Should we defend the middle class welfare state?

Over the last fortnight it has become clear: the govt. is planning a wholesale assault on universalism; should we defend the middle class welfare state or not?

Our guest writer is Ben Baumberg, researcher at the LSE and co-editor of the collaborative blog Inequalities

Over the last fortnight it has become clear: the coalition is planning a wholesale assault on the middle-class welfare state. The cuts in child benefit to higher-rate taxpayers have been followed by the Browne Review, and more of the same is going to come. In response, Ed Miliband has been defending the ‘squeezed middle’ and standing up for universalism.

Yet what he needs to develop – and quickly – is a coherent narrative on universalism vs. means-testing, in order to avoid both confusion on the left, and the prime minister’s accusations that this is naked political positioning.

From a traditional left-wing perspective, Mr Miliband is right to defend universal benefits – as previous posts on Left Foot Forward and Inequalities explain. Means-tested benefits create perverse incentives, where people get penalised for working harder and saving more. They are complex and often stigmatising, meaning that fewer poor people claim them.

And perhaps most damagingly of all, they change the very nature of the welfare state – from collective solidarity to poverty alleviation, which in the long-run leads to lower support and worse provision.

But it simply isn’t enough to defend universalism. Labour agrees that cuts need to made – and for any given level of cuts, if we take less from middle Britain then we have to take more from the poor. In fact the problem is worse than this: the welfare state has been trying to do ever-more – expanding higher education, new services for pre-school children, ever-increasing demands in health and social care. We simply cannot afford to make everything universal.

If both extremes are undesirable, it should be an obvious question to ask “which parts of the entire welfare state should be universal?” But somehow, neither academics nor wider thinkers on the left have engaged with this directly (Many academics have dealt with parts of this– for example, Theda Skocpol in the US and Richard Titmuss in the UK have thought carefully about the benefits of universalism – but they have not systematically dealt with where universalism is most important).

In the absence of anything definitive, it at least helps to start with a few possible principles.

Firstly, how likely are better-off people to use private welfare provision, and how damaging is this to inequality? Inequalities in old age are driven by the extent of private pensions provision – countries with earnings-related state provision have more equal outcomes because they have fewer private pensions. Conversely, certain aspects of private healthcare (e.g. paying for private rooms) may be less damaging, simply because they buy little beyond public provision.

Second, what are the wider consequences of means-testing particular parts of the welfare state? Some services have positive – or negative – side-effects beyond their primary goals, such as the role of children’s centres in creating social capital between mothers. Given the enormous popularity of Surestart from families across society, we can speculate that universal Surestart centres (aside from their positive impacts on child outcomes) create solidarity between parents in parts of society that otherwise rarely integrate.

The targeting of potentially solidarity-generating institutions such as schools, housing and Surestart may therefore be particularly damaging for a cohesive ‘Big’ society.

Third, which parts of the welfare state can be means-tested without damaging public support? We can think of the NHS as a beacon of public support sustained by universalism. Yet some parts of the NHS are not free – prescription charges are means-tested for very sensible reasons – and people who use private healthcare are still strong supporters of the NHS. Elsewhere, studying at university is self-evidently a ‘deserving cause’, which makes means-tested higher education unlikely to suffer catastrophically declining support – but again, evidence is lacking and the issues are complex.

Perhaps even giving benefits to the ultra-rich undercuts support for the benefits system because it seems like a waste of money, which would fit the initial public support for the principle of child benefit cuts.

The last Labour government partly responded to this through the principle of ‘progressive universalism’ – giving something to everyone, but more to the worst-off – which people like John Denham rightly say is close to most people’s view of a ‘fair’ system. Yet for all this rhetoric, the extension of means-testing – from 35 per cent to 41 per cent of benefit spending – does not seem to have been done in a consistently well-thought-out way that satisfies key principles. (This refers to benefits + tax credits, but not other public services, for which see here; figures calculated from source data on benefits, Working Families Tax Credit and current Tax credits.)

Mr Miliband somehow needs to avoid several temptations: not to give in to the siren call of means-testing everything, nor to universally defend universalism. To help him in this, we need to think through the welfare state systematically, rating the impact of targeting and means-testing against a complete set of principles – and come up with a plan for targeted universalism that is both affordable and which defends the key achievements of the middle-class welfare state.

