The Contradictions of Welfare to Work: Social Security Reform in Britain

The Contradictions ofWelfare to Work

Social Security Reformin Britain

BYRON SHELDRICK

Upon coming to power in 1997 New Labour made therestructuring of social security one of its top prioritiesReform of the welfare system was portrayed as the

means by which growing inequality and social division the lega-cy of more than two decades of Conservative government wouldbe overcome For Tony Blair the governments welfare reformprogramme was about national renewal and the reduction of socialdivision and inequality The direction of welfare reform was evi-dent at a very early stage In his first speech as Prime MinisterBlair announced that his government would be the Welfare toWork govemment2 The goal was to move people off the socialsecurity rolls and into paid employment Traditional forms ofincome security would be replaced with various workfare-typeschemes and tax incentives designed to make work pay

The theoretical underpinnings of social security reform underNew Labour are clearly rooted in a neo-liberal and monetarist con-ception of the welfare state The government has willingly adopt-ed much of the rhetoric and reasoning ofneo-liberalism regardingthe deficiencies and problems of the welfare state This has beenaccompanied by a fundamental reconceptualization of the natureof unemployment and the states role in regulating the economyThe Labour Partys historical willingness to use the levers of thestate has been directed away from the regulation of capital marketsto the regulation oflabour markets as a means to ensure global andnational competitiveness In short New Labour has becomeengaged in what Jessop has termed the Janus-faced task ofrolling back the frontiers of the Fordist state while rolling forwardthe frontiers of the post-Fordist state

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The reforms introduced by the Blair government have had acertain redistributive component The working poor certainly havemore cash in their pockets At the same time the hollowing out ofthe social security system means that there are fewer supports forthose without work Moreover the government is not developingan industrial strategy to generate jobs in the future This is seen asa private market responsibility The result is a system that cannothope to achieve the goals New Labour has set for it Given the cur-rent direction and orientation of the Labour party the politicalspace for developing a socialist or social democratic alternative toBlairs welfare to work programme appears limited

The paper is divided into four sections The first section setsout the economic reasoning that underpins New Labour policiesand examines how social security has been reconceptualized with-in this context The second section examines more closely theactual social security reform proposals that have been introducedby New Labour The third section examines the contradictions ofthe welfare to work initiatives In particular the lack of an indus-trial strategy to address structural problems in the British econo-my has meant that the welfare to work programmes remain tied tothe low-wage service sector of the economy The final sectionlooks at the political contradictions of social security reform andinvestigates to what extent there exists space for the developmentof political resistance to the Blair programme

Monetarism and the Reconceptualization of Social SecuritySince the economic crisis of the mid-1970s monetarism hasincreasingly assumed the position ofthe dominant paradigm guid-ing government policy Writing in the 1987 Socialist RegisterSimon Clarke argued that the rise of monetarist thinking cannot beexplained merely as a response to an economic crisis of capitalMonetarism was also a response to a political crisis of the capital-ist state and of its legitimating ideology Conceptualizing theascendancy of monetarist thought as part ofa broader crisis of thestate allows us to situate the acceptance of neo-liberal orthodoxyby social democratic governments within the transformation ofwestern states from a Fordist to a post-Fordist form State policybecomes centred on the promotion of open economies and supply-side interventions to promote the structural competitiveness of thenational economy while social policy is subordinated to the needfor labour market flexibility and international competitiveness

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Of course the conservative governments of Thatcher and Majorpursued the neo-liberallmonetarist restructuring of the welfare statewith considerable vigour The cutting of public expenditure and theadoption of a restrictive monetary policy were pursued to bringdown inflation and restore financial stability Rising levels ofunem-ployment were simply the price to be paid for that stabilityKeynesian systems of labour regulation were dismantled marketprinciples were introduced into the operation of the National HealthService (NHS) and state services were devolved to autonomousexecutive agencies designed to mimic private sector actors

The Tory approach to restructuring welfare concentrated onrecommodification5 This involved the reassertion of marketdiscipline and market rationality in the consumption of welfareservices At the level of the broader welfare state this has beenmanifested in the incorporation of market principles into the inter-nal organization of the state itself The NHS internal market is anexample of this sort of development At the level of social securi-ty however recommodification meant cuts to benefit levels Inpart this fit well with the ideology ofThatcherism which suggest-ed that if benefit levels were sufficiently punitive individualswould be forced into the labour market at low-wage levels Thisapproach did not require the restructuring of either the conceptualbasis of welfare or its delivery mechanism

Tory changes to social security benefits however served todeepen poverty levels in Britain High levels of unemploymentmeant both increased demand for social security benefits anddecreased standards of living Inner city housing estates quicklybecame characterized by urban decay and extreme poverty In thiscontext social security reform offered a logical and attractive pol-icy focus for Blairs stakeholder society

By focusing on social security reform New Labour could retainan overall monetaristneo-liberal policy framework therebyappealing both to the Citys financial elite and middle class Torysupporters while also satisfying the demands of traditional Labourvoters that action be taken on poverty issues Blair promised activestate intervention getting people into paid employment and off thesocial security rolls Social security reform became the vehicle fortackling unemployment and social inequality without having toaddress the need to regulate capital

The experience of nearly two decades of neo-liberal govern-ment in Britain provides little evidence to support the monetarist

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critique of state intervention and casts doubt on the argument thatthe privileging of markets necessarily leads to capital investmentand prosperity In monetarist terms however these failuresbecome reinterpreted into evidence that the state has not gone farenough in subordinating social and political issues to the logic ofthe market New Labour explains its general acceptance ofmone-tarism in these terms The government for example argued thatthe recession of the early 1990s and the burgeoning public debtwere direct consequences of the Tories misreading of the eco-nomic cycle and taking the cap off public spending when it wasimprudent to do SO6 The message from New Labour is that theformer government did not stay the course but rather was gov-erned by short-termism in its regulation of the economy Thegovernment is convinced that a more determined and consistentapplication of monetarist policies will avoid the cyclical boom andbust periods that characterizd the Tory regime For this reason thegovernment turned over control of interest rates to the Governorof the Bank of England with an explicit mandate to contain infla-tion This it argued will preclude political interference with inter-est rates and the undermining of the capacity to control the moneysupply as a means of achieving economic stability

