Fair's Fair? The divided soul of the Coalition will test Labour more than it yet realises

What does the fury directed at the IFS last week from Nick Clegg and assorted right-wing columnists, bloggers and think-tanks really tell us about the clash between left and right in Britain?
Nick Pearce
25 October 2010

What does the fury directed at the IFS last week from Nick Clegg and assorted right-wing columnists, bloggers and think-tanks really tell us about contemporary politics?Ironically, the IFS deliberately eschewed any normative judgment on the Spending Review, preferring to let others debate whether the Chancellor had met the test of 'fairness'. The IFS simply deployed the categories of 'regressive' and 'progressive' as they are understood in fiscal analysis – ie how much a particular change in the tax and benefit system or public spending takes from or gives to people at different points in the income or expenditure distribution. One might consider this naïve, or even use it to open up a debate about the limitations of empiricism in the social sciences, but neither is really central to what is really at stake here, which is a political struggle over the meaning of social justice.For old-school neo-liberals, the concept of social justice is, strictly speaking, nonsensical: there are individuals, who have property they should be at liberty to enjoy, but no such thing as society that might be considered just or not. Their main objective is to use the current political opportunity to cut spending, shrink the state and privatise as many of its remaining functions as possible. What most irks them about the IFS is that the mere fact of undertaking distributional analysis places questions of equality, rather than the (negative) liberty of the individual, at the heart of public debate. Yet since well-worn canards about equality (such as how awful it might be to live in a society of perfect income equality, like the former East Germany) are of little political use in this discussion, they revert to impugning the IFS for not taking into account the dynamic behavioural effects of tax and benefit changes, arguing that cuts to out of work benefits will get people off welfare and into jobs. Quite apart from the fact that this is asking too much, even of the IFS, just a day after the spending review announcement, the truth is that the Chancellor’s decisions actually reduced work incentives by cutting tax credits and childcare entitlements. The vast majority of the £7.2 billion welfare cuts announced last week actually fell on working households, not the long-term workless. A different kind of response has emerged from more centrist right-wingers. They too find the focus on distributive justice tiresome, at best. At worst? A deliberate trap laid by the last Labour government into which the Coalition government has walked. Their solution is to argue that the right has to get off the hook of equality, redefining fairness to mean something like ‘just deserts’. By this account, the welfare state needs to make sharper distinctions between the undeserving and deserving poor, aligning itself with popular social morality to cut benefits for the work shy and indigent and to pluck bare the feather-bedded public sector. In his weekend column, Matthew Parris [paywall] took this argument to its logical conclusion: the Coalition should be honest, as was Thatcher, that 'our people' come first. This is perhaps predictable, if a little depressing. Other conservatives – spanning the new Burkean left of the party and the traditional socially conservative right – have been more concerned to defend the Coalition on the grounds of equality and compassion, rather than to shift the political discourse out of this territory. To be sure, they still locate the structural cause of unfairness in the welfare state, and look for solutions in the family, civil society and benefit reform. But their willingness to defend the concept of social justice is an important stand, doubtless reflecting the ideological investment they have made in repositioning the Conservative Party over the last decade. Whether they can hold their ground within the party will be very important in determining the government’s wider ideological orientation – and once they get into the empirical evidence on the spending review, the going gets tough, as the following IFS graph makes plain.Source: Institute for Fiscal Studies What of the Liberal Democrats? Perhaps most troubling of all has been Nick Clegg’s criticism of the IFS. After all, his party’s first pledge at the general election was to 'create a fair tax system'. 'No tax system,' its Manifesto argued, 'should try to create total equality of income – but it can and should help redistribute wealth and power, to alleviate the worst excesses of inequality.' Now, apparently, this basic function of the tax system represents the application of 'a slightly dessicated Treasury measure', which it is 'complete nonsense to apply'.To be generous to the Deputy Prime Minister, his real intent here is to shift the debate about fairness towards one which focuses on intergenerational life chances – or, more narrowly, social mobility. His priority is to boost investment in educating children from low income families in order to develop their capabilities and enable them to do better in life than their parents. The problem with this line of reasoning is not that social mobility is unimportant – increased social mobility should indeed be a feature of a just, as well as an open, society. Nor is it that politicians haven’t thought about it before – both Tony Blair and Gordon Brown wanted to make Britain more socially mobile and backed that up with big investments in early years learning and schools. The problem is that when governments take decisions about taxation and spending, they have to make judgments which have distributional consequences in the here-and-now. Someone has to pay, and in some measure. And that necessarily involves judgments about the fairness or otherwise of the distribution of the pain.To state the obvious, inequalities in outcomes also structure the opportunities available to the next generation. And even if they didn’t – say, in a world of pure social mobility – there would still be considerable evidence that wide inequalities harm our societies in a myriad of other ways. You don’t have to accept all the arguments of The Spirit Level to believe that relativities matter and that gross inequalities of income and wealth have deleterious economic and social consequences, as thoughtful Conservatives such as David Willetts accept. We cannot simply bat away the question of social justice for another day. The Coalition and its outriders in the think-tanks are clearly in a position of considerably ideological fluidity on these fundamental governing principles. Yet although these fault lines have become readily apparent in recent days, they also serve to mask an underlying unity on one core proposition: a rejection of universalism in the welfare state. What unites the libertarian right with Iain Duncan Smith, David Cameron and Nick Clegg is a desire increasingly to focus the welfare state on the poorest and to strip back universalism. Only electoral calculation – not high principle – prevented the Coalition from means-testing or scrapping benefits for older people, as they have done for Child Benefit.This will become a bigger divide in British politics, defining how the different parties fight for the centre ground, with the Coalition defending means-testing as the only fiscally credible means of achieving a fairer society in an age of austerity and Labour seeking to defend the principle of universality as both fair and affordable. Paradoxically, however, Labour will have to be more selective in the universalism it defends: fiscal constraints are not going to disappear any time soon, and that means facing up to some tough choices on what kind of majoritarianism the welfare state should embody. As we have argued elsewhere, the focus should shift increasingly to universal family services, as such as childcare, and away from poorly designed benefits, like the Winter Fuel Allowance, that have no intrinsic rationale. There are other big dangers here too for the centre-left. If it finds a voice only when defending the poorest in society, or speaks too often in statistics, it risks not being heard by the majority. If it talks only about equality in the abstract and not about how a more equal society would be substantively different and better, it will not connect to people’s everyday concerns. And if it allows the right to colonise social morality and deep popular commitments to reciprocity and fair contributions, it will lose votes by the millions. In its own way – steadfastly neutral and empiricist – the IFS has opened up some big ideological debates.

Cross-posted from the Institute for Public Policy Research

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