Since the 2008 ﬁnancial crisis, this country has seen a programme of deep and sustained spending cuts to public services and social security, under the ideology of deﬁcit control and ‘living within our means’. As a result, public spending has fallen from 47 per cent of GDP to 41 per cent on the eve of the coronavirus pandemic.1 Compared to other European countries, this is a fast decline from an already small base. We now have one of the smallest states of any advanced European economy.
The folly of this approach has become clear as it has progressed. Austerity has left many public services struggling – not least our health and care systems. It has also been economically illiterate – stiﬂing productivity and reducing human capital. Overarching analysis has found that the UK economy was about £100 billion smaller in 2018/19 than it would have been without these cuts.2
COVID-19 RAISES SUBSTANTIAL QUESTIONS. AUSTERITY IS NOT THE ANSWER
Covid-19 represents perhaps the biggest disruption to our society and economy since the second world war, and the government has responded with a costly and far-reaching programme to protect the economy. But, in many ways, the impact of the crisis will be decided by what the government does not do.
Some (including former chancellor George Osborne)3 are already arguing for another programme of austerity in response to this crisis. But there is little left to cut: we have run out of road. If we take the path of austerity again, we will end up with no welfare state left at all, and poorly prepared for future crises, including the climate and nature emergencies. We need a different approach – one that recognises the foundational importance of a functioning social contract and a state capable of upholding it.
Two arguments stand in our way: ﬁrst, that we can’t afford it, and second, that others will take advantage of a generous welfare state. Both must be put to rest.
“Some are already arguing for another programme of austerity in response to this crisis. But there is little left to cut: we have run out of road”
On the ﬁrst, we are confronted with the spectre of the ‘magic money tree’. The argument made is that raising taxes, monetary ﬁnancing, and government debt are all impossible, so the only option is to cut spending. This is manifestly not the case. All four approaches have costs and beneﬁts, and different distributional outcomes, and these must be weighed up. And social security, public investment, and state capacity are not mere add-ons, but provide the foundations of a well-functioning economy.
On the second idea that others will take advantage: as Alison Garnham points out in this issue, the idea that our population is divided into ‘skivers’ and ‘strivers’ is manifestly untrue. Social security is there to catch anyone who may fall on hard times. And by far the majority of those in receipt of beneﬁts are either working, or moving into or out of work. Far from skivers, many are the key workers currently on the front lines of the Covid-19 crisis.
A RISK SHARED IS A RISK HALVED
The choice between austerity and welfare is, in many ways, a choice about who shoulders risk. Proponents of a smaller welfare state argue that the individual should bear the risk – of unemployment, ill health, or falling incomes – because the state cannot afford to do so.4 If the doctrine of ‘personal responsibility’ leads to ruin – in the form of chronic ﬁnancial insecurity, sustained in-work poverty, and little chance of getting into or progressing in good work – that is the price we must pay, the argument goes, for a competitive country.
But there is an alternative: shifting risk from the individual to the collective. The state becomes an insurer against risks that no individual or household can shoulder alone (without experiencing ruin). Taxes provide a premium against our health, care, security, community, and skills needs.
“David Cameron told us that spending on public services would saddle our children with debt; by contrast, the European example shows us that public services are one of the best ways to invest in their future”
There is every indication that the latter is affordable. Compared to Europe, the UK invests less in its people. The average on the continent is 48.9 per cent of GDP – in the UK, we spend just 40.8 per cent.5 Other European countries afford their extra spending through higher taxes, but their improved social outcomes then support their economies: for example, by leading to greater productivity and growth in human capital. David Cameron told us that spending on public services would saddle our children with debt; by contrast, the European example shows us that public services are one of the best ways to invest in their future.
But, importantly, it is also desirable. The future is set to be deﬁned by major disruptive forces, which will transform life in the UK and globally. Our ageing society, climate change, and the growing risk of pandemics all represent severe risks. These are risks that the individual has little to no control over, and they will have impacts that many will not be able to weather by themselves. The consequence of failing to provide a ﬁt-for- purpose welfare state – built around the speciﬁc challenges faced in the 21st century – will be destitution for many.6
TRUST THY NEIGHBOUR
At its core – as John Ballatt, Penelope Campling and Chris Maloney argue in their piece on ‘intelligent kindness’– the debate around the welfare state is about how we think about one another. If we trust one another, and recognise our mutual interdependence, then we can open ourselves up to one another; if we don’t, we close ourselves off. Instead of helping each other bear the risks that we all face, we take those risks onto our own shoulders. In the process, we are all made poorer.
While the springing up of mutual aid groups and volunteering through the coronavirus lockdown demonstrate that we are willing to help one another out, the fact that this is needed also exposes the inadequacy of our social safety net. With public health in sharp focus, we’ve been forced to confront the reality of our collective interdependence, but we have neglected the institutions, services, and people that serve to protect our communities. This crisis has highlighted care as vital social infrastructure that has gone under-resourced and under-valued for too long – across the NHS and social care settings, and in the nurseries and schools that are now out of reach. As large sections of our economy have ground to a halt, the public conversation on income protection, key-worker wages, and sick pay has brought attention to risks that have been increasingly individualised.