Social security has been reconceptualized within this frame-work For New Labour welfare programmes constitute one moremarket rigidity that must be eliminated for the effective pursuit ofmonetarist objectives Welfare reform therefore is linked to theachievement of economic growth and the maintenance of Britishcompetitiveness This link is made explicit in several ways Firstthe government says that reducing the number of people on thebenefits rolls will decrease government expenditures and therebyallow it to meet its fiscal targets more easily Over the past 20years welfare spending and social inequality have consistentlyrisen However rather than understanding these two developmentsas connected the government believes that welfare spending itselfis the problem Second welfare to work programmes are pre-sented as a means of creating incentives for people on benefits tomove into paid employment This is achieved through a series oftax and benefits changes to compel individuals to take jobs andthrough wage subsidies to employers who hire them

This reconceptualization of welfare has meant New Labourscomplete acceptance of capitals terms The welfare state ratherthan insulating and protecting people from the harshest aspects of

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capitalism must prepare and discipline people for participation incapitalist wage-labour relations Unemployment in New Labourterms is no longer seen as a structural problem of the economyRather unemployment is conceptualized as a problem of individ-ual will The welfare state should playa role in the developmentof an appropriate work ethic so that individuals can achieveattachment to the labour market In other words the old welfarestate created a series of labour market rigidities and dislocationsThe new welfare state seeks to overcome these through the rightmix of subsidies to employers and incentives to workers to ensurethat individuals participate in the labour market The role of thestate however is strictly limited to providing a gateway into thelabour market For New Labour therefore there is no need tothink about what shape an industrial strategy might take

In order to pursue welfare reform the government immediatelylaunched a number of initiatives The appointment of HarrietHarman as Social Security Secretary and Frank Field as Ministerfor Welfare Reform indicated that the reform process would notinvolve a left wing agenda Harman was clearly identified as NewLabour and Field had long been a maverick advocate of marketbased social security reform within the party and a target of hos-tility by the Labour Left Field was instructed to embark on a com-prehensive review of the welfare state and instructed by the PrimeMinister to think the unthinkable It was widely anticipated thatField would recommend the replacement of many existing bene-fits with a combination of tax credits and private insuranceschemes

At the same time the Treasury also investigated welfare issuesand spearheaded a number of proposals culminating in the launchof a number of pilot projects collectively referred to as the NewDeals Throughout 1997 both Chancellor Gordon Brownsspeeches and a wide range of treasury documents focused on thesignificance of welfare reform linking it to broader economicissues of global competitiveness

In December 1997 the government launched the SocialExclusion Unit The Social Exclusion Unit was established as partof the Economic and Domestic Affairs Secretariat in the CabinetOffice to report directly to the Prime Minister Staffed by civil ser-vants from a number of departments and by representatives fromlocal authorities and non-governmental agencies the unit wasgiven the mandate to investigate and develop policy recommen-

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dations to deal with particular issues of social exclusion The unitinitially examined issues of truancy rough sleeping (homeless-ness) poor housing estates and is now focusing on teenage preg-nancy and young people not in education or training

With so many different initiatives underway it was not at allclear from which quarter leadership on the welfare reform issuewould come It soon became apparent that the Chancellor had wonthe battle to set the reform agenda and that the Treasury would dic-tate the pace and direction of reform Harman was given the task ofcheerleader for the Chancellors initiatives shepherding throughthe House of Commons the new Social Security Bill and cuts tolone parents benefits By the time Frank Fields group finallyreleased its Green Paper on Welfare Reform in March of 1988 theparameters of reform had already been well established by theTreasury The Green paper did little more than reiterate the princi-ples and rationale for reform that had already been articulated byboth the Chancellor and the Prime Minister Rather than chartingthe course for a new welfare system it added layers of detail to pro-grammes that had already been announced by the Chancellor andwhich in some instances were already operational

Treasury department control over welfare reform has ensuredthe dominance of a monetarist conception of social securitys Therationale for reform was understood within the context of thechanging nature of the economy and the pressures of globalizationand competitiveness The Green Paper on Welfare Reform forexample notes that globalization produced a shift away from tra-ditional manufacturing industries in favour of flexible jobs in thehigh tech and service sectors This we are told led to increaseddemands upon the benefits system which was unable to keep pace

In the New Labour programme poverty is identified as rootedin structural changes to the economy Unemployment remains apersistent problem in the UK Although unemployment hasdecreased since its peak during the recession of early 1990s it stillstands at about 71 according to the International LabourOrganization (roughly 5 according to the British Government)The government estimates that approximately 3 million house-holds have no one in worklv The solution to this problem how-ever it to be found in the restructuring of the welfare system Theold benefits system is said to have prevented individuals fromadjusting to the changing nature of the labour market The solutionto high rates of unemployment therefore is to eliminate the mar-

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ket rigidities and labour participation disincentives inherent in thewelfare system The system must be retooled to permit people toadjust more quickly and effectively to market demands Ratherthan protecting and supporting those who are unable to participatein the market the welfare system should be geared towards

quickening the pace of economic change and equipping people tocope positively with its consequences - not attempting to slowchange on behalf of vested interests the best way for governments toprovide job security is through education and an employment servicethat helps people to new jobs and re-training throughout their livesl

Here we clearly see monetarist logic applied to social securityThestructure of government benefits has created market rigiditieswhich must be removed in the name of competitiveness Ratherthan intervening in capital markets to solve the structural problemsin the economy the social security system is seen as a vehicle forrendering labour markets more responsive to the needs of capital

