IN DEFENCE OF WELFARE: THE IMPACTS OF THE SPENDING REVIEW - FEBRUARY 2011 www.social-policy.org.uk
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IN DEFENCE OF WELFARE:
THE IMPACTS OF THE SPENDING REVIEW
EDITED BY
Nicola Yeates
Tina Haux
Rana Jawad
Majella Kilkey
FOREWORD BY
Nicholas Timmins
The Financial Times
SPA President
FEBRUARY 2011
www.social-policy.org.ukThe Social Policy Association
T
he Social Policy Association (SPA) promotes the study of social policy and advances the
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It is a professional association which links academics who teach and research social
policy in higher education, postgraduate researchers, policy makers and others. Most of
the Association’s members are active teachers and researchers in social policy and applied
social science within UK higher education, and a significant and growing number of members
come from other European, Asian and Australasian countries. We are therefore well-placed
to offer expert comment and analysis of current social policy developments both in the UK
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SPA Annual Conference 2011
The SPA Annual Conference 2011 ‘Bigger Societies, Smaller Governments?’ will take place
from 4-6 July 2011 at the University Of Lincoln. Plenary sessions so far confirmed include Dr
Sarah Cook of the United Nations Research Institute for Social Development, Professor Jan
Pahl of the University of Kent, and a session on ‘The Big Society: A new direction for third
sector policy in England?’ with Professor Pete Alcock of the University of Birmingham, Karl
Wilding of the National Council for Voluntary Organisations and Ruchir Shah of the Scottish
Council for Voluntary Organisations. The conference will also include about a hundred
papers examining various dimensions of social policy and welfare provision in UK and wider
international contexts. More details: www.lincoln.ac.uk/conferences/spa2011.conTenTs page
Nicholas Timmins Foreword 2
The new poliTics oF welFare 4
Mike Brewer and James Browne cuTs To welFare spending 4
Tania Burchardt Fairness 7
Pete Alcock TargeTing and universalism 10
Peter Taylor-Gooby The uK welFare sTaTe going wesT 12
Danny Dorling clearing The poor away 15
implicaTions For speciFic groups and policies 17
Jonathan Bradshaw child poverTy 17
Claire Annesley and Sue Himmelweit women 19
Alan Walker older people 21
Bob Coles youTh 23
Alan Roulstone disaBled people 25
Eugene Grant and Claudia Wood disaBiliTy BeneFiTs 28
Jon Glasby adulT social care 30
Karl Wilding volunTary and communiTy
organisaTions 32
Francis Davis religion and FaiTh communiTies 34
Anne Brunton housing BeneFiT 35
Colin Lindsay welFare ThaT worKs? 37
Sharon Gewirtz and Meg Maguire compulsory educaTion 39
Claire Callender higher educaTion 41
Bob Deacon overseas aid 44
Gerry Mooney scoTland, The csr and puBlic
secTor cuTs 45
Derek Birrell and Ann-Marie Gray a view From norThern ireland 48
Towards an alTernaTive 52
Karen Rowlingson all in This TogeTher? reFlecTions
on wealTh, The wealThy and
Fairness 52
Alan Walker and Carol Walker From The poliTics and policy oF
The cuTs To an ouTline oF an
opposiTional sTraTegy 54
reFerences 58Foreword
Foreword
nicholas Timmins, The Financial Times, spa presidenT
I
n the middle of history, it is hard to It was changed in shape, certainly. Less
get it right. It can be done. Lord Grey, generous in some areas, notably in
the British Foreign Secretary in 1914, housing. But in others – not just health and
declared that ‘the lamps are going out all education but also social care and some
over Europe’ - a phrase that presciently benefits for the disabled – it had been
declared that the First World War would undeniably bolstered, even if some of the
change western society forever. mechanisms that accompanied the extra
money, such as the introduction of more
Against that, Richard Titmuss, in his market-like mechanisms in the provision
day the doyen of social policy scientists, of services, remained controversial.
once declared that an admittedly large
increase in the amount of funding that Right now, there is no doubt that what
went to the NHS from the more regressive is happening is historic. The Coalition
national insurance contributions rather has announced the biggest single set of
than general taxation, was ‘the final stick spending cuts since at least the Second
of dynamite under the welfare state’ - a World War - £81 billion of them. Many
judgement that few would share 50 years affect the welfare state – with even the
on. relative protection offered to schools and
health amounting, in reality, to a reduction
Equally, many made the same judgement in the face of rising demand.
during Margaret Thatcher’s earlier
years as prime minister – her 1980 The rise in tuition fees for higher
social security bill consisted of just six education is a watershed – a partial de-
clauses, every one of which was a cut. nationalisation of the universities. So too
is the ending of child benefit as a universal
Some of those were indeed game changing. payment.
They ended the UK’s tentative move
towards a more mainland European-style Some technical sounding changes – the
earnings related benefit system. Some did replacement of the retail price index by
profound damage – the abolition of the the consumer price index for uprating the
‘better of earnings or prices’ formula for state second pension and public service
uprating the basic state pension sent it on pensions will reduce their value by perhaps
a slow downward spiral that undermined a quarter over the coming decades unless
both state and private pensions for 30 the formula is again changed.
years. It has only now been halted by
the Coalition Government placing a ‘triple The cuts to housing benefit have led to
lock’ on the increase, so that it will rise fears that the least well off will be forced
by the best of earnings, prices or £2.50 a out of city centres – changing the shape
year – a somewhat bold move, one might and nature of British society.
say, given the deficit.
