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Charity Ends at Home

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Peter Kellner finds that most of us think that Britain’s welfare bill is too large, that they suspect millions of people of lying to claim benefits, and that we are divided on whether we can still afford to pay state pensions to the better-off

This article appears in the March issue of Prospect

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If David Cameron didn’t know before, he surely knows it now: few political potatoes are as hot as the way the state hands out welfare cash. For a hundred years – from Lloyd George’s plan for retirement pensions, via the Beveridge Report seventy years ago and a succession of post-war strategies for state benefits – politicians of every stripe have tried to build a lasting settlement. The government’s Welfare Reform Bill is the latest attempt, and having as rough a ride as all the others.

At one level, controversy is inevitable. Welfare reform is a detailed, messy business. Almost any change is likely to throw up stories of genuine, if atypical, losers who don’t deserve their ill-fortune. (The equally atypical, undeserving big winners tend to keep quiet about their good luck.) When the treasury is flush with cash, it can throw money at this particular problem. Reform when times are tight makes such stories impossible to avoid.

However, what ministers can do is try to work with the grain of public opinion on the basic principles of reform. Where do voters stand on these principles? YouGov’s latest survey for Prospect sought to find out.

A number of different, though related, issues need to be teased apart: the affordability of the welfare system as a whole, our attitudes to redistribution, the extent to which people think the system is being abused, attitudes to specific recipient groups, and the enduring debate over universal versus targeted benefits. Let us consider each of these in turn.

Affordability

The public’s verdict is emphatic: we think the current system is too expensive. We asked: In general, do you agree or disagree with this statement "The government pays out too much in benefits; welfare levels overall should be reduced?" As the graphic shows, a huge majority, 74%, agrees; only 17% disagree.

As striking as the overall figure is the breadth of support for cutting back. Majorities in every group agree. Not surprisingly, support is lowest among those living on less than £10,000 a year – people who generally rely more on benefits than any other. But even here, more, 51%, agree than disagree, 35%.

These figures contain clear warnings for Labour and Liberal Democrat politicians who oppose welfare reform. Labour voters agree with the statement by 59-32%, and Liberal Democrats by 74-15%. A generation ago, Labour activists were notoriously out of touch with the majority view among Labour voters. In recent years the gap between the two has closed. If the party is seen to reject significant welfare savings, it could open up again. (Cameron has no such problem with his ambition to spend less: Tory voters agree by 94-3%: an exceptionally rare margin for a subject of public controversy.)

Otherwise the differences between different groups are notable for their modesty. Older voters agree more than younger voters, while people with professional or managerial jobs agree more than unskilled workers – but not by that much. As long as ministers can frame their argument in terms of affordability, rather than the impact of specific measures on specific families, they will have a big advantage in the battle for public opinion.

Other YouGov research suggests that the affordability problem is not just a temporary consequence of these straightened times. Last spring we asked people about taxation and public spending. We listed the variety of taxes, and the different forms of public spending and asked, and asked how fair the system was. To some extent with spending, and to a greater extent with taxes, people thought the systems unfair.

We then asked people to take all the different taxes and forms of spending into account, and posed this question: thinking about you and your immediate family, do you think the overall value of the benefits and public services you receive are worth more or less than the taxes you pay? A mere 8% said they were net gainers, while 55% said they were net losers. (The rest thought the two were roughly in balance or didn’t know.)

Again, the views of different groups were similar. It will cause no surprise that middle class voters regarded themselves as losers rather than gainers by nine-to-one; but among working class voters, the margin is still a hefty six-to-one. Less well-off voters are almost as resentful as more well-off voters.

Historic trends in public spending help to explain this. The Institute for Fiscal Studies has compiled figures going back to the early 1950s, when the NHS was young and the Beveridge reforms had bedded down. Back then, social security spending amounted to around 5% of gross domestic product. This year it is likely to be 14%. Similar trends apply to health and education spending.

To be sure, some of the money has been found from the defence budget (as a proportion of GDP, defence spending has fallen by three-quarters since the Korean War and the height of the Cold War); but most of the money has had to come from higher taxes. In the early post-war years, people on average incomes paid little income tax; now they pay a significant whack. And, as YouGov’s data show, few of them think they are getting their money’s worth for the taxes they pay. No wonder most voters, whatever their income, view welfare spending with a wary eye.

