The more you put in, the more you get out?
Welfare reform exhibits a well-known ‘trilemma’: out of the three main goals of policy – helping the poorest, incentivising work and saving, and containing expenditure – it is possible to choose any two but never all three. This, in essence, is why the contributory principle, which was only ever partially embedded in the welfare state, has been consistently eroded by governments of all parties. As John Hills, perhaps the UK’s leading welfare expert, argued in a paper back in 2003:
‘ under governments of the Left, arguments in favour of inclusion have been predominant, non-contributory benefits expanded and contribution conditions softened; under those of the Right, the emphasis has been on focussing limited resources on the poorest through means-testing’
Those on the political right are particularly prone to criticise what they allege to be a ‘something for nothing’ welfare culture. The celebration of Margaret Thatcher’s reign occasioned by the release of a biopic may therefore be somewhat tempered by the recognition that reforms to pensions and benefits during her time in office were a major assault on the contributory principle. The current Government is making further inroads into what is left. The Employment and Support Allowance is in part a form of insurance against losing employment through ill health. Those who have paid into National Insurance were implicitly buying this protection, but now it is being cut back.
The idea that what you get out of the welfare state might in some way reflect what you put in is not, however, something which should be consigned to history. Reviving this idea might be part of addressing ‘the paradox of entitlement’, the subject of several of my recent posts.
Yesterday saw an alliance of organisations (including the RSA) representing a wide array of interests and views calling on the Government and opposition to work swiftly towards a new funding regime for social care. The Coalition appeared to knock the recommendations of the Dilnot Commission on Social Care funding into the long grass when they were published last July, but talks are forthcoming to try to develop a new cross party consensus on reform.
Social care is in crisis and – as I have suggested in past posts – it may now represent the first major area of welfare provision since the creation of the modern welfare state demonstrably to deteriorate. Many in the sector argue that a new funding regime is the essential prerequisite for creating a more stable system capable of providing decency to all in frail old age.
In a sense the Dilnot package includes a modern form of the contributory principle. The Commission proposed a state guarantee to pick up all social care costs above a fixed limit (£35,000 was suggested by the Commission). As well as addressing the perceived unfairness of older people giving up lifetime’s assets to pay for care, through capping the total an individual can be asked to pay this proposal seeks to create the basis for a market in social care insurance. Dilnot also proposed that the means test limit below which people are not required to pay for any care should be significantly increased.
Some on the left criticised Dilnot on the grounds that his package was more geared to helping the middle class than the poor. But any attempt to create a financially sustainable system in which all have a stake involves combining a universal safety net with a partnership between the state and those who can afford to meet some of their care costs.
Another response to an ageing society is the auto-enrolment pensions system designed by Labour but from later this year being gradually rolled out by the Coalition. Indeed in combining individual contributions, employer contributions and a Government contribution (through a tax break) the new system echoes one of the first manifestations of the modern welfare state: Lloyd George’s famous ‘Ninepence for Fourpence’ health insurance scheme unveiled in 1911.
The student loan system too is a form of contributory welfare. Students’ courses are funded by a combination of direct funding and underwriting of loans by the state and income contingent student contributions.
It is well understood that the classic Beveridge model contributory system has largely withered away. It is less often noted that new models and proposals for state-individual contributory partnerships are emerging. Squeezed budgets and rising costs mean that new contributory arrangements are necessary – indeed inevitable - if universal entitlements (including core public services) are to be protected.
An important task for politicians and thought leaders is to explore the rationale, values and expectations necessary to underpin a new contributory principle.
In defence of IDS
I have over the years tried to defend ministers and MPs by arguing that they do difficult jobs and are generally motivated by a sense of public service. In that spirit, I am risking making enemies of old friends by writing today to defend the aims – if not yet the method – of Iain Duncan Smith.
