New model welfare
by Nick Pearce and Mike Dixon
Prospect - 19 April 2005
The British welfare state is changing. Until 1997, Britain sat alongside other Anglo-Saxon countries within the family of “liberal” welfare states of Gosta Esping-Anderson’s famous typology. These welfare regimes, typical of countries such as the US, New Zealand and Australia, favour individualism and markets, with limited social protection. Social security payments are focused on those most in need and are aimed at preventing abject poverty rather than providing a decent standard of living. Flexible, lightly regulated labour markets create a large low-wage service sector. This has enabled them to have high employment rates, low taxation and balanced budgets. But these achievements have come at the price of high levels of poverty and inequality.

The last eight years have seen Britain evolving away from this model, retaining its best features while adopting some key ideas from Scandinavian countries. In these social democratic welfare states, social security payments are generous and aimed at ensuring a decent standard of living, and come with obligations to find work or retrain. Many services, such as early years childcare, are provided universally through the state. This requires levels of taxation and public spending that are far higher than those in Britain but which allow the Nordic countries to combine high male and female employment rates with low levels of inequality and poverty.

By borrowing from the social democratic welfare state, Britain has started to occupy a new position in the typology of welfare states—what might be called an “Anglo-social” model. This model is a hybrid of the economic performance and flexibility of liberal welfare states and the social protection and equality of Scandinavian countries.

The most important change has been a Scandinavian focus on work as the best route out of poverty. In practice it has meant greater conditionality—requiring welfare recipients to fulfil obligations like attending a work interview or undertaking training. Jobcentre Plus has learned much from similar schemes in Norway and Sweden. (Applying conditionality to incapacity benefit is likely to be a controversial issue in the next parliament.)

This emphasis on the importance of work has led to a new architecture of tax credits, drawn this time from the US and some elements of old Tory policy but made broader and more generous. These boost the incomes of millions of people, encouraging them to remain in employme
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