The Scope of Reform New Deals for Britain The so-calledNew Deals are the centrepiece of the governments welfarereform package This package unlike its namesake does notinvolve Keynesian spending on job creation Rather it representsa series of directed policies aimed at facilitating targeted groupsback into the labour market The programmes are funded by theone-off windfall tax on privatized utilities introduced afterLabours election The windfall tax earned the governmentapproximately pound52 billion in revenue From the governmentsperspective the New Deal programmes represent an opportunity tosignificantly reduce the social security budget without incurringlong-standing funding obligations into the future

As suggested above a monetarist analysis of social securityconceptualizes income support as creating labour market rigidi-ties and dislocations This analysis has resulted in a welfarereform package that targets those specific groups of claimantsthat are perceived as being trapped in the cycle of welfare depen-dency Consequently social security reform has emphasizedthose groups integrated into the welfare state through the benefitssystem rather than through other welfare mechanism New Dealswere originally targeted at women (lone parents) the disabledand youth 12 For New Labour it is these groups who represent the

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tendency of social security programmes to create benefit trapsand work disincentives

The targeting of these groups however is not justified by theeconomic rationale that informs New Labours reform processGovernment statistics indicate that there are approximately onemillion lone parents on income support one million people onlong term incapacity benefits and approximately 250000 youngpeople receiving benefits This contrasts with the approximatelytwo million individuals of working age that are unemployed 13

Those groups targeted by the New Deals however are not nec-essarily trapped in a cycle of welfare dependency In the case ofloneparents for example the governments own figures reveal that theaverage length oftime on benefits is about four years 14 This is a farcry from the lifetime of benefits dependency used to justify tar-geting this group Similarly over two-thirds of disabled benefitsrecipients are of retirement agetgt Consequently welfare to workprogrammes will not greatly benefit this group in obtaining employ-ment although it may result in substantial savings to the govern-ment The decision to target young people was made while Labourwas still in opposition By the time Labour came to power howev-er the number of young unemployed had fallen from 250000 to justover 100000 and every indication was that the young were findingjobs significantly faster than the older unemployed 16

The individuals most affected by the changes in the labour mar-ket namely older workers formerly employed in heavy industryhave not been a priority of the programme The relationshipbetween the welfare state and those workers cannot be so easilyincorporated into a monetarist critique of welfare dependency andmarket rigidity Consequently the government has not made a pri-ority of assisting the long-term unemployed with relatively fewresources devoted to the New Deal in this area The governmentestimates that between 1997 and 2002 spending on the New Dealfor the long term unemployed will amount to approximately pound520million This represents only 10 of the total New Deal budgetBy contrast approximately 50 ofthe New Deal budget has beenallocated for the New Deal for Young Peoplei While there areonly about 100000 young people between the ages of 18 and 24unemployed in the UK there are 400000 people between 40 and55 on the unemployment register

These trends are also evident in the participation rates for NewDeal programmes According to the government approximately

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350000 people have participated in the New Deals to date and20 have found jobs A closer examination however reveals that65 of New Deal participation has been through the New Deal forYoung People the only compulsory programme and that jobplacements in this area account for 83 of the total jobs foundl

The governments overall fiscal objective depends on movingthe disabled the elderly and families out of the welfare systemGovernment expenditures on benefits for lone parents the dis-abled and the elderly constitute the largest proportion of the socialsecurity budget Department of Social Security statistics indicatethat in 1993-9426 of benefits were spent on people of workingage unable to find jobs while 8 was spent on supporting fami-lies 22 on the disabled and 44 on pensioners In 1999 supportfor the unemployed had decreased to only 5 of the social secu-rity budget while support for families the disabled and pension-ers had increased to 1826 and 45 respectively In order tosignificantly reduce government spending on social security ben-efits social security reform must address claimants other thanavailable-for-work unemployed In this context the emphasis onthe programmes aimed at lone parents and the disabled becomesself-evident 20

The design ofthe New Deals also reflects a monetaristneo-lib-eral orientation New Public Management emphasizes the publicsector incorporation of private sector principles It calls for therestructuring of welfare state bureaucracies which are character-ized as slow cumbersome and process-oriented to become moreflexible innovative and entrepreneurials The structure of socialsecurity reform in Britain derives its inspiration from this sort ofthinking The New Deals emphasize flexibility and innovation indealing with the needs of individual claimants In a recent publi-cation the Department of Social Security noted the array of insti-tutions dealing with welfare claimants arguing that this complex-ity promotes wasteful long-term benefit dependency rather thanencouraging work22 The governments solution is to restructurethe administration of benefits to create an active modem servicethat works to forge an entirely new culture which puts work firstand is based on a modem integrated flexible service for all23This goal is to be achieved through the creation of what the gov-ernment has called gateways to employment

The New Deals are organized to provide this gateway ser-vice linking individuals to employment At the gateway stage

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individuals are assessed as to their job-readiness and given per-sonalized counseling regarding their job-hunting skills A greatdeal of emphasis is placed on personal advisers as the means toensure that benefits recipients can respond flexibly to the chang-ing demands of the labour market The advisers overshadow thetraditional function of the social security system to provideincome support for the poor Social Security is transformed into ajob placement service with benefit recipients as the customers Asthe New Deals are implemented the government proceeds withcuts to the benefits levels At the end of 1997 the governmentannounced significant cuts to lone parent benefits and the recentintroduction of the Welfare and Pension Reform Bill seriouslyreduces the availability of incapacity benefits for the disableds-

