IDS is the heir to Beveridge

A jolly nice chap

“Iain Duncan Smith is scum” announced a former friend of mine on her Facebook wall recently. Actually, as anyone who has met him will attest, IDS is a perfectly affable chap. But he is sceptical of the present size and nature of Britain’s welfare state. This, apparently, makes him “scum”.

Between 2001 and 2007 British government spending increased by 54 percent in real terms. In nominal terms the coalition is actually raising spending even further, from £661 billion in 2010 to a projected £729 billion in 2015. What cutting is being done is coming from above target inflation so that, in real terms, spending will fall by 2.7 percent. And remember, that’s a real terms cut of 2.7 percent after a real terms increase of 54 percent.

But the reaction from sections of the left to this bare snipping has, as with my former friend, been nothing short of demented.

Nick Cohen frequently says very sensible things but at the end of the day he writes for the Observer and he has to sing for his supper – hence a steady flow of silly articles about barely existent ‘austerity’ and mythical ‘Tory cuts’. In a recent article he wrote that “Iain Duncan Smith’s universal credit poses a serious threat to women’s independence.” You actually have to ask how independent someone who is dependent on state welfare actually is in the first place, but to have done so would have been to intrude on the usual orgy of hysteria which accompanied the article.

One of Cohen’s Facebook friends commented, “Yes, yes, yes. Duncan Smith has a nasty agenda, fired by his own sense of Christian mission. A very creepy man.” Another warned that “The Tories especially are making attacks on the poorest, that are remarkably similar to the sort of thing the eugenicists of the nineteenth century used to say.” Sections of the left are currently consumed with lunatic levels of fear and loathing.

It never seems to occur to these people that someone could question the present size and nature of Britain’s welfare state from any motivation other than pure evil. It never enters their minds that someone might be critical of the welfare state as it stands for the simple reason that it is a massively expensive failure.

“Flat rate of subsistence benefit; flat rate of contribution”;

“Unemployment benefit will…normally be subject to a condition of attendance at a work or training centre after a certain period”;

“National assistance (a means tested benefit) is an essential subsidiary method in the whole plan…The scope of assistance will be narrowed from the beginning and will diminish”;

“Assistance…must be felt to be something less desirable then insurance benefit; otherwise the insured persons get nothing for their contributions. Assistance therefore will be given always subject to proof of needs and examination of means; it will be subject also to any conditions as to behaviour which may seem likely to hasten restoration of earning capacity”;

“The proposal to adjust benefit according to the rent actually paid by individuals should, provisionally, be rejected”.

These quotes, recommending conditions on eligibility for welfare, proposing a reduction of benefits over time, supporting the notion that benefits must not match employment income, and rejecting housing benefit, do not come from someone like Iain Duncan Smith who the contemporary left would brand as evil. They come, in fact, from the Report of the Inter-Departmental Committee on Social Insurance and Allied Services of 1942, written by William Beveridge, which laid the foundations for the welfare state.

Beveridge’s plan was, as James Bartholomew writes,

“very simple. Everyone would make flat-rate contributions to a national insurance scheme. Those who fell ill, became unemployed or reached retirement age would, in return, receive flat rate payments. That is it. The rest was detail”.

John Maynard Keynes reportedly told his friend Beveridge: “The Chancellor of the Exchequer should thank his lucky stars that he has got off so cheap”.

Keynes was wrong. Over the years Beveridge’s safety net became a vast hammock. Since the welfare state got under way in earnest in 1948, social security spending as a percentage of GDP has increased from 4 percent to nearly 14 percent; a 250 percent increase.

Source: IFS

Those on the right and this coalition government are often accused of launching an attack on the welfare state bequeathed us by Beveridge and the Attlee government. That ship has long since sailed. Beveridge’s welfare state died decades ago when it became the bloated, expensive, counterproductive monster it is today. And it wasn’t the right that killed it, the left did.

There is a new film out by dreary, overrated Marxist Ken Loach titled The Spirit of ’45. In it, among other things, Loach calls for the Brits of 2013 to resist coalition welfare reforms and redouble their commitment to state welfare spending. But that is not the spirit of 1945. The spirit of 1945 was of work, contribution, and insurance.

