chapter  15
14 Pages

Can we afford the welfare state?

In the first chapter of this book I began by emphasizing that welfare, as I defined it, could be financed and provided in a variety of ways. In the chapters that followed I showed that the ways in which Britons pay for their welfare state have changed significantly in the past decade. Direct income taxation on the highest-income groups has been reduced, but other forms of taxation have risen. The aver­ age earner and the poorer households have had to bear a larger part of the burden. Central government determination of both taxes and spending has increased at the expense of local determination. Social spending stabilized as a share of the economic activity in the United Kingdom and other countries in the aftermath of the crises of the mid-1970s. The scale of welfare spending by governments in the largest OECD nations reached a plateau after the rapid increases of the 1960s and early 1970s. The slower growth, or actual decline, in national incomes in the 1970s, and the growing burden of financing unemployment, shook the complacent view that such growth in pub­ licly financed services was inevitable or even desirable. Some writers swung to the opposite extreme, claiming that welfare states were in crisis and that major changes in their finance were necessary and unavoidable (Gough, 1979foECD, 1981; Mishra, 1983; Offe, 1984). This crisis view was shared by those with very different political values - free-market Conservatives and Marxists. Both believed that a mixed economy with a largely publicly provided element was inherently incompatible with a capitalist economic structure. The radical right argued that the balance must shift decisively towards individual purchases in a private market and that voters would

support such a move. Marxists argued that either a financial crisis would result from trying to pay for the welfare sector out of taxa­ tion, or a legitimacy crisis would result from trying to dismantle it.