The Centre for Social Justice say Brexit is ‘an opportunity’ to introduce private insurance schemes to replace contribution-based social security

Image result for demolition of welfare state UK kittysjones

I’ve written two lengthy pieces about the new report and submission this month to the UNCRPD – UK Independent Mechanism update report to the UN Committee on the Rights of Persons with Disabilities (published October 2018 by the Equality and Human Rights Commission) – which provides an independent assessment of the UK Independent Mechanism (UKIM) on the “disappointing” lack of progress by the UK governments to implement the UN’s recommendations since August 2017. You can access the articles here and here

The UKIM report says that the government “has not taken appropriate measures to combat negative and discriminatory stereotypes or prejudice against persons with disabilities in public and the media, including the government’s own claims that ‘dependency’ on benefits is in itself a disincentive of employment.” 

This is important because it shows just how embedded traditional Conservative prejudice is in policy design and within the practices that social security administration has come to entail. 

Image result for welfare state UK

The idea that welfare somehow creates the problems it was designed to alleviate, such as poverty and inequality, has become almost ‘common sense’ and because of that, it’s a narrative that remains largely unchallenged. The Conservatives believe that generous welfare provision creates ‘perverse incentives’. Yet international research has shown that generous welfare provision leads to more, better quality and sustainable employment. 

Moreover, this ideological position has been used politically as a justification to reduce social security provision so that it is no longer an adequate amount to meet citizens’ basic living needs. The aim is to discredit the welfare system itself, along with those needing its support. The government have long wished to replace the publicly funded social security provision ultimately with mandatory private insurance schemes.

The idea that welfare creates ‘dependency’ and ‘disincentivises’ work has been used as a justification for the introduction of cuts and an extremely punitive regime entailing ‘conditionality’ and sanctions. The governenment have selectively used punitive behavioural modification elements of behavioural economics theory and its discredited behaviourist language of ‘incentives’ to steadily withdraw publicly funded social security provision.

However, most of the public have already contributed to social security, those needing support tend to move in and out of work. Very few people remain out of work on a permanent basis. The Conservatives have created a corrosive and divisive myth that there are two discrete groups in society: tax payers and ‘scroungers’ – a class of economic free riders.

This intentionally divisive narrative of course is not true, since people claiming welfare support also pay taxes, such as VAT and council tax, and most have already worked and will work again, given the opportunity to do so. For those who are too ill to work, as a so-called civilised society, we should not hesitate to support them.

The government’s mindset is very disciplinarian. In their view, everyone else needs ‘corrective treatment’ to ensure that society is shaped and ruled the way they think it ought to be. The government believes that rather than addressing social problems – many of which are created and perpetuated by their own policies, such as growing inequality and absolute poverty – can be addressed by ‘incentivising’ people to ‘behave’ differently. In other words, they believe that people can be punished out of poverty, being ill, being out of work, and from being less “competitive”, cost effective citizens, letting down the Conservative’s constructed, overarching neoliberal state.

The ’round table’ report from the Centre for Social Justice 

Public policies that are supposed to address fundamental human needs arising from sickness and disability are tainted by a neoliberal idée fixe. The leitmotif is a total corporacratic commodification of human needs and relationships. This has entailed the government permitting private companies to build toll gates to essential support services, building hierarchies of human worth within the closed and entropic context of a competitive market place, where resources are “scarce” and people are being herded; where the only holding principle that operates is profit over human need.

In a report from the Centre for Social Justice (an Orwellian title if ever there was one) called REFORMING CONTRIBUTORY BENEFITS (2016), David Cameron is quoted in the introduction: 

“We have already come a long way in the last 5 years. In the last Parliament we created Universal Credit so that work would always pay. We capped benefits so we struck the right balance between incentivising work and supporting the most vulnerable. And we set up the largest programme to get people into work since the 1930s with over a million people coming off the main out of work benefits and over 2 million getting into work. But when it comes to reforming, we still have further to go …” David Cameron, June 2015.

The Centre for Social Justice (CSJ) is a neoliberal right wing think tank, founded by Iain Duncan Smith. The CSJ has played an important role in the design and development of Universal Credit. 

In the opening paragraph, the report says: “William Beveridge’s original blueprint for a welfare state had personal contributions at its core. Indeed, there is widespread consensus that the contributory principle inculcates a degree of responsibility and ownership in a system that has been criticised for breeding dependency.” (My emphasis).

These are views widely held by neoliberal Conservatives, not everyone else.

