IEA study: measuring British welfare dependency (summary)
The government of British Prime Minister Tony Blair has begun welfare reforms in the United Kingdom which, like those in the United States, are aimed at replacing permanent cash assistance for the able-bodied with a system requiring them to work or acquire the training necessary to make them employable.
He has been trying to push unemployed workers off the dole. Blair offers those under 25 years old four months to pick one of four options: take a six-month job with a private company with employers receiving a subsidy equal to about $ 100 a week for each unemployed youth hired; do volunteer work; join an environmental task force; or enroll in a full-time educational course.
The United Kingdom has one of Europe’s lowest unemployment rates at 6.5 percent. But the rate among young people stands at 10 percent. In 1995, the country devoted 22.9 percent of GDP to public special spending – compared to 15.8 percent in the U.S., where unemployment stands at about 4.6 percent.
Policy analysts propose to measure benefit dependency, to track how well these reforms succeed in increasing independence from welfare. In 1950 about 4 percent relied on national assistance, the chief means-tested benefit. Today nearly 17 percent of the population relies on its successor, called income support. Including some other means-tested benefits – housing and council tax benefits -27 percent of the British people are welfare-dependent.
Analysts point out that an underlying assumption of welfare that it is necessary to redistribute income and wealth to lift people out of poverty – is false. For instance, the British Household Panel Survey found that 46 percent of those in the lowest list of income in 1991 had moved up to a higher income group by 1993. Officials recently revealed that 30 percent of the United Kingdom’s population receive some kind of welfare benefit and nearly 17 percent rely on some kind of income support.
Over the past two decades, there has been a sixfold increase in claims for invalid benefits. Britain has the highest number of single parents claiming income support of any nation in Europe – more than one million in 1996.
Labor’s proposed “affluence testing” as a way to deny benefits to the less-needy and the prospect of taxing universal benefits for the better-off.
U.S., British Welfare Systems Compared
The United States and Great Britain have social welfare systems that just keep getting bigger regardless of which particular political parties are in power. Social scientists have coined the term “underclass” to describe a form of poverty explained more by self-destructive behavior – crime, drug abuse, bearing children out of wedlock and a lack of commitment to education – than mere material want. In both countries the welfare state has encouraged the growth of this underclass.
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The portion of the United Kingdom's gross domestic product devoted to welfare was 24% in 1991, up from 21.3% in both 1980 and 1989. In the U.S., the figures were 14.1% in 1980 and 14.6% by 1990. The U.K.-U.S. comparison is clearer when the focus is solely on non-medical spending on the non-elderly. In Britain, spending rose from 7% to 8.1% of GDP between 1980 and 1991. In the U.S., it fell from 4.5% to 3.5% in 1990. Although the Conservative Party has been in power in Britain since 1979, welfare benefits have continued to expand. British households received the equivalent of $136.1 billion in welfare benefits in 1993, up from $64.5 billion in 1984 (not including hospital insurance). The rate of increase from 1989 to 1993 was 50%, compared to roughly 30% from 1984 to 1989.
Meanwhile, out-of-wedlock births tripled from about 10% in 1977 to 3 1% in 1992 In both Britain and America, there are very media-conscious welfare lobbies which have promoted the notion that both Margaret Thatcher and Ronald Reagan slashed away at benefits to the poor. But the facts do not bear this out.
Welfare system in GB
Britain can claim to have been the first large country in the world to have accepted that it is part of the job of government to help any citizen in need and to have set up what is generally known as a “welfare state”.
The benefits system
The most straightforward way in which people are helped is by direct payments of government money. Any adult who cannot find paid work, or any family whose total income is not enough for its basic needs, is entitled to financial help. This help comes in various ways and is usually paid by the Department of Social Security.
Anyone below the retirement age of sixty-five who has previously worked for a certain minimum period of time can receive unemployment benefit (known colloquially as ‘the dole’). This is organized by the Department of Employment.
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All retired people are entitled to the standard old-age pension, provided that they have paid their national insurance contributions for most of their working lives. After a certain age, even people who are still earning can receive their pension (though at a slightly reduced rate).
