The United Kingdoms Welfare System - Case Study Example

We cannot afford to provide welfare for a population that continues to live longer and longer” Introduction The United Kingdom’s welfare system that is currently implemented had began after the World War II and lived onto the next thirty years. However, just like most countries at that time, UK had been through serious economic problems. However, unlike any other European Union nations, the United Kingdom is said to be different in such a way that Margaret Thatcher and the Conservative Party after 1979 had left a considerable imprint on the British welfare system. Thatcher and the Conservative Party had made a tremendous impact in the political party in the United Kingdom making it more unique than the other UE nations. (Faher, n.d.) Issues that concern the welfare of the society had become the top priority of the government since then. Until eventually John Major replaced Thatcher, welfare reform was high on the agenda. This was clearly illustrated and demonstrated when the government had considered spending two-thirds of its budget is spent on the welfare state and services it provides among its citizens. (Faher, n.d.) In 1980’s and 1990’s, the UK government had made several adjustments concerning the welfare state of the country due to the increasing crisis that the government was experiencing brought about by its increasing expenditures concerning poverty among the members of the society. Welfare benefits were divided into five groups – cash benefits, health care, education, housing, and personal social services. Cash benefits have become the most widely used form of welfare thus eating up around 10% of the country’s Gross Domestic Product (GDP). National insurance, which obtains the largest spending, has affected two of the other cash benefits subgroup, the means-tested and the non-contributory benefits. There had been very low pension benefit levels such that it only makes up half of a person’s active salary which is even barely enough to meet ones needs, most especially the elderly. (Faher, n.d.) Just as any other western countries, the growing population of the elderly has been greatly affecting the welfare state in the United Kingdom. The aging population in the UK had become the biggest challenge the welfare state has to face. The need for more assistance and services is required in order to meet the needs of this group within the community. This concern, in fact, does not only involve the social policies of the government but it also affects the financial aspect – that is the expenditure of the government. However, the problems are not as obvious as other countries whose problems with the elderly had been too prominent that they have eventually become the burden of the government. (Faher, n.d.) On the other hand, in the United Kingdom’s socio-economical perspective of the social welfare, it views such as one that is an essential complement to industrial development. This view, which is termed as the handmaiden model sees that social policy helps the economy to grow by serving the workforce, providing services to industry and offering a secure basis for development. One particular example of which is the Keynesian economics that is utilized in Germany where it recognizes that spending on welfare is a useful tool in economic regulator that aids in balancing the economy during the periods of recession. (“An Introduction”) The National Insurance Fund (NIF), which finances the retirement pension program (together with other income security programs, such as survivors, disability, sickness and maternity benefits, unemployment, and work injury), does not appear to have either short-term or long-term solvency problems. In addition, some comparative studies have demonstrated that the UK’s projected long-term public pension costs relative to the Gross Domestic Product (GDP) are the lowest among leading industrial nations. This is a rather impressive accomplishment, given that the United Kingdom has a larger proportion of aged population than does the United States and this situation is projected to continue through 2050. It would be useful to identify the factors that have minimized the solvency issue and kept public pension expenditures in the United Kingdom at a manageable level. (Liu, 1999) Welfare State in UK The welfare state in the UK is characterized as a liberal welfare state that uses an aggressive means testing program to determine who is eligible for state social assistance. Also, the transfer of money between the population is quite limited as seen by very modest social benefits such as low state-subsidized pensions, unequal distribution of funds for social services, and limited services for families resulting in wide disparity between the wealthy and the poor. Also, in the UK, a strong emphasis on a market economy has developed in the 1990s that has led to a rise in private health and social services. This is particularly true of hospital care where long waiting lists for elective surgery have caused great dissatisfaction. (Conger, 2001) Universal health care in the UK is provided through a federally subsidized health care system in contrast to the more limited social service benefits. The rise of the universal health care system is ascribed to the need for a prepared military force. This culminated in the introduction of legislation to form the National Health System in 1946. (Conger, 2001) The British National Health System (NHS) brings together hospitals, physicians, and community health services into one organization. It is financed through taxation; however, the rate of the GNP spent on health care (6.7%) is the lowest in Western Europe. This is in comparison to the other European Union countries where health care receives 