The fairness code

My constituents believe in a tough-minded fairness code, applying to both work and welfare
June 19, 2004

Sarah's front room, in the Weston area of Southampton, is crowded with friends and neighbours. They are at the end of their tether over the behaviour of a nuisance neighbour. These are not selfish or uncaring people. Indeed, some of them have shown great generosity in dealing with their drug-addicted, alcoholic neighbour. They have given money, fed and clothed her children, and lent furniture when she burned her own. Now they feel there is no one on their side.

"We phoned the NSPCC, the social services, the school - all the time we've tried to get support for her. But the housing association aren't enforcing the tenancy agreement; the police only react. She's got all these social workers and we have no one." Everyone agreed that "it just isn't fair." It is a sentiment I have heard a lot over the past year, summed up by a working mother: "You got to work, pay your taxes, play by the rules, but all the help goes to other people."

Another place you can hear this said is at employee-owned Southampton Cargo Handling. Ten years ago, the company was visited by John Smith's social justice commission. Gordon Borrie, chairman of the commission, declared, "I have seen the future and it works." Today, the worker-owners say, "The future doesn't work because people keep bloody screwing us." Owning their company has brought the workers benefits in health and safety, training and so on, but intense competition has held down wages. Workers who had once enjoyed a decent pension scheme now have no company pension at all.

The director of a ship-repair company complains that there is no premium to be gained from shipowners for a good health and safety record. It makes business sense to make more use of subcontractors, even if it means that the next generation of shipyard workers will come from EU accession states, not Britain.

The resulting resentment is only partly directed at employers. Migrants, especially illegal ones, are resented for their readiness to work in the most dangerous conditions at the lowest rates. But it is the government that is seen to let it happen. Many people believe, rightly or wrongly, that while other countries bend the rules, we can't, because "we're British."

A young IT professional says, "My mother has MS but she can't get beta interferon. She is told it's too expensive, but she's not smoked, doesn't really drink, has paid in national insurance all her life."

What is going on? Are these just familiar moans about the everyday difficulties of life? Or are people expressing deeper, more coherent concerns?

Freed from ministerial office last year, I wanted to explore the conundrum that faces New Labour. We have achieved much that we set out to do. With the help of researchers at the Southampton Institute I have the figures to prove it. I could show you the fall in the city's unemployment, the improvement in school standards, the cuts in hospital waiting lists, the extra help from tax credits to thousands of families and pensioners.

But we all know that the enthusiasm is not there. And while we have respectable mid-term polling figures, no one is sanguine about what a low turnout might do to our support in the European and local elections in June, or at the next general election. In 1997, New Labour sounded as though we shared the concerns and aspirations of the millions of people we wanted to vote for us. We no longer do that so well.

Over the past year, I have talked at length to my constituents in Southampton Itchen: nurses and dockers, tenants and homeowners, schoolchildren and pensioners, carers and bank managers - not all Labour voters, but a cross-section of the broad coalition which helped to put Labour in power. In small groups, we talked about their lives, jobs and hopes - in a general rather than party political way. It was a little "big conversation." Here are some more voices:

"House prices are so high. How am I ever going to own my own home? I'm going to be stuck in my little council flat forever. That's all I can see." For this care worker, earning under ?5.50 an hour in a city where you need over ?30,000 per annum to get on the housing ladder, it doesn't seem fair.

A tenants' leader with whom I worked on many housing campaigns says: "We've lost something. We never owed a penny on rent, never owed a penny on rates. Whatever you got you knew you were entitled to. They came to see if you had cared for your home. It was a matter of pride to be housed in this area."

"I'm doing what you want me to, but it's made my life worse," laments the lone parent whose return to work has been bedevilled by difficulties over tax credits, housing benefit and childcare.

Fairness comes up in every important area of public policy: what happens at work; access to public services and communal goods; the way public services are delivered. It's not a selfish "I should get more" reaction, but something broader and more complex. Is good behaviour rewarded? Do I get a fair return for what I put in? Are some people getting something for nothing?

There's a sense of fairness that comes out in many conversations - the belief that there is a set of obligations and opportunities that should underpin British society. When people say "it's not fair," it is usually because they believe that the balance of duties and rewards - "the fairness code" - has been upset.

