One cheer for Labour’s new welfare policy

It’s an uncomfortable fact for Labour Party supporters and Guardianistas everywhere that, as Guardian columnist Jonathan Freedland noted last week, ‘on welfare, the voters are on the Tories’ side’. Which may be the reason why, last weekend, Labour politicians did something shocking: in a bid to connect with voters, they actually said something sensible about the welfare state.

According to Sunday’s Observer, ‘detailed work is underway in the party’s policy review on how to revolutionise the way the system works and address concerns that it promotes a “something-for-nothing” culture. One central idea under consideration is the creation of a flexible payments system offering higher benefits to those who have been employed for longer and have therefore made more National Insurance contributions.’ It’s ‘about linking what you take out to what you have put in’, according to a ‘senior party source’.

Of course, it is pretty woolly stuff. For example, Labour’s shadow work and pensions secretary, Liam Byrne, wrote elsewhere in the Observer that ‘we must do more to strengthen the old principle of contribution’, but then he could only offer the example of prioritising social housing for those ‘who work and contribute to their community’.

Yet while Labour’s proposals currently lack clarity, the principle of welfare entitlements flowing from a contributions scheme – something that was at the heart of the original vision for welfare – makes a good deal more sense than what the state does at the moment: hand out small amounts of money to people regardless of their work history.

The contributions idea is very much in keeping with the early history of the modern welfare state. In his famous report, published in December 1942, William Beveridge concluded that benefits – basic rather than generous – should be paid ‘as of right and without means test’ to everyone who needed them and who had paid the appropriate contributions. Indeed, it was trade union leaders who were most adamant about having a link between contributions and benefits. According to the historian Jose Harris: ‘The TUC [Trades Union Congress] delegation to the Beveridge committee was in many ways a remarkable embodiment of the traditional sterling virtues of the labour aristocracy. The delegates were strongly in favour of contributory insurance: they were contemptuous of “dodgers”, of the “very poor” and of “the type of person who will not join a Friendly Society”, and to the surprise of Beveridge and his committee the leaders of the delegation favoured the withdrawal of public assistance from the wives and children of workers who went on strike.’

As it happens, the welfare system put in place by the much-trumpeted 1945 Labour government did not even offer the fairly spartan scheme proposed by Beveridge. Instead, benefits were still often subjected to a means test rather than being automatic in times of unemployment, and contributions were increased.

The current situation is mixed. Pension provision is based on contributions, though there is a means-tested top-up available for those on low incomes. Jobseeker’s Allowance for the unemployed is paid at the same rate whether you have made enough National Insurance contributions or not, but any savings you have are ignored for the first six months if you have made contributions. It’s similar with Employment and Support Allowance (which has replaced Incapacity Benefit) for those unable to work due to ill health rather than an inability to find a job. In other words, contributions still have some effect on entitlements, but not very much.

More importantly in monetary terms, thanks to the failure of successive governments to build homes, housing benefit is paid regardless of contributions, so long as you are on a low income or claiming benefits. Many other benefits are dished out without any connection at all to contributions. Indeed, it is astonishing how many households receive some kind of benefit. Long gone is the notion of welfare as a ‘safety net’ for hard times. As the Observer pointed out: ‘The welfare state is a big part of British family life, with 20.3million families receiving some kind of benefit (64 per cent of all families), about 8.7million of them pensioners. For 9.6 million families, benefits make up more than half of their income (30 per cent of all families), around 5.3million of them pensioners. The number of families receiving benefits will be between one and two million fewer now because of changes to child tax credits that mean some working families who previously got a small amount now get nothing.’

This expansion of state provision over the years leaves a very large proportion of the population dependent, to one degree or another, on the state and the whims of politicians. But the notion that all of this is ‘welfare’ blurs enormous differences in contributions made by people, in both a financial and social sense. It is one thing for society to support people in their old age after they have done decades of hard work or childrearing. It is another thing entirely for the welfare state to create a sense of entitlement in the young, who may have contributed little or nothing to society so far, or to mark millions of people as unfit to work and thus placing them in a situation of dependency that is demeaning and even disabling.

People’s relationships with welfare benefits – and their attitude to the legitimacy of the welfare system – would very likely be different if benefits were earned rather than being a handout, and often a handout that has some social engineering attached. Welfare born of contributions could help to improve individuals’ sense of social solidarity and their desire to contribute to the community, since they would recognise that they are no longer being sustained by the state but rather by themselves, and others, through a collective system. (Though of course, introducing contributions to welfare won’t magically fix the problem of social alienation.) For this reason, we should give Labour some credit for at least rethinking welfare, and possibly pushing it in the right direction.

Rob Lyons is deputy editor of spiked.