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Time’s up for today’s welfare state

12 September 2013

Welfare as we know it is doomed to defeat. It looks like going down to defeat from three major challenges, and each challenge comes from the sea change that is now so marked in public opinion. First, welfare has moved from one based on the duty to contribute before the right to help was conceded. Increasingly benefits are provided only after a test of income. Voters do not approve of this significant change.

The next challenge comes from an increasing reluctance by voters to pay an ever growing share of their income in taxes, of which the largest part goes to a form of welfare with which they strongly disagree – means-tested welfare.

The third fundamental change is generational. Whilst there is much goodwill about safeguarding the income of pensioners, younger voters are steel-like in their resistance to helping further the unemployed who currently gain help without earning their entitlement by having made contributions.

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How can politicians respond? In a pamphlet published today by Politeia I set out the case for radical welfare reform that meets each of these challenges. And I try to do so in an age when national budgets are being cut, and will need to be cut further to prevent long-term interest rates rising to a point when we will never be able to repay it.

Central to the reform is for welfare entitlement to be linked securely to contributions, either through money contributions, or to reflect the function individuals undertake within society – such as caring. There should also be a 10-year residency test.

I propose establishing four mutuals covering pensions, a new care pension, unemployment cover and increasing over time the funding of the NHS. Each mutual would have a membership board elected by each contributor, each of the four boards would have the power to set contribution rates and entitlement so that a clear link was established between the two. Each board would also have the power to set the general strategy of the mutual and to dismiss the management board if members were so disaffected with their governance.

Central to establishing these welfare mutuals is the need to raise more money. We are all living longer and many of us now draw our pensions for a longer period than we have actually worked. As we age so our need for care increases. How might that person’s income be guaranteed during periods of unemployment, as well as ensuring that their mutual is serious about getting them retrained for other jobs? Likewise, demand on our health service expands almost exponentially with new drugs coming on the market, with each of us, over our longer lives, making ever greater demands. How do we sensibly finance this growing bill?

In each of these areas, voters wish to see more money spent in an age when overall budgets are being cut. I believe it is possible to square this circle by guaranteeing a new deal with taxpayers. You pay increased contributions towards a more generous, but contributory based welfare, and we politicians are prevented by law of trying to put our sticky fingers onto these funds.

Frank Field is the Labour Member of Parliament for Birkenhead

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  • greggf

    Just because he public dislike or disagree with an aspect of governance doesn’t mean it is doomed.
    Anyway the problem is deeper than it appears because it is rooted in a public sector culture that has been politicized – socialized – since the end of WW2, and maybe before. I doubt that separating out bits of welfare will ever prevent any government treasury from interfering in its systems for social reasons.
    I’ve listened to Betty Boothroyd in parliament lambasting somebody for the deliberate failures to reclaim the costs of NHS services to foreigners – the will to change the culture of the NHS is absent, and I’m sure its the same for other welfare.

    Strangely the answer has to be to privatize the system. That is the only way actuarial management of welfare could succeed. So, if your Mutuals were private enterprises out of reach of the government grubby mitts your ideas could win.
    However persuading everybody welfare should be privatized is a tall order. I fear it has to get a lot worse before that might succeed.

  • thanksdellingpole

    Africans are imported here to do the jobs we don’t want to do, it’s the modern day slave trade.

    So this woman holding the placard had better wise up.

  • Smithersjones2013

    I propose establishing four mutuals covering pensions, a new care
    pension, unemployment cover and increasing over time the funding of the
    NHS. Each mutual would have a membership board elected by each
    contributor, each of the four boards would have the power to set
    contribution rates and entitlement so that a clear link was established
    between the two. Each board would also have the power to set the general
    strategy of the mutual and to dismiss the management board if members
    were so disaffected with their governance.

    One could give it the banner title of a ‘National Insurance Contribution’. Oh wait a minute! Even the good Mr Field conveniently overlooks NIC without even a passing nod. Surely under this plan NIC must be abolished?

    Now I have no doubt Mr Field means well but as I have just demonstrated two generations have already been deceived by a malignant political underclass which has misappropriated taxation intended for welfare but in reality used often for improper purposes. Its one of the main reasons Government are in the financial mess they are in (failing to address the cost of welfare satisfactorily both for the nation and its employees). Instead of inventing new quasi taxes for us to pay and quangos to subsidise, I suggest Mr Field first turns his attention to rationalising not only our ridiculous tax system but the scope of government that has caused such ridiculous and outrageous overspends and along with that also consider the stringent constraints under which the Government should perform their duties in terms of its scope in future. No longer can government be allowed to irresponsibly waste money on whatever whizzo wheezes come to mind at any particular point in time!