The fairness code cuts across the values of left and right. Few people express the left's traditional concern about income equality, though many have a strong sense of the broader obligations of employers, governments and councils. And while there is criticism of public services, there is little interest in the right's individualistic, self-reliant model of social and economic policy. The fairness code is concerned with how people act. Public policy ought to reward "good" behaviour and punish "bad." The fairness code is concerned with what rights you have earned, not just what your needs are today. The assessment of someone's needs should take into account the effort and contribution he or she has made in the past and will make in the future. Public services should be for people who are entitled to them, need them, and use them responsibly. People should be expected to exercise personal responsibility and be rewarded for it, but they must be given a realistic chance to do so.

Some of this - with its strong echoes of the deserving and the undeserving poor - will sound discomforting to modern progressives who also fear the stigmatisation of those, like recent immigrants, who have not had a chance to contribute. But in most cases the fairness code is a simple assertion of an appropriate connection between effort and reward. Indeed, it echoes the doctrine of rights and responsibilities that New Labour stressed in its early days when advocating welfare reform. That was one of the original pairings that described the party's attempts to marry the best of left and right: economic efficiency and social justice; fairness and opportunity; rights and responsibilities. New Labour's appeal challenged the idea that you had to choose between the Tories (good for the economy and the party for people who wanted to get on) and Labour (keen on equity and decent public services). In New Labour you could have both.

The good news is that these New Labour pairings remain much closer to popular values than either the old left or the new right. So why do so many people say "it's not fair"? We have seen redistribution through tax credits and child benefits. We have introduced the minimum wage and some new workplace rights. We have helped more people into work through the New Deal, given people more voice and choice in better-funded public services, and also tried to do more to put victims and witnesses first in the criminal justice system.

And parts of the New Labour approach reflect the tough-mindedness of the fairness code, notably in the way the welfare system has been biased to encourage work and to challenge dependence on benefit. But there are still too many areas of life where people feel that there is no reward for playing by the rules and that Labour in government has not helped. New Labour has not fully understood the fairness code, or what government must do to support it. We can start to understand by looking at the world of work.

Work was always central to New Labour ideology. The labour market flexibility which Gordon Brown has championed has helped create the near full employment we enjoy in the southeast. But in the process we have created many jobs that provide neither the income nor security we expect from work, nor the springboard to a better future. The minimum wage aside, Labour has largely left the flexible labour market alone while using tax credits to offset low pay, extending financial support for childcare and making it easier to acquire new skills.

Many people are better off than they were. But for some the flexible labour market that has helped bring full employment is a hostile place. For most, the promise of high-skill, high-productivity, high-wage jobs has yet to be delivered. As one personnel director in a big local company pointed out to me, so long as companies operate in such a deregulated system there will always be an incentive to go for low wage, low value-added forms of production. "Labour has flirted with the European model - based on differentiated product lines, investment in new technology and the requirement for a highly skilled workforce - but we haven't got there," he said.

Criticism of fat cats has virtually disappeared from New Labour vocabulary, and advocacy of corporate responsibility is muted, yet it sometimes sounds as if the government believes families on modest incomes are simply not making enough effort to help themselves. "People at work worry about Labour's values," says a post office driver whose job is to be given to an agency worker with no holiday, sick pay or pensions.

So this is part of Labour's problem. We made work a central virtue. We got people off the dole. But too many people have been left insecure and on low wages, unable to afford a pension or a house. Moreover, the care worker who can't buy a home doesn't just have a housing problem. There is a widening asset gap between homeowners and others, with all that means for social mobility, security in retirement and personal advancement. This contributes further to the feeling that you can work all your life, do what is expected, yet never achieve quite modest aims.

All this makes people wary when the government urges people to take more responsibility for things like pension provision. Meanwhile, the rationale for saving is undermined because the pension system now ensures that at least half the working population will end up on means-tested support in retirement.

If work was one central part of New Labour's message, a modern welfare state was the other. During my conversations, I got the sense that people are slowly beginning to believe that recent investment in health and education is making a difference. But concerns about fairness remain. One underlying problem is the gradual drift from contributory to needs-based benefits, which has been pushed by an alliance of the treasury and public sector professionals. For people of working age, only a few vestiges remain of the contributory system, which offered significant periods of income-related protection from unemployment or sickness in return for a good contribution record. The emphasis is now on the assessment of immediate needs rather than past contributions, whether in terms of national insurance or work history. The balance of state pension spending has shifted sharply from the national insurance-based pension to the means-tested pension credit.

It is true that the working tax credit and pension credit support, in different ways, those who try to help themselves, but both are aimed only at poorer people. Meanwhile, the allocation of public goods like social housing takes no account of a tenant's behaviour. And entitlements to costly services like health, education and benefits seem ill-defined.

