Britain debates: What should European welfare look like?

The debate in Parliament, which today passed a measure to temporarily cap most welfare benefits, is part of a larger debate in Europe over how to handle welfare amid the debt crisis.

On Tuesday, the British government pushed through a parliamentary vote to temporarily cap welfare benefits, setting down a dividing line on an issue that will be pivotal in determining who wins Britain's next general election.

But it also is the latest round of a struggle being played out in virtually every European nation facing the questions of what a welfare state should look like in the 21st century and how welfare can be subsidized in an era when the right (and many on the left) claim that dwindling resources mean traditional models are no longer affordable.

The bill, backed by the government's Conservative and Liberal Democrat parties coalition, caps annual increases in many benefits to 1 percent – effectively a real-term cut as it is below the expected level of inflation – and passed the House of Commons easily despite opposition from both the opposition Labour Party and even from some Liberal Democrat members of the governing coalition.

Domestic debate over dependency

The government paints the measure as necessary to fix an increase in benefits paid to supposedly work-shy “shirkers” over the past five years at a time when another group characterized as “strivers” have been unfairly shouldering the burden of paying taxes.

"Where is the fairness, we ask, for the shift worker, leaving home in the dark hours of the early morning, who looks up at the closed blinds of their next door neighbor sleeping off a life on benefits?” asked Chancellor of the Exchequer George Osborne last year when the measure was announced.

But critics charge that Mr. Osborne's imagery was a classic example of Conservative Party scapegoating of the poor, meant to play to a particular strata of voters fiercely fought over by the Tories and Labour. Labour points to analysis showing 7 million working households will lose out by an average £165 ($265) annually under the plan. And Sarah Teather, a Liberal Democrat member of Parliament who lost her job as children and families minister in a reshuffle in September, also said she would be voting against.

"As a constituency MP representing a very deprived area in London, I feel deeply anxious about the policy and I will be voting against the bill ... very reluctantly and with a very heavy heart," she told the BBC.

By ramping up the rhetoric ahead of today's vote, Britain's Conservative Party sought to exploit perceived associations between their Labour opponents and notions of an outdated welfare state. Drawing on focus group research, one recent Conservative election attack ad featured an image of a man on sofa watching daytime television and asked if the government should support “hardworking families or people who don’t work.”

Polling last week also revealed that more than 2 out of 5 people believe that benefits were too generous, and 3 out of 5 buy into the idea that a culture of dependency had emerged. A British trade union umbrella body that commissioned the research said Tuesday that public support for measures such as the one adopted by Parliament was based on ignorance of who will suffer.

A European problem

But in many ways, the British debate over how to deal with its welfare state amid an economic crisis is par for the course in Europe – and one that, according to the British government, Britain is handling better than its peers on the Continent.

In Portugal, Ireland, and Greece, the three eurozone countries that have suffered most from the crisis engulfing the current zone, draconian cuts in welfare have been part of the bargain for International Monetary Fund bailouts. France's newly elected Socialist president, François Hollande has meanwhile been preparing the French for major changes to one of Europe's most expansive welfare states, pledging to bring down the budget deficit to 3 percent this year and announcing that “we must be ready to do better by spending less.”

Traute Meyer, a professor at the University of Southampton involved in research about the welfare state in Europe, points out that trends over the past 10 years have seen every European welfare state moving to change their system in line with their own unique cultural and historical traditions. “Nordic countries are still those with the highest employment rates and equality measures. Systems in southern countries still tend to be the most fragile, while Germany and others on the Continent are holding onto systems based on social-insurance-based income,” she says.

“But at the same time you can see certain challenges and priorities are very similar," Dr. Meyer adds. "One is that all countries are thinking more about measures that will integrate people in the labor force – welfare to work.”

“So, in most countries, benefits that deactivate workers, such as early retirement, are being phased out, while those that activate people into the workforces are being brought in. Enhanced child care is on the table in many places.”

James Plunkett, director of policy at the Resolution Foundation think tank, notes that much political debate about welfare reform in Britain had turned on a long-running theme drawing on language such as “scroungers and strivers” – language particular to the British view of welfare.

While British workers pay a certain percentage of their income – known as the "replacement rate" – into an unemployment fund that they can tap if they become unemployed, that rate is so low that it gives the workers a sense that unemployment payments are "not meant for everyone," thereby creating a stigma against taking such payments, he says.

“In other countries," he adds, the welfare system "is seen more as a general insurance mechanism for everyone.”

“[I]n a country like Denmark for example, there is almost no stigma attached to being on unemployment benefit. It's quite common to graduate and be on unemployment benefit for a time. I suspect that is a more common experience whereas here there is more stigma attached to it.”

Ahead of the game?

When it comes to the much larger budget surrounding pensions Britain may at least be a step ahead of other continental countries, including Germany, despite an often repeated narrative that holds that past reforms by German governments to streamline labor laws and revamp unemployment benefits have put it on the kind of stable footing envied by European peers. 

Meyer, whose particular area of expertise is pensions, said that reforms in Britain by Labour in the second half of the last decade, and taken on by the coalition, have improved pension benefits in the future for lower income groups.

“In contrast, arising from the German pension reforms during the late '90s and early 2000s, there is increasing recognition in the German poverty debate that changes have led to a significant deterioration in future benefits for pensioners. If you take the perspective of pension, which is one of the largest parts of the Western welfare state budget, Germany has deteriorated and future poverty risks have increased while poverty rates for British pensioners have improved."

With its latest pension reforms, Meyer says that Britain is now closer to the sort of welfare approach taken by Nordic countries and the Netherlands.

"They have a basic state pension close to the poverty line and an occupational compulsory pension on top. In that sense the UK is not ahead but catching up. However, it is ahead of those countries that have now cut their previously very generous state pensions considerably, such as Germany and Italy."