(c) Hulton Getty collection.
Social security is sometimes used to refer specifically to social insurance, but more generally it is a term used for personal financial assistance, in whatever form it may take. It is also referred to as "income maintenance".
The reasons why financial assistance are given include:
solidarity. Social security is seen not simply as charity, but as a form of mutual co-operation. It is a principle which can be extended to the rest of the welfare state.
External link:Social security throughout the world
There are five main types of social security benefit.
Discretionary benefits. Discretion is widely used in the provision of social assistance, the provision of benefits for those in need who are not covered otherwise.
The principle behind social insurance is that people earn benefits by contributions, paid while they are at work. The advantages of an insurance scheme are:
Because people have paid for their benefits, it is supposed to be difficult to abolish the benefits. (This has been disproved in practice: the government of New Zealand, for example, has replaced insurance-based pensions with means-tested ones.)
The disadvantages are:
Poor people are less able to afford contributions.
Means tested benefits are based mainly on a test of income, though some also include tests of assets or capital. They are extensively criticised in the literature, being seen as the basis of a residual system of welfare.
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| At the benefit office, 1955. (c) Hulton Getty collection. |
The advantages of means tests are:
they are progressive, and redistribute resources vertically from rich to poor.
The disadvantages are
they create a 'poverty trap', creating disincentives to work. People who have an increase in earnings suffer from the withdrawal of benefits as their earnings increase.
Many of the same criticisms could be levelled at benefits which are not means tested.
This is a broad term which can be used for any non-insurance benefit, but which tends to be used for specifically for non-means tested benefits. Non-contributory benefits based on a test of need are used, for example, for people with physical disabilities, as a form of compensation for severe disability or as a means of meeting special needs (such as a need for social care).
The existence of a test means that the benefits are often administratively complex - in the case of disability benefits, they often require medical examination. Although they avoid a 'poverty trap' in the strict sense there are continuing problems of policing the borderlines and the potential to penalise people whose circumstances improve.
Discretionary benefits are given at the discretion of officials. Because some needs are unpredictable, many social assistance schemes have some kind of discretionary element to deal with urgent or exceptional needs; where social assistance is tied to social work, discretionary payments may also be used as a means of encouraging and directing appropriate patterns of behaviour. Some provision for discretionary benefits is generally seen as a necessity, because it is impossible to provide for every need in advance. However, in circumstances where other benefits are inadequate to meet basic needs, discretionary beenfits are liable to be called on more frequently than is appropriate administratively. Frequent use makes the process of claiming an act of personal supplication.
The element of 'discretion' in discretionary benefits varies. In some cases, the 'discretion' is the discretion of an agency; in others, it is the discretion of an individual officer. The basic rationale for discretionary benefits is the need for flexibility, and 'discretion' which is reserved to a large national agency does not always achieve that.
Universal benefits, or 'demogrants', are benefits given to whole categories of a population, like children or old people, without other tests. The benefits are administratively simple, but their wide coverage tends to make them expensive. Proponents of universal benefits have argued for a different type of social security system, a Citizens Income, which would be tax-financed and unconditional. Its proponents argue that it would be simpler, fairer, and would protect those in need more effectively than current systems. Opponents argue that it would be expensive, would undermine incentives to work, and that its apparent simplicity would prove illusory when special circumstances arose.
The main response to unemployment is through economic policy, which addresses the issues by considering the workings of the economy as a whole. General measures to manage the economy have to be distinguished from 'targeted' employment measures. like employment subsidies and wage supplements, intended specifically to affect the labour market. Targeted measures are liable to be inefficient, because they help people who may not have stayed unemployed anyway, or they displace problems to other groups.
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| Looking for work. (c) Hulton-Getty collection |
Employment services are mainly focused on the unemployed person: they offer , for example, improved information, retraining or work experience, which improves a person's comparative position in the labour market but does not of itself create jobs. Some are based in a view of unemployment as idleness: workfare, in the US, is designed to penalise benefit claimants for not working, on the assumption the claimants have a choice. There are two main approaches in Europe. Activation (an idea from Denmark) seeks to promote active participation in the labour market through motivation and the development of skills. Insertion, or social inclusion (from France) is based on a contract between the individual and society. The 'contract of insertion' made between individuals and the local Commission of Insertion is matched with a responsibility on the Commission to develop opportunities.
The details of the Beveridge report are concerned with National Insurance, which Beveridge planned to cover people 'from cradle to grave'. The scheme was based in six 'principles' of insurance:
unified administration
These objectives were never achieved; the inadequacy and poor coverage of the benefits meant that other benefits had to be filled in, and these systems were administered under different rules by different agencies.
Despite the deficiencies, National Insurance still accounts for over half of the expenditure on social security in the UK. But the failure of the scheme to cover the population led to increasing dependency on means-tested benefits, and in particular the basic benefit - National Assistance, later renamed Supplementary Benefit and then Income Support.