Moreover, some structures developed to promote fairness have unavoidably pushed the state more obtrusively into people's lives. Families which used to deal only with the Inland Revenue now may have to work with the childcare tax system, the criminal records bureau and the child support agency (CSA) among others. "I've always played by the rules, now they do this to me," says the victim of another piece of CSA maladministration. Tougher enforcement of anti-fraud measures can disrupt benefit payments and create barriers to moving into work.

We need a new agenda for fairness that reflects the tough-minded common sense of the fairness code. We must not turn our backs on the poor but we have to extend the fairness agenda visibly to the lives of the majority. If we want to address the concerns of people who say "it's not fair," we will need to draw - again - on new policies from both left and right.

No fairness agenda can succeed without fairness at work. We cannot make every job a top job, but we can move away from the idea that few ground rules beyond a minimum wage should be applied to the labour market. The sharp end of unfair competition often comes when relatively secure jobs are undercut by subcontractors exploiting the lower cost of self-employment, with few pension rights. Reduced pension provision can give many employers a competitive edge without delivering improved productivity.

So pension reform should be at the centre of an attack on unfair competition. We could, for example, bring the growing army of the nominally "self-employed" into the full state pension scheme. We could look at extending the rules that protect working conditions for subcontractors in the public sector to private sector contracting too, although with the decline of defined benefit schemes it might be better to require a minimum employer contribution for all staff and contractors. We should certainly end two-tier employment - largely a pension issue - in the public sector.

But pension policy should also underpin the positive responsibilities of the fairness code. A working life should deliver basic security in retirement, but people who make their own provision should also be rewarded. The state second pension must be developed to ensure that a working life leads to more than the basic level of means-tested retirement support. In return, employees will know that any savings they make will be to their benefit. Higher employer contributions should be linked to increased voluntary contributions by employees, not delivered as a right.

Although not every job can be a top job, we can increase an employee's chances of progressing to a better rewarded one. Most workers in small and medium companies have no training and little career progression. The raft of training initiatives and labour laws largely passes these companies by. Individuals have few chances to increase their pay or reduce their dependence on tax credits. Their employers remain underproductive and inefficient.

Labour's New Deals succeeded because they gave personal support through the transition into work. Individual Learning Accounts were popular because modest funding appeared to give individuals control over their learning. By applying these lessons to those in work too we can ensure that getting a job is just the start, rather than an end in itself.

We need a New Deal for the employed, delivered by a new "advancement agency." Drawing together the best of the employment service, voluntary organisations, small business organisations and unions, it should offer an individual service to employees and employers: guiding them through the maze of training, employment rights and career development to find the best way to increase skills, productivity and earning power. Over time, resources should be transferred from training providers and skills councils to the agency and its clients.

The fairness code can suggest new approaches to public services too. We are investing heavily in new social housing. But we know that new developments are too often blighted by a small number of dysfunctional households who happen to be top of the waiting list. Two generations ago, social housing was limited to those who kept their rent in order and complied with tenancy agreements. Some social housing providers already restrict improvement programmes to tenants who pay promptly and respect their neighbours. Reviving the old approach would provide a powerful incentive to change behaviour and reassure people that the benefits of new investment will go to those who have earned the right to them.

We can go further. Equity bonds - essentially a government grant which increases in line with property prices - could enable long-term social tenants to share in the value of their homes without having to exercise the right to buy. The chance to build up a capital pot will help bridge the gap between owners and tenants. And if we offer such bonds and the right to buy only to those who work to pay their rent, we create another big incentive to come off benefits.

The left needs to regain confidence in the ability of public policy to change behaviour. We need to lose our fear of being "judgemental." Working-class school students, all hoping to be the first in their families to go to university, complained to me about the failure to tackle disruptive behaviour which they said can often ruin other children's chances. "I know a lot of people who used to be quiet but now act hard, and they're not going to get the grades," said one student.

Of course, we know that simply taking enforcement action against dysfunctional families often fails. Barring disruptive pupils from school can send them straight into truancy and crime. Root causes must be tackled. But we can draw comfort from the way people discuss these issues. They don't, usually, support purely punitive action. They know some families need help to change. What they are looking for is reassurance that the state is trying to tackle bad behaviour that impinges on their lives and that it is there to protect them too.

