Among the very many challenges facing the next Labour government will be to rebuild trust in the social security system. By 2015 the system will be characterised by mass unemployment and low benefit levels. Labour’s challenge, if it gets back into power, will be to rebuild new public confidence in a system based on rights and duties.
In recent decades, British politics has been weakened by the Left’s almost exclusive focus on rights (in contrast to a more traditional and equal emphasis on duty, whether as a member of the friendly society, the union or the co-op), and also by the Right’s equally narrow emphasis on duty, turning its back on an earlier ‘one nation’ tradition. To focus on either one without the other is crass, too narrow, merely partisan and, in practical terms, leads up a policy cul-de-sac. What we need is a proper balance between the two.
A recent survey found that, in answer to the question ‘do you agree or disagree that “the government pays out too much in benefits; welfare levels overall should be reduced”, the total agreeing was a massive 74% – more Tory voters, yes (94%) but including 59% of Labour voters. A further question concerned “scroungers”: respondents were asked how many welfare claimants fit this description. 39% of the total said ‘a significant minority’, a further 22% suggested ‘around half of all claimants’.
Now not all public grievance can be taken at face value. But public anxiety does contain very strong grains of truth that need to be recognised and acted upon.
A benefits system based on ‘rights’ alone is a system built on sand, rather than the granite rocks of citizenship, reciprocity and conditionality. It is one reason why we are losing the battle of public opinion on social security.
A 21s century social insurance strategy
A building block for a modern social security system must be the renaissance and modernisation of the contributory principle, one based by definition on a proper balance between rights and duties. The idea of life-cycle accounts is worth exploring. These might include the following characteristics. First, they would be individualised accounts, accessible via the internet. Individuals should have a sense of ‘ownership’ of the account. Second, there should be flexibility, including the ability to access money at certain, albeit limited, points in one’s life cycle, ahead of retirement. The ability to ‘borrow’ certain amounts against future contributions should also be a feature. I do not under-estimate the need to build up funds for a decent pension, but the ability to draw on social insurance for specific purposes pre-retirement is attractive. Third, the scheme should enable individuals to make payments into their own account. This would be a welcome feature, not least at a time when many commercial schemes resemble a confusing savings swindle.
The current coverage of National Insurance is the starting point, but surely we can do better for the major risk of unemployment. Many of those who might subscribe to a popular perception that benefit levels are too high are shocked when they come face to face with the actualité of unemployment, as many are now doing. Unemployment insurance now lasts only six months, after that, if their partner is in work, there might be no Jobseekers’ Allowance at all. Rates are very low: for the under-25s the benefit is just £56.25; for the over-25s it is £71 a week.
But more realistic unemployment benefit rates must rest on two things: a tougher stance on the duty to work and locating the goal of full employment at the heart of public policy.
As for National Insurance pensions, why should not individuals be enabled to make extra contributions into the system in exchange for guaranteed enhanced benefits? Given the low administrative costs of National Insurance, the system could offer a far better deal than those currently available from expensive private pension schemes, typically defined contribution schemes with low annuity rates.
Life cycle accounts should include the reincarnation of child trust funds, not least to inculcate the savings habit early. A new child endowment should be vested in favour of every child at birth. There would be strict rules about the use of such an endowment. These might include the funding of post-16 or later further education; a deposit for home ownership, etc.
Ideally a new social insurance scheme should recognise the changing patterns of care within the nuclear and extended family, in the light of increasing women’s (and mothers’) employment and the care crisis posed by an ageing population. These represent challenges which were not present in the society that Beveridge experienced when he devised the post war social security system.
While Beveridge has much to say about pensions, surely today he would also have emphasised frailty in old age and the burden of long-term care as one of the important risks to be covered by social insurance. The Dilnot Commission on Funding of Care & Support has made important recommendations in this area, essentially proposing a sharing of costs between the individual and the State. Is there scope for a new insurance contract that would help meet these costs?
100 years after the introduction of National Insurance, and indeed 70 years after the publication of the pioneering Beveridge report, it is time for fresh thinking about the role that social insurance might play in our national social security system. This is not about history or nostalgia, but rather the search for a system of social security that commands public respect (and must therefore follow public consultation and debate) and one based on sound public finance. A hotch-potch of benefit provision, based on neither clear values nor public consensus, will fail to see us through in the difficult years that lie ahead. A new social contract between citizen and state, based on clear rights and duties, is the way forward.
Malcolm Wicks is the Labour MP for Croydon North. Prior to his election in 1992 he was Director of the Family Policy Studies Centre. Among his Ministerial posts in the last Labour Government, he served as a Minister in the Department for Work & Pensions between 2001-2005, latterly as Minister of State for Pensions.
This article is based on an IPPR lecture given by Malcolm Wicks on the 24th April 2012 at the House of Commons. The full text of the lecture is available here