The Fabian Society, 2009, xxxiii + 271 pp, pbk 0 716 341109, £12.95
This splendid result of a research project inspired by the centenary of Beatrice Webb’s Minority Report of the Royal Commission on the Poor Law will be of inestimable value to the new Government.
The first chapter shows how institutional detail affects public attitudes to poverty prevention and thus the extent to which poverty can be prevented; chapter 2 discusses the challenges facing policy-makers (particularly an ageing population) and shows that what is required is a new poverty prevention strategy designed to achieve public support; and chapter 3 offers lessons from the past sixty years: the universal NHS remains popular, targeted social housing isn’t, and the NHS serves poverty reduction far more successfully than social housing does. The authors show that benefits policy has shifted towards means-testing and thus towards negative public assessment of people receiving benefits.
Chapter 4 shows how targeting on the poor means that, in the longer term, poor people actually receive less, and that, paradoxically, allocating on the basis of need isn’t the best way to help people in need. Preventing poverty ‘is not about how we spend our next pound bringing about the largest possible reduction in poverty, but rather about getting the underlying institutional design right’ (p.98, their italics). If the design is wrong, then the evolutionary path will be wrong, and only a redesign of the system can correct that.
Chapter 5 offers the results of research on public attitudes to welfare provision, and chapter 6 takes the lessons learnt during that and previous chapters and recommends universalism and integration as the guiding principles for welfare system design. In the housing field the authors recommend full dispersal and integration of social housing, bringing housing assistance into a single system, and a spectrum of funding methods between ownership and non-ownership.
For tax and benefits they recommend turning tax allowances into a flat-rate tax credit and then making it payable to all, thus creating a Citizen’s Income (which the authors call a Basic Income). It is the third step in their plan which then poses a problem, for they recommend that the credit be paid on a household basis (p.163). This was suggested by Steven Webb in Samuel Britten and Steven Webb, Beyond the Welfare State: An Examination of Basic Incomes in a Market Economy (David Hume Institute, 1990). It was a mistake then, and it would be a mistake now. Quite apart from the fact that a household basis would lose the administrative simplicity of a Citizen’s Income paid to each individual, we know that people prefer income tax to be calculated on the basis of the individual and so Horton and Gregory’s own criterion of public acceptability requires an individual-based Citizen’s Income and prohibits a household tax credit. In addition, the household’s employment pattern choices would be improved by an individual-based Citizen’s Income, so in this respect too an individual-based Citizen’s Income would prevent poverty more effectively than a household benefit. Any government which decides to implement the report’s suggestions therefore needs to stop at the individualised Citizen’s Income and not transfer it to a household basis.
Similarly, the authors’ suggestion of a participation income also needs to be resisted. The casework approach required by this policy would render it socially unacceptable, which on its own would suggest that the authors ought to have resisted the idea. Also, the money saved by refusing the benefit to a tiny proportion of the population would be far less than the additional administrative costs of monitoring everyone. The authors correctly recognise the NHS to be a primary model for welfare policy because its unconditionality results in positive public assessment of those it serves and of the service itself. The same would be true of a Citizen’s Income, and for the same reason.
The report’s final chapter asks for a new welfare contract based on reciprocity. Here again, the authors haven’t quite learnt their own lessons. If the NHS is the public’s favourite part of the welfare state ( – and Child Benefit would, I suspect, run it a close second, or even beat it into first place), then it is universality, and not reciprocity, which generates public approval and so ought to be the basis of any new welfare contract.
It is certainly time for a redesign, and this report contains everything necessary for doing that. Now we need a second edition which doesn’t draw back from the lessons learnt during the first few chapters. The evidence points towards a welfare state founded on universal provision, with reciprocity a consequence of universality and not as the system’s hallmark. The evidence points towards a Citizen’s Income: universal, unconditional, and paid to each individual – not to households.
Whilst flawed, this report is a fine piece of work, and the authors are to be congratulated.