Fees, universal benefits, and facing up to the middle classes

Over the past week there has been an interesting development in Britain. The announcement by the UK Chancellor of the Exchequer, George Osborne, that child benefits would be withdrawn from taxpayers on the higher tax rate drew howls of anger from all sorts of quarters. Many of them won’t have mattered much to the Conservatives, but the negative reaction from some of their own members was a different matter – and we shall have to wait and see whether the whole thing materialises. What makes it interesting, however, is that if this particular plan fails, it will be because the middle classes object to losing this little gift from the government. For once there is none of this guff about universal benefits being needed to protect the poor: here it is quite clear that it is a hot potato because the rich don’t want to lose their candy.

If political backbone is needed here, it will be even more in demand when Lord Browne issues his recommendations about higher education funding and tuition fees this week. Already opponents of fees are gearing up for a fight, and some of them may be intending to target their anger at the Liberal Democrats in particular, who not that long ago promised to abolish tuition fees. But it should be clear that no quality system of higher education, and no equitable system to secure participation by the disadvantaged, can be created and maintained without tuition fees for those who can afford them.

I was interested last week to hear from a number of liberal and leftwing commentators about universal benefits in the light of the Tory party conference. Some of them still claim that universal benefits are needed to secure an equal society. I would strongly argue that the conditions that rightly produced the British welfare state in the 1940s have long gone, and that universality has long ceased to be a tool for re-engineering society, but has become a method of subsidising wealth. It no longer makes sense. And it is weird that it is the Tories that may, just may, grasp this nettle.

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Social benefits: universal or targeted?

As anyone reading this blog – or indeed anyone living in Ireland – knows, there is now a major national debate here on whether tuition fees for higher education should be reintroduced. Leaving aside the specific issue of university fees for a moment, there is a wider issue that this debate touches upon, and which perhaps can do with a little analysis: should social benefits be ‘universal’ (i.e. made available to everyone) or should they be ‘targeted’ (with the resources directed specifically at those most in need of them)?

The idea of universal benefits is a product of the development of the welfare state in the period after the Second World War. It was set out in Britain in the Beveridge Report, commissioned during the War by the British government and published in 1942 (Social Insurance and Allied Services). The report identified what it called the ‘Five Giants’ that stood in the way of social progress – Want, Disease, Ignorance, Squalor and Idleness – and recommended a system of universal social insurance that would produce universal entitlements to benefits and service, without means testing. To a greater or lesser extent, the welfare state that emerged after the War in several countries was based on the Beveridge formula.

Beveridge’s ‘Five Giants’ give a clear indication as to the particular context in which universal benefits arose: a society that had developed the knowledge and the means to achieve health and prosperity but had not yet developed the social structures to do so. The Victorian society set out in Dickens’ novels was still there and was not being pushed aside by the political, scientific and social insights that had been acquired. The universal benefits principle of the welfare state would achieve this in one sweep. In fact, it would be impossible to deny that the welfare state did exactly that, at least to a very significant extent, and it is doubtful whether our modern more egalitarian society could have been created without it.

The major advantage of universal benefits is that they are easy to administer and can be efficiently delivered. The major disadvantage is that they are very expensive, because they are delivered to those who do not need them as much as to those who do.

As society becomes more prosperous and fairer, universal benefits become much more questionable. The major priorities of social policy then change: they should no longer be directed towards transforming society as a whole, but rather to target those pockets in society which have still not caught up. If universal benefits are used to do this, it means providing very substantial resources to the 80 per cent who do not need them in order to assist the 20 per cent who do. The result of that in turn is that the taxpayer has to find very large sums of money in order to achieve, in material terms, quite modest objectives. Therefore, for reasons of affordability, the resources that reach the needy are often totally inadequate.

It is, therefore, perhaps now time to discuss whether universal benefits are an efficient way of achieving further progress. Indeed, it could be asked whether they are even a fair way of doing it, since people who are less well off also contribute to the cost of making contributions to those who are wealthy. So as we discuss higher education fees, we may also want to raise the broader issues and principles of social policy.

For all that, I might add that I do believe that universal benefits in some contexts are still right. I would strongly favour free secondary education, for example. But there are other areas where they have become of doubtful value and merit.