Generally it is far from clear just what options will be provid-ed to individuals at the gateway stage In the case ofthe New Dealfor Young People individuals are given the option of pursuingeither paid employment (the employer receives a job subsidy ofpound60 per week for six months) full time education or training workwith a voluntary sector organization or work on an environmentaltask force The New Deal for Young People is a compulsory pro-gramme and individuals who refuse to take up one of the aboveoptions are sanctioned by having their benefits reduced and even-tually cut off For the other New Deals however the range ofoptions available to participants are not spelled out with any clar-ity although employment or training are the primary options

More recently the government has proposed broadening thegateway concept as the first stage of any encounter with the ben-efits systemtgt From April 2000 all applicants for benefits will berequired to attend an interview with a personal job adviser as acondition of receiving benefits Although the government insiststhat this is not too much to ask of those seeking state support it isa significant development In particular the initial interview withthe personal adviser is intended to be work focused and follow-upinterviews are to take place while an individual continues to be onbenefits It is clear from government materials that the personaladviser is to have significant input into the determination of anindividuals eligibility In short the gateway has the potential ofbecoming a screening mechanism which diverts claimants awayfrom the benefits system There is great concern that the personaladviser system will become a mechanism by which vulnerableapplicants particularly single mothers and the disabled will be

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coerced into low-wage employment that does little to improvetheir situation

The design and structure of the reform package clearly revealsthe predominance of neo-liberal thinking The monetarist critiqueof the welfare state has led to the targeting of specific groupswhich are seen as suffering from welfare dependency The solefocus of the social security system is directed towards integratingpeople back into the wage-labour market with income securityfunctions clawed back for those who do not have work Lacking isany participatory or developmental component that would allowthe poor to have ongoing input into the design and administrationof the benefits system

Contradictions of Social Security Reform The restructuring ofthe social security system into a device for labour market inter-vention has not led to a complete abandonment ofthe social demo-cratic objective of income redistribution Indeed New Labourswelfare reform package has included assistance for the workingpoor In particular the government has introduced a new WorkingFamilies Tax Credit (WFTC) which replaces the old system ofFamily Credit26 The WFTC operates to provide families in workwith a minimum income of pound 190 a week At the same time thegovernment has also provided more support to low income fami-lies for child care This has come in the form of a childcare taxcredit which will be worth 70 of eligible childcare costs subjectto an overall limit pound100 per week for one child and pound150 per weekfor two or more children27

These programmes have redistributed income to the poorHowever the benefits are available only to those in work The taxrelief available through the WFTC and the childcare tax credit forexample require minimum hours of labour market participationand earnings by both partnersse The articulation of these pro-grammes with the tax system thereby consolidates the linkbetween benefits and work The significance of benefits as anincome support mechanism for those out of work continues to bedismantled and minimized This represents an important recon-ceptualization of benefits and reinforces the traditional distinctionbetween the deserving poor and the undeserving poor

The government does not consider income redistribution to bethe primary goal of these programmes Rather it conceptualizesthese new programmes as a mechanism for making work pay

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The creation of new systems of tax credits that benefit only thosein work while at the same time restructuring the benefits systemas a mechanism for labour market intervention is seen as provid-ing a series of incentive structures that will compel individualsinto the labour market The logical integrity of the new systemdepends both on the validity of the monetarist claim that the ben-efits system creates labour market rigidities and on the availabil-ity of jobs for people to take up

It is in the latter regard that the contradictions of the NewLabour welfare reform package are most evident Traditionalincome support programmes were conceived within a policy con-text of full (male) employment The assumption was that incomesupport was a temporary measure to see people through excep-tional periods of unemployment Of course certain groups such asthe disabled would require more long term assistance but thegeneral assumption was that Keynesian demand management pro-grammes would operate to create economic growth and jobs

While the practice of income support particularly during theThatcherMajor period may not have lived up to the Keynesiangoal of full employment Labours approach to welfare issues wastraditionally rooted in this perspective Now however the gov-ernment does not speak of unemployment or of job creation Thisis because of New Labours understanding of unemployment as amatter of individual responsibility rather than a structural conse-quence of capitalist economics The purpose of the New Deals isto provide a mechanism by which individuals who are withoutwork can be reattached to the labour market Ministers speak ofindividuals who are workless and the need for the welfare stateto re-establish the work ethic amongst these groups of peoplezBlair speaks of giving people back the will to win3o

To the extent that the government does speak of job creation itis clearly not in Keynesian terms In his budget speeches GordonBrown has insisted that the government is not willing to usemacro-economic levers to direct capital investment Such a policywould require much greater intervention and regulation of capitalmarkets than New Labour is prepared to consider Rather theproblem of job creation is seen as the responsibility of the privatemarket Governments role is to introduce policies in particulartax cuts that would boost productivity The governments com-mitment to an orthodox neo-liberal paradigm is clear in theChancellors exhortation to

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break free from old ideas of state control and crude laissez-faire ournew ambition for Britain must be to encourage enterprise andentrepreneurship to boost education and skills and to open marketsto competition and new opportunities The government today sends aclear signal of support for enterprise to those who invest in the UKMy message to business is-when you are ready to start out start upstart investing or start hiring-this Government is on your sideU

The governments policy orientation then is to foster investmentthrough tax cuts to business a policy with no actual guarantee thatthe savings to business will be reinvested in jobs

Labour introduced a number of substantial tax cuts for businessIn both the 1997 and 1998 budgets the main rate of corporation taxwas significantly reduced and the government pledged that the ratewould not be increased for the remainder of this parliament Thegovernment estimates that these changes will save companies anestimated pound15 billion each year Tax rates for small business aswell as capital gains taxes for investors have also been cut Ratesof corporation tax are now at the lowest level in British history

Finally the government also reformed the National InsuranceSystem so that the employers share of contributions to NationalInsurance was drastically CUt32 In particular employers now payno National Insurance on any employee earning less than pound81 aweek According to the governments figures this will mean thatthe costs to business of employing over 13 million people will bereduced In particular the saving to a business employing someoneat half average earnings would be about pound250 per year The gov-ernments assumption is that this money will be reinvested to hiremore workers Even if this assumption proves correct the changesto National Insurance create very definite incentives for those jobsto be created at the low-wage low skill end of the economy