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36 Responses to “Should we defend the middle class welfare state?”

  1. Hazico_Jo

    RT @leftfootfwd: Should we defend the middle class welfare state? http://bit.ly/96eoAN

  2. Ell Aitch

    RT @leftfootfwd: Should we defend the middle class welfare state? http://bit.ly/96eoAN

  3. James Shirtcliffe

    great article: should labour defend the universal welfare state? http://goo.gl/EIpT

  4. Steve Hynd

    RT @leftfootfwd: Should we defend the middle class welfare state? http://bit.ly/96eoAN

  5. Sally Gimson

    RT @leftfootfwd: Should we defend the middle class welfare state? http://bit.ly/96eoAN

  6. mike hartley

    When the super rich – including some senior members of the government, if Dispatches is to be believed – are involved in such high levels of tax avoidance, any idea that ‘we are in this together’ is laughable

    http://etonmess.blogspot.com/2010/10/senior-tories-accused-of-tax-dodging.html

  7. Kevin Dykes

    RT @leftfootfwd: Should we defend the middle class welfare state? http://bit.ly/96eoAN

  8. Denny

    Good piece on @LeftFootFwd about universal vs. means-tested benefits: http://s.coop/4d7

  9. Chris Goulden

    RT @leftfootfwd Should we defend the middle class welfare state? http://bit.ly/96eoAN < thoughtful piece

  10. Families Against National Debt

    On Sure Start, your “role in creating social capital” link goes to evidence from US children’s centres, and your “positive impacts on child outcomes” links to the national evaluation, which said “Nevertheless, however consistent the benefits detected in the current phase of impact evaluation, they should not be exaggerated, as all positive effects of SSLPs detected were modest in magnitude.” I think you have fallen into this very trap. Surestart has not helped the poorest parents for whom it was designed (ask OFSTED, the DCSF).

  11. Sure Start | The Trillion Pound Challenge

    […] 2009 National Evaluation had upbeat, widely quoted conclusions but massive reservations in the small print: “Nevertheless, however consistent the […]

  12. AnneJGP

    It may be helpful to consider the topic of dentistry.

    In theory, everyone should be have access to an NHS dentist, but this is far from being the case. Well-off people are very likely to use private dental provision. I don’t know whether there has been any research about the knock-on effects. I understand that the focus of private treatment is on preventative work whilst the NHS provides remedial treatment.

    I’ve been with several dental practices over the last few years, owing to moves. It is common for the NHS practitioners to be the younger, less experienced people and they usually seem to move on to private practice after a few years.

    Even NHS dentistry is far from being “free at the point of need”. Also, dental operations can involve a very long wait. When you consider that dental pain can be excruciating, this is really not acceptable.

    In spite of all this, the topic of dentistry is hardly ever mentioned in discussions like these. It seems very relevant to me.

  13. Mr. Sensible

    Mike, is this on tomorrow?

  14. Anon E Mouse

    Ben Baumberg – This article shows exactly why the left needs to change its approach on this matter and do it quickly.

    Whatever your position in the matter – Mr.Sensible above for example believes it is right to give Eric Clapton (worth £115 million and earns £thousands / minute) child benefit from the taxes of a Tesco’s minimum wage night shift shelf stacker. He’s said so elsewhere on this blog.

    And that’s it in a nutshell. Strip away all the waffle about “universality” and it comes down to the question “Is it fair?”.

    And Ed Miliband says he thinks it is. He’s wrong. It’s 10p tax all over again.

    It isn’t fair. It’s like giving Winter Fuel Allowance to people who live overseas in Spain. Or a bus pass to Alan Sugar. Or a free TV licence to the Queen.

    Minimum wage workers have to pay taxes to fund those spendings and it isn’t fair.

    And how far out of touch can the left be on this matter? A regular contributor to this blog, Rupert Read, states on another site that he thinks workers earning £45k are effectively “poor”.

    Regardless of how unpleasant this person is, making his comments unsurprising, at what point did nearly twice the average wage leave a person poor? I understand his point regarding two income households but that’s just rhetoric. He just doesn’t get it.

