Friday, January 26, 2007

Empowering Citizens to Help those in Need

Empowering Citizens to Help those in Need

The Problem
The state is an inefficient and ineffective provider of welfare services. While some state functionaries are well motivated, they are weighed down by the bureaucracy and uniformity which the state imposes in the name of conformity and equality. For example, they often have limited opportunities to build long term relationships with individuals in need of care or to adapt their approach to what suits the different needs of different people.
This system has profoundly negative results:-
- The most vulnerable in society are not helped to escape from deprivation and dependency to lead fulfilled lives; and
- The bulk of society sees social care and looking after the poor as not something with which it need concern itself. People pay taxes and then the state does the rest is the all too common mentality. The working classes and the affluent disengage from helping their fellow citizens and society as a whole suffers.
Two things are lacking – competition to improve services and freedom for organisations and staff motivated by a sense of mission to be properly funded to help those in need.

The Current Approach
The track record of the Third Sector (charities, religious bodies and other voluntary organisations) in achieving better results for those they work than the state is widely acknowledged[1]. Received wisdom amongst those in the Labour government who are even slightly open minded is that by contracting with the Third Sector the state will achieve better results for the poor than it will do through its own functionaries. The problem with this is that the state, once it becomes the principle funder of a third sector organisation (in lieu of the charitable fund raising which originally allowed the third sector organisation to function), imposes its regulations and paperwork on the third sector organisation (TSO), often with the result that the service the TSO is able to provide starts to look remarkably like the care previously provided by the state rather than the higher quality care which the charity was able to provide before the state started to interfere[2].
There is much mindless regulation which could and should be swept away by any government which wished to improve the quality of life of its citizens but even when this has been done much unhelpful bureaucracy will remain for so long as the state is using taxpayers money to provide social services.
Added to these difficulties is the fact that the state and many of its functionaries are viscerally opposed to providing funding to any charity with religious overtones, especially if these happen to be Christian. This is despite the strong evidence that the religious faith of those who work with those in need can often be the single greatest thing in helping the needy face up to the situations in which they find themselves with courage and hope rather than irresolution and despair. As Mother Theresa said, “The most terrible poverty is loneliness and the feeling of being unloved.”

A New Way
William Pitt’s introduction of the Consolidated Fund (all state revenue being paid into one pot) was undoubtedly crucial in helping the Royal Navy keep enough ships operational to defeat Bonaparte but, 200 years on, we should challenge the Treasury’s belief that all the funds that Revenue & Customs are capable of raising needs to remain in this one pot.
Income tax is a tax with which most people are familiar. Social spending by central government is currently £68.5 bn[3]. Income tax raises £124 bn[4], of which £80.2 bn[5] comes from income tax paid at the basic and starting rates. Therefore, it is not unreasonable to regard 19p of every 22p[6] paid at the basic rate as funding social spending.
Each year, rather than each of us paying all our income tax to the Treasury, we should be able to choose to which independent provider of social services 19p of the 22p we pay in basic rate tax goes.
In other words, while still making use of the HM Revenue & Customs collection systems, we should disintermediate the state from distribution of the money it collects for social spending.
How could this work ? There would be an approved list of TSOs committed to providing social services and we would choose which charities would receive the proportion of our taxes currently devoted to social spending. Having made the choice, we would agree to stick with it for three years to allow the TSO we were supporting some continuity of funding. Both religious and non religious TSOs would be allowed.
Once taxpayers had made their choices and it became apparent how much funding different TSOs would have, different TSOs would take responsibility for social services in different districts and boroughs. Each geographic area would have at least two TSOs providing social services so that the deprived were not forced to transact with an organisations whose principles were irreconcilable with their consciences. The location of the taxpayers who opted to support a particular TSO would be used to determine which TSOs provided services in which areas.
A large proportion of council tax is also used for the provision of social and caring services[7]. Here, as with income tax, council tax payers would be allowed to choose what charity (religious or otherwise) they wished to provide those services. A charity which received a viable amount of nominations (say 5% or 10% of council taxpayers depending on the size of the local authority) would be given funding to provide social and caring services. Thus local choice and democracy would be enhanced while the range and quality of social care would rise.

Disadvantages ?
Statists would doubtless be critical of this radical reform. I show below why such attacks lack validity and set out how they might be rebuffed.

