PRIVATISING STATE WELFARE

There is no reason why a country as wealthy as Britain cannot afford adequate 
state welfare for young and old alike. Its 500 richest inhabitants have between them 
assets worth £86 billion. There are an estimated 80,000 millionaires. 100,000 people 
have incomes of more than £100,000 per year. In 1994, total pension fund assets 
exceeded £400 billion. The following year, overseas direct investment ran to 
£37.8 billion; the total value of such assets held abroad amounted to £244.1 billion. 
This in turn was exceeded by the value of overseas non-bank portfolio investments, 
which totalled the staggering amount of £332.2 billion. Yet in the midst of this 
wealth, Labour has not only pledged not to raise the maximum rate of income tax, it 
has also stated quite clearly that it will not raise benefits at more than the rate 
of inflation. Blair's appointment of Harriet Harman and Frank Field to head the 
Department of Social Security reinforces the message for the poor: don't look to 
New Labour for any support or relief. ROBERT CLOUGH reports.

There should be no surprise. The Labour government is merely defending the 
class interests of those it represents - the middle class. Britain may be a wealthy 
country, but that wealth is concentrated in the hands of a minority, and they are 
not prepared to see it spent unprofitably on the relief of poverty. Far from it: the 
poverty that exists today is a condition of their wealth, as it is for the affluence of 
the middle class. Whilst during the boom years it was possible to provide state 
welfare for the mass of the working class as well as the more privileged, such 
conditions have long since gone. Now there is a clear trade-off: middle class 
affluence can only be preserved at the direct expense of the mass of the working 
class. Labour did not come to office to end poverty: its programme is one of 
providing economic and political security to the middle class. Its policies on state 
welfare are determined by this over-riding objective.

What this means is that Labour will introduce a two-tier state welfare system, 
where the level of benefits or care is determined by what the individual is 
prepared to pay. This means increasing the level of private provision whilst 
reducing the state-funded component to an absolute minimum. As Chris Smith 
said when he was Shadow Secretary of State for Health, 'the principle must surely 
be that the state acts as the guarantor of all provision, the regulator of all 
provision - and the administrator of some.'

Labour is determined to cut the cost of state welfare, particularly for the 
elderly, those whose usefulness to capitalism has disappeared. 40 per cent of the 
£90 billion cost of state welfare is spent on state pensions and benefits for the 
elderly, and half the £32 billion cost of the NHS is spent on their care as well. 
The way it will achieve this is by cutting all forms of welfare provision to the 
poorest section of pensioners, whilst keeping middle class commitment to the 
state sector by allowing them to 'top up' their provision through private means. 
The fact that privatising welfare is vastly more inefficient and costly on a per 
capita basis is irrelevant: the real issue is to reduce the numbers to whom welfare 
is made available. This can only be achieved by reducing state provision.

The crisis in state expenditure

Behind the meaningless posturings of the election campaign lay a crisis in public 
expenditure which New Labour will have to address. In a report published on 9 
April, the Institute for Fiscal Studies stated that 'either the current shape of the 
welfare state will be maintained, and the next government will have to spend - 
and tax - more than planned, or the welfare state will shrink and provide fewer 
services to fewer people'. A separate study by the accountants Coopers and 
Lybrands concluded that the incoming government would have to cut government spending 
by between £5 billion and £10 billion in order to bring it in line with revenue. 

These cuts will have to take place in education, welfare or health, which together 
make up to 60 per cent of government spending. Labour is already committed to Tory 
plans for the next two years, which predict a rise of no more than one per cent in 
NHS spending. Yet to maintain services, expenditure would have to increase by no less 
than 8 per cent. In other words, Labour will cut NHS services by seven per cent. 
No government has ever attempted this before. The results will be catastrophic. 
They will be the equivalent of cutting the workforce by 70,000 - enough to staff 
20 to 30 hospitals. 

The position is no different as far as local government expenditure is 
concerned. In March, the House of Lords ruled that local authorities can 
withhold or withdraw help from people when short of funds. It follows on a case 
when Glouce-stershire Local Authority cut home-care services to 1,000 people to 
save £2.5 million in 1994. The ruling means that the availability of resources will 
be the deciding element in whether someone gets a service or not.

