Tuesday, 27 March 2012

Welfare should reward contribution

A copy of this article originally appeared in Shifting Grounds 
Academics in social policy like to talk about three different types of ‘welfare state regime’. At one end of the spectrum we have the Nordic regimes: characterised by generous, universal benefits that are paid out as of right. At the other end we have the liberal regimes, where benefits are low (more or less subsistence level), means-tested and highly conditional. In between are the continental systems, where the contributory principle rules the roost.
The conundrum that Labour finds itself in is that of an increasingly liberal British welfare state. For decades the UK was more of a hybrid system, with distinct elements of all three principles: means-testing, contribution and universality. Over time though, liberal principles have taken over the welfare state and, perhaps inevitably, it is the Conservatives who are now seen as the party of welfare.
Labour thus faces two options on its welfare policy. The first is to keep ceding ground to the Coalition. This involves challenging the technical details of welfare reforms but accepting them in principle. This is the position Labour often seems to adopt and, as opinion polls show, it isn’t working.
The second option is to go beyond the liberal model of means-testing, low benefits and high conditionality. Indeed, many Labour members would like to jump straight from liberal welfare to social democratic welfare; where entitlement is universal and poverty minimal. For complex political, economic and cultural reasons, this is not going to happen – at least not overnight.
This means that if Labour wants to change – and strengthen – the welfare state it must look to ideas from elsewhere. This is where the continental system of welfare can help, with its prioritising of the contributory principle. Ed Miliband and Liam Byrne, among others on the Labour front benches, have recently shown their willingness to make it the basis of future policy. Now we need to put meat on the bones.
There are two imperatives for Labour going forward: in considering each, it becomes clear that the problem with Britsh welfare is not ‘something-for-nothing’ but ‘nothing-for-something’. The state needs to do more to recognise people’s contribution and hard work.
First then, Labour should make welfare more attractive to the middle-classes. Middle-class people support welfare when it offers them something back for their contributions. At the moment, the race to the bottom in welfare provision means that people with long records of contributions get the same as those with none. Labour’s first offer on welfare should be to establish a strong contributory principle. If you have worked for twenty years and become unemployed, you should get a decent benefit that ensures you avoid financial hardship. We should still offer basic support to young people and those without contributions, but there should be a clear principle at the heart of the welfare state: when you need it, you will get the support you have paid for.
So establishing a principle of contribution should be a priority for Labour. The next question then is how to apply this to those not covered by social insurance: young people, those with poor work histories or those who have spent time caring.
The policy response from the Coalition towards such groups has been to introduce a raft of compulsory work-based schemes with the threat of removing benefits for those who fail to comply. Participation in such schemes might – or might not – be good for unemployed people, but threats, punishments and coercion do little to strengthen the principles of contribution, reciprocity and responsibility.
Instead of threatening to punish claimants, Labour should offer to reward those who contribute whilst experiencing a spell of unemployment. If you volunteer for community work, find a work experience placement or enrol on a six-week training course, you should be rewarded with a stronger benefit: JSA Plus, for example. In return for making a contribution, you get something back. These two offers are about equal responsibilities throughout the welfare state: or, as Ed Miliband might prefer to say, a ‘something-for-something’ society.
Rather than ‘something-for-nothing’, the problem with welfare is the ‘nothing-for-something’ experience that most people have. Whether that’s paying decades worth of contributions and getting a measly benefit or undertaking compulsory work experience whilst looking for a job, most people sense the state isn’t doing its bit, despite asking them to do theirs. If Labour really wants to mark its ground with a ‘something-for-something’ welfare state, then we must look turn the tables, and look more closely at why so many people feel the state does nothing.

Tuesday, 20 March 2012

Why Labour should support an 'annual taxpayer statement'

In tomorrow's budget, it is expected that George Osborne will announce plans to issue annual personal tax statements in order to let citizens know precisely where their tax gets spent.  So far, the issue has been set up as one of left versus right, with some conservative commentators clearly believing the policy to be a route to lower taxes.

The theory is that if people know more specifically where their taxes go, they will be less content to pay them.  Indeed, the left-wing tax researcher Richard Murphy was on Radio 5 Live today predicting that this is precisely what will happen.  But such arguments are predicated on a misunderstanding: that 'unpopular' areas of spending, such as unemployment benefits, receive an undesirable proportion of the income tax pie.

On the Guardian's website today, there is a wonderful interactive tool which smashes these myths.  It shows how much an individual spends per day on public services (based on their income).  If we take the average salary - around £25,000 per year - we can see exactly what services cost the average taxpayer on a daily basis.

According to the Guardian's tool, here are the three most expensive services and what they cost per day for the average person:

  1. Health - £4.88 per day
  2. Education (including universities) - £3.77
  3. Pensions - £3.59
And here are the daily costs for three services we might consider much less popular:

  1. Unemployment benefits - £0.24
  2. Housing -  £0.14
  3. The EU - -£0.13 (meaning the average taxpayer gains 13p a day from EU membership)

What does all this tell us?  In my view, it shows us - perhaps unsurprisingly for those on the left - that the things which cost the most money are the services that benefit us all and that we most appreciate: health, education and pensions.  On the other hand, it's clear from data like this that taxpayers are not spending inordinate sums on small numbers of 'undeserving' groups.  The average earner, for example, pays just £7.30 per month to support the ever-swelling ranks of the unemployed.

Conservatives cheerily urging Osborne on with this policy might care to think again.  In future years, taxpayers might receive their annual statement from the Chancellor and think they don't get too bad a deal.  The parent of a secondary school child will see that it costs them just £252 per year to send their children to school; a snip compared to private sector rates.  Equally, we might end up realising how little we spend on needy groups.  Is it fair, for example, that all we contribute towards survivors is 8p a day?  Taken together, the public might end up thinking that the state actually does an efficient job at providing good services, while also believing the public could do a bit more for those in need.  

For years Labour has been shackled by strange and paradoxical public attitudes towards the state.  As the adage goes, the British public want Swedish social services at American rates of tax.  One reason for this might be the misconception that the UK government spends unfairly and unwisely.  Personal tax statements might be one way to combat such misconceptions that have, over a long period of time, been detrimental to British social democracy.  For that reason, Labour should support the Coalition in implementing this measure.