Recipe for redistribution

Can we afford the welfare state as it is? Can Keynesian economic policies work? Mark Donoghue, Treasurer, University of Kent Labour Club thinks so.

There can be no doubt that the welfare state's base has been steadily eroded over the last 20 years. Labour and Conservative governments have allowed it to creak under the strain of structural unemployment and poverty. Now the Labour Party is embarking on another restructuring that will probably be more about cuts than reform. These proposals are likely to owe as much to the New Right as the Social Security reviews and Acts in the mid-1980s.

Therefore the left must develop policies committed to the enlargement and saving of the welfare state, try to solve the blight of poverty and then argue for a return to Keynesian economics.

It can be argued that the increase in social spending means that the lowest tax threshold, the point at which people pay income tax on earned earnings, has come down to a point where the incentive to work and move off benefits is limited. This can be tackled by making the first £10,000 of earnings tax-free and then progressively increasing the rate of taxation -- for example 25p in the pound for people earning over £10,000 rising to 50p or more for those earning over £100,000.

We must shift the burden of tax from the poor to the rich again. A related policy for a Labour Chancellor should be to abolish the national insurance ceiling on high earners. Further policies to boost public investment and stimulate a full employment economy must be carried through, for example, the lowering of share dividends to 1979 levels, the cutting of defence spending to the European average and the raising of corporation tax by 5%.

We must nationalise the transport system, public utilities, the coal and shipping industries and take back control of interest rates from the Governor of the Bank of England. A minimum wage of £4 or more is imperative to increase incentives to work and help tackle low pay. Anything under £4 is not going to do this. The Chancellor should cut interest rates. We must get the value of the pound down and not destroy the remains of our manufacturing industry. Rising interest rates hurt jobs.

These policies could lead to an increasing role for the state in providing decent child care for lone parents who want to work, removing the threats to disability benefits, dropping the Blunkett proposals for higher education, building new schools, increasing pay for public sector workers and rebuilding the NHS. We could reintroduce free eye and dental checks. All of this is obtainable.

Although there is not much chance of these policies being carried out by the current Chancellor, future Labour Chancellors must keep in mind that monetarist economics have failed. Mass poverty, structural unemployment and conflicting pieces of legislation merely lead to more means-testing and disenfranchisement. We can afford the welfare state!

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