King's College London

The Policy Institute at King’s College London recently ran a series of deliberative workshops with citizens from Lambeth, Southwark and the City of Westminster about the cost of living crisis, and the policy responses they wanted to see.

As part of this process, we presented participants with a range of credible, expert information about the issues at hand to help them make their decisions about the changes they wanted to see. One of our experts was Professor Peter Taylor Gooby, Emeritus Professor of Social Policy at the University of Kent. He writes for us below.

Last resort welfare for the very poorest in the UK tends to follow a cycle of reform, decline and further reform. The Beveridge reforms after the second world war established National Assistance to bring together and uprate the patchwork of local government assistance benefits. This operation formed part of a far larger programme bringing together, codifying and establishing secure finance for the network of partial social, trade union, friendly society and private market insurance that existed at the time to provide pensions, disability, widows, sickness, unemployment and a wide range of other benefits.

The Wilson government in 1966 replaced National Assistance with a more streamlined and more generous Supplementary Benefit system, reformed pensions and other benefits. More recently the Blair Brown government developed a system of Tax Credits and Minimum Wages and introduced the minimum pension guarantee. (Minimum Wages are interesting in that they are the only part of the welfare system not challenged and subject to reform by either main party). Conservative-led governments since 2010 brought together existing benefits in Universal Credit and further reformed pensions towards a flat-rate system with a larger private sector.

The objectives of last resort social reform in the UK are two, in varying degrees: to enable the poorest to survive and to promote paid work. These often come into conflict. Work incentives have been seen to require poverty for those not in work since the 1834 Poor Law. The cycle of dissatisfaction with existing reforms and the promotion of further reform is driven by four main factors, which mediate the operation of survival and work imperatives:

1. Reforms are introduced through a political process that typically narrows the scope and reduces the generosity of the benefits to enable tax cuts. The benefit reform as established is then less able to maintain the poor than originally envisaged.
2. Over time reformed benefit systems become more complex. Rules, restrictions and sanctions are introduced to save costs, promote work incentives and direct the money that remains so that those with higher needs (large families, high rents, disabilities and so on) can survive.
3. Benefit reforms are typically introduced at the beginning of the electoral cycle when the impact of the unpopularity of spending on a particular minority on voters is less important, but endure through the cycle when governments are more concerned to save money and cut taxes. This generates the impetus for cuts and limitations which drive further complexity and inadequacy.
4. The context in which the benefit system operates changes, both through government policy and wider factors. Recently government rhetoric has stressed low taxes as a means of improving work incentives and denigrated the poor, promoted subsidies to owner-occupation and cut back on the construction of cheaper housing which increases rents, and contracted the tax base particularly among the wealthy, which reduces resources and polarises interests in society between those who believe they need or may need benefits and those with no interest whatsoever in them. In addition Brexit, restrictions on immigration and limited training policies have reduced the labour force, cut growth and increased commodity prices bearing disproportionately on the poorest. Attacks on trade union rights have increased poverty. The minimum wage system however has maintained basic living standards for those at the bottom in paid work.

The broader social context includes further inequality as a result of the long terms trends to globalisation and to the decline in the position of the UK relative to other advanced economies, and the changes in the labour market which result in higher penalties for the lower skilled, higher returns for the higher skilled and those in particular sectors and greater work stress reduces work incentives for many.

Specific short-run contextual factors also make a difference. In the UK the response to the Covid-19 pandemic included the temporary removal of the Universal Credit, restrictions and sanctions that had grown up since the system was established, the £20 - nearly 25% for a single person - benefit increase, the furlough and other schemes to support work and wages and the temporary moratorium on evictions). The impact of higher global commodity prices as a result of the patchy pandemic recovery and the Ukraine war, exacerbated in the UK by Brexit, and by weak regulation of energy markets, food retail and rented housing led to a cost-of-living crisis. This was addressed by various energy price caps, winter fuel payments, discounts and cost of living payments, again temporary, to enable the poorest and those with disabilities to survive. Most of these temporary improvements have been or soon will be removed.

Universal Credit rates had fallen in real terms since the benefit was introduced as the result of a wide range of cost-saving measures: benefit freezes and below inflation increases, overall benefit caps, caps rent support and the abolition of benefits for the third or further children in a family under Conservative-led governments since 2010.. The outcome has been an overall escalation of poverty for those at the bottom, especially for those of working age, single parent families, disabled people, women and children. Pressure for a new round of overall reform is growing. It may well take a new government for such reform to be implemented.

One attractive option would be Universal Income Benefit, paid to those both out of and in work , but taxed so that it diminishes and then disappears as work incomes grow. Experiments are underway with such systems in a number of European cities and countries and soon in Scotland. While this approach offers a simple and apparently seamless system, it would require substantial extra resources to bring living standards at the bottom to adequate levels. There is also uncertainty over whether the public would accept payments at this level to those out of work and permit governments to sustain them over time.

Another approach would be to peg benefits to a proportion of the median wage, so that incomes out of and in work are sustained. This would have the advantages of demonstrating that the poor were not supported at anything like the standards they could command in work, thus maintaining work incentives, and would benefit from the successful National Minimum (Living) Wage system, which sustains wages at the bottom. It would still require real government investment and political will. Whatever approach is adopted it seems clear that the increasing numbers in poverty in the UK are condemned to stunted lives unless serious policy reforms are pursued. Now is as good a time as any, and better than most.

As part of the deliberative workshops, participants debated the welfare reforms they wanted to see, and which would help them weather the impacts of the cost of living crisis. We’re grateful to all our experts who gave their time so willingly and helped to shape the debate – and particularly to the participants who shared their thoughts. We will be publishing more on this in the coming months. In the meantime, if you have any questions then please do get in touch with the team at costofliving@kcl.ac.uk.