Some cherished parts of Labour’s
On the benefits side, much of the welfare programme to boost social mobility –
state got meaner in the 1980s and 1990s the child trust fund and educational
in the wake of two recessions. Yet by the maintenance allowances, for example –
early 1990s, in the memorable phrase of are going. Against that, within the schools
Julian Le Grand, despite the ‘economic budget, there will be a ‘premium’ for
hurricane’ and ‘ideological blizzard’ to disadvantaged pupils.
which it had been subjected, what was
remarkable was how much of the welfare And then there are policies that accompany
state survived, not how little was left. the Spending Review – for example the
2 In Defence of Welfare: The Impacts of the Spending ReviewForeword
move to a single, universal credit – that The papers range from the fairly technical,
are not particularly party political in origin to a call to the social policy community to
but which have the potential for a big lead a national campaign in defence of the
impact on their recipients. welfare state, to the judgement that ‘this
is how you break a society’.
In this collection – In Defence of Welfare –
some of the UK Social Policy Association’s Time and events will tell. But here,
leading lights analyse these changes. still close to the announcements, is an
And given that there were going to be academic version of ‘the first rough draft
cuts anyway to address the deficit, some of history’ – an attempt in the middle of
suggest alternatives. it to assess just how profound the impact
on welfare, and the welfare state, will be.
In Defence of Welfare: The Impacts of the Spending Review 3The New Politics of Welfare
The new poliTics oF welFare
cuTs To welFare spending
miKe Brewer and James Browne, insTiTuTe For Fiscal
sTudies
J
une 2010’s Emergency Budget and Prices Index (RPI) or Rossi index (which is
October 2010’s Spending Review the same as the RPI except that it excludes
were the Coalition Government’s the costs of mortgage interest payments,
opportunity to prove it was serious about rent and council tax), as they are at the
cutting the deficit. Not cutting the deficit moment. Because the CPI has historically
is not an option: the financial crisis and given a lower measure of inflation than
associated recession opened an additional either the RPI or the Rossi index, this is
structural hole of approximately 5.8 per effectively an across-the-board cut to all
cent of national income, or £86 billion per benefits received by working-age adults
year in today’s terms. Ignoring this would (the pension credit guarantee and the
lead to an unsustainable debt path. Basic State Pension have been spared,
since these will be increased in line with
But, of course, no political party has ever earnings rather than prices); the change
proposed to do nothing about the deficit. is, therefore, estimated to save the
There are choices to be made about how Government £5.8 billion a year by 2014–
fast to do it, and whether the hole should 15, a figure that will increase each year as
be filled mostly with tax rises or spending the savings compound.
cuts. The previous government suggested
filling 70 per cent of this structural hole by There are two main reasons for the
2016/17, but the Coalition Government differences between the RPI and CPI. Firstly,
wants to go further faster, closing the like the Rossi index, the CPI excludes the
hole entirely by 2014/15. In the general costs of mortgage interest and council tax
election campaign, the Conservative Party (although, unlike Rossi, it includes rent),
suggested that 80 per cent of the hole be which have, in the past, tended to rise faster
filled by cutting spending, and 20 per cent than general prices. Secondly, a technical
by increasing taxes. At the time of the difference in the way the CPI is calculated
election, the other political parties wanted means that, even if it covered the same
tax rises to do slightly more of the work goods as the RPI, it would still give a lower
and spending cuts slightly less, and, in the measure of inflation. The Government
end, the plans announced in the Spending argues that these differences make the
Review assume that 73 per cent of the CPI a better measure of the ‘inflation
work will ultimately be done by spending experience’ of households on benefits,
cuts and 27 per cent by tax rises. on the grounds that benefit recipients
are largely insulated from changes in the
WELFARE CUTS housing costs the CPI excludes, and that
the way the CPI is calculated allows for
Of the £80 billion a year spending cuts the fact that households can minimise the
announced in the Spending Review, £18 impact of price changes on their welfare
billion will be found from cuts in welfare by substituting away from goods that have
spending by 2014-15. The largest single become relatively more expensive. The
saving came from the decision to link second of these arguments is reasonable,
benefits and tax credits with the Consumer although the first has been questioned
Prices Index (CPI) rather than the Retail by other Institute for Fiscal Studies
4 In Defence of Welfare: The Impacts of the Spending ReviewThe New Politics of Welfare
researchers (Browne and Levell, 2010a). number of unusual features. First, the
There are two main criticisms of the means test will be based on individual
Government’s argument. First, households rather than joint income. This means that,
that are already insulated from housing to give an extreme example, a one-earner
costs because they receive housing benefit couple with an income of £44,000 would
and council tax benefit currently have their lose all their child benefit, but two-earner
benefits uprated with the Rossi index, couple where each has an income of
which already excludes these items; for £43,000 would keep all their child benefit.
these households, the CPI therefore offers Secondly, this reform seriously distorts
little, if any, improvement in terms of its incentives for some families with children.
coverage. (However, once local housing In particular, parents whose income is just
allowance rates are increased in line with below the higher-rate income tax threshold
the CPI rather than local rents from 2013– would find themselves considerably worse
14, the CPI will provide a better coverage off after a small rise in income as they
for these households, since they will then would effectively lose all their child benefit
be exposed to real increases in rents). as soon as their income rose above the
Second, for households who do not receive higher-rate income tax threshold. The
means-tested benefits, the coverage of Government argues that using the income
the CPI is less appropriate than the RPI tax system to means-test child benefit
for measuring their inflation experience is less costly than devising a brand-new
because such households do tend to face means-test, and can be implemented more
the costs of housing and council tax. quickly. But the Government could have
straightforwardly reduced spending on
The other benefits that will be hit with child benefit by combining it with the child
significant cuts are child benefit, the tax credit in some way. Furthermore, the
child and working tax credits (CTC/WTC), Government expects to lose £280 million
housing benefit – particularly housing a year through parents potentially affected
benefit paid to those renting in the private by the loss of child benefit manipulating
sector, known as Local Housing Allowance their taxable income to avoid crossing the
(LHA), Disability Living Allowance (DLA) higher-rate threshold, which is hardly the
and Employment and Support Allowance sign of a cheap or efficient means-test (HM
(ESA). Most of these are benefits that have Treasury/DWP/HMRC, 2010).
