The Delusion Society

How to pursue a redistributionist agenda when public support for it is low? Change public attitudes by restructuring the welfare regime, says a new book titled The Solidarity Society by the Fabian Society.

A key thesis of the book is: the more the welfare state attempts to target spending on the poorest, the less it will ultimately redistribute to them.

The reason is that different welfare regimes provide different political incentives. When transfer payments or social services are targeted, it is apparent that some people pay for them while other people receive them. Society is divided into two distinct camps: givers and takers, “us” and “them”. This limits people’s willingness to contribute, and ultimately politicians’ scope for increasing welfare budgets. It also fosters a negative view of the recipients.

But when payments or services are widely or even universally available, these matters are reversed. There are no obvious paymasters and recipients; almost everybody views themselves as a beneficiary, and is therefore more likely to support further expansions of the programme. This is why increasing spending on the NHS (universal) or child benefit is usually popular with voters, while increasing spending on social housing (targeted) is not.

The authors’ message is not simply “spend, spend, spend!”. They want to move away from targeting and towards a welfare regime that aligns the political interests of the middle classes with those of the poor. If the former pay and the latter receive, then the former will usually be inclined towards constraining welfare spending. But if everybody is on the receiving end, all political incentives will point towards ever-expanding welfare budgets.

I have hitherto believed that the one thing the Fabians shared with the IEA was a profound belief in the power of ideas. This book is about something more mundane than that. Ultimately, the authors call for extending and restructuring “welfare churning” in such a way that it becomes utterly impossible to tell who is a net contributor and who is a net payer. Net-payers should be deluded into believing that they really benefit from the big state, and applaud at every further expansion.

Britain has a long-standing, rich tradition of voluntary solidarity and philanthropy. Is the creation of fiscal illusions really the best way to revive it?

I haven’t read all of the fabian book, but their argument isn’t really that original. Frank Field made a similar argument against targeting about 15 years ago, and Anthony Giddens also wrote about the need to engage with the more affluent if the welfare state was to survive. What seems to be the problem is that the left can recognise that something might be wrong with state welfare, but not face up to the conclusion that the problem is the state.

One way to pursue an unpopular policy that most members of the public are opposed to is to get all the main political parties to take the same line. Thus on (a) the European Union, (b) human-induced climate change, (c) capital punishment and (d) the welfare state, I think there’s not much doubt (i) that all three political parties — when in government, at least — take much the same approach to all four topics and (ii) that the public is opposed to that approach at least in respect of (a), (b) and (c). So in the UK we seem to end up in the same position as EU citizens do with respect to the European Commission — namely that there’s no practical way to ‘throw the rascals’ argument out’

Why not just have government refuse to disclose how much it spends for any program? In other words, total secrecy. Make it a crime for the media to even mention expenditures. Then the tax payers would have nothing to complain about. For no one could say that their tax money was not wisely used. A few might suspect they pay more in taxes than they receive in benefits. Make saying that a crime too.

The issue of fiscal illusions has already been explored >100 years ago by Amilcare Puviani, whom one could view as a predecessor of the Public Choice school. He asked how self-interested government actors would behave if their aim was to maximise tax revenue and influence, instead of ’social welfare’. So he came up with a tax-and-benefit structure in which costs were largely hidden and benefits were highly visible.

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