Our Unsustainable Welfare State

 

I have my own thoughts on the welfare state and what it means for your average person on the street, but since its birth in about 1945, shortly after the most horrific and bloody war in history, what one would understand as the welfare state has changed dramatically. So I am not going to focus on what I think, but more about the facts and recent time reforms.

Labour came to power in 1945, a landslide victory (not quite 1997) and immediately set about creating a protection system for the people of the UK. We had:

  • 1945 Family Allowances Act
  • 1946 National Insurance Act
  • 1946 National Insurance (Industrial Injuries) Act
  • 1946 National Health Service Act (implemented July 1948)
  • 1947 Town and Country Planning Act
  • 1947 New Towns Act
  • 1948 National Assistance Act
  • 1948 Children Act
  • 1949 Housing Act

All created, no doubt to help those in the most need but today however, Britain is a vastly different place to what it was in 1945. Welfare in the UK includes pensions, NHS, unemployment, social housing, social inclusion, family and children tax credits and much, much more. It is expected that in 2014 total welfare spending will be £348 billion when you take it all into account.

Pensions £144 billion, Health £130 billion and the rest is on everything else. This is a lot of money so it is now wonder the current government are looking to reform welfare. Not out of spite and hatred for those that need help, but because it is unsustainable. Of course, the bulk of this spending is effectively paid for, workers pay national insurance to cover the NHS spending, retired people have in theory, paid for their pension through taxes when working. So it is not all bad. On 8 March 2012 the Welfare Reform Act received Royal Assent. The Act legislates for the biggest change to the welfare system for over 60 years. In recent weeks though, welfare reform has been a major component of the mainstream media. The idea is that the reforms will create the right incentives to get more people into work, protect the most vulnerable in our society and deliver fairness to those claiming benefit and to the taxpayer. Seems quite the right thing to do.

The Welfare Reform Act includes:

  • the introduction of Universal Credit to provide a single streamlined payment that will improve work incentives
  • a stronger approach to reducing fraud and error with tougher penalties for the most serious offences
  • a new claimant commitment showing clearly what is expected of claimants while giving protection to those with the greatest needs
  • reforms to Disability Living Allowance, through the introduction of the Personal Independence Payment to meet the needs of disabled people today
  • creating a fairer approach to Housing Benefit to bring stability to the market and improve incentives to work
  • driving out abuse of the Social Fund system by giving greater power to local authorities
  • reforming Employment and Support Allowance to make the benefit fairer and to ensure that help goes to those with the greatest need
  • changes to support a new system of child support which puts the interest of the child first.

Not wishing to turn this blog into something political, it is worth noting that government between 1997-2007 spent an extra £343 billion on welfare than if payments had stayed at 1997 levels. This extra spending happened in spite of record economic growth and rising numbers of people actually in work. You could argue that if benefits were well-targeted, you might expect that welfare spending would actually reduce as more were working and people – in theory – got wealthier. Yet in 2007, about 30% of the money spent by government was gobbled up by the welfare state. Government claimed in 2007 that there were 2.5 million more people in work than in 1997. Yet welfare spending continued to rise, by 2007 there was almost 2.8 million people of working age were being paid almost £8 billion in disability benefits. The UK had the highest proportion of people of working age with a disability in the developed world. A rather worrying statistic: at the height of the 1985/6 recession there were about 3 million unemployed and 1 million on sickness benefit, in 2007 there were around 900,000 unemployed but 2.8 million on some form of sickness benefit.

So it is no wonder that in recent surveys of the British people show that there is actually vast support for the reforms and many believe it is the right thing to do. There is though, some – specifically from the left of the political spectrum –  who think that recent government reforms are aiming to divide society even more. Many say that by targeting tax credits, child benefit, housing benefit (#bedroomtax if you like) will do nothing but make life harder for those that really need the help. I cannot help but think that reforms will actually drive people either look for work, look for more hours to work and see that work really does pay.

2 COMMENTS

  1. A really poor analysis that doesn’t take into account the following:
    – the period 1997-2007 saw an aging population and pensions rose accordingly;
    – this period also saw massive investment in the NHS (which was desperately needed, you might not remember the waiting lists in 97 but I do) which had the effect of prologing lives of both the elderly and the disabled;
    – It was the tories who ‘fiddled’ with the benefits system in order to lower the total number claiming unemployment benefit. They moved them on to disability allowance.

  2. The first thing to be said is that I have not tried to confirm or refute your statistics, they remain unsourced and therefore open to criticism. However, the main thrust of what you say is right, Britain faced different challenges following WWII than it does now and that the welfare state has grown to the extent that it may be unsustainable. At the same time, though, the political landscape has also changed. The rejection of the notion of Britain having an unhealthy. uneducated and unemployed population was the driver that brought about the welfare state and I respectfully suggest that looking a little further back in history will reveal what was being avoided: men of fighting age being scarcely fit enough for combat at the time of the WWI, recognition that an extended franchise would require better education, that industrialisation and unemployment were often travelling companions.

    It is also the case that the 19th and 20th centuries saw greater importance placed on labour rather than land as the economy continued the transition from mainly agricultural to predominantly industrial and populations moved from countryside to town. The historical note is important because it partly explains why the some aspects of the welfare state were developed. But another aspect is the extent to which a political party might secure for itself a reliable source of votes in order to remain in power. Whether the original architects of the welfare state had such an objective is uncertain. The fact that subsequent administrations have had to keep an eye on the continuation of welfare has been a major factor in recent politics. The fact that government expenditure has become unsustainable has allowed or forced politicians to reassess priorities.

    But to focus on welfare, whilst it is a large portion of government expenditure and therefore important, runs the risk of avoiding the more fundamental question of what is government there to do? From propping up businesses, to building roads, law and order, defence, education and foreign aid, there are a substantial number of other areas of government activity which when added together make the treasury hungry for taxes. So my conclusion is that it is not the welfare state that is unsustainable but the comprehensive state that is unsustainable. And if the future debate is going to be more nuanced than all or nothing; the messy business of whether, or to what extent, health, education, welfare, business, defence, law and order etc. is properly the business of the state, will be played out in economies across the globe for the next generation.

LEAVE A REPLY

Please enter your comment!
Please enter your name here