R.H. Tawney is the patron saint of Labour thinking on welfare. More often cited than read, his chapter on ‘The Strategy of Equality’, first published in 1931, set the agenda for much that was to follow. In it, he called for ‘an extension of social services and progressive taxation [which would] mitigate disparities of opportunity and circumstance’, ensuring that ‘wealth which would otherwise have been spent by a minority is applied to purposes of common advantage’. Looking back some 50 years later in his own survey of The Strategy of Equality, another distinguished professor from the LSE, Julian Le Grand, passed judgement on Labour’s subsequent record. In so far as the social services were expected to be an engine of redistribution, they had failed – and, to this extent, so had the strategy of equality. In the four decades since, talking down the effectiveness of the welfare state as a mechanism for redistribution has become commonplace on the political left, right and centre. By the time Labour, now New Labour, returned to power in 1997 all talk of the welfare state as ‘a strategy of equality’ had disappeared. In its place was the shiny new ‘social investment’ state, designed to maximise opportunity for individuals and increase social mobility.
In the face of this widespread criticism and scepticism, it is worth recalling the significant successes of the welfare state (which almost everybody has an interest in ignoring). Welfare states do redistribute. Incomes after taxes and benefits are always more equal than original market incomes. Without its interventions, many additional millions of older people would be poor and destitution would be much more widespread. In practice, the successes of the New Labour era owed very little to its shiny new ‘opportunity state’, and almost everything to the old-fashioned social democratic rubric of ‘tax and spend’. It was this which did the serious work of redistribution during its years in office, sponsoring a significant reduction in both pensioner and child poverty. It was the reversal of these policies after 2010 which, while failing to fix the public finances, pushed several hundred thousand more children into poverty.
Moving forward to the present, the welfare state is also the unacknowledged hero of the covid-19 years. Whilst mass vaccination has been very widely and rightly praised, almost nobody seems to have noticed the remarkable successes of the covid-19 welfare state – in both its ‘ordinary’ and ‘extraordinary’ forms. In 2020, the number of people supported by Universal Credit mushroomed from three to six million in a matter of months. The £20 per week UC uplift made a real difference in keeping hundreds of thousands of people out of poverty. Under enormous duress, the much-criticised benefits system creaked but it didn’t collapse. At the same time, furlough and various business-support measures, funded by tens of billions of borrowed pounds, ensured that an unprecedented and sudden collapse in economic activity did not trigger a matching economic disaster. As was the case after 2008, we saw that, under these exceptional circumstances, and whether we like it or not, only the state will do.
When more ‘normal’ times return, the welfare state is not going to go away. It is, above all, a system of provision for older people. And we live in an ageing society. Government projections of long-term future commitments – whether to pensions or social care – make it clear that the challenge is how to contain and fund rising costs. The idea that somehow this could all be managed by the creation of a private insurance alternative has been revealed as the fantasy that it always was. The welfare state is, and will continue to be, what government spends much of its time and resources doing. And whenever governments tax and spend, they redistribute.
Given that the big welfare state is here to stay, it is doubly important to recognise that it cannot be a ‘strategy of equality’. As already noted, welfare states are crucial to our collective well-being and they do moderate (some) social inequalities. But there are real limits to this process. And the possibilities it affords have lessened across time. The strategic mistake of thinking that it could do much more than this goes all the way back to Tony Crosland’s Future of Socialism (1956). Crosland argued that governments, backed by powerful and effective trades unions, could tax and legislate for real social change. The state could underwrite a form of social citizenship which would render older ideas and forms of class struggle irrelevant. Most crucially, the question ‘who owns? – which had been at the top of the list for all previous socialists, whether revolutionaries or reformers – was no longer important. Put very simply, this was a terrible strategic mistake (as Crosland may himself have come to recognise in the 1970s).
What Crosland thought was a permanent trend – the ongoing equalisation of incomes and wealth – has been in reverse for the last 40 years. Under these circumstances, ‘who owns what?’ is now, as it always has been, the crucial political question; and changing it, the unavoidable political imperative. For all sorts of very good reasons, social democrats (like Crosland) tried to avoid this. But that isn’t possible. Wealth has always been more important than income. And in the society we have become, the salience of wealth over income is ever more important. Differences in home ownership (of both first and other homes), in pension assets and in inheritance have become both more unequal and more consequential. We cannot expect the welfare state to fix this.
Of course, the challenge is daunting (which is why social democrats have always avoided it). But a very simple first step would be to shift the funding of welfare away from income and towards wealth. There are a number of ways of doing this: a wealth tax, more effective inheritance taxes, land value taxation and a capital gains tax with serious intent. By contrast, funding the costs of social care out of more taxation of working people’s incomes (through National Insurance contributions) is the opposite of what we need.
Tawney knew all of this. Those who take the time to go back and read the famous chapter on ‘The Strategy of Equality’ will see him insist that none of his reforms can be expected to work (or, indeed, to happen) until and unless we address the question of who controls society’s economic assets. There is, so he insisted, ‘a lion in the path’ of social reform. Wishing it weren’t there will not be enough to make it go away.
We should defend the welfare state against those who want to make of it a mechanism for punishing poor people for being poor. We should set about funding it in different ways, with a tax regime that focuses upon wealth rather than income. But we shouldn’t expect it to change our world. To do that, we need something different: a new strategy of equality.
Chris Pierson is Emeritus Professor of Politics at the University of Nottingham. He is a contributing editor of The Oxford Handbook of the Welfare State and his latest book The Next Welfare State? is published by Policy Press and is available to order now.
This blog gives the views of the author, and not the position of the Social Policy Association.