Britain’s welfare state is under such a sustained attack from so many directions, it is difficult to know where to begin a defence. The latest volley – yet another assault on the principle of universalism from Iain Duncan Smith – may, at first, seem more more challenging to take on than, say, the scandalous kicking of the working poor, disabled and unemployed people. Duncan Smith argues that wealthy pensioners who don’t really need benefits such as the winter fuel allowance or free bus passes should hand them back. How is unclear; as Ken Clarke quickly pointed out: “You can’t... I don’t think it has a system for doing that.” But it’s clear where this is all heading: the Liberal Democrats already favour stripping these benefits from middle-class people, and a large chunk of Tories would like to do the same, too.
On top of the chaotic withdrawal of child benefit for higher earners, Duncan-Smith’s intervention is consistent with the gradual chipping away of the very foundations of the welfare state. It’s a clever ruse, too. It seems to reverse the positions of left and right. How is it defensible for low-paid workers to cough up to pay for frivolous benefits that multi-millionaires simply do not need? It even taps into widespread discomfort with the very inequality promoted by right-wing policies: why on earth should some of the country’s wealthiest people get free TV licences?
It is certainly true that members of Britain’s booming rich elite have lots of money they simply don’t need, whether they have retired or not. That’s one reason we have this thing called tax. What it does – in theory, any way – is take money from you based on your income, in order to pay for a functioning, civilised society. Rich people have benefited from this more than most: they need workers trained by a state-funded education system and kept healthy by a state-funded healthcare system; they depend on lending from banks rescued by the taxpayer; they rely on state-funded infrastructure and research, and – like all of us – on a society that does not collapse. Whether they like it or not, they would not have made their fortunes without the state spending billions of pounds.
The universal basis of social security is this: “Everyone pays in, everyone gets something back.” It should be seen as inextricably linked with citizenship: that all of us have access to certain rights, whoever we are. On technical grounds, universalism works: it is the most efficient, cheap, easily understandable and simple way of administering the welfare state. Take a look at a Scandinavian country like Sweden. The wealthiest pay one of the highest tax rates in the world – nearly 57 per cent – and get the same excellent cradle-to-grave benefits as everybody else. Sweden, of course, is one of the most equal, best-functioning societies on earth, as nations with universal welfare states tend to be.
But what the assault on universalism really means is the further destruction of Britain’s already-collapsing social cohesion. The Tory strategy since coming to power has involved the most shameless attempt to turn large sections of the electorate against each other since the Second World War. If you’re a low-paid worker suffering cuts to your pay packet and tax credits then you are encouraged to be enraged that the less deserving unemployed “scrounger” is not being mugged sufficiently. Stripping the welfare state of its universalism will breed a middle-class that is furious about paying large chunks of tax, getting nothing back and subsidising the supposedly less deserving. It will accelerate the demonisation of the British poor.
It is easy to see where it is leading. Low-earners are being taken out of income tax, even if they are being left poorer overall by increased indirect taxes and the slashing of both in-work and out-of-work benefits. But remember when Mitt Romney damned the 47 per cent of Americans who supposedly paid nothing in, while benefiting from supposed state largesse? That is where the shredding of universalism ends up, promoting poisonous ideas of an undeserving poor, where the wealthy resent paying taxes in exchange for zilch.
Given the explosion in the fortunes of the wealthiest 1,000 Britons since Lehman Brothers collapsed is bigger than our annual deficit, the case for the rich coughing up more money is unanswerable. That means an all-out war on the £25bn lost each year through tax avoidance, increasing tax on both income and wealth, clamping down on tax relief on pension contributions for the wealthiest, hiking capital gains tax, and so on. If a pensioner is well-off, then they should pay more proportionate to their wealth and income. That’s how we get money from the wealthiest without undermining universalism in favour of an inefficient, socially destructive alternative.
As ever, the Tories are setting the terms of debate on social security in the absence of an effective response from the Labour leadership. All too often, Labour’s leading lights have refused to take on – or have even endorsed – Tory attempts to set people against each other. Their most recent proposals included a contributory system – that is, you get back depending on what you’ve put in. It would discriminate against the million young people currently languishing in unemployment; women, who are more likely to take time off work to look after children; disabled and ill people; poorer people; and those with the misfortune to live in areas of high unemployment. Labour has finally started accepting that low wages are being subsidised courtesy of the taxpayer, but has yet to consistently make the same argument about landlords charging extortionate rents.
The universal welfare state is under siege; it needs a confident, coherent defence. Talk of reform must surely centre on the subsidising of bosses and landlords. The case for tax on the basis of wealth and income desperately has to be made. As Britain’s finest Prime Minister, Clement Attlee, put it: “If a rich man wants to help the poor, he should pay his taxes gladly, not dole out money at a whim.” If Labour fails to do its job and drive the Tory onslaught back, our already deeply fragmented society will face even further social destruction. It must not be allowed to happen.