We need to enable welfare contribution, not just enforce it

Is there a place for the contributory principle in the 21st century?

Liam Byrne’s article in the Guardian over the weekend re-opened the debate about what a more contributory system of social security might actually mean. Stating that "we must do more to strengthen the old principle of contribution: there are lots of people right now who feel they pay an awful lot more in than they ever get back," Byrne gave an example that doesn’t have much to do with the benefit system: giving priority in social housing allocations to those who "work and contribute to their community".

But how much scope is there for a revived contributory principle? And how far might this go to increasing public support for social security? We looked at the options for a more contributory system within social security in a report for the TUC last May. Here’s four things we concluded:

No system of social security can be based only on contributions

There’s a lot of confusion about the role of contributory benefits.

Allegra Stratton tweeted yesterday:

This is clearly a false choice. Any system of social security needs to meet different functions, and different models will be appropriate for each.

Let’s concentrate on working age benefits, as neither government nor opposition seems to be willing to discuss cutting pensioners’ entitlements. Universal benefits are appropriate for meeting additional costs faced by a particular group – those with children (Child Benefit was universal until recently), or those who face extra costs because of disability; the Government’s new Personal Independence Payment, like its predecessor Disability Living Allowance, is a universal benefit in that it’s not means tested, and applies universally to those meeting the conditions.

Tax credits primarily serve to top up wages for families with children – to ensure the politician's goal of ensuring that "work always pays" (something they’ve done pretty successfully to date). There’s a debate to be had about the extent to which tax credit expenditure could be reduced by increasing earnings – but it would be clearly absurd to base wage supplements on previous employment records (and we don’t think anyone is actually suggesting this).

Where the principle of contribution comes in is in the "insurance" functions of social security: preventing poverty during periods of either unplanned absence from work (sickness or unemployment) or planned absence (maternity leave). This is where the contributory principle has always functioned, and where its revival or enhancement looks most promising (of which more below).

A more contributory system isn’t a magic bullet

We know that in the long term, the more insurance based, earnings related systems prevalent in continental Europe are in general more popular than our own more means tested system. But we can’t assume that introducing more contributory elements into the UK system would instantly restore credibility to the social security system, for two reasons.

Firstly, as we argued in the report, and with Ben Baumberg in Benefits stigma in Britain, the widespread perception that the system is allowing people to gain "something for nothing" is based more on political and media representation of social security than experience. Prior to the recession, out-of-work benefit receipt was falling steadily; in contrast, media coverage depicting claimants as "scroungers" or using the vocabulary of non-reciprocity was rising sharply.

A more contributory system might offer a peg on which to hang a rhetorical strategy that seeks to convince people that the benefit system is largely doing the job it’s supposed to, but it’s unlikely to be enough on its own to restore credibility to the system. As we argued in the report, in everyday life people generally have very little information on which to assess whether claimants are "deserving" of support or not, or whether they have made contributions, and there is compelling evidence that they supplement this limited information with media stories. There is good reason, both empirically and theoretically, for suspecting that the default setting for views on social security in the UK is strongly negative.

Secondly, the idea that the UK might move rapidly to a fully-fledged contributory system seems implausible. The proposals for making contributions more important which have emerged so far, including ours, are pretty modest and wouldn’t constitute fundamental changes to a system which relies heavily on means-testing. As a long-term ambition, a rebalancing of contributory, universal and means-tested elements may be attractive, but as a way of dealing with the immediate perceived problem of legitimacy, we shouldn’t expect too much.

A contributory system could be used to break down some of the distinctions between employment and caring, rather than reinforcing them

A frequent critique of contributory systems is that they fail to recognise forms of contribution other than employment – caring for children or relatives for example. The current contributory system, National Insurance, actually does recognise these activities: recipients of Carer’s Allowance receive National Insurance credits, as do those on paid maternity leave.

We think that the key challenge for social security in the future should be to encourage employment. But we proposed a way that a more contributory system might do this by making combining employment and caring more compatible. As we put it in a previous blog for Touchstone:

We take our cue from the Belgian "time credit" system, in which contributions build up to the right to take up to a year off from employment, with financial support, to enable a range of activities including childcare, caring for a sick or elderly relative, or training. As a step towards this, we suggest that parents’ current entitlement to a period of unpaid parental leave could be supported through a contributions related payment. This model could also be extended to workers who need to provide temporary support for elderly or disabled relatives.

Thinking about our current system of parental leave and payment structures might also give us some clues towards how we could design a revival of the contributory principle in areas such as unemployment and sickness benefits. Statutory Maternity Pay at present is earnings related for six weeks, providing a cushion when people first exit employment, and then reverts to a flat rate payment, recognising that over time, most people’s needs will be broadly similar. If we wanted to think in the long term about how to embed a more earnings related system, this might be one model.

Social security exists in context: policies to promote employment will largely exist outside the social security system

Perhaps the most encouraging part of Liam Byrne’s article was the statement of a Labour commitment to full employment, one of Beveridge’s original "fundamental assumptions" underlying his design for National Insurance (alongside the establishment of the National Health Service and the introduction of Family Allowances, now Child Benefit). We argued in the report that this needs to be a commitment that takes into account the reasons why many people remain unemployed: a lack of childcare (now thankfully receiving attention from all sides), and the failure to design an employer-based strategy to enable disabled people to fulfil their potential in the workplace. In this way, "enabling contribution" could be as much a focus of policy as enforcing it through the social security system.

