1 Contemporary Policy & Society SOW 1043M Lecture 1 How do we Meet our Needs?: Understanding Welfare Pluralism or The Mixed Economy of Welfare

2 What is to be covered in the lecture ? i) Introduction – how do we meet our needs? ii)Descriptive – largely - account of all sectors of the mixed economy of welfare: State Sector State Sector Fiscal ( or Tax) Welfare Fiscal ( or Tax) Welfare Occupational Welfare Occupational Welfare Voluntary Sector – including community action Voluntary Sector – including community action Informal Sector Informal Sector Market or commercial/private provision Market or commercial/private provision Will deal in each with some aspects that are important for rest of unit iii)Changing Welfare Mix – including explaining quasi-markets iv) State Revisited

3 i) How do we meet our needs? Think of welfare – automatically think of state provision Principally though of course we look to our wage – if in work – or to our families and the state if below or above working age Most people….most of the time…..appear to want to enter the labour market – allowing them to enter other markets to meet their needs Markets appear to allow us choice and a wide variety of it – and value - we try to select and pay what our budgets allow Of course, some things we cannot afford to purchase easily – large operations; our primary and secondary educations; our houses So the state – or private companies (mortgages) have historically stepped in – why? – next week

4 ii) Descriptive Account of Different Sectors of Welfare Provision 1 State Provision The British state principally provides 5 social services: 1. Social Security – benefits, pensions etc – income maintenance 2. Education 3. Health 4. Housing 5. Personal Social Services The state here of course, refers also to the local state – or what is more commonly regarded as local government

5 The State : not just a provider…. The state must be seen as more than: A provider…………… A provider…………… …also : A subsidiser e.g. of voluntary organisations A subsidiser e.g. of voluntary organisations A regulator e.g. legal rules – private pensions & health insurance; community care regulations A regulator e.g. legal rules – private pensions & health insurance; community care regulations An employer e.g. from civil servants to cleaners An employer e.g. from civil servants to cleaners The ways and mix of these four functions are slowly altering – we will return this at (iii) and (iv) below, and later in the unit

6 Development of British Welfare State The state has historically developed provision in many of these areas – notably housing and health - because there was concern about the general populations welfare….and market provision was unable or unwilling to meet such needs…..i.e. did not think profits could be made Expenditure on welfare by the state has grown from: 2.6% of GDP in 1900 to 2.6% of GDP in 1900 to 11.2% by 1950 to 11.2% by 1950 to 22.6% by 1991……to 22.6% by 1991……to approximately 25% now approximately 25% now What other forms of welfare provision are there? Well obviously…….and secondly

7 2Fiscal Welfare Of course the state pays for welfare largely out of taxation Fiscal welfare was defined by Titmuss as welfare that derives from decisions not to collect resources from people i.e. tax relief & allowances Therefore this is welfare that can be seen as largely invisible but very important to peoples welfare – lets see some examples

8 Think of, for example: Working & Child tax Credits – which have clearly helped lower income families since 2003 Working & Child tax Credits – which have clearly helped lower income families since 2003 Tax free pensions savings – last year estimated that £12 billions set aside by rich tax payers last financial year. Therefore £4billions lost to Exchequer. This is invisible – unless you know what to look for – and is - clearly helping create two nations in old age. Tax free pensions savings – last year estimated that £12 billions set aside by rich tax payers last financial year. Therefore £4billions lost to Exchequer. This is invisible – unless you know what to look for – and is - clearly helping create two nations in old age. General tax credits & allowances – in income tax reliefs totalled £24 billions – 18% of all collected income tax! General tax credits & allowances – in income tax reliefs totalled £24 billions – 18% of all collected income tax!

9 Different Responses to State and Fiscal Welfare There is considerable media and public unease about so-called welfare scroungers – benefit fraud But much less so about tax evasion – indeed companies and private individuals pay accountants large sums to find clever ways to pay less tax Amount lost to Treasury : in benefit fraud – UK government estimates between £2 and 7bn – however as Sainsbury R argues in Poverty, 108, 2001, CPAG 75% of fraud in Income Support & Jobseekers Allowance claims is actually overpaying – i.e. errors by officials! in tax evasion – UK govt estimated in 2006 £60 bn underpayment into pension schemes alone each year Guardian estimates (23/7/02) £20 bn saved by use of corporate tax avoidance methods re VAT alone Scase estimates that 40% of all UK tax payers are avoiding some payment So our wage/earnings – and ability to keep our job, be taxed and gain rewards from the wage and our contributions – are clearly vital Jobs are important to how we meet or needs – our welfare - in other vital ways as well

