The debates over welfare reform, wages and pensions, against the grim backdrop of recession, have caused us all to think again about how we share out our national wealth. And the “thinking” is turning out to be a mean and selfish scramble among the various interest groups – not to say social classes and regional tribes. This sectional war is being encouraged by a provocative government at Westminster. We are indeed all in this scramble together.
There is much less thinking, however, about the size of the cake. We are all just hoping it has stopped shrinking and we can get back to the boom times when share-out becomes less of an issue. There is also not much thinking about how the cake is best divided to achieve the greatest happiness of the greatest number. And that’s probably because the answer is fairly obvious – the more equal a society the happier it tends to be. It is just rather difficult to accept the idea, as the authors of “The Spirit Level” Richard Wilkinson and Kate Pickett have found out.
But to the disputes themselves. The first panic is about the size of the welfare bill. Yes, it is growing, but only by 1.1 per cent a year – and half of that growth is because of the rise in the state pension. In 2011/12, welfare benefits amounted to £159bn, or 23 per cent of all public spending. £74bn went on state pensions, a rise of 3.7 per cent.
It is true that other benefits have also risen and this is hardly surprising at a time of high unemployment. Housing benefit accounted for £16.9bn, a rise of 5 per cent, Job seekers allowance was up 7.6 per cent at £4.9bn and disability living allowance up 3.3 per cent at £12.5bn.
It is also true that the welfare budget has increased substantially since the introduction of the welfare state in 1948. Then it was 4 per of GDP, now it’s 13 per cent. But our standards and expectations have risen and the rising graph is closely related to the growth of the economy, rising quickly in times of recession and levelling off in times of growth.
Iain Duncan Smith MP
Welfare Reform
If the government was serious about cutting the welfare bill, it would cut the state pension and get the jobs market growing again. It might also consider raising the minimum wage to the “living wage” ( ie from £6.30 an hour to £7.50) and doing something about the landlords who are raking in the higher housing benefits.
Instead government ministers are dividing us into “strivers” and “skivers”. In fact, welfare fraud is estimated to be just 0.7 per cent of the total welfare budget, or around £1bn a year, which is a few crumbs compared with the £70bn thought to be lost in tax evasion. And it is not just the poor who are doing well out of the welfare state. Taxpayers Scotland estimate that £31.8bn of welfare benefits are now paid to middle class households.
As the Fabian Society has recently argued, pensioners are not so badly off either, compared to working-age families. They have inflation-proof pensions, they pay less tax (27 per cent compared to 33 per cent) and they enjoy concessions such as free bus travel and a winter fuel allowance. It suggests that pensioners should be asked to shoulder more of the burden of paying down the national debt. Old age benefits it argues should start at age 80, not 60 or 65. And I agree – being one of those “over 60s” myself.
The Beveridge Report
Pensioners under the age of 80 are no longer the generation which won the war and made all the sacrifices, rather we are the generation who squandered the oil money, failed to adapt the economy to the modern world and failed to properly fund the state pension system. And with our unwise life-styles, we are likely to cause the NHS a good deal of expense in the next few years.
Another cause of division is the age-old distinction between the deserving poor and the undeserving poor. Those on the right see the welfare state, as constructed by Beveridge in 1948, as being only a temporary scheme to help people recover from immediate misfortune – unemployment or illness. But those on the left see the welfare state as also providing continuing support for the weaker members of society – the uneducated, the chaotic, the feckless and the lazy.
Right wingers – and Ian Duncan Smith, the welfare secretary, is one of the more sympathetic right-wingers – believe that we are doing a disservice to such “weaker” members of society if we keep them “locked into dependency” and we should be prodding them to get up in the morning and start earning their own living. Left wingers ask: what if there are no jobs for them to go to, as a present ? Or what if the underclass don’t respond to this “prodding” ? Are we to allow them, and their children, to starve ?
The Victorian solution was to separate the poor from their children and put them all into separate workhouses. Alas, that was not a great success and the poor have continued to be with us. Our modern interventions need to be more effective. They will probably cost more, even with a targeting of resources on the poorest areas like the east end of Glasgow.
Sheffield Hallam University
Cutting the welfare budget is not only bad for the poor, it is also likely to have a dampening effect on the economy. A study for the Scottish Parliament by Sheffield Hallam University suggests that £1.4bn will be taken out of the Scottish economy every year because those affected by the benefit cuts will have less to spend. That, combined with planned cuts of another 35,000 public sector jobs over the next two years, will be pretty disastrous for the Scottish economy, even if the money saved were handed back to private consumers in the form of tax cuts.
And those in work are not guaranteed to be out of poverty. Some 20 per cent of workers are on low wages. The gap between the richest families and the poorest is widening, according to the Office of National Statistics. The top 10 per cent of families in Britain are said to be 500 times richer than the bottom 10 per cent. The rather patronising “trickle down” theory is clearly not working, in fact the trickle is a flow and it’s upwards.
In view of all this, it is not much wonder that people are getting upset about how the national cake is being shared out. Each group is fighting for a bigger portion – the poor against the rich, those in work against those out of work, those on low pay against those on big bonuses, the active against the feckless, the north versus the south, the old against the young, the public versus the private sector, the natives versus the incomers.
No doubt these tensions always exist but it seems to me that they are becoming more bitter and more extreme, with more demonstrations, more strikes, and an increasingly hopeless underclass. We need a government which seeks to reconcile these groups by a more equal share-out of the national cake and we need ministers who don’t just talk about St Francis’ policy but really believe in it: “Where there is discord, may we bring harmony.”