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Erdogan’s purge was too big and too organised to be a mere reaction to the failed coup

There is a specific word for the melancholy of Istanbul. The city is suffering a mighty bout of something like hüzün at the moment. 

Even at the worst of times Istanbul is a beautiful city, and the Bosphorus is a remarkable stretch of sea. Turks get very irritated if you call it a river. They are right. The Bosphorus has a life and energy that a river could never equal. Spend five minutes watching the Bosphorus and you can understand why Orhan Pamuk, Turkey’s Nobel laureate for literature, became fixated by it as he grew up, tracking the movements of the ocean-going vessels, the warships and the freighters as they steamed between Asia and Europe.

I went to an Ottoman palace on the Asian side of the Bosphorus, waiting to interview the former prime minister Ahmet Davu­toglu. He was pushed out of office two months ago by President Recep Tayyip Erdogan when he appeared to be too wedded to the clauses in the Turkish constitution which say that the prime minister is the head of government and the president is a ceremonial head of state. Erdogan was happy with that when he was prime minister. But now he’s president, he wants to change the constitution. If Erdogan can win the vote in parliament he will, in effect, be rubber-stamping the reality he has created since he became president. In the days since the attempted coup, no one has had any doubt about who is the power in the land.

 

City of melancholy

The view from the Ottoman palace was magnificent. Beneath a luscious, pine-shaded garden an oil tanker plied its way towards the Black Sea. Small ferries dodged across the sea lanes. It was not, I hasten to add, Davutoglu’s private residence. It had just been borrowed, for the backdrop. But it reminded a Turkish friend of something she had heard once from the AKP, Erdogan’s ruling party: that they would not rest until they were living in the apartments with balconies and gardens overlooking the Bosphorus that had always been the preserve of the secular elite they wanted to replace.

Pamuk also writes about hüzün, the melancholy that afflicts the citizens of Istanbul. It comes, he says, from the city’s history and its decline, the foghorns on the Bosphorus, from tumbledown walls that have been ruins since the fall of the Byzantine empire, unemployed men in tea houses, covered women waiting for buses that never come, pelting rain and dark evenings: the city’s whole fabric and all the lives within it. “My starting point,” Pamuk wrote, “was the emotion that a child might feel while looking through a steamy window.”

Istanbul is suffering a mighty bout of something like hüzün at the moment. In Pamuk’s work the citizens of Istanbul take a perverse pride in hüzün. No one in Istanbul, or elsewhere in Turkey, can draw comfort from what is happening now. Erdogan’s opponents wonder what kind of future they can have in his Turkey. I think I sensed it, too, in the triumphalist crowds of Erdogan supporters that have been gathering day after day since the coup was defeated.

 

Down with the generals

Erdogan’s opponents are not downcast because the coup failed; a big reason why it did was that it had no public support. Turks know way too much about the authoritarian ways of military rule to want it back. The melancholy is because Erdogan is using the coup to entrench himself even more deeply in power. The purge looks too far-reaching, too organised and too big to have been a quick reaction to the attempt on his power. Instead it seems to be a plan that was waiting to be used.

Turkey is a deeply unhappy country. It is hard to imagine now, but when the Arab uprisings happened in 2011 it seemed to be a model for the Middle East. It had elections and an economy that worked and grew. When I asked Davutoglu around that time whether there would be a new Ottoman sphere of influence for the 21st century, he smiled modestly, denied any such ambition and went on to explain that the 2011 uprisings were the true succession to the Ottoman empire. A century of European, and then American, domination was ending. It had been a false start in Middle Eastern history. Now it was back on track. The people of the region were deciding their futures, and perhaps Turkey would have a role, almost like a big brother.

Turkey’s position – straddling east and west, facing Europe and Asia – is the key to its history and its future. It could be, should be, a rock of stability in a desperately un­stable part of the world. But it isn’t, and that is a problem for all of us.

 

Contagion of war

The coup did not come out of a clear sky. Turkey was in deep crisis before the attempt was made. Part of the problem has come from Erdogan’s divisive policies. He has led the AKP to successive election victories since it first won in 2002. But the policies of his governments have not been inclusive. As long as his supporters are happy, the president seems unconcerned about the resentment and opposition he is generating on the other side of politics.

Perhaps that was inevitable. His mission, as a political Islamist, was to change the country, to end the power of secular elites, including the army, which had been dominant since Mustafa Kemal Atatürk created modern Turkey after the collapse of the Ottoman empire. And there is also the influence of chaos and war in the Middle East. Turkey has borders with Iraq and Syria, and is deeply involved in their wars. The borders do not stop the contagion of violence. Hundreds of people have died in the past year in bomb attacks in Turkish cities, some carried out by the jihadists of so-called Islamic State, and some sent by Kurdish separatists working under the PKK.

It is a horrible mix. Erdogan might be able to deal with it better if he had used the attempted coup to try to unite Turkey. All the parliamentary parties condemned it. But instead, he has turned the power of the state against his opponents. More rough times lie ahead.

Jeremy Bowen is the BBC’s Middle East editor. He tweets @bowenbbc

This article first appeared in the 28 July 2016 issue of the New Statesman, Summer Double Issue