Icicles at the heart of the Welfare State

MIDWINTER is a good time to talk about the poor. When it's hot in the city, a season for riot and street crime, the underclass can seem menacing. But when the streets are icy and the sky is leaden, even the most hard-faced, comfortable people feel a shiver of compassion for the bleak lives of the bottom dogs. The harder the weather, the harder it is to deny common humanity: and all societies know this.

So whoever leaked news of a radical government review of the Welfare State to the Labour Party and the Observer was lucky in the coincident arrival of snow. Images of Scrooge, beggars and poor men gathering winter fu(-oo-)el bleed into the headlines. Moral judgements are apt because, as the recent Rowntree Foundation report by John Hills demonstrated, there are no overriding fiscal or demographic prohibitions on the Welfare State. This is an argument about political choices.

Changing the Welfare State and clobbering the poor are not necessarily the same thing, and could be opposite things. If the poor are to be given a better deal, there must be more targeting or higher taxes. Either way, the first victims are healthy, relatively well-educated people in work and their families. It is the Volvo-driving families who find it hardest to justify child benefit. If we move towards private insurance against unemployment, it will be the employable 'good risk' people who do it first.

Even the withdrawal of the dole after six months rather than a year would most hurt people with savings, particularly of more than pounds 8,000. These may be badly off, but they are not the poorest.

If this was where the argument ended, the case for more targeting would be unanswerable. Think: if you freed the money taken from the middle classes only so that it can then be given back to them in state benefits, you could cut all taxes - or have more to spend on those who really need it. The problem for Conservatives is that the people most hurt initially tend to be Tory voters. But if ministers are willing to take the risk, shouldn't we be cheering them on?

But it doesn't end quite there. Imagine what happens to bright teenagers, the people who are going to finance the Welfare State in 20 years' time, in an ideal Lilley- Portillo world. They may well have been privately educated; being bright, they will be awarded private health care by their employers, or will be able to buy it for themselves. They will take out private insurance to guard against unemployment and illness, a private pension for old age. They will take nothing from the state to help cover the cost of their children and they will certainly aspire to private education on their behalf. If today's panic about crime and policing continues to worsen, they may well hope to live in privately guarded housing estates. From cradle to grave, they will touch the state rarely. For them it will not be the Welfare State, but the Stranger State.

Much of that anti-statist Britain already exists and is irreversible, and plenty of people find it liberating. A sense of freedom comes from personal control rather than greater wealth: the privatisation of pensions, unemployment insurance and so on limits real income just as high taxation does, except that the privatised imposts may be used more efficiently.

That, though, still leaves the argument firmly tilted the radical way. Saving wealth in good times to protect against bad times, sickness and old age is hardly, of itself, an example of new brutalism. It has been a constant activity in developed human societies through history.

What the divorce of wealthier individuals from the state does mean is that their contact with poorer people is largely severed. In more primitive, less technological societies, servant-master relations or the sheer proximity of poor and wealthy ensured contact, even if it was sometimes of a malign, rancorous kind. Then the Welfare State slowly developed, depersonalising but institutionalising rich-poor contacts. We always focus on the new hope it brought for ordinary families; but remember, too, that it bought physical security for the better-off. It took taxes, in return for inoculating society against those afflictions of the poor which spread to the middle classes - such as burglary, tuberculosis and the economic misery caused by an under- educated workforce. A cynic might call it a giant protection racket, except that it was sanctified by the post-war consensus.

And if the racket dies, what then? When the prosperous two-thirds, J K Galbraith's 'contentment society', lose their last personal contacts with welfarism, will they also lose their concern for the bottom third? These would be people living within a physically and politically alien system, with their own state-subsidised schools, their own policing, hospitals and incomes. So the Welfare State gives way not just to the Stranger State - but to the Strangers' State.

That is the liberal nightmare - the island in which everyone aspires to be 'an Island, Entire of Himself'. But there is a Tory paradise on offer, too: an age of philanthropy and conscience in a land where low taxes and the end of state involvement free millions of active citizens to help their fellows directly. Whichever one you believe to be more likely will influence the way you lean in this debate. Only note that here, the liberal defenders of the Welfare State rely on a cautious, pessimistic view of human nature, while principled Tory radicals rely on a primal trust in human goodness - an interesting reversal of what you might expect.

These may seem high-flown questions to ask in response to a few leaked sentences from some departmental committees. But behind those sentences lie big philosophical questions, then clear political choices. It is as well that we keep them in mind as we listen to the debate, and watch the snow fall.