The absence of any role for the state in regulating capital alsomanifests itself in the structure and priorities of the New Deals Inthe absence of an industrial strategy the New Deals cannot possi-bly create the sort of high tech high skill jobs the governmentconsiders necessary to achieve global competitiveness The gov-ernment recites industry estimates that approximately 120000 jobvacancies exist because applicants lack necessary skills The skillsneeded are primarily in information technology engineering andconstructionu The focus of the New Deals however has been onlow-wage low skill segments of the economy

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Early indications are that very few employers in this area arecoming forward to sign on to the New Deal programmes Thisprompted the government to backtrack on its initial promise thatall New Deal jobs would be in the private sector and to includepublic sector jobs in the programme A major advertising cam-paign selling the programme to employers was launched promis-ing businesses more bang for their buck through the subsidiza-tion ofwagesJ4 The New Deal for young people provides employ-ers with a wage subsidy of up to pound60 per week for six months andan additional pound750 grant if an employer provides its workers withsome sort of training towards a recognized qualification The NewDeal for the long term unemployed similarly provides wage sub-sidies of pound75 per week to employers for a six-month period

Those employers who signed on to the programme tend to bein the low-wage end of the service industry particularly the retailsector and the hotel and catering industryJ5 These sectors werealready expanding and many of the companies that signed on tothe New Deal were already in the process of recruiting newemployees Consequently the New Deal is likely creating veryfew jobs while providing a tremendous subsidy to employersTesco grocery stores for example obtained nearly pound6 million insubsidies two-thirds of which it received up front for the 1500New Deal workers it pledged to take onJ6

The subsidies to employers are tremendous but they are mostattractive at the lower end of the pay scale Moreover it is in theinterests of participating companies to make positions short term sothat subsidies can be rolled over on an ongoing basis Although thegovernment has asked companies to agree not to release New Dealrecruits after the six-month subsidy period expires this will beextremely difficult to police Moreover it will be in the interests ofthe government not to police this too strenuously as the rollingover of recruits will make the programmes appear more effectivethan they actually are The structure of the New Deals is such thatit will provide subsidies to low-wage employers and a coercivecomponent so that vulnerable members of society such as lone par-ents and the disabled are forced to accept those positions

The governments programme relies on fairly conventionalneo-liberal devices namely the cutting of taxes to foster invest-ment and job creation and the subsidization of wages at the lowend of the economy New Labour has no industrial strategy thatcan compare to the Alternative Economic Strategy (AES) that was

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advocated by the Labour Left in the 1970sAlthough the AES wasnever implemented the need for some sort of industrial strategywas a subject of active debate For New Labour however theterms on which government policy should operate are quite clearand from the governments perspective there is no room fordebate This leads to a consideration of the space for politicalopposition to the reform direction of the government direction andthe degree to which there is still some potential for the develop-ment of a social democratic alternative within the Labour party

Political Resistance and Welfare Reform The development of asocial democratic alternative to the welfare reform agenda set byNew Labour would require a greater degree of collective involve-ment by anti-poverty activists and social movements in the settingof policy This would allow the government to move beyond thenarrow monetarist framework and develop a more comprehensivereform package that involves both an industrial strategy and thecreation of more democratic and participatory organizationalforms within the state Political mobilization around a socialdemocratic alternative must come from either social movementsand activists in the anti-poverty movement or from within theLabour party itself At the moment however neither scenarioseems likely

The organization of social security within the state has limitedthe potential for collective mobilization of poor people State insti-tutions responsible for income support are centralized and lackdemocratic features that might serve as a focal point for localmobilization The welfare state dominated by a bureaucratic andlegalistic process privileges centralized pressure groups that inter-act with state policy makers at that Ievelr During the 1980sgroups like Shelter or the Child Action Poverty Group wereincreasingly excluded from the policy process by Thatcher withno organizational framework to mobilize poor people themselves

It would be incorrect however to suggest that there was nomobilization of poor people in response to benefits cuts of the1980s and 1990s Organized labour through the ruc attemptedto organize the unemployed through the creation of a network ofCentres for the Unemployed38This resulted in a somewhat high-er profile for issues related to unemployment but mobilizationwas controlled by organized labour and was integrated into thestructure of the trade union movement and the Labour party

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Radical independent organizations of the unemployed wereexcluded from involvement in the TUC centres The centresplayed little role in bringing together disparate anti-povertyactivistsI Dependent on Local Authorities for funding the polit-ical activities of the centres were circumscribed Many LocalCouncils including sympathetic labour councils only funded theprovision of direct services to the unemployed and strict prohibi-tions were imposed on campaigns against government policies oragainst government agenciesw

These developments meant that the capacity for anti-povertyactivists to develop an independent collective political organiza-tion of the unemployed was limited Consequently there is verylittle in the way of a poor persons movement to challenge NewLabour Those groups that do exist are poorly organized and oper-ate on the fringes of the political spectrum Rather than a coherentmovement there exists a collection of individuals groups and the-ories including militant urban anarchists new age travelers ruralco-operators and environmental activists These groups have lit-tle potential to exert influence over New Labours direction

What possibilities exist within the Labour party for the emer-gence of a social democratic alternative around welfare reformPrior to coming to office Blair restructured the organizational andrepresentational base of the Labour party His drive to modern-ize the party has transformed it from a mass based party to a moretraditional cadre party Power was centralized and the role oftrade unions social movements and grass roots constituencygroups seriously eroded As Leys and Panitch have argued therewas a disempowering of activism within the party42 Since comingto office power continues to be centralized and the partys abilityto influence policy is greatly diminishedO

