Government must rebalance the relationship between the citizen and the state.
To achieve fiscal sustainability a clear redefinition of the relationship between the individual and the state is required. That is likely to mean letting go of a raft of entitlements which the country cannot now afford.
The notion of the ‘cradle to the grave’ welfare state introduced after World War 2 needs to be redefined to reflect the large and growing proportion of older people and the long term pressures on public finances.
Central to the ethos of the Beveridge report was personal responsibility in providing yourself and your family with more than the minimum. But successive governments have increased the welfare bill with entitlements which are electorally attractive but which go well beyond minimum needs as originally defined. Nor are they means-tested - for example, free TV licences and universal winter fuel payments for older people.
In helping make the welfare system more affordable, universal benefits are an obvious target for cuts in welfare spending. The government’s move in 2013 to transform child benefit from a universal benefit into an income related one reduced public spending estimates by around £1.5 billion (IFS). Extending means-testing of other universal benefits would also produce savings. For example, the winter fuel payment, is paid at a flat rate of up to £300 (for couples over 80), regardless of a person’s wealth, withdrawing payments from those paying higher rates of tax would save around £105 million a year.
Despite being ring-fenced from the cuts elsewhere, the NHS budget is facing increasing pressures from the ageing population and advances in healthcare. Reforms in how health services are delivered, including integration of health and social care and preventative strategies such as improving public health can help, but additional sources of income are still likely to be required. Research by Reform shows that an extra penny on income tax or National Insurance would raise only enough to fund the NHS for a fortnight (around £5 billion). Co-payment charges have long been introduced for many of the services that were free at the founding of the NHS; most patients now pay for their prescriptions, glasses, and dental treatment.
So means testing and charging are widespread within the NHS, and could be extended. For example, a £10 charge for GP consultations (with exemptions on the basis of age and income) could raise £1.2 billion each year.
CIPFA calls for:
The principles behind the welfare state to be clearly re-articulated in order to drive the future shape of the benefit and service provision. In addition to clearly defining the desired outcomes (e.g. poverty definitions), the principles that need to be incorporated in a new contract between citizen and state include: