With Labour voting for the government’s bill to cap welfare spending, the debate on the welfare state has taken a decisively wrong turn. The issue is not the cap itself, its level, or even its design. The problem lies in the very way in which the welfare state is understood.
Even if one accepts the need for the cap, there are many problems with the way in which it is designed. Many people have rightly pointed out that the capping scheme is not as “recession proof” as it is portrayed. One defence of the bill offered by the government – and accepted by Labour as the key justification for its support – is that it exempts “cyclical” spending, such as unemployment benefit (now given the Orwellian name jobseekers’ allowance). But there are other elements of welfare spending that increase in economic downturns that won’t be exempt. For example, recessions may increase the need for disability benefit because more people are incapacitated due to the psychological and physical impact of unemployment, poor diet, and lack of heating.
Important though these criticisms are, the biggest issue is the very way in which the “problem” of the British welfare state has been defined and understood. The cap is based on the view that the UK needs “to prevent welfare costs spiralling out of control”, given the wasteful nature of such spending. This is not backed up by the evidence.
The British, having supposedly invented the modern welfare state (a debatable proposition), have the mistaken notion that they have an exceptionally generous welfare state, as evidenced by the widespread worries about “welfare scrounging” and “welfare tourism”.
However, measured by public social spending (eg income support, pensions, health) as a proportion of GDP, Britain’s is not much bigger than the OECD average; 24.1% against 22.1% as of 2009. And the OECD includes among its 34 members a dozen or so relatively poor economies – Mexico, Chile, Turkey, Estonia and Slovakia, for example – where the welfare state is much smaller for various reasons (eg younger population, weaker parties of the left).
Even when it comes to income support for the working-age population – the element targeted by the new bill – the UK is not a particularly generous place. In 2007 it spent 4.5% of GDP for the purpose. This was only slightly above the OECD average (3.9%) and way below other rich European economies: the figures were 7.2% for Belgium, 7% for Denmark, 6% for Finland and 5.6% for Sweden.
And it is not even as if the need for social spending goes away if you reduce the welfare state. For many British supporters of a smaller welfare state the role model is the US, which has a very small welfare state (considering its level of income), accounting for only 19.2% of GDP as of 2009. However, it has a huge level of private spending on social expenditure, especially medical insurance and private pensions, which is equivalent to 10.2% of GDP. This means that, at 29.4%, the US has total social spending that is almost as high as that of Finland, which spends 30.7% of GDP on it (29.4% public and 1.3% private). Moreover, if the cost is “spiralling out of control” anywhere, it is in the largely private US healthcare system, thanks to over-treatment of patients, rising insurance premiums and soaring legal costs.
Most importantly, the view that social spending is wasteful needs to be seriously challenged. The frequently used argument against the welfare state is that it reduces economic growth by making the poor workshy and the rich reduce their wealth creation, given the tax burden involved.
However, there is no general correlation between the size of the welfare state and the growth performance of an economy. To cite a rather striking example, despite having a welfare state that is 50% bigger than that of the US (29.4% of GDP as against 19.2% of GDP in the US, in 2009), Finland has grown much faster. Between 1960 and 2010 Finland’s average annual per capita income growth rate was 2.7%, against 2% for the US. This means that during this period US income rose 2.7 times while Finland’s rose by 3.8 times.
The point is that the welfare state – if well designed and coordinated with labour market policies to re-train people and get them back into work – can encourage people to be more accepting of change, thereby promoting growth. Firms in countries such as Finland and Sweden can introduce new technologies faster than their US competitors because, knowing that unemployment need not mean penury and long-term joblessness, their workers do not resist these changes strongly.
Most American workforces are not organised and thus incapable of resisting technological changes that create unemployment – but the minority that are organised, such as the automobile workers, resist them tooth and nail because they know that if they lose their jobs, they will not even be able to afford to go to hospital, and will find it extremely difficult to get back into the labour market at the same level.
The British debate on the welfare state needs to be recast. The false premise that the country has a particularly generous welfare state whose cost is spiralling out of control needs to be abandoned. The structural factors driving up welfare costs, such as ageing, should be accepted – rather than denied and so putting undue pressure on other elements of social services.
Above all, the debate should be redirected into reforming the welfare state in a way that promotes structural change and economic growth.