The government pension, however, is not very high. Many people therefore make arrangements during their working lives to have some additional form of income after they retire. They may, for instance, contribute to a pension fund (also called a ‘superannuation scheme’), and both employer and employee make regular contributions to it A life insurance policy can also be used as a form of saving. A lump sum is paid out by the insurance company at around the age of retirement.
Some people are entitled to-neither pension nor unemployment benefit (because they have not previously worked for long enough or because they have beenunemployed for a long time). These people can apply for income support (previously called supplementary benefit) and if they have no significant savings, they will receive it. Income support is also sometimes paid to those with paid work but who need extra money, for instance because they have a particularly large family or because their earnings are especially low.
A wide range of other benefits exists. For example, child benefit is a small weekly payment for each child, usually paid direct to mothers. Other examples are housing benefit (distributed by the local authority, to help with/rent payments), sickness benefit maternity benefit and death grants (to cover funeral expenses).
Unlike pensions and unemployment benefit, claiming income support involves subjecting oneself to a ‘means test’. This is an official investigation into a person’s financial circumstances which some people feel is too much of an invasion of their privacy.
The whole social security system is coming under increasing pressure because of the rising numbers of both unemployed people and pensioners. It is believed that if everybody actually claimed the benefits to which they are entitled, the system would reach breaking point. You don’t have to be poor in order to receive your pension of your dole money or your child benefit. It is argued by some people that only those people who really need them should get them. However, this brings up the possibility of constant means tests for millions of households, which is a very unpopular idea (and would in itself be very expensive to administer).
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Social services and charities
As well as giving financial help, the government also people’s welfare.
Services are run either directly or indirectly (through ‘contracting out’ to private companies) by local government Examples are the building and running of old people’s homes and the provision of “home helps” for people who are disabled. Professional social workers have the task of identifying and helping members of the community in need. These include the old, the mentally handicapped and children suffering from neglect or from maltreatment. Social workers do a great deal of valuable work.
Before the welfare state was established and the concept of ‘social services’ came into being, the poor and needy in Britain turned to the many charitable organizations for help. These organizations were (and still are) staffed mostly by unpaid volunteers, especially women, and relied (and still do rely) on voluntary contributions from the public. There are more than 110,000 registered charities in the country today. Taken together, they have an income of more than £ 15-billion.
Charities and the social services departments of local authorities sometimes co-operate. One example is the ‘meals-on-wheels’ system, whereby food is cooked by local government staff and then distributed by volunteers to the homes of people who cannot cook for themselves. Another example is the Citizens Advice Bureau (CAB), which has a network of offices throughout the country offering free information and advice.
The National Health Service
The NHS (the National Health Service is commonly referred to by this abbreviation) is generally regarded as the jewel in the crown of the welfare state. Interestingly, it is very ‘un-British’ in the uniformity and comprehensiveness of its organization. The system is organized centrally and there is little interaction with the private sector. Medical insurance is organized by the government and is compulsory.
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However, in another respect the NHS is very typically British. This is in its avoidance of bureaucracy. The system, from the public’s point of view, is beautifully simple. There are no forms to fill in and no payments to be made which are later refunded. All that anybody has to do is to register local NHS dot tor. Most doctors in the country are General Practitioners (GPs) and they are at the heart of the system. A visit to the GP is the first step towards getting any kind of treatment The GP then arranges for whatever tests, surgery, specialist consultation or medicine are considered necessary.
As in most other European countries, the exceptions to free medical care are teeth and eyes. Even here, large numbers of people (for example, children) do not have to pay and patients pay less man the real cost of dental treatment because it is subsidized.
European Union (EU formerly to 1993 European Community)
Political and economic alliance consists of the European Coal and Steel Community (1952). European Economic Community (EEC, popularly called the Common Market 1957) and the European Atomic Energy Commission (Euratom. 1957). The original six members – Belgium, France, West Germany, Italy, Luxemburg, and the Netherlands – were joined by the UK, Denmark, and the Republic of Ireland 1973, Greece 1981, and Spain and Portugal 1986. East Germany was incorporated on German reunification 1990. Austria, Finland, and Sweden joined Jan 1995. Norway rejected membership in November 1994. In 1995 there were more than 360 million people in EU countries. In 1991 the possibility of full membership was signed with Chechoslovakia, Hungary and Poland. On 1 November 1993 the Maastricht Treaty on European Union came into effect and the new designation European Union was adopted. The aims of the EU include the expansion of trade, reduction of competition, the abolition of restrictive trading practices, theencouragement of free movement of capital and labor within the alliance, and the establishment of a closer union among European people. A single market with free movement of goods and capital was established Jan 1993.
