Reconstructing social democracy: New Labour and the welfare state

British Journal of Politics and International Relations, Vol. 2, No. 3, October 2000, pp. 403–413

Reconstructing social democracy: New Labour and the welfare state1

DAVID O’BRIEN

Books reviewed

Driver, Stephen and Martell, Luke (1998) New Labour: Politics afterThatcherism. Cambridge: Polity Press, 1 + 210 pp., ISBN 0-7456-2051-5

Jordan, Bill (1998) The New Politics of Welfare: Social Justice in a GlobalContext. London: Sage, 1 + 260 pp., ISBN 0-7619-6022-8

Levitas, Ruth (1998) The Inclusive Society? Social Exclusion and NewLabour. Basingstoke and London: Macmillan, xi + 223 pp., ISBN

0-333-73087-9

Powell, Martin (ed.) (1999) New Labour, New Welfare State? The ‘ThirdWay’ in British Social Policy. Bristol: Policy Press, xii + 351 pp.,

ISBN 1-86134-151-2

The Labour government’s programme of welfare reform is challenging

and controversial. Whereas the government claims the success of initiatives

such as welfare to work, tax credits and various minimum incomes

guarantees, critics highlight benefit cuts and tighter eligibility criteria for

vulnerable groups, and delays over pension reform. Nevertheless, the ideas

that underpin these reforms remain fundamental to understanding New

Labour’s public philosophy. This philosophy, popularised as the ‘Third

Way’, constitutes a distinct set of ideas that represents a modification of

the socialist tradition in response to specific dilemmas conceived largely

in terms associated with the New Right. Most of the relevant literature

concedes it is too early to consider how successful the government has been

in reforming the welfare state. A review of this literature, however, allows

© Political Studies Association 2000. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 1JF and

350 Main Street, Malden, MA 02148, USA 403

us to explore the rationale and content of New Labour’s welfare vision

and indicate how government policy reflects this vision. The aim is not

to present an exhaustive account of all recent scholarship in this field;

rather, it is to provide an overview of some responses to New Labour’s

welfare reforms.

Welfare dilemmas

The recent literature reveals an emerging consensus on the nature of New

Labour’s welfare programme and the challenges facing it. There are com-

peting positions within this consensus, but it is possible to unpack three

broad unifying themes. For a start, there is general agreement about the

problems New Labour believes beset the traditional welfare state. The

principal difficulties arise from domestic and global fiscal constraints, and

the emergence of an underclass of welfare-dependants (Driver and Martell

1998, 84–91; Jordan 1998, 6–15; Levitas 1998, 112–158; Powell 1999,

296–298). These difficulties can be understood in terms of dilemmas,

highlighted by the New Right, to which New Labour responds. New Right

theorists argue that spiralling welfare expenditure is both unsustainable

and limits the competitiveness of the domestic economy in global markets

(Marsland 1996). Old Labour, and some earlier socialists, believed exten-

sive public spending on welfare provision was indicative of good social

policy, even if it challenged economic efficiency. New Labour responds to

the dilemma of globalisation with an attempt to reconcile social justice and

economic efficiency (Brown 1994). Scholars contest the existence and

effects of globalisation, but the key point is that New Labour perceives the

fiscal constraints of globalisation to exist. New Labour thus believes that

expansive welfare spending hinders competitive efficiency (Jordan 1998, 9;

Powell 1999, 297). Jordan, for instance, tells us that: ‘the idea of a global

market is probably even more powerful than global economic forces them-

selves’ (Jordan 1998, 9).

In addition, New Right theorists argue that traditional welfare benefits

create an underclass of welfare recipients that becomes economically and

psychologically dependent on benefits (Campbell 1981). Old Labour cer-

tainly favoured a paternalistic welfare state that unconditionally provided

individuals with substantial resources. New Labour, in contrast, responds

to the dilemma of an underclass to evoke an enabling welfare state that

promotes social and economic inclusion (Mandelson 1997). Scholars also

contest the existence and characteristics of the underclass, but again the

important point is that New Labour perceives an underclass to exist and

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404 © Political Studies Association 2000.

thus believes that traditional welfare benefits create and sustain exclusion.