As UKIM pointed out in their report, the term “welfare dependency” is itself controversial, often carrying derogatory connotations that the recipient of welfare support is unwilling to work. This narrative has diverted attention from the structural factors that cause and entrench poverty, such as government policy, labour market conditions and economic change. Instead of focusing on how to tackle the root causes of poverty, the Conservatives have focused instead on attacking the supposed poor character, morals and psychology of those needing social security support.

This narrative transforms individual experiences of social inequality and being in poverty into a personal failing, rather than a failure of the state. The ideas came from political writers such as Lawrence M. Mead. In his 1986 book Beyond Entitlement: The Social Obligations of Citizenship, Mead argued that American welfare was too permissive, giving out benefit payments without demanding anything from poor people in return, particularly not requiring the recipient to work. Mead viewed this as directly linked to the higher incidence of social problems among poor Americans, more as a cause than an effect of poverty. Neoliberal governments in both the US and UK found these ideas appealing, and the government of Margaret Thatcher imported several other similar US ideas. 

Charles Murray argued that American social policy ignored people’s inherent tendency to ‘avoid hard work’ and to be ‘amoral’, and that from the ‘War on Poverty’ onward the government had given welfare recipients disincentives to work, marry, or have children in wedlock. His 1984 book Losing Ground was also highly influential in the welfare reforms of the 1980s and 90s, and remains so among neoliberal Conservatives. 

Murray exhumed social Darwinism and gave the bones of it originally to Bush and Thatcher to re-cast. Murray’s culture of poverty theory popularised notions that poverty is caused by an individual’s personal deficits; that the poor have earned their position in society; the poor deserve to be poor because this is a reflection of their lack of qualities, poor character and level of abilities.

Of course, this perspective also assumes that the opposite is true: wealthy and “successful” people are so because they are more talented, motivated and less lazy, and are thus more deserving. Just like the widely discredited social Darwinism of the Victorian era, proposed by the likes of Conservative sociologist Herbert Spencer, (who originally coined the phrase “survival of the fittest,” and not Darwin, as is widely held) these resurrected ideas have a considerable degree of popularity in upper-class and elite Conservative circles, where such perspectives provide a justification for extensive privilege. In addition, poor communities are seen as socialising environments where values such as fatalism are transmitted from generation to “workshy” generation.

Charles Murray and Lawrence Mead clearly made an impact on the international policy debate in the 1980s, partly due to the legitimisation that they received from the support of the Reagan and Thatcher administrations for their central claims. They were particularly influential in the growth of work fare and a welfare system based on punishment and psycho-compulsion. Murray claimed the underclass of poor people avoid work because of the “overgenerous” nature of welfare benefits. Mead argued that a “culture of poverty” meant that workfare policies are required to ‘reintegrate’ and ‘incentivise’ the ‘unemployed poor.’ 

This toxic brand of neoliberal anti-welfarism, amplified by the corporate media, has aimed at reconstruction of society’s “common sense” assumptions, values and beliefs. Class, disability and race narratives in particular, associated with traditional prejudices and categories from the right wing, have been used to nudge the UK to re-imagine citizenship, human rights and democratic inclusion as highly conditional.  

Leaving the European Union provides an opportunity for the government to shift what is left of social security from public to private provision

The round table paper discusses the ‘further reform’ to welfare that Cameron hinted at:

One of the reasons why this has not happened so far has been the commitment to EU rules on maintaining a benefit programme that is exportable. The British Government succeeded in establishing that Universal Credit would not be exportable as long as contributory benefits were. 

Had contributory benefits been abolished whilst UK social security was bound by EU law, this would have exposed Universal Credit (the significantly larger budget) to exportability. In light of the British vote to leave the EU, however, there is now the possibility of reforming contributory benefits without breaching EU law.” 

The authors of the report say reforming welfare would mean “[a] new insurance model would also allow competition, greater diversification and, finally, the opportunity for claimants to take control over their long term financial support.” 

During the round table discussion, participants discussed a “potential solution”  put forward by private company Legal & General. The report itself carries legal & General’s logo. 

The suggestion was to replace the contributory benefits system with a low premium social insurance scheme delivered by employers through an auto-enrolment structure. This new social insurance scheme would take the form of a ‘rainy day guarantee’, where beneficiaries would make regular payments into the scheme, which would protect against the risk of “future income shocks as a result of long term sickness or unemployment.”

The target for the new social insurance scheme would initially be individuals from “the professional and skilled class who have fewer transactional experiences with Government. They are less likely to suffer a shock to income from illness or sudden unemployment and often need support  infrequently and for less than six months.”

“The infrastructure of this new social insurance scheme could replicate that of the auto-enrolment pension products that have been phased-in under the previous and current Governments. Employers could offer new employees access to a ‘social insurance product’ that could be administered by a private sector organisation, though partially facilitated by the Government.”