9.1% of the GNP. Funding from direct fees charged to patients for NHS services is only 4% of the total health budget. Hospitals are under control of a local Hospital Trust which receives money from the state system. Each trust employs its own doctors so that when a person enters a hospital, care will be provided by a physician other than his/her primary care provider. The District Health Authorities provide local public health services, primary care, and community nursing services. Their funding is obtained through the Physician Fundholder Groups who collectively obtain money from the state system based on a capitated fee for each person enrolled in the group practice. Factors such as the enrolled persons age are considered when determining the amount of money per person enrolled in the practice. (Conger, 2001) Social service in the United Kingdom has began in 1948 when the National Health Services was established. In the early days of the NHS, social care and health benefits were closely attached. Much social care was provided by long hospital stays and wide use of residential care. However, long hospital stays are no longer the norm. Financing for social care became the responsibility of communities through enactment of The Community Care Act and Social Care Act of 1990 while health care remained part of the state budget. Three years of federal financing were offered to help get the local communities prepared to take over this role, but in 1997 all communities were financially responsible for social care services. Often poorer communities with a low tax base have the most pressing social needs but insufficient tax base to meet these needs, leading to great disparity among communities. Also, the local district was expected to raise 9% of its funding from the recipients of services, but many can not afford to pay these fees. This change in financing has also led to an increase in the number of elders who moved into residential care units because such care is financed through other government money. In addition to increased fees for social services, the use of means testing to qualify for social services has also caused considerable anger among elders. (Conger, 2001) Many problems have emerged from this split in health and social services. The District Health Authority that oversees primary health care is often not related to the district social service organization; the two may not even cover the same geographical areas. Assessing need for social services such as home care aid, food delivery, or other services was assigned to community social workers. Lag time for a social worker assessment of need for service can run into months or years from the time of first referral. Thus, elders who need assistance often cannot get it within a reasonable time. Currently there is movement to return this assessment role to the district nurse who may be better prepared for it. (Conger, 2001) The lack of available social services needed for the elderly has resulted in some interesting shifts. Between 1990 and 1999 the number of nursing home beds has quadrupled, an increase ascribed to the lack of community service. Between 1982 and 1993, money spent on residential care increased by 2.53 billion pounds. There are 27% more people are living in residential homes than would be predicted if the per capita levels for social spending had remained constant. The service systems developed in ways which were inconsistent with the core policy objective of community care. (qtd in Conger, 2001) Pension and the Elderly “The biggest challenge facing the UK welfare system is how to pay for retirement.” There had been research studies that show a growing population of old citizens in the United Kingdom. The people in the country are observed to live longer however they produce fewer and fewer children. This situation has become a threat to the country’s economic stability. The state welfare’s plan of welfare reform that would be addressing such problem would only seem to be putting the country into a more frightening state. (Schifferes, 2005) The decrease in social services is only part of the problem that elders face in the UK. An important issue to maintaining a quality of life is pension benefits. Pension benefits in the UK are provided for each person; however, the amount in the basic state pension is quite low leading to an elderly poverty level of about 25%. Only 9.5% of the GDP in the UK is used to provide state pension benefits, the lowest level in Western Europe. Under the Conservative government, public policy in recent years has led to a decrease in the state pension while encouraging the purchase of private pensions. Studies also state that only 17% of the work force are eligible for state pensions. With the change from state-supported pensions to private pensions, the poor and the elderly are at an disadvantage. Occupational pension schemes are already abandoned by the companies due to the overwhelming growth among the elderly population. Luckily, so far the government has avoided making tough decisions – such as introducing a compulsory savings scheme, or substantially increasing state pensions – needed to deal with the crisis. On the other hand, the longer the government creates a consensus regarding the issue, the more that the welfare state that concerns the elderly becomes more at risk. (Schifferes, 2005) For the past 90 years, the U.K. system of retirement income security has been anchored by a near-universal, flat-rate basic state pension. This basic tier is a compulsory contributory program that provides a “poverty level” benefit to the working population (except the lowest earners, who are excluded from coverage). (Liu, 1999) The basic state pension, first introduced in 1908, is one of the sacred cows