Consequently, Driver and Martell argue: ‘it is the socially excluded, a

much narrower category than standard definitions of the poor, who are to

be the beneficiaries of New Labour’s social policies’ (Driver and Martell

1998, 90).

Ideas and objectives

The authors reviewed here broadly agree about the challenges New Labour

believes confront the traditional welfare state. In addition, a consensus

emerges around the idea that New Labour’s welfare objectives fail prop-

erly to consider certain social and economic problems. The main goals

of New Labour’s welfare policies can be summarised as follows. The

welfare state should address the causes of poverty, promote participation

in the labour market and support national competitive efficiency. Welfare

policies should deliver social and economic inclusion, ease the transition

from welfare benefits to paid employment and control social-security

expenditure. Academics suggest that although these goals are admirable,

they are not sufficient in themselves to address issues such as poverty,

inequality and unpaid work.

Levitas unpacks the ideas that inform current debates about welfare in

terms of three discourses. A redistributionist discourse suggests that the wel-

fare state should reduce poverty and inequality by redistributing resources

from rich to poor (Levitas 1998, 9–14). Old Labour typically emphasised

this discourse to evoke a paternalistic state that provides resources such as

benefits, education and healthcare. A moral underclass discourse indicates

that welfare policy should address the moral character of the poor and

excluded rather than structural causes of poverty (ibid., 14–21). New Right

theorists typically emphasise this discourse to suggest that benefits erode

individual responsibility and self-reliance and lead welfare-dependants

to develop undesirable cultural mores. Finally, a social integrationist

discourse implies that welfare policy should promote paid employment as

the principal means of inclusion (ibid., 21–27). New Labour typically

emphasises this discourse to suggest that the state should give citizens

opportunities to move from welfare into work.

Levitas interprets the objectives of New Labour’s welfare reforms as the

adoption of both the moral underclass discourse and the social integra-

tionist discourse and a concomitant move away from the redistri-

butionist discourse (Levitas 1998, 128–158). New Labour no longer

considers the less fortunate in society to be straightforwardly poor.

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© Political Studies Association 2000. 405

Instead, it discursively constructs such people as excluded, due, in crude

terms, to a lack of either morals or work. The best way to help these

people is not simply to raise the value of welfare benefits, as the redistri-

butionist discourse recommends. Such a strategy might reinforce exclusion

because higher benefit levels potentially create greater disincentives to

work. Instead, the social integrationist discourse leads New Labour to

promote inclusion through participation in the labour market. New

Labour’s welfare policies therefore contain a series of carrots intended to

encourage people to move off benefits and into paid employment. These

carrots include reform of the tax and benefit system, a minimum wage and

welfare to work schemes that combine job placements with education and

training. The moral underclass discourse leads New Labour to underpin

these carrots with the threat of sticks. Welfare to work, for example, effect-

ively compels certain categories of people to seek employment or training.

People who refuse to do so may forfeit their benefits.

Levitas sympathises with Roy Hattersley, a prominent critic of New

Labour, who argues that a focus on inclusion does little to overcome

existing poverty (Levitas 1998, 133–138). Opportunities to work or train

do not immediately alleviate poverty and do not help people who cannot

work, such as the elderly or disabled. In addition, Levitas argues that

New Labour’s focus on paid employment does not satisfactorily deal with

inequality. The idea of labour market inclusion uncritically accommodates

the wealthy in the included ‘in work’ majority and thus fails to challenge

existing distributions of wealth and power (Levitas 1998, 7). It presents an

overly homogeneous image of society in which many inequalities persist.

