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 – 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?
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?
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??
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?
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.