On the Defensive

The Report of the Commission on Social Justice, Social Justice: Strategies for National Renewal, is not the first attempt since Beveridge to consider our social security system as a whole – nor is it necessarily the best – but it has been the most widely publicised and reviewed. That is because, unlike the others, it comes from the heart of the political élite itself. The Commission was instigated by the late John Smith and conducted its work under the auspices and with the assistance of the Institute of Public Policy Research. The Institute also published the important working papers which preceded the Report. The Commission was carefully not tied to the Labour Party, and its chairman, Sir Gordon Borrie, the former Director-General of Fair Trading, is very much one of the ‘great and the good’ – those who (before 1979) could expect to preside over such enquiries regardless of which party was in office. Its membership is drawn broadly from the progressive class and the Report, though acknowledging the Commission’s general ideological alignment with ‘the Opposition’, conspicuously denies any particular attachment to the Labour Party. In fact, the Commissioners look remarkably like the Gaitskellite Labour Party – and that includes those of its members who might have left the Labour Party in the Eighties.

The Commission began its work in 1992, the 50th anniversary of the publication of the Beveridge Report, and most reviewers have made the obvious comparison between the two. Yet their differences are more striking than their similarities. Beveridge’s Report was commissioned by the Government and not by the Opposition. His committee was interdepartmental: all its members, aside from Beveridge, were civil servants co-opted from what were thought to be the appropriate departments – Labour, Health, Pensions etc. That was why it was deemed proper that it should be signed by Beveridge alone: the civil servants were there as his ‘advisers’ and ‘assessors’. Thus, whatever doubts members of the Government had about Beveridge’s recommendations, his Report had an ‘official’ character which raised expectations that it would be implemented. That is not true of the Borrie Report.

Furthermore, the political and ideological circumstances in which the two Reports emerged could scarcely have been more different. Beveridge’s was almost classically an idea whose time had come. Popular opinion shifted ideologically faster and more deeply in the early Forties than at any other moment in modern British history. The remarkable move to the left was accompanied by the politicisation of many, even those who did not go left, for whom overt political discussion had been hitherto socially unacceptable. The long queues outside HMSOs; the hurried reprintings; the intensity of public discussion and, to judge by wartime diaries, private discussion as well; the enormous publicity given to Beveridge by the Mirror – all contrived to give the Report a social centrality inconceivable today. Beveridge was himself well aware of this:

a revolutionary moment in the world’s history is a time for revolutions, not for patching ... The Plan for Social Security in this Report is submitted by one who believes that in this supreme crisis, the British people will not be found wanting, of courage and faith and national unity, of material and spiritual power to play their part in achieving both social security and the victory of justice among nations upon which security depends.

As the last sentence implies (it is indeed the last sentence of the Report proper) Beveridge’s Report had international resonance: its huge circulation was not confined to Britain. In many ways, and quite deliberately so, it summed up what the Allies were fighting the war for. This wasn’t something their enemies missed: Goebbels worried about Beveridge’s effect on neutral opinion and wondered whether the Germans should not produce their own version. Nor was this due entirely to the Report’s intrinsic qualities. Britain was still a great power with great prestige and what it said and did mattered.

The position of the Labour Party was also strikingly different. Beveridge’s Report was formally commissioned by a Labour minister, Arthur Greenwood, and formally presented to another, William Jowitt. The Labour Party, both in Parliament and in the country, was its strongest proponent. And the Labour ministers of Churchill’s coalition had no doubt that the war, as Attlee put it, was to be fought for, and according to, their ‘ideas’. Nor did many doubt that the country’s political institutions and its Civil Service could and would execute Beveridge’s recommendations if they were required to. Their implementation was to contemporaries a matter of political will, and by December 1942 – the month of their publication – that will existed, even if it took the 1945 election to confirm it.

The circumstances in which the Borrie Report was commissioned and published are wholly different. Although there seems to be a profound disenchantment with the present government there is little sign that the political and intellectual torpor of the last 15 years has much diminished. A more likely result of the ideological decline of Thatcherism is simply defeatism; not, as in 1942, a sense that there is a democratic alternative which can be adopted and will work. Nor is there a confident Labour Party with a sense that its historic moment has arrived. On the contrary, John Smith commissioned Sir Gordon Borrie in part to disembarrass it of social policies which seemed an electoral burden: in other words, to get the Labour Party out of a hole. International circumstances are also profoundly different. There is no ‘supreme crisis’, no revolutionary epoch that demands revolutionary measures, no wider significance attached to Britain’s social policies, except perhaps to privatisation; there is no notion that Britain leads in the development of a modern social system. One of the depressing features of the Borrie Report is, indeed, the extent to which it urges us to adopt other people’s practices, even those of countries like Australia which have been subject to many of the same deregulatory influences. Nor is it now thought axiomatic that government institutions will loyally execute a new social policy, even if there were the political will to introduce one. Rather, as Borrie observes, ‘reforms’ to government and the Civil Service have themselves become part of the problem.