seen expenditure rise in real terms over the
past 10 or 15 years. But there is no simple The reforms to tax credits mainly involve
reason for these increases: spending a more aggressive means-test, with the
on housing benefit did rise considerably rate at which tax credits are withdrawn
during the recent recession, as one would being increased from 39 per cent to 41
expect, but both the numbers of claimants per cent from April 2011 and tapering the
and average awards had been rising for a family element of CTC immediately after
number of years before the financial crisis the child element is exhausted. This will
hit. The increased spending on DLA largely mean that, from April 2012, a two child
reflects higher numbers of recipients (as family will not receive any tax credits if
real entitlements have hardly changed). their income exceeds £31,000. Significant
Spending on tax credits has risen, by sums will also be saved by altering the way
contrast, largely through policy decisions in which tax credits respond to changes
taken by the past government to increase in circumstances (essentially, allowing
entitlements for families with children in parents less time to back-date claims,
real terms. having tax credits respond more quickly to
rises in income, and more slowly to falls
IMPACT in income); it is likely that the number
of overpayments will rise as a result.
What will be the impact of these cuts? However, the Government has announced
£2.5 billion will be saved in child benefit above-inflation increases in the per-child
by freezing it for three years, and then element of the child tax credit in 2011
means-testing it for the first time, by and 2012, at a total cost of £2.4 billion.
removing it from families containing a The combined impact of all these changes
higher-rate income tax payer. But the on tax credit entitlement is complicated,
particular form of means-testing has a depending on how many children are in the
In Defence of Welfare: The Impacts of the Spending Review 5The New Politics of Welfare
family, whether it qualifies for the working stock as well as new claimants, and expects
tax credit, and family income. it to reduce the number of claimants by a
fifth. It is hard to object to the idea that
Much attention has been focused on the DLA recipients should undergo a medical
changes to local housing allowance (LHA). test, but clearly the move will make
LHA rates are currently supposed to be set those worse off who in future are denied
at the median level of rents in a local area; DLA. Second, the Government has also
from April 2011, they will be set at the 30 announced a reform to ESA which will
per cent centile, and subject to a nationwide mean that it will be paid for more than
cap on the level and on the property size. 12 months only if a claimant is heavily
Virtually all LHA recipients will lose from disabled or if a claimant’s family has such
these changes. Most should find, though, a low income that they qualify for the
they can still afford around 30 per cent of means-tested variant of ESA.
rents in their area; the two groups who
will see much bigger falls in their LHA THEMES
payments are large households currently
in properties with 5 or more bedrooms, Are there any overarching themes
and those living in Central London, where running through these benefit cuts? First,
the nationwide caps will be binding. It is pensioners have been largely spared: the
possible, of course, that reductions in LHA pension credit and basic state pension
rates be
maymorelead landlords
focused on thetopoorest
reduceas rents are not
a result of these affected
reforms. Third,bythose
the families
move to index
receiving
in response.
very largeArguably
paymentsaofmorebenefits and tax creditsbenefits
important with the CPI,
will be particularly hard the
hitstricter disability
as a result of
change will take place in 2013, from which test for DLA will not apply to Attendance
changes to Local Housing Allowance and the benefit cap. Inevitably, the poor will lose more
point LHA rates will be linked to the CPI: Allowance (the equivalent benefit for
as a percentage
this breaks of income
the link between LHAthan theand
rates rich from such a large reduction
pensioners), in the overall
and universal welfare
benefits for
bill. And, as our distributional
the level of local rents, and some have analysis of all tax and benefit changes to be introduced
pensioners will continue in their non-
warnedbetween
that thisnowreform
and 2014–15 shows,
will lead the tax risesmeans-tested
to many announced byform.the Government are not all
Secondly, although
areassufficient
being unaffordable
to offset thistopattern
those for LHAbottom working-age
on the benefits have
90% of the population. been cuttoback
It is important
in therecognise,
medium- though,
to long-term.
that the hardest hit from tax toand
some extent,
benefit the taking
reforms working-age benefit
effect between
system as a whole will be more focused on
now and 2014–15 will be the very richest, mainly
There are two reforms affecting disability
as a result of reforms pre-announced by
the poorest as a result of these reforms.
the previous
benefits. First, the government.
Government will be Third, those families receiving very large
introducing a medical test into DLA, payments of benefits and tax credits will
Figureon
modelled 1: Distributional
the existing impact of tax
test for ESAand benefitbe changes to be introduced
particularly hard hit as by 2014-15
a resultbyof
claimants.
income It decile
will apply
groupthis to the existing
£0 0%
-£500 -1%
-£1,000 -2%
-£1,500 -3%
Annual cash loss
-£2,000 -4%
-£2,500 CSR -5%
-£3,000 June Budget -6%
-£3,500 Announced by previous government -7%
-£4,000 -8%
Poorest 2 3 4 5 6 7 8 9 Richest
Income decile group
FigureNotes:
1: Distributional impact
Income decile groups of tax
are derived and benefit
by dividing changes
all households into 10toequal-sized
be introduced by
groups according to income adjusted
2014-15 by income
for household decile
size using thegroup
McClements equivalence scale. Decile group 1 contains the poorest tenth of the population,
decile group 2 the second poorest, and so on up to decile group 10, which contains the richest tenth. Assumes increases in
employer NICs are passed on to employees in the form of lower wages.
