Some phrases just stick. While British politicians often bemoan the ‘something for nothing’ culture in the benefits system, somehow the other side of this has been missed. Yet there are people who contribute to the welfare state for decades, and then receive very little in return when they need it. This is what Kate Bell and Declan Gaffney call the problem of ‘nothing for something’ – and I’ll be amazed if you don’t hear this phrase on the lips of politicians for years to come.
This comes in a Trades Union Congress pamphlet launched last week (see blog posts and launch). The real departure from the usual bland pronouncements of politicians, though, is that Bell & Gaffney offer some credible solutions to the crisis of reciprocity in the benefits system – the first steps in a vision for a revitalised welfare state after these times of austerity.
The crisis in contributory welfare
But first, the problem. Or more precisely, the many problems: the declining public support for the benefits system, the low level of benefit payments, et al. But in terms of nothing-for-something, perhaps the most striking figure from the report is the table below – showing that only Australia and New Zealand have fewer unemployed people receiving contributory benefits. And Australia and New Zealand don’t even have contributory unemployment benefits.
The pamphlet explains just why this is a problem. It starts by quoting the Beveridge Report, “benefit in return for contributions, rather than free allowances from the State, is what the people of Britain desire.” Without a contributions basis, the something-for-something basis of the welfare state is eroded, and benefits become for ‘the poor’ rather than for ‘people like us’. [This isn’t in the report, but at the launch Declan Gaffney also used the phrase ‘invisible reciprocity’ – to show that the perceived something-for-nothing culture is also often an issue of perceptions more than reality].
Moreover, contributions-based systems may lead to a better-functioning economy instead of restraining it – for example, by increasing the incentive to work. We’ll be coming back to pieces like this on the link between the economy and Social Policy.
What to do about it?
The pamphlet is clear on what not to do – emphasising punitive conditionality and anti-fraud measures simply reduces trust in the system, whether in the US with Clinton’s reforms or in the UK under Blair and Brown. Their recommendations increase both the apparent and real contributory basis to the system:
1. Make the link between contributions and benefits more visible. Bell & Gaffney argue that there already is a link between the two in the form of the ‘National Insurance (NI) fund’ – which is used for benefits and a small piece of NHS spending, and contrary to most people’s views, is actually a really-existing, separate fund (albeit one running on a pay-as-you-go basis, and with a healthy balance which is used to cope with recessions & otherwise reduce general government debt).
They don’t want to completely break the fund away from wider government spending, but they do suggest “a binding commitment by government to stop using National Insurance contributions as a way of avoiding tax increases,” only allowing NI contributions changes when the balance of the fund requires it. This is a welcome change from the promised Government consultation on abolishing NI entirely.
2. Raising the value of contributions. Bell & Gaffney consider adding an earnings-related element to UK social security, mirroring the arrangements in many more generous, more popular systems – but they see little appetite for this among the UK public. They slightly prefer a £30 flat-rate top-up to Jobseekers Allowance for people who meet the contributions conditions. This would cost £0.2bn for the current cohort of claimants, but if more people claimed as a result then the costs will increase, doubling the costs to around £0.4bn if 2% more of the unemployed claimed benefits (p33).
The exciting suggestion, though, is – wait for it – to copy Belgium. No, really. In 2002, Belgium introduced a ‘time credit’ system, where you can build up an entitlement to a year’s complete or partial absence from work, for a variety of purposes: childcare, other care, or training. As a first step to a Belgian Beveridge, they take the current statutory entitlement to 13wks unpaid leave before your child’s fifth birthday, and argue for making this leave paid – but only conditional on your contributions record. So a real commitment to the contributory principle, but designed for the 21st century.
3. Make as many people as possible included in the contributory system. Their final argument is that the contributions system needs to cover as many people as possible – while still making the contributory principle clear. So they recommend extending ‘contributions’ to everyone who works (including in mini-jobs with few hours), and ending the get-out of employer contributions for such mini-jobs.
[They also briefly mention the other pieces of the puzzle that are needed: a commitment to full employment, a job guarantee, a disability employment strategy, improving job security, and recognising the contribution of unpaid work].
A model for revitalising the welfare state?
I agree with much of what Kate and Declan argue – it’s the best contribution to revitalising social security in the UK that I’ve seen. The niggling doubts that remain, though, come in two parts.
Firstly, there is a gap between the scale of the problem they identity, and the scale of their recommendations. This is inevitable; the only way to avoid being called a utopian idealist is to be called an unambitious pragmatist, and perhaps the mark of success is to be called both… Kate Bell (with Jason Strelitz) has also put forward her argument for a focus on ‘Decent Childhoods’, which I argued was a fantastic contribution but was over-ambitious! While Declan Gaffney promises ‘grey-skies thinking’ on his excellent Twitter feed.
That said, the proposals above are only proposed as first steps. Looking further into the future, though, they suggest (p34) expanding the time credit scheme to longer parental leave too, and even beyond. For example, we may be working and have a situation where our elderly parent’s health deteriorates, needing some short-term support before they recover. The time credit could help us to stay working some of the time, while using our time credit to avoid a massive income penalty. It’s critical to bear in mind that the proposals above advance the contributory principle, but it will take these sorts of radical steps to restore it to its former glory.
More importantly, though, they don’t really talk about what a ‘contribution’ is. The problem with the old Beveridgean contributory system was the gaps in it – women in particular were penalised for contributing through child-rearing and other care work, instead of paid work. Bell and Gaffney try to avoid talking about this, simply saying that they don’t propose to change the current system, although unpaid work needs rewarding in other ways. But this leads to two problems:
- Some people will simply assume that ‘contributions’ means ‘paid work’ – if you watch the video of the report’s launch, you’ll see Matt Oakley of Policy Exchange making this assumption.
- The current system of giving contributions to non-workers (‘crediting-in’) is unsatisfactory and highly complex. For example, if you are not working because you are caring for a child, you receive contribution credits for your state pension and bereavement benefits, but NOT contribution credits for other benefits. Horton & Gregory’s brilliant The Solidarity Society therefore talks about ‘the participatory principle’ rather than the ‘contributory principle’ to deal with this problem.
These caveats aside, this is the sort of principled contribution on the contributory principle that we need: grounded in evidence, and with concrete ideas to take us forward. With the welfare state in crisis and subject to continued cuts, this is welcome help towards a path to a renewed welfare state in future.
Kate, Declan and I are working together on an Elizabeth Finn Care project on ‘benefits stigma’ – lots more on this from about July onwards on the blog.