Are universal benefits good policy, or just good politics?by Gavin Kelly / April 16, 2012 / Leave a comment
Published in April 2012 issue of Prospect Magazine
A poster protesting welfare cuts. Image: Byzantine_K
Universal welfare benefits, available to all regardless of income, have long animated the politics of the welfare state. Prime Ministers from Atlee to Cameron have grappled with the universal principle, whereby certain benefits are given to all citizens, even the rich. Universalism goes against the notion that benefits should always target the poor. Defended by some, lambasted by others, the idea of benefits for all has divided opinion within and between parties.
At times, universalism has served the cause of good policy. It underpins the notion that risks are shared by all in society, and lessens the grip of means testing. The high take up means administration costs are low. But it has also generated bad policy in pursuit of good politics—eye-catching ways of shifting resources to key electoral groups, but with little intellectual rationale. As cuts bite deeper, the risk is that bad universalism sticks, while the better version falters.
Universal child benefit, first created by the Labour government of Jim Callaghan, has long been viewed by some as the jewel in the crown of the social security system. Others see it as the pinnacle of unnecessary state largesse. It was finally, if clumsily, laid to rest in the March Budget. Come next January, these cash payments to parents (overwhelmingly mothers) with dependent children will be phased out for families in which anyone has an income over £50,000. One of the untold stories of the Budget was that, just as the 50p tax rate on the super-rich is being abolished, this withdrawal of Child Benefit for the relatively affluent will effectively be a new 50p tax rate hitting incomes between £50,000-£60,000.
In some respects, the passing of universal child benefit shouldn’t surprise us. It has always been eyed suspiciously by many, though by no means all, on the right. Conservative Chancellors tended to favour running it down while Thatcher (sometimes reluctantly) and Major (as PM) tended to defend it. Now, despite its popularity with some on the Tory backbenches, Osborne has done what Lawson dared not.
For many in Labour it has always been a totemic benefit: the magic glue that, together with the NHS, is supposed to bind the middle classes into the welfare state. Its value was greatly increased during the Blair and Brown era, from £11 to £20 per week for the first child, though some dissidents always favoured targeting this money at the poor. The Coalition’s decision means that today’s Labour leadership has now been spared a bout of soul-searching on what to do with Child Benefit when power is regained. It is highly unlikely that, if Labour were to win the 2015 general election, it would prioritise the restoration of a universal benefit which would see most gains flow to the affluent.
Indeed, if universalism is to re-emerge in family policy, it is more likely to do so via the forging of a proper system of childcare out of the current complex patchwork of dwindling tax credits, employer vouchers and nursery entitlements. Labour strategists note that support for universalism holds strong for public services—schools, hospitals and children’s centres—while it has frayed in relation to cash benefits for families.
At the same time as it is under attack for the young, universalism is in robust health for the old. In some respects this is to be welcomed. For many years the value of the basic state pension (strictly a contributory benefit though not a means-tested one) was eroded and with it the prospects of a modicum of security in retirement for the majority of working people. Now, happily if belatedly, there is cross party support for protecting and up-rating this vital part of our welfare system. Long may this last.
But that doesn’t mean all universalism for the elderly is wise or affordable. Currently there is a political consensus in favour of protecting existing benefit entitlements for pensioners, a view which will only have hardened following the backlash against George Osborne’s cack-handed handling of the granny tax. Yet informed opinion would wager that all party leaders, at least in the deepest privacy of their own thoughts, would prefer to redirect resources spent on Winter Fuel Allowances or free travel passes for pensioners on middle and higher incomes towards a new system of care for the elderly. The unforeseeable, uninsurable and often catastrophic cost of social care is a towering social problem crying out for some collective risk pooling. The same cannot be said about the cost of a bus fare.
Yet no leader will make this argument—the one who moves first fears being the big political loser. The result? We’re locked into bad universalism, and in the meantime good policy—like the suggestions made by the Dilnot Commission on Funding of Care and Support—goes begging.
David Cameron may go into the next election pledging another £10bn of welfare cuts targeted at working age families while simultaneously protecting existing benefits for the elderly. This would point us down the stony path to a US-style welfare system characterised by ever-harsher treatment of the working poor alongside the protection of established entitlements for the affluent old whilst new needs go unmet. Bad universalism has life in it yet.
Gavin Kelly is chief executive of the Resolution Foundation. Between 2007 and 2010 he was deputy chief of staff at Number 10 Downing Street