Opinion: A Liberal idea for welfare reform

Its not often an article which seeks to promote the Liberal agenda gets to use Alan Sugar and Peter Stringfellow as case studies.
But the millionaire duo, are, through no fault of their own, examples of all that is wrong with the approach successive governments have taken to welfare provision.

As Lord Sugar explains, he receives, despite never having applied for it, the winter fuel allowance available to all people over the age of 60.

The businessman even explains that he subsequently spent more than an hour on the phone trying to give the money back, only to be told that he couldn’t return it. Sugar says he always gives the money to ‘good causes’, as does another millionaire receipient of the payment, Peter Stringfellow.

But it’s not just millionaires who are adamant they don’t need the money; many thousands of people throughout the UK every year surely do the same, and donate the money to charity.

The Liberal party laid the foundations for the welfare state in early years of the twentieth century with the National Insurance Act, and later when the Liberal MP William Beveridge wrote his famous report on how a system of welfare should be created to provide a ‘safety net’ to free the poor from the scourges of ‘Want, Disease, Ignorance, Squalor and Idleness’.

But somewhere between the publication of the Beveridge report during the Second World War and the present day, Beveridge’s great vision became obscured as government, have chosen to make benefits Universal rather than be accused of wishing to introduce ‘means testing’ and allow their opponents to draw vivid similies about the victorian era which would play well with readers of certain newspapers.

But by choosing to take this quantitative approach to benefit provision, rather than the more qualitative approach favoured by Beveridge and other early architects of the welfare state, a system where welfare is not merely a safety net for the poor, but also as a down payment on a weekend away for the Chablis set, and that’s not what Beveridge or any other Liberal had in mind.

It’s no coincidence that the current welfare reforms being introduced by Iain Duncan-Smith ignore the anomalies contained in the Winter Fuel Payment, the high earners who receive it are more likely to vote Tory, so not for the first time political calculation replaces the real need for reform.

It’s quite a difficult task to ascertain the true means of a pensioner, the tax system is different for them than for a person still in employment and they could be receiving income from a number of sources and have variable outgoings.

This is why an arbitrary income limit being set above which a person cannot receive the winter fuel payment would be too likely to lead to massive inequities.

As Liberals we all believe that the government should aim to interfere as little as possible in people’s lives, while ensuring that the system is as fair as possible for all, and one suggestion which corresponds to those aims is to create a system where people have to ‘opt-in’ for the winter fuel allowance by applying for it, although they are guaranteed to be accepted when they do apply.

This would allow the huge numbers of people who don’t want the winter fuel payment to simply not receive it, instead of undergoing the rigmarole of receiving it now and then donating it to charity.

This would benefit the government in the short term as it would receive fewer applicants, so each claim could be processed quicker and with less beauracracy, saving on the admin costs of the scheme.

The poorest pensioners would benefit in the short term as their winter fuel payments would be received quicker.

There also considerable potential long term benefits, after the scheme has been running for a few years the government would be able to calculate a mean of what percentage of those eligible are actually applying for the payment and can budget accordingly, with the possibility of an increased payment for the smaller number of applicants benefiting the poorest pensioners over time.

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  • I mostly agree with you – You didn’t mention this but I’m assuming that there would need to be a lot of advertising, or the applications put through the door of every pensioner? This would be to ensure that those who do need it, first of all, know it’s available for them, and second make sure they apply.

  • Mark Inskip 6th Aug '11 - 11:14am

    There is plenty of evidence that ‘opt in’ schemes have a significantly lower take-up amongst those who are eligible. Whether for reasons of pride, lack of knowledge of the benefit, relunctance or difficulties with form filling, a significant number of those who benefit are likely to miss out.

    The usual arguments for an ‘opt in’ schemes is that the process ensures that benefits are targeted at those who are most in need of those benefits and therefore for the same cost benefits paid can be higher than for a universal payment (though offset by additional admin costs).

    Your proposal appears to combine the worse side of both universal and restricted benefits, lower take up because its opt in nature combined with no targeting of the benefit to those who most need it.

