Tag Archives: austerity

Extractive capitalism: Britain has been a high-inequality, high-poverty nation for most of the last 200 years, with significant consequences for life chances, social resilience, and economic strength

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Stewart Lansley writes that Britain’s model of ‘extractive capitalism’ – with a small elite securing an excessive slice of the economic cake – has created a two-century-long high-inequality, high-poverty cycle, one broken for only a brief period after the Second World War.

Over the last four decades, Britain has moved from being one of the most equal of rich nations to the second most unequal (after the United States). The same period has also seen a surge in levels of poverty, with the child poverty rate more than double that of the late 1970s (figure 1).

That these two key measures of social fragility have moved in line is no surprise. History cannot be clearer: poverty and inequality are critically linked. Poverty occurs when sections of society have insufficient resources to be able to afford a minimal acceptable contemporary living standard. Its scale is ultimately determined by how the ‘cake is cut’. Barring the short post-war period, Britain has been a high-inequality, high-poverty nation for most of the last 200 years, with significant consequences for life chances, social resilience, and economic strength. Because of the impact of inequality, the poorest fifth of Britons are today much poorer that their counterparts in other, more equal nations (chart 2). Germany’s poorest, for example, are a third better off than those in Britain.

Poverty and inequality levels are ultimately rooted in the outcome of the political and economic power games that play out between big business, state, and society. With the exception of the immediate post-war era, the struggles for share over the last 200 years have been won by the richest and most affluent sections of society, often with the compliance of the state.

For most of the nineteenth century, Britain was a near-plutocracy, with society run mostly by and for the richest sections of society. Colossal and heavily concentrated wealth sat beside crushing poverty through a form of collective monopoly power exercised by a small landowning, industrial and financial elite. The governing and wealthy classes created a form of ‘extractive capitalism’ aimed at securing a disproportionate share of the economic gains from industrialism, often by steering economic resources into unproductive use, with no or limited addition to economic value. ‘The efforts of men are utilized in two different ways’ declared the influential Italian economist Vilfredo Pareto in 1896. ‘They are directed to the production or transformation of economic goods, or else to the appropriation of goods produced by others’.

The long high poverty/inequality cycle and the strength of extraction are inter-connected. The cycle has only been broken once, when from 1945 the bitter ideological battle of ideas was finally won by pro-equality thinkers. The achievement of peak economic equality and an historic low for poverty in the 1970s was a seminal moment in British history. Yet it was short-lived, with the ideological baton passing to a group of New Right evangelists who proclaimed, falsely as it turned out, that a stiff dose of inequality would drive economic progress. As Sir Keith Joseph, a key adviser to Margaret Thatcher, put it in 1976: ‘the pursuit of income equality will turn this country into a totalitarian slum.’ From that point, egalitarianism was replaced by an entrenched bias to inequality. But instead of creating the promised economic and entrepreneurial renaissance, the new licence to get super rich simply triggered a second era of extraction and of Pareto’s ‘appropriation’ and a second wave of high poverty and inequality that is still in place.

Few other nations have applied a pro-inequality economic strategy as comprehensively as Britain and the United States. With the world’s top one per cent emitting twice the carbon emissions of the poorest half, the return of extraction also lies at the heart of the global climate crisis. Corporate leaders have exploited their growing muscle using business practices that have played havoc with pay, jobs, and livelihoods. As the American megabank Citigroup wrote in a confidential note to its clients a few years ago, the United States has long been aplutonomy, one that allows ‘the economic disenfranchisement of the masses for the benefit of the few’.

Examples of complex and carefully hidden extractive devices have included the application of monopoly power through the ruthless destruction of rivals and the rigging of financial markets, to the ‘skimming’ of trading profits – a process City traders like to call ‘the croupier’s take’ – and the engineering of company accounts. The boom in the private takeover of public companies since the millennium, from the AA to Boots and Morrisons, has enriched a generation of private equity barons, often at the expense of the survival of the targeted companies themselves. The long list of companies destroyed by such financial manipulation include ICI, GEC, BHS and Debenhams. Under extraction, economic activity becomes detached from new wealth creation, with the boost to profitability and rising corporate surpluses of recent times used to reward executives and investors rather than boost productivity. In 2019, global stock markets paid out record dividends of $1.37 trillion.

What has been at work is a form of levelling up at the top by levelling down at the bottom.  While egalitarians have yet to regain the ideological high ground, one of the big questions of political economy of the next few years must be the extent to which an entrenched anti- egalitarian model of capitalism can be reformed?

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Note: the above draws on the author’s new book, The Richer, the Poorer, How Britain Enriched the Few and Failed the Poor, a 200-year history ( Bristol University Press, 2021).

About the Author

Stewart Lansley is a visiting fellow at the University of Bristol, a Council member of the Progressive Economy Forum and the author of Breadline Britain, The Rise of Mass Poverty (with Joanna Mack, 2015) and The Cost of Inequality (2011).

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‘Levelling-up’: the government’s plans aren’t enough to promote economic growth and tackle inequality

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The government’s levelling-up plan dodges the hard choices says Henry Overman. Countering the economic forces behind the UK’s spatial disparities requires addressing multiple barriers and allowing differing approaches – and the funds committed so far don’t appear to be proportionate to the scale of the challenge.

The government’s Levelling-Up White Paper focuses on 12 missions that aim to level-up the UK. Lots will be said about whether the government is spending enough (almost certainly not), whether devolving more powers is a good thing (almost certainly), and how much of their plan is different to past efforts (not much, for those of us that remember the 1990s and 2000s).

Setting these issues aside, does the economic strategy make sense? If government spent enough, and gave places the right powers, would pay, employment and productivity gaps narrow? The answer will depend on how government resolves the fundamental tension between the role of ‘globally competitive cities’ (part of mission 1) and other local economies spread across the country. For the economic strategy to work, the evidence suggests that spatially concentrated investment is crucial, but politics and a concern for quality of life make the case for equalising spending.

Many things determine spatial disparities in Britain. The legacy of 1970s deindustrialisation, the ongoing shift from manufacturing to services, and falling communication and transportation costs all play a part in changing the geography of jobs and the demand for different types of workers. Spatial differences in educational attainment, the selective migration of skilled workers and differences in amenities and costs of living help determine the supply of different types of workers. Demand for and supply of skills interact in a way that can be self-reinforcing, meaning large spatial differences can emerge and persist. Levelling-up policy must counter these economic forces if it is to succeed.

One important consequence of these economic forces is that spatial disparities in earnings – which the government wants to narrow – largely reflect the concentration of high-skilled workers. The share of adults with degrees ranges from 15 per cent in Doncaster to 54 per cent in Brighton. High-skilled workers tend to work in better performing labour markets, which further magnifies individual labour market advantages. At least 60 per cent and up to 90 per cent of differences in average wages across areas can be attributed to differences in the types of people who work in different places.

