Making the welfare system more contributory

by Graeme Cooke

Ed Miliband has argued that Labour’s position on welfare should do more to demand responsibility and reward contribution, sparking a revival of interest in the notion of ‘contributory welfare’. This can be traced to the coming together of two forces over the last couple of years. On the one hand, the realisation that the welfare state offers minimal protection for those who have paid into the system at moments when disaster strikes. On the other, the hardening of attitudes towards those on welfare, in particular the widespread fear that the system offers a ‘free ride’ for people who do not work.

These forces pose new opportunities, but also constraints. So what might ‘contributory welfare’ mean in practice?

Let’s start with an uncomfortable truth: David Cameron sees only political upsides – and votes – in further steps to cut benefits. Back in June the Prime Minister made a speech setting out seventeen ideas for doing just that, ranging from removing Housing Benefit from the under 25s to limiting Child Benefit for larger families. The policies were not tied together by any sort of coherent principle other than drawing some pretty crude and populist lines. Expect the Chancellor to move on some of these ideas in the Autumn Statement on the way to cutting 10 billion from social security expenditure.

This is not attractive politics – nor particularly good policy – but, like it or not, it is the battleground on welfare. Trying to ‘change the conversation’ won’t work: only the voters get to do that. So moves toward more ‘contributory welfare’ must start with this crucial spending question. It could do this by contrasting cuts with reform.

In essence the Tories are searching for unpopular bits of the system to chop off, while offering no strategy or sense of priorities and neglecting the reasons expenditure has been rising. In contrast changes should focus on switching spending to boost employment (such as from Child Benefit or Child Tax Credit into high quality, affordable childcare) and advancing reforms to reduce demand pressures on the benefits bill (in areas like low pay, energy bills and private sector rents). It will also have to make difficult decisions on areas of spending to cut back – starting with scaling back the Winter Fuel Allowance and free TV licences to those on Pension Credit.

Having confronted the expenditure question, moves towards more ‘contributory welfare’ could carve out a new ethical position as well. This would have to be different from the traditional model of Lloyd-George and Beveridge – because major shifts in the worlds of work and family life dictate it – but could be developed in three types of directions.

The first would be to provide greater protection to people who have contributed into the system. This most closely reflects the traditional model of social insurance, still embodied in the basic state pension. A higher rate of Job Seeker’s Allowance and Employment and Support Allowance (or Universal credit in time) for those who have recently worked would strengthen it further. Given the cost implications of such a move, an alternative would be to offer significantly greater financial support on a short term basis for people who have paid in, but with the money recouped once they are back in work.

The second direction would be to expect greater contributions from people in receipt of support. There have been a number of extensions of such ‘conditionality’ over the last 15 years, but the principle could be further entrenched by guaranteeing work for anyone at risk of long term unemployment – and expecting them to take it up – as proved so successful under the Future Jobs Fund. For those who are not ready for paid work yet, it could focus on way to counter the isolation and loneliness of unemployment

The third area for developing the notion of contribution would be in the relationships and acts of reciprocity among those involved in delivering or experiencing the welfare system. This is generating fascinating new insights, such as those discussed by Hilary Cottam in a post on LabourList. Thinking about the social connections of unemployed people, not just their CV, is vital given how many job opportunities never get registered with JobcentrePlus. And getting people who have successfully moved off benefits into employment to mentor those who are chasing vacancies might be much more effective than identikit, generic training.

Much further thinking, analysis and discussion is needed on each of these fronts – but they demonstrate the potential for a distinctive story on ‘contributory’ welfare, alongside a strategy for full employment including a proper stock take and re-think on the Work Capability Assessment, which is clearly not working as it should. In this way a divisive, tactical and narrow approach to the politics of welfare could be replaced by a compassionate, strategic and majoritarian response.

Graeme Cooke is Research Director at the Institute for Public Policy Research

A version of this article first appeared on LabourList, 15/11/2012