The Borrie Commission is conscious of two other circumstances which distance its Report from Beveridge. The first is the labour market. Although about one-third of the workforce was female when Beveridge wrote, his implied model of the family (and thus of the workforce) was of a man in full-time work supporting a wife and children. And the largest single element in the working population was comprised of unskilled male manual workers. So long as there was something approaching full employment – as there was when Beveridge wrote, and for the next thirty years – the social security system was largely ‘passive’. Over the last twenty years, however, the labour market has been almost transformed: nearly half the workforce is female (in some parts of the country more than half); the demand for unskilled manual workers is a fraction of the level of the Forties; in many families women are now the only earners, but women are also concentrated heavily in low-paid, part-time jobs. The tendency, therefore, has been for full-time male labour to be eliminated and replaced by part-time female labour. This tendency has been accelerated during each of our recent recessions. At the extremes there are ‘work-rich’ families, where both partners are working, and who have done very well in the last 15 years, and ‘work-poor’ families where neither partner works and who have done very badly. In such conditions, the Borrie Report concludes, social policy should be ‘active’ – not just something that operates when things go (temporarily) wrong, since when they go wrong now they usually stay wrong.

Secondly, Beveridge and Borrie attach quite different meanings to the word ‘crisis’. To Beveridge the ‘supreme crisis’ was the struggle between a civilised democracy and a barbarian state from which Britain should emerge both victorious and better. But the crisis was not one of the British state or British society themselves. If anything, the war had reinforced and legitimated them. For Borrie, however, the crisis is a crisis of British state and society. The Borrie Commission detects a pervasive sense of decline: a widely-shared view that British social and political institutions are self-evidently defective – a view held more intensely since Mrs Thatcher’s efforts to legitimate a reactionary version of them are generally held to have failed. In 1942 it was difficult not to be impressed by Britain’s comparative social integration and moral unity. Today the reverse is true: we are impressed by social and moral disintegration.

The Borrie Report is filled with vignettes of decay: that two-thirds of families now live on incomes less than the average; that one-third of children now grow up in poverty; that 20 per cent of men of working age are now unemployed. The more bizarre facts are often the more telling: that the poorest children are four times more likely to be killed in car accidents than the children of the non-poor; that since the privatisation of water the incidence of dysentery, having fallen for a century, is once again rising. The decay of social solidarity is nowhere better illustrated than in the growing rapacity of our directorial class. Borrie notes the dramatic uncoupling of directors’ earnings from company pre-tax profits in the late Eighties: as profits plunged earnings shot upwards – whither they continue to go. Much of this class has now clearly lost any idea of social fitness or mutuality, as has the political party which represents it. The extent of this sense of decay is at first sight surprising since the earnings of the ‘average’ family have risen by about one-third in the last 15 years. But, given the hugely uneven distribution of this rise, averages are more than unusually misleading and its increasing unevenness violates the norms most people still hold.

For these reasons the Borrie Report is much wider in its scope than Beveridge’s. Beveridge was asked to examine ‘social insurance and its allied services’ and this injunction he interpreted more or less literally. To this extent a more apt comparison with Beveridge is the proposals for reforms of the social security system associated with the Institute for Fiscal Studies.* But for Borrie a reformed social insurance system is only one, and conceivably not the most important, of several ‘strategies for national renewal’. The Report thus proposes reforms not only to the social services but to education, housing, health services, taxation, wage-rates and the institutions of national and local government. It argues that at the moment there are three ways in which British society can be approached: the deregulators’, the levellers’ and the investors’. The deregulators believe that the efficacy of the market is absolute; the levellers that the prime function of government is to distribute equally such cake as there is; the investors that the market is a socially and historically determined institution to which no magical powers can be attributed and which cannot function satisfactorily without external intervention. But the investors (unlike the levellers) also believe that dynamic economic growth is indispensable to a socially integrated community. The Borrie Commission, the reader is unsurprised to discover, is on the side of the investors.