This has important consequences for ‘levelling up’. A pragmatic aim for the economic strategy might be to improve economic performance in some areas outside of London and the South-East – reducing spatial disparities at the regional level, if not necessarily across more narrowly defined local areas. This would allow talented young people in left-behind places to access better paid opportunities without having to move across the country.

To generate these opportunities and counter the self-reinforcing feedback loops – which mean the highest paid jobs are concentrated in London and a handful of other areas – large investments will be needed in a limited number of cities to attract high-skilled workers and the firms that employ them. The mention of globally competitive cities (as part of mission 1) suggests that the government understands this key point.

Why focus on the high-skilled? Because the evidence – much of which is discussed in a report on spatial inequalities by myself and Xiaowei Xu, written for the IFS Deaton Review – suggests that the impact of targeted R&D investment(mission 2), infrastructure (missions 3 and 4), public sector relocation and other place-based policies will be small unless they significantly alter the composition of the workforce in an area. Even a project of the size of HS2, for example, will do little for the economy of the West Midlands unless it somehow improves local educational outcomes for children growing up there or encourages a much larger share of graduates and the firms that employ them to locate there.

And why cities, not towns? Such investments could improve earnings in any area. However, there are many small towns, investment in infrastructure and innovation is costly, and there are only so many public sector jobs to relocate. Focusing on towns, especially with limited funds, does not scale up to produce large effects across lots of areas.

Looking to cities recognises that the advantages of high-skilled areas are self-reinforcing. The concentration of high-skilled firms and workers generates productivity advantages for firms and better labour market outcomes for workers. In turn, this attracts high-skilled workers from across the country. In short, London’s economic advantages stem from the concentration of skilled firms and workers, and from its economic size, and these factors are self-reinforcing. London’s economic strength also spills over to benefit towns and cities across the wider South-East.

To provide a counterbalance to London and the South-East, investment needs to kick-start these self-reinforcing processes elsewhere. The fact that size is one key part of this self-reinforcing cycle explains why that investment needs focusing on cities.

Unfortunately, we need to recognise that these policies are likely to benefit high-skilled workers more than low-skilled workers. For talented children growing up in struggling towns, increased opportunities nearby offer the option of commuting or a small-distance move, making it easier to maintain links with family and friends. Moreover, some of these benefits will trickle down to the lower-paid in the form of moderately higher wages and improved employment rates, but at the cost of expensive housing.

Sadly, while all these trickle-down benefits are possible, London – with its many poor neighbourhoods, expensive housing and high poverty rates – points to the limits of this approach for improving outcomes for those at the bottom of the income distribution. A more equal spread of graduates – and globally competitive cities in each region – may help reduce spatial disparities and may even help improve the overall performance of the economy, but it is no simple fix for improving outcomes for poorer households. To do this, complementary investments must make sure that households can access the opportunities generated.

The current debate often interprets this as being about ‘better transport’. For many poorer households, however, transport investment generally will not be enough. Again, examples from London illustrate the issues – Barking and Dagenham (areas in the east of London) have good transport links to one of the largest concentrations of employment in the world, but this is not enough to prevent low earnings for many households who live there. If poorer households are to benefit from the kind of investments described above, then they will need help to improve their education and skills.

For some households, the multiple barriers that prevent individuals from being able to access better economic opportunities go beyond education and skills. Many of the ‘left-behind’ places that levelling-up wants to target have high proportions of vulnerable people with complex needs and low levels of economic activity. This compounds their problems, as long-term unemployment, poverty, mental illness and poor health often go hand-in-hand.

Addressing these multiple barriers will involve significant investment not only in education and skills, but also in childcare, and in mental and physical health services. Research suggests that small tinkering and minor tweaks of existing policies will not be enough to tackle the multiple barriers faced in these places. The White Paper recognises these issues with its focus on education (missions 5 and 6) and health (mission 7), but the funds committed so far do not appear to be proportionate to the scale of the challenge.

I have focused on the economics of levelling up but it is important to be clear that spending on levelling-up does not always need to be justified based on economic growth. There are important public good arguments that can justify increased expenditure across a wide range of policy areas. And unlike the economic strategy, there is a strong case that these funds should be equally distributed. For example, it is possible to argue for subsidising rural broadband (part of mission 4) as a public good, while recognising that its economic impacts are likely to be limited. In addition, although such policies, including those around wellbeing (mission 8), pride in place (mission 9) and crime (mission 11) do not specifically target the bottom of the income distribution, they will often benefit poorer households most.

Places matter to people. For many people, the place where they grow up will become the place where they live and work. Disparities in economic opportunities, in costs of living and in amenities provide the context for, and directly influence, the decisions they take and the life they will live.

Improving economic performance and helping to tackle the problems of left-behind places are both important policy objectives. Addressing these challenges requires a new approach to policy, one that allows for different responses in different places. Such variation makes many people nervous. Constituency based politics mean that political messages tend to prefer spending everywhere. However, policy must allow for this variation. Devolved power (mission 12) will help but central government will still need to grapple with the fundamental trade-off between concentrating spending to help achieve the economic strategy while spreading out spending to meet the other objectives.

I would argue that this becomes easier if we remember that we should care more about the effect of policies on people than on places. If this is the case, we should judge the success of levelling-up on the extent to which it improves individual opportunities and on who benefits, rather than on whether it simply narrows the gap between places.

 

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About the Author

Henry Overman is Professor of Economic Geography in the Department of Geography and Environment at the London School of Economics and Director of the What Works Centre for Local Economic Growth. He is Research Director of the Centre for Economic Performance.

https://blogs.lse.ac.uk/politicsandpolicy/levelling-up-the-governments-plans-arent-enough-to-promote-economic-growth-and-tackle-inequality/?utm_source=feedburner&utm_medium=email

Budget 2021: a missed opportunity to make permanent the £20 increase to Universal Credit

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Posted: 03 Mar 2021 09:50 AM PST

Ruth Patrick, Kayleigh Garthwaite, Geoff Page, Maddy Power, and Katie Pybus comment on the government’s decision to extend the £20 uplift to Universal Credit by six months only. They argue that the increase should be a permanent one, as part of a broader commitment to reforming the social security system.

We’ve learned a lot over the past 12 months of the pandemic. About ourselves, our children, our local areas, but also, inevitably, about our politicians and government. We’ve learned that our government is sometimes willing to make bold policy decisions, such as the recent announcement of the extension of furlough into the autumn. As part of the 2021 Budget, Rishi Sunak promised that he would ‘do everything it takes’ to protect ‘lives and livelihoods’. His government’s budgetary measures simply did not live up to these words.

