ‘open Nicholas Timmins rightly sees this pensions working-age wel- to accusations of inconsistency and opportun- revolution as a clear example of a coalition effect: ism’, and raised the question of why they had not ‘Without the Liberal Democrats, it is highly fare reform. blocked the policy within government.15 32 Journal of Liberal History 92 Autumn 2016 Liberal Democrats in coalition: social security In view of apparent public hostility to ‘wel- A sharper focus 4 Author’s calculations from Department for Work and fare’ claimants, it is difficult to judge what Pensions, ‘Benefit expenditure and caseload tables, impact the coalition’s benefit policies had on on the party’s Budget 2016’, available online at https://www.gov.uk/ the Liberal Democrat performance in the 2015 government/statistics/benefit-expenditure-and-case- election. Certainly, the party’s opposition to record of deliv- load-tables-2016 (accessed 14 May 2016). Conservative plans for a further £12 billion ery for older peo- 5 McKay and Rowlingson, ‘Social security’, p. 183. of welfare cuts – backed up by claims that the 6 See especially Liberal Democrats, Dignity and Security in Tories would cut child benefit – did not resonate ple might have Retirement: Pensions Policy Paper (2004). The policy also with voters in the way Liberal Democrat strate- featured in the party’s 1992, 2001 and 2005 manifestos. gists seem to have hoped. More puzzling is the helped the Lib- 7 Nicholas Timmins, ‘The Coalition and society (IV): party’s decision not to make more of its impres- Welfare’, in Anthony Seldon and Mike Finn (eds.), The sive record on pensions and social care.