    If you’re really worried about well-off pensioners receiving this benefit then why not recover it but a small adjustment to the 40% tax threshold for pensioners?

  • You want to strip universality from the welfare system? Wouldn’t it be fairer to assume that all are entitled to welfare, but those who do not need it are taxed a higher amount to restore balance and fairness in the system?

    Otherwise you end up with a two, or multi-, tier system where the have nots are shamed into depending on the state, rather than having the same relationship with it as those on higher incomes.

    Then those who are dependent on welfare become a political target for those who object to ‘scroungers’.

    Why not just come out as a tory?

  • david thorpe 6th Aug '11 - 11:23am

    @ edis,
    thats corect he was only an MP for a short while, winning a bye election but losing the general…….then was enobled as Laberal Peer
    @ Mark…..

    I would think that a scheme of advertising targeting those most in need could be launched alongside…but targeted advertising, the problem witht he tax thing is that pensioners can have welath in different ways to purely income…..

  • david thorpe 6th Aug '11 - 11:32am

    @ g

    universality shouldnt be in the welfare system,w elfare is for those who need it most….
    and paying it then taxing it means creating a whole layer of beaucracy to implement that which is more spening by the government on somehting which is unnescessary meaning less moeny to spend on p[rovision of nesecessities, which ultimately hits the poorest harder while actually, through the fact that the jobs created will go to the middle class, benefitting the middle class mroe and as such being a welath transfer from pooorets to nmiddle
    and alreday we have a two tier system, some people get JSA and some dont, some people get 100% of the their income from the state and some dont…the two tiers have always been there for the poorest……

  • david thorpe 6th Aug '11 - 11:36am

    @ g

    I think the only aspects of the welfare system which should be automatic are those which are contributory(such as old age pension)
    the others should be asses on the basis of need.
    and in relation to taxing gtthe winter fuel allowance its a 200 paymenbt, how much would have to be soent on tacxing it back..add in the beauracracy of sening it out in the first place and it could cost the government money to tax it back without the individual benefiting…….

  • Ruth Bright 6th Aug '11 - 12:50pm

    It does seem mad that elderly people in residential care receive this money.

  • Although I think an opt-in scheme could be fairer, there is a problem with that theory. Pensioners can range from someone who has just left work as they turned 65 to someone close to 100. As people age it inevitably brings health problems and also isolation – you are not as able as you were to do even basic tasks. This affects your ability to do things such as form-filling, making applications etc Friends die off around you the longer you live and therefore contact with the outside world is increasingly limited. Many in the older age range would simply not be aware of any opt-in scheme. Someone close to 100 years old was born berfore the first world war, and is quite likely not a user of the internet, social networking etc. Even if made aware, they would in all likelihood be unable to act on it. Family, friends, carers could do it for them perhaps? But it is likely in the current climate that they just will not be able to cope with any extra burden – most are already at breaking point as more and more servies and support are cut.

  • @g
    Whatever happened to “from each according to his ability, to each according to his needs”? Marx was hardly a closet Tory…

    @David Thorpe
    It’s a thoughtful article and your proposal has some attractions in theory, but I’m not sure if it would be a good solution in practise. I certainly agree that it’s absurd to see wealthy pensioners receiving this payment, but I’d rather have it that way round that risk those in genuine need going without the fuel payment because of registration problems and/or reluctance to register.

    I’m no expert on this, but isn’t it a common theme across most types of benefits that if people have to actively do something in order to get their entitlements, then many people miss out through inaction, lack of knowledge of what they’re entitled to, or reluctance to “ask” for something. I know you’re suggesting an advertising programme to combat this problem, but I’m not convinced that it would overcome it completely. Filling in a form, even if it doesn’t require means-testing, might feel like asking for charity, especially to elderly people who often already dislike how dependent they’ve become on others and don’t want to be what they perceive as “a burden”.

    Would an opt-out system be another option? i.e. how about just letting Alan Sugar et al refuse the winter fuel payment instead of donating it to charity?

  • Christine Fitze 6th Aug '11 - 10:40pm

    Means Testing may seem a fair way of alocating benefits, however, the problem with means testing is that it takes away the initiative of some people to do the right thing. i..e. workhard and sve for a rainy day.