    I have a far off prediction for the Labour Party. In 2015 if Labour goes into the election claiming it is right or fair to give the rich benefits paid for by the poor they will get whacked by the electorate.

    The left can waffle on about tax evaders all day long but the unfair agenda Labour is embarking on will come back and bite them…

  15. Ash

    Anon –

    “I understand his point regarding two income households but that’s just rhetoric.”

    Just rhetoric? A single-income household on £44,000 a year has a *lower* after-tax income than a household with two people on the median wage (£21,000). How can it be ‘just rhetoric’ to point out that if millions of two-income, middle-earning households need Child Benefit, so do hundreds of thousands of single-income households on lower incomes?

    As for the ‘waffle’ about universality – have you noticed the predictions of people making that point already coming true? The CB cut for higher earners is *already* being used to justify calls for tax breaks for the better-off (e.g. extending the marriage tax break to high tax rate payers) and calls to ‘stop paying people to have children’.

  16. Anon E Mouse

    Ash – That situation arises in the Tax system as well so why did Labour, with 13 years in power not do anything about that. Nothing.

    The combined income of the household should be the benchmark – not an individual in that household but how do you know they won’t do it?

    But you are selecting small parts of my post though and not answering my central point. £45k is a good wage in this country and Labour is supposed to be the party that helps the less fortunate but now it advocates taking taxes from poor people to line the pockets of the rich.

    And that’s not fair in anyone’s book.

    At the next election Labour will be accused of being unfair and as I stated above – “It’s like giving Winter Fuel Allowance to people who live overseas in Spain. Or a bus pass to Alan Sugar. Or a free TV licence to the Queen.”

    None of those things are fair. Labour is now the party of unfairness.

    Go on then Ash – justify the ex-pats, Eric Clapton, Alan Sugar and the Queen…

  17. Ash

    Anon –

    OK, let me answer those central points and a few others:

    “£45k is a good wage in this country”

    It certainly is; but it’s a pretty average *household income* for a family with kids. Individual earnings and household income are two different things, and it’s household income that matters when it comes to assessing how well-off a family is.

    “Labour is supposed to be the party that helps the less fortunate but now it advocates taking taxes from poor people to line the pockets of the rich.”

    Firstly: there’s no “now” about it. Labour is just sticking to what it’s always believed on this issue. Secondly: this is just the wrong way of looking at it. Take two high earning neighbours, each paying £20,000 a year in tax. Jill has two dependent kids and Jack has none. If we give Jill £1700 Child Benefit, all we’re really doing is reducing the total amount of tax she pays by £1700. That seems fair enough to me, since she really can afford to pay a little less tax than Jack. (If you think she should be paying £1700 more in tax, fine – put her taxes up by £1700. But put Jack’s up too; it’s not fair that he should only be paying the same as her.)

    “That situation arises in the Tax system as well so why did Labour, with 13 years in power not do anything about that. Nothing.”

    This just isn’t true. Many of the things Labour did to change the tax and benefit system were designed to take account of household income (rather than individual earnings) when deciding who should get extra support – most obviously, tax credits.

    On paying the Winter Fuel Allowance to people in Spain – yes, that does seem absurd, but not because those people are better-off; just because heating isn’t an issue for them.

    I don’t really think giving bus passes and free TV licences to a few super-rich people is a big issue; they cover the cost of those things thousands of times over through their taxes. We might as well keep the system simple. But you’re right; I don’t think it would damage the welfare state to stop a few minor perks going to a few very rich people. That’s not what’s happening with Child Benefit, though.

    I’d still like to hear your answer to this point (which I raised on another thread): should poor people be paying for rich people to get state pensions and free use of state schools and hospitals? Above a certain income, after all, they don’t need any of those things any more than they need Child Benefit; they can afford excellent private healthcare, education and pension provision.

    Are you going to be consistent and say that rich people shouldn’t receive any expensive benefits and services paid for through poor people’s taxes, but instead should pay for their own private healthcare, pensions and schools – leaving all state benefits and services targeted at low and middle earners?