The decision Sunak announced to extend the £20 uplift to Universal Credit by justsix months is testament to this. Not only has the government missed the opportunity to properly invest in social security into the longer term, but they have also failed to extend the support provided through the £20 Universal Credit uplift to an estimated 2.5 million legacy benefit recipients. They have further failed by not acting to make those subject to the Benefit Cap eligible for support through the £20 uplift.

These failures on the budget are part of a broader narrative emanating from this government on ‘welfare’, which continues to rely on divisions between ‘deserving’ and ‘undeserving’ populations, and shows an unwillingness to retire old (and arguably ineffective) policy tools, such as welfare conditionality. Both Sunak and Johnson have also shown an unwillingness to think more ambitiously and structurally about the social security system. They have been unprepared to delivery long overdue reform to address issues tied to adequacy and eligibility to social security support, whilst they have also failed to address the design limitations with Universal Credit, which negatively impact on the experiences of existing claimants, and the millions of households who have claimed as a direct result of the pandemic.

Through the Nuffield Foundation funded COVID Realities research programme, we are working in partnership with over 100 parents and carers living on a low-income, who are documenting their everyday experiences in online diaries and by responding to weekly video questions. The parents are also meeting up together in virtual discussion groups. In these monthly meetings, parents work with us to develop recommendations for change, recommendations which are rooted in their own experiences, that are all too often of insecurity, of poverty, and of a social security system that is failing them.

After the budget, some of the parents we have been working with gave their reactions to the decision on Universal Credit. Dorothy, a single parent to two children, one of whom is disabled, told us:

I am a bit relieved that they have extended the £20 UC payment, but I’m disappointed it is only for six months because I don’t think the pandemic is going to go away within six months. The cost of living went up so much from the pandemic and from having children at home. In my eyes, the pandemic is no way near over and the £20 just did not go far enough.

Aurora, a widowed single parent, spoke for many who do not receive the £20 uplift at all:

We as the poorest members of society cannot understand why we’ve been overlooked yet again. Why have we been ignored? We have already bared the brunt of austerity and continue to do so. That extra £20 would’ve been going towards feeding us or ensuring we were able to meet the increased costs the pandemic has inflicted on our lives. But we don’t receive it at all because our benefits are capped. I’m just thankful to Covid realities for giving us a voice when no one cared.

The Universal Credit decision extends and perhaps makes permanent the insecurity and anxiety that social security claimants face. Now, Universal Credit claimants must wait till the autumn to find out what will become of their £20 a week, which for many is the difference between keeping their heads above water, and finding it simply impossible to get through the week. Winter explained what this feels like and the difference the £20 currently makes to her family:

The proposed change [removing the £20 uplift] is the difference between paying our bills and not being able to pay some of them. And if [a] one off expenses crop up (like new shoes for kids etc) then you can’t cover it. Amy changes to benefits are very stressful.

From our work with parents and carers, we know how this financial insecurity intersects with, and is compounded by, the insecurity that we all face because of the conditions that the pandemic creates. We also know that the £20 uplift is not a panacea, and it is not enough: families with children urgently need help with the costs of their children, and to address the stubbornly high levels of child poverty. Lexie, who receives the £20 uplift explained:

The £20 is the bare minimum of help to be honest. I know that sounds ungrateful but £20 doesn’t cover much these days. By the end of the month, we are still choosing between eating and heating. We have always aimed to do better by our children than what we had but it’s almost impossible. No one in today’s day and age should be choosing between eating and heating.

As analysis by the Institute for Fiscal Studies has shown, the £20 uplift to Universal Credit represents the first significant real increase in benefit levels in the last half century for families without children. However, and this is especially important, while a sizeable and significant increase, it has made ‘barely a dent’ in the decline in the real value of the social security safety net (excluding housing) for childless families as a faction of earnings levels, which has fallen almost continually for the last 50 years. The picture for families with children, the focus of our COVID Realities work, is more complicated; but there is a broader message that the £20 uplift is only a partial and limited corrective for decades of decline in the real value of social security, which hastened under the 2010-2019 Conservative-led governments, especially due to the freezing of benefit levels. Against this context, it was especially important to make the £20 increase a permanent one as part of a broader commitment to the social security system in the UK.

We have seen the possibility in their pandemic response for the government to be bold, to spend money, and to intervene to protect livelihoods. But there has been a failure to do this on social security, and this failure needs to be writ large in all the analysis of this budget, in the weeks and months ahead. It is a failure of ambition and a failure to do what our society so urgently needs.

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Note: The project on which the above draws has been funded by the Nuffield Foundation, but the views expressed are those of the authors and not necessarily the Foundation.

About the Authors

Ruth Patrick is Lecturer in Social Policy at the University of York.

Kayleigh Garthwaite is a Birmingham Fellow in the Department of Social Policy, Sociology and Criminology at the University of Birmingham.

Geoff Page is Research Associate at the University of York.

Maddy Power is a Research Fellow at the University of York.

Katie Pybus is a Research Fellow at the University of York.

https://blogs.lse.ac.uk/politicsandpolicy/budget-2021-20-uplift/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+LSEGeneralElectionBlog+%28General+Election+2015%29

Progressive Internationalism & why a Corbyn government is the only cure for a terrible Brexit – openDemocracy video interview

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Progressive Internationalism & why a Corbyn government is the only cure for a terrible Brexit – openDemocracy video interview

Progressive Internationalism & why a Corbyn government is the only cure for a terrible Brexit – openDemocracy video interview


— Read on www.yanisvaroufakis.eu/2019/10/21/progressive-internationalism-why-a-corbyn-government-is-the-only-cure-for-a-terrible-brexit-opendemocracy-video-interview/

For those who want to stop no deal, Jeremy Corbyn is the only hope

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www.theguardian.com/commentisfree/2019/oct/04/jeremy-corbyn-mps-labour-leader-legitimacy

Many MPs are in denial, refusing to accept the Labour leader’s legitimacy. Yet he is the only one who can prevent Boris Johnson trashing Britain

Departing Tory leaders have developed an odd and presumptuous habit of demanding that the leader of the opposition resign too. “As a party leader who has accepted when her time was up,” Theresa May told Jeremy Corbyn in her final prime minister’s questions, preparing to leave her party to Boris Johnson and the country without a prayer, “perhaps the time has come for him to do the same.”

In 2016, David Cameron – who had called a referendum lost it, only to then break his promise and abandon the country in a moment of self-inflicted crisis – suggested Corbyn’s resignation would be a patriotic act. “It might be in my party’s interest for him to sit there. It’s not in the national interest. I would say, for heaven’s sake, man, go.”