6 In Defence of Welfare: The Impacts of the Spending Review
Sources: Authors’ calculations using TAXBEN run on the 2008–09 Family Resources Survey and 2008 Expenditure and Food
Survey.The New Politics of Welfare
changes to Local Housing Allowance and 2012–13. And, given that there are more
the benefit cap. Inevitably, the poor will cuts to welfare benefits in 2012-13 and
lose more as a percentage of income 2014-15, it would be very surprising if the
than the rich from such a large reduction direct impact of the Government’s changes
in the overall welfare bill. And, as our on child poverty was neutral by the end
distributional analysis of all tax and benefit of the Parliament. The Government has
changes to be introduced between now said, though, that it is unfair to judge it
and 2014–15 in figure 1 shows, the tax on policies due by 2014-15 given that it
rises announced by the Government are has not made a final decision on the level
not sufficient to offset this pattern for the of welfare benefits and tax allowances
bottom 90 per cent of the population. It is in that year. In particular, we now know
important to recognise, though, that the that the Government intends to introduce
hardest hit from tax and benefit reforms a Universal Credit, replacing all means-
taking effect between now and 2014–15 tested benefits and tax credits for those
will be the very richest, mainly as a result of working age, from 2013. In principle, a
of reforms pre-announced by the previous unified system of means-testing will save
government. the Government money, reduce losses to
fraud and error, and be simpler and more
The Government initially claimed that transparent for claimants. The Government
its June 2010 Budget was progressive, also wants to strengthen the incentive to
but this was based on a distributional work facing benefit recipients, particularly
analysis of tax and benefit changes which for so-called mini-jobs. In the Spending
omitted some of the largest welfare cuts Review, the Government set aside a total
(because the Treasury did not feel it could of £2 billion to pay for the costs of building
model precisely which households would new systems, and paying higher benefit
be affected). The Government has also entitlements to some claimants. Although
claimed that its measures will have no we don’t have enough details to be sure,
measurable impact on child poverty in it seems likely that this reform will lead
2012-13. We have not yet assessed this to some low-income families gaining. We
second claim, but we have noted that hope this will become clearer when the
the Treasury’s supporting analysis again Government legislates for the Universal
omits many of the welfare cuts due in Credit early in 2011.
Notes: Income decile groups are derived by dividing all households into 10 equal-sized
groups according to income adjusted for household size using the McClements equivalence
scale. Decile group 1 contains the poorest tenth of the population, decile group 2 the sec-
ond poorest, and so on up to decile group 10, which contains the richest tenth. Assumes
increases in employer NICs are passed on to employees in the form of lower wages.
Sources: Authors’ calculations using TAXBEN run on the 2008–09 Family Resources Survey
and 2008 Expenditure and Food Survey.
Fairness
Tania BurchardT, london school oF economics and
poliTical science
T
he Coalition Government has made budget and the Comprehensive Spending
considerable use of the concept of Review (CSR). Indeed according to HM
‘fairness’ in support of its policies and, Treasury’s CSR website ‘The Spending
in particular, in justifying the package of Review sets out a new vision for a fairer
public spending cuts announced in the June Britain’ (2010a, accessed 16/11/10). What
In Defence of Welfare: The Impacts of the Spending Review 7The New Politics of Welfare
is meant by ‘fairness’ in this context has unclear. Assuming it refers to those who
been less clear. Significant differences are currently children and young people,
of interpretation are apparent in recent the size of public debt they inherit will be
statements by the Prime Minister, Deputy only one determinant of the potential their
Prime Minister and Chancellor: adult lives hold. The condition of public
infrastructure (hospitals, schools, housing
Cameron: ‘Fairness means giving people stock, railways and roads, etc) and the
what they deserve – and what people skills base of the workforce (trained
deserve depends on how they behave.’ doctors, teachers and engineers) will also
(speech to Conservative Party conference, be important. There is little advantage
6/10/10 – Conservatives 2010) to having low public debt if you will not
be able to be treated when you are sick,
Clegg: ‘It is simply not acceptable that housed when you are homeless, or, less
the circumstances of a child’s birth can dramatically but no less importantly,
become a life sentence of disadvantage.’ unable to make a living because the basic
(announcing ‘fairness premium’, services on which the economy depends
15/10/10 – Liberal Democrats 2010) are dilapidated, understaffed and under-
skilled. Physical and human capital are
Osborne: ‘[F]airness – that we are all accumulated over periods of years and
in this together and all must make a decades, but they can be undermined at
contribution. Fairness means creating a the stroke of a Chancellor’s pen.
welfare system that helps the vulnerable,
supports people into work, and is also Moreover ‘the next generation’, however
affordable for the working families who defined, is not homogenous. The children
pay for it from their taxes. Fairness also and grandchildren of today’s wealthy stand
means that across the entire deficit to inherit considerable private wealth,
reduction plan, those with the broadest especially in the form of housing assets,
shoulders should bear the greatest and hence will be shielded from the long-
burden. Those with the most should term impact of public spending cuts,
pay the most, including our banks.’ (CSR while the children and grandchildren of
speech, 20/10/10 - HM Treasury 2010d) today’s social housing tenants are likely
to be dependant on public services and
‘There is nothing fair about running huge transfers to a much greater extent. Saving
budget deficits, and burdening future ‘the next generation’ from high taxes
generations with the debts we ourselves to service a large public debt by cutting
are not prepared to pay.’ (CSR speech, today’s and tomorrow’s public spending
20/10/10 – HM Treasury 2010d) is of considerable advantage to the next
generation of wealthy individuals and of
Fairness, it seems, encompasses something doubtful advantage, and quite possibly
about a concern with intergenerational significant disadvantage, to the remainder
justice, issues of social mobility, a principle of the next generation. Raising the
of universal but progressive contributions, threshold for Inheritance Tax serves only
just deserts and the protection of the worst- to reinforce the inequality.
off. Almost any individual policy could be
justified by appeal to one or more of these SOCIAL MOBILITY
ideas, but if we take the package of tax and
spending cuts as a whole, to what extent This brings us to the Coalition’s claims to
can they be seen as promoting any of these be promoting fairness through enhanced
concepts of justice? social mobility. Conservative politicians are
fond of asserting that social mobility fell
INTERGENERATIONAL JUSTICE under New Labour, and this may indeed be
the case, although there is no evidence as
Firstly, intergenerational justice. Great yet to support this claim. Social mobility –
play has been made of the importance the extent to which children find themselves
of not leaving ‘the next generation’ with as adults in a different place in the social
huge public debt. But this is based on a order, usually defined in terms of earnings
rather narrow and superficial analysis. or occupation, than their parents – takes a
The definition of ‘the next generation’ is generation, literally, to become manifest.
