Balancing rights and responsibilities – rebuilding the social security system in the 21st centuryOriginal
11 May 2012
Labour MP and former pensions minister Malcolm Wicks argues that many Labour voters have lost faith in the welfare system and that to revive it the contributory principle needs to be restored.
Among the very many challenges facing the next Labour government will be to rebuild trust in the social security system. By 2015, the system will be characterised by mass unemployment and low benefit levels. Moreover, after years witnessing the triumph of fear over hope, faith in the welfare state will be at a low level with many benefit claimants on the hostile end of popular attitudes, not least from those in employment whose salaries are in decline. Labour’s challenge, if it gets back into power, will be to rebuild new public confidence in a system based on rights and duties.
The challenges we face
The starting point, as we seek to develop coherent and affordable policies for the future, must be our values. I would argue that these are guided by three key principles:
- we must aim for a more equal society
- it must be one that liberates individuals and families, empowers them, plays to their strengths and is allied to their aspirations – not a dead-end, dependency state
- and it must encourage ‘fraternity’ – or social cohesion: it should help to integrate society, not divide it.
The last point, the role of social security in promoting social cohesion, has been neglected in recent decades. But the views of the giant of 20th-century social policy, Richard Titmuss, that if services and benefits are focussed on the poor they are bound to end up being ‘poor services’ ring out as a strong truth that should guide the Labour party towards a new social welfare approach. As Titmuss argued in 1972:
‘Universal services available without distinction of class, colour, sex or religion, can perform functions which foster and promote attitudes and behaviour directed towards the values of social solidarity, altruism, toleration and accountability’.
At present, this sense of social solidarity, particularly in relation to the welfare state, is missing. A man in my Croydon constituency told me recently that after the war the ‘rules’ were clear: ‘You paid your contributions, when you had a job, and you could receive benefits when in need.’ He felt that clarity was now missing. One problem now is that the bridging concept of citizenship is not as strong as it was in the past.
In contrast to unity and solidarity, partly forged out of the battles against Hitler, there is today more individualism and also more diversity in our population in the wake of substantial immigration. There is also a decline in those institutions that created solidarity, whether large industries such as coalmines, steelworks and factories, or church and chapel, trade unions and mass political parties. So there is less shared interest and less shared history. And globalisation weakens ties between company and community, when shareholders’ and people’s interests point in different geographical directions. These factors challenge the reality of citizenship and therefore make it more important to foster.
This raises a central issue for a democracy: what are the fundamental rights and responsibilities of citizens? British politics has been weakened by the left’s almost exclusive focus on rights in recent decades (in contrast to a more traditional and equal emphasis on duty, whether as a member of the friendly society, the union or the co-op), and also by the political right’s equally narrow emphasis on duty, turning its back on an earlier ‘one nation’ tradition. To focus on either one without the other is crass, too narrow, merely partisan and, in practical terms, leads up a policy cul-de-sac. What we need is a proper balance between the two.
The responsible nation
The responsible nation should be one that fosters a strong sense of responsibility in the country as a whole, whether in government itself, the private sector, in communities, families or individuals, rich and poor. It recognises that we grow stronger if we respect mutual rights and responsibilities and if there is a strong egalitarian ethic that cherishes, but also holds to account, each and every citizen.
We need public understanding and support for the principles and the practice of a modern welfare state. All citizens, whether as taxpayers, family members or as pension or benefit recipients, need to have confidence in the underlying ethos and the ‘rules of the game’ – a confidence that welfare is not a burden, but rather a crucial foundation stone for a well-functioning social democracy.
Is this the case today? I don’t think so, at least not entirely. Parts of the welfare state, of course, are massively supported, notably the NHS. Yet, as many of us found during the general election campaign, there is much public disquiet about alleged benefit scroungers and the work-shy and a perceptible unease that hard-working citizens are taken for granted; that parents who responsibly plan for family-building go to the back of the housing queue; and that to work on a low income earns you little extra above benefit levels.
A recent survey found that, in answer to the question ‘do you agree or disagree that the government pays out too much in benefits; welfare levels overall should be reduced’, the total agreeing was a massive 74 per cent – more Tory voters, yes (94 per cent) but including 59 per cent of Labour voters. A further question concerned ‘scroungers’: respondents were asked how many welfare claimants fit this description. Of the total, 39 per cent said ‘a significant minority’, a further 22 per cent suggested ‘around half of all claimants’. Again, significant numbers of Labour voters thought that there were many scroungers in the system. Another survey found that as many as 69 per cent agreed with the statement: ‘Our welfare system has created a culture of dependency. People should take more responsibility for their own lives and families.’