Moreover, Levitas argues that New Labour’s emphasis on paid employ-

ment does not recognise unpaid work, such as caring or parenting, as a

legitimate contribution to society. She claims, for example, that ‘the very

phrase welfare to work when applied to lone parents carries the message

that parenting is not work’ (Levitas 1998, 145). Childcare only becomes

legitimate economic activity when it is integrated into the labour market

to enable parents to work and create jobs in the childminding sector.

Jordan also criticises New Labour’s emphasis on inclusion through

labour-force participation, but from a different perspective to Levitas. New

Labour underpins its welfare objectives with an attempt to universalise

values such as hard work, responsibility and community. Jordan questions

whether we can satisfactorily establish common values acceptable to all

groups in a cosmopolitan society (Jordan 1998, 19). When we unpack this

in terms of welfare policy, the promotion of inclusion through paid employ-

ment privileges both a particular view of the citizen’s proper contribution to

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society and the appropriate institutions through which such contributions

are made. New Labour’s welfare programme seems only to recognise those

contributions made through paid work as offering sustainable claims to

welfare goods. It does not fully legitimise the type of unpaid work Levitas

highlights, such as caring and parenting, or other forms of unpaid activity

we might associate with voluntary groups or community politics.

Jordan concurs with Levitas to claim that the idea of labour market

inclusion is blind to socioeconomic factors such as class, exploitation and

inequality. He argues that New Labour’s failure to address such dynamics

arises in part from an emphasis on equality of opportunity over outcome,

and an attendant stress on rights to training and education over rights to

benefits. New Labour evokes the demands of national competitive effi-

ciency in global markets to justify a limit to traditional redistributive

strategies (Brown 1994). In addition, New Labour believes that a skilled

workforce enhances national competitive efficiency (Blair 1998). Rather

than redistribute income and wealth, therefore, the most appropriate role

for the state is to provide citizens with opportunities for education and

training. Such a strategy fosters economic efficiency because it improves the

quality of the workforce and controls welfare expenditure. It also promotes

social justice because the improvement in the skills of citizens enhances indi-

vidual life chances. Furthermore, because everyone is entitled to opportun-

ities for lifelong learning, this strategy endorses equality of opportunity.

New Labour thus claims that equality of opportunities for lifelong learning

reconciles social justice with economic efficiency (Brown 1994). Jordan

rejects this claim, arguing that welfare strategies based on the national

economy are inappropriate. He unpacks a paradox regarding the role of

the state in New Labour’s welfare thinking, namely, that an outmoded idea

of the national economy underpins a claim to break from the past (Jordan

1998, 43–44). New Labour perceives a process of globalisation that

reduces the relevance of nation states as economic units, yet its response is

to evoke a strong idea of the state as providing opportunities for lifelong

learning. New Labour conceptualises social justice as a domestic concern,

but in global markets the only relevant unit is the world economy. We must

therefore consider issues of social justice only in a global context.

Scholars highlight further difficulties with New Labour’s account of

social justice. Driver and Martell believe the fusion of fairness with

efficiency is problematic because when social justice is conceived of as a

spur to competitive efficiency it loses value (Driver and Martell 1998,

106). Social justice becomes desirable only in so far as it supports com-

petitiveness. This raises questions about New Labour’s future commitment

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to social justice should it fail to promote efficiency. Levitas interprets the

appeal to fairness and efficiency as a move from the redistributive dis-

course to the social integrationist discourse. The reduction of economic

inequalities through redistribution of income and wealth gives way to a

redistribution of opportunities to access the labour market. Levitas high-

lights two problems here without really answering them—namely, that in

New Labour’s marriage of fairness and efficiency it is not always clear

precisely what constitutes fairness or who decides (Levitas 1998, 136).

