The case for a new social contract with the British people

Lord Beveridge in 1943

It’s clear to most people and certainly to anyone who has had the misfortune to have to use the social security system in recent years, that it is it not fit for purpose. It fails to fulfil the promise to provide even the most basic of ‘safety net’ as and when needed, and too often dehumanises and demonises the very people that are meant to be supported.

Given this, and that it’s 77 years since the Beveridge report was published, it could be argued that it’s time for a new social contract with the British people on social security. What should be its purpose? What principles should underpin it? Who should it be for? How should it be funded? What level of support should be provided?

But even before that, fundamental to any review of our social security system should be the question what kind of society we want to be? Do we want a country where one in four of our children are growing up in poverty, where persistent poverty effects one in five children, where in the fifth richest country in the world, we have the highest rate of childhood mortality in western Europe driven by this poverty? Is it acceptable that sick and disabled people are being isolated and excluded from society, with over four million living in poverty?

Are the increasing inequalities in income, wealth and power fair? In addition to increases in the Gini coefficient showing rising income inequality, the richest 1,000 people in the UK have wealth estimated at £724bn, this compares with the wealth of the poorest 40% at £567bn. This privileged 1,000 saw their income increase by £66bn in one year alone, and £255bn over the last five years.

The consequences are that we are now seeing our life expectancy flatlining. For women, it is actually going backwards, and yet the government has increased their state pension age. In addition to having the worst child mortality rates in western Europe, infant mortality has increased for the first time in 100 years – four babies in 1,000 won’t reach their first birthday. Again, is this acceptable?

There are signs from last year’s British Social Attitudes Survey that in addition to a majority (56%) who believe that cutting social security would “damage people’s lives”, over seven out of 10 people thought the national living wage (NLW) should be increased and nearly eight out of 10 thought employers should ensure they pay enough for someone in full-time work to meet a “basic cost of living”. They also believe that the government must top up wages where this doesn’t happen, particularly for single parents.

In this year’s analysis of the Minimum Income Standard published last week, the Joseph Rowntree Foundation shows that the cost of living full, healthy and connected lives ranges from £314pw for a single person to £789pw for a family of four including two pre-school age children. Even with the NLW, “after a decade of austerity, many households with low incomes both in and out of work are being held back from reaching a minimum acceptable standard of living”.

And the reasons for this are that in addition to the NLW not being adequate, there have been cuts in social security support to working age people and children which previously ensured that these household incomes were more adequately supplemented. At 4.4% of UK GDP, social security support for working age people and children is at the lowest level since 2002.

JRF argue that we need to uprate and restore these benefits by at least inflation so that everyone in full-time work can achieve a MIS. And that we also need to provide free childcare support in full and not at the current rate of 70%. But I believe we need to go further.

We must tackle the unfair tax burden and poverty pay through progressive economic policy changes. Develop an industrial strategy that helps create the new, high skill, high quality jobs of the future. Create a national education service to ensure people have the lifelong skills and resilience needed to take up these new jobs. And we also need to radically transform our social security system.

We cannot expect people who are living in such hardship to wait a few years for Labour’s real living wage to kick in. And what about sick and disabled people who can’t work? All of this is in the context of Brexit – and we shouldn’t ignore the strong evidence that poverty and inequality are not inevitable, they are political choices. Poverty, and the powerlessness too many of our fellow citizens are experiencing, is driving political extremes of the left and right, just as we saw in the 1930s. I would argue that not only is there a moral imperative to act now and address this poverty and inequality, but that the survival of our democracy depends on it.

The 1942 Beveridge Report was the basis for a new welfare state after the Second World War, when the debt to GDP ratio was over 250% (it’s currently 90%). We established the NHS in 1948, expanded our education system, undertook a massive housing building programme and extended our social security system. It was heralded as a revolutionary system that would provide “income security” for its citizens “as part of a comprehensive policy of social progress”.

But since then, society has changed. Pressures from globalisation, automation and an ageing society mean we need to develop a new, sustainable social security system that we can be proud of. We should be encouraged by the BSA saying the public are ready for a new public spending settlement. We need a new Beveridge report for the 21st century, defining a new social contract with the British people, addressing the poverty, inequalities and indignity millions of people are enduring. We need to bring hope to a new generation as we did 77 years ago.

 

More from LabourList