Source – Welfare News Service 28 March 2014
Defrocked UKIP MEP Godfrey Bloom, a swivel-eyed loon of the first order, has come up with another one – ban the unemployed from voting.
He has attacked the fact that some will still get a vote even if they have “contributed nothing to the national exchequer at all and maybe never will”.
You might well think he’s talking about corporations who pay no tax here, or rich individuals who can afford accountants to bend the rules to avoid paying their fair share, but of course no…Bloom subscribes to that weird right-wing theory that the poorest are to blame for everything, and are probably doing it just to be spiteful.
No, his solution is that the electoral system needs to give “more electoral power” to the wealthy who “create the revenue”.
In other words, a system where the vote of the richest is always worth more than that of the poorer electorate, and those at the bottom getting none at all.
Good thinking Godfrey ! When the worst off in society cant even comfort themselves with the thought of voting idiots like you out at the next election (even though that prospect is a rank outsider at the best of times) then maybe bombs not ballots will become the order of the day. Because once you’re totally disenfranchised, what have you got to lose ?
He explained his rationale further – “I do not expect to vote in a Unite ballot because I am not a member and pay no dues. I do not expect a vote at Marks and Spencer’s AGM because I am not a shareholder. We need to get to a system where the interest of the individual and the state are more compatible.”
Yes Godfrey but… you see, this is a nation, not a company or a trade union. The vast majority didn’t apply to join it, we just ended up here as an accident of birth. If the accident had been slightly different some of us might have been born with silver spoons in our mouths and would spend our days trying to dodge paying taxes rather than scraping by.
And this idea that the poorest contribute nothing. Bloom, who apparently worked as a financial economist (although it may be worth noting that in 2008 Bloom’s company,TBO, was fined £28,000 by the Financial Services Authority for ‘posing an “unacceptable risk” to customers) doesn’t seem to realise that however poor you might be you still pay taxes – Council Tax and VAT at the very least. Some unfortunates also have to pay the Bedroom Tax. So lets have less of this “contributing nothing” crap.
Of course the man’s an arse, although what that makes the people who voted for him I shudder to think (and I am almost tempted to suggest that they are the people who should have their right to vote removed).
He is a member of the Ludwig von Mises Institute, a tax-exempt libertarian organization located in Auburn, Alabama. Its website states that it is dedicated to advancing “the Misesian tradition of thought through the defense of the market economy, private property, sound money, and peaceful international relations, while opposing government intervention” and has published views critical of democracy, which authors in Institute publications have called coercive, and incompatible with wealth creation… so I think we have pretty good idea of where he’s coming from.
Bloom, who seems to hate women almost as much as the poor, confessed that has visited brothels in Hong Kong. He claimed however he never consummated the visits (even the most hard up prostitute has to draw the line somewhere …) and also claimed “terrified young women beaten into prostitution often from Eastern Europe […] is only a very small aspect of the flesh trade”, and concluded that “in short, most girls do it because they want to.”
After inviting students from the University of Cambridge Women’s Rugby Club to Brussels in 2004, he was accused of sexual assault, making “sexist and misogynistic remarks” and using offensive language during a dinner party. One student handed a formal letter of protest to the President of the European Parliament, heavily criticising Bloom’s behaviour.
Bloom who sponsored the club with £3,000 a year, admitted making misogynist comments but denied sexual harassment. Perhaps, given his Hong Kong experiences, he thought his three grand actually entitled him to act like that.
In December 2008, Bloom was carried out by an intern after making a speech in the European Parliament while drunk, the second occasion on which he was accused of being drunk in the chamber. During the speech, Bloom denied that MEPs from Poland, the Czech Republic or Latvia have the ability to understand economic relations.
On 24 November 2010, Bloom was ejected from the European Parliament after directing a Nazi slogan at German MEP Martin Schulz who was speaking in a debate on the economic crisis in Ireland. Bloom interrupted Schulz and shouted “Ein Volk, ein Reich, ein Führer“ at him.
Bloom was filmed at the 2009 United Nations Climate Change Conference in Copenhagen congratulating the French for bombing the Rainbow Warrior, a Greenpeace ship, in 1985.
In the clip, posing in front of the present Greenpeace flagship, Rainbow Warrior II, Bloom said, “Here we have one of the most truly fascist boats since 1945, well done the French for sinking (it).”
Truly a prince among men…