The Financial Fairness podcast
Episode Two: Social Security
Guest: Alison Garnham
How did we end up with the social security system we have? How can we make out social security system better? We speak to Alison Garnham, CEO of Child Poverty Action Group (CPAG) about social security. Alison has spent many years working as a welfare rights adviser, been a senior lecturer in social policy at the University of North London and has headed up CPAG since 2010 making her ideally placed to take the long view on all things social security.
Mubin: The dole, Social Security benefits, welfare, there's been various ways of describing how the state supports us financially. Nearly all of us benefit, especially through more universal schemes such as a state pension or child benefit, which supplements incomes during hard times or particular stages in our lives when we need more support, including recently during the pandemic, when the government introduced new schemes such as furlough and grants for self employed.
So how did we get the Social Security system we've ended up with? And how might it develop going forwards? That's a question for today's Financial Fairness podcast and I'm delighted to have Alison Garnham joining us.
Alison, you've been working in the field of social security for many years, having been a welfare rights adviser, a member of UK government's Social Security Advisory Committee, and for the past decade leading the work of Child Poverty Action Group, you're ideally placed to help us better understand how we got here. So, Alison, let's go way back.
Welfare benefits haven't always been with us, what support was available to people prior to Social Security as we know it? Was there any kind of safety net?
Alison: Yes, I mean, if you go way back, of course, you go back to the Poor Law and parish relief. The 1601 Elizabethan Poor Law was the start of it all. And then going right through to the 19th century, you had the Poor Law Amendment Act in 1834, which brought in the workhouse. And of course, the workhouse changed and became used as hospitals, the parish relief changed into national assistance and public assistance, which when I was first a welfare rights worker, pensioners could remember, they remembered Poor Law Guardians coming around and telling them they had to sell their piano and things like this. And the sort of the looming fear of the means test was kind of the overwhelming impression that people had of that period. So it wasn't really until the 20th century that we started to see sort of systematic development of a social security system, as we would recognise it.
Mubin: And what kinds of support did people get during this period of Poor Law? What was on offer? Was it, you know, sort of Oliver Twist territory? Or did we have something a little bit more generous? And did it differ according to where you lived?
Alison: Yeah, it very much did. And it was based on a parish system, often involving parishes, and then later local authorities. And, of course, the churches - churches were very much involved in it. And there was a way you could either have indoor relief, which meant that you went into an institution of some kind, or outdoor relief, which meant you got cash. And then from the early days, it tended to be widows and pensioners that got outdoor relief, and other people were expected to take indoor relief.
And of course, it changed through the years.
Mubin: And I'm guessing you'd have been the sort of person would have wanted for outdoor relief, Alison, the cash in hand rather than having to go into the workhouse.
Alison: It's extraordinary actually, isn't it that today we're seeing the growth of basically parish relief in things like food banks, that our social security system is failing to such an extent that we’ve now seen an extensive development of effectively charitable support through food banks and the like, because our system isn't adequate to meet people's needs.
Mubin: We then started to get reforms including for those who were older, the first pensions were means tested benefits for the very poorest people, and you had to be a good character. And it came in when you age 70, though this was at a time when your life expectancy - or average life expectancy - was well below 60, so just 2% of a population received a state pension in 1910. What other early reforms were there? And what were the drivers behind this shift? Why did we shift from this sort of quite parochial system into something which was much more sort of state organized?
Alison: So of course, we'd seen the industrialization of the UK, and movement of people into large towns and cities, we also saw the development of the trade union movement, and of course, by 1909, the Labour Party. So, there was a strong move, that there should be better support for workers.
There were also international events, you know, there was in Russia, for example, topical today, there was threats of revolution, and so on. And so, the mood became that, you know, something needed to be done to make sure that people were properly supported. So, you saw retirement pensions being introduced in 1905, 1908. And then in 1911, you saw unemployment insurance, the first unemployment benefits and sickness benefits.
But these were not obviously comprehensive, so only covered some people. And at the same time, you'd seen friendly societies and trade unions, developing their own insurance-based benefits, if you like, so that you could pay in and then get some benefit if you were unemployed or sick. And William Beveridge was asked in the 1940s, to write a report, what he was asked to do was to look at this patchwork of charitable Union and other types of assistance and make recommendations about how they could all be brought together in some way. I mean, what he came out with was far more revolutionary than what they expected. But that's what he'd actually been asked to do is to look at this patchwork and make some recommendations about it.
Announcer: As the result of much intensive study into questions of social security, Sir William Beveridge is the recognised authority on present day and post war problems. Following upon the publication of his report, Sir William summarises the points of his plan.