Powell, along with Driver and Martell, argues that New Labour does

not straightforwardly adopt New Right ideas and policies (Powell 1999,

284–285; Driver and Martell 1998, 158–173). The authors reviewed here

interpret New Labour’s welfare vision mainly in terms of a synthesis of

contemporary communitarian and stakeholder ideas drawn from thinkers

such as Anthony Giddens (1994 and 1998), Amitai Etzioni (1995 and 1997)

and Will Hutton (1995). Driver and Martell rightly describe this vision in

terms of a post-Thatcherite settlement. The Third Way represents one

possible response from within the socialist tradition to specific dilemmas

highlighted by the New Right (Bevir and O’Brien 2000 (forthcoming)). We

might therefore challenge Powell, who claims that the Third Way is

vacuous or post-ideological in that it is simply ‘what a New Labour

government does’ (Powell 1999, 285–288). Terms such as stakeholding

and the Third Way evoke a concept of moral personhood within the com-

munity that overlaps considerably with that of many earlier socialists

(Bevir and O’Brien 2000 (forthcoming)). For instance, Blair’s belief that

individuals prosper best within an active society underpinned by reciprocal

rights and duties clearly draws in part on the traditional socialist belief in

individual freedom found through and within the community (Blair 1996,

299–300 and 1998). The roots of New Labour thus extend far beyond

either the New Right or thinkers such as Giddens, Etzioni and Hutton.

New Labour argues that the New Right’s attempts to withdraw the

state and promote individualism and markets eroded communal and co-

operative values. In contrast, New Labour’s welfare programme embodies

the idea of citizens, linked together by reciprocal duties and responsi-

bilities, who collaborate with the state in a co-operative enterprise to

ensure an economically vibrant country. Some commentators reduce the

role of the state in this partnership to that of regulator or purchaser

(Driver and Martell 1998, 103; Powell 1999, 289). Clearly, however, the

state has a more extensive role than this—it also acts as an enabler. The

state gives citizens opportunities to move from welfare into work both to

improve their own condition and to reduce the social-security burden on

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the economy. We might agree, however, that this role for the state indicates

a movement in welfare provision from the collective towards the indi-

vidual. The introduction of stakeholder pensions to encourage individual

provision of retirement income clearly represents such a move. The notion

of individual employability through lifelong learning also illustrates this

trend (Levitas 1998, 118–121). New Labour defines employability as the

capacity of individuals to find work should they become unemployed.

Employability thus becomes something individuals must achieve and its

absence, understood to mean a lack of appropriate skills, becomes an

individual deficiency. However, as we have seen, New Labour does not

expect individuals to achieve employability entirely on their own. The

enabling state accepts the responsibility to generate suitable opportunities

for the self-improvement of citizens. Levitas argues that, because employ-

ability carries a duty to exploit opportunities, inclusion is an active

process in which agency and responsibilities reside with the individual

(Levitas 1998, 157). We might argue, however, that significant elements of

agency and responsibility also reside with the state, as it must provide

opportunities for individuals to achieve their inclusion.

Welfare policies

Within the literature an emergent consensus unpacks the problems facing

the traditional welfare state and the objectives New Labour pursues in

response. In addition, scholars doubt whether the welfare policies of the

Labour government are adequate to achieve their stated objectives. The

main criticisms can be outlined by considering responses to the New Deals,

the government’s flagship welfare policy. The New Deals provide training,

education and work placements, rather than cash benefits. The first New

Deal implemented was that for young people. Young people who have

been unemployed for over six months must choose between a job, volun-

tary work, a place on an environmental taskforce and full-time education

or training. There is no fifth option of remaining on benefits. Further New

Deals apply to groups such has lone parents, the disabled and the long-

term unemployed, and in future they will extend to all unemployed adults.

One set of criticisms considers the institutionalisation of New Labour’s

focus on inclusion through paid employment. The New Deals promote

participation rates in the labour market, but they do not provide alterna-

tive routes to inclusion, address inequality amongst workers or properly

consider in-work poverty (Jordan 1998, 97; Levitas 1998, 7, 160, 138).