8 In Defence of Welfare: The Impacts of the Spending ReviewThe New Politics of Welfare
However, research on previous generations
of young people going on into adulthood Thirdly, international evidence suggests
has revealed a number of factors that that countries with high inequality at a point
promote or hinder social mobility. Firstly, in time (‘cross-sectional inequality’) tend
we know that experiencing unemployment to have low social mobility and countries
early on in your labour market career with low cross-sectional inequality tend
has a long-term adverse effect on your to have higher social mobility (Blanden,
earnings and employment chances, a so- 2009). This also makes sense intuitively:
called ‘scarring effect’ (Gregg, 2001). it is easier to climb a ladder if the steps
Hence, the particularly high rates of youth are relatively close together. So one route
unemployment during the current recession to promoting social mobility would be to
– reaching 21 per cent for men aged 18- reduce inequality in the here and now.
24, according to the Labour Force Survey
- are likely to be extremely damaging for FAIRNESS
today’s young people not only in the here
and now, but also for their prospects of This brings us to the Coalition’s third
achieving upwards social mobility. The loss interpretation of fairness – that they
of hundreds of thousands of public sector are protecting the most vulnerable, and
jobs and related private sector jobs just as ensuring the burden of cuts is borne by
the country is apparently emerging from those with the ‘broadest shoulders’. Were
recession is not offering a helping hand to this the case, it would be an equality-
these young people. promoting package and hence could
also have a positive effect on social
Secondly, research has consistently pointed mobility. This concept of fairness is closely
to the importance of education in promoting associated with the liberal egalitarian
social mobility. The Coalition Government political philosopher John Rawls, whose
is protecting spending on schools, and this ‘maximin’ principle requires that priority
is certainly to be welcomed from a social be given to the worst off. To what extent
mobility perspective, but in the modern does the package of cuts in the Budget and
‘knowledge economy’, higher education CSR meet this criterion?
is also significant in determining future
earnings and employment prospects. Here The analysis in Annex B of the Treasury’s
the Government’s proposals for a dramatic Spending Review document (HM Treasury
shift away from tax-funded support 2010a), suggests that the combined effect
towards direct financing by individuals of changes in taxes, benefits and services
and families are likely to have a strongly is mildly progressive by 2012-13, with the
unequal effect, reinforcing the link between top fifth of the income distribution losing
the class background of your parents and most (as a proportion of their combined
your own chances of acquiring a degree. income and the value of benefits-in-
Many children from wealthier backgrounds kind they receive), while the one-but-
will not be saddled with debt because their top fifth and the bottom fifth of the
parents will be in a position to support income distribution lose least. However,
them directly, while potential students from independent analysis by the Institute for
poorer backgrounds will need to make Fiscal Studies (Browne and Levell 2010b)
the difficult judgement about whether to gives a rather different picture. The HMT
risk incurring substantial debt to increase analysis omits the impact of the reforms of
the chance of future higher earnings, or Housing Benefit, Employment and Support
whether to play safe and start earning right Allowance, Disability Living Allowance and
away. The proposed extension of bursaries Council Tax Benefit, all of which are likely
and scholarships is little more than a sop, to have a larger negative effect on the
since a young person from a disadvantaged poorest half of the income distribution. It
background would need to jump through also omits around two-thirds of the cuts
two hoops (university entrance and to departmental spending, on the grounds
scholarship application, the latter most often that the impact on households cannot be
with higher academic requirements), each clearly allocated. Moreover, the Treasury
associated with considerable uncertainty, analysis of taxes and benefits stops at
while those in a more privileged position 2012-13, leaving a further £10.7 billion of
need only meet one set of criteria. the proposed £18 billion welfare cuts still
In Defence of Welfare: The Impacts of the Spending Review 9The New Politics of Welfare
to come into force. Correcting for these enforcement and keeping the peace.
limitations in the HMT analysis as far as Instead, people are expected to come
possible – which necessitates making together in voluntary collectives and decide
some assumptions about the future among themselves to support community
incidence of welfare cuts and about the projects - a vision which appears to have
value of services to different family types much in common with the ‘Big Society’. As
– Reed (2010) concludes that the bottom critics of libertarian philosophy have been
tenth of the income distribution will be quick to point out, the effects are likely to
hardest hit, losing around 11 per cent of be a polarisation between the ‘haves’ and
their combined net income and the value ‘have-nots’, particularly when the starting
of public services they receive per year, point is very unequal and when residential
compared to approximately 4.5 per cent patterns overlap geographically with socio-
per year for the top tenth of the income economic segregation.
distribution.
Yet this libertarian philosophy is ‘out of
Finally, we can consider whether the sync’ with the British public. Evidence from
Coalition’s policies support the ‘just the British Social Attitudes survey has
deserts’ interpretation of justice reflected shown that nearly three-quarters (73 per
in the Cameron quote at the beginning of cent) believe the gap between those with
this paper. This is perhaps closest to the high and low incomes is too large, and a
libertarian theory of justice, associated similar proportion (69 per cent) believe
with the political philosopher Robert Nozick, it is right that taxes paid by the majority
according to which people are entitled to help to support those in need (Sefton,
the full fruits of their labour and to their 2005). As the cuts begin to take effect,
assets, provided they have been obtained the underlying rationale of the Coalition’s
through fair exchange. Hence there is no policies will become ever more apparent.
justification for compulsory redistribution, The expectation must be that it will also be
or taxation to fund public goods. The increasingly unpopular, and that any claims
role of the state is limited to contract of ‘fairness’ will soon ring hollow.