    Christine Fiitze

  • The issue with the winter fuel allowance could be solved by only paying it out to people who have actually retired and qualify for the basic state pension. That way it becomes part of the state pension that arrives during winter to help pay fuel bills.

    Objecting to it beyond that is the same as wanting to cut the personal tax allowance for pensioners by a £1000.

  • Stephen W there are two principle objections to your argument. Firstly, the more practical, it is more expensive to means test everybody, than to have minimial means testing for benefits but more recovery of unnecessary monies through taxation. Secondly, the principle of the thing, that all in the state are considered equal in terms of access to the benefits of the state, whether support payments, healthcare, education, etc. Liberalism, in the Coalition era, seems more like Conservatism in it’s willingness to create a massive gulf between the haves and have nots, those with personal wealth and those without. Those without wealth are left to subsist on sub standard provision of services because those with wealth have power and don’t want to pay into society, merely to exist in their own selfish bubble. It’s been illuminating for those of us who foolishly expected that the liberal demcorats cared about social justice – that view, it seems, was always a minority with the LDs.

  • david thorpe 7th Aug '11 - 9:58am

    @b geoffrey

    taxing perople more is creating buracracy….do you mean pay them the winter fuel allowance them tax them to get it back, so you have a (middle class) bueauracrat doing the paper work to send them the money…
    another middle class beauracrat doing the paperwork to tax them back, and all for 200 which they dont receive, its wuite likley it would cost the government money to implement this leaving less money for the government to alloacte to srvices which are used by the poor, but spending money to craete jobs for the middle class.
    AKLSO IF YOUR EAD THE LINK IN MY ARTICLE, there are enomrous beauractic sosts alreday, teams of people sending out the payment every year to people, less people getting the payment would mean less beauracracy, and more money for the government to spend on provisdion of sevrices for the poorest…..surely thats what youw ant?
    because at the moment we have pensioners dying in huge numbers every winter from hypothermia because 200 isnt enough if your poor, while creating unnesscesary jobs in the state beauracracy for the mjiddle classes to pay money to rich people who dont need it, I have no idea why anyione would want that.
    @ Edis,
    Indeed registration is a better woprd for what I propose than application,
    and yes, like all significant thinkers beveridges views evolved over time

  • david thorpe 7th Aug '11 - 10:03am

    thanks ofr all the comments folks

    @ judy
    its true that the circumstances of pensioners varies widely, and it would be nescessary for the government to take that into account, indeed thats why Im not, at this stage in favour of an arbitrary cap.
    @ mark inskip
    I want signifiantly lower take-up I just want to make sure that those in need receiev it….and dthose not in need dont recieve it….
    @ charles

    I dont really have a problem with what your proposing, I wonder if the current limit of sixty years evolved because thats when women can retire on state pension,but to give the payment to them but not to a man of the same age would be discriminatory? the equalising of the retiremnt age would solve that

  • david thorpe 7th Aug '11 - 10:07am

    @ g

    benefgits are for those in need not those inw ant, and the graeter the need the greater the entitlement to benfits, indioviduakls are equal in terms of being assesed for beenfits, but not fior eligibility, a person who is in full time employment is not equally entirtled to JSA as a person who is unemployed, a person with no children is not equally entitled to child benefit as a person with two children
    a person who is in employment is not as entioteld to chidl ebenefit as a person who is unemployted…
    the NHS is a free at the point of use service and I would never wanbnt that tio change
    but that universailty is the exception rather than the rule….
    and means testing everyoen doesnt have to be mroe expensive, although I acceot it may be the case with pernsioners, thats why I dont propose it for pensioners.
    for people in employment its easy, you asses it based on their income tax band,. there is no extra beauracy required to do that as the tax status would already be known

  • There are many well worn-out arguments for and against this. The same old ones being trotted out ” those who need it should apply for it”. I agree that there are those who are so well-off that they will never need the Winter Fuel Allowance – but they still take it. Let’s be honest – many do not NEED the State Pension either but they still get it!

