Posts Tagged 'social welfare'

Taxation, inequality and post-industrial society


Sally Ruane

In this blog post, Sally Ruane, co-author of Paying for the Welfare State in the 21st Century, explains why we need to challenge the political culture surrounding taxation to effectively tackle inequality.


“The dramatic electoral developments in the US, France and most recently the UK, point to a state of flux in which there is a high degree of uncertainty regarding future direction and outcomes.

These political symptoms emerge following the transition of advanced Western countries from industrial to post-industrial societies, a transition managed in such a way that economic inequality has deepened and financial deregulation has brought about a destabilisation of the whole system.

The rise of in-work poverty

In the UK, from 1980 to 2003, median income began to lag behind economic growth, rising at the rate of only 70% of national economic growth; and in the five years leading up to the financial crash, household income stagnated despite economic growth during the period. More recently, the Institute for Fiscal Studies found that in the seven years after the crash, average gross employment income had yet to recover its pre-recession levels. Into this mix we must add that, unlike the postwar period when poverty was associated with a problematic or disrupted relationship to the labour market, most people living in poverty today are living in households where at least one person is working. What is more, average pensioner household income is now higher than average income in working age households. Meanwhile, at the top end of the scale, the best off 1% of households has raced away, holding 7.9% of all income in 2014/15 against 5.7% 1990.

“Average pensioner household income is now higher than average income in working age households.”

Tax and the allocation of resources

The allocation of resources in society is an outcome not just of ‘market incomes’ but also of the totality of fiscal policy. This entails government spending on benefits and in-kind services, on the one hand, and the tax system on the other. The social policy gaze has tended to focus on the former rather than the latter but to understand questions of inequality we have to examine taxation. The tax system encompasses more than the entities taxed, the taxes levied, and the rates and thresholds at which those taxes are levied. It entails also attitudes to the payment of tax, the capacity to and vigour with which the tax collection authority pursues those who owe tax and the infrastructure through which income and wealth are handled, disclosed (or not) and made subject (or not) to tax liability.

‘Flexible’ working and rising inequality

The way in which the tax system works not only is influenced by the nature of the wider socio-cultural and economic system but at the same time influences that wider system.

The acceptance of a model of globalisation in which the financial system was deregulated and many relatively well paid working class jobs were transferred to other, low wage economies, reinforced by a strong pound which suited the interests of the financial sector, gave rise to exhortations that labour must be flexible to attract capital investment. ‘Flexibility’ meant that the wages and terms and conditions of workers were systematically worsened to the advantage of capital. New Labour’s revival of Speenhamland type policies in which the low wages of those in work were supplemented by tax credits afforded a degree of redistribution but at the expense of establishing the acceptability of paying low wages, reinforcing the problem of in work poverty. In other words in addressing workplace exploitation, the tax system has simultaneously exacerbated it.

“… in addressing workplace exploitation, the tax system has simultaneously exacerbated it.”

The cost of tax avoidance

The increasing effectiveness with which corporate and financial interests have been able to lobby ministers has given rise to criticism of Her Majesty’s Revenue and Customs for lacking zeal in its pursuit of complex and sophisticated forms of tax avoidance and evasion, reinforcing the resources which corporations can bring to bear in further lobbying of ministers. The debilitation of the organised working class through acceptance of the dominant globalisation model has weakened the countervailing forces which might have checked concessions to big business and big finance. The success with which large corporations and affluent individuals are able to avoid and evade paying taxes materially affects the resources governments claim are available for funding social security and public services. The resulting austerity erodes the social wage and further weakens the base for social democratic policies.

“Challenging the political culture surrounding taxation is essential if inequality is to be effectively tackled.”

These are just some of the inter-linking examples of the way in which the tax system is both shaped by wider cultural and social factors as well as recursively shaping that wider society.

We argue in Paying for the Welfare State in the 21st Century that reforming the tax system goes beyond altering rates and bands and that challenging the political culture surrounding taxation is essential if inequality is to be effectively tackled and some of the destructive consequences of the shift to post-industrial society are to be reversed.


Paying for the welfare state in the 21st century [FC]Paying for the welfare state in the 21st Century by David Byrne and Sally Ruane is available with 20% discount on the Policy Press website.  Order here for just £10.39.

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Can childcare markets deliver?

Chilcare markets book cover By Eva Lloyd, co-editor of Childcare markets: Can they deliver an equitable service?

At first glance it may seem far-fetched, if not downright distasteful, to draw parallels between developments in childcare markets and emerging findings in the recent disturbing report from the deputy Children’s Commission’s Inquiry into Child Sexual Exploitation in Gangs and Groups, with a special focus on children in care (Office of the Children’s Commissioner, 2012). But both cases highlight risks attached to private-for-profit agencies delivering social welfare services on behalf of public bodies.