The government however has faced internal opposition At the1998 Labour Party convention dissatisfaction over the directionof welfare reform was evident A left wing coalition the CentreLeft Grassroots Alliance fielded a slate of candidates for electionto the National Executive Councils constituency section Its plat-form called for the reversal of cuts to lone parent benefits and theending of university tuition fees Although the Party leadershipactively campaigned against the group it won four of six posi-tionss- This was viewed as a serious rebuke of the leadershipsgt

There has also been opposition within the parliamentary partyaround specific proposals to cut social security benefits The deci-

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sion to cut lone parent benefits provoked a serious backbench revoltwith 47 Labour MPs rebelling and voting against the governmentShortly thereafter rumours that disability benefits were to be cutproduced demonstrations outside Downing Street A letter fromEducation Secretary David Blunkett to Chancellor Gordon Brownin which Blunkett criticized the proposed cuts was leaked46

These developments produced press reports of deep divisionsin the cabinet It was reported that a faction of the Cabinet thatincluded John Prescott Robin Cook Blunkett Frank Dobson andClare Short was prepared to oppose the governments welfarereform plans The response by Blair to these developments wasquick A special ministerial committee chaired by Blair was cre-ated to oversee welfare reformss An intensive media campaignwas launched to assert the governments resolve to pursue welfarerestructurings Blairs determination to face down the oppositionwas favourably compared to Thatchers battle against the wetsin her cabinet and his battle to remove Clause 4 from the LabourParty constitution

These developments were followed in July 1998 by a majorcabinet reshuffle which further centralized control over the parlia-mentary party Harriet Harman was sacked as Social SecuritySecretary A Blair loyalist it was reported that her dismissal wasdue to her inability to prevent the back bench revolt over lone par-ent benefits In her place Alaister Darling was moved from hisposition as Chief Secretary of the Treasury to the Social Securitypost thereby consolidating the Treasurys control over socialsecurity reformw

The cabinet shuffle also created a new position with FrankCunningham a long time party loyalist and right-wing member ofthe party appointed to the post of Minister for the Cabinet OfficeThe intention was that Cunningham would act as cabinet enforcerCunningham acknowledged that his job would involve trying toensure that squabbles between ministers would not derail policyobjectives like welfare reform A crisis command centre and apolicy think tank inside the cabinet office were also createdstrengthening Blairs control over policy development and reduc-ing reliance on departmental advice51 Finally seeking to consol-idate control over the parliamentary caucus Blair moved the partywhip position into the cabinet In short the cabinet shuffle was aneffort to ensure that backbench revolts and ministerial conflictscould be contained and minimized

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These developments despite their effectiveness have notsilenced backbench opposition to benefits cuts The rumoured cutsto disability benefits were finally realized with the introduction ofthe Welfare and Pension Reform Bill The bill included proposalsto drastically alter the structure of incapacity benefits In particularentitlement to the benefit will be subject to strict means testing andassessment of an individuals work capacity It will disentitle any-one who has not been paying National Insurance contributions forthe past two years or who had been in receipt of a pension of morethan pound50 per week These changes will cut off benefits from olderunemployed workers who have not been paying National Insurancecontributions in recent years despite having done so for most oftheir working lives

Party members reacted angrily to the replacement of a univer-sal contributory benefits scheme with a means-tested and workfocused approach This opposition was clearly evident when theWelfare and Pension Reform Bill came to a vote in the House ofCommons in May 1999 Sixty-seven Labour MPs voted againstthe government Although the legislation was passed the govern-ment majority of 176 was reduced to a mere 4052 The result rep-resents a significant setback for the government which has hintedthat the Bill might be altered before it returns to the House ofCommons for another vote

The opposition to the governments plans however is primar-ily directed at those aspects of welfare reform that would roll backwell-established benefit programmes rather than at the theoreticalunderpinnings of the New Deals Attacks on lone parents the sin-gling out of pensioners and the disabled produce reaction withinthe party At the same time however the introduction of the NewDeals received scant comment within the party The New Dealshad been in place for months before the first signs of internal dis-sent over cuts to lone parent benefits The most recent backbenchrevolt was led by Roger Berry who is supportive of the govern-ments welfare to work proposals

The government remains committed to its welfare reformagenda 53 It is unlikely to change its direction unless there is apolitical mobilization beyond the parliamentary party SimonClarke writing in 1987 suggested that the rebirth of a radicalKeynesian alternative must be tied to the rebirth of the Labourparty as a mass participatory party in which popular strugglescould retain their autonomy without absorption into alienat-

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ed forms of representation54 This possibility continues toseem remote

Conclusion Social security reform has constituted a major policyinitiative of Tony Blairs New Labour government It was intendedto provide an opportunity to distance New Labour from the legacyof the Tories while at the same time maintaining a fundamentallyorthodox neo-liberalmonetarist policy orientation To this end thegovernment set about to restructure the conceptual underpinnings ofthe social security system transforming it into a work-focusedmechanism of labour market interventions This resulted in the dis-mantling of the traditional functions of social security benefits andthe hollowing out of the welfare state At the same time the restruc-turing of social security has not been without contradictions In par-ticular the government has not addressed the structural causes ofunemployment nor developed policies that would aid the long-termunemployed This would require an economic strategy that goesbeyond a neo-liberal understanding of the state Instead the focus ison regulating workers rather than regulating capital markets Thisapproach will do little to achieve the goals that New Labour hasestablished for the welfare reform programme

The development of a political alternative to the neo-liberalvision of welfare is critically important The Fordist welfare statehas proved remarkably resilient The political costs of dismantlingit are high New Labours experience indicates that while many inthe party are supportive of welfare reform and even willing toendorse its New Deals the dismantling of existing programmesgenerates opposition This provides space for developing a socialdemocratic alternative one that would permit the progressiverestructuring of existing programmes rather than their dismantling

