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902   5 January 2004   

the Welfare State

Last week, I spelt out my own New Year priorities, and put at the top of my list “Improving the Welfare State”.  That has prompted some quizzical reactions from friendly Labour “modernisers” who think of the Beveridge Welfare State as a 1950s phenomenon, now somewhat anomalous, which should simply be allowed to fade away, as self-regulating market systems “take the strain”.   

That view is misconceived.  I recognise that the principles of the 1950 Welfare State are in some respects now inappropriate.  They proceed, for example, from an outdated view of the "employment system" and its role both in society and in the economy.  But the concept of a Supportive State, which stands ready to lend support its individual citizens where needed, particularly in the most grave vicissitudes of life – that concept will not wither away.  It is of the essence of human civilisation, of all our deepest collective values. 

The 1950s Welfare State does need to be transformed into the 2010s Supportive State – but that is a matter of re-design, not an abdication of basic principle. 

  • Let me explain what I mean.

At bottom, we need a fundamental re-think of the “employment relationship”, and the stance of Government towards the business, or trading, sector.  Government is still stuck with the 1960s view of the “system of employment” as one of the primary institutional pillars of society.  It is not. 

This is not, be it noted, solely a Labour problem: it was Margaret Thatcher who grossly oversold and overloaded employers with obligations which they should never have had to bear.  In her maniacal drive to reduce the size of the State, she transferred to employers a whole raft of welfare obligations which should never have been put upon their shoulders - they belonged properly with the State, with public servants.  I sympathise with employers, who are forced to act as agents of the State in far too many ways, reducing their capacity to trade effectively, move decisively, change course quickly.  Running a business, in ever-changing trading circumstances, and with ever-changing staffing requirements, is not like running the Church of England, or a university, or the Government.  We have endowed the institution of "business" with excessive significance as a pillar of our society and a primary institution for the distribution (now even the re-distribution) of wealth.  The sector is not suited to, nor should it be expected to perform, such functions.  But because it was Maggie who took the wrong turning, Labour is finding it difficult to get out of the cul-de-sac.

I say that the first task is to de-politicise the State’s relationship with the all employers - in the private, voluntary and State sectors .  This is the offer I would make to them, as part of a new Supportive State deal. 

  1. 1.  Abolish PAYE – while this system of tax-collection is undoubtedly efficient, and more efficient than if the alternative (“self-employed”) system applied to everybody, we are wrong to put the convenience of the State above the effective pursuit of trading success.   Employers should pay out all wages in full, without the deduction, and the State should devise other ways of collecting its taxes.  I accept that this change would weaken the Gordon Brown tax-credit systems; but there are already systems in position for delivering the entitlements of the low-paid self-employed (e.g. many farmers and farmworkers) and those systems would have to be generalised. 

  2. Abolish all employer-based procedures for the payment of sickness benefit, injury benefit, maternity benefit: this work should all be done by main-stream employed civil servants, and removed altogether from the employers' overheads. 

  3. Abolish Redundancy Payments, which reflect an entirely outdated understanding of the employment system, and of a "job as a quasi-property right"; it should be replaced by a new form of Adjustment Pay, payable to all employees for up to six months, to give them time to find alternative employment.  

  4. Abandon any pension expectation, that employers will provide occupational pensions for their staff: it is now quite clear that this “obligation” has proved far too burdensome for the trading sector to carry, both in Europe and America; these expectations should be systematically dismantled.  Everyone should be entitled to look to the State for the payment of an adequate basic Old Age Pension, supplemented according to means in the private sector.  But this whole societal function should be removed from the shoulders of employers. 

  5. Abandon any childcare expectation, that employers should be providers of crèche or childcare facilities for their staff: that is altogether too burdensome a liability, and Government should meet its policy objectives in other ways.

This would (I think you will agree…) constitute a real charter of freedom for our principal employers in the trading sector.  And it would generate a range of good quality, useful Civil Service jobs.   It would give the UK huge competitive advantage - but it would come only at a price.  Government should spell out its price for this New Deal, as follows. 

  1. That employers should accept, and support, radical reform of company law, with greater transparency throughout the conduct of the trading sector, and the introduction of effective checks-and-balances in the corporate sector. 