Modern states traditionally have varied in the amount of public support provided for early childhood education and care systems and other types of social welfare provision. Compared to commodity markets, childcare markets tend to form part of a mixed economy, in parallel with developments in social welfare markets such as the residential childcare market. In this mixed economy, the state, private-for-profit and private-not-for-profit providers all play a role in its provision, funding and regulation. The conclusion becomes almost inescapable that prioritising business interests, including profit or surplus, may underlie the geographical clustering of private sector care homes which was identified in this report. Almost half of all children in care were living outside the local authority with primary responsibility for their welfare, thus promoting their vulnerability, in particular to sexual exploitation (Office of the Children’s Commissioner, 2012, p 8).

There is growing evidence that marketisation and privatisation – including corporatisation – risk deepening, consolidating or widening inequalities of access to social welfare services. They may also drive up costs and promote qualitative differences between provider types. That this also applies to childcare markets, a distinctive and rapidly growing phenomenon in the present global economic climate, is shown from a range of disciplinary perspectives in a new edited book from the Policy Press, Childcare markets: Can they deliver an equitable service?

This book documents the economic and policy backdrops of eight current childcare market systems, allowing comparisons between privatisation and marketisation processes of early childhood services within their national policy and political contexts. It examines their consequences for parents, children, providers and the systems themselves. Alongside this it offers material about ‘raw’ and ‘emerging’ childcare markets operating with a minimum of government input, mostly in low income countries or post-transition economies in the process of adopting a market model. Finally, it explores alternative approaches and interrogates the case for government intervention.

Those authors writing from an education or childcare background emphasise the position of children, especially vulnerable children, and consider the detail of the care and education they are likely to receive within a market system. The economists’ contributions, on the other hand, consider the childcare market from the perspective of wider economic analysis and prediction, and they view childcare as a more or less well-functioning sector of the market. But despite these contrasting starting points, evidence presented challenges the expectation that the market will create incentives for providers to offer consumers more choice and competitive pricing, leading to a better balance between service supply and demand. Instead, all chapters in their own individual way demonstrate the case for increased attention to the ethical demands inherent in negotiating the interplay between social, political and economic issues and tensions within childcare markets.

This position is cogently argued by Jennifer Sumsion on the basis of her case study of the rise and fall of ABC Learning, the Australian childcare corporation which briefly became the world’s largest for-profit childcare provider, and virtually monopolized the Australian childcare market before its spectacular collapse in 2008. From her analysis of the current Dutch childcare system, Janneke Plantenga concludes that local providers and loyal parents do not by definition generate efficient markets, but that their atypical nature may generate additional market regulation, aiming at steering and perhaps limiting the choices of providers and parents. Even in New Zealand, according to Linda Mitchell, a state and community partnership model can build early childhood services more responsive to the wider context of children’s lives and supporting a stronger local sense of community than a market approach, while the Norwegian childcare system as described by Jacobsen and Vollset, does indeed operate on a non-profit basis, while still offering parents choice, by using a wide-reaching regulatory approach and judiciously targeted – and generous – public funding.

Rather than primarily ideologically driven conclusions, the book presents a balanced and pragmatic case for reform and outlines constraints needed to ensure that mixed economies of childcare can deliver equitable services.

Eva Lloyd, Reader in Early Childhood at the University of East London, UK, and Co-director of the International Centre for the Study of the Mixed Economy of Childcare (ICMEC), has extensive childhood policy research experience. Childcare markets: Can they deliver an equitable service? is edited by Eva Lloyd and Helen Penn and is available now at 20% discount from the Policy Press website.

Celebrating the British Welfare State?

The UK has recently looked back over the last sixty years in the context of the Queen’s Diamond Jubilee celebrations. At The Policy Press we have been thinking about what the last sixty years have really meant for Britain, and would love to know your thoughts – by leaving a comment on this blog, emailing or on Twitter @policypress.

Here, author Paul Spicker (How Social Security Works, Social Policy) takes a look at what has happened to the British Welfare State over this time:

The British Welfare State was intended to be an ideal. Asa Briggs identified three key elements by which it would act:

“First by guaranteeing individuals and families a minimum income irrespective of the market value of their work, or their property. Second by narrowing the extent of insecurity by enabling individuals and families to meet certain “social contingencies” (for example sickness, old age and unemployment) which lead otherwise to individual or family crisis, and third, by ensuring that all citizens without distinction of status or class are offered the best standards available in relation to a certain agreed range of social services.”  (Briggs A., ‘The welfare state in historical perspective’, European Journal of Sociology, 1961, 2, pp.221-258)

Although he refers three times to “individuals” and “families”, the Welfare State was conceived in collectivist terms. It depended on the idea that some things are done better through collective action, that government needed to serve the public, that it should try to ensure basic universal standards, and that it should do things as best it could.