10 3Occupational Welfare These are advantages people derive from their employment. Some we all enjoy : Paid holidays Paid holidays Maternity & paternity leave, etc Maternity & paternity leave, etc Others are particular to certain jobs: Subsidised housing, canteens & gyms Subsidised housing, canteens & gyms Company cars & housing Company cars & housing Occupational pensions Occupational pensions Life assurance policies Life assurance policies Private health insurance schemes Private health insurance schemes etc etc The extent of which is extensive – very tough to estimate but Farnsworth K (2004) Welfare through Work : an Audit of Occupational Social Provision at the Turn of the New Century, Social Policy & Administration, Vol. 35, No 5, pp ……makes an attempt The fourth aspect of welfare pluralism concerns voluntary donations and civic activities

11 4 Voluntary Action – including community action The scale of UK voluntary activity is wide and diverse Westall (2005, pp 76-8) suggests there are: 220,000 not for profit organisations 220,000 not for profit organisations 100,000 community groups 100,000 community groups 600, ,000 micro groups 600, ,000 micro groups According to the Charity Commission, the total annual income for all registered charities was £34, 863,247, 125 millions or £35 billion (Source in 2003/04

12 % Share given privately by cause, 2006/07 1. Medical Research17% 2. Religious16% 3. Children & Young People12% 4. Hospices11% 5. Overseas Aid 9% 6. Education 6% 7. Animal welfare 5% 8. Disabled 4% 9. Homeless 3% 10. Environment 3% 11. Sports 3% 12. Elderly 2% 13. Health 2% 14. Arts 0% 15. Other 0%

13 Where Do Charities Get Their Money From? Source of Income 2003/04 Source of Income 2003/04 Income in £millions Income in £millions FundraisingIncome Fundraising Income3,229 Legacy Income 1,065 Income from Lottery 252 Income from goods to shops 383 Total Voluntary Income 4,930 Government grants 1,405 EU grants EU grants507 Other grants 2,250 Total Non-Voluntary Income 4,163 TOTAL INCOME TOTAL INCOME£9,093

14 Changes in Giving Habits International issues have increased enormously in popularity since LiveAid in the 1980s Tsunami Appeal raised £2bn in 2 weeks Some charities – Medicin Sans Frontiers – in Australia received £80 millions tried to redirect – some controversy Cancer and animal causes always popular in UK Charities for the physically disabled & blind people have become less popular in recent years In the USA people give 2% of their income to charities – in the UK 0.5% The corporate sector – 1% of companies income in US – half that in UK These appear HUGE sums of money – but they are TINY compared to what is required to run an adequate state health service, education system or income maintenance system as we will see over the weeks Giving implies ALTRUISM – worth thinking about the UKs blood donation system – see Titmuss R The Gift Relationship

15 Strengths & Weaknesses of Voluntary Sector Strengths - seen as more responsive – tackling issues stigmatised or ignored by mainstream services - less bureaucratic – are they? - often directly involving users Weaknesses - difficult for some large charities not to also ossify into bureaucratic rigidity - maybe too focussed on their own cause – self serving – and not equitable CAF estimate that charities spend on average 13/14% of their income on administration and fund-raising

16 5Informal Sector By the informal sector we mean the role played by family, friends and neighbours Of course, this support is assumed by the other sectors – notably the state when planning community care; and the private sector in selling residential care, health insurance and pension provision Equally, of course, when the nature of the welfare/services supplied by the other sectors changes – this will in turn affect family life and support Obvious example, is the huge increase in women entering the labour market to meet their needs in the post 2 nd World War period Demographic changes and labour mobility have affected for the worst our ability to care for our close and extended families Not possible to examine any welfare provision – least of all this one – without being forced to notice………

17 Gender Divisions in Welfare It is relatively easy to perceive a clear gender division in informal sector caring Cultural patterns around care of children, older & disabled people as well as in routine domestic work suggest such work should be carried by women This is a good example of an ideological belief – women are naturally better carers and therefore expectations about their roles – we will look further at ideologies in Week 5 It is estimated that if every hour women spent on care and housework were paid each year at the minimum wage – the costs would be much higher than the total GDP !!! We will pay considerably greater attention to gender in later weeks But we should also recognise that such gender divisions have clear effects in other sectors too – for example private or commercial provision Married women – have a gendered & inequitable access to pensions – their abilities to contribute being severely disadvantaged by being married, caring for children, working part-time, etc Beveridge Report defined men as wage earners and women and children as dependents – another example of how ideologies work The role of carers now features more and more in social policy – see Adult Community Care module

18 6Commercial, Market or Private Welfare Private market provision has historically existed alongside UK state provision – obvious examples being public schools, and private health insurance Here people choose to pay their taxes but not use the public provision that is provided by them… …they pay extra fees or premiums for what they regard as a better service They are not opting out – they still pay taxes There is much debate about the effects of such purchases – do they promote inequality and/or sustain privilege?– particularly with regard to private schools We will discuss this in seminars today

