Britain’s coalition government is taking something of a battering. Its health service legislation is under siege. Now big business is stepping back from a flagship welfare-to-work scheme. There is an important distinction to be drawn between these two sets of public service reforms. The welfare shake-up makes eminent sense.

Iain Duncan Smith is as passionate in the pursuit of a modernised benefits system as is Andrew Lansley about reshaping the NHS. Both ministers have jobs they want – curiously, something quite rare at this level of politics. There the similarities end. The work and pensions secretary has an intelligent plan. The health secretary presides over a costly mess.

Mr Duncan Smith starts from three propositions. There are too many benefits administered by too many agencies. The result is byzantine complexity and a system riddled with perverse incentives deterring benefit recipients from taking jobs. And the overall cost is unsustainable. On present trends Britain could soon be spending more on housing benefit than on defence.

His response is to wrap as many payments as possible into a single universal benefit, to increase work incentives by cutting benefit withdrawal rates when claimants return to work, and to inject some more compulsion into schemes steering people back into the labour market.

There is nothing ideological about any of this. The proposals match the something-for-something intent of the founders of the welfare state. There can be arguments about the balance between incentives and sanctions, but it was William Beveridge who said that the dole should be “conditional upon attendance at a work or training centre”.

Mr Duncan Smith’s misfortune is to be pushing through change during an economic bust. Against a background of rising unemployment and deep spending cuts, he is vulnerable to charges that the burden of austerity is falling on to the least fortunate.

That is what has happened in the recent row about work experience. A voluntary spell of a few weeks in the workplace to give school leavers a taste of employment should be uncontroversial. The evidence suggests such schemes can provide a gateway into full-time jobs.

Yet companies backing the scheme have been vilified by critics for allegedly exploiting the jobless and undercutting existing employees. Suddenly, we are to believe that unpaid work experience (participants keep their benefits) amounts to “slave” labour. Being offered a few weeks in a supermarket is apparently an affront to human dignity. What can young people possibly gain from “stacking shelves”, one leading BBC presenter was heard to say.

A separate controversy – centering on the private sector welfare to work contractor A4e – has added to the government’s problems. Allegations of fraud need serious investigation. This should not mean, however, accepting a narrative that says work placements are all about handing big profits to the private sector for pushing the unemployed into dead-end jobs.

Business has nothing to lose from pulling out of work experience schemes. The victims will be those who want to get on the bottom rung of the employment ladder. So there is a big political opportunity here for Ed Miliband, the Labour leader. Mr Miliband says he too wants a welfare system matching benefits with responsibility. He would add serious credibility to the claim by publicly asking the big retailers to recommit to the government’s scheme.

The present squalls are likely to be the first of many. Government will not get it right first time and some private sector partners may well prove unreliable. Rationalising benefit payments depends on getting IT systems to speak to each other. Ministers must be alert to the risk of hurting those who will always depend on the state. Training schemes assume there are jobs available to those who participate.

What Mr Duncan Smith needs above all is sufficient funding to iron out disincentives, protect the weak and provide decent work opportunities. The big threat here comes from the Treasury, which never looks beyond the short term. The really painful irony is that Mr Lansley is wasting billions on unnecessary upheaval. His colleague badly needs that money to make a success of welfare reform.

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