  18. Robert

    Make suicide legal and compulsory to people who cannot work, lets get to the bottom of this problem, mind you if you commit suicide you then have to pay for the funeral and the injection.

  19. John Lees

    Very good – one of the first genuinly thoughtful pieces I have read on LFF. Most articles here are based on pavlovian tory/rich people bashing or partisan rubish – but this is more interesting. Well done there is intelectual life out there.

  20. Robert

    Look I’m classed as being Paraplegic because my bowel and bladder do not work anymore I have no control over them. I tend to have a bowel movement twice a day, nothing I can do about it except get on with life.

    can I work yes without doubt, but I will need time and help to get cleaned up, new drugs can help me stop a bowel movement, sadly it then makes other problems. I have now filled in over 980 job applications in my area thats over ten years, out of this I’ve had three replies, one was nice it told me and I quote, ” I have enough F*cking cripples working for me now, I do not need anymore”.

    This gent had to give me a written apology because all my job applications come through the job center, once I showed them this reply they wanted to take action in the courts, but I’ve had much worse replies. So am I a fraud well it depends on your view of frauds, for example I was given a job on a Friday, went to work on a Monday to be told sorry we changed our minds people talking to somebody in a wheelchair would not be a benefit to the company.

    But out of 980 applications it says a lot to only get three replies, so the job center tried something, they sent my CV out removing any remarks about my disability ten job application were sent out and I had seven replies offering interviews, once we told them I was a wheelchair users all seven refused to allow the interviews to go ahead saying the position was now closed.

    So how the hell do I get a job

  21. Anon E Mouse

    Ash – Yes I am going to be entirely consistent and say that if people can afford to pay for education for their children and private healthcare then they should. There should be a tax incentive for them to do so – it works in the States to fund universities and should be adopted here.

    The Lib Dems have done more in power to lift people out of poverty than Labour did in 13 years. In April next year 850k people will be taken from paying any tax at all. Contrast that with a Labour Party that took away the 10p tax band and worse they then claimed it wouldn’t negatively affect people.

    I agree the CB issue was bodged but I think that was to show that when people get hit further down the scale they can say they have hit the middle classes as well but it’s the general impression that will be attributed to Labour that will hurt.

    Those four examples in my opinion cannot be justified and whilst I agree they are a minority it’s the principal that is more important. Labour can bleat on with excuses all they like – 10p Tax hurt and so will this.

    As for tax credits they shouldn’t exist. They are just a big government idea that needs to be scrapped and the tax system reformed to protect the poorer by reflecting their circumstances.

    I’m sure the government will sort out the CB issue you mention but my central point remains unchallenged as it stands.

    “Is it fair for the nightshift shelf stacker to pay for Eric Clapton’s daughter, ex-pats to get a heating allowance, Alan Sugar to have a free bus pass or the Queen a free TV licence?”

    Because as it stands Labour think it is. Well I don’t Ash and you personally haven’t answer that easy question. Is it fair? Well?

  22. Mr. Sensible

    Mr Mouse, I just don’t buy that.

    I don’t think it is fair that someone on £40000 odd should lose their child benefit whilst a household on £60000 should keep it.

    It is not even as if it will save money, as I have said before.

    Cameron himself has said that people on £40000 are not ‘the super rich.’

    And is it fair for that same Minimum Wage worker to pay taxes to fund a tax break for married couples?

  23. John Lees

    Mr Mouse – is it fair that a minimum wage earner pays taxes to fund child benefit and housing benefit for those richer than him. Is it fair he pays for a kid to go to university who then earns more than him? This is more complicated than just pointing out anomalies and saying it is unfair. What would you do and how would you pay for it??

  24. Anon E Mouse

    Mr.Sensible – What tax break? Doesn’t currently exist. When it does I’ll let you know if it’s fair or not.

    I know you think it’s fair for shelf stacker’s to pay for Eric Clapton’s daughter but what about people living in the sun getting Winter Fuel Allowance? The bus pass for Alan Sugar? The free TV Licence for the Queen?

    You’ve been very honest so far Mr.Sensible – I’ll accept any excuse you choose to use as well but is that lot fair?

