Labour will be tougher than Tories on benefits, promises new welfare chief

Labour will be tougher than the Tories when it comes to slashing the benefits bill, Rachel Reeves, the new shadow work and pensions secretary, has insisted in her first interview since winning promotion in Ed Miliband's frontbench reshuffle.

The 34-year-old Reeves, who is seen by many as a possible future party leader, said that under Labour the long-term unemployed would not be able to "linger on benefits" for long periods but would have to take up a guaranteed job offer or lose their state support.

Adopting a firm party line on welfare, the former Bank of England economist stressed that a key part of her task would be to explode the "myth" that Labour is soft on benefit costs, and to prove instead that it will be both tough and fair.

"Nobody should be under any illusions that they are going to be able to live a life on benefits under a Labour government," she said. "If you can work you should be working, and under our compulsory jobs guarantee if you refuse that job you forgo your benefits, and that is really important."

She added: "It is not an either/or question. We would be tougher [than the Conservatives]. If they don't take it [the offer of a job] they will forfeit their benefit. But there will also be the opportunities there under a Labour government.

"We have got some really great policies – particularly around the jobs guarantee and cancelling the bedroom tax – that show that we are tough and will not allow people to linger on benefits, but also that we are fair. Where there are pernicious policies like the bedroom tax, we will repeal them."

Under Labour's jobs guarantee scheme – arguably its biggest policy announcement so far and one that party strategists are frustrated has not received more attention – under-25s will be offered a job after one year of being unemployed, while over-25s will be offered one after two years out of work.

The scheme, which will be paid for by reinstating a tax on bankers' bonuses, would, Reeves said, take 230,000 long-term unemployed people off benefits and be a more effective in returning people to work and cutting benefits than anything the Tories were offering.

Reeves's remarks, made just days after she replaced Liam Byrne in the key shadow cabinet job, reflect a recognition that Labour will be punished by voters if it is seen to be too focused on opposing cuts, particularly cuts to benefits.

Last week Labour's own pollster James Morris said the party faced a "very severe" challenge in overcoming the Conservatives' opinion poll leads on benefit cuts. He pointed to a TUC survey which showed that 64% of key Labour/Conservative swing voters backed the government over benefit cuts.

Reeves said she faced three challenges in her new role. First, to show that Labour is on the side of "ordinary people struggling with the cost of living crisis", while demonstrating that it would run a social security system fair to those in and out of work. Second, she wanted to hold Iain Duncan Smith to account for his "incompetence" over the botched introduction of a new merged-benefit system, universal credit, and third to promote a Labour alternative vision of "responsibility, decency and fairness".

She challenged the idea that this government has controlled benefits. "Compared with 2010 the government is spending £9bn more now on social security. More people are long-term unemployed, more people are on housing benefit, and 4.8 million people are being paid less than a living wage, up from 3.4 million in 2009.

"So you have got more people in work claiming tax credit and housing benefit to make ends meet. You have got a million people on zero-hours contracts… you have got 1.5 million who are working part-time who want to work full-time."

Reeves hinted that Labour would make a manifesto commitment that public-sector procurement contracts would only go to companies that paid a "living wage".

"You could absolutely do things through procurement. You could make a decision that all your contracts could be living-wage contracts. It is something I think is a good and really exciting idea," she said.

She was cool, however, about another element of work developed by Byrne – plans to shake up the welfare state so that benefit payments would vary according to past contributions – the so-called contributory principle.

"It is not easy," she said. "If you increase what you give to some people then presumably you have to reduce it for others. We are not in an environment where there is more money around. It is a difficult thing to achieve."

Asked if she agreed with the government's £26,000-a-year benefit cap, she said she backed it, though she added that Labour would look at regional variations to reflect prices. "I think it is right that those people who are in work do not feel that those who aren't in work are getting something that they couldn't dream of getting."