Now, this is complex territory and not all public grievance can be taken at face value: there’s a fair share of urban mythology and certainly misunderstanding (and exceptional cases, such as families living courtesy of housing benefit in millionaire mansions, gain currency and undermine public confidence). But public anxiety does contain very strong grains of truth that need to be recognised and acted upon.
Indeed, some on the left seek to belittle the size and significance of benefit abuse or, by comparing it with tax avoidance, speak of its relative insignificance. They doubtless assume that raising the question undermines public confidence, yet the reverse is the case. We avoid this issue at our peril.
Abuse is clear, certainly to many living on our estates and in poorer communities. Sidestepping benefit abuse is a grave disservice to legitimate public anger about the failure of some to comply with the duties that must accompany rights, if the system is to be perceived as fair. Fraud is difficult to quantify but the DWP’s central estimate for 2010/11 is that fraud cost £1.32 billion, some 0.8 per cent of total benefit expenditure. A further £1.3 billion loss was due to customer error. For tax credits, fraud is estimated at £400 million. The scale of abuse was clear to me when I had ministerial responsibility at the Department for Work and Pensions for tackling the problem.
My argument is that a benefits system based on ‘rights’ alone is a system built on sand, rather than the granite rocks of citizenship, reciprocity and conditionality. It is one reason why we are losing the battle of public opinion on social security.
Moving forward: the key building blocks
If we are serious about building a modern social security system fit for purpose in the 21st century, much detailed work will need to be done. Here, however, I suggest some of the key building blocks that are required. Some I discuss only briefly, but I will conclude by emphasising the importance of the contributory principle as a key building block.
With the numbers of unemployed approaching 3 million, talk of the citizen’s duty to work (whenever possible) may seem idealistic. But evidence has grown that unemployment has impacts well beyond the obvious ones, including on health, on children’s educational attainment and on access to decent housing. The challenge therefore is to place employment centre-stage with strong implications for macroeconomic policy, but also for industrial policy and for skills and innovation. I believe that the urgent priority is to guarantee a job or training for Britain’s school-leavers. Few things can be more disheartening than leaving school and ending up in a wilderness of inactivity. This will require a national effort: the public sector and large businesses – Sainsbury’s, Marks and Spencer, construction companies and others must be signed up to help achieve this objective.
Skills and education
High levels of unemployment are not simply a consequence of today’s austerity regime but have been a feature of the labour market in recent decades. In Croydon, even during the ‘boom’ Labour years, many of my constituents remained unemployed. Yet there were vacancies and many migrants, typically from eastern Europe, were easily finding jobs. How do we explain this seeming paradox? Explanations relate to job-readiness, a lack of willingness to go the extra mile in search of work, and a frank lack of education and skills.
In contrast to the immediate years after the war, there are now far fewer jobs which require only low skills – on the other hand, there are more and more jobs that require high levels of literacy and numeracy at the very least, and often sophisticated IT skills as well as further and higher education qualifications. The last Labour government did much to address this problem, from literacy hours in our primary schools, tough targets at secondary level and a rising number entering university. But there is so much more to be done, and we need to make a reality of ‘lifelong learning’ and a new programme to focus on those who lack skills.
There is no more crucial building block for ‘social security’ than the family. It is the family that brings home the lion’s share of household income, and there is huge silent majority of families that bring up their children very well.
Our aim in family policy should be to be on the side of what I have called ‘strong families’. Such families are to be found among many different kinds of households, including those headed up by married couples, by those who are cohabiting and by single parents. We should play to their strengths and promote the right balance between rights and duties. We should be on the side of aspiration and ambition. It should be a positive family policy, but therefore one that does not shy away from tough and controversial questions.
In my view, the last Labour government failed to develop a coherent family policy.
It was hardly inactive, and many of our policies helped the family, from child trust funds to sure start centres, but I think we failed to tackle some fundamental and very difficult questions. These include:
- Why are Britain’s divorce rates among the highest in the world?
- Why do we have such a high percentage of single (never married) families?
- Why do so many fathers effectively abandon their own children, certainly financially, but often in other respects too?
One consequence of such trends is that the welfare state, and therefore taxpayers and, yes, therefore other parents, have had to take on financial burdens that properly should fall to the families themselves. Of all the children living in separated families, only half are financially supported by the ‘absent’ parent – normally the father. Other data from DWP for all separated families, totalling 2.5 million, shows that there is a CSA [Child Support Agency] payment liability or non-CSA arrangement in place for some 1.51 million. It is important to note, however, that this does not mean, in all cases, that payments are actually made or that they are made in full.
The depressing picture of irresponsibility shown by the child support data is but one indicator of a far wider and disturbing demography. There are too many children being brought up in families which are uncaring and chaotic, where there is no father figure. This is an inconvenient truth about the social revolution that has engulfed many families.