Stranger still, many Labour parliamentarians agreed with them: Cameron’s speech took place in the middle of a full-blown, if woefully inept, coup.

The political and media establishments are still struggling with the choice the Labour party made in 2015. The fact that the decision was emphatic, had to be made twice following the failed coup, and was effectively endorsed by the electorate in 2017, has not been enough. On some level, that goes beyond the political to the psychological: they refuse to accept his tenure as legitimate.

This sense of denial runs deep – as though insisting he should not be the party leader in effect means he’s not. It is a delusion that recalls the author Doris Lessing’s observation of Blair’s declarative approach to politics: “He believes in magic. That if you say a thing it is true.”

Corbyn is the leader of the Labour party. He has a mandate. He represents something other than just himself. That is not a statement of opinion but of fact. One does not have to like it to accept it. But the failure to accept it will have material and strategic consequences. And, with a general election imminent and the future of the country’s relationship with Europe finely balanced, the moment of reckoning with that fact is long overdue. For there is no route to a second referendum without Labour; there is no means of defeating Johnson without Labour. The party remains the largest, and by far the most effective, electoral obstacle to most of the immediate crises that progressives wish to prevent. Once again that is not a case for Corbyn or for Labour, but for reality.

Jeremy Corbyn is congratulated on winning the Labour leadership in 2015.
‘The political and media establishments are still struggling with the choice that the Labour party made in 2015.’ Jeremy Corbyn is congratulated on winning the Labour leadership in 2015. Photograph: Stefan Wermuth/Reuters

Earlier this week, when asked which was worse, a no-deal Brexit or Corbyn as prime minister, the Liberal Democrats’ Scotland spokesman, Jamie Stone, said: “It may be that somebody else may emerge from the Labour party. I think the ball is very much in the Labour party’s court to see what alternatives they could find.”

That is not going to happen. Liberal Democrats don’t get to choose the Labour leader. Labour does. The Lib Dems have long struggled to understand this. In 2010 Nick Clegg said he could work with Labour, just not Gordon Brown. Two years later they said they could work with Labour but the shadow chancellor Ed Balls must go.

There is candour in this. It is effectively the position of his party and many others, including a few disgruntled Labour members, for whom a potential Labour government under Corbyn is somehow worse than the actual no-deal Brexit under Johnson that may soon happen. But there is a clear contradiction too. Some of those who have devoted the past few years to stopping any kind of Brexit now claim that the only thing worse than a no-deal Brexit – the worst kind of Brexit they could possibly imagine – is the leader of the only party that can stop a no-deal Brexit.

None of this is a reason to necessarily support Labour or Corbyn. There are all sorts of reasons, from antisemitism to an insufficiently pro-European stance, as to why progressives might decide not to back Labour at this moment; and the calculations are very different outside England and in those areas where tactical voting offers the best hope of getting rid of Conservatives. And given the redistributive agenda that Labour laid out at last week’s conference, there are all sorts of reasons why progressives might back it, too.

Political parties are not entitled to anyone’s support. They must earn it. The moment they start blaming voters for not supporting them, they are sunk. That’s as true for Labour under Corbyn as it was for the US Democrats under nominee Al Gore. But that does not absolve the voter from the strategic and moral responsibility of accounting for their vote.

In the second round of the French presidential elections in 2002, which pitted the conservative Jacques Chirac against the far-right candidate Jean-Marie Le Pen, a Communist party local councillor, François Giacalone, voted for the conservative. “When the house is on fire,” he said, “you don’t care too much if the water you put it out with is dirty.”

Right now, the house is on fire. Johnson’s first couple of months in office have illustrated that what’s at stake is not a contest between bad and worse. This is a leader who uses the police as props; breaks the law to undermine democracy; and stokes division with rhetoric that can and has been easily co-opted by the far right, pitting a section of the population against parliament and the judiciary. Johnson’s cabinet and its agenda, both with regards to Brexit and beyond, do not represent a mere shift to the right but a paradigmatic sea-change in British politics that, where Europe is concerned, may have irreversible consequences.

Those who last year were literally on the fringe of the Tory party conference have this week been running the show. The coming election will not just be about opposing Brexit – it’ll be about defending democratic norms. The key consequence of understanding that Corbyn is the legitimate leader of the Labour party is understanding that this fire cannot be extinguished without him.

• Gary Younge is a Guardian columnist

Using housing wealth to fund social care: why the Care Act 2014 is unfair

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Posted: 04 Feb 2015 06:30 AM PST

Nicholas HopkinsEmma Laurie

The Care Act 2014 reinforces the expectation of leaving housing wealth as an inheritance, which perpetuates inequalities across generations, argue Nicholas Hopkins and Emma Laurie. Intergenerational fairness requires homeowners to use a greater proportion of their housing wealth to fund social care rather than relying on the state.

The issue of funding social care costs is one that provokes strong feelings. Many homeowners resent the idea of having to sell the family home to pay for residential care costs. But with an ageing population, a real concern is raised over who should pay. The Commission on Funding of Care and Support (the Dilnot Commission) was an independent body tasked by government with reviewing the funding system for care and support in England. Its report, Fairer Care Funding, provided advice and recommendations to government and was subsequently enacted in the Care Act 2014.

The Dilnot Commission’s overriding objective was to make the system of funding adult social care fairer as well as sustainable. The Commission took the view that it was fair to limit the extent to which an individual is required to draw on their own wealth, including housing wealth, to pay for the costs of their care. It also recommended that the home should not have to be sold during the owner’s lifetime in order to pay for social care costs.

To achieve these two objectives, the Care Act 2014 places a cap on individual liability for care costs and provides a scheme of Universal Deferred Payment (UDP). UDP is intended to prevent ‘forced sales’ of the home. Despite its name, it is not intended to be available to everyone. We consider that the measure is justified and that its operation could be confined to those who would otherwise have to sell their home. This could be achieved by making UDP available only to those who could not pay the capped sum from non-housing assets.

Our concerns with the Care Act 2014

Our principal concern lies with the Act’s treatment of housing wealth through the cap. Its effect is to preserve individual wealth and, in practice housing wealth, at the expense of the public purse. Ultimately, it will benefit those who will inherit that wealth. The use of public funds to preserve an inheritance lies at the heart of our criticism.

By passing a greater proportion of the costs of social care to the state, the Act will inevitably have undesirable – and unfair – consequence for the younger generation of taxpayers. We therefore advocate a phased scheme which would aim to change the expectation of leaving housing wealth as inheritance and, instead, inculcate an expectation of using housing wealth to fund social care costs.

