From the provider state to the membership state

David Green, 2 October 2006

The Tories are recalibrating their position on the political spectrum and some new ideas are starting to emerge, but they are still paralysed by the problems of the welfare state. There is an entrenched belief that Tories are selfish individualists who don’t care about the poor, which means they are not fully trusted to reform health, education and welfare and are accused of only wanting tax cuts so their rich friends can enjoy the high life. The mistake of the Tories has been to fight back by accepting that big spending on the welfare state is proof of their compassion and that by rejecting tax cuts they are demonstrating their concern for the poor. Indeed, in all parties debate about public sector reform still seems wedged halfway between the age of collectivism and a more consumer friendly future. The Conservatives urgently need to differentiate themselves from Labour’s failed strategy without making it easy to caricature their view as selfish.

Perhaps the arrival of Danny Kruger as David Cameron’s new policy adviser and speechwriter suggests a promising new possibility. He has revised the French revolutionary slogan to sum up a new Tory approach: ‘liberty and fraternity but not equality!’ The ‘new fraternalism’ still lacks detail but the general direction is clear. According to Kruger, the family is the ‘key agent of wellbeing’ and social problems are best solved by social enterprises, not by extending state power.
The new fraternalists need to take two underlying realities into account. First, under all welfare systems some people take advantage of the generosity of others, and beyond a certain point this tendency seems to accelerate. Welfare dependency has increased dramatically over the last couple of generations. In 1951, about 4% of the population received income support or its equivalent and in 1971 the figure was still only 8%. By 2004 some 18% of households were receiving ‘key benefits’, not including tax credits. The character of welfare dependency has also changed. In the 1960s the vast majority on welfare were receiving most of their income from the state, but subsequently partial reliance on welfare has increased considerably. In 2004, 30% of all households received half or more of their income in state benefits, including tax credits.
Second, when services are provided as part of the national minimum the producers may take advantage in order to advance their own interests, especially by creating monopolies to increase their own power. Monopoly behaviour in public services such as health and education is now the major obstacle to improvement.
Today, two rival views of the state contend for support: the provider state and the membership state. The provider state offers health, education and welfare for citizens so long as they are prepared to accept command-and-control provision. A provider state is especially vulnerable to producer capture, a fact recognised by the Blair regime but about which little has been done.
The ideal of a membership state offers a viable guiding philosophy for the Conservatives. It has the merit of facing up to benefit dependency and providing a solution to producer capture, as well as killing stone dead the false accusation of Tory selfishness. In addition, if we retrace our steps to look back at the emergence of liberal democracy in Britain since the seventeenth century, the membership state is the ideal that consistently secured the allegiance of the British people. Today’s provider state is a corruption of it.
Britain’s legacy of freedom has never been about worshipping the unrestrained individual, but living under agreed constraints, freely accepted for the common good. The ideal embodied in the writings of John Locke, Adam Smith and Edmund Burke is that of a free people living in their homeland as part of what I am calling a ‘membership state’, accepting the law because it helps us all to benefit from the fruits of peaceful co-existence. In the same mutual spirit we have willingly offered a helping hand to anyone who fell on hard times. But it has always been an essential part of the bargain that each of us must pay our way when able and that we don’t take advantage of the generosity of others.
The promoters of political authoritarianism – whether in the earlier form of the divine right of kings or the modern provider state – have consistently accused the champions of freedom of disregarding the common good, but there are two traditions of freedom, one vulnerable to the accusation and one not. The tradition that flowed from Rousseau stressed the rights of the authentic individual to fulfil personal desires. It is not compatible with liberal democracy. The second – traditionally preferred by Conservatives – emphasised the kind of freedom that can be enjoyed by a free people trying to live together in a particular land as a kind of membership association. Its champions wanted freedom of conscience as much as freedom to buy and sell. Michael Polanyi captured the distinction when he wrote of ‘private liberty’ and ‘public liberty’. Private liberty was the ability to pursue the personal satisfactions we all enjoy, whereas public liberty was the ability to use our time and energy to fulfil a public purpose, such as a journalist seeking to uphold professional objectivity in news reporting, a charity worker trying to help people, a business avoiding pollution without waiting for the government to tell it what to do, or a farmer who worries about the environmental impact of agriculture.
Many of the defects of the provider state were foreseen by John Stuart Mill. He was no advocate of a bare minimum of government but he was cautious about over extending state compulsion. He feared the sheer scale of government as well as the consequences of reducing opportunities for personal development. There was a general presumption against adding too much to the government’s powers, because the bigger it got, the more it converted ‘the active and ambitious part of the public into hangers-on of the government’. Even if government officials could do a better job, he said, there was still a presumption in favour of private provision as a means of educating people in the skills of voluntary co-operation. By taking an active part in philanthropic enterprises, jury trials and local government people could acquire the knowledge and confidence to serve as bulwarks against absolutism.
