Nicola Yeates
Tina Haux
Rana Jawad
Majella Kilkey

Nicholas Timmins
The Financial Times
SPA President

                         FEBRUARY 2011
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The SPA Annual Conference 2011 ‘Bigger Societies, Smaller Governments?’ will take place
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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                                                               58


nicholas Timmins, The Financial Times, spa presidenT

   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 Review

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                                   3
The New Politics of Welfare

The new poliTics oF welFare

cuTs To welFare spending

miKe Brewer and James Browne, insTiTuTe For Fiscal

    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 Review
The 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                                      5
The 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
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-
          that thisnowreform
                         and 2014–15    shows,
                                will lead        the tax risesmeans-tested
                                           to many               announced byform.the Government        are not all
                                                                                        Secondly, although
       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
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
      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

        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
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.


Tania BurchardT, london school oF economics and
poliTical science

      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                                      7
The 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 Review
The 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                                      9
The 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.
                                                  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

      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 Review
The 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                                    11
The 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

      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 Review
The New Politics of Welfare

Figure 2: Public Spending Trends, Selected Advanced Economies 2008-15 IMF (per cent GDP)





         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
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
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
 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
   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.
                                         manage   as othergroups,
                                                                         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
 cyclical at low income
           pattern          minorities.relatively
                     of spending,        The protected areas account for about half of all public
 lower when
spending.   The GDP
                                  impact onhigher
                                               poor groups  Where
                                                               in a waythe that
                                                                             UK previous
                                                                                  stands cyclical
                                                                                             out is shifts
                                                                                                        in thein
public   recession,have
                    because    GDP shift
                          not. The   is relatively          spendingsocial
                                           away from European            trajectory    afterand
                                                                               protection      2009-10
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
The       spendingcutsin and
                           the competition
                                  UK had been   rules in June
                                                                      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
 the not
will  more   developed
          have             European
                the resources           countries.
                                   to manage     services course     steeper
                                                           effectively   in the new thanNHSin and
 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
schools      andup
          opens   social
                    a rangecare,of and  tax creditfor private
                                   opportunities           G7 education
                                                                levels and     that of thefirms.
                                                                             management       US byThe2014-
 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
 (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
 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                                                   13
The 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 Review
The 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

     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

In Defence of Welfare: The Impacts of the Spending Review                                   15
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