Leading Article: Wider values of the welfare state

THE WELFARE state faces pressure to retreat under the onslaught of the Government's pounds 50bn budget deficit. Surely, think some ministers, some spending on social security and the NHS - which together consume nearly half of state expenditure - could be cut or funded from private sources?

So they look at the bills for various benefits. They realise the poor are not receiving a particularly generous deal. But they also notice fat among the better-off. Why, they muse, should rich, elderly people be on a state pension? Can it be right that wealthy women receive child benefit for progeny born with silver spoons in their mouths? And when those children and affluent elderly fall ill, surely the state should not have to pay their prescription charges?

It seems to be a compelling argument: cut away the fat, save the Government money and use some of the spare resources for those who really need help. This is the populist argument in favour of 'targeting' benefits, rather than providing them 'universally' regardless of income.

In principle, there is no reason why benefits should not be so targeted and most are: income support is a prime example. But NHS medical care, the state pension and child benefit are universal entitlements: Michael Portillo seems to have them clearly in his sights. Partly because everyone has a stake in these services, they are defended with a wild passion. Thus, before the last general election, the Conservatives were forced to make promises protecting them. Outbidding the Tories, Labour promised to spend more on all three and raise taxes. The Dutch auction lost Labour the election and saddled the Tories with electoral pledges.

Each party now rightly regrets the beanfeast and is rethinking policies. Rigid adherence to the universality of benefits means Labour can do little for the poor without raising taxation. Meanwhile, the Tories are hamstrung as they attempt to control public expenditure. A more pragmatic approach is required: Britain's welfare state needs imaginative development to face fiscal difficulties and social change. Among groups such as pensioners, for example, who were the poorest in Beveridge's time, there are many who no longer need state financial support.

No universal benefit should be regarded as sacred. Equally, targeting should not be considered an end in itself. It may sometimes prove bureaucratic, inefficient and produce few savings. Furthermore, focusing welfare benefits solely on the very poor may intensify the poverty trap, making it difficult for people to move into low-paid work. Anomalies entitling the rich to state benefits may, on occasion, be an unavoidable flaw.

Honesty on both sides of the political divide is needed. Labour, for example, is wedded to the universality of some benefits for reasons not of equity or efficiency but to maintain middle-class support for the system. Meanwhile, Tory right wingers are disingenuous when they argue that the budget deficit is their reason for backing more targeting. The right's agenda has long sought a shrinking of the welfare state: this is merely the political opportunity.

There is a danger that the welfare state will contract so much that it will be reduced to protecting only the poorest from destitution. Such a change would destroy an institution that plays an vital role in maintaining social solidarity. Those who would reform the welfare state should recognise the value of such cohesion and not sacrifice it in the cause of ideology, or even fiscal rectitude.