European states have adopted different welfare models because of different historical development processes and different political priorities. The subsequent history of the welfare state has demonstrated both the inherent flaws in political and social schemes and the extent to which successive administrations have been either unable or unwilling to fulfil these objectives. During history, the most obvious weakness has been the consistent failure of governments to set the rates of national insurance benefits at levels such that recourse to means-tested assistance would be rendered unnecessary. The effect of this policy has been that increasing numbers of people, in particular those who are unemployed or retired, have been forced to rely upon the safety net of a means-tested benefit. In the era of globalization and integration, European states need an effective and efficient system of welfare in order to meet the increasing needs and demands of the citizens. The paper will discuss and analyses two main models, the British and Norwegian models, and compare their weaknesses and benefits.
In Britain, the modern benefits system is still based on the Beveridge Report of 1942. Beveridge’s model for a new system of social security envisaged a central role for universal and comprehensive social insurance, building on the national insurance scheme established by the 1911 Liberal Government (Baldwin, 1990). His intention was that the new system of insurance benefits would guarantee a subsistence level of income to cover the major causes of income loss, through unemployment, sickness, and old age, whilst individuals would be encouraged to provide a higher standard of living for their families by voluntary savings. Beveridge hoped that such a scheme would satisfy the needs of most of the population, but accepted that a safety net of residual means-tested assistance would have to be available for those who failed to qualify under the contributory scheme. According to the Beveridge Plan, such a social security system could not be implemented in isolation; the government also had to be committed to introducing family allowances and national health services, and to maintaining full employment. In this way, Beveridge, like subsequent policymakers, recognized the interrelationship between social security and other areas of government policy (Bale, 2005).
In Norway, the welfare system was adopted in 1936 and modified in 1997. Norway follows a universal and social insurance model based on 100% coverage of people in need. The importance of ‘targeting’ resources effectively (an insidious semantic change from means-testing) to meet the needs of the poorest in society was a recurrent theme. The principal means to this end was the replacement of supplementary benefit by income support. The extra weekly additions to supplementary benefits, known as additional requirements, for recurring needs such as heating, special diets, and extra baths were abolished. Instead, the basic level of income support was supplemented by a range of premiums, for example for families, pensioners, and disabled people. Simultaneously the right to claim a single payment grant was replaced by the possibility of a loan (and sometimes a grant) from the discretionary social fund (Crouch, 1999). Once the emphasis has shifted from contributory or universal benefits to means-testing, the question arises as to the proper balance to be struck between regulation and discretion in the administration of benefits. “All residents, including resident noncitizen seamen serving on Norwegian ships outside territorial waters. Pension income is independent of previous income or contributions paid” (Norway 2008). These facts suggest that the Norwegian system is more democratic and beneficial for citizens but it cannot be used effectively in the era of globalization and integration (Crouch & Streeck 1997).
“Old fashioned” and the traditional model adopted by Britain is more sustainable in the face of globalization because of its taxation system and discretion (Esping-Andersen, 1990). Today social security benefits in Britain, as in most other developed countries, fall into two broad categories. The first consists of means-tested benefits designed to relieve poverty, the primary form being income support, a lineal descendant of the old Poor Law. Its previous incarnations were as national assistance and supplementary benefit. The second category is comprised of benefits that are designed to meet particular risks or needs irrespective of income levels (Crouch & Streeck 1997). This group includes the national insurance benefits, which aim to guarantee a minimum level of income over the life cycle by the collective spreading of risks. This is typified by unemployment benefit, entitlement to which requires a certain level of contributions to have been paid on past earnings. Although matters of entitlement to benefit are governed by a complex web of legal rules, these adjudication arrangements cannot be regarded as purely legal issues. The main problem with the Norwegian model is that the state cannot support the increasing number of refugees and newcomers, foreign citizens and native citizens living abroad. In this situation, the British system is more effective and beneficial for the state and citizens (Ebbinghaus & Hassel 2000; The Norwegian welfare system 1998).
The first area of debate has concerned the proper balance to be struck between public and private provision. The emphasis of the Beveridge Plan on collective provision was attacked from the outset by theorists of the neo-liberal right as an unwarranted interference with the naturally efficient workings of the market. The post-war consensus on welfare policy meant, however, that this critique found little political support until the mid-1970s when the sharp rise in oil prices put Western economies under immense strain. This in turn led to doubts as to whether the developed nations could continue to sustain expenditure on social security on the same scale as before, resulting in a crisis of legitimacy for the welfare state. The second area of debate on welfare provision has focused on the question of how far benefits should be universal rather than selective in nature. Historically the distinction between universal contributory insurance and selective means-tested assistance is said to have ’emerged within the context of the Edwardian obsession with the deserving and undeserving poor. the non-contributory pension, national assistance, and free school meals. Since then the range of means-tested benefits has been extended, most notably by the introduction of rent and rate rebates, and rent allowances (all now subsumed within housing benefit), and the creation of Family Income Supplement, a benefit for people in low-paid work with family responsibilities (now Family Credit). Whereas Labour governments have reluctantly accepted the increased use of means-testing as an unfortunate compromise dictated by the pressures of economic stringency, selectivity has been welcomed by Conservative governments as a means of preserving work incentives within a distinctly minimalist conception of social welfare. During the period of globalization, small states like Norway and Sweden cannot respond to changing social patterns and new social demands without cutting costs and reduction of benefits. “Contributions from employed and self-employed insured persons are calculated on the basis of pensionable income (gross wage income including cash sickness, maternity, and unemployment benefits)” (Norway 2008).