In such conditions, there are two options: either cut services, or charge people 
for them. In practice, both are happening. In a 1996 survey, only 11 local 
authorities (seven per cent) provide a free home care service for all users. This is 
down from 17 per cent in 1994. Almost two thirds (96) have a minimum charge 
for home care even for people on benefits. 26 local authorities (11 of which are 
Labour) expect disabled people to give up the care component of their Disability 
Living Allowance to pay towards the cost of their care. As more and more 
authorities levy such charges, and as the charges rise, so the poorest will be 
unable to get the services they need: only the middle class will.

Rationing healthcare

The cuts in health spending will not only mean enormous job losses, they will 
mean introducing new forms of rationing. Rationing already exists: it operates 
through the use of waiting lists - a queuing system. This has the formal 
semblance of equitability, but as everyone knows, you can jump the queue if you 
have the money. Take a coronary artery by-pass graft: some 40 per cent of these 
opera-tions are now performed privately. But those who are most in need of it 
are working class people: angina is twice as high among male manual workers 
than male non-manual workers in middle age. Health authorities already ration 
this operation. In 1993/94, the lowest 10 per cent of all health authorities bought 
on average five such operations per 100,000 head of population. The top 10 per 
cent bought 42 - an eight-fold difference. There are wide variations in the 
purchase of cataract surgery and hip replacements, with the top 10 per cent of 
health authorities buying twice as many operations per head of population for 
either category than the lowest 10 per cent. There is a large private market for 
both of these as well - 30 per cent of hip operations, for instance, were done 
privately in 1994. There is no doubt that Harriet Harman, notorious for securing 
a privileged education for her children, will do everything in her power to defend 
and extend privileged access to healthcare for her class as a whole.

Rationing - or 'priority setting' as it is called, is now a subject that is debated 
regularly in the newspapers. One so-called expert, Professor Alan Williams from 
York University's centre for health economics, argued earlier this year in the 
British Medical Journal for explicit rationing by such factors as age. He argued 
that limits should be set on the amount of health care to which pensioners 
should be entitled. However, this is already happening: access to intensive care is 
already rationed according to age. But the rationing is for working class people 
only: as state-funded surgery becomes more limited, so middle class people will 
turn to private health care. Rationing and a two-tier system are inseparable.

Privatising pensions

In 1980, pensions were indexed to price increases rather than wage rises. If the 
link had been retained, the single pension would now be £82.55 rather than 
£61.55, and the married couple pension £132.10 instead of £97.95. The single 
pension is now 20.3 per cent of average male manual earnings. Occupational 
pensions are now a privilege for a diminishing number of employees - 48 per 
cent in 1994 as opposed to 52 per cent in 1983. Although New Labour are re-
viewing pension arrangements, Frank Field has already provided the answers. 
Every worker earning more than £100 per week will be required to contribute 
towards a second pension. This will not be a pay-as-you-go system, where current 
payments cover existing pensions. Instead, each individual will have their own 
individual fund which will be lodged with the pension fund of their choice. The 
aim is to get people to invest up to 16 per cent of their annual income in this 
scheme.

Any privatised scheme of this character will act to preserve and exacerbate 
inequality. There is no pretence at a socialised system: middle class people will 
end up with the best pensions because they will have been able to save more. 
Field himself says 'For workers earning up to £100 per week the state retirement 
pension, currently £61.15 per week, provides a reasonable replacement retirement 
income'. Reasonable for whom? Not, we think, Frank Field. As it is, the onus on 
working class people who earn more than £100 per week will be enormous: to 
lose 16 per cent of an income of, say, £150 per week represents a huge burden. 
Yet this is what is required if public spending is to be cut - the individualisation 
of pension arrangements. There is no doubt that Frank Field has been given the 
post of Minister of State for Social Security in order to introduce this kind of 
scheme.

The poor will get poorer

State welfare provision is far more efficient than privatised provision. It would 
only cost £2 billion to restore the state pension to the level that is would have 
been had it been indexed to wages rather than prices. But for Labour this is too 
much of burden to be carried by the middle class. Adequate universal health-care 
would cost another £1 billion or £2 billion. The same applies: the middle class is 
willing to pay for its own healthcare, but not for anyone else's.

The fact is now that if you are elderly and working class, you will become 
worse off under Labour over the next few years, because the middle class is 
concerned only about its own interests. The NHS will continue to become a two-tier 
system, where treatment will only be available if you can pay for it. The same 
will be true for home help services. If you are approaching retirement, the 
pension you will get will still be linked to prices, not wages. In the meantime, 
middle class people will be able to buy what is not on offer to the working class. 
END