As if the UK economy weren't already buckling under enough strain - record spending and record taxes to fund record deficits have seen to that - its underlying pre-pandemic weaknesses still persist. Nowhere is this more evident than in the cost of its creaking welfare state whose anomalies threaten to engulf us all unless fundamental action is taken, according to Jeremy Warner.
Founded by the Attlee government in 1948, it's anyone's guess what Citizen Clem would have made of it now:
"[For] despite the near record levels of peacetime state spending we are now heading for, I am not sure he would have recognised today’s welfare state as his own. In the 80 years since the Beveridge Report was published we seem almost entirely to have forgotten the “contributory principle” that lay at its core, and instead replaced it with a plethora of in-work benefits that make a mockery of the idea of “an honest day’s pay for an honest day’s work”.
“Benefit in return for contributions, rather than free allowances from the state, is what the people of Britain desire”, Sir William Beveridge said, describing his Plan for Social Security as “first and foremost a plan of insurance ...” In organising social security, he insisted, the state “should not stifle incentive, opportunity, responsibility; in establishing a national minimum it should leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and his family”.
Part of the problem is that millions of people are in subsidised work where any income they derive through employment has to be topped up by benefits to secure a living wage.
"Research by the Centre for Policy Studies found that over half the population receives more in state benefits than it puts back in taxes. That effectively makes them clients of the state. They are unlikely to vote for any alternative, helping to explain why Conservative governments find it so difficult to grasp the nettle."
Two justifications support the existence of a welfare system in a developed economy:
"One is an entirely moral argument – that rich societies are duty bound to help the deserving poor. In a civilised society, no one should live in poverty.
The other is that a strong social safety net actually supports economic activity by reassuring citizens that they do not have to worry about unemployment or sickness. They therefore save less and spend more, making the economy stronger, not weaker."
But, argues the author:
"The challenge is getting the balance right. We’ve been failing on that count for many years now here in the UK and much of the rest of Western Europe. Yet making work pay when you are starting from here? That’s a tough one.
The full article can be read here with a link to the original beneath it:
We also include, as an addendum, Iain Duncan Smith's support for the increase in Universal Credit as the best way for making work pay. It won't address the underlying cause of low wages but by getting people back into work through targeted incentives it will at least provide
a step towards more highly skilled and productive work further down the line.