However, some of New Labour’s other welfare initiatives do address

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in-work poverty. The national minimum wage assists people in low-paid

jobs and the working families’ tax credit provides a guaranteed minimum

income for families in which one adult has full-time employment. In

addition, Levitas highlights the gendered nature of the New Deals—

compulsion often applies to unemployed young men but not to un-

employed lone mothers. As seen above, Levitas also believes the New

Deals fail properly to recognise unpaid work such as caring and parenting

(Levitas 1998, 145–147). Finally, Levitas argues that the stress on paid

employment can actually impede inclusion. The demands of employment

might adversely affect participation in social networks and parent/child

relationships (Levitas 1998, 169).

Another set of criticisms concerns labour-market dynamics. Jordan argues

that welfare to work schemes such as the New Deals are economically

inefficient if participants are not effectively used, are not properly trained,

and are then discarded to return to benefits (Jordan 1998, 97). The process

of displacement, in which employers replace permanent employees with

subsidised recruits, compounds this process (Jordan 1998, 97; Driver and

Martell 1998, 111). Further problems include dead-weight, whereby sub-

sidies are wasted on people who would find work without them, and

churning, whereby participants move from one temporary placement to

another without securing permanent employment (Driver and Martell

1998, 111; Levitas 1998, 161). Driver and Martell also raise concerns

about the relation of costs to benefits. Firstly, the lost efficiency and poor

productivity that result from compelling unskilled and unmotivated people

to work might incur costs that exceed the state subsidy. Secondly, whereas

New Labour claims the New Deals save money because they reduce wel-

fare expenditure and generate taxation revenue, evidence from similar

schemes overseas suggests otherwise (Driver and Martell 1998, 111).

Finally, the New Deals face potential problems of job supply. Difficulties

arise if there are simply no jobs available, or if the available jobs are

unsuitable (Driver and Martell 1998, 112; Levitas 1998, 140). Many lone

parents, for example, might embrace paid employment if good jobs and

affordable childcare facilities were available within practicable travelling

distance. In many areas, however, such opportunities are rare.

Powell broadens the critique of New Labour’s welfare programme

to uncover a paradox in health and education policy. New Labour seeks

to empower individuals in the running of local services. Yet, in order to

maintain service quality, New Labour enforces a stringent and centralised

regime of standards, targets and inspection. A tension thus exists between

local empowerment and effective ‘command and control’ (Powell 1999, 291).

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Powell, moreover, claims that much of New Labour’s welfare programme

is not new at all. The centrality of the work ethic echoes the New Poor

Law of 1834, and Beveridge incorporated work-related obligations and a

role for private and voluntary organisations in his welfare blueprint (Powell

1999, 292). Finally, Powell invites us to distinguish between rhetoric and

reality in welfare policy, warning that ‘policy slippages’ or ‘implementation

gaps’ often occur between intentions and outcomes (ibid., 285). In the

NHS, for instance, New Labour’s rhetoric evokes traditional ideas about

universal access to free healthcare, but current practice owes more to the

marketisation, privatisation and managerialism associated with the New

Right. However, we might consider this a distinction between means and

ends. New Labour believes that, in terms of quality and efficiency, the best

way of delivering services is, where appropriate, to draw on the relevant

features of markets, private finance and managerial expertise.

