Confronting the welfare culture is a political risk
WITH far too many exceptions, a new sense of reality seems at last to be dawning across the governments of Western nations that the age of entitlement may be coming to an end. British Prime Minister David Cameron took a leadership role by proposing a stunning blow to a population long accustomed to feeding at the public teat.
Cameron has decided to take on the culture of entitlement that has become an ingrained component of the welfare state.
In doing so he’s taking a political risk, but the stark reality is that “lifters” in any economy must outnumber the “leaners”. “There are few more entrenched problems than our out-of-control welfare system, and few more daunting challenges than reforming it,” Cameron said.
After the multi-billion-dollar bank bailout in Spain and the protracted election process in Greece, we are seeing the new government in Athens pursuing unpopular austerity measures imposed by Germany and the European banks. Now, by zeroing in on the welfare state, Cameron is attacking those who claim they are owed a state-funded entitlement.
Trust France to be out of step. Newly minted President Francois Hollande would rather lower the retirement age and impose punishing new taxes on the rich that will force the wealthy to leave the Republic in droves. Instead of going in the same direction as 28 of 34 of his OECD partners in increasing the retirement age, the new French President has done the opposite.
But across the Channel, Cameron says a serious debate is needed on the idea that citizens should receive something for nothing. “Raising big questions on welfare, . . . might not win the government support,” he announced in a speech in Kent.
“Frankly, a lot of it might rub people up the wrong way. It’s about the kind of country we want to be. It’s about doing what is right for our country, not just for today but also for the long term.”
Cameron is keen to take the biggest of axes to a system he describes as “mind-numbing”, “complex” and full of unfairness. So it is instructive to note the timing of words delivered in London three months ago by Australia’s opposition treasury spokesman Joe Hockey before a group of Tory backbenchers at Westminster.
In a speech called The End of the Age of Entitlement, Hockey told them Western nations had lived beyond their means for too long, that now was the time for an end to the expectation that governments would continue to provide for all. In other words, citizens need to take more responsibility for themselves.
Some domestic commentators criticised him, but Hockey is unbowed in his determination to send a message to Western countries, including Australia, that demographics and debt are tearing down the era of welfare largesse. A restless group of Tory backbenchers had been pressing their leader for a dramatic overhaul of Britain’s welfare state, so Hockey’s timing was prescient.
With a pound stg. 90 billion ($136bn) budget deficit — 6 per cent of gross domestic product — Cameron knows any reform to the culture of entitlement is a political and economic imperative.
With pound stg. 1 in every pound stg. 3 of British government expenditure being poured into welfare, Cameron has reassured his backbenchers, who are constantly receiving knocks at their electorate office doors from furious constituents sick of subsiding others: “Those within (the British welfare system) grow up with a series of expectations: you can have a home of your own, the state will support you whatever decisions you make, you will always be able to take out no matter what you put in. This has sent out some incredibly damaging signals. That it pays not to work. That you are owed something for nothing.”
Cameron highlighted the young couple both employed full-time in service industry jobs, together earning pound stg. 24,000 versus a couple who have never worked, have four children, get paid pound stg. 27,000 by the government. Little wonder the Prime Minister said: “Can we really say that’s fair?”
Under Cameron’s proposed reforms, welfare for families would be capped at pound stg. 26,000, while the young unemployed would be forced to live at home rather than automatically qualifying, as now, for government housing.
The yowls of protests across Britain were loud and fierce, but this was a calculated risk by Cameron. He knows welfare may consume a large part of his budget, but the majority of citizens are honest, hard-working people wanting to get ahead because of hard work, not handouts.
Margaret Thatcher, not a usual source for me, said in a 1975 New York speech as opposition leader that the age of personal responsibility was finally being revived.
She commented: “It’s not that our people are suddenly reverting to the ideals of laissez-faire. Nor are they rejecting the social advances of recent decades. It’s rather they are reviving a constructive interest in the noble ideals of personal responsibility.”
Thatcher was right, but sadly it has taken 37 years for this start to come to fruition.
At its core, personal responsibility means the rejection of entitlement. If an individual chooses to work hard and obtain a decent job, this means they are earning their income, not receiving it as a handout — and they expect their compatriots to do the same.
Voters, especially those who pay no tax, care little for the preferences of future generations.
Spending on Australia’s welfare bill is also about a third of the total outlays of the federal budget.
Australians resist when told they could lose middle-class welfare tax breaks and payments, but at the same time any poll will also show they want their governments to spend more on health and education.
Both sides of politics know this is unsustainable, yet neither has displayed the political will to take it on. Short-term populism has so far won every time.
Once the carbon tax debate ebbs away, as it surely will, the Labor government will still be a hostage to welfare — how else can it protect its disappearing base and placate its union mates?
Unlike Britain, where Prime Minister Cameron has at least outlined what should be done, Australia is lagging in rigorous intellectual debate — the Hockey contribution so far being a rare light in a fog of inaction.
No matter how tough it is, the tough questions will have to be asked. In summary, it’s time for us to grow a backbone, not a wishbone.
Ross Fitzgerald is the author of 35 books, including his memoir, My Name is Ross: An Alcoholic’s Journey, and the political satire Fools’ Paradise
The Weekend Australian July 7 -8, 2012, Inquirer, p 24.