From the TUC

What is living and what is dead in the contributory principle?

02 May 2012, by in Society & Welfare

Guest post from Kate Bell and Declan Gaffney, ahead of their presentations to the TUC’s online seminar on benefits reform this Friday. Register now to attend in person or for an online reminder.

This year marks the 70th anniversary of Sir William Beveridge’s epoch-making report Social Insurance and Allied Services, which set out the main features of the post-war social security system. Famously, Beveridge proclaimed that ‘Benefit in return for contributions, rather than free allowances from the State, is what the people of Britain desire’. In a new Touchstone pamphlet we ask whether Beveridge’s contributory principle is relevant to social security in the 21st century, a subject we will be debating at a TUC seminar on Friday.

The question may seem paradoxical: the contributory basis for social security has been eroded over the last thirty years by successive governments of all parties and by deep changes in labour markets. Contributory benefits are worth less, many workers are not covered, many who are fail to claim the benefits they are entitled to and the funding basis for the system, National Insurance contributions, has been diverted by successive governments to fund income tax cuts or avoid tax increases, simultaneously reducing fiscal transparency and making the tax/benefit system more regressive.

It is little wonder then if people see no relationship between the contributions they make and what they can expect in return, or if commentators such as the IFS call for the pretence that the UK has a functioning contributory principle to be abandoned, merging NI contributions with income tax. It would be easy to conclude that at both individual and collective levels Beveridge’s contributory principle is a dead letter.

Nonetheless the answer we give to the question is a qualified ‘yes’: as long as we focus on those areas where there is a clear rationale for linking benefit entitlement to contributions (and this is not universal) a revived contributory principle could help us deal with some of the major challenges faced by social security in a climate marked by fiscal constraints and rapid population ageing. Making clear and strengthening the links between contribution and entitlement could also help overcome the problem of public legitimacy which the UK social security system faces by reinstating the value of reciprocity at the heart of social security- ‘making reciprocity manifest’ in Stuart White’s phrase.

But we also argue that the potential of a contributory approach could be undermined by symbolic ‘get tough’ policies which, while often promoted as a return to Beveridge’s principles, are primarily intended to send political signals to the electorate rather than address the real issues we face, and which actually undermine the chances making reciprocity credible over the longer term.

In this, the first of three posts, we address the last point. Any discussion of Beveridge today needs to recognise that along with the erosion of the link between contributions and entitlements, the contributory principle has also been the victim of an extraordinary impoverishment of meaning. When Beveridge contrasted ‘benefits in return for contribution’ with ‘free allowances from the State’, his aim was to break with previous paternalist models of social protection: the new model turned on workers having an entitlement to the benefits for which they had paid. This did not mean that benefits were unconditional (Beveridge was clear that both unemployment and sickness benefits were conditional on making preparations to return to work except where this was ruled out by disability) but it meant that they were part of a deal between citizens and government : a social contract extending across the lifecycle and across generations . In contrast, when ‘the contributory principle’ is invoked these days it is often in terms of the policing of the benefit system, referring to little more than the idea that people who have not worked or fail to meet worksearch conditions should not be able to access benefits.

This attenuation of the idea of contribution is an important development in the political language of welfare in the UK. It arises in part from the way the language of reciprocity came to be turned against the welfare state in earlier decades. The political fortunes of the phrase ‘something for nothing’ over the last twenty years are instructive. ‘The something for nothing society’ was introduced into the political discourse of welfare by Peter Lilley at the Conservative party conference in 1993; it was adapted by Tony Blair as ‘the something for nothing culture’ to frame New Labour’s welfare reform agenda in the late 1990’s. Variations on the phrase continue to frame policy statements on social security on both Labour and Conservative sides, reinforcing the message that the main problem faced by social security is one of non-reciprocity, of people taking out who have failed to put in. And policy under both the current and previous government has often seemed to have more to do with reinforcing the sense of a system subject to massive abuse than any genuine policy objective. It is hard to imagine Beveridge welcoming ‘lie-detector’ tests for benefit claimants, or proposals to cut benefits for the families of convicted rioters, or the existence of a benefit fraud hotline where people can denounce their neighbours under cloak of anonymity, with only 1.3% of calls leading to the detection of any fraud.

In the report we subject the ‘something for nothing’ perspective to a reality check and find it severely wanting. Perhaps the most heretical statement that could be made about the UK social security system is that it overwhelmingly does what the public want it to do: however, this would seem to be the case. Most people who claim benefits have ‘put in’ in the past and will do so in the future; most benefit claims are short-term; most long-term claims are for disabled people or carers. As for the social archetypes that haunt the contemporary welfare discourse- the families in which no-one has worked for generations, the areas where ‘nobody works around here’- these bear virtually no relation to any identifiable social reality. To see ‘scrounging’ or benefit fraud as the main issues facing social security is about as realistic as seeing the theft of prescription medicines as the main issue facing the NHS.

If the contributory principle is to play a serious role in future thinking about social security, we need to move away from the ‘something for nothing’ framing and address the ‘nothing for something’ problem of a system in which the great majority of people contribute but see little visible return for their contribution. In doing this, we should be alive to the full meaning of the principle that Beveridge set out when he talked of ‘benefits in return for contributions’. Although there were important limitations to Beveridge’s system which were to dog social security policy for decades-especially with regard to gender and disability – his contributory principle was nonetheless intended as a principle of inclusion. To use it to draw new lines of exclusion, as often seems to happen today, would be a poor tribute to his achievement.

GUEST POST: Guest post from Kate Bell and Declan Gaffney, ahead of their presentations to the TUC’s online seminar on benefits reform this Friday. Register now to attend in person or for an online reminder.
Kate Bell currently works mainly for the Child Poverty Action Group. She was previously Director of Policy at Gingerbread. She has blogged for Touchstone on previous occasions.
Declan Gaffney has worked in public policy and research since 1997, as an academic, as advisor to regional and national government and as a freelance policy consultant. He has written and published extensively on child poverty, public finance, social security and labour markets, and has published several articles correcting widespread myths about social security over the last eighteen months. As policy advisor on social inclusion at the Greater London Authority he oversaw the GLA’s policy and research agenda on income inequality and poverty, including managing and editing the production of major reports and designing the London childcare affordability programme. The organisations for which he has produced commissioned reports include the British Medical Association, the London Child Poverty Commission and trade unions.

3 Responses to What is living and what is dead in the contributory principle?

  1. What is living and what is dead in the contributory principle? (Part 2) | ToUChstone blog: A public policy blog from the TUC
    May 3rd 2012, 12:50 pm

    […] for the revival of the contributory principle in the social security system. As we set out in a post on Wednesday, we need to move beyond the ‘something for nothing’ perspective which dominates […]

  2. Something for nothing or nothing for something? | ToUChstone blog: A public policy blog from the TUC
    May 25th 2012, 1:01 pm

    […] Post from Matt Oakley of Policy Exchange – see also the contributions by Richard Exell and Declan Gaffney and Kate […]