  2. That employers should meet the costs of Adjustment Pay: any employee facing job-loss would be entitled to receive six months’ pay at the full rate previously paid, paid at the same intervals and in the same way as preceding employment pay, from the employer, although it might well be necessary to build up a common-fund both to cover employer failures and special circumstances where the State should bear the burden; some form of compulsory levy (including an insurance component) could certainly be devised.  But an employer should ordinarily have an incentive to assist the employee to find new employment: as soon as that job commenced, the liability to pay Adjustment Pay would cease. 

  3. That employers should be required to be more assiduous in the collection of taxes, with a drive to weaken the culture of tax avoidance which has become endemic in Western societies, both in Europe and the States, and for which the legal and accountancy professions are principally responsible. 

  4. That employers should be required to make higher contributions to the National Insurance Fund, or however the “Old Age Pensions Fund” were designated; they would no longer have any requirement to administer employees’ tax or National Insurance, and that concession requires a quid pro quo.

This has all the makings of great New Business Deal.  It would take several years to put in place, but it would be a great project for Labour’s third term, and if successful would certainly lead to a Fourth Term...

But this transformation of the employment system would not exhaust my ambitions for the Supportive State.  I have other ideas which should, I say, command political attention. 

  1. Guardianship Allowance   While I acknowledge that New Labour’s childcare policies have been popular with those mothers keen to maintain continuity of employment (whether for career or other reasons), I do not consider that these measures are either sufficient or just.  I think the State should in parallel offer to parents wanting to stay at home with their children (up to age 12)  the option of a Guardianship Allowance.  It is anomalous and wrong in principle that the principal drive of the State should be to facilitate the decisions of mothers wanting to leave childcare to others (paid or unpaid) and re-enter the labour market.  The State should also offer support to mothers taking the other view.  Gordon Brown has, in this respect, misjudged the universality of the work ethic: for young parents there are other priorities.  The receipt of Guardianship Allowance (I say, at £5,000 pa, but subject to tax) should be inconsistent with the pursuit of employment, or of any substantive self-employed business, although there could be a “disregard” procedure for minor self-employment or other incidental income.  Parents should not be forced be lack-of-means to entrust the care of their own children to others.

  2. Universal Capital Grants   We should not underestimate the importance of Gordon Brown’s “Baby Bonds”, which are a significant manifestation of Citizens’ Income reasoning.  Indeed, his Sixth Form “Allowances” seem to me to be sensible moves in the same direction, although not yet universal.  The principle is a sound one, provided that the distribution is universal. Such distributions of public funds will not in the long run prove politically acceptable if they are means-tested: that is already a failing of Sixth Form Allowances.  Baby Bonds are universal, and rightly so.  We are seeing, emerging in this sector, one of the great future institutions of the Supportive State. 

  3. Finally, pensions - although in political terms the most urgent, there is the creation of a Universal State Old Age Pension at not-less than one-third of the average wage, payable to each individual regardless of marital status, and without deduction for broken contribution-record – as an absolute entitlement of old age, and an indication of the valued status of older citizens.  This issue is related also to changes in our view of “the employment system”, but it needs to be spelt out as a principal commitment of the Supportive State. 

Our Welfare State, while well-established in education and health, is far too weak in these other respects. That is why I remain committed to its modification, and improvement. 

  • That, I say, is the political
    project to which Labour should now turn.

 Do you think the Welfare State will wither away?  Drop me a line

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903  1 January  2004

Get to know
your neighbours, the Abdroids

The Company  A short history of a revolutionary idea, by Mickelthwait and Wooldridge, pub Weidenfeld & Nicholson -that was my Christmas relaxation...   And although the book is more of a history of "forms of business generally", it is an excellent read, for aficionados of this arcane subject.  After all, we 60m "natural" persons share these UK islands with 1.1m artificial persons, shadowy abdroids structuring our lives, and trading in our environment.  And new abdroids are being formed, by Companies House in Cardiff, at the rate of 5,000 every week...

My hope is that, together with my own recent essay The Rise of the Abdroids (Go to “What’s New" at Greenleaf Books, then follow the "Something to Believe in" title) it will stimulate wider political interest in the failure of the Left to reform the basic legal "Constitution" of the the global corporate sector.

We are planning a strategic conference in London at Easter 2004, and we would welcome your support.

Drop me a line

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- is that a deal?  Roger WE