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John Harris and the transformation of the welfare state

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John Harris has one of those we must build back better pieces. We need a new Beveridge plan and all that. We’re fine with that idea of discussing the base structures of the welfare state. We just think there are a few base points that have to be understood about it:Despite the self-evident caveat that wars and pandemics are very different things, the parallels between the uneasy historical moment that story captures and the current phase of the Covid crisis are obvious. The past 12 months have seen a mixture of unprecedented deaths and huge collective sacrifice. Moreover, as the crisis has gone on, profound social questions that have been rattling around British politics for at least a decade – about poverty, inequality, work, and housing – have roared into the foreground. If some people

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John Harris has one of those we must build back better pieces. We need a new Beveridge plan and all that. We’re fine with that idea of discussing the base structures of the welfare state. We just think there are a few base points that have to be understood about it:

Despite the self-evident caveat that wars and pandemics are very different things, the parallels between the uneasy historical moment that story captures and the current phase of the Covid crisis are obvious. The past 12 months have seen a mixture of unprecedented deaths and huge collective sacrifice. Moreover, as the crisis has gone on, profound social questions that have been rattling around British politics for at least a decade – about poverty, inequality, work, and housing – have roared into the foreground. If some people are asking questions about a return to “normal” and the dashed hopes that would represent, that hardly seems unreasonable.

The first hard fact that we’d call into evidence is one that Polly Toynbee has been complaining about for decades now. Britons wouldn’t mind that Scandinavian all embracing welfare state but we’ve a marked resistance to paying for it. That is, no one really has managed to sustainably increase taxation to more than 36, perhaps 37% of GDP. That seems to be a hard limit to what will be paid for whatever system is put in place. To shout that other places do manage it is just to note that other places are populated by different people.

A second is that those Scandis also have a markedly more free market economy than we do. That’s the balancing item that makes their welfare heavy systems work.

The importance of the funding limitation of that tax share of GDP is that it forces a decision upon a welfare system. It is possible to have a generous but selective system. It’s possibly to have a universal and not generous system. But there’s not enough of everything there to have a generous and also universal system.

We can, for example, fund university for some portion of the age cohort through taxation but not the 50% currently going. We can fund child care for those who really need it but full time for everyone? Not enough cash.

We also need to decide what it is that is to be dealt with:

“want, disease, ignorance, squalor and idleness”

OK, those can be dealt with as we have dealt with them. As Barbara Castle pointed out back in 1959, that sort of destitution didn’t exist even then.

a welfare state that too often both sustains and deepens scarring inequality

Ah, no, inequality is something different. As is that modern measure of poverty, being on less than 60% of median income. From Harris again:

A first step towards a basic income might guarantee that, say, a family of four could count on a minimum of £10,000 a year.

We tend to like the idea of a universal basic income around here. But we keep insisting that the important word there is basic. That family of four on £10,000 would still, by current definitions, be poor. Median household income is £30,000 a year or so. This calculator tells us that £10,000 leaves the family at perhaps the second percentile. That is, 98% of the country gains a higher per capita income and so this is definitively poverty when we define that as less than 60% of median income.

Which is what we mean about having to decide. Do we want to make sure everyone, as of right, no questions, has some base amount? Or, do we want to beat inequality? Because we can’t do both, not within that limit of how much tax Britons seem to be willing to pay.

We can only have a generous but selective system or a universal and meagre one. A point which we all do have to understand if we are to have this discussion about the transformation of the welfare state. We’ve a budget constraint and no, we can’t have it all.

An insistence that we can have, just as an example, a basic income which is also 60% of median is to make the “and a pony” mistake.

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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