From Beveridge to Turner: Demography, Distribution and the Future of Pensions in the UK

This article outlines the recommendations of the UK Pensions Commission, and the data and analysis on which they were based, including projections of demographic change, trends in private pension saving, and evolution of the state pension system. The Commission concluded that without reform, structural problems with UK pensions would lead to increasingly inadequate and inequitable provision in 15-20 years time. It recommended reforms which would lead to a more generous, more universal and less means-tested state system than would otherwise evolve, and the establishment of a low cost National Pension Savings Scheme, into which employees without good employer provision would automatically be enrolled. The proposals, which have now largely been adopted by the UK government, imply eventual increases both in state spending on pensions as a share of national income and in State Pension Age, but accompanied by measures to facilitate later and more flexible retirement.Demographic change, Pensions, Retirement incomes, Social security

Taxation for the Enabling State

This paper takes as its starting point Henry Neuburger's injunction that taxation must be seen as a contribution to the maintenance of the welfare state, not as a dead-weight burden. It sets recent developments in the UK tax ratio in the context of changes in public spending, particularly on welfare services, in the public sector's balance sheet, and the distributional effects of both tax and spending. It then discusses tax and transfer policy since the change of governance in May 1997 in the context of public attitudes to inequality and different forms of redistribution. It compares the distributional effects of the four Labour Budgets since July 1997 with those which would have resulted from simply indexing the April 1997 tax and social security system for income growth. This suggests that actual reforms will on average deliver as much to lower income groups as income indexation would have done, but at lower cost to the public finances, and in a way which is more consistent with public attitudes. However, delays between Budget announcements and implementation meant that inequality and relative poverty increased in Labour's first two years in office. If further progress is to be made towards the target of abolishing child poverty in a generation, the measures so far announced will have to be added to each year.Tax, public spending, inequality, public attitudes, redistribution

Inclusion or Insurance? National Insurance and the future of the contributory principle

This paper examines the decline of National Insurance in Britain, as witnessed by its declining share of all social security spending and the steady dilution of the "contributory principle" on which it was originally based. It argues that this decline is not an accident: under governments of the Left, arguments in favour of inclusion have been predominant, non-contributory benefits expanded and contribution conditions softened; under those of the Right, the emphasis has been on focussing limited resources on the poorest through means-testing. Given where we are now, the strong arguments in principle for social insurance look much weaker. However, there are also reasons why the system has not been swept away, notably the way in which the bulk of the system is concerned with state pension rights which have already accrued. The paper explores current plans for the future development of state pensions, arguing that their combined effect is to restore something like a flat rate state pension, but with significant complexity. This could be developed into a more transparent system guaranteeing a total state pension at a fixed percentage of average earnings for those meeting a participation test, rather than being based on contribution records. This leaves a choice for the remaining sixth of National Insurance benefits: to separate out state pensions and absorb the other insurance benefits within the rest of working age social security, or to maintain the scope of National Insurance, but also based on participation, not past contributions.social insurance, social security, pensions, direct taxation

Inequality and the state.

This CASEbrief summarises findings from 'Inequality and the state' by John Hills, published by Oxford University Press

Thatcherism, New Labour and the Welfare State (chapter in "New Labour: A turning point in British Politics", H Kastgendiek and R Stimshoff (eds), Philo, 1999)

This paper examines the extent to which the policies towards the welfare state pursued by the Labour Government in its first fifteen months represent a break with those of its Conservative predecessor and with earlier policies put forward by Labour in opposition. Four key parts of its inheritance from the Conservatives are identified: attempts to control public spending; privatisation (more in terms of welfare provision than of its financing); the growth of means-testing; and the growth of inequality. The paper summarises the main policy developments towards the welfare state since May 1997, and identifies four linking themes: the importance to Labour of shedding its 'tax and spend' image leading to tight budget constraints, but with significant reallocation towards health and education; a strong focus on the promotion of paid work; a series of measures intended to reduce inequality and relative poverty, but with controversy over benefit levels; and the new dominance of the Treasury in making welfare and social policy. Some of these policies mark clear reversals from those of the Conservatives, but in others they continue an evolution which was already underway, despite the earlier Labour rhetoric about 'thinking the unthinkable' on welfare reform.Welfare state, welfare reform, Thatcherism

Exclusion, Employment and Opportunity

The relationships between employment, education, opportunity, social exclusion and poverty are central to current policy debates. Atkinson argues that the concepts of poverty, unemployment and social exclusion are closely related, but are not the same. People may be poor without being socially excluded, and vice versa. Unemployment may cause poverty, but this can be prevented. Equally, marginal jobs do not ensure social inclusion. Britton argues that convential economic analysis misses a key part of the problem of unemployment: the role of work in providing self-esteem and non-material parts of human well-being. Hills examines whether new evidence on income mobility implies less worry about inequality and relative poverty. Some low income is transitory, but the 'poverty problem' discounting this remains 80-90 per cent of that shown by cross-section surveys. Machin finds that intergenerational mobility is limited in terms of earnings and education, and that childhood disadvantage has effects long into adult life and is an important factor in maintaining immobility of economic status across generations. Arulampalam and Booth suggest that there is a trade-off between expanding more marginal forms of employment and expanding the proportion of the workforce getting work-related training. Workers in temporary or short-term contracts, part-time, and non-unionised employment are less likely to receive work-related training. Green and colleagues compare 1986 and 1997 surveys to show that skill levels for British workers have been rising, not just in the qualifications needed to get jobs, but also in the skills actually used in them. There is no evidence of 'credentialism'.social exclusion, income mobility, employment, skills