19 On the other hand of course….. The majority of us appear to want to buy our houses in the private market 10% of British house dwellers were owner occupiers in 1910; 31% in 1951; 54% in 1981 and 68% in 2000…and growing….well until the recent credit crunch!!! This also is a process with huge inegalitarian effects – generating much wealth for owners Between 1981 and 2000 the number of publicly rented, council houses/social housing has halved – from 34% of all housing supply to 16% A key function of social housing is to provide housing that is affordable to people on low incomes. Rents in the social housing sector are kept low by state subsidies 1.7 million families presently on waiting lists for social housing in England alone….predicted by The Guardian to grow to 5 millions for the UK over next five years! There is a crisis in social housing in the UK for poorer people!!

20 Advantages of Market Provision As we are constantly purchasing in markets this should not be too tough to work out – think of a small village market and buying food Right wing thinkers describe the natural flow of markets – a natural social order & self regulate Right wing thinkers describe the natural flow of markets – a natural social order & self regulate Markets do bring together very diverse people & commodities internationally at a attractive, cost effective prices e.g. Friedmans pencil example Markets do bring together very diverse people & commodities internationally at a attractive, cost effective prices e.g. Friedmans pencil example Markets contain 1000s of pieces of information which no state regulator could ever have under their control Markets contain 1000s of pieces of information which no state regulator could ever have under their control Market provision can clearly act as a powerful catalyst to innovation in public and voluntary provision – best value; customer care etc Market provision can clearly act as a powerful catalyst to innovation in public and voluntary provision – best value; customer care etc For state provision can be very one dimensional and paternalistic – one type of provision, no choice For state provision can be very one dimensional and paternalistic – one type of provision, no choiceBUT

21 However…… Disadvantages of Market Provision: Market production decisions are always driven by profit considerations – not welfare ones – try getting private health insurance when very sick!! Market production decisions are always driven by profit considerations – not welfare ones – try getting private health insurance when very sick!! Consumers face charges – which some will be unable or unwilling to pay – e.g. the need to put down public sewers to prevent spread of cholera….many objected to paying in the s, c.f. home care now Consumers face charges – which some will be unable or unwilling to pay – e.g. the need to put down public sewers to prevent spread of cholera….many objected to paying in the s, c.f. home care now In a society with steep inequalities a pure market system will Appears inevitably fail to meet the service demands of poor people – 16 millions with no health insurance in the US In a society with steep inequalities a pure market system will Appears inevitably fail to meet the service demands of poor people – 16 millions with no health insurance in the US Access to more and more previous British state welfare provision is becoming assessed – meaning that those not seen as eligible have to resort to markets – e.g. private residential care & other community care services. Also, 61% of residents fees in private homes are paid for by the state! See week 7 Access to more and more previous British state welfare provision is becoming assessed – meaning that those not seen as eligible have to resort to markets – e.g. private residential care & other community care services. Also, 61% of residents fees in private homes are paid for by the state! See week 7 Markets appear to produce a great deal of ephemera – useless tat….alongside vital commodities Markets appear to produce a great deal of ephemera – useless tat….alongside vital commodities

22 iii) New Welfare Mix Early 21 st Century Britain : New Mix of Private & Public Provision Subsequent to the Thatcher/ Major years, , both main political parties appear to have accepted – to varying degrees – a new balance between public & private Might be interesting to explore your thoughts in seminars about whether YOU think this is a good or a bad thing Also about what you think about the involvement of markets in public welfare provision generally Lets remind ourselves of some of key aspects of this change

23 Key Aspects of Changing Welfare Mix : 1980 – 2005 (1) Sale of Council Houses – not just to private individuals but also Housing Associations Sale of Council Houses – not just to private individuals but also Housing Associations Private provision in health has been encouraged – over 650,000 people now with private health insurance – just over 200,000 in 1974/5. 50 new private hospitals between 1979 & 1989 Private provision in health has been encouraged – over 650,000 people now with private health insurance – just over 200,000 in 1974/5. 50 new private hospitals between 1979 & 1989 Between 1974/5 & 1994/5 number of children in private education reached a peak of 7.4% in 1989/90 Between 1974/5 & 1994/5 number of children in private education reached a peak of 7.4% in 1989/90 Sick Pay & Maternity Pay transferred social security protection from DSS to private employers Sick Pay & Maternity Pay transferred social security protection from DSS to private employers The use of charges increased generally in community & health care – 20p in 1979; 1979 over £3…..what next? The use of charges increased generally in community & health care – 20p in 1979; 1979 over £3…..what next? Public regulation of services such as public transport was largely withdrawn – commercial providers now compete….big issues with Railtrack! Public regulation of services such as public transport was largely withdrawn – commercial providers now compete….big issues with Railtrack! Introduction of quasi-markets – particularly in social care. The state subsidising private care homes and many for-profit organisations now involved in the delivery of residential and day care Introduction of quasi-markets – particularly in social care. The state subsidising private care homes and many for-profit organisations now involved in the delivery of residential and day care

