ABSTRACT
Much of what the welfare state does is to redistribute income across people’s own life-cycles, rather than redistributing between different individuals, if one examines its effects over complete life-times (Falkingham & Hills 1995). Such redistribution could, in principle, be achieved in two ways. One would be enforced contributions into a fund that would be invested on its contributors’ behalf and drawn on when needed – much in the way that private sector pension schemes in fact operate. The second is what has actually occurred in Britain: welfare services like education, health care and social security are financed on a “Pay As You Go” basis, using the national insurance contributions and tax payments drawn (largely) from the current working generation to pay for the benefits going (largely) to the non-working generations.
