Contributory welfare has become the latest fad in Westminster village. Labour politicians are in favour of it, Conservative politicians are in favour of it, think tanks are in favour of it, and they all use largely the same rhetoric: rewarding contribution, restoring confidence in the welfare system, ensuring greater fairness, ending the ‘something for nothing’ culture, establishing a ‘something culture’.
Sounds good. But it won’t happen, and here’s why.
The difference between a contributory and a means-tested welfare system is not just an administrative one. The two reflect completely different conceptions of fairness, and different understandings of what a welfare system should be there for.
A contributory system is based on an understanding of ‘fairness’ in the sense of ‘proportionality’, or reciprocity: the more you have paid into the common pool, the more you should be entitled to take out of it. Quid pro quo, something for something. In a means-tested system, meanwhile, fairness is understood as supporting the needy, with support being proportional to need. The more you need, the more you get, and if you don’t need support, you won’t get any.
The two principles can easily be in conflict with one another. Suppose you are in charge of the welfare budget, and you have to allocate a fixed amount of money between two people:
- X has worked full-time for many years before losing their job, on a salary in, say, the second quartile of the distribution. They have managed to put some modest savings aside, and their partner is in minor employment (meaning that the household’s current market income is insufficient but not zero). They have no children.
- Y is a workless single parent. They have worked in the past, but their employment history has been short and patchy, and so is their contributory record. They have no savings or family support.
Who should get more? If you are ‘contributionist’, you will allocate most resources to X. You may favour some non-contributory support instrument to help Y, but probably with much more stringent conditions attached, and certainly at a lower level. They have barely contributed anything, so why on earth should they now be entitled to generous support? Yet if your main criterion is need, you will favour Y. X has their savings, and their partners’ income, to bridge the gap. Why on earth would you waste scarce welfare resources on somebody who clearly does not need them? Moreover, Y has a child, while X has not, a reason for prioritising them.
Due to their emphasis on proportionality, contributory systems are not, in themselves, redistributive. They are only redistributive to the extent to which they deviate from the contributory principle, which no system adheres to in an entirely pure form. But a welfare state that honours contribution cannot, at the same time, be strongly redistributive, and a welfare state that is strongly redistributive cannot, at the same time, honour contribution. In this sense, those who have recently discovered their love for the contributory principle are not telling the full story. They are right to point out that the British welfare state offers those who have worked and contributed for a long time a rough deal. But they fail to mention that this is precisely what redistribution is all about. If the welfare state has little left for those who have a paid a lot into the system, it is because all the money has already been spent on non-contributory transfers.
So unless our new contribution enthusiasts are also planning to substantially expand the welfare state – and I take it that that is not their intention – then they can only restore the contributory principle by reducing the extent of redistribution. Since nobody appears to be prepared to do that either, ‘something for something’ is hollow rhetoric. There will be no return to contributory welfare.