This will be a controversial argument for many people. We understand the sense of unfairness felt by current homeowners at having to use housing wealth to pay for their social care costs and the desire to leave housing wealth as an inheritance. The ability to provide an inheritance is one of the bases on which homeownership has been promoted. Equally, there is understandable confusion about the different funding models for health and social care. While health care is provided free at the point of delivery, social care is means-tested and incorporates an assessment of a person’s assets to determine eligibility for financial support from the state.

The need for intergenerational fairness

Nevertheless, the wider concern of intergenerational fairness requires homeowners to use a greater proportion of their housing wealth. There is a growing recognition that issues of intergenerational fairness must form part of the ‘social contract’ between individuals and the state. In the UK, life expectancy has been growing while the birth rate has been falling. The consequence is popularly referred to as a ‘demographic time-bomb’, and the phenomenon of an ageing population is a policy concern that has been taken up at international, European and national levels.

But government policy on the need for intergenerational fairness is inconsistent. On one hand, the government has taken steps to increase the age of eligibility for the old-age pension and further increases are planned. On the other hand, it has passed the Care Act 2014 which entails a greater proportion of the costs falling on the state and, inevitably, the younger generation.

Changing expectations

Inculcating an expectation of drawing on housing wealth to fund older age care can address our concerns of intergenerational fairness. Such a policy reflects the principle of asset-based welfare, which entails expanding asset holdings among low-income households as a means of reducing wealth inequalities and promoting wealth-creating behaviour among citizens.

Successive governments since the 1950s have consistently encouraged homeownership and, as a result, housing wealth now exceeds other forms of investment to become by far the largest element in personal disposable assets. Homeownership has spread wealth more widely than any other form of asset or investment. Despite doing so, housing wealth is unequally distributed. Many older property owners have seen large, tax-free capital gains over the past few decades due to the rising value of property. The proportion of housing wealth held by older people is forecast to grow, while the term ‘generation rent’ has been coined to refer to those younger people who have no realistic prospect of buying their home. Inculcating an expectation that people will look to their housing asset, rather than to the state, to fund their welfare can reduce those intergenerational disadvantages by requiring homeowners to use the wealth in their lifetime.

Homeownership has not been explicitly promoted with the idea that the wealth will be drawn upon to fund the owner’s older age. Combined with the lack of understanding of the difference between health and social care, it is perhaps unsurprising that a strong sense of unfairness is felt at the prospect of housing wealth accumulated over a lifetime being dissipated by the requirement to fund a few years of social care. However, rather than attempting to change expectations, the Dilnot Commission’s proposals, as implemented by the Care Act 2014, appear uncritically to accept the perception of unfairness. The Act reinforces the expectation of leaving housing wealth as an inheritance, which perpetuates inequalities across generations. As a result, the funding model provided by the Act is neither fair nor sustainable.

Paid work is never enough: we need to pay attention to the quality as well as the quantity of jobs created

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Getting people into employment will not on its own ensure decent living standards and reduce poverty, finds Peter Taylor-Gooby. His research shows that, while higher employment is associated with lower poverty, other factors are more important. The most important factor in reducing poverty levels across the countries looked at was the strength of contractual rights, and other policies, such as access to child care, policies to reduce discrimination against women were also significant.

Most people think paid work is the royal road to a better life for people of working age. The value of work is at the centre of policy thinking across the board, from Labour’s Compulsory Jobs Guarantee to UKIP’s commitment to ‘enroll unemployed welfare claimants onto community schemes or retraining workfare programmes’. Ian Duncan Smith’s Universal Credit puts work ‘at the centre of our welfare system’. The EU’s 2020 Growth Strategy ‘is about more jobs and better lives.’ And so on.

The idea that getting people into work will solve the problem of achieving decent living standards for those of working age was given extra impetus as unemployment rose from about 5 to over 8 per cent between 2008 and 2012, paralleled with a rise in working-age poverty. Now unemployment is falling back towards pre-crisis levels but, as IFS analysis shows, poverty among working age adults is failing to respond. The poor quality of many of the new jobs indicates short-comings in the case for paid work as the foundation of welfare.

Most of those in poverty live in working households. Among families the proportion in households with at least one member in work rose from 50 to 68 per cent between 1996 and 2013 according to the DWP’s Households Below Average Incomes statistics. The job market started to recover from its low point in 2012 but many of the jobs on offer are far from satisfactory. The number of part-time workers rose from 7.2 million to 8.2 million between the recession in 2008 and 2014, the numbers of involuntary part-timers from 0.7 to 1.7 million and the number of temporary workers from 1.4 to 1.7 million. The Labour Force survey shows a doubling of zero-hour contracts between 2007 and 2013 to 300,000.

These statistics suggest that we need to pay attention to the quality as well as the quantity of jobs created. Our new research examines factors affecting employment and poverty across 17 European countries for the period of prosperity and growth between 2001 and 2007. This is the time when the sun shone, the most favourable period in recent history for the work = welfare = decent living standards project. The research shows that, even at this time, new welfare was much more successful at getting people into work than at reducing poverty.

Employment rates rose across Europe, especially for women. However, far from declining, poverty rates also increased (by the standard EU 60 per cent of median income measure) from 18 to 18.6 per cent between 2001 and 2007 in the UK, and also in other successful economies such as Germany (11 to 15.2 per cent), Sweden (9 to 11.5 per cent) or Poland (16 to 17.3 per cent). One explanation is to do with access to paid work. Governments need to make sure that even more people move into work. This is the logic that lies behind the EU’s Employment Strategy and Horizon 2020 programme and behind national work-centred policies such as Universal Credit. Then the great recession swept everyone towards work at any price policies, redoubling the stress on paid work.

These were the good times, when, if ever, the link between work and decent incomes should be strongest. Higher employment is associated with lower poverty, but the analysis shows that, even during this period, other factors were more important. In fact the most important factor in reducing poverty levels across the countries was the strength of contractual rights. Other policies such as access to child care, policies to reduce discrimination against women were also significant.

The level of employment plays a role in ensuring decent living standards, but one that is less powerful than that of employment rights. The suggestion is that while employment is probably a good thing, if we want people to be better off, we also need to make sure that the quality of jobs is adequate. The best way to ensure that is to strengthen contractual rights against dismissal and to promote trade union membership. Recent trends in policy to weaken employment protection, to undermine the role of trade unions and to introduce high fees for access to employment tribunals move us in entirely the wrong direction. Shovelling people into low-paid jobs is all the fashion, but it is not the answer to the problem of poverty among those of working age.

For more, see “Can ‘New Welfare’ Address Poverty Through More And Better Jobs?” by Peter Taylor-Gooby, Julia M. Gumy and Adeline Otto.