TargeTing and universalism
peTe alcocK, universiTy oF Birmingham
T
argeting and universalism are issues significant, and can lead to major problems
at the centre of social policy practice in the delivery of welfare services. Targeting
and analysis. We have both targeting aims to focus support only upon those who
and universalism within our welfare are in need. This can mean targeting by
system, and policy development seeks to need, for example, the support services
balance a constant tension between the provided for some people with disabilities.
two. This tension contains both practical More usually, however, it tends to mean
implications and clashes of principle. In targeting support upon those unable to
practice it matters because the choice provide for themselves because of low
between targeting and universalism has income or lack of independent income, and
major consequences for the way welfare it requires those seeking such support to
services are designed and delivered. In undergo a test of their means to determine
principle the different approaches address entitlement.
central concerns of social policy in very
different ways. Such means-tests are relatively expensive
to administer, because they require detailed,
The practical consequences of targeting are and ongoing, checks in order to determine
10 In Defence of Welfare: The Impacts of the Spending ReviewThe New Politics of Welfare
entitlement. These are complex for claimants for some recipients, which in extreme cases
as well as administrators. They can lead to could exceed 90 per cent. That is, for each
problems with take-up – not all those who extra pound earned, up to 90 pence could
might in theory be entitled actually receive be lost through withdrawal of credits and
the support they need because of the other forms of means-tested support.
complexity of entitlement. They can also
lead to high levels of error and fraud, where The planned changes to Housing Benefit
complex circumstances are inadvertently or are being made in part to minimise the
deliberately misrepresented. Targeting also problems caused by higher benefit levels for
produces what commentators have called the unemployed than for those on low pay
the ‘Poverty Trap’. This is the consequence – without raising support for the low paid
of targeting support upon those with low which would exacerbate the poverty trap.
incomes, which means that this support However, these changes seem likely to price
must be withdrawn if income rises. As these Housing Benefit claimants out of the
a result little real benefit is felt by those housing market in many inner city areas,
securing an increase in their income, and in leading to evictions and re-housing – again
effect they remain trapped in poverty. potentially with higher costs elsewhere
and increased administrative intervention.
The practical problems of targeting are Whatever the desirability in principle,
all well known and well documented in more targeting inevitably leads to greater
academic social policy debate, although practical problems.
not often understood outside of this. From
an administrative point of view therefore However, there are issues of principle
targeted provision is always in practice too. The new Government has stated its
second best. Universalism is simpler commitment to policy being driven by a
and easier because it provides the same concern for fairness. Targeting is fair in
support to everyone. However, this means one sense, they suggest, because it pays
supporting people who have extensive each according to their needs. But this
resources and could easily purchase such raises difficult questions about what is
support themselves. Thus universal Child need, and who decides this. In the case
Benefit is paid to the Prime Minister (or of Child Benefit, for instance, arguably
more likely to his wife, as it is normally paid it is the children’s needs which are being
to the major carer), despite the fact that met, through payment to their carer – and
they are millionaires and do not need this children’s basic needs are the same whatever
extra money. Especially at times of public the circumstances of their parents. More
austerity this does not look like a prudent generally though there is a social dimension
use of scarce resources; and this is just what to need, and to benefit. Child Benefit is also
the Coalition Government has concluded in an investment in future generations for
its Spending Review, promising to withdraw everyone’s benefit – we all need children to
Child Benefit from high rate taxpayers and grow up fit, healthy and well cared for. So
tighten the targeting criteria for tax credits is it fair to target the high rate taxpayers
and benefits such as Housing Benefit. with children for an increased contribution
to this investment, rather than higher rate
Predictably, however, the practical problems taxpayers in general?
with such further moves towards targeting
quickly come to the fore. Already the This raises the more general question about
Government is having problems matching who pays for, as well as who benefits from,
up the high rate taxpayers (often men) with welfare services; and here the principles
the Child Benefit recipients (often women), of equality and inclusion also compete
because taxation is administered on an with fairness. Any commitment to equality
individual basis – leading to more intrusion within welfare provision requires us to
and confusion within the tax system, pay attention to who pays as well as who
and greater administrative costs. Tighter benefits, as the collective investment in
limits on tax credits will have the effect of children demonstrates. If the notion of
steepening significantly the poverty trap, fairness does not also embrace this, then
as explained by Brewer and Browne, with it is only addressing one part of the welfare
closer focusing of credits on the lowest paid contract – and the absence of focus on
likely to lead to higher marginal tax rates taxation policy within the Spending Review
In Defence of Welfare: The Impacts of the Spending Review 11The New Politics of Welfare
suggests such a narrower approach may at contributions, since all pay what they can
the moment be more influential. afford. It also promotes inclusion as all are
both paying for and benefiting from public
Who pays for welfare matters for another support, whereas targeted support has
reason, however; and this is because it is sometimes been associated with stigma for
through paying for, as well as benefitting those receiving benefits which are seen to
from, welfare services that all citizens feel be ‘only for the poor’.
included in them. One of the reasons for the
continuing popularity and high engagement The role of targeting has been growing
with the NHS is the fact that all pay for, and significantly within social policy for some
benefit from, it. It was also the principle time now, and the Spending Reviews are
behind Beveridge’s National Insurance (NI) likely to accentuate this drift. Nevertheless
scheme, established at the same time, and the principles of universalism remain
this remains a continuing source of popular central to much social policy delivery and
support for NI through the belief that debate. The tension between targeting and
contributors have paid for their pensions universalism continues to be very much in
or other benefits. Although in practice the balance therefore. Support for universalism
complexity of NI entitlement makes this could be encouraged through appeals to
relationship less effective on the ground, and the alternative approach to the principles
its legitimacy was undermined by Labour of fairness and inclusion that it offers –
Government increases in contributions to fair because all do over time contribute to
meet more general taxation needs. cost of services and benefits, and inclusive
because all benefit from them. At the same
Universal services are popular because time the practical problems of targeting in
all are included within and contribute high administrative costs, failure to take-up
to them; and, ironically, this appeals to entitlement and high marginal tax rates, will
another notion of fairness – that paying for be likely to dominate the delivery of means-
something justifies benefitting from it. It tested support. When concerns over these
makes it easier to equalise benefits, since all arise, as inevitably they will, policy makers
get the same, whilst redistributing through will know that there is an alternative.