William Beveridge: The report proposes first, an all in scheme of social insurance, providing for all citizens and their families, all the cash benefits needed for security - in return for a single weekly contribution by one insurance stamp. The benefits are to be adequate in amount and to last, as long as the need lasts. (source Pathe News)
Alison: He said that his propositions on Social Security, assumed that they would be a National Health Service, that they would be full employment, and that there would be Family Allowances - Family Allowances because wages can never take account of family size. So, there would always have to be a system of supporting children. And of course, today, we call that child benefit, it was changed in the 70s, Family Allowances were combined with tax allowances to make Child Benefit.
So, his proposition on abolishing want, was a comprehensive system of benefits, Social Security benefits based on contribution. So National Insurance was to be used to pay into the system and provided that you'd paid in enough, then you would receive benefits in return - in those periods in your life when you weren't able to work, and of course, pensions.
He intended it to be entirely comprehensive, but of course, over the years, it became obvious that there were gaps. So, for example, it was assumed that women would be supported by their husbands’ contributions. And of course, as time has gone on, and women have entered the labour market, much more than in those days, they've either been able to qualify under their own contributions, or they're in a position where, because they haven't been working, they don't qualify at all. And so, for women, particularly single parents, after 1969, when divorce was made available to everybody, other than just the rich, you saw the growth of single parenthood and of course, his system couldn't deal with that. Nor could it deal with people who were disabled from birth who weren't able to make a contribution
The other thing that happened was that the benefits were intended to be flat rate. And he was kind of looking at the kind of rates that Joseph Roundtree had been considering what subsistence levels for example, but he intended that they when we could afford it, they would be increased to become much more generous. But that never happened. So, our problem in this country that we were stuck with flat rate National Insurance benefits, and the means tested system sort of grew up to meet the needs that it wasn't meeting. And we've never really addressed that properly, we've ended up with a system of very low-rate National Insurance benefits, but a big means tested system trying to deal with everything else.
And over the years, it's had a lot to deal with. So, it's had to deal with really rapidly rising housing costs. And in the current day, that's particularly in the privately rented sector. It's had to deal with childcare costs needed for parents to be able to work and since tax credits, they've now been met through means tested Social Security system. So, lots of sort of social change has ended up being dealt with, through our means tested system. And we've not really addressed whether we want the National Insurance system to do better than it does.
Mubin: That's a really good overview, because you've highlighted that there were, you know, Beveridge wasn't perfect, that there were gaps. And actually, when he created the welfare state, it was actually really tiny this social security element, because we did have full employment, there were people who didn't benefit from the system, and it's grown significantly since then, a very big component of that has been pensions.
Just looking internationally in terms of how other countries who are similar to us have fared. Who do you think's been doing it better? And are there others who are you know, markedly worse than the situation we have here in the UK?
Alison: So, I mean, you've only got to look to continental Europe to see the difference, France and Germany have National Insurance systems that are way more generous than ours and tend to be earnings related. And also the Nordic states have an earnings related sort of contributory based benefits systems. They're very like what we've just lived through in the lockdown, through the furlough payment system. So, for the first time in the UK, we've actually had to invent the same system as they've got sort of overnight, in order to support people properly through the pandemic, whereas they've had that system there all along. So, it must have been much easier for them to just roll that out.
But yeah, so we never actually developed our system in that way. And it's a, it's a, it's a tragedy, in my view, that we didn't, because what happens in this country is rather than creating a sort of a soft landing pad for people, which enables them to go back into work, we crush people down on to £73 pounds a week, which is below destitution level of income, and then expect them from there to trampoline back into the labour market, we make it very hard for people. Whereas those continental systems give you a softer landing, you're protected on a certain proportion of your previous earnings. And therefore you've got the space to get back into a really decent job, not just any job that comes by.
Mubin: Yes, it's a bit like they have a trampoline on which you can land and we've got some sacking you can land on. It's not very impressive.
Alison: You know, we've got - our unemployment support is now the lowest level ever as a proportion of average weekly earnings, it's about 14% of average earnings, which is incredibly low. It’s the lowest, even today, as low as it was back in 1990. So, we have the least generous system of support for individuals in the whole of the OECD. And I think the third least generous for families with children.
Mubin: I think what's interesting about unemployment is that, those low level of benefits have proved quite popular in terms of the public and just touching on that in terms of sort of stigma around social security, particularly for those not in work. There's just been this really strong narrative around scroungers or people deliberately committing fraud. Has there ever been a sort of golden age when public support for Social Security was high or has there always been sort of peaks and troughs in relation to public attitudes?
Alison: I mean, obviously, you'd point to the post war period as being a period of great sort of social solidarity, which is really what you want with a social security system, you want it to have public support, and therefore for it to be able to be generous and do its job at preventing poverty and supporting people at those times in their life when they need it, with the support of the public, and I think that's where we were postwar. Now that's kind of changed in various ways.