The bulk of the Report is detailed and often requires considerable technical knowledge, though it is preceded by a useful ‘executive summary’. In general terms, its recommendations are as follows:

1. There must be a transformation in our political institutions; there can be no ‘renewal’ while an ever more centralised and unaccountable government increasingly distances itself from society. Such a system of government, besides being objectionable in principle, both demoralises the national community and squanders its creativity.

2. Unlike Beveridge, a modern social insurance system should ‘actively’ engage with an individual over his/her lifetime. Each person should have a ‘second pension’ (in addition to the state pension) and the Commission suggests ways it might be financed. Child allowance, far from being allowed to wither away, should be significantly increased. Means-testing of benefits would not be a part of such a system. The Commission proposes changes to the way health care is funded in order to diminish the widening inequalities of health and life expectancy between one community and another.

3. The British working population must be ‘re-skilled’ – particularly unskilled male manual workers whose vocational future now looks bleak. Access to the educational system must be significantly widened and the distinctions between ‘education’ and ‘training’ abolished. The Commission suggests a Learning Bank which would allow people to renew their skills throughout their working lifetime and enable the British workforce to respond flexibly to changes in demand and techniques of production – as they cannot do now. It also proposes major modifications in the way universities are funded – particularly by a form of graduate tax which would fall most heavily on those who had been full-time students. They, the Report rightly notes, should be expected to finance most of the costs of university expansion. In many ways the educational recommendations are central to the Borrie Report since, it argues, it is in education that the national failure had been most marked.

4. The taxation system must be recast. It must encourage people when they make the transition from unemployment to work instead of, as it can now do, effectively taxing them at a marginal rate of 70 per cent. There should be no going back to the marginal rates of the Seventies, and the Commission proposes that there might be fixed a ‘total tax bill’ which should not exceed a maximum of (say) 50 per cent of income. The inheritance tax should be made serious by taxing the donee rather than the donor. Inter vivos gifts could thus be taxed immediately rather than, as is now the case, not taxed at all if they are made long enough before the donor’s death. The Commission opposes ‘hypothecated taxes’ except for a one-off National Renewal Fund. It does not oppose ‘hypothecated’ increases to existing taxes along the lines the Liberal Democrats suggested for education in the last general election. It also proposes to tax polluters and the like – taxing ‘bads’ not ‘goods’. It does not, however, propose or even consider an expenditure tax, for which a strong case can be made. Although the Report favours a broadly-based tax regime, given the extent to which VAT has made the British tax system regressive, it implies a move towards enlarged forms of direct taxation.

5. The Commission favours a minimum wage and properly dismisses the notion that such a wage – if appropriately set – would make labour costs uncompetitive. It favours the restoration of security in work and argues that an insecure working population is not a productive one; even more, that insecurity lies behind much of our present malaise. Managers cannot have an unfettered right to manage and, it argues, the more intelligent managers know this. It also believes that unless racial and other forms of discrimination are eliminated much of the potential talent of our workforce will be wasted.

6. The Commission proposes a voluntary community service scheme – a ‘Citizen’s Service’ – primarily for people aged between 16 and 25. The Service is designed to promote social unity and a democratic notion of citizenship.

The Borrie Report has inevitably received a mixed press, although everyone has recognised that it addresses serious problems seriously. The crucial question is where it stands in relation to the Labour Party and its traditions. In a recent issue of New Left Review the political theorist G.A. Cohen criticised the Report (or rather one of its previously published working papers) on the ground that it has abandoned any ‘foundational’ beliefs. The commitment to equality as a principle has been forsaken for an instrumental definition whereby equality becomes useful under certain conditions and for certain purposes – procuring economic growth, for example – but seems not to be desirable in itself. Nothing in the Report can, therefore, be argued with conviction.

There is undoubtedly force in this criticism. The Report is certainly not ‘socialist’ in any conventional sense and the exact relationship between social justice and economic growth is never fully explored. Its argument that as a rule dynamic economies flow from (and by implication only from) communities united morally by a diffused idea of social justice seems to me historically false. It can be true – though one community’s conception of moral unity may well not be another’s – but frequently is not. The Report has to argue this, of course, because it is trying to assimilate two differing traditions – both to be found on the British left. One is the commitment to social justice as a principle; the other is to the modernisation of the British economy, a process in which social justice might be subordinate. Within the second tradition social justice is not a necessary condition for a dynamic economy, as Borrie argues, but a dynamic economy is a necessary condition for social justice.

