Wednesday, 6 October 2010

The End of the Universal Welfare State

The announcement by George Osborne at the Conservative party conference this week, of the ending of Child Benefit for those paying higher rate income tax (earning of just under £44K), signals a break with the post war consensus of universal benefits in the UK.

On the face of it, why are people earning £44K getting handouts from the taxpayer, when savings need to made in public spending? Well, even leaving aside the anomaly that two parents earning £43K will still be allowed to claim this benefit, but a single wage earner on £44K will be disallowed, which raises questions of fairness, we also need to look a little deeper into this policy.

It is no coincidence that Child Benefit is paid at the same the rate to all parents, regardless of their income. The fact one partner, almost always the man, is earning a good wage, is no guarantee that this money will find its way to the child(ren). It has long been the view that direct payments to mothers is the surest way to get money to children, as unfortunately, fathers are not always reliable in this department. The problem of middle class child poverty is not uncommon, and this has been recognised in the universality of Child Benefit, ever since its inception.

Of equal importance though, is the very concept of universal benefits. If welfare benefits are seen by the middle classes as something that they have to pay for in tax, but are never going to claim, it undermines the whole basis of our welfare state. Prior to the second world war, what benefits did exists, were means tested, and therefore stigmatised, as a hand out from the wealthy to the poor.

The founders of the British welfare state in the post war period understood that the middle classes had to feel that there is something in the welfare state for them to want to continue contributing to the costs, and so designed welfare around the universal principle.

This is not the first time that Conservative and Labour governments have chipped away at universality, since Margaret Thatcher became Prime Minister in 1979. It is hard to imagine, for example, that before this, unemployment benefit was paid at 55% related to earnings for the first twelve months of a claim, a situation which (although even better) still exists in France and other European countries. And, it will probably not be the last time, as the spotlight falls on free public transport and winter fuel payments for the retired, for example.

Considering the measly savings to be had by ending universal benefits like Child Benefit (around £1b savings), the price of tearing our society apart into haves and have nots, is too high a one to pay. Why not just tax the rich more, and make the banks pay their fair share of the costs to get us out of this borrowing crisis, that children in particular, had no part in causing.


Jeff said...

I disagree Mike. You seem to be saying that we need to give benefits to the richer so that the poorer don't feel so bad about needing support. I like to think we could do better than such a cotton wool approach.

My preference would be, as you day, to push taxes up for the better-off but under a Tory Government that simply isn't going to happen so, adopting a pragmatic approach, this for me is a good result as it's the best one can reasonably expect and is fair.

Also, you say it saves a 'measly' £1bn but I'd much sooner have 4,000 extra people employed on the average wage than dole out money to higher earners that, broadly speaking, don't need it.

Mike Shaughnessy said...

Hi Jeff,

Well, if being practical frames the debate in favour of the establishment, then we should frame it our own way.

In more progressive societies like Denmark, most people get free at the point, nursery care. The rich do get charged, but even a millionaire only pays about £350 a month.

It's a collective thing, I suppose, which I approve of.

If you think these savings are going to spent on jobs, then you are wrong. The reason they went for such a quick fix policy, was becuase it was cheap. They know who pays top rate tax, calculating household income would mean jobs for those calculating.

Anonymous said...

A Green councillor had a different idea for Child Benefit reform: "The first two children in a family should continue to receive child benefit as of right, but the third and subsequent children should receive an equivalent sum only from other sources, as the result of negotiating with the fund providers."
Steve H

informationhub said...

hi, i have gone through your blog its so fantastic work you have done their. i would like to have more information from you...thanks for doing the great job..cheerup!

Guaranteed Rent London

letting agents finchley said...

Mike , really informative work , i am afraid with jeff, his approach is completely anonymous to me..