External link: Beveridge report
Although Income Support disposes of only a limited proportion of all the money spent on social security, it is perhaps the most important benefit, because it guarantees a minimum level of income for many recipients. There are four basic elements to the Income Support scheme.
Deductions. People can have their benefit reduced for voluntary unemployment or striking; there may also be deductions made to cover past debts.
The basic calculation of Income Support is based on the sum of these elements, minus the claimant's existing income.
The number of people dependent on this basic means-tested benefit has grown steadily over the years. The response of governments to the increasing numbers of claimants has been of two kinds. One has been to try to change other benefits to float people off the safety net; the number of pensioners claiming in the 1990s fell because of improved insurance-based pensions. The other response has been to try to adapt the system to its 'mass role', changing it from an individuated, complex benefit to a general system capable of coping with millions of claimants.
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| Welfare to work: (c) Chris Priestley. |
Unemployment was initially provided for through the Beveridge scheme. National Insurance was intended to deal with a wide range of marginal employment, including casual labour, seasonal work and short-time working. It was never intended, however, to deal with long-term or mass unemployment. As long-term unemployment grew in the 1970s and early 1980s, unemployed people became increasingly dependent either on Income support or on alternative benefits, such as benefits for incapacity or single parenthood.
By the mid-1990s, the system had virtually ceased to apply, with only 8% of unemployed males receiving National Insurance. Unemployment Benefit was replaced by Jobseekers' Allowance, basically equivalent to Income Support for unemployed people.
Throughout this period there was also an increasing emphasis on trying to engage people in the labour market as the main route out of poverty. The term "welfare to work" refers to a series of measures intended to encourage unemployed people into work, including advice, training and supervision. The current programme of "welfare reform" is based on three principles. The first is conditionality, or subjecting unemployed people to sanctions for non-compliance with the rules. The second is personalisation, giving people support to speed their return to work. This kind of individualised response has two main problems: imposing responsibility on benefit claimants for the general lack of employment, and trying to deal with millions of claimants as if they could all be dealt with flexibly and individually. The third principle is contracting out provision, which is an attempt to provide services to large numbers of people.
External link: Paul Spicker (this website's author) on welfare reform in Scotland
The Beveridge scheme provided for universal pensions at a low level. Pensioners were likely to be on low incomes, and in the 1970s more than half the people in the lowest 20% of the income distribution were elderly.
From the 1950s on, numerous schemes were proposed to offer higher pensions through earnings-related contributions and benefits. This was the subject of bi-partisan agreement in the 1970s, and led to the introduction of the State Earnings-Related Pensions Scheme (SERPS). Subsequently, however, governments came to feel that this represented too large a commitment to state pensions: the Conservative government argued that "it would be an abdication of responsibility to hand down obligations to our children which we believe they cannot fulfil." They arranged for SERPS to phase out gradually and sought instead to encourage more private and occupational pension provision. From April 2002 SERPS was replaced by the Second State Pension, which makes more generous provision for people on lower incomes and those whose contributions are incomplete. The final income of pensioners relies increasingly on individual and independent provision.
The Pensions Credit has now replaced the previous means-tested support. The "Guarantee Credit", replacing Income Support and the Minimum Income Guarantee, offers a basic means-tested minimum. The Savings Credit allows extra income to be retained for people within a narrow band of income. It is complicated, and take-up is uncertain; the government thinks that half all pensioners should qualify.
Tax allowances for children were first introduced in 1909, and Family Allowances in 1945. Titmuss, in 1955, made the important argument that tax allowances and benefits were really two aspects of the same thing, a principle which has gradually gained acceptance since then. Child Benefit, combining the two, was passed into law in 1975 (though, because it was controversial, it was not implemented for two years after that).
Child Benefit is flat-rate, not age-related. The case for age relation is that children become more expensive as they grow older. The case against is that poorer families tend to be those with younger children, mainly because the woman in the family is unable to work; and it is simpler not to relate the benefit to age. The basic arguments for Child Benefit are:
- it is paid to the mother, who may have no other income
- it is not means-tested and takeup is very high (perhaps 99%)
- it is simple to administer
- it avoids problems like the poverty trap and stigma
- it helps to protect the position of the working poor.
The arguments against are:
- it is not well targeted. Poorer families tend to be smaller and younger, but Child Benefit gives most to larger families.
- the redistribution is horizontal - from people without children to people with children - rather than vertical, from rich to poor. Child Benefit may redistribute from a poor single person to a better-off family.
One of the most important objections to Child Benefit has now been removed. For most of its existence, Child Benefit was deducted directly from means-tested benefits, leaving it without value to the poorest families. The system has now been revised so that support for children is now distinct from the rest of the benefit system; it now comes largely from a combination of Child Benefit and Child Tax Credit.
External link: Social security in the UK
P Spicker, 1993, Poverty and social security, Routledge
J Millar (ed), 2003, Understanding social security, Policy Press
R Walker, 2004, Social security and welfare, Open University Press.