Mill’s insights on income support are also relevant. A free people in a membership state should always be willing to help one another. The mere giving of such help was not the problem, but becoming reliant on it was. Consequently, no encouragement should be given to long-term reliance on public assistance. The modern idea of welfare as a right has encouraged dependency and the importance of reciprocity has tended to be forgotten. The Blair government made an effort to link rights and responsibilities but welfare dependency has continued to grow since 1997.
This danger has been understood in America, where dependency reached a peak in the early 1990s. It had increased from 147,000 families (under 1% of the American total) in 1936 to over 5 million families (about 15% of the total) in 1994, with most of the increase in the late-1960s and 1970s. A major welfare reform was enacted in 1996 and by June 1999 the number of families on welfare had fallen by half to around 2.5 million. Fifteen states experienced falls of over 60%. In March 2006 only 1.8 million families were claiming benefits, a fall of 59% since 1996.
Five main principles guided this reform: Everyone who can work should work; people not capable of total self-sufficiency should work within their abilities; all policies should be judged by how well they strengthen the responsibility of both parents to care for their children; the government should not fund behaviour it does not want more of, particularly out-of-wedlock births; and benefits should not be an unconditional entitlement, but reinforce behaviour that leads to independence.
In Britain tax credits were preferred and have proved incredibly wasteful. But can any in-work subsidies be justified? We need to reframe the ideal we are aiming for. It can never be ‘no one should ever be poor, but it could be that ‘no one who works hard should be poor’. If it were the aim of policy, we would need to define hard work. At present it is possible for someone who has only worked for 16 hours a week to have their wages made up to the amount a full-time worker would earn. An alternative would be to expect 40 hours work a week for 48 weeks a year and, if at the end of the year, a person had earned less than an agreed amount it could be supplemented. Such a system would be a defensible recognition of work effort without encouraging benefit dependency.
Devising a strategy for consumer choice in education is less of a challenge. Private is not automatically better than public; the real choice is between monopoly and pluralism. Monopoly is undesirable because it allows the abuse of power and suppresses innovation through trial and error from which we all learn. The sheer scale of public sector monopoly also means that mistakes cause more widespread harm. When given the choice, not many parents opted for the experimental Summerhill school of the 1960s, where children could skip lessons if they felt like it, but when the monopoly state system effectively abolished the use of phonics in teaching reading, its effect was felt across the land, and is only now being corrected.
Pluralism could be encouraged by allowing anyone to set up a school and to receive funding so long as it could command the confidence of a minimum number of parents (perhaps 50). The education voucher scheme offered by the Tories during the 2005 general election gave parents £5,500 (the average cost of state schooling) to buy a place in a school of their choice. Above all, it would have encouraged the foundation of new schools aimed at assisting the poorest members of society. It can be criticised for not allowing topping up, but by insisting that the school – public or private – must accept the voucher in full payment, with no extras, the policy ensured that assistance would go first to those most in need of it. Despite decades of justifying state education as a necessity to ensure access for the poor, it is the most disadvantaged members of society who get the worst schooling today. The Tories could have worn their education policy as a badge of honour, but instead it has been sidelined as a bit of an embarrassment. If they were additionally to call for the transfer of ownership of all state schools to local non-profit educational trusts, they would have a solid educational policy that would guarantee access for all without the faults of monopoly. No less important, transferring schools to local ownership would also be a radical step in rebuilding the social fabric, creating outlets for idealism and public service in every neighbourhood. Such a policy would appeal to the best in all of us.
Ration-book collectivists in the Labour and Lib-Dem parties will follow their usual ploy of claiming that the Tories don’t care about the common good and accusing them of celebrating selfish individualism, but it wouldn’t be true and no one with an open mind would take seriously these smokescreens for public sector monopoly that neglect the common good and encourage selfish individualism among public sector workers. The Tories should reject the caricature of freedom proffered by enthusiasts for a powerful state and reclaim the true ideal of liberty as their own.
The ideal of a membership state reminds us that we are all in it together. Unstinting material support for anyone who falls on hard times should always be there. But no such system can be one-sided and each must play their part in trying to be independent. Liberty is a system of personal security under laws that apply equally to all and whose legitimacy is the result of consent. Just as we guarantee security for all who accept the law of the land because it benefits everyone, ourselves included, so too we should guarantee a national minimum of health and education, but without public sector monopoly.