Powell concludes that the shifts in New Labour’s ideas and policies

constitute only the outline of a ‘new design’ for welfare (Powell 1999,

288). While he, and Driver and Martell, are content mainly to provide

critical overviews of New Labour’s welfare programme, Levitas and Jordan

present alternative possibilities. We can locate their beliefs within certain

traditions and unpack their proposals as alternative responses to specific

dilemmas from within the relevant tradition (Bevir 1999; Bevir and Rhodes

1998 and 1999). For instance, we can situate Levitas in a social democratic

tradition that favours redistributive strategies to reduce social and eco-

nomic inequalities. Levitas certainly sympathises with Roy Hattersley, a

leading representative of the social democratic tradition, and she strongly

supports egalitarian ideas (Levitas 1998, 133–138, 187–189). Levitas does

not deny the dilemma of an excluded underclass, but she believes the

existing discourses of exclusion are underdeveloped because they do not

address poverty, inequality or unpaid work. Levitas wants to develop a

notion of inclusion that also promotes egalitarianism, and thus favours a

redistributive welfare strategy, not least because this potentially can

valorise unpaid work (ibid., 14, 163). In addition, Levitas evokes a limited

form of Keynesian demand management, a traditional social democratic

policy, to ensure that schemes such as the New Deals have an adequate

supply of jobs. She suggests, for example, that local authorities might

make good any shortfall in New Deal placements (ibid., 161–162).

Jordan presents the most radical alternative to New Labour’s welfare

programme. We might locate Jordan’s ideas within an Anglo-Marxist

tradition that strongly favours social and economic equality. Certainly, his

concerns about class, wealth and exploitation seem to suggest continuing

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anxiety about class dynamics and unequal power relations. Jordan proposes

a basic income scheme that would give all citizens an equal unconditional

income guarantee, adequate for essential needs, in advance of entering the

labour market (Jordan 1998, 157–195). Under such a scheme, and unlike

present models of welfare-capitalism, the subsistence of the individual

would not depend on participation in the labour market. The citizen’s

income, Jordan claims, creates fewer disincentives to work than do either

means-tested income support, which creates an unemployment trap, or

wage supplements, such as tax credits, which are withdrawn as earnings

rise. In addition, Jordan believes the citizen’s income encourages saving

and thrift, promotes egalitarianism, minimises costs and targets only those

in genuine need. Jordan does acknowledge some difficulties with the

citizen’s income idea (ibid., 159). For a start, we can doubt the possibility

of finding a correct level for any given economy or society. In addition, it

breaks the fundamental principle of social justice that links benefits to

contributions. Finally, the citizen’s income alone cannot give people ade-

quate opportunities or incentives to improve themselves or participate in

the common good. The government would have no motives to generate

employment opportunities because the citizen’s income satisfies for every-

one the basic conditions of security and survival. Jordan is keen to endorse

universal co-operation in some form of social activity to promote the

common good, but is reluctant to reduce the social to the economic and

thereby limit such activity to paid employment. He therefore proposes to

complement the citizen’s income with measures to motivate other forms of

active contribution and participation (ibid., 181–188).

Conclusion

New Labour’s programme of welfare reform is at a relatively early stage

and further critical literature is likely to appear. Within the recent literature

an emergent consensus can be identified about the problems that confront

the traditional welfare state and New Labour’s response to them. Scholars

generally identify the perceived dilemmas of an underclass and fiscal con-

straints imposed by globalisation. New Labour’s Third Way in welfare

represents one possible response to these dilemmas from within the social-

ist tradition. In addition, the consensus suggests that, although objectives

such as social inclusion and prudent public spending may be appropriate,

New Labour’s welfare programme ignores other important goals that

arise from issues such as existing poverty, inequality and unpaid work.

Finally, the consensus indicates that some of New Labour’s welfare policies

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may not be sufficient to deliver their stated goals. Historically many

socialists believed in a community of fellows bound by universal rights to

substantial resources. The New Right upholds an individualism in which

contracts and the market are the key forms of social relations. New Labour

advocates a Third Way of included welfare stakeholders linked to each

other and the state in networks of partnership. As Powell suggests, how-

ever, although New Labour discursively constructs a radical new welfare

state, the outcome might be rather different.

Note

1. For helpful comments I thank Mark Bevir. For financial assistance I thank the ESRC, the

Carlisle Educational Charity and the Lipman-Miliband Trust.

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Dr David O’BrienContact No. 01228 401683

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Reconstructing social democracy: New Labour and the welfare state