Thursday 12 January 2012

Vision of welfare spawned a monster

Post-war Beveridge Report in Britain led to system that is now widely abused
By Jonathan Eyal, The Sunday Times, 8 Jan 2012

London - Exactly 70 years ago at the height of World War II, a report was presented to the British Parliament. It was bound in a brownish cover, and bore a tedious title: Social Insurance And Allied Services. And it was authored by William Beveridge, a little-known academic.

Since this was the moment when ordinary Britons were struggling just to survive as German bombs rained down on their capital, nobody expected the paper to attract much attention.

Yet it did, and how. People queued to buy the publication, and the Beveridge Report went down as one of the most important political documents in modern history. It laid the foundation for all government welfare projects which followed - public housing, unemployment benefits and health care. And it inspired similar programmes around the world, including Singapore's own Central Provident Fund scheme.

However, last week's anniversary of this seminal report went almost unnoticed. The Conservatives in the coalition government want to dismantle much of Beveridge's inheritance, and even the opposition Labour Party admits that the Britain he envisaged 'is now a very different country'.

The reason for Beveridge falling out of favour is that the welfare system for which he is held responsible has grown into an unaffordable monster which is widely abused, discourages personal responsibility, and also fails to eradicate poverty.

Just a few figures should suffice. Under Britain's laws, the local authorities are obliged to provide a roof for every homeless person, even if the person is a foreigner. The total bill for this alone is £20 billion (S$40billion) a year. Claimants carry no personal responsibility; the more children they have, the bigger the property to which they are entitled.

The central government spends another S$212 billion yearly on welfare. But because this is divided among 27 different types of benefits and is often distributed regardless of personal circumstances, individual payments are too small to treat real poverty.

Unemployment benefits often mean that people have no incentive to find work. And health-care spending, which devours an additional S$250billion a year, is still not sufficient, so cancer patients suffer agonising delays when seeking treatment. The result is that Britain has one of the most comprehensive cradle-to-grave welfare provisions, but also one of the biggest wealth disparities in the industrialised world. The critics claim that everything goes back to Beveridge.

But the accusations are unfair. Contrary to the prevailing opinion, Beveridge was neither a socialist nor an advocate of limitless welfare payments. He wanted to put an end to what he called the 'five giants' - poverty, disease, ignorance, squalor and unemployment - but he believed that people should contribute as much as they claim back from their state.

Beveridge's centrepiece was the creation of a state-run system of compulsory insurance into which every worker was expected to pay, and from which every citizen could draw benefits when sick, unemployed or retired.

Alongside this provision, Beveridge proposed universal access to education and health services, all financed from taxes. The beauty of the scheme is that it created a bond, a new contract between citizens: payments were not charity, but an entitlement, paid for by its beneficiaries.

Beveridge's answer to the problem of people who just milk the system was simple: 'Unemployment benefit after a certain period,' he wrote, should be 'conditional upon attendance at a work or training centre.'

And, although his supporters now prefer to forget this detail, Beveridge initially suggested that those who could not or would not work should be deprived of the ability to vote.

So, it was not Beveridge who is responsible for Britain's perverse welfare system, but subsequent generations of the country's politicians, who used his concepts in order to invent schemes which were ultimately unaffordable.

The rot set in right from the start. Beveridge's initial suggestion was that ordinary Britons would only start enjoying protection 20 years after his insurance scheme was first established. But the Labour Party which came to power at the end of the World War II decreed that benefits were to be made available immediately. Politicians always found it easier to offer welfare entitlements, but much more difficult to tax people in order to finance them.

That game could work only as long as Britain's economy and its population were growing, and only as long as it remained an industrial powerhouse. It never occurred to Beveridge, who was born in India to a family of colonial administrators, that Asia would become an economic competitor. Nor did it ever occur to him that labour markets would be freed, so that British citizens would have to compete for jobs at home.

But over the past decade alone, about a million people from other European Union countries have come to Britain, often better-educated and more willing to work than some of the natives. And roughly half of Britain's children are now born to broken families, a phenomenon which was virtually unheard of when Beveridge presented his ideas in 1942.

In short, the world which Beveridge envisaged, one of regulated markets and of Western dominance, has gone. It's not so much that he was wrong, but that he was right for an age which no longer exists. Britons can still argue about how they should divide their economic cake. But it's a much smaller cake, and one which is increasingly half-baked.

That is accepted by all of Britain's politicians. Even Labour, which created the system, is vowing to reform it. Mr Liam Byrne, its spokesman on welfare, promised last week to 'reclaim Beveridge's vision', a polite way of saying that matters cannot continue as before.

His comment sparked off predictable outrage from those who still treat Beveridge as religion: 'An insult to his memory' was how The Guardian summed up the debate.

But Beveridge himself would have probably taken the criticism in his stride. For his last words in 1963 were an admission of his fallibility: 'I have a thousand things to do,' he complained on his deathbed.

That task is now left to his successors. And they still don't know what to do with the scheme which the great man inspired.

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