Reinventing the Welfare State. Ursula Huws
system was still as it had been established under the 1946 National Insurance Act: contributions were paid by those in work, and their employers, into a common pot from which unemployment benefit, sickness benefit, retirement benefit (pensions) and other benefits were paid. Pension coverage was not universal (married women and some self-employed workers were excluded from it), but the principle was that everyone contributed to a system from which everyone then benefited.
The baby boomers thus spent the first two, three or even four decades of their working lives contributing to the basic state pensions of the generation that preceded them. Some were, of course, also enrolled in employer-provided pension schemes which provided additional income in retirement, but by no means all (in the case of women working part-time and people working for small companies, only a very small proportion).
Over the ensuing decades a series of changes placed pension schemes more and more into the hands of private providers and shifted the logic from one whereby people currently working paid for the pensions of their elders concurrently drawing pensions, to one where working people paid for their own future pensions, a principle whose most recent formulation was in the Pensions Act of 2008, with its ‘defined contribution’ principle that whatever the ‘job-holder’ puts in he or she should then take out.
This is quite contrary to the principle ‘to each according to need, from each according to ability’ that underpins most socialists’ idea of what a welfare state should be about. It also strays away from the idea that contributions into a common scheme should be obligatory, a principle which even Winston Churchill recognised as necessary (in relation to unemployment insurance) because if it were not compulsory for everyone to pay into the system then only the bad risks would take out such insurance, leading to the failure of the whole scheme.16
Baby boomers have, in other words, being paying into the system throughout their working lives, though it is only in the latter part of their working lives (and in the case of many women and self-employed people, hardly at all) that many have been paying into their own private pension pots. Contrast this with the companies who benefit from tax credits, many of which are registered in tax havens and pay little into the public purse.
A second common theme is that baby boomers, often portrayed as selfish squatters, have benefited disproportionately from the rise in house prices and are occupying high-value properties that would otherwise be available for young people to live in. Again, let us leave aside the obvious point that in many cases young people, in the form of the baby boomers’ own children and grandchildren, are already living with them in these properties, albeit perhaps sometimes with all parties wishing that they had a bit more privacy and control of their living space. There are some other myths here that need debunking. A few facts about the history of housing in the UK may help. During the twentieth century, owner occupation of homes grew from 10 per cent to 68 per cent, with most of that increase taking place in the last four decades of the century (it actually fell between 1938 and 1951). A high proportion of the rented accommodation (a majority from the 1970s onwards) was in housing owned by local authorities or (from the 1980s) housing associations. In the twenty-first century these trends have reversed a little, with a resurgence in the role of private landlords, so that by the 2011 census the breakdown was: 7.2 million homes owned outright, 7.8 million owned with a mortgage, 4.2 million privately rented and 4.1 million socially rented (of which 2.2. million were from local authorities and 1.9 million from other social landlords).17 Nearly 70 per cent of homes, therefore, require the payment of either rent or mortgage to secure ongoing occupation. If the residents cannot keep up the payments, they will be booted out.
The majority of baby boomers were brought up in rented accommodation and started their working lives paying rent. Some, but not all, switched to paying mortgages when they could afford to do so (often driven as much by fear that rents were becoming unaffordable as by the desire for the proverbial ‘home of one’s own’). Those who chose to acquire mortgages had to sacrifice a considerable chunk of their incomes to pay them off. (Let us not forget that for every pound of the purchase price of the property you pay off with your mortgage you pay at least as much again to the bank, building society or mortgage company that lent you the money to buy it with.) Except in a minority of cases where it was inherited, the property these baby boomers now own was thus anything but a windfall (except to the moneylenders). Like their pensions, it was paid for from the wages of a working lifetime.
It is certainly true that many of these properties, including the former public housing that tenants were encouraged to buy from the 1980s onwards, have increased enormously in value. But let us look at what precisely was going on when the Thatcher government decided to sell off the cream of Britain’s public housing stock. First, the cost of most this housing had already been amortised: the initial cost of building it had already been recovered. If the logic of the spirit in which welfare states were ostensibly set up had been followed, the rents of these publicly owned homes should have been very low. If there was no need to make a profit from them, all that the local authorities who owned them should have needed by way of income was enough money to cover the costs of maintenance and repairs and a contribution towards the cost of building additional new housing. So the tenants to whom these homes were sold off were in effect being asked to buy something that was already publicly owned and paid for. And since they had to get a mortgage in order to do so, half of what they paid was in effect a gift (in the form of interest payments) to the financial services companies that were such strong supporters of the Thatcher government, as well as beneficiaries from its policies.
But surely, readers might think, the people who bought these properties nevertheless benefited hugely from doing so, didn’t they? Well, perhaps some did. But it is interesting how many people who were not former tenants did so even more. A surprisingly high proportion of former council flats have ended up in the ownership of private ‘buy to let’ landlords, including a number of Tory MPs (most notoriously Richard Benyon who purportedly collects £625,000 per year in tenants’ housing benefits18).
But even when, after years of paying off their mortgages, people have managed to remain in possession of their properties, do they really get to leave them to their children as the enticing promises led them to believe? The answer is only yes if they are fortunate enough to die suddenly. Because of the pernicious distinction that has been drawn in the neoliberal welfare state between ‘treatment’ (which, although increasingly narrowly defined, is still provided free by the NHS) and ‘care’ (which most emphatically is not), the chances are very high that the house will have to be sold off, either before or after death, to pay for the rocketing costs of social care – provided by private companies which, in a further irony, are very likely to be employing workers on such low wages that they require tax credits to survive, and which may or may not be paying corporation tax.
So much for the baby boomers who scrimped and saved to pay off their mortgages. What of those who remained in their social housing and paid rent instead? Well they have been punished in another way – by the ‘bedroom tax’ introduced in 2013, whereby tenants’ benefits are cut by 14 per cent if they have one spare bedroom and by 25 per cent if they have two or more. In other words, if they have any spare space whatsoever apart from their own bedroom (whether used to house medical equipment, a study or for any other purpose) then they have to pay an unaffordable extra sum of rent for it. So, although they may have faithfully paid rent for many years and put money and effort into maintaining and caring for the property, they are no more secure in their housing than anyone else.
GENERATION SET AGAINST GENERATION
What, meanwhile, has been the experience of younger generations? Let’s look at the generation born in the early 1980s, now approaching their forties, too young to benefit from the advantages conferred by the post-war welfare state and too old to benefit from the softening of the Thatcherite policies introduced under the New Labour government of the 1990s. They were born too late, for example, for their parents to take advantage of the more generous funding for state nurseries in the pre-Thatcher era but too early to benefit from tax-deductible childcare costs and the Sure Start Programme. Their childhood was played out against a background of progressive cuts. Every year, something was withdrawn that had been available to older children, such as free music lessons, school trips or bus passes