Good Times, Bad Times exposes pernicious myths about the welfare state, and shows how much the great majority of us benefit from it, finds Ellen Graubart

Good Times, Bad Times is an in depth study of UK social policies regarding taxes and benefits, and the effect they have on people’s lives over time. It is an invaluable store of facts vital in helping to expose the forces that are determined to destroy our welfare state.

John Hill strips away the myths and propaganda that are spread by the media and politicians about the welfare state and how it operates. He describes how both rapid and long-term changes in the lives of individuals and families interact with the welfare state and other parts of public policy, all of which are taking place within a changing economy and society, especially since the start of the economic crisis.

He exposes the all too prevalent caricature of families where two or three generations have never worked, a situation that is very rare and unrepresentative of those who become unemployed and get benefits (and usually for a short time only). He uses extensive research and survey evidence to challenge the myth that the population divides into two separate camps, those who benefit from the welfare state – the scroungers and skivers – and those who work hard and pay the taxes that go to finance the welfare state. He describes politicians’ and the media’s use of this caricature as propaganda, and describes it as a ‘very poor basis for designing policy’ (p.109).

How public and social policies work

Hill invites us to examine the ways public and social policies operate and the problems they are designed to address, across different time periods, from the very short-term to the very long-term, using two fictional families, one fairly comfortably off, and the other poorer, lacking the extra advantages that prosperity naturally brings. He traces the two families through two generations, through good and bad times, demonstrating in the process that the  individual fortunes of both families fluctuate through time, both from week to week, month to month and throughout their lifetimes, and across generations, and that both families benefit in one way or another, throughout their lives, from the welfare state. These fluctuations occur because of the various pressures that all families, rich or poor, have to cope with, whether it is through losing or gaining employment, having children, illness, divorce, and so on.

The aim of the welfare state is to smooth out some of these variations throughout people’s lifetimes. Nearly all families have a major stake in the system, both in what they are likely to get out of it, and the way it insulates them from risk (and from living longer), because it is dominated by universal entitlements such as pensions, education and healthcare, and not by stigmatised ‘welfare benefits for the poor’ (p.72). The result is that incomes, after allowing for the benefits people receive and the taxes they pay, are much flatter across the life cycle than those from the market.

However, neither in the design of tax credits by the last government nor in the attempt of the current one to introduce Universal Credit does enough attention seem to have been paid to the complicated circumstances of people’s lives, which makes it difficult for them and the bureaucratic systems to cope with. This complexity has led to messy interactions between a series of separate tax and transfer systems designed in different ways to give the greatest help to people who need it the most, while keeping down the costs of running the system. For example, the coalition government’s plans for a single Universal Credit payment to replace six existing means-tested benefits and tax credits by 2017 with exactly the right amounts paid out each month on the basis of ‘real time information’ requires a heroic administrative effort that is able to cope with the more than a million changes in people’s circumstances every month (p.108).

One of the main challenges facing the welfare state is that evenafter a great deal of redistribution of wealth (through taxes), Britain still ends up as one of the most unequal of the industrialized countries, because it starts from such an unequal distribution of income from earnings and investment income. Therefore our welfare state has to work much harder than other countries even to get to where it is.

There is a popular perception that the poor have become too expensive   

Hill states that: ‘in fact the net gain that the poorest were receiving in a snapshot of redistribution through the welfare state and household taxes was no higher as a share of overall market incomes in 2010 than it was in 1996. The overall share of income going to the poorest fifth fell considerably as inequality grew between 1979 and 1996, and simply stabilised between then and 2010. It was the share of the top tenth that grew, squeezing everyone else. Within that,

‘nearly all of those gains from 1979 to 2007 went to just the top 1 per cent, with their gain nearly equivalent to the whole of the income share that goes to the bottom 20 per cent’ [my emphasis] (p.45).

