British Leaders Assess Costs of Welfare State

Labour Party begins sweeping reassessment of social policy in a bid to regain public confidence, as Conservatives push new `enterprise culture'

AFTER 13 years in continuous opposition, Britain's Labour Party has decided to take a hard look in the mirror and ask a series of searching questions about its own political doctrines.

A newly appointed commission on social justice will spend the next 18 months examining the role of the welfare state and will propose changes in Labour doctrine aimed at putting the party in tune with the needs of people in the 21st century.

To counter the Labour moves, Conservative members of Parliament are planning their own campaign to promote what they call the "enterprise culture" as an alternative to the welfare state.

John Major's government, too, is expected to take a hard look at welfare and the burden it places on an economy suffering from low growth and high unemployment.

Naming the 16-member inquiry team, Labour Party leader John Smith said the commission would be independent. Its task was to mount "the most sweeping study of Britain's social condition" in half a century.

Mr. Smith promised that it would address "deepening poverty, growing homelessness, and ever-increasing unemployment." A senior member of Labour's shadow cabinet added that the political aim of the commission would be to "help the party find a way back to power by proving that we have social solutions better than those of Thatcherism."

Smith's move prompted activity by Conservative members of Parliament who believe Thatcherite principles hold the answer to Britain's social problems.

Michael Portillo, a younger member of Prime Minister Major's Cabinet, has begun to emerge as leader of a cluster of parliamentarians who call themselves the No Turning Back Group. The group has announced plans to publish a series of pamphlets which will argue the case for the free enterprise economy and the progressive dismantling of key elements in the welfare state, including the national health service. Party rifts

The coming battle is unlikely to be a simple tussle between Conservatives and Labour. Even as Smith announced he was setting up the commission on social justice, sharp differences of approach emerged within the Labour movement.

Smith, a cautious politician of Labour's moderate wing, said he personally opposes moving away from universal social security benefits - a central feature of Britain's welfare state.

This drew a riposte from Frank Field, Labour Party chairman of the House of Commons social security committee. Mr. Field attacked his own leader for apparently trying to set limits to the commission's inquiry.

"Everything must be up for consideration," Field said. "There are no sacred cows. It should not be an exercise in merely shuffling our prejudices."

Smith's decision to order an inquiry into the welfare state reflects his party's difficulty in breaking out of what a senior Labour official calls "a deep-seated political dilemma."

If the party tries to modernize the welfare system, the official says, it cannot hope to do so without modifying some of its basic elements, such as state benefits paid to parents for each child and tax relief on home loans. But cutting back on benefits, or targeting them at poor people, would run the risk of alienating middle class voters whose support Labour needs if it is ever to return to power. Tax option

The alternative - maintaining the welfare state at current levels by investing more in it - "would entail higher taxes," the Labour official says.

Smith and his supporters accept that Labour's tax increase plans helped it to lose last year's general election, particularly among middle class voters.

Sir Gordon Borrie, chosen by Smith to chair the social justice commission, is a tough lawyer who for 16 years directed the Office of Fair Trading and is widely seen as a champion of consumers' rights.

Borrie says his team, which excludes members of Parliament and is heavy on academics and social workers, will "go back to first principles."

"What we have to do is consider all the changes since the welfare state was established 45 years ago," he said.

"We must analyze those changes and ask what the perception of a fair and just society is, and what we mean by social justice."

This means looking at how taxes, national insurance, and the welfare benefit system fit the society in which Britons live and how they are expecting to live in the next century, Borrie added.

The national insurance fund is used to make payments to pensioners, the sick, and Britain's 3 million unemployed.

Government sources say Major's response to the Borrie commission's inquiry will include a Treasury review of the national insurance system. The sources argue that a review is inescapable, because the national insurance fund is already running a deficit of 4.7 billion pounds ($7.1 billion) this year, and will be in the red by 7.6 billion pounds ($11.5 billion) in 1993-94.

Mr. Portillo, who is chief secretary to the Treasury, is widely expected to play a prominent part in attempts to prune the deficit either by raising workers' national insurance contributions or reshaping benefits.

"Something radical must be done about [national insurance] and other welfare provisions," says a member of the No Turning Back Group.

Describing the benefits as "political time bombs" which involve "huge sums of money," he said the government could not escape "drastic action" in coming months.