And that appears to be the spirit of 2013 too. As a recent report by the National Conversation found: “Wherever they stood on the political spectrum, we were told that the welfare system was broken, and that no one party held the answer to fixing it… A key concern, shared by respondents from different backgrounds, was the degree to which the modern welfare system had moved away from Beveridge’s original plans for social insurance. With the gradual erosion of Beveridge’s contributory principle, governments found themselves paying out ever larger welfare disbursements to people who had never paid into the system”.

Sensing this even Ed Miliband has begun making noises about “recognising contribution”.

Iain Duncan Smith is not “scum”. Rather, unlike Loach and Cohen and his loony friends, he is the heir to Beveridge. If the spirit of ’45 lives on anywhere, it is in the coalition’s welfare reforms.

This article originally appeared at The Commentator

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Who needs jobs anyway?

Down with that sort of thing

Nick Cohen is one of my favourite writers but he really has come a cropper with his latest piece on Starbucks and its taxes for the Spectator.

He writes

In the past, right-wingers argued for lower taxes and a smaller state and left-wingers argued for higher taxes and a bigger state. Both agreed, however, that you had to pay what taxes the state set.

But that is what almost everyone still thinks. A company which doesn’t “pay what taxes the state set(s)” is engaging in tax evasion, a criminal activity, and I’m not aware of many people supporting that. Starbucks, to be clear, paid every penny of tax it was legally obliged to and if Cohen has information to the contrary he ought to contact HMRC.

If you think Starbucks should pay more tax then increase its legal obligations. This is a point of view Cohen dismisses, saying “We are not talking about a couple moving assets to keep their tax bill down, but vast corporate structures hiding money in piratical tax havens”

First, notice the loaded language. Cohen could have written “We are not talking about a couple moving assets to keep their tax bill down, but vast corporate structures moving assets to keep their tax bill down” Less emotive sure, but also more accurate and more helpful analytically.

Second, consider the thinking behind it. It’s ok when one set of people do it but when another set of people does it it’s not, that we should apply one law to one set of people but another set to others. This is a major blind spot for a man who considers himself the beleaguered tribune of a dying, liberal England.

The whole piece is an example of the moralistic guff which fogs the debate about tax in this country. One of the silliest phrases in current public policy discourse is ‘aggressive tax avoidance’, which is a little like complaining that someone is ‘aggressively’ quitting smoking when they stop as a result of the tax on cigarettes going up.

Cohen, for example, writes “A good rule of thumb in all circumstances is to ask whether you can defend your actions in public”. Actually Nick, in business that’s a pretty terrible rule of thumb. If you are wondering whether to invest or not you need information upon which to base the calculation of whether that investment will be worth it. Considering that tax is going to effect the return on investment it therefore helps to have a firm idea of what taxes are likely to be. This is why taxes are levied on the basis of laws everyone knows in advance. If we dispensed with taxes raised in this way and, instead, investors had to base their tax calculations based on “What Nick Cohen might think is fair”, well, it’s a far less quantifiable variable.

And there’s the moral question. Can a man who wrote ‘Reports from the Sickbed of Liberal England’ really be advocating the rule of man (himself) or the mob (UK Uncut) over the rule of law? Apparently so.

We have a large and persistent problem in Britain with youth unemployment. Many unemployed youths simply lack the skills to command high wages and so, until either that changes or until capital can be applied to make their labour more productive a job somewhere like Starbucks is probably the best gateway to employment. And if we want to tackle youth unemployment we ought not to be chasing these companies out of the country.

Nick Cohen gleefully instructs David Cameron to “point [Kris Engskov, Starbucks’ UK managing director] westwards, and tell him to keep going until he reaches Heathrow” and writes that “From the point of view of the Exchequer, it is a matter of supreme indifference whether Starbucks stays or goes” But it might be a matter of rather less indifference to Starbucks’ staff. Or maybe Cohen can get those unemployed baristas jobs writing for his tax efficient employers at The Guardian?

This article originally appeared at The Cobden Centre