As the welfare reform bill heads for the House of Lords next month it is worth pausing to interrogate that word “welfare”. What does it conjure up for you? The state of faring well? The institutions of the welfare state, with its promise of security for all from cradle to grave? Or a narrow, rather miserable, form of social assistance for people in poverty?
The last is the meaning imported from the US, where it is the term used to describe means-tested financial support for people of working age. And with it came negative connotations of “dependency” – a state that marks the universal human condition but that turned into a label stuck only on benefit claimants. The assumption that welfare creates a “dependency culture” underpins the government’s reform agenda. From a common aspiration, welfare has been turned into a divisive notion that sets “the poor” apart from the rest of society.
This American import has not only besmirched the concept of welfare, but also displaced the term “social security”. Once upon a time, the current bill would have been called a social security bill. New Labour, in its wisdom, deleted social security from the policy lexicon. In its place it too adopted the language of welfare reform, and the Department for Work and Pensions replaced the Department of Social Security.
In his first speech as secretary of state for work and pensions, in 2008, James Purnell underlined the significance of this move: “My title … embodies an ideological break with the past … What a telling name: security as something handed down; welfare as bureaucratic transfer; people as recipients of funds … The new title tells a wholly different story. It tells you that work is the best route to personal welfare and wellbeing; it tells you that if you work hard and contribute then you deserve your retirement to be free from anxiety about money.”
But what about the people for whom work does not, or even cannot, provide the route to wellbeing in either the short or longer term, or for whom there are no jobs available? Social security was established to protect their welfare or wellbeing. Yes, it may conjure up images of top-down bureaucracy – and not always an efficient or benign one at that. But social security is not simply a bureaucratic means; it also represents an end to which society aspires. It expresses the desire to ensure genuine security for all through social means. At a time of such great economic insecurity, we must not forget this fundamental protective function.
It provides protection against a range of risks that disrupt income from the labour market and it shares some of the costs associated with, for instance, disability or raising children. It not only redistributes resources from groups who need the money less to those who need it more – its Robin Hood function – but also contributes to the economic security of us all through its piggy-bank function, which helps us transfer money over the life cycle to when we need it more. Yet much of today’s debate about social security ignores its wider functions because it assumes the much narrower role of the relief of poverty after the event rather than its prevention.
The “social” in social security recognises that private insurance cannot perform this protective function for the whole population in an equitable and efficient way. It is an expression of social solidarity – best expressed through more universal, non-means-tested mechanisms, which give genuine expression to the “we’re all in this together” principle.
In this context, it’s encouraging that there is renewed interest in the contributory principle – the idea that entitlement to benefit should be linked not to means but to contributions made (or credited). In recent months we have seen proposals (not all attractive) to strengthen contributory benefits from both the right and the centre-left. For instance, from the right, Policy Exchange has floated a number of options for reinstating a link between contributions and benefit receipt: stronger conditionality for those without a contribution record; higher benefit levels for those who have made contributions; and personal welfare accounts in place of collective and redistributive national insurance. These proposals are motivated by a desire to strengthen individual self-reliance rather than social security’s protective functions.
In contrast, from the centre-left, IPPR has proposed a ‘national salary insurance’, sub-titling its report ‘Reforming the welfare state to provide real protection’. It makes the case for reviving the national insurance ideal, focusing on unemployed people who currently receive lamentably inadequate income protection compared with that in most other OECD countries. A national salary insurance would provide unemployed people with up to 70 per cent of their previous earnings for up to six months, up to a maximum of £200 a week (including the existing £67.50 jobseeker’s allowance). The idea is similar to the earnings-related supplement, which used to be paid on top of short term national insurance benefits and which was abolished by the first Thatcher government. There is one catch though – the additional amount would in effect be an interest free loan because it would be recouped through the national insurance system once back in work. This could be problematic particularly for people who can find only low paid work.
Both right and centre-left versions of a revitalised contributory principle are animated by the spirit of “something for something” – that slogan beloved of politicians on both sides of the political divide. While this slogan can encourage the principle of reciprocity, all too often it has more punitive overtones. As such, it points towards a potentially more exclusive contributory benefit system.
Yet a criticism made of the national insurance system in the past was that it excluded many people such as part-time workers (mainly women) who were unable to build up a full contributions record. From this perspective, it’s worth looking back at the report of the Commission on Social Justice (of which I was a member) set up by John Smith to advise the Labour party. We called for a more inclusive social insurance system better designed to reflect contemporary employment patterns. We also suggested modern social insurance could give its members the option of paying higher contributions in return for higher benefits. This would introduce an element of personalisation without sacrificing the principle of collective solidarity.
At a time of growing economic insecurity, socioeconomic division and widespread poverty we urgently need a social security system that provides genuine security, ensures an adequate standard of living sufficient to enable people to live with dignity, and guarantees genuine welfare.
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