About the Author

Peter Taylor-Gooby is Research Professor of Social Policy at the University of Kent’s School of Social Policy, Sociology and Social Research. He chaired the British Academy New Paradigms in Public Policy Programme (2010/2011) and is Chair of the REF Social Work and Social Policy and Administration panel 2011-15, a Fellow of the British Academy, a Founding Academician at the Academy of Social Sciences and, previously, a Fellow of the Royal Society of Arts and President of the British Association for the Advancement of Science, Sociology and Social Policy Section.
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The Coalition’s Social Policy Record 2010-2015

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This paper summarises nine detailed reports assessing the social policies of the
UK Coalition government elected in 2010. What did the Coalition set out to
achieve? How much was spent and saved? What policies were enacted and with
what effect?
– The Coalition made ‘tackling our record debts’ its most urgent task. However, it also aimed to
deliver radical reforms to achieve ‘a stronger society, a smaller state and responsibility in the
hands of every citizen’.
– Rapid and far reaching reforms were enacted: re-structuring the NHS; expanding the number of
Academies; starting to introduce Universal Credit; pension reforms; widening non-state provision,
increasing local autonomy and reducing eligibility for services and benefits.
– The Coalition’s decisions to offer relative protection to schools, pensions and the NHS meant that
its austerity programme was more limited overall than its rhetoric suggested, and was
concentrated in particular policy areas. Total public spending fell by 2.6 per cent between
2009/10 and 2014/15. However, “non-protected” services were cut by around one-third.
– Although the Coalition stressed the importance of the “foundation years”, real spending per child
on early education, childcare and Sure Start services fell by a quarter between 2009-10 and
2012-13 and tax-benefit reforms hit families with children under five harder than any other
household type. Provision for adult social care users fell 7 per cent per year during the Coalition
period to 2013/14.
– Despite a promise that the better-off would carry the burden of austerity, changes to direct taxes,
benefits and tax credits affected poorer groups most. After initial protection ended, estimates
suggest that poverty increased to 2014/15 and will get worse in the next five years.
– It is too early to assess the full effect of the Coalition’s structural reforms (such as changes to the
school system). Whoever is elected in May 2015 will face many continuing issues including child
poverty, unaffordable housing, pressure on the NHS and social care from an ageing population, a
regionally unbalanced economy, low wages and insufficient affordable childcare. The ‘cold climate’ for social policy – very high public sector debt and a high deficit – also remains.

The Coalition’s Inheritance

The Conservative – Liberal Democrat Coalition that took power in May 2010 inherited a particularly tough fiscal climate. By the end of 2009/10 net public sector debt had reached £956.4bn (62 per cent of GDP), while the current budget deficit stood at £103.9bn (6.9 per cent of GDP). These figures were very high for the UK by recent standards and reflected the impact of the global financial crisis that affected most major world economies in similar ways. Strategic choices had to be made: should public spending be maintained in a Keynesian move to support economic growth, or cut in order to pay down the debt quickly? Should efforts to balance the public finances focus on tax increases or spending reductions? Who should bear the burden of these efforts?
On the issues that are the principal concern of our enquiry – social outcomes, poverty and inequality – the Coalition inherited a better situation than its predecessor. Labour’s social policy programmes had delivered expanded public services. Socio-economic gaps in access to services had decreased. Economic and social outcomes, such as pupil achievements and child poverty, had also generally improved, while differences between the most and least deprived social groups narrowed.

But a lot remained to be done. Child and pensioner poverty had fallen, but overall income inequality had not. There were still large social class gaps in health, early childhood development, school achievement, university participation, and neighbourhood living conditions. An ageing population made the funding of health, social care and pensions increasingly challenging. Other pressures included rising unemployment, concerns about the quality of care, and a chronic under-supply of housing.
What were the Coalition’s aims and goals?

The incoming Government declared that its most urgent task was to tackle the country’s debts. But it also insisted that fairness would lie at the heart of its decisions “so that those most in need are most protected”. The better-off would be expected to: “pay more than the poorest, not just in terms of cash, but as a proportion of income as well”.
Beyond deficit reduction, the Coalition set a further goal of improving social mobility and creating a
society where “…everyone, regardless of background, has the chance to rise as high as their talents and ambition allow them”. Reforms to ‘welfare’, taxation and education were promised, with devolution of decision-making powers from central to local government and communities. Defining its core values as “freedom, fairness and responsibility”, the Coalition pledged to deliver “radical reforming government, a stronger society, a smaller state and power and responsibility in the hands of every citizen”.
What did the Coalition do?

Cut public spending, rather than raising taxes

A fundamental decision announced in the Coalition’s first, “emergency” Budget was to target deficit reduction through spending cuts (77 per cent) much more than tax increases (23 per cent). On the taxation side of its strategy, the Coalition raised the VAT rate from 17.5 to 20 per cent, and increased Capital Gains Tax for higher rate taxpayers. Yet room was also made for sizeable tax cuts – including raising the Income Tax personal allowance from £6,475 to more than £10,000. Corporation Tax was cut, and, from 2013/14, the Income Tax rate for people earning over £150,000 was reduced from 50 per cent (recently introduced by Labour) to 45 per cent.

Gave relative protection to the NHS and schools, but made deep cuts to other budgets

The Government chose to maintain spending in some policy areas and implement deeper cuts
elsewhere. Budgets for the NHS and schools, accounting for more than a quarter of total departmental expenditure, were relatively protected. Spending on health grew in real terms by 2.7 per cent between 2009/10 and 2013/14: a real increase although a smaller growth rate than in previous years and much lower than the increase in need (for example as measured by the increasing elderly population). Schools expenditure fell by less than one per cent up to 2012/13 (the latest data available). A Pupil Premium, paid to support pupils from low-income families, helped maintain school budgets and also directed money towards those in more disadvantaged contexts.
Although funding for schools and 16 to 19 year-old learners was protected, the budget for adult skills training was reduced by 26 per cent between 2009/10 and 2013/14. Higher education spending was also cut – by 44 per cent in the short-term – as government grants for teaching were replaced with student tuition fees and loans.
The biggest losers among ‘non-protected’ services were those provided by local councils. Between 2009/10 and 2014/15, local government funding in England fell by an estimated 33 per cent. Within particular service areas, spending on children aged under five fell 21 per cent between 2009-10 and 2012-13, with falls of 11 per cent for early education and 32 per cent for Sure Start. These reductions coincided with a 6 per cent increase in the number of under-fives. Spending on housing and community amenities, which includes funding to build social housing, fell by 35 per cent between 2009/10 and 2013/14. All the main central government funding streams for neighbourhood renewal were removed. Budgets for residential homes and other adult social care community services were cut by 7 per cent between 2009/10 and 2013/14, while the population aged 65 and over grew by 10 per cent.
Uprated pensions, while reducing other social security budgets