    For the rest of us at the bottom of the heap you would have us all “apply for the Winter Fuel Allowance” like everything else which we have to apply for such, as Pension Credit, any form of Supplementary Benefits, Housing and Council Tax Benefits, Disability Benefits etc. Thus country is obsessed with the poor and elderly having to justify their very existence and beg with cap in hand for that to which they are already entitled by having paid their income Tax for forty years or more while they were working ( nearly all of them too). Why Iain Duncan Smith has found it necessary to REDUCE the Winter Fuel Payments when domestic fuel has already gone up by 18% beggars belief! He, of course, is one the well-heeled rich brigade who will never know poverty in any form. It’s fine for the such people to dictate what the rest of us will live on during old age. It’s fine for those who are in much more fortunate positions than many of us – bully for them!

    It’s high time that the State Pension was a proper living amount – it is less than half the Minimum Wage and yet we are expected to be able to live on it. OK, some of us have small Occupational Pensions, many have much larger ones, but that is not the point. Add to that – the insult of the extra money when we reach 80 years old – a WHOLE 25 PENCE A WEEK. It is derisory!

    These kinds of comments above made by the financially well-off make my blood boil! Well done to Alan Sugar and Peter Stringfellow – I hope there are many more who do the same. I am sure, though, that many of us know very well-off, two-income families who will take every single penny of every benefit to which they are “entitled” – I know quite a lot of them! They are laughing all the way to the bank!

  • Means testing would involve costs to the state.
    Reclaiming through the tax system would not.
    All ? Almost all ?
    Probably using a professional advisor through the automated on line system.
    An extra box to tick.
    The adjustment would be calculated automatically once set up on the system.

    This would not solve the problem highlighted above, by Ruth, that care home residents would still receive the payment. Individuals living in modern flats may also not even pay £200 a year for their space heating (excluding water heating).

  • Before anyone starts saying – “the young cannot afford to pay for the State Pensions of the elderly” – when we were working (many of us worked long hours, not short hours like some folk do today) we did it for our elders. Our payments into Income Tax and National Insurance paid for them – it is how the system works.

  • It is very sad when Lib Dems come out with proposals like this. For your info, David Thorpe, universality in Benefits was proposed and partly implemented to ensure that people were NOT embarrassed, patronised, demeaned etc, and we did NOt have a 2 (or 3 or 4) tier society. That for a millionaire to accept their benefits with good grace was GOOD, because they were accepting they lived in the same world as others – not to announce loudly that they have no need for these paltry and useless benefits, and are far too rich and important to accept them. They then know that their higher rate taxes will quietly pay for the system (as mentioned above by Geoffrey Payne and g and Pansioner, for example).

    It strikes me that the system you propose, David, is highly illiberal, and entirely contrary to the spirit of the Preamble to the Lib Dem Constitution. It is likely that it would see many more people in penury, especially in an era when the have nots are likely to be suffering very strongly. Can I also say that “as Liberals we all believe the Government should aim to interfere as little as possible in people’s lives” is not a description of the principles of the party I have belonged to since the mid 60s. Most of the time we have believed in an active state which ensures a greater degree of equality than would come about from the activity of the private sector alone. That is not to say I believe in a busybody, or an intrusive means test society and government. The system you propose seems to me to be an official sanction of begging – and if that’s Liberalism these days, I’m off, I’m afraid.