The capacity of the Labour party to engage in this sort of exer-cise however is limited The legacy of New Labour and the dis-empowering of activism means the party lacks the capacity tothink creatively about these issues The party leadership is willingto pursue its vision of welfare reform at any cost If however thepolitical price of that decision becomes too high it will likely jet-tison the reform proposals rather than explore social democraticalternatives Those who oppose the governments direction appearcontent to defend existing benefits without contemplating howthey might be progressively reformed The solution to this dead-lock requires the Labour Party to act as forum for dialogue

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between politicians party activists and social activists Blairsdetermination to transform the Labour party into a modem effec-tive electoral machine undermines its capacity to play this role

Notes

1 Speech by Tony Blair 8 Dec 1997 at Stockwell Park School Lambethregarding the launch of the Governments new Social Exclusion Unit

2 Speech by Tony Blair 2 June 1997 at the Aylesbury Estate Southwark3 Bob Jessop The Transition to Post-Fordism and the Schumpeterian

Workfare State in Roger Burrows and Brian Loader Towards a Post-FordistWelfare State (London Routledge 1994) p 22

4 Simon Clarke Capitalist Crisis and The Rise of Monetarism in RalphMiliband John Saville and Leo Panitch Socialist Register (Merlin Press1987)

5 Paul Bagguley Prisoners of the Beveridge Dream The PoliticalMobilisation of the Poor against Contemporary Welfare Regimes inBurrows and Loader A Post-Fordist Welfare State supra nt 3 pp 74-94

6 HM Treasury Fiscal Policy Lessons from the Last Economic Cycle (Nov1997) The government consistently feared that the economy was on theverge of entering a new inflationary cycle and that a tightening of monetaryand fiscal policy is necessary See both Gordon Browns 1998 Budget speechand his 1998 pre-Budget statement to the House of Commons (25 Nov1997)

7 Welfare spending in the UK is generally low and increasingly below the aver-age rate of economic growth The total welfare budget represents 13 percentof GDP which is well below comparable spending in other countries SeeWill Hutton Lack of Welfare State Causes Poverty The Observer 21 Dec1997 p 22

8 The dominance of the Treasury was also the experience of the NewDemocratic Party during its attempts to reform social security in Ontario SeeByron Sheldrick Welfare Reform Under Ontarios NDP Social Democracyand Social Group Representation Studies in Political Economy 55 (1998)pp 37-63

9 Frank Field A New Contract for Welfare Ch 1 p 6 These points are madein more detail in a Treasury Document The Modernisation of Britains Taxand Benefit System Employment Opportunity in a Changing Labour Market(27 Nov 1997)

10 HM Treasury The Modernisation of Britain s Tax and Benefit System (Nov1997)

11 Speech by Tony Blair 20 Jan 1998 at the Annual Friends of NieuwspoortDinner The Ridderzaal The Hague A Modem Britain in a Modem Europe

12 More recently New Deals have been announced for the long term unem-ployed and individuals over 55 years of age On how the development of thewelfare state reflects and incorporates differential social relations aroundclass race and gender see Fiona Williams Social Relations Welfare and thePost-Fordism Debate in Burrows and Loader Towards a Post-FordistWelfare State supra nt 5 pp 49-73

13 HM Treasury The Modernisation of Britains Tax and Benefit System Nov1997 para 213

14 The welfare to work programme for lone parents was launched on 21 July1997 in eight pilot areas The average length of time that lone parents were

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on benefit before getting a job in those areas was just under four years SeeDepartment of Social Security Press Release 97185 (23 Sept 1997)

15 See Green Paper on Welfare Reform Ch 1 p 916 Anthony Barnett and Patrick Wander Its a New Deal but will it be a New

DawnT The Observer 4 Jan 1998 p 17 The success rate at finding jobsfor participants in the New Deal for Young People is approximately 25while the success rate for participants in the New Deal for Long TermUnemployed is only 6 See HM TreasuryFinancial Statement and BudgetReport (March 1999) Ch4 pp 6-7

17 Her Majestys Treasury Financial Statement and Budget Report March1999 Table 41 Ch 4 p I I Much smaller amounts have been allocated forthe New Deals for lone parents and the disabled (pound190 million and pound210 mil-lion respectively) these are still disproportionately large given the relativelysmaller numbers of claimants in these categories

18 Ibid19 Department of Social Security Annual Report 1999 pt 4 For a further dis-

cussion of this report see David Brindle End of the Line The Guardian 7April 1999 Available httpwwwguardianunlimitedcoukArchivearti-c1e04273385017700htmI See also See Department of Social SecurityFacts and Figures 1999 (May 1999)

20 The government has proposed wide-ranging pension reforms that seek toincrease self-reliance among retired workers See Department of SocialSecurityA New Contract for Welfare Partnership in Pensions (Dec 1998)

21 John Shields and B Mitchell Evans Shrinking the State Globalization andPublic Administration Reform (Halifax Fernwood Publishing 1998)

22 Department of Social Services A New Contract for Welfare The Gateway toWork (October 1998) Ch 2 p I

23 Ibid Ch Ip I and Department of Social Security A New Contract forWelfare Principles into Practice (Oct 1988) Ch3 p I

24 Incapacity benefit is a universal contributory programme that provides bene-fits to those individuals whose disability precludes engaging in work For afurther discussion of the proposed changes to incapacity benefit see belowpp 36 ff

25 Department of Social Services A New Contract for Welfare The Gateway toWork Ch3 The requirement that benefits applicants attend for a counselinginterview has been included in the Welfare and Pensions Reform Act whichwas introduced into the House of Commons in February 1999

26 Family Credit was a means tested benefit programme aimed at low incomefamilies It provided an income supplement as well as other entitlementsincluding free NHS dental services and free prescriptions See Muriel Brownand Sarah Payne Introduction to Social Administration in Britain (7th ed)(London Routledge 1994) esp Ch 2 for a description ofthe various bene-fits programmes