The uK welFare sTaTe going wesT
peTer Taylor-gooBy, universiTy oF KenT
B
ritain has abandoned its attempt to one that is not being taken by anyone who
join the European tradition of state has a choice in the matter. The weaker
welfare and is making a decisive Mediterranean and Celtic governments are
move towards the US/liberal model of not in a position to preserve their social
market capitalism. This is implicit in the settlements because they cannot maintain
discussion of policies in various areas the incomes from taxation or borrowing to
elsewhere in this volume. It emerges do so. The British experiment may work,
clearly when patterns of overall spending, in the sense of restoring growth. If it does
privatisation, management of the labour we will undergo a painful transition, but
market, social divisions and insecurity are wake up in a very different world, one that
considered. The British approach offers is more competitive and more prosperous
a qualitatively different solution to the but more unequal. Restructured Britain
problem that faces all advanced economies: will be able to offer good lives to the
how to maintain competitive position in an advantaged but not to more vulnerable
expanding world, where other economies groups, and will be less humane than
are growing rapidly. It is a gamble and Europe at its best.
12 In Defence of Welfare: The Impacts of the Spending ReviewThe New Politics of Welfare
Figure 2: Public Spending Trends, Selected Advanced Economies 2008-15 IMF (per cent GDP)
60
55
G7
EU
50
France
Germany
Sweden
45
UK
US
40
35
2008 2009 2010 2011 2012 2013 2014 2015
Source: IMF (2010)
Source: IMF (2010)
The impact of the new
SPENDING policies
TRAJECTORIES increases elsewhere in Europe tended to
One feature of the changes is that the UK Government hasadecided
include to reduce
much greater supportoffor
proportion the
labour
economy more rapidly than any
The overall pattern of public spending other major economy. Centre-right commentators
market subsidies, most notably the state-
sometimes interpret
across Western the cuts package
economies as simply afinanced
in the early return to‘training
the normal Britishthat
schemes’ pattern. After
effectively
all, spending during the years of growth
years of this century was of a more or lessin the late 1980s, late 1990s and early 2000s
took many core workers off company was at
about the 40 per cent level. This argument
steady state in the context of continuing misses the point.
payrolls at the height of the downturn in
growth. This was succeeded by a sharp Germany, France and Italy. These have
First,
rise the
fromperiod in which
2007-8 in spending
response intothethe UK is to bebeenabruptly cutby
followed back is not expected
measures to reduceto be
social
ademands
boom, buttorather a cautious return
rescue favoured industries, to growth, with high levels of unemployment imposing
insurance contributions and help particular
particular demands oncapital
provide investment the state.
andSecond,
manage as othergroups,
chaptersyounger
point out, the cuts forpeople
unemployed the mass and
services, health care, education and
unemployment. Spending follows the usual pensions, will be much less severe than for
long-term unemployed (OECD, 2010). the benefits
directed
cyclical at low income
pattern minorities.relatively
of spending, The protected areas account for about half of all public
lower when
spending. The GDP
2009-15rises
cutsrapidly,
impact onhigher
poor groups Where
in a waythe that
UK previous
stands cyclical
out is shifts
in thein
duringspending
public recession,have
because GDP shift
not. The is relatively spendingsocial
away from European trajectory afterand
protection 2009-10
solidarity(see
is
lower
part of and the demands
a programme are greater.
that imposes a moreIt is
insecure,Figure 2). The combination
market-centred system. of the previous
exaggerated by the scale of the crisis. government’s March 2010 Budget, the
Publicspending
The spendingcutsin and
the competition
UK had been rules in June
relation2010
to Emergency Budgetopen
local government and up the
climbing painfully
opportunities fromproviders
for private the low toposition September
take over services, 2010 itComprehensive
and make Spending
increasingly difficult for
of the
local late 1990s
authorities towards
who wish the provision
to keep level of in-house.
Review set state
It seems likelyspending
that manyonGP a downward
consortia
the not
will more developed
have European
the resources countries.
to manage services course steeper
effectively in the new thanNHSin and
anywillmajor
use
This reflects
private reforms
companies to do to so.
expand the NHS,
The move Europeanstatus
to extend academy country, so that
eventually it falls
across all below
state
education
schools andup
opens social
a rangecare,of and tax creditfor private
opportunities G7 education
levels and that of thefirms.
management US byThe2014-
free
and other subsidies towards those on lower 15. The G7 includes Germany, France,
schools currently under consideration will be mostly run by private companies. In higher
incomes and improvements in pensions. Italy and Canada, as well as the US and
education the Browne review signals a shift to a largely market-centred user-financed
In common with many countries, spending Japan, so a position below spending levels
system. The Government has indicated openness to private providers to attain university
ceased to rise from 2004-5 so that the averaged across these countries is not a
status.
(limited) progress towards a mitigation new experience (but one that is instructive
of poverty came to an end. The UK and to those considering how the UK stands in
Benefit reforms are designed to sharpen work incentives yet further. These pressures will be
US with their relatively large and needy international comparison). What should be
extended to substantial numbers among those currently receiving sickness and disability
financial sectors experienced a particularly noted is that this is the first time UK public
benefits.
rapid riseRelated reformsonto the
in demands tax-credit, rent benefits
exchequer and to has
spending social
everhousing and the
fallen below greater
that in the
targeting of the more universal
between 2007 and 2009. The spending benefits will intensify the difficulties faced by those at the
US. This fact brings home how substantial
bottom further.
