Fairness and social security

A fair and effective social security system increases productivity and economic growth, rather than acting as a drag on growth by increasing the size of the state or incentivising idleness. People want to work, and a social security system that supports people when they are unable to work is more effective at helping them back into work than one that penalises them on the assumption that they are trying to avoid work.

Social security plays a key role in ensuring that people are protected from unearned bad luck that would otherwise prevent them from enjoying equal opportunities to make the most of their potential, helping those who are able to get back to work, while supporting those who are not.

Two essential roles of social security are to handle inequalities created in markets and to provide insurance for risks faced by individuals. Its sustainability depends on its ability to fulfil these roles and to handle the potential trade-off between fairness and efficiency. When is it seen as legitimate to compensate unlucky risk takers? Do attitudes to social insurance take account of what alternatives people are facing when they make risky decisions?

A fair social security system is universal and reciprocal. This means that it is there to support everyone, not just ‘people on benefits’. It should be like a ‘piggy bank’ that people pay into during their working lives, and in return it helps them when they need support. Social security systems in many other countries operate on this basis, and enjoy broad public support as a result. We need to move away from a ‘them and us’ view in which the majority of the public do not support a generous social security system because of a perception that the main beneficiaries are ‘scroungers’ of one form or another.

A system under strain

While our social security system has never been perfect, a combination of reforms and spending cuts in recent years has led to huge suffering for many disadvantaged people and pushed millions more into poverty. The COVID pandemic has both exacerbated and highlighted the impact of these changes. Increasingly, poverty is affecting people in work as well as those out of work, with many dependent on benefits that the government is paying to compensate for low wages paid by some employers. Meanwhile, benefit fraud is at record levels, partially driven by organised criminal gangs taking advantage of flaws in the design of universal credit that were exacerbated by the COVID pandemic.

The basic message, delivered in the language of managerial efficiency and automation, is that almost any alternative will be more tolerable than seeking to obtain government benefits. This is a very far cry from any notion of a social contract, Beveridge model or otherwise, let alone of social human rights.

Philip Alston, former United Nations Special Rapporteur on extreme poverty and human rights

Looking overseas

Attempts in the UK to talk about Scandinavian countries as role models for social security tend to fall flat because it is easy to argue that those systems rely on much higher taxes. However, the evidence from countries such as Denmark is that people are much more willing to pay higher taxes when the benefits that they receive in return (such as childcare, sick pay, a state pension and social care) are generous and universal. Social security provision in Britain could also be improved significantly without requiring huge tax increases, by improving efficiencies, reducing tax avoidance and investing more now to reduce unnecessary long-term spending (for example, building more social housing, thereby reducing demand for private rented accommodation, cutting rental costs and reducing the huge annual housing benefit bill).

What needs to change

There is an urgent need to provide additional support to particularly vulnerable groups and to increase the generosity of the system as a whole, making it more supportive and less punitive. We also need to tackle some of the broader issues outside of the social security system that are undermining living standards and pushing people into poverty, such as ever-rising housing costs. Beyond these urgent changes, we need to refocus our social security system to act more like the NHS, as a collective insurance system that supports all of us when we need it. It needs to work better alongside the other sectors that together ensure that everyone has equal opportunities to make the most of their talents, including education, health and housing. It needs to do more to help people affected by ‘compound unfairness’, whose life chances are undermined by a lack of support and opportunities at every stage of their lives, from their early childhood onwards.

There is a strong economic case for action, but more fundamentally, the government has a moral responsibility to ensure that people have decent life chances and to intervene to address hunger and extreme poverty, and it has both the ability and the means to tackle these problems for good.

At the level of principles, we need to refocus the welfare system onto helping people to cope with shocks in life and to prevent those shocks from pushing people into poverty. We need to re-establish the idea of a social contract and a universal welfare system based on reciprocity and contributions, whereby people pay into the system during their working lives and are then entitled to receive support at an adequate level when they need it, and to move away from the ‘them and us’ view in which the majority of the public do not support a generous welfare system because of a perception that the main beneficiaries are ‘scroungers’ of one form or another, while the recipients of benefits are stigmatised, which undermines citizenship and the belief that anyone could be the victim of unearned bad luck. According to this view, the poor deserve their plight and only a small number of deserving cases are worthy of public support; the rest should be treated more harshly. A universal system could replace this vicious circle of declining public support, and an increasingly punitive welfare system creating a two-tier society, with a virtuous circle of strong support from across the political divide for a collective and universal system based on the idea that we are all in it together. There are some specific calls for policy changes that would support this transformation, for example a recent Fabian Society study suggesting public support for increasing the use of non-means-tested benefits.

In the short term, however, the ‘them and us’ view remains dominant, and so there is only limited public appetite for increasing welfare spending, even if the pandemic has increased it slightly. The Fabian polling above suggests that there will be least resistance to prioritising five groups who are judged to be more ‘deserving’ of extra help (disabled people, young adults, lone parents in work, lone parents without work who are caring for babies and toddlers, and carers of disabled people). Key short-term proposals made by organisations such as the Fabians, IPPR and JRF include:

  • Cancelling the withdrawal of the £20 weekly uplift to universal credit introduced last year
  • Extending the same uplift to legacy benefits, such as Jobseeker's Allowance and Employment and Support Allowance
  • Removing the two-child limit on universal credit
  • Providing a universal entitlement to free, year-round care for all children aged between one and four, combined with wraparound childcare for school-age children, and in the meantime providing childcare support claimed through universal credit upfront rather than in arrears
  • Increasing income support (many of the income top ups available for particular groups have been lost in the transition to universal credit)
  • Raising local housing allowance to the 50th percentile to help meet the shortfalls faced by those on low incomes with unaffordable private rents
  • Restoring the lone parent premium for working single parents and raising allowances for them
  • Reintroducing a top-up payment for those with a limited capability for work on universal credit
  • Giving an extra £10 per week to carers and severely disabled people

Labour has recently announced plans to allow low-income workers on universal credit to keep more of their pay by reducing the taper rate, which currently means that for every £1 earned over the work allowance, the payment is reduced by 63p. Other proposals have been made for reforming universal credit in various ways, including on the centre-right by Bright Blue.