The complexity of having more than one social services provider will be raised. The current reality is that social services are already immensely complex and there are already multiple state led providers on the ground as well as some TSO which have contracts with state organisations in certain areas. The charge that the scheme would add complexity is false – the funding would still come to the service provider from the Treasury – the choice as to which service provider it went to would simply be made by the citizen rather than the bureaucrat.
The second aspect of complexity is the breadth of services which any provider, whose name appeared as a choice for taxpayers, would have to provide. The reality is that TSOs are already adept at co-operating and forming themselves into plausible "best of breed" umbrella bodies to tender for government contracts. The system of taxpayer choice would give TSOs an incentive to ally with complimentary TSOs to offer taxpayers a credible set of service providers to support. Further, having been approved to appear on the list (approval would screen out organisations which had agendas, such as Jihad, hostile to British national interests or those which lacked any operational credibility), there would be nothing to stop organisations such as the English and Roman churches from sub contracting in areas where their own "in house" charities lacked breadth or capacity. Taxpayers would have a chance to "vote" on the success of any organisations service delivery every three years and would, at that point, have the option of transferring their financial support to another organisation.

One argument against the plan would be the cost to TSOs of communicating with the public on their operations, seeking support. This would undoubtedly be substantial but it would serve to heighten awareness of work with the deprived, strengthening understanding and social cohesion. Secondly, this would not be an additional cost but a substitute cost as it would replace the money which TSOs currently have to spend tendering and endlessly retendering for short term government contracts and then accounting in minute detail to bureaucrats for every pound spent. In fact, given scale economies it is likely that the costs of keeping the taxpayers who support them in touch with their work would be far lower than the cost of keeping the bureaucrats happy at present[8].

Difficulty in finding a place to draw the line will be one challenge hurled by those against reform. They will question whether, in talking about social services, we are including things such as the payment of housing benefit, and various other cash based forms of social security or whether we are talking of running hostels for vulnerable women, care homes, youth services with young offenders and drug addicts, to name but a few.
The answers is that what is included and excluded can be decided pragmatically. Given the evidence of state failure in welfare provision, most benefit would be derived if the scope were drawn as wide as possible. If we consider social services as a cohesive whole to be provided to a population in a geographic area (as opposed to dividing into categories such as "housing benefit" and "work with young offenders") then there would be merit in transferring everything to TSOs within a specific area. By doing this we would free the TSOs to reshape welfare provision, to innovate and to provide holistic effective care and support in their own way, rather than forcing them to provide care according to the categories devised by bureaucrats and to distribute payments with pre determined labels.
Old age pensions and unemployment benefit (to which we accrue rights through National Insurance contributions) would be excluded but all benefits which are not linked to contributions and "in kind" services would be in scope.
The above is clearly the ideal for which we, as Conservatives who believe that the state works best when it does least, should strive for. Political and bureaucratic realities may force us to settle for something less than this such as only including all "in kind" welfare services provided by TSOs with welfare payments remaining the preserve of the state. This would mark a failure to sell the vision but it would be a compromise which would still do much good for the deprived and should therefore be accepted if the alternative is inaction. It would be unlikely to effect council tax payer choice much as most local councils provide "in kind" services but it would mean that lesser proportion income tax would be available for allocation by income tax payers.

Tax allocation
As the statistics above show, an obvious result of assuming that social services are paid for out of basic rate income tax and council tax is that other taxes are relied upon for other forms of government expenditure. Given that a critical strand of this reform is choice and that income and council taxes are those taxes which taxpayers most readily identify with, it makes sense to impute revenue received from those taxes to social welfare expenditure. There is nothing innately wrong with other major areas of spending such as education, health and defence having to rely on other reliable taxes such as VAT, excise duties, higher rate income tax and corporation tax.

Less than Egalitarian ?
The most pervasive attack which the left would make on the proposals is that, through introducing choice, it would be inegalitarain and the service provided by different TSOs in different parts of the country would be different. These arguments are similar, in some respects, to the arguments put forward in favour of nationalisation and against the privatisation of the utilities. As Conservatives we should not be afraid to make the case in favour of choice, diversity of provision and competition because these are the things which have helped our society evolve since the Reformation.
If services provided in West Sussex are different from those in Birmingham that will probably be to the benefit of the deprived in both communities because the challenges faced are likely to be quite different. Further, the system would be established so that at least the two most popular social services TSOs would be capable of delivering social services in any area so choice would be offered, to a degree,[9] to the users of services. This element of choice would encourage TSOs to offer different approaches and to improve in response to what other providers found to be working. We could talk of competition but in practice, TSOs, given the lack of a profit motive are rather good as co-operating where they agree that a certain approach is best. That said, they are unafraid to try different things where they think these will do more good than the status quo. This combination ensures that the interaction between them is likely to continually drive up standards – a concept often all too alien when services are directly provided by the state.
It is highly likely, and we should not be afraid to acknowledge this, that the new system will encourage greater inequality of results for the deprived as different TSOs would have different success rates in different areas with different approaches and different populations to support. Whilst this might sound like a disadvantage, it is actually a sign of success when one contrasts it with the almost universally poor results obtained by state agencies. The inequality of results would come from many more of the deprived and needy being effectively helped to lead more fulfilled lives, it would be evidence of success, not failure. Given the low base from which we are building it is unlikely that outcomes would be worse that the current state led system produces for more than a few while the lives of many would be significantly improved – the main object of the reform.