    Then perhaps we can get down to discuss the intricacies of a new individual National Insurance Scheme (which frankly is the only sustainable model)…….

  • The_Missing_Think

    People from other countries, by definition, aren’t English, Scotish, Welsh, or N. Irish.

    In short, not the same race.

    Therefore, all contribution based systems are rendered invalid, as all UK residents must be treated equally, regardless of all other factors.

    That’s why the Indian 25,000 doctors won their court case against New Labour in 2006, using the 1976 race relations act.

    No link to verify this I’m afraid, the ‘free press’ spared New Labour the blushes of being found guilty of a bona fida race crime. I heard it on Eddie Mair’s R4 PM show, it was covered very briefly, and then slipped silently into the ether.

    Though most likely not forgotten in upper political circles.

    Hence the beat about the bush residency test that the EU has promptly declared “discriminatory” (see link). And there’s still the UK’s own race laws, once they’ve stepped off the coach/train/plane.

  • Tominic_Grieve

    I am sick and tired of paying taxes so that the alcoholics in the Council Flat across the road can stay at home living on benefits, get pissed every day, fight in the street, shout swear and play music at full volume day and night.

    Time to replace the welfare state with a guarantee of work – if you are prepared to work.

    Long term sickness insurance [if you don’t pay in, you don’t get anything out], disability living allowance, and all pensions should be private pensions [not funded by the Taxpayer]. That’s all that the state should provide.

    • OldLb

      Correct. For a 26K a year worker, they would have been 400K better off. The difference has been pissed away. 5% per annum charges by the DWP, and the rest skimmed off for other things.

  • Graeme S

    Times Up … your joking , we haven’t given enough to the migrants or the feckless white trash.

  • bobby_b

    ” . . . and we politicians are prevented by law of trying to put our sticky fingers onto these funds . . .”

    The “prevention” can always be revoked, anytime, for ever.

  • Peter Saunders

    Yes, restore the contributory principle, it’s crucial. But why make people contribute to these big funds run by strangers on their behalf? Why not let us instead contribute to our own funds which we control ourselves? The new workplace pensions are the model – require everyone to pay into them (no opt-outs), extend their purpose to cover unemployment and sickness insurance as well as retirement, and means test all state benefits claimed by those who haven’t contributed.

    • Guest

      If you were capable of controlling your investments yourself successfully, you would be doing it privately already.

      You already have many ways that you can invest privately: you don’t ‘cos you’re no good at it.

    • Guest

      Yes you can opt out.

      • OldLb

        You can’t. You are forced to pay into NI

        • Tominic_Grieve

          Yes you can opt out of the new workplace pension scheme.

          The new workplace pension auto enrolment scheme is not NI: it is in addition to NI.

          So: YES you can.

  • Lady Magdalene

    You missed the 4th objection Mr Field.
    People object to paying taxes so that welfare can be given to recently arrived immigrants.
    A Welfare State depends on a united society, where people believe they have a duty to support their fellow citizens who have fallen on hard times.
    A Welfare State cannot survive when people are being expected to pay taxes to support immigrants and their broods from the minute they step through our open borders.
    I don’t believe I have any responsibility to pay towards social housing, JSA, Child Benefit, Tax Credits or any other benefit for EU immigrants – let alone those who turn up from Somalia, Pakistan or anywhere else. If they can’t afford to live here on what they earn, they shouldn’t be here.
    A Welfare State and mass uncontrolled (and uncontrollable) immigration are incompatible.

    • Lui Rixx

      I couldn’t agree more!

    • Peter Woodifield

      Leave a message…

      • blindsticks

        ‘The ten year residency test’ would have been better enacted about 1997, when Tony Blair got his ar*e on the seat and decided to let in another five million.Too little too late. And as for the ‘we’re all living longer’ argument, well looking around some of our towns and cities and knowing it can only get worse(because the other argument is we need them to help with out pensions),who bloody wants to.

  • mrsjosephinehydehartley

    The big problem as far as I’m concerned is the way ” goods and services” are automatically bandied together like love and marriage. It’s fairly obvious the services side of anything going in the market, is grossly over-blown and over-priced –

    Every tortuous aspect of so-called service provision gets marked up to some ridiculous high market value price – whilst the goods one actually receives in the end ie after one has suffered the slings and arrows of outrageously opportunistic and intrusive IT processing – are worth very little in real terms.

