Socialism as an idea for directing industry has evaporated, yet market alternatives to welfare remain marginalised in debate. This is a tactical disadvantage to the liberal capitalist side in politics. If we win the skirmish to let competitive markets supply merely socks and videos and chocolate biscuits but not welfare, we lose the greater war of ideas.
The vast empire of the Department of Social Security is constructed on an error. It is legitimate that the state obliges us all to be insured when we drive on the road - for third parties as much as ourselves. This does not mean the state has to supply the contingent insurance. If the Ministry of Transport had operated a national monopoly vehicle insurance cover, do we imagine it would have done better than a market of rivals?
It seems plain to me that the monies now harvested by the state and redistributed in numerous 'benefits' could be subcontracted through competing agents. There would still be a measure of compulsion. We would all be obliged to contribute to welfare bodies. The 'poor risks' would be allocated as they are now, but perhaps randomly.
Words are powerful magic. National Insurance sounds splendid. In fact, it is a chain letter across the generations. It is not analogous to any insurance contract.
What generous returns could be enjoyed if NI contributions were placed in deferred annuities or other insurance instruments. If welfare sums were computed no longer as transfer payments but as savings, the nation's GDP figures would be enhanced, too.
It was a successful piece of political enterprise by Lloyd George to use sleight of hand to create National Insurance. It would not be difficult to outbid the left with a better set of offers. No actuary will contest that NI contributions would accrue far better benefits if placed in the investment markets.
One hundred years ago, says the caricature of history, there was only degradation and destitution for those of modest means. I think history has to be rediscovered. Dr David Green of the Institute of Economic Affairs has done some valuable pioneering work in describing the extent of provident insurance in Victorian Britain.
The primary vehicles for savings and insurance and pensions were the friendly societies. Ten million people were subscribing members in 1894. These societies have some claim to have been the midwives at the birth of the Labour Party. The original Labour Representation Committee found its support from the provident societies, not the trade unions. I propose that they be re-empowered to allow welfare choices to supplement or to displace the state.
Friendly societies remain the most tax-efficient savings vehicle for individuals. They pay no tax. Yet the tax rules allow only pounds 200 a year to be invested in them. I believe it is time to allow the friendly societies to resume the role they fulfilled in the past.
The power of friendly societies lay in their name. They were based on propinquity. People in a community of town or factory were known to each other. They were critical of performance. If the Rotherham Friendly Society offered better results than the Doncaster, you were free to switch. Recipients of benefit were seen to be either genuine or doubtful, thereby minimising the moral hazard.
There is more. Rather than pay for unemployment, the society would strive to find people jobs. It was in their interest to do so. Nobody can claim that a JobCentre employee has any sensation of personal loss when he fails to place someone in work.
If health were part of a future friendly society culture, I have no doubt that smoking and other costly habits would open members to sanction through shame. Small platoon loyalties mean far more than big battalion rules.
Who now remembers that until 1948 the friendly societies used to disburse state benefits on an agency basis? The government found that they delivered entitlements more cheaply than a civil service administration and with a close knowledge of the recipients.
A new generation of friendly societies might be attached to bodies such as housing associations. Charities and churches could offer friendly society services as supplements for their supporters. These would enhance the informal social glue. The point is to create clubs that are more than another part of the financial services sector.
If I am correct in seeing virtues in friendly societies, then enlightened personnel managers might find them attractive additions to the lives of their companies, too. We need clubs that draw in participant members, not exclusive groups.
The details matter, but the heart of my argument is the strategic one. It allows those who believe in the voluntary over the coercive to out-manoeuvre the left on its moral high ground.
Just as the Labour Party's hostility to council house sales was a tactical catastrophe, so its animosity to alternatives to state benefits would wrong-foot its electoral appeal.
This is more than an argument to the Treasury to allow friendly society contributions to match the per capita tax cost of welfare. I am not in the business of tax relief. I want to challenge the unquestioned assumption that the DSS need be a monopoly.
It seems likely that more generous benefits can be delivered at a lesser cost. But balance sheet considerations are of less importance than any mechanisms that will nourish a sense of community and intimacy.
I think friendly societies, now lingering only as the hamsters in the financial bestiary, could again become the primary vehicle for welfare. Privatisation and contracting out has opened up a new landscape. It is time that we applied these experiences to social security.
What a tragedy that Keir Hardie and the British left did not read Samuel Smiles more. Mitigating poverty and giving people dignity can better be done through self-help than socialism.
Lord Joseph was Secretary of State for Social Services, 1970-74.
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