How social security works

An introduction to benefits in Britain

Spicker, Paul

• Publisher: Policy Press
• Year: 2011
• ISBN:
  9781447317920
• Edition: 1
• Topic: Politica e relazioni internazionali
• Subtopic: Politica sociale

How social security works is an introduction to the much-misunderstood system of benefits in Britain. The book is an accessible, broadly based and sometimes controversial text which can help readers to make sense of the system in practice. It explains the guiding principles, outlines the social context, considers the development and political dimensions of benefits, and reviews how the system operates now. There are detailed discussions of the types of benefit, and the contingencies covered by the benefits system. Paul Spicker examines whether the system offers value for money, how it could be simplified and how it can be improved. The book will be useful to students on undergraduate and professional courses, but beyond that it will appeal to policy makers, practitioners and a broader general readership.

Part I

Introduction: social security benefits in principle

Chapter 1

What is social security?

Social security is often written about as if it was only concerned with the relief of poverty; many of the key debates are about how to do that more effectively. However, social security is provided for many other reasons: they include prevention, social protection, redistribution and economic policy, as well as economic and social measures intended to benefit society as a whole. Further aims include compensation, income smoothing and the promotion of solidarity. There is much more to benefits than providing a safety net, or getting people back to work.

The idea of social security

In Britain, the term ‘ social security’ is a term used for income maintenance provided by the state. ‘Income maintenance’ is the provision of financial resources when personal income is interrupted or insufficient. The social security system is mainly made up of benefits administered by the Department for Work and Pensions – such as Retirement Pension and Jobseeker’s Allowance, and a suite of benefits run by Her Majesty’s Revenue and Customs (the UK tax authority), including Child Benefit, Child Tax Credit and Working Tax Credit. Other benefits, including Housing Benefit and Council Tax Benefit, are administered by local authorities.

This description of the social security system is fairly conventional, and like many conventional classifications it does not really stand up to close examination. The first question is: what are financial resources? Does a benefit cease to be social security if people get the goods rather than the money? In many other countries, social security includes a range of activities well beyond financial support, including health care; but few people in Britain would think of the National Health Service as a form of income maintenance, because that is not how the health care system works here. Payments for social care, which have not been included in this book, are not currently classified as social security benefits. At the same time, several benefits which provide goods, rather than money, are treated as social security: examples are milk supplements and vitamins for expectant mothers, free school meals and school clothing vouchers. These are referred to as benefits ‘in kind’,1 but it is very unclear why they are classified differently from the provision of services such as medical care or nursing.

Is every form of income maintenance a form of social security? In Britain, the payment of rent is treated as social security, but it has been treated as part of the housing budget in the past, and the payment for support from housing management may be treated as social care. Legal aid is provided for people who cannot afford to take legal action, but that is not generally thought of as a social security benefit. Fiscal welfare provisions – tax reliefs and allowances – are a form of financial support, but usually they are left out of the assessment. Agricultural subsidies are not usually thought of as social security in the UK, though they might be in other places – arrangements in Finland and Greece have put agricultural compensation together with social insurance for farmers.2 The leading legal textbook on social security in Britain states confidently that Child Tax Credit is a social security benefit, while Working Tax Credit is not; but the two benefits are administered in tandem, and it is very difficult to tell the difference between them.3

Is it essential that social security benefits should be provided by the state? In continental Europe, similar arrangements are used to provide benefits by non-state organisations: the system of pensions in France is administered in large part by a complex network of autonomous funds, while unemployment benefit is the responsibility of a convention agreed between employers and workers. Few people in the UK would think of insurance for mortgage protection or funerals as social security, but it takes very little to see privately funded arrangements in that light; several countries have built their national systems on the basis of voluntary contributions. Conversely, transferring the operation of benefits from the state to private organisations does not mean that social security has ceased to exist. Before 1983, the National Insurance system offered Sickness Benefit to workers whose work was interrupted by sickness. Sickness Benefit was largely replaced by Statutory Sick Pay, which is paid by the employer. One way to explain this is to say that SSP has been taken out of the remit of the social security scheme; another, that employers have been co-opted into the scheme. This sort of co-option is commonplace in other fields - for example, the administration of tax by employers - and it is questionable whether a different method of service delivery implies any major difference in principle.

Much of the way we think about social security comes from our particular history, not from any obvious reasoning about the subject. For a British reader, social security is a national system, part of the welfare state set up after the Second World War. If it was part of that system, like Retirement Pension, Industrial Injuries Benefit or Unemployment Benefit, it was social security. If it was not part of the system, like occupational pensions, life insurance or compensation in the courts, it was not social security. People from different countries understand the basic concepts differently. In the United States, social security usually means the social insurance system introduced in the 1930s by the Roosevelt administration, which covers old age, survivors, disability and sickness; other forms of income maintenance are ‘welfare’. In Mexico, social security for families includes day care for pre-school children. In France, la Sécu means health insurance to most people, and unemployment benefits are outside the government’s social security system altogether. The definition of social security seems to reflect the administrative arrangements, rather than any common understanding of what social security is meant to do.

Reasons for providing social security

Social security is provided for many reasons. The system of government has been central to the development of social security in Britain, so most of those reasons reflect in some sense the policies of governments past and present, but the provision of social security also reflects the influence of other groups, like employers, the labour movement and the friendly societies. This section looks at the aims most commonly attributed to social security benefits.

The first is the relief of poverty. For many people in Britain, this seems to be the most basic function of the social security system, though as I shall explain, it is not necessarily the main one. The relief of poverty is important partly because it has been highly influential in the development of benefits, but also because people from all shades of the political spectrum think that benefits ought to be about the relief of poverty. People who support the benefits system are critical when benefits fail to relieve people’s poverty. People who oppose the benefits system tend to be critical when benefits are wasted, as they see it, by spending money on others who are not poor. Both these positions depend on the assumption that the relief of poverty is what benefits are supposed to do. That may be true, and it may not. Income Support was specifically geared to people who are on low incomes, which is not quite the same thing as poverty; others, like the State Pension or Jobseeker’s Allowance, are not only available to people who are poor, but cover circumstances in which people might otherwise be likely to be poor; and some, like War Pensions or the universal pension for people over 80, do not have much to do with poverty at all. (There are some relatively marginal benefits which I think can be argued to be directed towards ‘the poor’, like parts of the Social Fund and discretionary payments in social work. I discuss these in Chapter 21.)

In historical terms, the benefits system was not intended principally to relieve poverty. On the contrary, it was based in an attempt to break away from the relief of poverty, the principle which had dominated the provision of welfare for 350 years.4 This is part of a much broader set of issues, and I will deal with it the course o...