THE END OF ENTITLEMENT
October 23, 2009
The United Kingdom spends £31 billion (about US$51 billion) on benefits to the middle classes. This represents an extra 8 percent on income tax. The British think tank Reform calls for £14 billion (about US$23 billion) in immediate cuts and moving to a welfare society of contribution and responsibility, and not entitlement, says Reform.
There is a political consensus for some limited aspects of welfare reform. Yet to deliver real benefits the United Kingdom needs a radical reform plan that immediately constrains public spending and then, through reform, moves towards a smaller, more effective welfare system. The only alternative is to continue to increase the burden on current taxpayers, which will harm prospects for economic growth and only serves to postpone difficult decisions on expenditure, says Reform.
- Abolish middle class welfare and benefit gimmicks, with immediate cuts that would save £14 billion (about US$23 billion); further savings, including migrating individuals from the state pension onto personal protection accounts, should be made as part of a medium term plan to restore the public finances.
- Hand benefit rules and operation to social enterprises and companies, funded through employee national insurance contributions.
- Develop flexible Personal Protection Accounts, building on the success of Individual Savings Accounts (ISAs) which offer tax free returns and the introduction of auto enrolment and personal accounts for retirement savings in 2015.
- Where possible, replace social security benefits with private provision, with private insurance being a potentially useful but largely underutilized tool, particularly for disability but also in other areas.
Source: Thomas Cawston, Andrew Haldenby and Patrick Nolan, "The End of Entitlement," Reform, October 22, 2009.
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