When William Beveridge published the Social Insurance and Allied Services report in 1942, he proposed a universal system of social insurance financed by the state, with contributions made from employers and employees via their wages. He spoke of his system providing a ‘subsistence’ payment for the elderly, infirm and unemployed.
CapX readers need little reminder of how the welfare state has ballooned since then. What was designed to provide a safety net has become an all-encompassing, hugely expensive, part of national life. The idea of government as provider rather than insurer reached its apogee during the pandemic, when the Treasury was paying millions of people’s wages at a huge cost to future taxpayers.
A more recent example of Britain’s paternalistic drift is Sadiq Khan’s commitment to give all primary school children in London free school meals. Although younger children already get free meals as standard, by extending this to older cohorts the Mayor of London is moving away from a means-tested system which prioritises those most in need. In most of England, free school meals are a Beveridge style subsistence payment, only available to kids whose parents are in receipt of certain benefits and have an income after tax lower than £7,400.
For all his high-flown rhetoric, Khan’s plans will not actually benefit children from the poorest households, as they are already being catered for. Instead, as Mark Lehain explained last week, a significant chunk of the £130m he has set aside will go to the children of parents with incomes far above the national average. It’s the epitome of middle-class welfare, and the antithesis of what Beveridge envisaged when he helped found the modern welfare state.
The energy price cap is another fine example of this misplaced universalism. Liz Truss might argue that she acted in haste because the situation demanded it, but there’s no escaping that subsidising all bill-payers in this way has meant a huge misallocation of public money.
And despite wholesale gas prices falling favourably since Truss left office, her policy has still added billions to the UK’s public debt, which is now forecast to reach 97.6% of GDP by 2025-26. The other big problem with the price cap is it dramatically reduced the incentives for wealthier, more energy-intensive households to reduce their usage, contributing to the very problem it was designed to solve.
If that was designed to deal with the cost of living crisis, there are plenty of other areas where the Government is adding to the burden of households, rather than reducing them. The prime suspect here is Net Zero, a project that ministers blithely insist can be done in an economically beneficial way, but which promises huge costs to consumers in the form of more expensive transport, high electricity prices and expensive home heating.
Banning petrol cars from the 2030s will require a vast network of charging points to be built. In total we’ll need somewhere between 280,000 and 480,000 to fully satisfy driver demand, but at the moment we have a paltry 35,000. This means a huge outlay for taxpayers to build all those charging points, while buying a car will be far more expensive. Doubtless in this brave new world the cost of buying a second-hand petrol or diesel car is going to be inflated as it becomes illegal to make new ones.
And this is just the tip of the paternalistic iceberg. We’re already hearing calls for a ‘climate tax’ on food deemed to have a particularly heavy environmental impact. Given the Government’s fondness for pointless taxing and regulation of what we eat and drink (the sugar tax springs to mind), it’s not too much of a stretch to imagine a new green levy on meat and dairy.
This is all the inevitable consequence of a political class that is in hock to the twin religions of Net Zero and ‘Our’ NHS, both of which are destined to suck up ever more public money and, in turn, necessitating ever higher taxes. Most dispiritingly, neither seems to be the subject of any serious conversation about how they might be reformed to promote better taxpayer value. Instead we march onwards to a poorer, less free country – one that is nothing like the state William Beveridge envisaged all those years ago.
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