The assault on the Welfare State by the New Right, and the shift in politics that has taken place since, challenged the conceptual foundation of the Welfare State, not just its practice. The market economy is now taken as the norm. The Treasury’s Green Book advises:

“Before any possible action by government is contemplated, it is important to identify a clear need which it is in the national interest for government to address. Accordingly, a statement of the rationale for intervention should be developed. This underlying rationale is usually founded either in market failure or where there are clear government distributional objectives that need to be met. Market failure refers to where the market has not and cannot of itself be expected to deliver an efficient outcome; the intervention that is contemplated will seek to redress this. Distributional objectives are self-explanatory and are based on equity considerations.”  (HM Treasury, n.d., Green Book, at

It appears, then, that it is not good enough for government to justify their actions because they would benefit people, because they protect people’s rights, because the government has a moral commitment – or even because it has been elected to address an issue. We have lost sight of the fundamental principle that government is there to do things for people.

Paul Spicker.

Paul Spicker’s book How Social Security Works is available for only £15 until the end of June only. Order your copy here.

DEBATE: A Beveridge report for the 21st century? The implications of self-directed support for future welfare reform

The Policy & Politics Blog features debates from recent issues . An extract is below, then please click on the link at the end to download the full article. Policy & Politics is the leading journal in the field of public policy with an enviable reputation for publishing peer-reviewed papers of the highest quality .

DEBATE: A Beveridge report for the 21st century? The implications of self-directed support for future welfare reform

Jon Glasby, Simon Duffy, Catherine Needham

In the early 21st century, elements of the English welfare state are in the middle of a ‘transformation’ process based on the concepts of personalisation and self-directed support (HM Government, 2007; Glasby and Littlechild, 2009; Carr, 2010; Needham, 2010). Beginning in adult social care, these approaches seek to recast users of state welfare away from being passive recipients of prepurchased services towards a situation where they are active citizens with a right to control and shape their own support. Central to this agenda has been the concept of direct payments (pioneered by disabled people’s organisations and developing in the United Kingdom from the mid-1980s onwards) and personal budgets (developed from 2003 onwards by a national social innovation network known as In Control)… Read the rest of this article by downloading the pdf (free).

The Conservatives and the future of social welfare

Under David Cameron’s leadership, prior to the 2010 general election the Conservatives sought to present a more ‘compassionate’ or ‘progressive’ face than under his immediate predecessors, with more socially liberal and inclusive rhetoric, and an emphasis upon the Party being more socially representative in its membership and particularly within parliament.

Since the election however, despite the necessity of forming a coalition with the Liberal Democrats, arguably the position of the Conservatives (and the government as a whole) has hardened significantly, not only with regard to reducing the deficit, but also across whole swathes of social policy. The government’s changes to social security, reforms of the NHS, changes to education, and proposals for ‘localism’, all have major implications for the ways in which services are delivered and experienced by individuals, and these are in addition to the likely impacts of substantial cuts in public expenditure.

Should the Coalition government persist until 2014 it seems probable that the shape of welfare services will be considerably different from now, with a smaller role for the state and a larger role for the private sector and potentially for social enterprises and the voluntary and community sector, although Cameron’s ‘Big Society’ remains amorphous, and its future uncertain. It is important, therefore, that we seek to understand what the provision of social policy could and should look like in the future.

Hugh Bochel, author of The Conservative Party and social policy, publishing this month

Agency and social change

The recent events in the Arab world are powerful examples of what can happen when individuals, using modern communications, exercise their collective agency to alter the structures that shape their lives and ultimately achieve change. As has been so forcefully demonstrated, in Tunisia and Egypt, the current power of electronic communications can create virtual communities of interest – and the internet has the ability to harness public opinion and push for change.

In my forthcoming book, Understanding agency: Social welfare and change, I suggest that the concept of agency can shed a useful light on how change is achieved. I attempt to explore the relationship between agency and structure and to identify how individuals, acting either individually or collectively, can impact on the structures that affect their lives – and in doing so, influence the future shape of society.

My book focuses on the significance of agency theory to social welfare – to welfare professionals and those with whom they work. However, I draw attention to the fact that only recently has it been applied specifically to this field, having already been helpful in the varying fields of economics, management and foreign policy analysis. In a later chapter, I also consider the relevance of the work and writings of Fanon, Freire and Amartya Sen, the Nobel prize-winning economist. All of these authors, in different ways and in differing national, historical and political contexts, allude, implicitly or explicitly, to the significance of agency theory to, for example, the freeing of Algerian ‘natives’ from colonial rule, and, in Sen’s work, to the economic development of certain parts of the world, particularly Asia.

