With Fewer Workers, Britain Can't Support Costly Welfare

THERE'S little shame in drawing a welfare check in Britain. And the ruling Conservative Party, and to a lesser extent the Labour opposition, see that as a problem.

As is the case in other industrialized nations, Britain faces a graying work force, and leaders here worry there soon won't be enough people earning wages and paying taxes to support the number of people drawing welfare.

The World Bank says there are four workers in Britain for every retired person. By the year 2020, the Bank estimates, the ratio will be 3 to 1. Both Conservative and Labour leaders acknowledge that unless fundamental reforms are pushed through in the next decade, the welfare system will deteriorate under a shrinking number of income earners.

But in a battle for popular support before elections within the next few years, the two parties agree to little beyond that.

The Conservative government is currently putting the focus on a United States-style ``workfare'' approach to welfare benefits, which eat up 15 percent of the country's wealth. The party also wants to save money by drawing away from state-financed health care and pensions.

David Willetts, a younger Conservative member of Parliament and author of an influential book ``Modern Conservatism,'' points to ``the paradox at the heart of the debate about the welfare state.

``We provide money to people in need so they can afford to participate in the life of society,'' he says, ``but if they become dependent on state finance, they may not be really integrated into society.''

The Labour Party, which launched Britain's welfare system half a century ago, plans more comprehensive reforms than those proposed by the government and stresses education and job retraining.

It hopes to create what Tony Blair, its new leader, calls a ``second-generation welfare state'' that ``attacks the insecurity of middle-income Britain and the poverty of low-income Britain.''

Party spokesmen also agree that without radical welfare reforms, the country will find it difficult to sustain economic growth in the next century.

Government figures show that the national insurance fund, out of which pensions are paid, has a 7 billion pound ($11.5 billion) deficit. Pressure on the fund has helped boost government borrowing to around 1 billion pounds a week. Late last year, the government ordered big tax increases in a bid to shrink the resulting deficit. Now it is looking for ways to curb state spending by making changes in welfare provision.

Spearheading government attempts to reshape the benefits system, Peter Lilley, the social security secretary, published a report Oct. 24 aimed, he said, at ``helping the jobseeker and motivating the workshy.'' Roughly 2.8 million Britons are out of work.

Starting in 1996, Mr. Lilley plans to make available a ``jobseeker's allowance'' to replace the current unemployment benefit. To qualify, the unemployed will be required to be available for any work the benefits office thinks they can be expected to do, and to show that they wish to find work.

If they refuse, their benefits will be reduced or removed.

Michael Portillo, the employment secretary and an ally of Lilley, said the scheme would ``require the unemployed to agree to a contract with the taxpayer to make themselves more employable.''

Where Lilley's platform reflects the difficulty the government faces in paying for welfare in a country with an aging population and a slow-growing economy, Labour's plans are largely an attempt to update socialism and to make the party more attractive to voters at the next general election.

The opposition party's rethink has its roots in a decision two years ago by the late John Smith, Mr. Blair's predecessor, to set up a social-justice commission.

A 400-page report, published by the commission on Oct. 24, proposes creating a ``learning bank'' that would enable people to borrow at preferential rates to finance education and retraining through their working lives.

Unlike the government, the commission proposes a minimum wage and an increased tax rate for ``very high'' earners. It wants Britain to sign up to the European Union's Social Chapter on workers' rights, which Prime Minister John Major says his government will never join.

The commission's report also attacks government policy in the 15 years the Conservatives have been in power, speaking of the ``failure of free- market Conservatism'' which it claims has produced a poorly educated work force.

Sir Gordon Borrie, the commission chairman, says the ``key to regeneration'' of Britain is closing the ``skills gap'' between Britain and its European competitors, and ``allowing people to regain control over their lives.''

This, he says, can be done by the state helping them to educate themselves. Blair and the Labour team have yet to decide which of the commission's ideas they will adopt.

Lilley, speaking with Prime Minister Major's backing, called the report ``an expensive wish list that needs to be costed to be taken seriously.''