For years the Nordic model has stood out as a beacon of universal welfare provision. But if you want evidence of how the global financial crisis has ripped up the political rulebook then look no further than Denmark, the country with the highest tax burden in the world and one that’s long prided itself on a highly developed system of welfare for all.
Its current Social Democrat-led Government has cut welfare payments, raised the retirement age and started to means test college and university students for study grants. And, as of this year, they’ve cut access to child support for richer households.
According to Danish Finance Minister Bjarne Corydon, this reflects ‘a continuing debate of priorities’. And it’s not just taking place in Denmark. The same debate is being echoed all around Europe as the challenge of balancing welfare largesse with political gravity becomes ever harder.
This debate, like many others, has yet to be had publicly in Britain because of the way our politics is haunted by the future. This may seem an odd thing to say, especially given the amount of time currently devoted to chewing over the record of the last Labour government, but it’s true. We talk about the past because the future scares us.
In the UK you only have to look at the sobering facts. At the start of the next Parliament the budget deficit will be somewhere north of £75 billion. We’re running the worst budget deficit of any major country in Europe and very little is being done by the Coalition Government to get it under control.
Last week’s budget drove this home once again. George Osborne insisted he’s taken the tough decisions and that British people can now enjoy the rewards. The truth is that most of the tough decisions are still ahead of us and very few are feeling any sense of recovery.
With both main parties pledging to eliminate the deficit entirely by the end of the next Parliament it is clear there are going to have to be some pretty extreme cuts, maybe as much as £25 billion, whoever is in power.
The Labour Party must be psychologically prepared for this challenge, and that means having awkward debates about our priorities and principles. Universal benefits must be part of this conversation. With such huge savings to make, and very little fat left to cut, it’s hard to see how we can continue to defend spending large amounts of money on some universal benefits simply to maintain our ideological purity.
There are some who will not take kindly to this suggestion. They will argue that the principle of universalism was enshrined in the DNA of the welfare state created by previous Labour governments.
To some extent this is true. Universalism was a founding principle of the original welfare state, but it was a welfare state unrecognizable to what the current system has ballooned to. When the founders of the welfare state talked about universalism they meant healthcare, education, state pensions – not bus passes and TV licences.
Take free Television Licences for the over-75s as an example. This is a policy with laudable aims and there is certainly a good reason for maintaining it in some form. However, with an aging population, the cost of this measure has rocketed to about £600 million per year. Whilst there are undoubtedly many pensioners who need a free licence, there are many more that are relatively comfortable and could reasonably be expected to pay.
Figures obtained from the House of Commons Library show that if this benefit were limited to those pensioners in receipt of some form of pensioner credit the total saving could be as much as £413 million. Almost half a billion pounds is not an insignificant amount and gives an indication of the potential savings to be made by going down this route.
It is only by making savings such as this that the next Labour government will be able to protect other universal services such as the NHS and education as well as pursuing some of the policies that could make a bigger difference, such as tax breaks for Living Wage employers.
Universalism is a nice idea, but in the current economic climate it’s a luxury Labour simply can’t afford. In order to rise to the challenges the next parliament will bring, we’re going to have to bring some sacred cows in from the meadows. Labour has already hinted this option is on the table by abandoning universalism for the Winter Fuel Allowance. Now’s the time to go further and show we have the resolve to make the tough choices that the country needs.
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