Indeed, the more prominent role of means-testing today marks a shift from minimum rights for the many to conditional welfare for the few. Selective benefits offer a number of advantages for any government. In particular, the lower take-up rates for such benefits produce savings in public expenditure, and the perpetuation of the ideological distinction between the ‘deserving’ and ‘undeserving’ poor creates a political climate in which restrictions on the scope of such assistance can be implemented with minimal opposition (Kohli, 1999). The incremental cuts in housing benefit since its introduction in 1983 are a recent illustration of this phenomenon. Many social security rules provide ample scope for the exercise of discretion, such as the provision which renders claimants who are dismissed for misconduct, or who leave their jobs without just cause, liable to be barred from unemployment benefit for up to twenty-six weeks. The duration of the disqualification may be any period from one day to the full twenty-six weeks, the only guidance being that the authorities must take into account all the circumstances of the case and exercise their discretion in a judicial and sensible fashion (The Norwegian welfare system1998). Conversely, the law may appear to allow considerable scope for discretion in paying benefit when in fact little or none exists. For example, the apparent discretion under the pre-1980 single payments regime to meet ‘exceptional needs’ was curtailed in practice by a complex body of internal rules devised by the Supplementary Benefits Commission. In contrast, the Norwegian model implies that all deficits are covered by the state. It is the main limitation of this system because only small states can cover deficits and maintain balance in social insurance programs (Pierson, 1994). In reality, therefore, rules often make provision for the exercise of discretion, whilst discretion becomes fettered by the development of rules. The important issue is the right balance to be struck between discretion and rules, and this is not something that can be determined in the abstract. Traditionally there has been a clear distinction within the social security system between national insurance benefits and means-tested national assistance (Heclo, 1974).
It may be argued that the shift of emphasis in means-tested benefits from discretion to regulation had more to do with administrative convenience and the need to contain costs than with the poverty campaigners’ aim of making the system fairer to claimants. Any form of means-testing necessarily involves a labour-intensive process of checking the eligibility of claimants (Kohli & Novak 2001). It is not surprising, therefore, that the drift from universal to means-tested benefits that have occurred has been accompanied by a phasing out of discretion. A regulated system is, at least in principle, simpler to administer than one based on discretion. As far as cost-cutting is concerned, the transition to rule-based entitlement provided the potential for tighter controls on supplementary benefit expenditure. At every stage in this transition, a concern to contain costs has been evident (Rhodes, 1998).
The 1980 changes, for example, were explicitly introduced on a nil-cost basis, which meant that any improvements in benefits had to be met by savings elsewhere in the system. This strategy worked for a year or two, but, as claimants and welfare rights workers became more familiar with the new system, so the numbers of additional requirements and single payments awarded began to rise again. The Norwegian model is beneficial only for those states where the unemployment rate is low and stable (Rhodes, 1998).
There are other reasons for questioning whether the shift away from discretion has led to such an improvement. A perennial problem with a purely rights-based approach is that it depends for its success on the willingness or ability of individuals to assert their rights (and assumes that the rights themselves are worth asserting). The introduction of a legal entitlement to a means-tested benefit, given that certain criteria are satisfied, has not been enough to erase the long history of stigmatization attached to the Poor Law and its successors. Indeed, in many ways, a rule-based system may be subject to precisely the same criticisms as one founded on discretion. van Kersbergen (1995) has demonstrated that the problems of arbitrary decisions, uncertainty, insecurity, and intrusiveness into claimants’ private lives, all of which are potential features of a system based on discretion, may equally well exist under a regulatory scheme. Following British mode, in any case, the protection afforded to claimants by a rule-based system can prove largely illusory since, if the Government wishes to restrict eligibility to social security benefits as a means of achieving wider social and economic objectives, it can simply use its parliamentary majority to force through the desired legislative changes. Similarly, where decisions of the tribunals or courts concerned with social security have had the effect of expanding entitlement to benefit, the value of such decisions as precedents has often been nullified almost immediately by the laying of statutory instruments designed to close such unexpected ‘loopholes’ (Hall & Soskice 1999). The utility of a rights-based system should not, therefore, be overestimated and it would be mistaken to regard welfare rights as ends in themselves. Finally, it is important that the shift away from discretion should not be overstated. Even where there appears to be no discretion vested in those responsible for making the decision, questions of judgment are inevitable in the application of rules, as this can never be a mechanical or automatic process (Fajertag & Pochet 2000).
In sum, in spite of some limitations and weaknesses, the British welfare model is the most sustainable and beneficial for both citizens and the state in the era of globalization. Where the rules themselves are not settled or do not obviously cater for the circumstances of a particular case, the adjudicator will have greater room for manœuvre in deciding how best to develop the rules in order to determine the appeal. Thus it is a question of judgement to determine whether a claimant has indeed been dismissed for ‘misconduct’ or has voluntarily left a job without ‘just cause’.
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