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Coffee House

Time’s up for today’s welfare state

12 September 2013

5:21 PM

12 September 2013

5:21 PM

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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