The New Deals have shown that values and conduct can change. If people are given strong messages ("you should work"); a personal challenge (a New Deal interview or benefit sanction); and help to move on (training and personal support), they change. Too often our public services have no such strategy. Different agencies take different views about what is acceptable; inconsistent messages are sent. Local people are excluded by professional agencies, each with their own agenda, from setting the standards that will govern solutions to local problems.

In principle, each interaction with public services should reinforce the idea of responsible use. For example, electronic patient records will soon make it easy to identify those who regularly miss doctors' appointments. In most cases, a challenge alone will rectify the problem. (On occasion it will reveal problems, like caring responsibilities or an unsympathetic employer that the patient needs help with.)

We can also imagine better rewards for playing by the rules. If councils can give discounts on prompt payment of council tax, other agencies might offer similar rewards for prompt and accurate compliance. Individual compliance records could become a type of credit reference in dealing with other agencies. We might invert some of the penalty regimes so that there is a modest tax cut for getting your form in on time, rather than a penalty for lateness.

The fairness code accepts - indeed demands - that you work and you pay taxes. The tax income from near full employment has allowed New Labour to invest heavily in public services. But nothing is more damaging to social cohesion than the belief that expensive tax-funded services are too readily available to people who are not entitled to them. Illegal immigration is the central concern here, and is often exaggerated, but resentment runs deep against any type of fraud or unfair access to a service. The links between who pays and who benefits have become too blurred in the public mind.

The legal basis for access to the NHS and education is not clear enough for a modern mobile world; this is unsustainable given our record investments in these services. Citizens must be sure that access to public services is not a free-for-all but is based on a protected and privileged entitlement. Identity cards, supported by legislation to clarify entitlement to services and backed by a beefed-up workplace inspectorate to take action against employers of illegal labour, will demonstrate a commitment to using taxpayers' money fairly. This could also provide a clear framework for phased entitlement to different benefits and services - a kind of "earned citizenship."

However fair we make our public services, many people will still feel victims of bureaucracy. The best way of rewarding those who play by the rules is to allow more individual control over state-funded benefits and services.

We cannot recreate the contributory system in the old sense of paying into the state pot for defined benefits - it was unfair towards women and anyone else with breaks in his or her working life, and it would also reproduce today's wider inequalities - but we can develop "owned" entitlements that allow people to organise their own provision. This is a long-term strategy but we can start laying the foundations now. It is particularly important for those who are not categorised as socially excluded - the people most likely to ask what benefit they get from their own efforts.

For some time disabled people have received an allowance to employ their own carers; this right has been extended to the elderly who are entitled to home care. We should now allow families to take a cash sum to provide care at home, rather than placing frail parents in homes. After months of trying to get social services to match her father's care need, a middle manager asked: "Why can't I have a voucher to organise his care; why do I have to fit in with rules that say if he costs so much he has to be in a home?"

There is now talk of extending childcare provision, with free places for some children and charges for others. But it would be preferable to extend vouchers to all families to make their own arrangements, with local providers getting extra funds to subsidise costs for low-income families.

Over time, post-18 or even post-16 education and training could be developed as a new entitlement. We should aim to give every 18 year old the right to a fixed-sum, lifelong learning account (set at the current cost of a university degree). Those who choose university might spend it all in three years, topping it up later with their own and employers' contributions. Others might go for cheaper, vocational courses, keeping money "in the bank" for later, knowing that it will increase their attractiveness to employers.

Where the state does not or cannot deliver services, it can do a great deal more to support individuals in making their own arrangements. It is a long time since dentistry was a free service for most people. I would like to see a big expansion of NHS provision. But if this cannot be done, then the NHS might concentrate on providing dental insurance at far lower prices than current schemes.

The booming housing market produces unfairness, as we saw earlier, but also opportunities. Even if house prices fall in real terms, most families will still enjoy significant housing equity. The beneficiaries regard the gain as the result of their own efforts, and will resist state attempts to claw it back. But many will be prepared to use part of the equity to develop owned entitlements. The current private schemes to convert equity are expensive. State regulation has already reduced the cost of pensions and savings and could now enable families to make more efficient use of their home equity to increase incomes for the elderly and insure against the cost of long-term care.

Fairness at work, reward for good behaviour and greater independence based on owned entitlements: all follow from my constituents' fairness code. This may represent a less unconditional, less idealistic notion of fairness than some on the left have championed over the past 30 years, although it also reasserts the left's historic concern with the workplace. But at the core of the fairness code remains the social democratic idea that we can construct our society around the values that bind us together. Too many people think Labour is out of touch with their lives; the new fairness agenda could persuade them otherwise.