  • Baron

    It’s too late for any sensible reform of the Welfare system through a political discourse. The forces that stand against it are more powerful that those that back it. The number of people (voters) who are engaged in the running of the Welfare monstrosity with all its derivatives, and that includes the mammoth NHS, outnumber those who have to fund it. However much one may appreciate what Mr. Field is proposing, it ain’t going to happen.

    More to the point, the only Welfare system that could be cost effective as well provide a reliable safety net for each and every burgher who needs it is one run at a parish level, the centre furnishing just the guidelines. This is how the predecessor of the statist Welfare was administered. It wasn’t perfect because it was underfunded, but the principle was right since each claim on the ‘insurance’ and each response to it is different. Running the system from the centre raises both the cost of administration unnecessarily as well as creates anomalies that are inherent in such ‘broad brush’ approach e.g. winter fuel allowance, bus passes.

  • Tom M

    Sounds fine Frank with the exception that I wouldn’t trust a government to run it. You coud never give me sufficient assurances to allay my fears that after paying into the system just when I was too old to do anything about it you would change the rules.

  • SP Resident

    Frank Field misses one other reason why we are seeing the breakdown of support for Welfarism. People are tribal and support others when they feel affinity. The multi-cultural disaster in the UK means that people have not integrated and therefore there is little sense of “us” in the national sense. People don’t wish to support perceived “others”. Read The British Dream – excellent analysis by a left wing thinker on this phenomenon.

  • Russell

    And I suppose Frank the trusted MP’s (remember expenses and cash for questions) will nominate Lord Such and such or Sir thingymagig or some other establishment troughers like the new NHS Trust chairperson Jacqui Smith of lodger fame in 2nd home, on another taxpayer funded bender!

  • telemackus

    Frank. Cross the floor please. You are wasted on those labtards.

  • Count Dooku

    Frank, I am in complete with everything you have written. 100%, which is a first!
    I must say though, your proofreader is terrible.

  • @PhilKean1

    And the prize for wrongly thinking that the British people’s –

    – political sentiments had shifted to the left in 2010 : goes to David Cameron.

    Blair tricked him. He swallowed it. He’s now trying to repair the damage. But the British electorate have got him sussed.

    You can’t bring yourself to be a Liberal-lefty unless it is in your blood.

    • HookesLaw

      I think the notion you refer to died the death in 2008.
      The government for instance has cut maximum benefits to 26K and is talking about reducing it further. The govt have reduced housing benefits for people who do not need the houses they are occupying – and in so doing laid itself open to criticism from some lefty UN abomination.

      So to be frank your assertion is a load of rubbish, serving only to keep you in the level of prejudice you have grown accustomed to.

      • @PhilKean1

        Oh, when domestic and world event forced him to drop his pledge to stick to Labour’s spending plans?
        And was that when he went a bit quiet about aspiring to be the Heir to Blair?
        Oh, and I thought he was going to stop inflicting extra burdens on British businesses?
        Ooh, what about reneging on his stated intention of giving the British people a say on EU membership? If I remember correctly, he said – “I don’t want to give people an in-or-out referendum because I don’t want Britain to leave the EU”.

        Let’s not forget imposing Gay Marriage, with NO mandate and without consulting the British people.
        Oh, and raising taxes on already high taxpaying, single-earning fathers, forcing many stay-at-home mums to look for work to make up the shortfall in the family income.

        No, this man must be removed and replaced by a Conservative.

  • Dave Nolan

    The parameters you suggest may seem fair and reasonable now but there are no guarantees that future governments will not find a way to access these funds should “extreme circumstances” prevail.

    • OldLb

      Like steal them.

      Poland Confiscates Half Of Private Pension Funds To “Cut” Sovereign Debt Load

      Steal pensions to carry on spending.

      • HookesLaw

        You are over simplifying.
        Poland has a 3 tier pension system and it is nationalising the state bonds owned by pension funds (50%). It is also taking on their liabilities, which by your definition means it is increasing debt. If Poles opt not to use private funds to save for pensions then they will contribute to the state system instead.

        • OldLb

          No over simplification.

          1. State takes the money.
          2. State spends it on its debts.
          3. State carries on spending.
          4. State defaults on its debts.