There've been, you know, periods of intrenchment because of big sort of dips in the economy, for example. And it's often been accompanied by politicians talking the language of scroungers is a way of sort of excusing themselves for cutting support. We saw that very much in the 1980s. And we've seen it again, more recently with a sort of strivers and skivers language, which plays into all that historical belief in deserving and undeserving. And sadly, that still works.
But if you look at public opinion, when governments go through these periods, when they're being very ungenerous, the public tends to get more generous and worried about what's going on. That's certainly happening now. I mean, it's all very well for the government says, oh, nothing's happening on poverty and sort of point of the fingers that that suit them. But the public can see food banks are growing, and there's something wrong, you know, you can't pull the wool over their eyes. And at the moment, people's views are becoming more generous and, and being more sympathetic towards people who are unemployed. And then when you go through periods, when governments are more generous, people start to get suspicious that people you know, people are no better than they ought to be. It's a, it's a kind of a national, sort of cultural habit, I suspect. And it really needs to be sort of brought in hand, governments need to stop using Social Security as a kind of a punch bag and start to kind of talk about it with the respect that it deserves because it's actually critical to our economy.
Mubin: Let's now touch on Universal Credit. And it's the sort of relatively new kid on the block. How different is it to the system we had before?
Alison: Very, and not very - one at the same time. Essentially, Universal Credit is an integration of benefits. So, it's bringing a series of benefits together into one.
And, you know, it's debatable how desirable that is, I never felt it was desirable, because you basically bring all the complexity of those individual benefits into one benefit, throw a blanket over them and say, - oh, look, it's simple, it's all one thing now. In fact, you still got all those individual tests within it that were there already, you still got to see whether someone's sick, when someone's unemployed, what they're doing around work activity, how many children they have - all of those things are still going on, except under the name of one benefit.
The chief achievement of Universal Credit is to ease the transition from out of work benefits, to in work benefits. So previously, you had to come off income support, and then get on to tax credits. And that could take some time, and it made it more difficult to move into a job. So often, you could wait for months for the local authority to calculate your housing benefits, for example. So, the idea is that having all those things in one, should make that transition easier. And of course, that that is the case it must do. So that that that it really is a big achievement.
But I mean, what Universal Credit claimed for itself was that it would make the benefits system simpler, that it would protect the vulnerable and that it would help make work pay. And it hasn't really done those three things. It's certainly not simple. No massive means just like Universal Credit is simple, you know, for the user is very complicated indeed. In terms of protecting the vulnerable. Well, we've seen over the last 10 years, over 50 cuts to benefits, the rates of all benefits - including Universal Credit -frozen on and off. We entered the pandemic spending £36 billion a year less on social security than we were in 2010.
And Universal Credit has been so degraded if you like that, in trying to transition people from the old benefits onto Universal Credit, many people will find themselves worse off. So, they've kind of damage the new benefit that was supposed to be the thing that was improving things.
And then thirdly on, you know, getting better off in work, it still had a very high taper rate, but that's the one thing that's been improved recently, with Rishi Sunak’s changes to the taper rate, reducing from 63% to 55% and increasing the work allowances. And that's a restoration of the damage that was done in 2015, when work allowances were cut. So it's a mixed bag in so many ways.
Lord Forsyth of Drumlean: Universal Credit isn't working. That's the title of the report of the Economic Affairs Committee of the House of Lords which I chair into Universal Credit. We found widespread support for the concept of Universal Credit. But the design and implementation is resulting in real harm to some of the most vulnerable people in our country, the five week wait for payments, results in rent arrears, increased debt, people are having to go to food banks in order to feed their children and enormous stress. (source House of Lords, UK Parliament)
Mubin: Do you think we should start again? I mean, there are calls to scrap UC. Do you think that's the right approach?
Alison: I mean, in a way, doesn't matter what you call it, you're gonna have to reform it. And I think the reality is that that's what anyone who wants to improve Universal Credit will have to do, they'll have to sort of go back to the drawing board and say, well, let's sort out the things with this that can be sorted out.
And I think a lot of them can, you know, the monthly aspect could be changed - although they claim it can't. Everything you say at the moment, its computer says no. Can't be done, but I'm sure it can.
You know, the monthly aspect, the five week wait, and the fact that you pay to one main earner. And you can't automatically split payments, which is a real disadvantage for women, particularly women where there's any kind of domestic violence or power and control going on. There are lots of things about Universal Credit that needs to be reformed.
Mubin: It sounds like there's sort of two elements to this. There's the one which is how do we treat people with dignity and respect, which has been a real touchstone in Scotland, in terms of social security there and that being sort of at the heart of what the new system tries to look like. And then there's the amounts which are paid out, which have a huge bearing on whether or not people can cope with their living costs, including the squeeze, which we're facing now.
