Jill Kirby is a writer and policy analyst, and was Director of the Centre for Policy Studies, 2007-2011.
As David Cameron defends his “moral mission” against Cardinal Nichols’ accusations of welfare cuts being neither “moral nor fair”, new polling reveals the extent of public scepticism about the morality of modern welfare. Two-thirds of the public believe that “you should only benefit from state services if you have been paying into the pot which funds them, even if you really need them”. This may be the Benefits Street effect, but there is a growing belief that even the poorest should contribute in some way to the fund which sustains them.
This poll marks the publication of a collection of essays from Theos, the religion and society think tank, entitled The Future of Welfare. With contributions from politicians, theologians and writers across the political spectrum, there is a surprising degree of consensus amongst many of the report’s authors. One theme stands out: if we are to create a better, and more affordable, welfare system, it must be built around reciprocity and mutual support, rather than resting on means testing.
As one of the report’s authors, I believe that welfare can only be sustainable if we restore contributions and encourage family interdependency. Both of these objectives were inherent in Beveridge’s original concept of welfare, yet have long since fallen away. Whilst Universal Credit undoubtedly represents an improvement on the tax credit system, it still lacks these two vital ingredients.
The post-war welfare settlement was intended to mimic an insurance contract; by pooling risks and resources, the state would act as insurer, but would not discourage self-reliance. Crucially, payments would not be means tested, since this would discourage participants from working. Once means testing came to replace the contributory principle, an important economic constraint was lost: an insurance fund capable of paying out more than it receives is not financially sustainable. For many years now, governments have thus been obliged to make transfers out of general taxation (and, more recently, to borrow) to meet welfare bills.
To remove disincentives to work, Universal Credit aims to ensure that people will always be better off working than on benefit. Yet because it remains means tested, recipients who increase their working hours will continue to face very high marginal tax rates as credits are withdrawn. Family breadwinners will still have to make a difficult choice: do they keep their non-earned income from credits, or do they put in enough extra hours to lift them clear of dependency?
Nor will the new credit make a serious impact on the so-called ‘marriage penalty’, whereby parents face serious disincentives to marriage or open cohabitation. Successive governments from the 1960s onwards have developed and enlarged the social security system so that parents are guaranteed a minimum level of income, whether or not they are married or in paid employment. Beveridge’s family allowances, intended to boost family life and enable parents of young children to live on one income, have long since mutated into a set of payments to mothers. The impact has been to reduce interdependency and discourage fathers from taking responsibility for their children.
In more than a quarter of the nation’s families, women are raising children alone, and the majority of them are not receiving regular financial support from the fathers of those children. Universal Credit is intended to encourage more single mothers to take paid work, dispensing with the minimum hours threshold imposed by tax credits. It will make part-time work more viable, but is unlikely to break dependency on income supplements, because part-time work is unlikely to generate sufficient income to meet the family’s financial needs. Where caring for children limits a mother’s working hours, the first recourse for additional income should not, however, be the state, but the co-parent. It is time we reformed the social security system to acknowledge this.
The income that couple households receive from welfare is assessed on the assumption that they will share work and caring responsibilities. Where parents live apart, surely welfare payments should also be based on this expectation? If all parents were required to attend benefit assessments jointly, whether or not they live together, and have their payments assessed on the basis of joint income, the incentive to live apart (or declare separate households), would be greatly reduced. Such a reform would not only reduce the cost to the state, it would also send an important signal to fathers about their obligations towards their children.
The abandonment of the contributory principle has not only discouraged personal responsibility, it has undermined the place of fathers in family life. A welfare system reliant on redistributing income from one household to another, and on means-testing in order to do so, ultimately destroys its own means of survival. If we are now to build a sustainable welfare state, we must first recognise and then foster the primary responsibility to provide for our own needs and those of our families. We cannot claim moral authority for a system which condemns the poor to dependency, breaks up families and continues to pile up debt for future generations.