of Britains welfare state. Even Margaret Thatcher regarded it as too holy to slaughter. In one crucial respect, admittedly, the Tories propose retaining a kind of state provision: under their plan for a “basic pension plus”, the state would continue to ensure that every elderly person had at least as big a pension in real terms as todays pensioners. But every person entering the workforce after the scheme is introduced would be obliged to take out a privately provided pension. Ultimately, the public purse would top up only pensions that fell short of the real value of today’s pensions-mainly affecting those who had been unemployed for long periods or who had spent little time in a paying job. (The Economist, 1997) But, promising to privatise the basic state pension just before a general election looks like an act of political suicide. But on March 5th Britain’s Conservative government unveiled proposals intended to lead, eventually, to the end of state-pension provision for most people. Perhaps the Tories think that, facing humiliation at the polls, they have little to lose. And yet, even if that is so, give them some credit. What they have proposed is bolder than any plan endorsed by any mainstream political party in the industrialised world-including Newt Gingrichs Republican “revolutionaries” of 1994. It also happens to make good sense. Despite being only eight weeks at most from a general election, the Tories have produced a plan that is workable, attractive and takes account of the undoubted difficulties that confront the project. (The Economist, 1997) The United Kingdom has shed its future unfunded public pension liability, built up massive pension assets in the private sector, and seen rapidly increasing retirement income for high earners. However, it now faces the prospect of increased dependency on tax-financed means-tested benefits by future pensioners with a history of lower earnings. Partially privatizing its public pension has led to a “creaming off” of the country’s top earners from State Earnings-Related Pension Scheme (SERPS) to occupational pensions, and of medium earners to personal pensions, leaving mainly the lower-earning National Insurance (NI) contributors in SERPS. Both the first-tier pension and SERPS have been subject to steep cuts, probably because the majority consider these public programs less and less relevant to their own retirement incomes. Yet both defined-benefit occupational pensions and defined-contribution plans (occupational or personal) have their respective risks; and the ultimate contribution to pensioner income from personal pensions remains unclear. (Liu, 1999) Conclusion The UK welfare state had gone through several changes on the policies it has developed in the previous years in order to address the said social problem affecting the economic status of the UK government. The huge expenditures on welfare state had made significant effects such that the need to reorganize, develop and reform the welfare state policies of the UK must be considered. If there is a continuous high spending on the welfare state in the UK, the risks that the country may lose its economic strength and competitiveness globally is also higher. Privatisation of the national insurance and the benefits of the elderly are considered as the solutions in dealing with this risk in the economic spending brought about by the various policies on welfare in the UK since the initial development of the various laws involving the poor. National insurance and welfare benefits threaten the capitalist government of the UK. Looking at the ideologies that the United Kingdom follows, it could be observed that it follows that of the Marxists since the welfare state has become an outcome of the fundamental conflicts between capitalism and the working class. Therefore, the needs of the poor, especially the elderly, are not met since too much spending is required for the growing number of elderly. There is also a need for the UK government to earn more than it has been spending on welfare policies. This conflict results into a social conflict that puts the government at risk. “The modern welfare state is above all a welfare state for the elderly. An overwhelming proportion of its services and benefits go to them. The current crisis of the welfare state is also, therefore, a crisis of policy concerned with the aged.” (“Old Age”) References and Works Cited: _______ (1997). Who needs a state pension? (United Kingdoms Conservative Party proposes privatization of state pension). The Economist (US) An Introduction to Social Policy. Retrieved from http://www2.rgu.ac.uk/publicpolicy/introduction/needf.htm on February 12, 2007. Brunson, K. Welfare Policy: The primary factors that attribute to the stark differences in welfare policy among the United States of America and various countries of the European Union, specifically the United Kingdom. Retrieved from http://www.smu.edu/ecenter/discourse/Brunson.htm. on February 12, 2007 Conger, M. (2001) Health and social services for the elderly: a comparative analysis. Nursing Economics. Faher, N. Country Case Studies and Links: United Kingdom. Retrieved from http://www.pitt.edu/~heinisch/ca_brit.html on February 12, 2007. Liu, L. (1999) Retirement Income Security in the United Kingdom. Social Security Bulletin. Mullard, M. & Spicker, P. 1998. Social Policy in a Changing Society. Routledge: London. Old Age and the Welfare State. Retrieved from http://www.amazon.com/Welfare-State-Studies- International-Sociology/dp/0803997841 on February 12, 2007. Rhodes, M. (2000) Building a Sustainable Welfare State. West European Politics. Schifferes, S. (2005) The future of welfare reform. Retrieved from http://news.bbc.co.uk/1/hi/business/4720727.stm on February 12, 2007. Read More