We need a welfare state that secures Beveridge’s legacy

reform, welfare

Author(s):  James Purnell
Published date:  05 Mar 2012
Source:  Financial Times

We need to re-establish that welfare is the way we care for each other. It would be a tragedy if instead we repeated history by letting support for welfare ebb away.

The government’s welfare reform bill completed its passage through Parliament this week. It has been hailed as the most radical reform since William Beveridge. But then I had the same accolade for my bill in 2008, and so had John Hutton, Alistair Darling and Gordon Brown before me.

Welfare didn’t start with Beveridge. His 1942 report into the five ‘Giant Evils’ – want, disease, ignorance, squalor and idleness – was the culmination of decades of reform that sprang from revulsion against the Victorian Poor Law. One of James Keir Hardie’s few successes as an MP was to make the case that unemployment was structural, not exclusively self-inflicted. As guardian of Poplar Workhouse, fellow future Labour leader George Lansbury then tried to protect people rather than punish them, an approach to welfare the government found so dangerous that they launched a public inquiry into how it could be stopped.

Beveridge’s report grew out of the nightmare of the workhouse. But we forget that the Poor Law itself was a reaction to an earlier public outrage against the Speenhamland system of the early 19th century. Writing at the same time as Beveridge, economist Karl Polanyi showed how criticism of this earlier system, where rural workers had been guaranteed an income but not a real job, led to the New Poor Law of 1834. “If Speenhamland meant the rot of immobility, now the period was that of death through exposure.”

We are far wealthier than in 1945. Yet, we still fail to protect millions of people from unnecessary suffering, whether because they can’t find a job or have to do so many part-time ones that they can’t see their kids.

For the last 25 years, Labour and the Tories have conducted a faux argument about who is tougher on welfare, while quietly agreeing on almost everything. But the phoney war has been fought on an ever shrinking battlefield. Welfare has gone from slaying the five giants to finding the right combination of carrots and sticks to get people into work and the marginal deduction rate that might make a marginal difference. We have all spent too long fiddling about with the mechanics of the car rather than asking where we’re driving.

The result is that that the Right cuts without a plan and the Left defends the welfare state without identifying priorities. It leaves support for welfare ebbing away precisely when need is rising – as insecurity returns and as new issues such as childcare or social care demand attention.

This government devised their policies before the financial crisis and that’s when they would have been good. But the fiscal and economic reality demand new ideas.

The Work Programme is being engulfed by rising unemployment – and risks sending claimants on a merry-go-round of interviews for jobs they won’t get. Instead, the government should guarantee a job for everyone who had been out of work for a year – by creating jobs with charities, local government and business. That’s what the previous government did for young people during the recession and my plan had been to extend it to all ages. However, it was dropped by the new government.

This was a mistake. It would make the Tories’ flagship reform work. The Universal Credit puts working age claimants on one benefit, instead of over thirty – a wise simplification. However, claimants will still lose 65p for every extra £1 they earn. If those marginal rates would cause the rich to emigrate, then they’re also likely to cause the poor to stay at home.

The job guarantee fixes this problem – those who didn’t want to take a job would be found one (paid at least minimum wage) and if they refused it, would lose their benefits.

The Tories dropped this policy because they were still stuck in pre-recession thinking – that if you made people look for a job, they would find one. But the Left is also guilty of not breaking out of the pre-2007 straitjacket, closing its eyes to the huge fiscal challenge on the horizon. At the same time, social democracy without new money means policy of narrow scope and little hope.

It’s by finding old money to switch that we can nourish new ideas. We need a strategy for spending and reform – based on few, bigger priorities that really make a difference to people and are capable of making welfare popular again. In its first term, Labour made genuine cuts, and re-prioritised spending into health and education. It’s one of the few times a British government has shown such fiscal discipline and an experience which the Left could use for inspiration today.

For example, we should prioritise childcare, improving its quality and making it more affordable. It boosts child development and enables parents to work. Today, the UK spends relatively generously on children compared to other countries in the Organisation for Economic Cooperation and Development – but that money goes mostly on benefits rather than services. By contrast, countries such as Denmark, which has built up a universal childcare system, have more people employed and less poverty.

That’s why we should look at freezing Child Benefit for 10 years and diverting that money into building up childcare. This would release £2.5 billion per year by the end of the decade. By restricting the winter fuel allowance and free television licences to those on pension credit, we would have at least another £4 billion. The province of Quebec did just this as part of the much lauded Canadian deficit reduction strategy of the late 1990s. It cut back family allowances and massively expanded childcare, capping costs to parents at C$5 (£3.20) per day.

The Victorian Poor Law was a heinous response to a badly designed, insufficiently demanding system that increased benefits and drove down wages. We need to re-establish that welfare is the way we care for each other. It would be a tragedy if instead we repeated history by letting support for welfare ebb away to the point where politicians can no longer justify sufficient spending. Instead, the political party that is prepared to cut some parts of welfare to make the rest genuinely protective could not just save but complete the reforms that Hardie and Lansbury started a century ago.