We can change things, but it will require us to have the courage to place our faith in one another. Attitudes can change quickly – as John Curtice documents, public opinion on unemployment beneﬁts dramatically shifted between 2017 and 2018, from two-thirds thinking beneﬁts were too high, to roughly equal numbers rating them too high versus too low. With large numbers of people likely to soon experience the beneﬁts system for the ﬁrst time, the current crisis may shift attitudes further. And local governments are stepping up through the crisis and rapidly changing how they deliver public services. In Scotland and Wales, devolved administrations have outlined very different visions for the role of the state in providing public services and social security, deﬁned at times in opposition to that articulated by recent governments at Westminster.
UNIVERSALISM – AND ITS LIMITS?
This issue explores the case for universalism in theory, and the challenges of realising true universalism in practice. This is evident in public service provision, where, for example, access gaps in government childcare offers lead to different outcomes for disadvantaged families. Applying universalism in social security, while facing budget constraints, requires difﬁcult choices for progressives. More generous and more targeted payments for those most in need, on one hand, might have a greater redistributive impact. Universal payments, on the other, may reach a greater share of eligible families, but see fewer lifted out of poverty or ﬁnancial insecurity as a result. While we may wish to counter these effects through a progressive tax system, this is far more complex in practice than targeting beneﬁt receipt.
“We can’t go on like this, with an economy running on fumes and quantitative easing, shrinking the state further with every new recession”
In her article, Christine Berry examines calls for a universal basic income in response to our current economic crisis, and instead advocates for a universal income guarantee, where the means to provide an adequate standard of living are guaranteed to every household. Wim Van Lancker articulates the limits of universalism by asking who beneﬁts from the offer of universal services (such as childcare) or beneﬁts (such as child beneﬁt). His piece reminds us that any exploration of universalism must also grapple with the challenge of cash payments that disproportionately beneﬁt the middle class, or universal services that are not accessed by households on the lowest incomes.
In 2018, IPPR’s Commission on Economic Justice argued that fundamental changes were needed to the economy, on the scale of the post-war paradigm shift in economic and social policy. The Covid-19 crisis will force our hand. We can’t go on like this, with an economy running on fumes and quantitative easing, shrinking the state further with every new recession. We can’t expect the key workers risking their lives during this crisis to return to precarious employment, nor accept further cuts to the safety net. We can’t keep pushing our systems to breaking point. We need a new approach.
This issue of the IPPR Progressive Review examines what that might look like. Alison Garnham and Wim Van Lancker examine the case for more universalism. Lars Trägårdh describes the political economy of the social contract in Sweden – one based on what he calls “statist individualism” – and reﬂects on Sweden’s response to the Covid-19 crisis. Stewart Lansley reviews Peter Sloman’s history of the idea of a guaranteed income, while Christine Berry and Rajiv Prabhakar look at the idea in the context of the current crisis.
Chris Maloney, John Ballatt and Penny Campling make the case for a culture change in public services. Adrian Smith reﬂects on the history of grammar and endowed schools and argues for greater access and civic responsibility.
Aveek Bhattacharya reviews the rise and gradual decline of marketisation in public services and proposes the need for different responses to the questions that marketisation tries to answer. He suggests that, at the very least, we should make these policy decisions deliberately – rather than blindly following ideology. Bent Greve reiterates the importance of the welfare state to the economy and cautions against calls for more austerity. And John Curtice looks at how public opinion on the welfare state has changed over time.
Much of our previous political reality is now unmade, at least temporarily, in the face of this crisis. The Financial Times calls for radical reform,7 and new polling ﬁnds majority public support for universal basic income, rent controls, and a jobs guarantee.8 How policy and debate play out now may deﬁne our political reality for decades to come. This is a moment where change is possible. Progressives – in and outside of government - must rise to the challenge.
Shreya Nanda, Chris Thomas, Rachel Statham and Joshua Emden
- See: https://data.oecd.org/gga/general-government-spending.htm
- See: https://neweconomics.org/2019/02/austerity-is-subduing-uk-economy-by-more-than-3-600-per- household-this-year
- See: https://www.bloomberg.com/news/articles/2020-04-20/architect-of-u-k-austerity-says-retrenchment- needed-post-crisis
- See for example: https://www.telegraph.co.uk/ﬁnance/budget/10487295/Autumn-Statement- 2013-Britain-can-no-longer-afford-welfare-state-warns-Osborne.html
- See: https://www.ippr.org/blog/austerity-there-is-an-alternative-and-the-uk-can-afford-to-deliver-it
- Quilter-Pinner H et al (forthcoming 2020) The Decades of Disruption: New Social Risks and the Future of the Welfare State, IPPR
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