  25. Anon E Mouse

    John Lees – Simplify the tax system.

    The kid who goes to university will hopefully pay more tax back into society in the long run.

    But my point John is that the Labour Party now stands for unfairness because those specific examples I cite are real and they are unfair as far as I’m concerned however they are packaged.

    Factory workers should not be paying for Ed Miliband’s child when he earns what he does and lives in a £1.6 million house.

    It isn’t fair.

  26. Ash

    Anon –

    “Yes I am going to be entirely consistent and say that if people can afford to pay for education for their children and private healthcare then they should. There should be a tax incentive for them to do so”

    Ah, OK. Sorry – I thought you were arguing from a left-wing sort of perspective that Labour should back scrapping CB for high rate taxpayers. Obviously if you’re making a right-wing argument that better-off people should pay lower taxes and rely on private services, while the poor rely on a targeted, safety-net welfare state, we’re just coming at this from completely different directions. I think that sort of Thatcherite society, with excellent private services for the rich and second-rate public services for the poor, just sounds hideous.

    (And I did try to answer the point on Alan Sugar’s bus pass – I don’t think it’s massively unfair that he gets one, since he pays for it out of his taxes anyway; but I accept that maybe the money could be better spent elsewhere, and I don’t think it would damage the universal welfare state to withdraw minor perks from a few very rich people.)

  27. Anon E Mouse

    Ash – (I’m not saying that richer people should not pay the taxes, just that for altruistic reasons they should choose to go private to free up the NHS – the taxes I mean is to give an incentive to donate to worthy causes and benefit for doing that)

    I’m actually playing devil’s advocate but just looking ahead to the next election where the coalition will simply say “That’s not fair”.

    You see the emotive nature of that line will resonate with the electorate. How many siblings will cry out “But that’s not fair” when they perceive an injustice in life and that’s just in a family.

    It’s a universal thing this fairness stuff and regardless of the excuses Labour will use it just isn’t fair.

    I know which side of the argument I’d rather be on…

  28. Mr. Sensible

    Mr Mouse it is a clear proposal that Cameron has outlined.

    And on the point about bus passes for people like Alan Sugar, as Ash has said that’s not really what this is about. It is about taking Child Benefit from Middle-Britain.

    I draw your attention to Nicola Smith’s article a couple of weeks ago on this, referred to in this article. What it says, and what this article says, is effectively that if you keep welfair for a certain section of society you can end up stigmatizing that section of society.

  29. Ash

    Anon –

    Well, of course there’s a right-wing understanding of ‘fairness’: it’s ‘fair’ that people keep more of the money they earn, make their own choices about paying for healthcare etc for their own families, and aren’t made ‘dependent’ on state services and benefits; and it’s ‘fair’ that public services are provided only for those who really need them.

    There’s also a left-wing understanding: it’s ‘fair’ that everybody pays into the system based on what they can afford, and that everybody then has access to the same decent standard of benefits and services at the appropriate times in their lives: school when they’re young, pensions when they’re old, Child Benefit when they start a family, and healthcare when they’re ill.

    I know which side of the argument I’d rather be on, too!

  30. Anon E Mouse

    Mr.Sensible – The policy doesn’t currently exist – when it does I’ll let you know if I think it’s fair or not.

    “And on the point about bus passes for people like Alan Sugar, as Ash has said that’s not really what this is about. It is about taking Child Benefit from Middle-Britain.”

    No Mr.S. That’s EXACTLY what this is about. You see it as taking Child Benefit from middle class families and I see it as minimum wage workers paying the rich. What a surprise from Labour to be supporting the rich.

    It’s still not fair and no matter how you word it I guarantee next election the right wing press will present it as I do. Poor people pay to give the Queen a free TV Licence. Do you really not see the irony in that?

    Ash – Exactly right on the left wing fairness – not that I accept Labour was fair in government. And there isn’t a left wing government in power and it is highly unlikely they will be back before 2020.

    The problem is that because of the mess the last government left us in we can’t afford those services in the same way and I do not think that people should be so dependant on the government. Especially when they stole our money for years and years and then tried to justify the money as “expenses” when it was straightforward theft.

    If politicians from whatever party could be trusted then I’d agree with you.