Of course, there are many other ways of theorising these events, but agency theory arguably has a contribution to make here too. So perhaps an understanding of it is helpful in considering not just social welfare, but events further afield too.

Liz Jeffery, author of Understanding agency, publishing this month.

Interview with Mr Rys, former ISSA Secretary General, on the occasion of the publication of his book Reinventing social security worldwide

An extract from the ISSA newsletter, Update

Mr Rys, thank you for agreeing to this interview and giving ISSA members the opportunity of learning more about your views on some key issues of social security policy and on the future development of the institution.

What was your motivation in writing this book now?
I would single out three main motives for writing this book. In the first place, I noticed that the younger generations of policy analysts did not seem to have a full picture of social security concepts which prevailed at the time of its expansion. Due to such gaps in the knowledge of the historical background of the institution, they sometimes considered as new emerging issues certain questions which had been researched and debated many years ago. My conclusion was that people of my generation have not succeeded in passing down the full accumulated knowledge of the subject and that some effort should be made to improve the situation.

The second reason was the wish to provide a correct historical account of the beginnings of international sociological research in the field of social security in the sixties and seventies of the previous century. As head of the research service of ISSA, I had the opportunity to develop a certain number of projects which made considerable impact on the promotion of social security research worldwide. This history reflects a collective effort of ISSA member organisations and forms an integral part of the institutional memory of the Association.

The third motive was the sudden outbreak of the world financial crisis during the last stages of the preparation of the manuscript. This event supplied a new evidence to prove some points made in the first part of the book regarding the mistaken belief in the reliability of the financial markets as providers of income capable to replace social security benefits. And perhaps more importantly, it underlined the danger concealed in recent trends in the evolution of social security which consist in a progressive abandonment of the principles of social insurance. The institution comes out always weaker after each repeated crisis and gradually loses its capacity to fulfil its original mission. Given the importance of social security for the preservation of the existing world socio-economic order, steps should be taken to review its functions so as to make the institution politically widely acceptable and economically sustainable.

What are the main messages you wish to convey?
The chief message concerns the need to preserve social insurance in its role of the main social security technique. Its contributory system with benefits granted as of right ensures to all beneficiaries their full human dignity while promoting the spirit of participation and self-help. Many social policy reactions to current social needs keep mixing social insurance principles with those of social assistance and encourage the use of social insurance benefits to cover needs, which are beyond their scope.

In order to regain confidence in the institution, it would seem necessary to reduce the volume of income redistribution through social security measures between different income classes of the population and transfer all income redistributive functions to the taxation system. This policy should be accompanied by an increased transparency of income flows generated by social insurance and regular information of insured persons concerning their future benefits.

What lessons do you see for social security in the light of the global financial and economic crisis?
One of the main lessons concerns the irreplaceable role of the state as a final guarantor of social security rights of the individual. It is not the case of the state as a direct provider of benefits but rather that of the state as an active supervisor of all measures. In the same way as in the financial and economic sector, the state must closely supervise and control the private and occupational welfare institutions so as to ensure that they correctly fulfil their functions.

Another lesson points in the direction of the need for building up financial reserves to permit the institution to function normally during the periods of economic crises. In view of the close dependence of social security on the performance of national economy, it is inevitable that the income of the institution decreases when the volume of benefits paid is at the maximum. Such financial reserves should hence be constituted outside the regular financial system of the institution possibly out of levies on some excessively high salaries or on earnings from speculative investments.

According to the ILO, 70 to 80% of the world population has no social security coverage. How would you answer the challenge of covering those in the informal sector and poor particularly in developing countries and countries in transition?
This challenge is real and there is no point in trying to hide the difficulty of providing an adequate answer. According to Beveridge, social security was meant to combat only those physical and social risks of human existence which exist even when the state of the society as a whole is as good as it can possibly be – it has never been created as an instrument for combating global poverty or even societal dysfunctions such as mass unemployment. These are basically two different sets of problems requiring different defensive approaches. However, the socio-economic and political reality in developing countries commands that the two targets be tackled at the same time. Under these circumstances, classical social insurance schemes should no doubt continue their advances, even at a slower pace, to protect the growing skilled manpower, indispensable for the creation of national wealth, while other source of finance such as general taxation should be sought to deal with the problem of global poverty. In this perspective, the main task of governments would be to keep an appropriate balance between these two types of social protection approaches.

Vladimir Rys is the author of Reinventing social security worldwide: Back to essentials

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