Patronising ?
The Left would attack our reforms for being unfair because it would, "give the classes with incomes power over the poor and downtrodden." Why this should be worse than the overmighty state having and using the power so ineffectively that it keeps the deprived in miserable poverty I'll leave to those on the left of the political spectrum to explain. In any case, two aspects of this accusation are easily refuted:-
· The system would not give taxpayers choice as to whether to pay or not – only the choice as to through which organisation social services should be delivered.
· Elitism in the system would be eliminated by ensuring that a person only chooses where to allocate a proportion of the lower or basic rate tax he or she pays. Thus most members of the population would have similar, though not identical, spending power and patronage would not be handed to the wealthy as all higher rate income tax would continue to be paid directly to the Consolidated Fund as at present.
Finally, it is worth pointing out that part of the purpose of the reform would be to give workers (those who produce the wealth on which those in need depend for support) a stake in society and how care is provided to their less well off brethren. This might appear patronising to some but it is far more likely that the workers will continue to support a welfare system in which they have a stake and over which they exercise some control than one controlled by a distant state apparatus on behalf of deprived people of whom they know little. The reform will help secure a popular mandate for a high level of support to those in need, it is not a threat to them.

The Left has had more than 50 years to prove that state run and state funded social services are the best way the help the distressed and deprived. On almost every measure, the statist experiment has failed and through it, countless millions who might have led fulfilled existences have been left broken.
We can improve the lot of the vulnerable, the sick and lonely by using taxpayer choice to empower the voluntary sector (including churches and those of other faiths working to do good) to replace the state in the provision of social services. In doing so, we will strengthen society by reconnecting the working classes and the wealthy with the needy. In doing so we will help many of the currently needy rebuild, thrive and contribute to our common society. Unlike left wing reforms, this radical change does not depend on demigod administrators, a false understanding of human nature and a misplaced faith in regulation. Rather, it is something eminently achievable which would use the best Thatcherite methods to deliver Disraeli's vision of One Nation.

[1] For example, even p. 105 of the 2005 Labour manifesto stated, “In a range of services the voluntary and community sector has shown itself to be innovation, efficient and effective.”
[2] See p.22-23 of Better Regulation for Civil Society published by the Better Regulation Task Force in November 2005 for multiple first hand examples of the damage to TSOs caused by state regulation.
[3] This takes the £126.9 bn for 2005/6 figure HM Treasury gives for Social Security Benefits in Public Expenditure Outturns – National Statistics release 20th July 2006 and then deducts all contributory benefits (state pensions, unemployment benefit etc) from this. These came to £58.45 bn in 2005/6 according to DWP Table 3: Benefit expenditure, Great Britain, 1991/92 to 2007/08 (nominal terms).
[4] Calculated from HMRC table of Income tax liabilities, by taxpayer's marginal rate 2005-6.
[5] Calculated from HMRC table of Income tax liabilities, by taxpayer's marginal rate 2005-6.
[6] 18.8 pence rounded up. Equivalent figure for lower rate tax payers would be 8.5 pence.
[7] Local social spending came to £18.2 bn in 2005/6 according to Table 1: Expenditure on Personal Social Services (PSS), 2004-051 2006, NHS Health and Social Care Information Centre, Social Care Statistics. HM Treasury states that locally financed expenditure (E.g. Council tax and business rate receipts) totalled £26.6 bn in 2005/6. Therefore, council tax and business rates payers would be able to choose which TSO received 69% of these taxes.
[8] See Chapter 21, Better Regulation for Civil Society – making life easier for those who help others for full details of the huge administrative burden which current arrangements put on TSOs.
[9] Some services, such as mental health services or youth services where court intervention was required might not be able to allow the deprived individual choice.


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