In a series of four linked posts, Professor Chris Pierson looks at the politics of the welfare state over the period of the last parliament in the context of the upcoming election. Since our political classes are asking the wrong questions, they are likely, he concludes, to come up with the wrong answers.
Questions of welfare loom large in the 2015 General Election. But the contest we are witnessing is a strange one. The main UK parties fall over themselves to pledge their commitment to increase resources for the NHS, to protect spending on state education, to uprate the incomes of pensioners and to promise to build hundreds of thousands of new homes, in much the same way that a magician produces rabbits from a hat. At the same time, they all suppose (to very varying degrees) that the budget for ‘social security’ or ‘welfare’ can be (and should be) cut or capped. The ‘good’ bits of welfare are to be funded at least in part by screwing down on the ‘bad’ bits. But if we really want to understand what is happening to the welfare of people in Britain today, we need to raise our eyes a little higher and to widen our vision. We need to consider a much broader political economy of welfare and to recognise that the welfare state, to use that old-fashioned term, is best understood as part of a broad and complicated apparatus for the distribution and redistribution of costs and opportunities, in which government has a central role. Looking backward, government action since 2010 has systematically disadvantaged the young and the poor. The challenge for the welfare state now is not to find still more ways of cutting costs, but rather to think of ways of reversing this trend in the face of the real challenges arising from demographic change and a globalized economy.
All governments tax and all governments spend. And in doing so, they redistribute; not always money, but nearly always sources of advantage and disadvantage. And most government spending, perhaps as much as two-thirds of it, goes on the broadly-conceived welfare state (including health care and education). The modern state is a welfare state. In the UK, for example, in the fiscal year 2016, government expenditure is projected to be around £747bn. Of this budget, around two-thirds (£494bn) will be spent on pensions, social security, public health care and state education. Of this spending, rather more than a half consists of various cash transfers (of which, in turn, rather more than a half are pension payments). The remainder of the welfare state (above all, health and education services) is produced rather than redistributed. As John Hills’ recent book, Good Times, Bad Times amply demonstrates, almost everyone benefits from their membership of the welfare state at some point in their life, while the welfare state is as much a machine for redistribution across the individual’s life-cycle and between generations, as it is from richer to poorer, (though everywhere this remains one of its key functions). Despite the attention it attracts, providing benefits to able-bodied people of working age represents a comparatively small part of this welfare state activity. And beyond the things that we instantly recognise as part of ‘the welfare state’ or ‘tax and spend’, government also plays a quite crucial role in the much broader process of generating and regulating wealth and well-being (and their unequal distribution). It sets targets for inflation (and implicitly interest rates), it prints money, it regulates the ways in which labour-power may be bought and sold, it sets terms and condition for the housing market and it mandates (and subsidises) private pension contributions. Most fundamentally of all, it provides a framework of private property rights which it uses the coercive machinery of the law to uphold. In all these ways (and others), governments serve to shape the distribution of income, wealth and opportunity in societies like ours; (on which see Pierson, Beyond the Welfare State?).
Given all of this, and the fact that information about these processes is so widely and freely available (from the Institute for Fiscal Studies amongst several other reliable sources), it seems almost criminally neglectful that the issues that surround the politics of the welfare state and its reform are so poorly understood and so often posed in a way that begs all the most important questions: as, for example, when we are asked to consider how the spiralling costs of welfare can be contained. As a political community, we certainly need to think very hard about how we can expect to foster adequate lives and tolerable opportunities for all of our citizens. We need to be very clear about what and who the redistribution in the welfare state is for. And we have to face up to the challenge of funding welfare, in circumstances where the demographics are against us, and as we emerge from the longest and deepest recession since the 1930s with the prospect of entering a new phase of permanently low economic growth. These are all difficult questions with no easy answers. But we certainly cannot hope to meet this multi-faceted challenge by simply demonizing a part of the population that depends upon the welfare state – a comparatively small number of people drawing down a very small proportion of the welfare budget – and/or by defraying the costs upon those who are already poorest and/or by defaulting upon the inter-generational compact which has made welfare states work.
In the next of these posts, I look at what has happened to the poor over the past five years.
Chris Pierson is Professor of Politics at the University of Nottingham, author of Beyond the Welfare State and lead editor of Political Studies.