The current welfare state changed in such a way that a true reflection is required as to how this has come about and and its context.
Post Second World War, the Attlee government nationalised the Bank of England, the coal industry, the Central Electricity Generating Board and area electricity boards, Cable & Wireless Ltd, the railways and the local authority gas supply undertakings in England and Scotland. It introduced free education for all by nationalising institutions which were either provided by parishes or philanthropists. The National Health Service was formed and made accessible to everyone regardless of ability to pay.
If you were
unemployed there was infrastructure to support you when you could not afford to
pay by creating the welfare system as you see today. The expenses of running
such a nationalised state was met by cheap loans borrowed from
overseas, contributions made by tax payers and companies in times when
Britain was losing imperial dominance. Post war employment was near to 100%.
Such a boom would not last forever; an oil price
shock lead to a 70% increase in oil prices when Arab oil producers imposed an
embargo on Western countries in retaliation for their support for Israel during
the Arab-Israeli War in 1973. This increased costs to industry and
was a trigger in their decline. According to a recent Government report:
’Since 1973…there has been a substantial decline
in the share of manufacturing in economic activity on all measures. The
sharpest decline has been in the share of manufacturing in total output at
current prices, from 31.9% in 1973 to 12.4% in 2007’[1].’ [2]
In the early 1980s over 3 million people were
unemployed; more than 10.5% of the total workforce in Britain.[3] Most
of those unemployed were in former manufacturing areas which saw the highest
unemployment rate since the Great Depression.[4] Although the intention of the
Conservative Government was to cut welfare spending, due to the high
unemployment level, increased expenditure on the benefit system was inevitable.
By the end of Margaret Thatcher’s premiership,
nearly all the publicly owned industries and utilities had been privatised. The
justification for doing it was to make these firms more efficient and
competitive.[5]
The financial industry emerged as a powerful force
during this period partly as a result of the deregulation of the mortgage
market. This, among other changes, enabled local high street banks to lend
mortgages instead of solely local building societies which helped to fuel a
rise in house prices.[6] We have also saw the first mass use
of credit cards which created a consumer bubble.[7] In 1980 banks created £109 billion.
Just after the financial crisis in 2010 it was up to 2,213 billion. In London
at least 50% of the sector’s output was generated in this way. [8]
Though this gave finance a powerful presence in the
economy, the fracture in this sector began to emerge once Lehman Brothers filed
for bankruptcy in the US due to its high exposure in subprime mortgages. Many
of the household financial institutions in Britain were also exposed to these
toxic investments, so much so that the British government had to intervene to
rescue these banks instead letting them go insolvent. Northern Rock
was nationalised; the Royal Bank of Scotland, Lloyds TSB and HBOS were also classified
as public owned financial corporations by October 2008.[9] These institutions received over
£500[10] billion
of tax payers money in order for them to stay afloat because they were deemed
too big to fail.
According to Lord Adair Turner, former chair of the
Financial Services Authority:
‘“The financial crisis of 2007 to 2008 occurred
because we failed to constrain the financial system’s creation of private
credit and money.”
Under the Conservative-Lib Dem coalition
government, the Chancellor George Osborne stated that the government’s fiscal
policy would be to make substantial reductions in public
expenditure. According to the Institute of Fiscal Studies, almost
one in three councils have faced 30% or more in budget cuts in real terms [11].
Such cuts reduced the ability of councils to spend on social care, health,
housing and education. 90% of British councils have now charged council tax to
those who were previously deemed too poor to pay. Local councils in the fiscal
year 2016/17 in England and Wales referred 2.3 million debts to bailiffs[12] adding
further indebtedness to the most disadvantaged communities.
As local council budgets shrank due to cuts in
grants provided by the central government, the welfare reforms also targeted
vulnerable communities who have physical and/or mental health problems. As a
result of these changes, according to Disability Rights UK, £5 billion has been
cut in the last decade from disability benefits.[13] The same data shows that,
cumulatively, £37 billion less will be spent on working age social security
benefits by 2021 under the current Conservative Government compared with 2010.[14]
Shelter, the homeless charity, emphasised that homelessness is increasing year on year. Currently one in every
200 [15]people
are now homeless in Britain. In London, however, the figure is one in 52 people[16].
Polly Neate, CEO of Shelter states the following:
‘Due to the perfect storm of spiraling rents, welfare
cuts and a lack of social housing, record numbers of people are
sleeping out on the streets or stuck in the cramped confines of a hostel room.’[17]
According to the Trussell Trust, in every area where universal credit
goes live, within 12 months of rollout foodbanks see a 52% increase in demand,
compared to 13% in areas with where universal credit has been in force for
three months or less,[18] The trust cites delays in
receiving the first payment and the process of moving to a new benefit system
as the cause.
It seems that the current welfare reforms are removing the safety net
which the welfare state was supposed to provide and is putting the most
vulnerable people in our society at serious risk.
[1] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/277158/ep2-government-policy-since-1945.pdf
[2] https://www.cbr.cam.ac.uk/fileadmin/user_upload/centre-for-business-research/downloads/working-papers/wp459.pdf
[3] https://www.theguardian.com/business/2006/aug/16/socialexclusion.politics
[4] https://www.economicshelp.org/blog/630/economics/economy-in-1980s/
[5]https://www.centreforpublicimpact.org/case-study/privatisation-uk-companies-1970s/
[6]https://econ.economicshelp.org/2010/02/economy-of-1970s.html
[7]https://econ.economicshelp.org/2010/02/economy-of-1970s.html
[8] https://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN06193
[9] ukpublicsectorinterventionsinthefinancialsector22may15_tcm77-404993.pdf
[10] https://publications.parliament.uk/pa/cm200809/cmselect/cmtreasy/27/27.pdf
[11] https://www.ifs.org.uk/publications/8780
[12] https://www.stoptheknock.org/
[13] https://www.disabilityrightsuk.org/news/2018/september/disability-benefit-spending-reduced-%C2%A35-billion-over-last-decade
[14] https://www.disabilityrightsuk.org/news/2018/september/disability-benefit-spending-reduced-%C2%A35-billion-over-last-decade
[15] http://media.shelter.org.uk/press_releases/articles/320,000_people_in_britain_are_now_homeless,_as_numbers_keep_rising
[16] http://media.shelter.org.uk/press_releases/articles/320,000_people_in_britain_are_now_homeless,_as_numbers_keep_rising
[17] http://media.shelter.org.uk/press_releases/articles/320,000_people_in_britain_are_now_homeless,_as_numbers_keep_rising
[18]https://www.trusselltrust.org/what-we-do/research-advocacy/universal-credit-and-foodbank-use/
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