Should the way in which taxes and charges areleviedto pay for social welfare systems reflect the benefits that particular individuals and families receive from the welfare state?

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The Politics of Welfare

Second Semester Essay

Should the way in which taxes and charges are levied to pay for social welfare systems reflect the benefits that particular individuals and families receive from the welfare state?

The modern welfare state faces a wide variety of problems, and the question of which system to adopt, how best to adapt and implement such a system is of primary concern. This paper will examine the introduction of a social insurance type system, with reference to the alternative models of social assistance and universalism, its desirability and validity.

The modern welfare state in capitalist societies appears as three distinct models; Universalism, Social Insurance and Social Assistance1. These will be used as the comparative models in evaluating the desirability of social insurance type welfare systems, concentrating on the United Kingdom (U.K.) as the primary point of reference.

The differing approaches of the three welfare systems are important in understanding the causes of welfare problems and whether or not the introduction of a more contribution based, social insurance type, system is desirable or indeed viable.

The first of the models, according to Esping-Anderson, is the Universalist Welfare type, typical of Scandinavian countries. It aims to provide high-quality state benefits and services free to all at the point of need in an attempt to prevent the commodification of labor and subsequent income gap, which inevitably leads to poverty and deprivation with its associated problems.

The disadvantages of this system are that it is extremely costly to maintain and improve, requiring high levels of taxation. The second disadvantage is that such a system requires near full employment in order to maintain the cost/service threshold.

The second, the Social Insurance model typical of Central European countries, (notably Germany), provides benefits and services on a quid pro quo basis. Level and quality of entitlement is based on past contributions. This system type was originally designed to preserve conservative conceptions of class hierarchy and paternalistic family structures ('traditional family values'). Such systems present problems. They create and sustain gender inequality maintain social stratification and also present the problem of who caters for the well-being of dependents that have not and may continue to be unable to contribute.

The third, the Social Assistance model, common to Anglo-Saxon countries such as the USA, Australia, and increasingly the UK, focuses on providing subsistence assistance to the very poor, allowing the better off to provide for themselves through private welfare provision. This generates a commodification of labour that increases income disparity. This situation is primarily geared to favor large corporations and their wealthy scions. "What is good for business may not necessarily be good for the economy overall."2

Such systems also dramatically increase the problems of poverty and deprivation. Creating a growing number of people existing on or below the poverty line, and adding to the number of people the system supports. It increases costs and leads to a decline in economic growth.

The nature of the difficulties faced by the modern welfare state and the direction reform can and should take, are key factors in examining service modernisation, centred on the introduction of more targeted benefits and services, the swiftest and best provided to those who contribute most, quid pro quo.

British welfare has encountered a number of problems over the past decades. From the pressure of the International Monetary Fund (IMF) and international business concerns to reduce government spending, primarily in the area of welfare transfers, to the approaching 'taxation ceiling', beyond which middle-class support for welfare taxation is believed to rapidly dwindle, creating a backlash and the erosion of the welfare state.

Though the willingness of citizens to pay taxes obviously varies with the political circumstances, there is surely something to the idea that the overall level of taxation has reached its limits in many OECD countries3.

More recently heavy criticism of the level of service degradation, and rising costs, has encouraged a further withdrawal of confidence in social welfare systems.
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The problems in public service, such as declining quality, increasing school class sizes and hospital waiting lists, fewer state benefits more closely tied to means testing and the decreasing rate of state pensions have been brought about by a number of factors. A change in the system will have to be able to successfully deal with these difficulties.

Firstly, if the welfare state is to continue as an effective system it is essential to maintain middle-class support and participation. The new middle-class is now the single largest socioeconomic group within the electorate not to mention the largest ...

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