Welfare revolution 'is needed to unlock national wealth'

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Indy Politics
Welfare should be 'taken out of the ghetto' and made part of the debate about Britain's economic and industrial future, Frank Field said yesterday in the third of his four Durham lectures. Today, he proposes action to restore full employment as a key policy goal.

A TOTALLY NEW approach to welfare aimed at locking people into national wealth through full employment and a dramatic change in the way pension funds are owned was called for yesterday by Frank Field in the third of his Durham lectures on Labour's future.

The present welfare system cannot be defended when it offers so many people so little chance of change, Mr Field, Labour MP for Birkenhead and chairman of the cross-party Social Services Committee, said. 'An expanding welfare system is a failing welfare system . . . because it means people are being dragged down and snared in the safety net'.

An 'about turn' over a system that has seen rising billions spent on rising numbers of casualties of the industrial system was needed which at the same time would end the 'short-termism' that pension funds impose on industry. Welfare would be 're-cast as a key part of an industrial strategy'.

Occupational pensions, Mr Field said, have been one of the unsung post-war successes with almost 16 million people in funds whose portfolios account for a 'staggering' 30 per cent of all shares.

But the pounds 254bn in pension fund assets are not owned by the people whose capital that it is.

'In respect of pension wealth, the population is treated in law in exactly the same way as were women, children and lunatics until very recently - they were not seen as responsible enough to be trusted with ownership.'

At the same time final salary schemes, which face a range of acute pressures likely to put some of them in difficulties, are increasingly likely to be replaced by money purchase.

A truly radical pension reform, Mr Field said, would give people control over their own pension capital and the ability to place it where they wished. And individuals would have an interest in the long-term outcome of their investment - not in the league tables of pension performance which are 'the root of the short- termism which has so bedevilled British industry'.

When each company demands that its pension fund outperforms the average, Mr Field said, it is hardly surprising that fund managers go for short-term capital gains from takeover bids rather than the long term.

'The effective ownership of companies by the pensioners and workforce would bring about the most profound change imaginable in attitudes to industrial performance, the need for long-term industrial prosperity and the breaking down once and for all of the them and us mentality in British industry.'

The emphasis would be less on capital gains and immediate dividend advance, more on a 20-year view of the likely growth value of pension assets. At the same time there would be 'a revolution in the ownership of capital which owes nothing to the tax system but which has the potential to make the sale of council houses appear as a feeble dress-rehearsal'. As the change took effect, questions about whether future upratings to the state pension should go to rich and poor alike would inevitably arise.

Once people were locked into 'the success that comes from work and ownership of wealth' the debate about reforming the welfare state 'takes on totally different proportions'.

(Photograph omitted)