  • david thorpe 8th Aug '11 - 9:27am

    @ Dane

    The liberal democrats are a party who believe in equality of opportunity, iour tax cuts for the poorets workers, while blocking Tory plans for tax cuts on inheritance tax show that.
    @ Hugh
    I am specifically not prosing means tesating on this issue, and of course reclaiming it though tax has a cost attached to it, you need a civil servant to pay the money out, and another civil servant to reclaim the money back, if you dont pay it out in the first place then you dont have to claim it back and the two staff members can be deployed doing somehting useful.
    Your automated system would cost money to establish and someone to montior its effciiency, would require people to deal with specifc cases(as I mention int he article pensions have a lot more varioety of income than someone in the PAYE system, so while automation can be effective in thew PAYE system, I dont see how it can be in the winter fuel allowance situation, where you have sisxty year old CEO’s of major corporations and 100 year old pensioners…….this habit of creating ane xtra layer of beaucrarcy to take moeny away from where its needed, and create jobs for the middle class while the poor die of hypothermia shows how far from Beveridge the welfare state has moved.
    Those arguing for the status quo are ignoring the fact that IF THE WINTER FUWL ALLOWANCE AIMS TO STOP FUEL POVERTY ITS NOT WORKING BECAUSE PEOPLE ARE DYING RATHER THAN PUTTING THE heating on, but his isnt de to lack of resources fronm vthe state, THE STATE ARE POAYING OUT FORTUNES TO PAY OUT THE MONEY TO PEOPLE WHO DONT NEED it, I mean the system where 1005 of people get it requires beauracracy of x if even the top ten percent of earners opted didnt recieve the moeny, the admin bill would go donw, and there would be more resources to take the poorest out of fuewl poverty.
    @ tim
    we do not have universality of benefits I have no diea where that idea comes from. JSA is not a Universal benewfit,
    housing beneift is not a universal benefit.
    and how is thye state giving the same amount of moeny to a millioanirew like sugar as to a person with no asstes ofn the state pension preventing a two tier sovciety? surely its reinforcing it? I mean saugar was wealthier before he got the [payment, and welatheir afterwards.
    how about we close thew wealth gap by giving 400 to the poor pensioner on state benefits and zero to Lord Suigar, that would reduce the inewquality and thats what you claim to want? But instead of that you are proposing to reinforce the exisiting gap and ask the poorest to pay for it. I wantt he gap closed, I want the poorest to reciev more and the richest to recieve less or nothing acroos the welfare system, the current syetenm has people dtying of hypotehrmia, while millionaires have another 200 quid, ithats whanot what Liberals have ever wanted in their history and I hoep thewy never will.
    @ dane
    the rich are trying to opt out, but they cant! Thats what happened in the article I linked tp. Aland Sugare telephoned to opt out and was told he couldnt do it by telephone, he would have to write in.
    Now some of the budget for the winter fuel allownace went on psying for the telephone operators time, and another chunk to paying for the person who opens the letters time, and another to their respective managers…and another to the person who sent lord sugar the cheque which you then employ two perople to cancel…thats a ludicrous waste of state resources……if none of those people existed and sugar didnt get the money but a poor pensioner who needs it got double the amount then they wouldnt die of hypothemia, there would be no need to increase hte budget the gap in wealth between usgar and tge poorest pensioner would be reduced and the government wouldnt be wasting taxpayers moeny to subsidise the lifestyles of the welthy.
    I will emphasise again, Im ojt proposing a means test, just a registartion, if your over the age and want it, you get it, in that situation huge numbers would not claim it(As a twenty-nine year old male I dont have a wide circle of acquantainces in this age group but four well off people I am aware of have said they get the money and send it staright out to chairty and of cousre wouldn t apply for it)
    those akong you who regard yoursleves as left wing surely agree with redisitributingw elath away from lord sugar and to the poorest pensioner, yet defend the ucrrent system where the govbernment mnaintains the gap and the poorest die….

  • david thorpe 8th Aug '11 - 10:25am

    @ tim
    how precisely would taking money away from alan sugar and giivjkng it to a pensioner who would oterwise die from hypothermia illiberal?
    how is giivng people more shoice aboitu wherther they want something rather vthan forcing them to take it illiberal?
    as for my quote, the lib dems buoilt their current reputation on opposition to id cardsand detention, on lgbt equality on human righsta bd anti-racism……all areas in which we are commititng to the government minimising interference in peoples lives…..while at the same itme introducing the pupils premium and taking the poorest workers out of tax….which is increaisng their opportunity, so whatever about the constittgution what about the manifesto?
    and where in the cosntitution does it say we should maintain the inbalance in welath ebwteen the poroest and the ricjhest by forcing the richest to take money we got from taxing the poorest, while the poorest die of hypothermia…if that latter staement is a lib dem aim then I am in the wrong party………………….