Sir Keir Starmer: It needs to cancel the cut to Universal Credit, the government pretends that it's interested in levelling up - you cannot level up if you're going to take £1000 a year, from the 6 million families who are struggling to make ends meet.
Mubin: That £20 cut to Universal Credit is here to stay. What's your reflections on why the uplift wasn’t extended?
Alison: Yeah, but just go back to what you said about Scotland. The other thing that Scotland has in its social security legislation is a responsibility on governments for benefit take up. I think if you're going to have a means tested system, governments should be responsible for take up, take up is very poor for these kinds of wage subsidy benefits. Always has been it was the same with the predecessors, family credit and family income supplement, and tax credit, so I think that's a pretty crucial development in Scotland
On the £20 payments. I mean, the government, I think, always fondly believed that people coming on to benefit during the pandemic were kind of different sorts of people who needed extra help, and they always plan to get rid of it. It was, that's a complete, you know, misapprehension, of course, they are the same sorts of people who find themselves on benefits at any time. And at any time, it's not the same people - people, you know, you have to view Social Security has been quite dynamic, people move on and off pretty frequently. And so this is the story that's not told about unemployed people, isn't it, in fact, they leave benefit within six to 12 months, without any help from anybody, you know, the, the one thing you can say about British people is they want to work and they get back into work pretty damn quickly - 90% do so you know, that that's you, they're pushing it an open door in terms of, but they'd like to maintain the myth that somehow there's some massive push has to be made to get people into work - it doesn't, it happens anyway.
Mubin: It feels like there's a real disconnect between the politicians or some of the politicians and what it's like to actually live on Social Security. What do you think we can do about that in terms of this disconnect?
Alison: Well, I mean, there's some pretty good stuff going on at the moment. I mean, I think the intervention of people like Marcus Rashford, genuine outside observers are just going, come on. We’ve got people going to food banks, we got kids who are hungry, don't be silly, we've got to do something about this. And the voices of people who have experienced including him, it's a good example of that. I mean, child poverty has increased by 700,000 since 2010. And that was entirely predictable as a result of all of these cuts. The value of child benefits, has it's lost nearly a quarter of its value since 2010. I mean, the losses have been huge. I mean, we calculated that, you know, by about 2019, single parents had lost something like £2,300 pounds a year and couple families about £1000 a year is a huge amount of money when you're living on the kinds of income that they are you talking about people, you know, living on between sort of £10,000 and £12,000 a year, you know.
The other thing in this country, we kind of don't really understand where most people's incomes are. We often think we're middle income, you know, the sort of newspaper commentators think they're middle income, and when that's your middle, you know, if you look at average earnings, it's about £27- 28,000. So that means half the population lives on less than that, their whole household lives on less than £26,000/£27,000 pounds a year. So, people who regard themselves as middle income, probably will find that they're actually in the top 10% you know. So, we don't really, I don't think we really understand just how low income a lot of people are.
Mubin: And that's going to be even squeezed more with the cost-of-living crisis, which we've got now. But I want to end on a sort of, hopefully an optimistic note. And you've, you've touched on lots of this already, but there've been some really interesting developments of late such as furlough, which isn't traditionally seen as being part of social security. We've also seen the Scottish child payments, which have risen to £20 a week, what would be your one big policy idea? If you if you had that magic wand of yours Alison, what would you do?
Alison: You can't just let me have one! I mean, my, my first one would be, you know, making furlough permanent, you know, that, that our system should function like this, we should, for a period of time, have a proportion of our earnings. You know, and you can make contributory benefits more accessible by crediting in other sort of types of contribution, like having children or where people have been disabled or whatever. So you can make it more open than it was before. But I think it's absolutely critical that we get to accept that you can't, you can't drop people onto £73 a week. It's just not acceptable.
And my second, and which is probably my first actually is about child benefit. The one thing that has worked throughout all of this kind of mess around Universal Credit, is child benefit. People we meet at food banks who have children is the one thing they have in their pocket. It works, they get it straight away, there's no problem. It's simple. And so we need to rescue it, we've got to restore its value, and remove the top slicing, because child benefit as Beverage said - it's about recognising the additional costs of children, that those costs will never be recognised by the labour market because wages aren't about meeting the cost of children. They're about a rate for the job. And we can't have a situation where 4.3 million children in this country are living in poverty. It's not good for them. It's not good for the rest of us. It's not good for our society, and Child Benefit is a crucial cornerstone in recognising that and preventing that from happening.
Mubin: Alison, thanks very much for your insights. It's always a pleasure speaking to you. And thanks to all of you for listening. We'll be back again soon looking at another big issue which affects our financial security and living standards.