The impact of the dramatic changes that have been made (first by Labour, and then the coalition) was to have reduced the deficit, but following the financial and economic crisis since 2008 this has not spread evenly across the population. Super rich families without children have benefited (changes to top Income Tax rates and other adjustments have had major effects). Meanwhile, the decision that the balance of adjustment should come mainly from cuts in public spending, especially on social security benefits rather than from taxation, with pensioners protected rather than families with children,has hada regressive effect. The burden has fallen more heavily on people the lower down the income distribution they happen to be, with the poorest suffering the most. The loss of 6% of net income by lower-income families has been fairly typical, and they have also lost proportionately more from cuts in public services than others. Against this, loss of only 1% for higher income groups is typical – because of the changes between 2010 and 2014.

If anyone has got too expensive, it is the rich that have become too expensive.

Myths have consequences

‘Misconceptions about the welfare state and the way it is abused are not just a matter of harmless misunderstanding’ (p.263). They affect both the poor and the rest of society in that they create huge problems in how the welfare state is run. According to official analysis, actual fraud in claiming Job Seeker’s Allowance may be less than one thousandth of all spending on social security, but if the public believe that it is over a tenth of the total, our politicians are pressured into reacting accordingly. This has had disastrous effects on those at the sharp end of ‘welfare reforms’ designed to cut spending and to give a signal to voters that the government is listening to voters’ concerns.

Here are some of the ‘reforms’ that the Coalition government has put in place in its efforts to cut public spending:

• Sanctions imposed on those receiving Job Seekers’ Allowance if they have failed to meet conditions such as not attending interviews (for whatever reason), or for not seeking work assiduously enough. ‘By the autumn of 2013 more than half a million different Job Seeker’s Allowance recipients had been affected; a majority of those appealing against the sanctions have had their appeals upheld’ (p.265).
• Creation of  the ‘Bedroom Tax’ (‘abolition of the spare room subsidy’), which targets only low income groups, who occupy between them 3% of the nation’s ‘spare’ (or under-occupied) bedrooms, whether or not there are smaller properties available to move into.
• Cuts in Council Tax support because responsibility for it has been passed to local councils with reduced budgets.
• Limits set on Housing Benefit for private tenants, at levels that only rise with general price inflation and not at the rate of rent increases.

The measures that the government has taken to save money have targeted often very narrow groups of vulnerable people. Only a small share of the resources of the welfare state goes to people who are out of work, so the amount saved makes little difference to overall spending, but requires squeezing these groups even more drastically. Evidence of the dire effects of these cuts is amply demonstrated in the rapid increase in the use of food banks, with more than 900,000 people receiving three-day food parcels from the Trussle Trust in 2013-14. The individual testimonies of people who have become destitute as a result of harsh government decisions underlines the stark crisis many people are facing.

‘What was once a national safety net, albeit not a very generous one, now has substantial holes in it’ (p.266).

There is no ‘them and us’, just us

Many more of us benefit from the welfare state than are affected by narrowly selected parts of it at any one time. If we continue to believe that only a small group of people need the benefits of a welfare state – even if we never expect to be out of work or have to face illness or disability ourselves – we will make choices that will eventually lead us to the alternative of a private insurance-based system, which the vast majority of the population could not afford.

The effect of an aging society is that we will have to pay more to even stay still in terms of supporting a welfare state. The resources needed for this cannot be got by ever tightening provision for poor minorities. We risk creating a future of ever widening and deepening social divisions unless people are willing to accept higher taxes and spending where it is needed. Therefore it is vital that we reject the myths that those with an interest in keeping down the contribution from taxes on higher incomes or greater accumulations of wealth may continue to promote:

‘In a situation where there are rising demands for the services on the one side and the legacy of crisis and slow growth in living standards meaning tight constraints on resources on the other, we cannot afford to make choices and decisions by myth, rather than in the light of reality’ (pp.267-8).

What we pay into the welfare state we more or less get back throughout our lives, in good times and bad times. When we pay in more, we are helping our children and parents, and ourselves if things had not turned out well for us: ‘In that sense, we are all – or nearly all – in it together’ (p.268).