The EU has the following institutions:
the European Commission of 20 members pledged to independence of national interests, who initiate Union action (two members each from France, Germany, Italy, Spain, and the UK; and one each from Austria, Belgium, Denmark, Finland, Greece, Ireland, Luxembourg, Netherland, Portugal, and Sweden); the Council of Ministry of the European Union (formerly the Council of Ministers), the most powerful organization of the European Union, consisting of one government minister from each European Union member country, it's based in Brussels and is responsible for most EU decisions; the European Parliament, directly elected from 1979 and every 5 years by the people in those countries; the Economic and Social Committee, a consultative body; the Committee of Permanent Representatives (COREPER), consisting of civil servants temporarily seconded by member states to work for the Commission; and the European Court of Justice, to safeguard interpretation of the Rome Treaties (1957) that established the original alliance.
A European Charter of Social Rights was approved at the Maastricht summit Dec 1991 by all members except the UK. The same meeting secured agreement on a treaty framework for European Union, including political and monetary union, and for a new system of police and military cooperation. The treaty was formally ratified by all member states November 1993.
In 1995 the European Commission announced a significant increase in fraud and in organized crime within the EU 1993-1994, related largely to the misuse of EU grants & subsides, particularly in agricultural industries.
European Economic Community (Ё.Е.С., Common Market)
West European economic association. It was formed in 1957 and its original members were Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany. Its goals were to establish the economic union of member nations and eventually to bring about political union. It has sought to eliminate internal tariffs, institute a uniform external scale of tariffs achieve free movement of labor and capital from one nation to another, abolish obstructions to free competition, and establish collective trade and transportation policies. In 1973, Great Britain, Ireland, and Denmark joined the organization. Since then new members have included Greece (1981), Portugal (1986), and Spain (1986). Greenland withdrew in 1985. The European Community (EC), formed by a merger of the EEC, European Coal and Steel Community, and European Atomic Energy Community (1967), established the European Monetary System (1979), and after passage of the Single European Act (1987), made major strides toward economic unification of Western Europe. After the collapse of Communism in East Europe, East European states also took steps toward becoming members of the EEC.
European Community (EC).
With ratification of the Maastricht Treaty on European Union in Nov 1993, the former name of European Economic Community was dropped. The EC is part of the European Union. The EC is an economic and, increasingly, political alliance formed in 1957 by Germany, France, Belgium, Luxembourg, the Nederland and Italy to foster trade and cooperation among its members and “an ever closer union among the peoples of Europe”. Membership was subsequently extended to the UK, Ireland and Denmark (1973); Greece (1981); and Spain and Portugal (1986). Austria, Finland, and Sweden became members in 1995. Norway rejected membership in Nov. 1994. Tariff barriers between the member states have been abolished, and import duties vis-a-vis non-EC countries have been standardized. EC headquarters is in Brussels, administrated by the European Commission, the executive arm of the European Union. By Dec 1992, most remaining non-tariff trade barriers between the member states had been eliminated, and common standards in many industries had been adopted.
Maastricht /'ma:strict 'ma:strixt/ a city in the Netherlands. The leaders of the 12 countries of the European Community met there in 1992 to sign the Maastricht Treaty, an agreement about closer union between European countries. This included plans to have a single currency, a shared defense force and a more powerful European parliament. Many people in Britain were opposed to the agreement, and there were disagreements about it within the British Conservative government. Britain finally signed it in 1993, but the continued disagreements within the government were an important factor in their defeat at the election of 1997. A new version of the Treaty was signed in Amsterdam in 1997 by the British Labour government.
The single European currency
The currency of the European Union, called the euro. It became Europe's official currency on 1 January 1999 as a part of European Monetary union, and will be available as coins and paper money from 1 January 2002. After this the national currencies will no longer be used. Britain doesn’t plan to join the single European currency immediately, partly because some eurosceptics in Britain fear mat doing so will lead to a loss of economic power and political control for Britain.
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