Redistribution

In last month’s Prospect, David Goodhart drew on British Social Attitudes data that showed a marked decline in support for redistribution since the mid-1980s. The figures are indeed striking. A generation ago, most people thought the government had a duty to reduce inequality, and to transfer cash to the less well-off. By 2004 these were minority views. But then something odd happened. The numbers started rising again, as Britain’s economy hit the rocks.

Two trends seem to be at work. One is a long-term gradual decline in support for redistribution; but around this trend, short-term views oscillate according to the health of the economy. People tend to warm to redistribution when unemployment is high (and therefore more people are dependent on, or fear needing, state benefits); their ardour cools when the economy is booming and jobs are plentiful.

However, there is one figure in the British Social Attitudes series that seems NOT to be cyclical. The percentage agreeing that the government should spend more on benefits fell from 55% in 1987 to 36% in 2004. Then, instead of climbing part way back when the economy started to contract, as with support for redistribution in general, the figure continued to fall. By 2009 (the latest BSA figure) it was down to 27%.

How big is the problem of 'scroungers'?

One explanation for this low figure, despite the partial recovery in the public’s appetite for redistribution, is that there is now a huge preference for conditional rather than unconditional welfare. The Victorian distinction between the 'deserving' and 'underserving' poor may have been consigned to the dustbin of heartless social attitudes, but its cousin, the concept of a reciprocal relationship between taxpayer and welfare recipient, enjoys great support on the streets. One big reason for this is evident from YouGov’s survey for Prospect, which finds that voters think vast amounts of money go to people who are taking the system for a ride.

We asked people how many welfare claimants are 'scroungers' in the sense that they 'lie about their circumstances in order to obtain higher welfare benefits (for example by pretending to be unemployed or ill or disabled) or deliberately refuse to take work where suitable jobs are available'. Just 28% think the problem is confined to 'a small minority' or 'few, if any' claimants. Two-thirds of the public say that 'scroungers' are a 'substantial minority” or 'around half' or a majority.

Again, this perception can be found across the board. It is felt by 84% of Tory voters, 70% of people whose household income exceeds £70,000 a year and 68% of people in managerial and professional jobs – but also by 55% of Labour supporters, 57% of Liberal Democrats, 65% of people in semi- or unskilled jobs and 60% of those living on less than £10,000 a year. No wonder so many people think their own families are net losers from the tax and spend system: they believe a substantial chunk of their rising tax bill is being used to support people who are wrongly pocketing large amounts of welfare cash.

How views about different claimant groups vary

So far this analysis has considered welfare benefits in the round. In real life, of course, very different kinds of people are affected, from parents receiving child benefit to retired people receiving state pensions and the winter fuel allowance; from unemployed people to those with low-paid jobs.

We asked respondents to consider six of the main groups of claimants. In each case, did they think income tax should rise to pay for greater support, should tax be cut to pay for less support, or is the current balance is about right? For many years polls have found sympathy boosting help for older people – but generally these surveys failed to point out that the money must come from somewhere. Now, higher income tax is not the only possible source of extra cash. We could, for example, reduce defence spending or overseas aid. But most people who favour such cuts think they should happen anyway – and there would then be a big debate as to how to use the money thus saved (for example tax cuts versus health spending versus more police on the streets). The simplest and clearest way to compare peoples’ attitudes towards individual benefits is to consider each of them in turn and to trade them off against income tax.

When we do this, we find that benefits for older people still score reasonably well. Just over half the public don’t take sides on benefits for older people; of those who do, support for taxes and benefits to rise outnumber those who want both to fall by four-to-one. This is not entirely altruistic: almost all of us are elderly, or have elderly relatives, or expect to receive a state pension some day.

There is also some sympathy for helping disabled people more, with the minority who support change backing higher rather than lower taxes and benefits by almost three-to-one.

After that, our generosity runs out. Labour and Liberal Democrats divide evenly over support for low-paid people, while those Tories who take sides divide by two-to-one in favour of cutting taxes and paying less in income support, tax credits and housing benefit.

As for the other three groups of benefit claimants we tested, far more people back less rather than more tax-and-spend. The margin is two-to-one for parents on standard rate tax receiving child benefit, six-to-one for unemployed people and seven-to-one for single parents who have never married. And although the detailed numbers vary by party support, age, income and gender, every group of YouGov respondents sides more with the lower-cash than higher-cash option for these three kinds of benefit.