The authors also say: “During the roundtable discussion, a significant question emerged over whether a new social insurance product would be compulsoryor voluntary. One concern raised in discussion was that a voluntarysystem risks not gaining a critical mass that enables it to function,whereas a compulsory programme could undermine public confidence in the state welfare system.”

Yes, the one that most citizens have already contributed to. It is not ‘state’ welfare, it is publicly funded social security.

The report continues: One of the barriers to wide-spread acceptability of a private insurance model ahead of a state-contributory benefits model is the emotional reaction by claimants who have paid taxes but are no longer entitled to a benefit payment. Many trust the system to pay out – any alternative outcome could undermine trust in the state welfare system.

“Herein lies a problem: many people place a high degree of trust in the welfare system, only to be disappointed when it delivers less than they expect it to. Part of the challenge in proposing an insurance model, therefore, is to communicate the benefits compared to the state system.”

The benefits to whom, exactly? Legal & General and the wider private insurance sector ?

More of the rub: “Another challenge is the extent to which a new social insurance model could be extended to include both unemployment and sickness support currently covered by ESA and JSA contributory benefits. PwC (PricewaterhouseCoopers) has estimated that the annual cost of sickness absence in the UK is almost £29 billion. (Hyperlinks added by me). 

“Insurance premiums are calculated on risk and probability, such that if the risk and the probability are high,the premiums will also be high. From an insurance perspective, unemployment is seen as a greater long-term risk than sickness. Company efforts to mitigate the risk may thus mean premiums rise to an amount greater than the £11 per month previously stated.” 

Prioritising private business profit over collective human needs: the neoliberal model

In their conclusion and policy recommendations, the authors say:  

“As this report has discussed, the contributory benefits system is ripe for reform and the proposition of a social insurance model poses a potential solution. With regards to the implementation of a social insurance programme to replace contributory benefits  participants at the round table discussion made the following conclusions: 

  •  Premiums should be treated as income in the Universal Credit system, promoting use of the social insurance system.  
  • The notion of a social insurance model must be communicated correctly; Lessons can be learned from past government announcements on, for example, privately run prisons.
  • The support of business is essential, and communication must be clear as this is another product that sits alongside auto-enrolled pensions, the new lifetime ISA, and the apprenticeship levy
  • High opt-out rates risk destabilising the functionality of a voluntary model, and will therefore determine the necessity of a mandatory system or at the least an opt out model.
  • Individuals who do not draw down on their insurance pot could be offered financial recourse in the form of either a savings or pensions benefit.

“Overall, the opportunity to reform contributory benefits has arrived,the political and economic climate allows for it, and the presence of a strong alternative policy makes it possible and practical.”

You can read the full report here.

Some thoughts

The government says it believes that:

  • the current [welfare] system is too complex
  • there are insufficient incentives to encourage people on benefits to start paid work or increase their hours

The government are aiming to:

  • make the benefit system ‘fairer’ and more affordable
  • reduce poverty, ‘worklessness’ and welfare dependency
  • reduce levels of fraud and error. 

However,  ‘worklessness’ and ‘welfare dependency’ are contested categories based on assumptions and not empirical evidence. 

Our welfare state originally arose as a social security safety net – founded on an assurance that as a civilised and democratic society we value the well-being and health of every citizen.

There was a cross-party political consensus that such provision was in the best interests of the nation as a whole at a time when we were collectively spirited enough to ensure that no one should be homeless or starving in modern Britain.

As such, welfare is a fundamental part of the UK’s development –  our progress – the basic idea of improving people’s lives was at the heart of the welfare state and more broadly, it reflects the evolution of European democratic and rights-based societies.

Now the UK “social security” system is anything but. It has regressed to reflect the flawed and discredited philosophy underpinning the 1834 Poor Law Amendment Act, to become a system of punishments aimed at the poorest and most marginalised social groups. The Poor Law principle of less eligibility – which served as a deterrence to poor people claiming poor relief is embodied in the Conservative claim of Making work pay: benefits have been reduced to make the lowest paid, insecure employment a more appealing option than claiming benefits.

Back in the 1970s, following his remarks on the cycle of deprivation, Keith Joseph established a large-scale research programme devoted to testing its validity. One of the main findings of the research was that there is no simple continuity of social problems between generations of the sort required for his thesis. At least half of the children born into disadvantaged homes do not repeat the pattern of disadvantage in the next generation.

Despite the fact that continuity of deprivation across generations is by no means inevitable – the theory is not supported by empirical research – the idea of the cycle of ‘worklessness’ has become common sense. Clearly, common perceptions of the causes of poverty are (being) misinformed. The individual behaviourist theory of poverty predicts that the same group of people remain in poverty. This doesn’t happen.

However, the structural theory predicts that different people are in poverty over time (and further, that we need to alter the economic structure to make things better). Longitudinal surveys show that impoverished people are not the same people every year. In other words, people move in and out of poverty: it’s a revolving door, as predicted by structural explanations of poverty.

Therefore the very ideological premises of Conservative welfare policy is unevidenced and fundamentally flawed.

Problems with social security provision delivered through private insurance schemes

The National Insurance Scheme (NIS) provides cash benefits for sickness and disability,  unemployment, the death of a partner, retirement, and so on. Citizens already  earn entitlement to these benefits by paying National Insurance contributions;

  • The National Health Service (NHS), which provides medical, dental and optical treatment and which is normally available free of charge only to people who live in Great Britain and Northern Ireland;  
  • The child benefit and Child Tax Credit schemes, which provide cash benefits for people bringing up children;   
  • Non-contributory benefits for certain categories of disabled persons or carers;  
  • Other statutory payments made by employers to employees entitled to maternity, paternity and adoption leave.

The government’s ‘low tax low welfare view of society, coupled with a decade of very low wages and rising costs of living has created ‘tax constraints’ that conflict with the demands made on the welfare state, the government says. Substituting private insurance for tax-financed welfare provision is being touted as some kind of painless way out of those self imposed ‘constraints’.  

However, in general, switching from tax-financed social security to private insurance, where premiums are related to each individual’s risk status, will be ‘regressive’, that is, it will benefit the better-off at the expense of the less well-off. Certain citizens will not be offered cover because their level of risk is too high to make it profitable and economic for private insurance companies. This will also add to the regressive effects. Certain risks will be excluded from cover as a result of the nature of the insurance market.  

If the state still provides some kind of safety net, it may end up with all of the ‘downside risk’ but none of the ‘upside gain’: if things turn out badly and insurers are unable to meet their commitments, the state has to fill the gap created, but if things turn out well, it is the insurers who keep the surplus and profit.

In discussing the future of the welfare state, the question of whether the private sector should take on some of the insurance functions currently provided by social security has  almost inevitably arisen. However, much of this debate has a purely ideological basis.

Switching from social security to private insurance generally increases costs for those on low incomes; premium levels for products mean that those with average incomes and average risk also lose. For many insurance products, women, older people and those in poor health lose the most. 

For many with higher incomes, the role of permanent health insurance is already filled by long-term occupational sick pay while for those with lower incomes, affording enough cover to get clear of means-tested benefit entitlement is difficult. 

Uncertainty over future long-term care needs and costs makes policies virtually impossible to assess, for both consumers and providers, making reliance on private insurance a dubious proposition. The nature of the risks leads to policies which limit coverage and exclude some groups, including those without good employment records and people with disabilities.

Tax-financed provision offers not only the most equitable but also the most efficient solution, minimising costs to average-risk as well as high-risk and low-income ‘consumers’ and preserving the advantages of unified public finances.

Furthermore, it retains the integrity of the original aims of the welfare state and ensures a democratic state.

UKIM’s report to the UNCRPD raised other concerns about the potentially negative impact of Brexit on the human rights of disabled people, which you can read about here.

 

Related

This explores the overlapping neoliberal ideas aimed at the reform of both welfare and health care in the UK – Rogue company Unum’s profiteering hand in the government’s work, health and disability green paper

The Poverty of Responsibility and the Politics of Blame 

The connection between Universal Credit, ordeals and experiments in electrocuting laboratory rats

 The government plan social experiments to “nudge” sick and disabled people into work

A critique of benefit sanctions:  the Minnesota Starvation Experiment and  Maslow’s Hierarchy of Needs

The benefit cap, phrenology and the new Conservative character divination

Stigmatising unemployment: the government has redefined it as a psychological disorder


My work is unfunded and I don’t make any money from it. But you can support Politics and Insights by making a donation which will help me continue to research and write informative, insightful and independent articles and to provide support to others.

12 thoughts on “The Centre for Social Justice say Brexit is ‘an opportunity’ to introduce private insurance schemes to replace contribution-based social security

  1. We don’t need to leave the EU for this to happen we could do it now in the same way the utilities were privatised and the nhs is being privatised blecause EU procurement legislation actually requires this to be done.

    Like

    1. If you read the document, the CSJ said clearly that EU rules meant that the government couldn’t have changed contribution based benefits. The authors also said that Brexit gives them an opportunity to do so

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s