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.

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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.