Fighting inequality isn't cheap

November 17, 2000

New Labour's social security reforms fall short of helping the most needy, says Hartley Dean

Social security accounts for about a third of public "spending". However, there is a view that money transferred through the social security system is not "spent". It is merely redistributed. Most of it, moreover, is not redistributed from rich to poor, but is paid for over the life of the particular individual claiming benefits. Why then, has new Labour taken up the idea that the present system is unaffordable?

In seeking to reform the system, new Labour has observed that the world for which it was originally designed has changed and that the system has failed to prevent increasing levels of inequality.

The age of the "passive" protectionist welfare state, says new Labour, is over and it is ushering in the age of the "active" workfare state. Work, it argues, is the best form of welfare and social security policy is now firmly married to labour market policy.

A raft of initiatives encourages or requires those who can to work. Meanwhile, because of its preoccupation with tackling fraud, new Labour is sometimes in danger of tempering its commitment to provide security for those who cannot work by reinforcing a culture of suspicion around the receipt of benefits.

However, some aspects of new Labour's reforms have been promising. The new deals for lone parents and disabled people have been empowering for some, though this will shortly be threatened when participation is made compulsory. The national minimum wage has boosted the earnings of many low-paid workers, especially women, although its low level means that too many working families are still dependent on in-work benefits.

There have been quiet increases in child benefit and in children's income support allowances. Yet the outlook remains worrying. Next year sees the creation of the Working Age Agency and a regime under which all working-age social security claimants will be required to submit to work-focused interviews. We are promised an extension of in-work tax credits and similar measures, portending an insidious shift to a negative income tax or universal means test.

The future of pension provision seems complex and uncertain: there is to be a further shift towards voluntary state-subsidised private provision, underpinned by a means-tested safety net.

For the short term, the die is cast. The immediate issues that are posed relate to the sensitivity of the system to the needs of the most vulnerable, the adequacy of benefit levels and the extent to which a gap may emerge - in terms of their relative generosity and the degree of stigma that attaches to them - between in-work and out-of-work benefits. Can we civilise the means-test?

In the longer term, is there an alternative? There are two principal possibilities. One is that we could eventually stumble into a form of participation or citizen's income scheme, the other that we might yet be able to re-invent social insurance. To my mind, however, the forgotten debate is about our willingness to redistribute wealth as much as is necessary not only to sustain people throughout their lives, but more effectively to combat social inequality and economic insecurity.

Hartley Dean is professor of social policy, University of Luton. This is an edited version of a presentation to be given at the conference "In and Beyond New Labour", organised by Critical Social Policy and the Social Policy Association in London on November 18.

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