      • itdoesntaddup

        The State has been stealing pension funds with gay abandon here ever since Gordon Brown’s raiding measures, and requirement that funds invest in gilts (even at negative real rates of return or bubble prices). Inflation linked annuities pay out half what they did before these measures.

        • OldLb

          But this is outright theft of assets.

          Brown taxed pensions to encourage investments. So where’s the results of any differences? Not one. i.e. It was a pure tax.

          Negative rates. Correct. It’s just forcing people (pensioners) to lend to the state along with printing money (QE) to keep those in the state in cash.

          It’s back to the debt. The state owes people money for their pension contributions. 6.5 trillion of debts have accumulated with no assets. Watch Hookeslaw in a second try and justify why not paying the state pension is good, because its not a debt.

    • Count Dooku

      That’s the case now. They just tweak the entitlement.

  • Bonkim

    Have to agree with Frank Field – social security is a safety net – not an automatic entitlement for all comers. this also includes NHS treatment.

    It was simple when social security meant help to those that became unemployed due to no fault of theirs and those that fell on hard times despite trying, and the very weak, the old, and the ill.

    Today’s benefit system offers life-style choices that is patently wrong. Also all comers – immigrants, and those passing through.

    Mr Field has set the principles clearly and there is not a great deal of difference between this and those the coalition government is trying to put in place.

    Regrettably the free-for all benefits system had changed society radically and zapped the will to work amongst certain segments – there will be withdrawal symptoms amongst the addicts – life is harsh and they will just have to adjust.

  • OldLb

    It’s far far simpler.

    The welfare state is over. The reason is that politicians like yourself have been running a Ponzi fraud. There’s no other description that fits.

    1. Where are the accounts? In particular, you owe people for their contributions. Not on the books.

    That’s the first condition satisfied for the 2006 Fraud act.

    2. At risk of losing money, or lost money?

    Yep, you increased the retirement age. For a 26K a year worker, that’s a loss of 20K from contributions and loss of income.

    That’s the complete evidence required. False accounting leading to risk of, or actual loss.

    3. Then there is the spin. It’s all down to people living longer. It’s not.

    What’s its down to is a Ponzi fraud.

    If a 26K worker had invested their NI that would have resulted in a fund of 627,000. Even allowing for the 10% of NI that goes on the insurance elements, that still leaves 564,000 pounds. The state pensions costs 152,000. Where’s the difference gone?

    One is charges. With the DWP creaming off 5% per annum, that’s one impact. The other is that NI has been looted. A la Maddoff by politicians.

    And your solution? More tax. More tax solves every known ill doesn’t it. From Syphilus to the kings itch, to recessions, to paying for fraud. More tax, more tax more tax.

    Now for the question that politicians lie through their back teeth about. Just how much is owed. Its, 6,500 bn when you include civil servants pensions. That’s the liabiliities of the unfunded pensions. There are no assets. None. It’s all debt. It’s all rising at above inflation. 734 bn a year according to the ONS.

    So you can’t square that circle with tax. Tax raises 600 bn. Spending is 722 bn. The debt is even rising faster than spending. It’s tipped.

    All down to a fraud.

    • HookesLaw

      usual rubbish

      • OldLb

        So how much does the state owe for its pensions?

        Cost of said pensions, according to you, 91 billion a year, payable over the next 100 years, and increasing faster than inflation. Increasing with life expectancy. Increasing with the demographics.

        That’s some debt,

        So large it can’t be paid.

        Even at the moment, income is less than spending going out. Check the latest numbers.

      • Hugh

        Actually, that does very little to undermine its similarity to a ponzi scheme – most ponzi schemes are sustainable in the short run. However, without changing the rules liabilities would increase significantly faster than the receipts.

        Anyway, the National Insurance Fund It is not a “fund” in any real sense of the word; the pensions system is pay as you go.

        As the IFS puts it: “The NI Fund is notionally used to finance contributory benefits, but in years when the Fund was not sufficient to finance benefits, it was topped up from general taxation revenues, and in years when contributions substantially exceed outlays (as they have every year since the mid-1990s), the Fund builds up a surplus, largely invested in gilts: the government is simply lending itself money. These exercises in shifting money from one arm of government to another maintain a notionally separate Fund, but merely serve to illustrate that NI contributions and NI expenditure proceed on essentially independent paths. The
        government could equally well declare that a quarter of NICs revenue goes towards financing defence spending, and no-one would notice the difference.”

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