Some of these children will face harmful impacts on their socialisation, their educational attainment and consequently their future life chances. The last Labour government did much. However, there is a need for some fresh thinking.
First, we must emphasise that the frontline of defence against insecure childhoods must be the promotion of the strong family. How do we achieve this? And how do we ensure that social and benefit programmes nurture and support rather than discourage responsible parents?
Second, we must ensure that public expenditure is used to most effect, pooling portions of departmental budgets in pursuit of agreed priorities, such as investing in early intervention, raising teenagers’ aspirations and promoting parental responsibility. Spending money effectively requires a strong focus on objectives, not dull allegiance to Whitehall configuration.
A 21st-century social insurance strategy
A final, but substantial, building block for a modern social security system must be the renaissance and modernisation of the contributory principle, one based by definition on a proper balance between rights and duties. The idea of lifecycle accounts is worth exploring. These might include the following characteristics.
First, they would be individualised accounts, accessible via the internet. Individuals should have a sense of ‘ownership’ of the account.
Second, there should be flexibility, including the ability to access money at certain, albeit limited, points in one’s life cycle, ahead of retirement. The ability to ‘borrow’ certain amounts against future contributions should also be a feature. [I do not underestimate the need to build up funds for a decent pension, but the ability to draw on social insurance for specific purposes pre-retirement is attractive.]
Third, the scheme should enable individuals to make payments into their own account. This would be a welcome feature, not least at a time when many commercial schemes resemble a confusing savings swindle.
What should a new social insurance system cover? What 21st-century lifecycle risks and circumstances might be included in a modern social insurance scheme?
The current coverage of national insurance is the starting point, but surely we can do better for the major risk of unemployment. Many of those who might subscribe to a popular perception that benefit levels are too high are shocked when they come face to face with the actualité of unemployment, as many are now doing. Unemployment insurance now lasts only six months; after that, if their partner is in work, there might be no jobseekers’ allowance at all. Rates are very low: for the under-25s the benefit is just £56.25 a week; for the over-25s it is £71.
But more realistic unemployment benefit rates must rest on two things: a tougher stance on the duty to work and locating the goal of full employment at the heart of public policy.
As for national insurance pensions, why should not individuals be enabled to make extra contributions into the system in exchange for guaranteed enhanced benefits? Given the low administrative costs of national insurance, the system could offer a far better deal than those currently available from expensive private pension schemes, typically defined contribution schemes with low annuity rates.
Lifecycle accounts should include the reincarnation of child trust funds, not least to inculcate the savings habit early. A new child endowment should be vested in favour of every child at birth. There would be strict rules about the use of such an endowment. These might include the funding of post-16 or later further education, a deposit for home ownership, etc.
How would it be funded? The current period of austerity, which has affected families so badly, was caused primarily by the banking crisis, when government was forced to nationalise large segments of the banking system. When the nationalised shares are finally sold (and this should not be done at a low price) we should think more imaginatively than merely returning the money to the Treasury for general usage. What better than to use some of this capital to invest in our children’s future through the new endowment scheme? This would indicate that we take our newest citizens seriously and seek to promote their futures. Another mechanism would be to enable the funding of the new child endowment scheme through loans against future national insurance contributions.
Ideally, a new social insurance scheme should recognise the changing patterns of care within the nuclear and extended family, in the light of increasing employment among women (and mother) and the care crisis posed by an ageing population. These represent challenges which were not present in the society that Beveridge experienced when he devised the post-war social security system. Should a modernised social security system, possibly through social insurance, include either a childcare payment or enhanced parental leave, to be shared by both father and mother?
While Beveridge has much to say about pensions, surely today he would also have emphasised frailty in old age and the burden of long-term care as one of the important risks to be covered by social insurance. The Dilnot Commission on Funding of Care and Support has made important recommendations in this area, essentially proposing a sharing of costs between the individual and the state. Is there scope for a new insurance contract that would help meet these costs?
100 years after the introduction of national insurance, and indeed 70 years after the publication of the pioneering Beveridge report, it is time for fresh thinking about the role that social insurance might play in our national social security system. This is not about history or nostalgia, but rather the search for a system of social security that commands public respect (and must therefore follow public consultation and debate) and one based on sound public finance. A hotchpotch of benefit provision, based on neither clear values nor public consensus, will fail to see us through in the difficult years that lie ahead. A new social contract between citizen and state, based on clear rights and duties, is the way forward.
This article is based on an IPPR lecture given by Malcolm Wicks on 24 April 2012 at the House of Commons. Download the full text of the lecture.