Pensions were protected from Coalition commitments to curtail spending on social security. A ‘triple lock’ was put in place requiring them to be uprated each year by earnings growth, price inflation or 2.5 per cent, whichever was highest. In contrast, cuts were made elsewhere by restricting eligibility for tax credits and working-age benefits and imposing new conditions on claimants. Benefits were made less generous by a change to the inflation index used for annual adjustments and by below-inflation increases from 2012-13, as well as cuts for particular groups.
Restructured the welfare state
Alongside spending cuts, the Coalition embarked on an extensive restructuring of welfare state
institutions. In education, it vastly extended Labour’s programme of directly-funded Academies, and enabled ‘Free Schools’ to be set up by groups of parents, charities or other institutions. Higher education regulations were changed to allow new providers to offer degree qualifications. In the NHS, government introduced major reforms emphasising competition, decentralisation, a range of provider types (public, private and third sector) and outcomes. Delivery of a new, consolidated Work Programme, helping jobseekers to gain employment, was contracted-out on a ‘payment-by-results’ basis. Social housing providers were encouraged to seek more private funding for new homes, charge rents closer to market levels, and move away from ‘tenancies for life’.

‘Localism’ provided another key theme. Government regional offices and regeneration programmes, were abolished in favour of local decision-making. Local government finance was reformed to provide more incentives for economic development. In addition, two elements of the social security system – the Social Fund and Council Tax Benefit – were devolved to local authorities, both with reduced budgets. New rights were also conferred on community groups. Local government assumed new responsibilities and powers in the context of public health and the public health budget was devolved. However, with the exception of public health, the expansion of local powers and responsibilities took place at a time when budget cuts gave local authorities less capacity to make use of them.
The Coalition also shifted the boundaries of welfare provision, in many cases moving away from
‘progressive universalism’ towards greater targeting. Eligibility was restricted for some benefits and services. Extra conditions were imposed, particularly for out-of-work benefits, along with tougher penalties for not meeting them. In some areas, financial responsibility underwent a wholesale shift from the state to the individual; for example, by trebling university student tuition fees in England and by introducing adult learning loans. In social care there were moves in both directions: on the one hand tighter eligibility criteria for receipt of social care services shifted responsibility towards individuals and their carers; on the other hand the Care Act 2014 introduced a lifetime cap on the total long-term care costs individuals would in future be required to pay.

Embarked on reforms to the content and design of services

In some policy areas the Coalition’s reforms went deeper into the content and design of services, living up to its promise of sweeping changes. These changes are described in detail in the papers that underpin this summary report. For example, the school curriculum and examination system in England were overhauled, justified on the grounds of making them more rigorous, and a new system of teacher training was introduced. In adult skills training, the Coalition instituted changes to the length and quality of apprenticeships, designed to bring England closer to European systems. One of the most ambitious reforms was a complete overhaul of working-age benefits and tax credits, bringing most of them into a single system, Universal Credit (UC), designed to incentivise work and get rid of complicated overlaps in means-tests and taxation. While many people support the principles behind UC, it proved challenging to implement, and there are remaining concerns about its design and the capacity of the IT system to cope with the number of monthly changes in circumstances which will be required. Just 18,000 people were receiving it late 2014, against an original target of 2 million.
What were the results?

Cuts in many services and increasing pressure on others

‘Unprotected’ services have been substantially reduced. In adult social care, where spending was cut despite a growing elderly population, there was a falling caseload (down 25 per cent from 2009/10 to 2013/14) (Figure 1) and ‘intensified’ focus on supporting those with the greatest needs. Housing policies made little impact on the supply of new homes. Between 2010 and 2013 an average of 139,000 new homes per year were completed, compared with 190,000 under Labour. There were 17 per cent fewer adult learners as course funding was curtailed, and loans introduced. Centrally funded neighbourhood renewal activity was drastically reduced, while economic regeneration programmes performed well below expectations in terms of business and job creation. Despite Government endorsements for voluntary activity and a ‘Big Society’, Third Sector budgets also fell, with cuts estimated between 50 and 100 per cent in some deprived neighbourhoods.

Falling number of people receiving community-based, residential or nursing care
services through local authorities, (England).

In early years services, the number of Sure Start children’s centres fell from 3,631 in April 2010 to 3,019 in June 2014, although survey data showed that many of those remaining expected to maintain, or even expand, the services they provided, in part by making them more targeted. There was also new early education provision for 2-year olds and the number of health visitors and Family Nurse Partnership provision for teenage parents expanded.
‘Protected’ areas have been less hard hit. In education, the Coalition kept school funding resources broadly stable. In England, the number of schools increased, pupil-teacher ratios were maintained, and while the average class size increased in primary schools, it fell in secondary schools. Although there were more 16-19 year learners, the proportion not in education, training or employment fell. Health services were protected relative to other areas but pressures on access and quality began to emerge as increases in demand outstripped increases in spending. The proportion of cancer patients seen within 62 days declined and fewer hospitals met their Accident and Emergency waiting-time targets. Public satisfaction with the NHS, measured by the British Social Attitudes Survey, fell from 70 per cent in 2010 to 60 per cent in 2013. Among employment services, the new Work Programme proved cheaper, though no more effective, than its predecessors.
Tax and benefit changes benefited richer groups more, while contributing nothing to deficit
reduction

Despite the Coalition’s insistence that “those with the broadest shoulders should bear the greatest
burden”, the poor bore the brunt of its changes to direct taxes, tax credits and benefits from May 2010 to 2014-15. Up to 2014/15, the poorest twentieth lost nearly 3 per cent of their incomes on average from these changes (not allowing for VAT and other indirect taxes) and people in the next five-twentieths of the income distribution lost almost 2 per cent. With the notable exception of the topmost twentieth, those in the top half of the distribution were net gainers from the changes. Perhaps surprisingly, overall the ‘welfare’ cuts and more generous tax allowances balanced each other out, contributing nothing to deficit reduction.

The combined impact of direct tax and cash transfers was mostly regressive, moving
incomes from poorer households to those that were better off.