24 Key Aspects of Changing Welfare Mix : 1980 – 2005 (2) The new welfare mix now involves: Direct purchase of some services – e.g. houses and glasses Direct purchase of some services – e.g. houses and glasses Large usage of private based insurance in pensions and health Large usage of private based insurance in pensions and health Large usage of occupational welfare schemes – sickness pay; pension cover; cars; private health cover etc Large usage of occupational welfare schemes – sickness pay; pension cover; cars; private health cover etc Increasing use of charges to cover the costs of much provision previously offered free e.g. charges for personal social services such as home care and meals on wheels; dental services etc Increasing use of charges to cover the costs of much provision previously offered free e.g. charges for personal social services such as home care and meals on wheels; dental services etc Private providers delivering publicly funded services e.g. residential care under contracts from state agencies/local authorities Private providers delivering publicly funded services e.g. residential care under contracts from state agencies/local authorities Increasing numbers of partnerships between private companies and government to invest in capital projects such as new hospital buildings – the private finance initiative Increasing numbers of partnerships between private companies and government to invest in capital projects such as new hospital buildings – the private finance initiative Widespread use of quasi-markets – what are these? Widespread use of quasi-markets – what are these?

25 What are quasi-markets? Both main political parties believe that the use of quasi markets allows the advantages of state and market provision to be realised. Not really that new - such processes have existed previously Based in state services – funding guaranteed by the state with access to generally free services – so one excluded by lack of resources/poverty However a division is introduced between providers & purchasers (or consumers) So that purchasers can choose between providers Therefore providers have to pay attention to consumer preferences – and consumers have an organisation representing their interests

26 Examples of Quasi Markets TWO EXAMPLES Local authorities are now purchasers of residential care – providers sometimes themselves; private providers; voluntary organisations – have to purchase 85% from market/voluntary sector Local authorities are now purchasers of residential care – providers sometimes themselves; private providers; voluntary organisations – have to purchase 85% from market/voluntary sector Providers such as hospitals are organisationally & financially independent trusts & their care is purchased by primary care trusts representing GPs and other community based patient services Providers such as hospitals are organisationally & financially independent trusts & their care is purchased by primary care trusts representing GPs and other community based patient services

27 Dangers in Use of Quasi Markets The incentives of the private profit motive might distort incentives - affecting the rationale for public welfare delivery. For example, the work of welfare professionals are increasingly having to involve accountancy and budget management skills The incentives of the private profit motive might distort incentives - affecting the rationale for public welfare delivery. For example, the work of welfare professionals are increasingly having to involve accountancy and budget management skills Quasi markets may then introduce price sensitivity i.e. the proper real cost of delivering a service - but at some cost to workers ability to do their job Quasi markets may then introduce price sensitivity i.e. the proper real cost of delivering a service - but at some cost to workers ability to do their job Need to remember that in a civilised society the state has provided services for poorer people that private providers would not entertain supplying – important for welfare/moral reasons….whatever the cost….think of NHS treatments….or looking after the severely disabled Need to remember that in a civilised society the state has provided services for poorer people that private providers would not entertain supplying – important for welfare/moral reasons….whatever the cost….think of NHS treatments….or looking after the severely disabled The state may still wish to retain some services free at the point of delivery – it appears to me that the more accountancy procedures bite in – less and less may be provided free e.g. social care for older people The state may still wish to retain some services free at the point of delivery – it appears to me that the more accountancy procedures bite in – less and less may be provided free e.g. social care for older people Key question what should be supplied free in a civilised society – and why? Again one may like to take this up in your seminars

28 iv) State Revisited Clearly, we can no longer have just a simple public/private split when analysing welfare provision Purchasers and providers allow: State purchase of private services State purchase of private services Private purchase of state services Private purchase of state services Also methods of payment and delivery are altering…

29 Conclusion- what we now have… Pure public services Pure public services Publicly provided services paid for by user charges Publicly provided services paid for by user charges Publicly contracted out services paid for by consumer Publicly contracted out services paid for by consumer Publicly contracted out services purchased by the state Publicly contracted out services purchased by the state Publicly provided services bought with vouchers Publicly provided services bought with vouchers Publicly provided services bought by individuals Publicly provided services bought by individuals Free market services Free market services Privately provided services bought with vouchers, tax relief or grants Privately provided services bought with vouchers, tax relief or grants In effect we have diverse forms of provider and purchaser provision with the state increasing its role in a regulatory capacity