    They can’t and I don’t. At least you defend your position dude which seems to be a rarity on this blog. Nice one.

  31. John Lees

    HI Mr Mouse – I am all for simplifying the tax system and the benefit system. The problem with cutting clild benefit from the ‘rich’ (which I support) is how to do it. We do not do joint tax filing so it is not possible to get a couples joint income. So we have this imperfect proposal of identifying a higher rate taxpayer. Not sure what a better solution is. An alternative that might work is abolishing CB all together and giving each parent a tax allowance, as in Germany etc. This would shift the onus of tax from those who earn to those who can afford to pay (i.e those without children) a better system in my book.

  32. Anon E Mouse

    John Lees – Agreed. I like the German system from how you describe it…

  33. Simon Landau

    Ash summarises the current position well – “There’s also a left-wing understanding: it’s ‘fair’ that everybody pays into the system based on what they can afford, and that everybody then has access to the same decent standard of benefits and services at the appropriate times in their lives: school when they’re young, pensions when they’re old, Child Benefit when they start a family, and healthcare when they’re ill.”

    Of this list two are services (health and education), two are income (pensions and Child Benefit). I don’t think Mouse et al are questioning the two services but they are questioning the income side. Why is that ? Because income directly relates to tax – there is no argument (sensible or otherwise !) that the public service can allocate the resources more effectively. So Mouse is right in a sense that it can seem ‘unfair’. However, as the post points out, in the case of pensions it seems clear that graduated state provision is accepted as a way of limiting reliance on private pension provision. Universal Winter Fuel benefit is justified (I think rightly) purely on the ‘take-up’ argument. Bus Passes I think fall into the same category. TV Licenses for over 75s can be justified purely on the paucity of programming for that generation compared to the the taxes they have contributed in the past (do you have an image of the Queen tuning in to Radio 1 Xtra ?).
    So the real problem area is Child Benefit – why is it fair to continue providing it as a universal benefit ? I think because since Beveridge, it is seen as part of national insurance (small n and i are deliberate !). So when we work (before and after child raising) we recognise that providing for children properly ensures a healthy next generation that will ensure that society broadly continues in an equitable direction. If I was confident that child-raisers were rewarded equally to the childless then we could switch from Child Benefit as income to one based on services only (e.g. SureStart). It may be that as equity of reward to child rearers improves we can reduce Child Benefit progressively to increase funding of children’s services but I guess that Mouse would think that would produce an inefficient allocation of resources !

  34. Ash

    John Lees & Anon –

    “An alternative that might work is abolishing CB all together and giving each parent a tax allowance, as in Germany etc. This would shift the onus of tax from those who earn to those who can afford to pay (i.e those without children) a better system in my book.”

    This is what we used to have – Family and Child Tax Allowances meaning those without kids, whatever income they were on, paid a bit less in tax than those with kids.

    We switched to Child Benefit because a) it goes straight to the mother (usually) & hence is more likely to be spent on the kids and b) that way non-taxpayers can get it too. But it still effectively does the same job; it’s just that rather than paying less tax in the first place, higher earners with kids get some of their taxes paid back to them in the form of a cash benefit. I can’t see any reason to prefer the old system.

  35. Anon E Mouse

    Simon Landau – To me it’s black and white. No shades of grey I’m afraid. All the words in the world will not change the fact that my four examples are one’s that will bite the Labour Party by it’s regressive position.

    The word is “fairness” is emotional and intangible in this matter. Whilst I agree with a lot of Ash’s post myself, I have to say that if Ed Miliband believes it is OK in his position in life to take much needed taxes to benefit his own family he is wrong.

    People who vote for him will not like it near the election and if the intention is to get the “Squeezed Middle” to vote Labour he has no hope due to the mess the country is in.

    This debt thing is generational – Labour needs to lose the tribal dogmatism over this and get real. What they say may be correct but it isn’t fair and we Brits just don’t like that…

  36. Weekend reading, 22 October 2010 « Policy Progress

    […] Baumberg – Should we defend the middle class welfare state? An interesting and challenging post on Left Foot Forward from Ben Baumberg of the LSE and the […]

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