27 For an average family moving off of welfare the change from Family Creditto WFTC amounts to a weekly increase of pound925 More importantly under theWFTC the rate of c1awbackas an individuals wages increase is reduced from70 to 55 See HM Treasury The Modernisation of Britains Tax andBenefit System The Working Families Tax Credit and Work Incentives (17March 1998)

28 Both partners must work at least 16 hours per week and have full time earn-ings of at least pound100 per week

29 See Department of Social Security Green Paper on Welfare ReformSummary p 4 See also Harriet Harmans speech to the General Assembly ofthe European Anti-Poverty Network the full text of which is available in

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Department of Social Security Press Release 97263 PromotingEmployability to Reduce Poverty a Key Theme in Europe says Harman 27Nov 1997

30 Tony Blair Speech to the Aylesbury Estate supra nt 231 HM Treasury The Chancellors 1998 Budget Speech pp 3-432 The government transferred responsibility for the collection of National

Insurance Payments from the Social Security department to the TreasuryThis limits the Social Security departments ability to set NIS policy It alsocontributes to the view that National Insurance Contributions are a tax ratherthan a contribution to a welfare system with universal benefits

33 See pre-budget news release HM Treasury Chancellor sets out plans forJobs Training and Childcare 25 Nov 1997

34 A survey by the Institute of Directors indicated that its members were unwill-ing to hire New Deal recruits because candidates were a) unsuitable (73)b) unwilling conscripts (71 ) and c) lacking necessary skills (60) TheObserver 4 Jan 1988 p 17

35 See HM Treasury Financial Statement and Budget Report 1988 Ch 3 p4 Two of the biggest commitments to the New Deal have been from Tescoand Radisson Edwardian Hotels See also HM Treasury New Release14597 New Deal Giving Impetus for More Jobs in the Retail Sector 20Nov 1997 in which Paymaster General Geoffrey Robinson stated that thegovernment considers the retail sector as an extremely important part of theNew Deals

36 Barnett and Wander Its a New Deal supra nt 1637 Paul Bagguley Prisoners of the Beveridge Dream supra nt 5 p 8638 The number of Centres for the Unemployed peaked in the mid-1980s at just

over 200 In 1994 there were only 117 funded primarily by voluntary con-tributions from trade-union members See Paul Bagguley Collective Actionand Welfare Recipients in Britain in Rik van Berkel Harry Coenen andRuud Vlek Beyond Marginality Social Movements of Social SecurityClaimants in the European Union (Aldershot Ashgate) p 39

39 See Kevin Dixon Strategies for Survival Poor Peoples Movements inBritain in ibid p 24

40 1bid41 Ibid p 3442 See Colin Leys and Leo Panitch The End of Parliamentary Socialism From

New Left to New Labour (London Verso 1997) Ch 1043 In May 1998 for example the partys National Executive Council approved

proposals that all candidates be chosen from a centrally approved list prior toselection by the local constituency party This has been seen as an attempt toprevent the nomination of left wing party members and to undermine theauthority of local constituencies See Nick Assinder Blair Tightens ReinsOn Would-be MPs BBC News 26 May 1998 Available httpwwwnews2thdobbcco uklhienglishlukipoliticsnewsid5F I 000001 00835 stm

44 The group was actively attacked by the party leadership Both LaboursGeneral Secretary Tom Sawyer and former party leader Neil Kinnocklaunched bitter attacks on the group See Labour hijack claim deniedBBC News 15 August 1998 available httpnews2thdobbccouklhienglishluk5Fpoliticsnewsid5F 151000151432stm The alliance candi-dates elected included Liz Davies Mark Seddon the editor of the left-wingLabour weekly newspaper Tribune Cathy Jamieson and Pete Willsman

45 The party leadership attempted to minimize the impact ofthe NEC electionsThe announcement of the constituency section election results were movedforward so that they would coincide with Blairs keynote conference speech

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Shortly after the conference Margaret McDonagh the partys new GeneralSecretary proposed a code of conduct for NEC members which would haverequired NEC members to inform the Partys press office before discussingparty business with the media After much criticism the code was approvedas a set of guidelines rather than as a mandatory requirement

46 The text of the letter was published in The Sunday Telegraph 21 Dec 1997p18

47 See for example The First Split Five Ministers Confront Blair overBenefits The Independent 22 Dec 1997 p I

48 See Philip Webster Blair will Take Command of Benefit Reform TheTimes 22 Dec 1997 p I

49 See for example Blairs editorial No Part of Britains Welfare State can beImmune to Reform The Daily MaU22 Dec 1997 p 8

50 Gordon Brown fought to save her position Field who evidently wanted toreplace Harman resigned when he was not given her position In resigningField was extremely critical of Treasury interference in welfare reform pro-cess Alaister Darling although at one time identified on the left of theLabour party has recast himself within a New Labour framework of man-agerialism See Andrew Rawnsley Darling Buds in May The Guardian 16May 1999 Available httpwwwguardianunlimitedcoukarchivearti-cle04273386553200html

51 See ValerieElliott Blair Creates Crisis Centre at Cabinet Office The Times29 July 1998 available athttpwwwthe-timescouknewspagestim980729timpolpoI0I002html999

52 See Ewen MacAskill Darling fails to stave off Big Revolt The Guardian21 May 1999 and Patrick Barkham Government Fends off Welfare RevoltThe Guardian 20 May 1999 Available on-line at httpwwwnewsunlimit-edcoukuk_news

53 See Ewan MacAskill Labour MPs Revolt May Force WelfareConcessions The Guardian 21 May 1999 available httpwwwnewsun-limitedcoukuk_newsstory036045I 88400html

54 Clarke Capitalist Crisis and the Rise of Monetarism supra nt 4 pp 425-426

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