In Defence of Welfare: The Impacts of the Spending Review
15 13The New Politics of Welfare
a shift is contained in the current policy will be extended to substantial numbers
package. among those currently receiving sickness
and disability benefits. Related reforms
THE IMPACT OF THE NEW POLICIES to tax-credit, rent benefits and to social
housing and the greater targeting of the
One feature of the changes is that the more universal benefits will intensify the
UK Government has decided to reduce difficulties faced by those at the bottom
support for the economy more rapidly further.
than any other major economy. Centre-
right commentators sometimes interpret These changes are likely to be associated
the cuts package as simply a return to the with further social divisions and a
normal British pattern. After all, spending continuation of the pattern of growing
during the years of growth in the late inequality traced by Atkinson (2007)
1980s, late 1990s and early 2000s was at across advanced countries during the
about the 40 per cent level. This argument past quarter-century. In particular the
misses the point. imposition of greater costs for child care
(through cut-back of schemes), higher
First, the period in which spending in the UK education, and housing (through rent
is to be abruptly cut back is not expected to benefit reforms and the move to 80 per
be a boom, but rather a cautious return to cent market rents for new social housing)
growth, with high levels of unemployment will damage those towards the bottom, but
imposing particular demands on the state. not better-off groups.
Second, as other chapters point out, the
cuts for the mass services, health care, The shift towards the market, the
education and pensions, will be much less contraction of state sector and expansion of
severe than for the benefits directed at low private sector employment and the current
income minorities. The protected areas likelihood that employment protection will
account for about half of all public spending. be weakened will lead to greater insecurity
The 2009-15 cuts impact on poor groups in in many people’s lives.
a way that previous cyclical shifts in public
spending have not. The shift away from THE NEW GROWTH MODEL
European social protection and solidarity is
part of a programme that imposes a more These changes are sometimes seen as
insecure, market-centred system. the normal centre-right market-centred
programme, facilitated by the opportunity
The spending cuts and competition rules to advance an exceptionally stringent
in relation to local government open up cuts package that the crisis offers. An
opportunities for private providers to take alternative approach is to understand them
over services, and make it increasingly as a conscious restructuring, intended
difficult for local authorities who wish to to resolve a long-standing problem.
keep provision in-house. It seems likely The UK, like many western countries,
that many GP consortia will not have the flourished during the first 19th century
resources to manage services effectively in era of globalisation through industrial,
the new NHS and will use private companies imperial and military pre-eminence. That
to do so. The move to extend academy era ended in the conflicts between the post
status eventually across all state schools imperial powers of the first half of the 20th
opens up a range of opportunities for century. The post second world war boom
private education management firms. The under US hegemony provided 30 years of
free schools currently under consideration stability. From the 1970s globalisation has
will be mostly run by private companies. In reasserted itself, this time with the centres
higher education the Browne review signals of economic dynamism elsewhere.
a shift to a largely market-centred user-
financed system. The Government has Europe (and the UK) may continue to
indicated openness to private providers to achieve real growth. In fact the UK grew
attain university status. rather faster than the main European
economies during the boom between 1997
Benefit reforms are designed to sharpen and 2008. The problem is one of relative
work incentives yet further. These pressures decline, as centres elsewhere grow much
14 In Defence of Welfare: The Impacts of the Spending ReviewThe New Politics of Welfare
faster. The UK’s share of world total GDP rests on achieving competitiveness by
shrank from about four and a quarter per offering low taxes, a deregulated market-
cent in 1980 to two and three-quarter per place and a relatively cheap and highly-
cent by 2010 and is predicted to continue to motivated work-force for a country at a
decline (IMF, 2010). This is what underlies north European level of development.
the fear that the loss of the political and Leading to sharp and continuing cuts in the
military power associated with economic social wage, a weakening of employment
domination condemns Britain to backwater protection and the intrusion of market-
status. One response is that of Germany competitiveness across society – and
and to some extent France and associated perhaps a more dynamic and fluid society.
countries: an integrated corporatist If you can’t beat the leading European
welfare model that sustains high value- powers at their game, you might as well
added, high productivity export industries, try the American model.
able to retain comparative advantage by
competing on quality. The US has had growth of about 100
per cent during the past 30 years and
Britain has gradually lost its position as productivity gains of over 80 per cent,
a major exporter. One possible growth but the incomes of most of the population
path sought to emulate Germany with the have only risen by 9 per cent. Median full-
welfare state conceived as investment in time men’s wages have been largely static
human capital. Such policies, under Wilson and this limited rise is a real increase in
and Blair, have not provided the basis for women’s wages (Wasow, 2008). The gains
stable growth. Another approach highlights of economic progress have gone almost
the contribution of the new service sector entirely to the top 20 per cent, most of
industries, notably the finance sector. them to the top two per cent (Hacker
These have failed to generate wealth and Pierson, 2010). Advocates of the US
in sufficient volumes or with sufficient solution should remember that, in liberal
stability to secure national prosperity. The competitive capitalism with a weak labour
welfare reforms are best understood as movement and limited social protection,
part of a different growth strategy. This it’s the rich that gets the gravy.
clearing The poor away
danny dorling, universiTy oF sheFField
T
he Comprehensive Spending Review is adept at dealing with callousness. His
announced the start of a new era immediate reaction to the cheering that
of engineered social polarisation; greeted the Government announcements
a further separation of the lives, hopes, was that for many Coalition MPs it was now
homes and chances of rich and poor. obvious that ‘this is what they came into
politics for’. George Osborne (39), who
One of the first announcements was that became an MP in 2001, ended his speech
new tenants of council and other social saying he had brought sanity to our public
housing will now have to pay at least 80 finances and civility to our economy. The
percent of market prices in rent. In one printed version of his speech suggests
stroke millions of low paid families are to the word was ‘stability’, not ‘civility’, but
be excluded from living in hundreds of George was mumbling at that point and I
towns, cities and villages where they no think that he thinks he is civilised.
longer earn enough to ‘deserve’ to be.
Osborne announced that housing benefit
At age 60, shadow Chancellor Alan Johnston will not be paid for people under the age of
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