Recent reports on increasing social mobility and transforming the lives of young children have echoed some of these calls for welfare reform. The government’s Social Mobility Commission has called for scrapping the two-child limit for universal credit, increasing UC child payments and child benefit by at least £10 per week per child, and expanding eligibility for the entitlement for 30 hours of free childcare per week to all families, as well as extra investment in education and housing. Meanwhile, the Early Years Commission, jointly run by the Centre for Social Justiceand the Fabian Society and co-chaired by Labour MP Sharon Hodgson MP and Conservative MP Edward Timpson, has called for the scaling up of ‘family hubs’ to provide “integrated support to all children, especially to those in greatest need”.

Health experts have also made the link between welfare reform and better health outcomes. The Marmot Review 10 Years On called for everyone to have “a minimum income for healthy living through increases to the National Living Wage and redesign of Universal Credit, and remov[ing] sanctions and reduc[ing] conditionalities in welfare payments”.

The Resolution Foundation has identified some of the lessons from the pandemic and suggested three areas of reform (providing a greater degree of earnings-replacement; ensuring a more generous system overall; and doing more to support those with additional costs):

  • Earnings replacement is a fundamental role of the social security system
  • Inadequate sick pay leaves workers with too much of a financial imperative to carry on working
  • Treating employees and self-employed differently is hard both to justify and to implement
  • The level of support provided is insufficient to meet the needs of low-income families
  • The safety net needs to reflect the variation in costs faced by different households
  • Delivering real-time, multi-billion-pound programmes inevitably results in design flaws
  • Our system to support long-term health conditions will be under huge strain due to long COVID

IPPR has identified a range of “major disruptive forces will transform life in the UK and globally in the 2020s and beyond, creating a new set of social risks”, to which the welfare system must respond.

An independent review has called for major reform to and investment in children’s services, including a serious policy effort to tackle poverty and deep-rooted child welfare inequalities across England that mean that children living in the 10% most deprived neighbourhoods are 10 times more likely to be on a child protection plan than children in the least deprived areas.

Many campaigners are calling for more fundamental reforms to social care than have been proposed by the government recently, such as the introduction of a universal care service along the lines of the NHS, which would make social care universally free at the point of need by abolishing the means test, widen the availability of social care by ensuring the universal application of the national eligibility criteria set out in the Care Act, and improve working conditions by introducing a care living wage.

Disability rights groups are calling for reforms to disability benefits. Disability Rights UK proposes that payment levels should meet the costs of disability and that processes should support wellbeing, respect and dignity, while there should be more support for families with disabled children and for disabled parents so that they can play a full parenting role, as well as targeted impairment-specific employment programmes to support disabled people into work.

The negative impacts of the ‘no recourse to public funds’ policy should be minimised through reforms including redefining the definition of ‘public funds’, making it easier for the condition to be lifted when people apply for this, and helping local governments to support people affected by the policy.

The Equality and Human Rights Commission has called on the government to “carry out a comprehensive review of the application of sanctions and conditionality on claimants sharing different protected characteristics and take action to address any disparities”.

The Resolution Foundation has laid out plans for a Living Pension benchmark to improve pension outcomes, in collaboration with the Living Wage Foundation and Aviva.

There are competing proposals for various minimum income schemes, including a minimum income guarantee, a universal basic income and a universal minimum inheritance:

  • A minimum income guarantee is based on the idea of providing everyone with a decent standard of living, regardless of their circumstances. There are a few different variations. Proposals for a guaranteed income floor would sit below the existing benefits system, whereas NEF’s proposal of a weekly national allowance would change universal credit more radically. The so-called ‘minimum income standard’ (an estimated budget deemed adequate to meet material needs and participate in society) was £210 per week for a single adult in 2020, compared to the absolute poverty threshold of £150, and basic benefit levels of £94.
  • A universal basic income also has several variants, but most are based on the idea of providing a set level of income to all citizens, regardless of need. This is a harder sell because of the expense and because of objections that it would disincentivise work and unnecessarily support those who didn’t need it, although it does have various advantages, and there is an increasing body of evidence from various countries (such as the US) that recipients of guaranteed incomes are more likely to be in employment as a result than non-recipients as well as being more resilient to shocks and less likely to be pulled into poverty by them.
  • IPPR’s Commission for Economic Justice proposed a Citizens’ Wealth Fund, a sovereign wealth fund owned by and run in the interests of the whole UK population, and capitalised over a 10-year period from a variety of sources to provide all citizens with a small annual dividend, or a £10,000 ‘universal minimum inheritance’ to all young people at the age of 25.

At a time of growing economic insecurity, socioeconomic division and widespread poverty we urgently need a social security system that provides genuine security, ensures an adequate standard of living sufficient to enable people to live with dignity, and guarantees genuine welfare.

Baroness Ruth Lister, Loughborough University, August 2011