Victimising the victim

Rob Deans, North East Cambridgeshire CLP, casts an economist's eye over New Labour's welfare reforms and finds them wanting.

In the foreword and introduction to the Green Paper on welfare reform, New Ambitions For Our Country: A New Contract For Welfare, Tony Blair writes: "The principles guiding reform and our vision of the future welfare state are clear. We want to rebuild the system around work and security. Work for those who can; security for those who cannot." The paper identifies three key problems with the existing system:

• increases in inequality and social exclusion despite more spending;
• barriers to work and financial disincentives trap people on benefits rather than helping them off;
• fraud diverts resources from genuine claimants.

Four 'ages' of welfare are defined: stopping outright destitution, alleviating poverty, preventing poverty and promoting opportunity and developing potential.

We are considered to be in the third 'age' and aspiring to the fourth. The alternatives contemplated are: privatisation and a residual safety net; the status quo, but with more generous and costly benefits; or the Government's "third way" -- promoting opportunity instead of dependence based on eight key principles:

• the importance of work,
• new partnerships for welfare,
• the importance of welfare services,
• support for disabled people,
• tackling child poverty,
• attacking social exclusion,
• rooting out fraud,
• a modern service.

Attached to these are a total of 32 success measures against which performance is to be judged over the next 10 to 20 years. A new contract between citizen and government, based on mutual responsibilities and rights, will be at the heart of the modern welfare state.

The Green Paper must be evaluated within the wider context of New Labour's plans to regenerate the economy, restructure the state and reinvigorate civil society. Established social democratic conceptions of welfare have given way to a neo-liberal approach justifying withdrawal of state provision of adequate levels of social security, increasing regulation of those claiming benefits and enforcement of a duty to work.

While the social security system has failed to alleviate inequality and poverty, the Green Paper is premised upon a highly questionable interpretation of the reasons for its ineffectiveness that ignores the impact of changes to entitlements and benefit levels made by previous governments. As to its unaffordability, it is simply a fallacy to suggest that costs are spiralling out of control or that current and projected levels of expenditure cannot be sustained.

Table 1 shows spending by the 'big three' welfare departments as a percentage of government expenditure between 1982 and 1996. Over this period spending rose slowly in all departments, except education, and combined they took a larger share of the Government's budget.

Table 2 looks at the share of welfare spending by the same departments and also the share of total government expenditure as a percentage of Gross Domestic Product (GDP) over the same period, during which their share of GDP has again risen slowly in all departments, except education. Combined, they also took a higher share of GDP, but a lower share of total government expenditure and it is projected to decline even further.

Table 3 looks at how spending by the 'big three' welfare departments and government expenditure has increased in relation to increases in Gross Domestic Product (GDP) over the last five years. A ratio of 1.00 implies that welfare spending or government expenditure has increased at 100% of the increase in GDP, so as GDP has grown this item has maintained its share of the national cake. A ratio less than 1.00 implies an increase of less than 100% of the increase in GDP, and a ratio greater than 1.00 implies an increase of more than 100% of the increase in GDP.

The ratios show that apart from 1992 and social security in 1993, welfare spending and government expenditure failed to grow at the same rate as GDP. The figures for 1992 and social security for 1993 are affected by the recession at the beginning of the 1990s which reduced the growth in GDP and increased the level of social security payments. A significant increase in the ratio is therefore to be expected during a recession due to cyclical factors. However, during a boom the Government has discretion whether to take advantage of the rising national prosperity to spend more. Given the choice, governments have chosen instead to restrain expenditure.

Table 4 looks at how spending by the 'big three' welfare departments and government expenditure has increased in relation to increases in Gross Domestic Product (GDP) in cumulative periods over 1982-1996. The interpretation of the ratios is the same as in the previous table. By taking cumulative periods the recent trend for the increase in welfare spending and government expenditure to fall behind the increase in GDP is again shown. The effects of the 1990s recession are still visible, especially in the 1987-1996 data.

This survey shows how stable welfare spending has been over the last 15 years, whether measured as a percentage of government expenditure (Table 1), or of GDP (Table 2), or as a ratio of change in respect to GDP (Tables 3 and 4). It also demonstrates how reliant these are upon growth and therefore upon the success of macroeconomic policy. Poor performance not only results in increased cyclical spending on social security benefits, but also reduces both the ability to fund this increase and to make discretionary spending. Sustained growth requires both increasing demand and increasing capacity. Neither have grown at the required rates as the current orthodoxy, fully subscribed to by New Labour, eschews anything to do with the former and severely damages the prospects of the latter due to its high interest rate / high pound anti-inflationary policy. Much of the pressure on welfare budgets has therefore been of governments' own making.

However, New Labour's proposals for welfare reform should not be dismissed simply as a pretext for cutting expenditure. This is secondary to its main purpose -- imposing a stricter market discipline on the workforce, especially the non-employed, whose very existence questions the morality of an economic system that produces increasing inequality and poverty, and whose mass organisations, if permitted, could create a political consciousness that threatens its continued dominance. What the Green Paper is really about is the reinforcement of the social relations essential to capitalist reproduction.

The welfare state has never been a neutral structure with the objective of ensuring the population's well-being, but rather an apparatus underpinning, through class conflict and institutional compromise, the imperatives of capitalist accumulation.

It is therefore no surprise that New Labour's proposals for welfare reform have concentrated solely upon supply side reforms aimed at the labour market. It accepts the underclass thesis that benefits are a disincentive to work and nurture dependency. By focusing upon behaviourial and cultural explanations of poverty it neglects structural factors at the macro level. The danger of this approach is that once the argument is accepted that poverty, if not caused by welfare dependency, is at least sustained by it, the inescapable policy conclusion is that poverty will be eliminated by reducing benefits, restricting entitlement and coercing claimants into punitive workfare schemes. New Labour is thus constructing an ideology that blames the poor for their poverty and justifies abandoning collective responsibility for the provision of adequate social security protection.

No longer are inequality and poverty regarded as flaws of the market economy, but as flaws of the social security system. Whereas these problems would previously have been remedied through progressive taxation and redistribution, now they are to be remedied by measures which discourage reliance on benefits.

Policies designed to create jobs are now taking second place to policies designed to compel people into accepting whatever jobs are available. New Labour is intentionally placing the burden of market failure onto the shoulders of those groups in society that are least able to bear it. It is victimising the victim.

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