The public want a better state, not a smaller one

New Fabian Society research shows enduring support for government-funded public services.

This year’s US presidential election is a contest about the role of the state. Mitt Romney and his running-mate Paul Ryan offer American voters the choice of a radical small-state political economy, with less tax and much less public provision. Their prospectus is backed by a philosophy, championed by the Tea Party, which calls into question the very legitimacy of government action. Against them, Barack Obama offers a more European model of state-funded social entitlements. American politics may have plenty of faults, but shirking big debates is not among them.

A powerful strand in British political thinking has adopted a diluted version of US anti-state rhetoric. A combination of fiscal pressure and a reaction to New Labour’s centralist statecraft has led to a range of calls for a "smaller" state, which often conflate financial and organisational arguments. This is seen in the coalition government’s advocacy of "the big society" as something  ‘big state’. Even within Labour, parts of 2011’s The Purple Book argued in favour of "leaving the big state behind".

But the Fabian Society's new report No Right Turn challenges this presumption. The state is far more popular and less "problematic" than conventional political wisdom would have us believe. When it comes to arguments for or against state spending on public services, people are more concerned with competing notions of entitlement, compassion and desert, rather than debates about the size or scope of government. It is not the state in itself, but the values and ethos that state activity represents which matter.

People respond far more favourably to pro-state arguments than almost all of the arguments against strong state intervention. The most popular statement in favour of the state was one that saw public services as a system which we all put into and, at one point or another, get some return from. Egalitarian arguments stating that public services should be provided to all, regardless of ability to pay, also received strong support.

There are some conditions on the public’s support for the state. Conservative voters stand out from other voters, with all of our anti-state arguments enjoying a positive response from them. Labour, Liberal Democrat and, crucially, swing voters are all much less sympathetic to the idea of a smaller state or more private service provision. For these voters, including those who will decide the outcome of the next election, the values and ethos of the public good remain central to their expectations of public services.

A more difficult challenge is posed by continuing public concerns about welfare dependency. The only anti-state argument to enjoy a positive response across-the-board was that a strong state makes people more reliant. Labour has struggled to find ideas and language to respond to these concerns but if it does there is real prize. If the party can assuage fears about dependency then support for state action will become even more entrenched.

The Fabian research shows there is little appetite for a rapid roll-back of public services in Britain. The Ryan plan would receive short shrift from a public that is largely signed-up to public services based on values of the public good. If Labour can successfully answer the tough questions on welfare dependency, it can be confident that when it defends the state it will get a fair hearing from a public who want strong government-funded services.

The Fabian Society's new report No Right Turn: Britain’s enduring support for public services is published today.

Demonstrators protest against the government's Health and Social Care Bill in London, on January 31, 2011. Photograph: Getty Images.

Andrew Harrop is general secretary of the Fabian Society.

Photo: Getty Images
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A simple U-Turn may not be enough to get the Conservatives out of their tax credit mess

The Tories are in a mess over cuts to tax credits. But a mere U-Turn may not be enough to fix the problem. 

A spectre is haunting the Conservative party - the spectre of tax credit cuts. £4.4bn worth of cuts to the in-work benefits - which act as a top-up for lower-paid workers - will come into force in April 2016, the start of the next tax year - meaning around three million families will be £1,000 worse off. For most dual-earner families affected, that will be the equivalent of a one partner going without pay for an entire month.

The politics are obviously fairly toxic: as one Conservative MP remarked to me before the election, "show me 1,000 people in my constituency who would happily take a £1,000 pay cut, then we'll cut welfare". Small wonder that Boris Johnson is already making loud noises about the coming cuts, making his opposition to them a central plank of his 

Tory nerves were already jittery enough when the cuts were passed through the Commons - George Osborne had to personally reassure Conservative MPs that the cuts wouldn't result in the nightmarish picture being painted by Labour and the trades unions. Now that Johnson - and the Sun - have joined in the chorus of complaints.

There are a variety of ways the government could reverse or soften the cuts. The first is a straightforward U-Turn: but that would be politically embarrassing for Osborne, so it's highly unlikely. They could push back the implementation date - as one Conservative remarked - "whole industries have arranged their operations around tax credits now - we should give the care and hospitality sectors more time to prepare". Or they could adjust the taper rates - the point in your income  at which you start losing tax credits, taking away less from families. But the real problem for the Conservatives is that a mere U-Turn won't be enough to get them out of the mire. 

Why? Well, to offset the loss, Osborne announced the creation of a "national living wage", to be introduced at the same time as the cuts - of £7.20 an hour, up 50p from the current minimum wage.  In doing so, he effectively disbanded the Low Pay Commission -  the independent body that has been responsible for setting the national minimum wage since it was introduced by Tony Blair's government in 1998.  The LPC's board is made up of academics, trade unionists and employers - and their remit is to set a minimum wage that provides both a reasonable floor for workers without costing too many jobs.

Osborne's "living wage" fails at both counts. It is some way short of a genuine living wage - it is 70p short of where the living wage is today, and will likely be further off the pace by April 2016. But, as both business-owners and trade unionists increasingly fear, it is too high to operate as a legal minimum. (Remember that the campaign for a real Living Wage itself doesn't believe that the living wage should be the legal wage.) Trade union organisers from Usdaw - the shopworkers' union - and the GMB - which has a sizable presence in the hospitality sector -  both fear that the consequence of the wage hike will be reductions in jobs and hours as employers struggle to meet the new cost. Large shops and hotel chains will simply take the hit to their profit margins or raise prices a little. But smaller hotels and shops will cut back on hours and jobs. That will hit particularly hard in places like Cornwall, Devon, and Britain's coastal areas - all of which are, at the moment, overwhelmingly represented by Conservative MPs. 

The problem for the Conservatives is this: it's easy to work out a way of reversing the cuts to tax credits. It's not easy to see how Osborne could find a non-embarrassing way out of his erzatz living wage, which fails both as a market-friendly minimum and as a genuine living wage. A mere U-Turn may not be enough.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.