LETTER: More welfare, fewer taxes

From Frank Field, MP

Sir: Jean Corston (letter, 23 August) has simply misunderstood the plan for reconstructing welfare I put forward ("Poverty, but not as you know it, Roy", 18 August), and she shares with Roy Hattersley what I regard as, yet again, a total misreading of what the electorate might vote for.

Nowhere have I proposed private insurance in place of today's welfare state. The issue we face is that, largely because of the fundamental changes in the labour market, the welfare budgets needs to increase. Yet the electorate will increasingly wish to see welfare, and thereby tax bills, reduced. How can this circle be squared?

What I propose is striking a new deal with voters, offering a new insurance corporation which will be run by the members themselves - largely employers and employees. Unless such fundamental changes are made in how welfare is run, the centre left will face a growing taxpayers' revolt with nothing to offer.

The new body will be an agent making for greater social cohesion. It will be a membership-run body that provides universal coverage. Any redistribution will be clear, open and above board, and will come from taxpayers meeting the contributions of those who are not at any one time in the labour market.

These ideas are set out in greater length in Making Welfare Work. Here two other key reforms are explained. There will be a compulsory second pension scheme to run alongside the existing state retirement pension, made up from contributions, again from employers and employees. Employees will own individually their own New Capital Account.

Also the income support system will be totally revamped from a passive agency into an active agency, whereby benefits will be used for training and education objectives. The aim will be increasingly for income support to be fashioned into a liferaft taking people from benefits back into work.

Jean's letter continually harps back to the Victorian era. Making Welfare Work is about forging a new welfare state which the voters will endorse for the new millennium.

Yours faithfully,

Frank Field

MP for Birkenhead (Lab)

House of Commons

London, SW1

24 August