  • David – I am sorry, you have lost me. I thought I had explained how a universal benefit system could, without demeaning people, help everyone to be more equal, not less equal. As I said in my post, others here have touched on how the tax system could be used to ensure a universal benefit system does NOT “take from the poor to give to the rich”, but is in fact a progressive move. If Alan Sugar et al wanted to ensure that they were making those less well off than they rather better off, surely they should be paying more tax into the system. I haven’t heard a great clamour for that, have you, David?

    I don’t see how those of us who support universal benefits are somehow likely to cause more hypothermia among elderly people than at present – I wouldhave thought a number of current Government welfare policies would be rather more likely to do that.

    I agree with you that the abandonment of ID cards represents taking government out of people’s lives to some extent. However, other examples you quote mean more regulation, and some criminal offences which would not exist without anti – discrimination measures.

    It is very laudable to believe that people left to themselves “will do the right thing”, and it is good to seek to have as few oppressive controls as we can. But the reality is that some regulation is necessary, and in an increasingly populated, polluted, and environmentally threatened world, more so now than in the 19th and early 20th Centuries. Which brings us neatly back to another argument for quoting my length of time in the party (see my answer to you on another thread).

  • As a postscript, Lib Dems had as policy certainly up till around 1995, an integrated tax and benefit system, which would have eliminated “poverty traps” – some of which appears in the current IDS – Steve Webb Universal Credit idea.

    In terms of taxation and poorer people, surely it would have given people a better chance of equalising their situation (some redistribution) by abolishing recent VAT rise and taking more income tax from higher middle and top tax earners? Which should remove your objection of more elderly people getting hypothermia. It might also provide some more money for providing free or cheaper support and care to vulnerable groups through Social Services (who have been consistently losing out for the last 30 years or so).

  • david thorpe 8th Aug '11 - 6:43pm

    @ tim

    its an interetsing economic argument as to whether the VAT irse affects the poorest or richest most.
    the theory of VAT is that its a yax on discretionary income, on the consumption of luxuriies.
    so for example, there is no VAT on supermarket food, but there is on restaurant food, and of course the better off are much more likely to eat in restaurants.
    the classic argument against this is that there is VAT on petrol and petrol is a cost to getting superamkret food to market, and therefore if you pt up the price of superamkret food, however the coalitin have no increased the fuel component of VAT so thats not relevant in this case.
    I do think there needs to be aradical refomr of the tax system, aslongw itht eh beenfits system as neither is at optimum efficiency at present

  • david thorpe 8th Aug '11 - 8:23pm

    @ steven
    Im very much in agreement
    I think the state pension is contribuotry based isnt it? yes that should be universal……i mean the state pension is not paid to people who have not worked enough and paid enough enough NI…no matter how long they have been in the country? is that correct?

  • I can say (apologies, David Thorpe, I have had a number of years’ relevant experience!) that the means testing for benefits is very complex, and is ever changing, where any minor (or major) change of circumstance needs to be reported to the correct authority. I am not saying it has to be done in exactly the way it is at present, but if it is to be a valid means test there will have to be an updating mechanism. People get stuck for ages in the system, not getting what they are entitled to, often for months. Too many people “learn” about the Benefits system from the Daily Mail and the Express. It’s no wonder we have the sort of Benefits policy in this country that we have. Of course there are some benefit cheats – there are cheats all over the place – but to leave people with an impression that the system is either very generous, or pleasant to remain in for long periods of time is just rubbish.

  • david thorpe 9th Aug '11 - 10:06am

    @ tim

    indeed thats why Im not really in favour of means testing for the winter fuel payment. An opt-in with garuanteed acceptance would eradicate the worst elements of means testing while also ensuring the money goes where its needed, rather than to people who dont actually want it.
    If you look at the article I quote above, alan sugar spent an hour on the phone to a guy in a call centre tryng to give the money, the guy said he cant give it back. later it emegeres the only way he can gve it back is tow rite a letter. since call centres are all sub contracted out by government, the chances are the guy who sugar spoke to on the phone isnt going to be the guy opening the letter from him, so two people being paid t do something thats beneifts no one, meanwhile people are dying of hypothermia….and Tim this is an area where relevant experience is emprical!

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