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