Nonetheless, Borrie’s proposals are undoubtedly radical within a British context. The emphasis on ‘social capital’ – an adequately educated workforce, good infrastructure, proper housing and health – and the slightly uneasy instrumentalism of the Commission’s attitude to social justice come from a recognition that a well-functioning modern economy is very expensive: something that the deregulators and levellers have persistently refused to recognise. Furthermore, the emphasis on institutional reform is something one hopes any Labour government would accept. Such reform is, moreover, now indispensable to the execution of social policy. The agencies created by the present government rest on a spurious distinction between policy and administration. But administration is policy, and nothing is more political than the administration of the social security system. The agencies must be made as accountable as any public body and that can only happen once this distinction is abolished. And the Commission does not run away from the continuing salience of class in the distribution of rewards and penalties; the reverse, if anything.

Nor is there any resemblance between Borrie’s proposals and the policies of the present government. Borrie really does wish to supplant the Beveridge system. The Conservatives, on the contrary, have preserved it in an utterly degraded form. In addition, the Borrie Report has, if not a strong commitment to equality in all circumstances, a strong commitment to social solidarity. There is, for instance, perhaps more to be said for means-testing and targeting than the Report argues – though the Thatcher and Major Governments have probably tainted them irremediably – but it rules them out on both economic and solidaristic grounds. Were its proposals enacted – something which, it points out, would take more than one parliament – they would certainly be more radical than the Beveridge system and, since they are more fundamental, probably more radical than the legislation of the Attlee Government. If, therefore, the task of the Commission was to get Labour out of a hole by recommending a series of simple prescriptions it has failed to do so. Rather, it has presented a scheme which the Labour Party in its current mood almost certainly will not enact, except in the most piecemeal way.

There are several reasons why Labour will not enact it en bloc – if at all. The first is the most obvious: there is simply too much of it. Borrie, of course, knows this and sees the Report as the work of several parliaments. But Labour under existing electoral conditions is unlikely to have several parliaments. This puts an absolute premium on electoral reform, but the Party’s hopeless timidity over this – as well as its commitment to a referendum (referenda?) before introducing it – makes it very unlikely any such measure will eventuate. Labour has managed to put major constitutional bills ahead of everything else: the result is that its first (and probably only) parliament will be bogged down in huge pieces of constitutional legislation, and that almost certainly precludes any serious attempt to recast the social security and educational systems à la Borrie. The only way out for Labour is that some of Borrie’s recommendations could in practice be executed within the existing political structure.

If we allow that the Party does wish to enact the Report in something like its present form, a Blair government will face other major constraints. The Report will be costly and almost certainly demands an economy which is already strong or else an electorate which is prepared to accept longer-term cuts in private consumption. But the British economy is comparatively weak: it finds it difficult to meet those levels of private consumption which the majority of the British electorate seem to demand as the price of electoral support. Furthermore, no other social democratic party seeks power in an economy quite so enmeshed within the international financial system. The enactment of Borrie – the tax changes, for example – will undoubtedly alienate many of the denizens of that system and it can be assumed they will react as they always have. But the ways in which British governments used to protect themselves against ‘the market’ – import surcharges, credit restrictions, foreign exchange controls – all, all are gone and cannot be restored. Furthermore, by returning to the ERM, Labour proposes to abandon the one weapon that remains, control of the exchange rate, despite what should now be a historical maxim – that the pound can never be too undervalued.

Most of all, 1996 (or whenever the next election is held) is not 1945. The Labour party might have been surprised to win the 1945 election but it did not doubt that the zeitgeist favoured it and its traditions. This is not the view of its present leadership. Whether true or not, Tony Blair’s working assumption is that the popular ideology which, so it is said, determined the last four Tory victories, is still dominant. His view is that the electorally crucial elements of the population – the thrusting, aspiring upper working class and lower middle class – is hostile to egalitarian or redistributive politics; this opinion is appropriated wholly from the Thatcherite view of the Eighties. His performance over private education suggests how weak Labour’s attachment to a democratic social system now is. What is alarming is not so much that Mr Blair believes this as that he has made no attempt to discover whether it is true and, if so, whether Labour should cater for it. The Borrie Report may not be socialist but it has powerful egalitarian implications. So long as the Labour leadership adheres to this view of the electorate hardly anything in it, except its most consensual recommendations, will be acceptable to the Labour Party. This, in turn, means that Labour’s posture will always be defensive: the cardinal rule that progressive parties must at particular historical moments behave progressively has not so much been broken by Mr Blair as not even recognised by him to exist. This is a pity, for there is much at the moment a progressive party with a taste for demagogy could exploit – to its own and the electorate’s benefit.