This is not just despite, but – perversely perhaps – because of the amount of misery some of his reforms will cause and the criticisms they will face. I share the widespread concern that reform of housing benefit and the cap on aggregate family welfare income of £500 a week will cause real hardship and may force poor people out of currently socially mixed areas like central London. I was disturbed by some of the examples of people losing incapacity benefit through the new work focussed interview process (although I should declare a double interest in that (a) I am a non-exec of a company which has a partnership with the company which undertakes the work focussed interviews and (b) the interviews of new claimants started under the last Government which also intended to extend them to existing claimants). Like many other commentators on yesterday’s speech about pensions, I applaud the principle of a universal flat rate payment but fear that the devil may be in the detail.
And yet … when I was working in and around Government there was a pretty regular cycle. Secretaries of State for Welfare would be appointed and agree to a mission of thinking the unthinkable. But as the weeks passed in the Department they would start to understand that any substantial and affordable reform (and this was at a time of rising budgets) would cause noisy losers as well as ungrateful winners. In the end there was a new pensions policy – but it was exhausting getting it past the Treasury – and the work focussed interviews were put in place (although, as I say only enacted for new claimants). But housing benefit was pretty much a no-go area and I have my doubts that Labour would have pushed ahead with assessing existing IB claimants. And so Labour’s record on welfare reform over the full period of its time in office was well-intentioned but uninspiring and at the time of leaving office it was still the case, for example, that anyone who spent a year on IB was more likely to die on benefit than come off it.
I’m not belittling the hardship and anger being caused by the work focussed interview but I can’t help noticing how often critical journalists cite the fact that around a third of the claimants being found not to be eligible for IB win their appeals. What is less often pointed out is that this is a third of the third who appeal at all. This suggests that more than 4 in 5 are correctly taken off a benefit which is essentially a way of parking people out of work for life.
I know a lot of people who think the Coalition’s welfare reform plans are despicable and some may comment on this blog. In the end, in the court of public opinion and through the mailbags of MPs, it may be that IDS will find he has bitten off more than he can chew. However, no one can question that the system needed reform, and to be a reforming minister with limited budgets means making very tough decisions. Unless we are going to embark on a major process of additional redistribution – and none of the major parties promised that in the election – the choice is either leave things as they are or accept that reform will be painful.
The same people who will have to bear the brunt of welfare reforms are those who will be most hard hit by public service cuts. The Coalition has its work cut out to show it has a compassionate and just side as well as one determined to reform and cut. But having seen from the inside how hard it is to be brave on welfare reform I think IDS deserves credit at least for having the courage of his convictions.
Welfare reform – our confused attitudes
Just because I’ve lost my job doesn’t mean I’m ‘unemployed’.
On Wednesday I asked why it is that Labour strategists believe people are becoming ever more censorious towards unemployed benefit claimants, a belief which is borne out by opinion polls. The psychology seems counter-intuitive; surely as more people lose jobs through no fault of their own, they should become more sympathetic to other unemployed people?
The answer may lie in the combination of cognitive dissonance and the proven tendency of normally-adjusted people to view themselves more positively than they view others.
Cognitive dissonance is what we experience when reality conflicts with our beliefs. The theory predicts that we are as likely to respond to such dissonance by changing our view of reality as by reforming our beliefs.
What Jonathan Haidt has called the ‘rose coloured mirror’ is the way we systematically assume we are better than other people. On a whole array of questions (for example, whether we are good drivers), the overwhelming majority of respondents – usually about 90% – claim they are ‘above average’. But this optimism does not extend to others, not even our nearest and dearest. We are good at predicting the performance and behaviour of everyone else but ourselves.
Put this together – and growing hostility to welfare claimants is neatly explained. People who have thought themselves safe in their jobs and as being ‘too good’ to end up on benefits suddenly find themselves at risk of unemployment. This causes cognitive dissonance. One way to resolve this dissonance is for them to believe that even if they do lose their jobs they will still be better than other people on benefits.
So, the more difficult it is for us objectively to distinguish ourselves from those we have previously looked down upon, the more our belief system has to maintain that distance for us.
To keep ourselves feeling good we have to think badly of others.
This is a doubly baleful aspect of our psychological makeup: first, because it is delusional and hypocritical; second, because it is ultimately self-defeating. Just like when you realise you have grown up into the kind of person you promised you would never be, there comes a point when we can no longer distance ourselves from people who share our plight. At which point our carefully cultivated disdain of others is turned on ourselves.
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