The political lesson is clear. For most people and most aspects of welfare reform, charity ends at home. The government’s current plans tap into a widespread public desire for less generous provision for others. Any future government that seeks to reverse these reforms will have its work cut out to persuade voters that it plans to give the right money to the right people for the right reasons.

Universality, targeting and the insurance principle

There is another dimension to the vexed issue of who constitutes 'the right people'. Some of our benefits are universal (notably the state pension and winter fuel allowance). Child benefit is currently paid to all parents of children under 16, but will be removed from higher-rate taxpayers from next year. Other benefits are means-tested.

The argument for universal, or near-universal, benefits is a familiar one. They bind society together. They avoid stigma. They are cheap to administer. They reflect the view that there are other kinds of redistribution than rich to poor – such as from childless adults to parents and children, and from working people to the elderly. They uphold the principle of national insurance, that we pay money in at one stage in our lives, and draw it out at another stage.

How persuasive are such arguments these days? We tested them in relation to child benefit and pensions. On child benefit, the public’s verdict is clear-cut. A large majority, 70%, support their withdrawal from higher-rate taxpayers. Only 21% oppose them. Not surprisingly, those whose household incomes are below £30,000 a year support the move overwhelmingly, by more than five-to-one.  However, many of those who stand to lose out also support the measure. Among parents whose household income is more than £50,000 a year, as many as four out of ten support the measure, while just over half oppose it. Obviously some people are furious that single-earner families on £45,000 a year will lose out, while two-earner families on up to £80,000 a year do not; but the evidence of our survey suggests that aggrieved losers are a tiny minority of the whole electorate.

The figures for retired people are different. When we posed the option of withdrawing the state pension and winter fuel allowance from pensioners paying higher-rate tax, opinion was divided. 43% of the general public backed the idea on the grounds that, in today’s harsh financial climate, the government should 'use the money instead to provide more help to people who need the money more', whereas 48% said it would be wrong to do this, as 'pensioners have spent their working lives paying for their state retirement benefits'.

I would advise caution against over-interpreting these figures. Differently-worded questions might well elicit different responses; and views might change if the withdrawal of benefits from better-off pensioners became a real possibility and a national debate ensued. Nevertheless, what is clear from both of our questions is that universality is a minority passion. This suggests that there could be a politically acceptable solution to the problem outlined by the IFS’s Paul Johnson suggested in last month’s Prospect, that the present array of benefits, especially those for Britain’s growing proportion of elderly people, cannot be afforded for much longer. Should a future government wish to design a more targeted system that concentrated more on people on average and below average incomes, and also managed to tackle (or persuade people that it had tackled) the 'scrounger' problem, then it might be able both to save money and gain support.

Overall, our survey makes it clear that the public think their taxes end up helping too many of the wrong people, they want the system overhauled, and they are looking for big savings. This would probably be the case even if the public finances were healthy. The fact that government borrowing is so high and needs to be cut back has added to the urgency of the problem. Taken together with British Social Attitudes data, our figures suggest that today’s voters take an especially dim view of the way welfare benefit money is spent. Most of us think that if we must tighten our belts a little, there are plenty of others who should tighten theirs a lot. It’s another sign, along with the public resentment towards bankers’ bonuses, that the government needs to do far more to persuade us that we really are 'all in this together'.

It’s also a sign that the world envisaged by William Beveridge 70 years ago has changed beyond recognition. The post-war welfare state was created in an era of near-full employment when husbands worked and wives stayed at home; where seven out of ten Britons were working class, few of whom paid income tax, owned their own home or car or had significant savings; and where those people who lived long enough to reach retirement age generally died not long after. Welfare spending was an immensely popular but also affordable way of helping the right people in the right way. Underlying the strong current of discontent detected in this survey is a clear public desire to scrap a system that, people think, has become too expensive and helps too many people, and return to the more targeted moral heart of Beveridge’s philosophy. It’s not so much a demand to end the post-war settlement, as to return to its essence.

However, even more than with other issues, the devil is certain to infect the detail. Cuts need to be made with care and skill, as well as energy and determination. Only a fool would expect the road to a more efficient and targeted welfare system to be other than exceedingly bumpy.

This article appears in the March issue of Prospect