Early protection for the poor, but increasing poverty later

As a result of decisions made under Labour and initially continued, benefits rose in line with inflation during the Coalition’s first two years at a time when real earnings fell during the recession. The result was that poverty measured in relation to median incomes (before housing costs) fell until 2012-13. Income inequality also fell during election year 2010-11 and held steady up to 2012-13 at its lowest level for a quarter of a century. However, figures measuring poverty against a fixed income threshold show an increase over the same period – the more so when housing costs are taken into account.
These latest official figures pre-date most of the Coalition’s welfare reforms coming fully into effect.
Modelling analysis by the Institute for Fiscal Studies suggests there will already have been a sharp rise in relative poverty (and in poverty against a fixed line) between 2012/13 and 2014/15 for children and for working-age non-parents, and then a further rise to 2020/21, with the relative child poverty rate reaching 21 per cent, up 3.5 percentage points from 2012/13. Qualitative evidence suggests growing hardship since 2013 among households affected by a combination of falling real wages, rising fuel and food costs, changes to benefit rules, and sanctions.
Pensioners were protected, children less so

As far as taxes and benefits (including pensions) are concerned, pensioners continued to be relatively favoured. As a share of national income, transfers to pensioners had increased under Labour from 5.4 per cent of GDP in 1996-97 to 6.6 per cent in 2009-10. This was also the proportion in 2014-15, although a peak of 6.9 per cent was reached in 2012-13. However, pensioners with care needs were affected by cuts to adult social care.

Meanwhile the cost of working-age benefits not related to having children fell from 3.4 per cent in
2009/10 to 3.1 per cent in 2014/15, and spending related to children from 2.8 per cent to 2.3 per cent of GDP by 2014-15. Concerns about future social mobility might be raised as young children in low-income families were affected by cuts to spending on services, as well as by reductions in benefits for the underfives. On the other hand, poorer school age children received additional help through the Pupil Premium. Fears that the abolition of the Education Maintenance Allowance and the rise in university tuition fees would widen socio-economic gaps in further and higher education participation have not been borne out to date. In fact the proportion of young people not in education, employment and training fell for the first time in a decade in 2013, and increasing numbers of disadvantaged young people applied to university.
Too early to tell for many social and economic outcomes

Most data indicating changes in outcomes are only available until 2012 or 2013, making it impossible to assess the full impact of Coalition policies. The data available to date show that progress in many areas continued in the new government’s early years, but much of this must be considered the legacy of the previous government, since many policies were not fully implemented in the period covered. An exception is education, where, up until 2013, attainment continued to improve and socio-economic gaps to narrow, although no immediate accelerating effect of the Pupil Premium was evident. Early indications are that these gaps may widen when 2014 results are released, since poor pupils have tended to rely more on the vocational qualifications that now carry less value in school league tables.
The overall picture is that there has been little significant change, as yet, in many of the key indicators of social progress and equity. Health inequalities remain deeply entrenched. There is no evidence of closing socio-economic gaps in child development. Gaps in worklessness and poverty between the poorest neighbourhoods and others reduced as the economy recovered, but not quite back to their preeconomic-crisis levels. The Coalition did preside over positive trends in employment, which rose to a new peak in summer 2014, higher than before the crisis. But wages fell and much of the increase was in self-employment and part time working. Some indicators were less positive. Unmet needs for care among the elderly increased. Housing became increasingly unaffordable and homelessness increased.
Still high levels of debt and deficit, and further cuts to come
The protection of health, schools and pensions from major spending cuts meant that even with
reductions of around a third in some other services, the scope for budget savings was limited. Overall, the effect of all the Coalition’s measures in the current parliament has been to cut public spending by 2.6 per cent in real terms, from £674bn in 2009/10 to £656bn in 2014/15 (at 2009/10 prices). As GDP grew, this brought spending down from a peak of 47.1 per cent of GDP in 2009/10 to 43.7 per cent in 2014/15.
The current budget deficit was reduced from 5.9 to 3.5 per cent of GDP. However, public sector net debt rose to 80 per cent of GDP by 2014/15. Current plans to address this are predicted to reduce public spending overall to 38.2 per cent of GDP by 2018/19. Day-to-day spending on public services (excluding benefits and debt repayments) is predicted to fall to its smallest share of national income at least since 1948.

Conclusions

There is no doubt that the Coalition Government formed in 2010 faced a very tough fiscal climate and ongoing social policy challenges. Its response was to seek to reduce the deficit quickly. It also decided to achieve most of its fiscal rebalancing through public spending cuts rather than increased taxes, and to protect the NHS, schools and pensions – all very big areas of public spending – from major cuts. And it implemented some expensive commitments, notably increasing the income tax personal allowance to £10,000 and a more generous system for uprating state pensions.
These decisions meant that while the overall reduction in public expenditure has been less than three per cent, very substantial cuts were made in unprotected areas, largely in local services. In the tax and benefits system, pensions were protected and benefits to lower income families were reduced, while there were tax reductions for some better off households. Despite the aim that the better-off should contribute a greater share of income than the poor, the reverse was the case across most of the income distribution. Poverty rates measured against a fixed threshold rose to 2012/13 (the latest official data) and are predicted to rise further, and there are signs of increasing material deprivation and hardship arising from a combination of rising costs of living, reductions in the value of benefits and eligibility and short-term benefit sanctions. Meanwhile, the ‘protected’ NHS has experienced real average annual expenditure growth rates that have been positive but exceptionally low, while adult social care services have been cut.

Although current public attention rests on ‘the cuts’, the Coalition’s large-scale reforms designed to
reduce the size of the state, stimulate private and voluntary provision and increase personal
responsibility may ultimately prove its biggest legacy. It is too soon to establish their effects on social and economic outcomes. Whoever is elected in 2015 faces a welfare state in flux, with fundamental changes to the NHS, schools, and benefits still underway. At the same time, many problems that the Coalition inherited remain. Increasing need for health and social care, unaffordable housing, a regionally unbalanced economy, and continuing labour market inequalities all remain to be tackled, as do child poverty, insufficient high quality affordable childcare, a weak system of apprenticeships for young people and relatively ineffective mechanisms for helping workless people back into work. The next Government, like the Coalition, will need to address these issues in the context of high public sector net debt and a current budget deficit, and with many of the most straightforward cuts already made. The climate for social policy and those most affected by it will remain cold for the foreseeable future.

Further information

The full version of this paper The Coalition’s Social Policy Record: Policy Spending and Outcomes 2010-2015, is available at http://sticerd.lse.ac.uk/dps/case/spcc/RR04.pdf. It is a summary of nine detailed accounts of changes under the Coalition in all the topics mentioned in this paper: cash transfers, health, adult social care, housing, employment, the under fives, schools, further and higher education and area regeneration. Readers wanting further details are advised to go to the individual papers which can be found at http://sticerd.lse.ac.uk/case/_new/research/Social_Policy_in_a_Cold_Climate.asp. All the papers are part of
CASE’s research programme Social Policy in a Cold Climate (SPCC), funded by the Joseph Rowntree Foundation, the Nuffield Foundation, and Trust for London. The views expressed are those of the authors and not necessarily those of the funders.

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