Britain debates: What should European welfare look like?

In Portugal, Ireland, and Greece, the three eurozone countries that have suffered most from the crisis engulfing the current zone, draconian cuts in welfare have been part of the bargain for International Monetary Fund bailouts. France's newly elected Socialist president, François Hollande has meanwhile been preparing the French for major changes to one of Europe's most expansive welfare states, pledging to bring down the budget deficit to 3 percent this year and announcing that “we must be ready to do better by spending less.”

Traute Meyer, a professor at the University of Southampton involved in research about the welfare state in Europe, points out that trends over the past 10 years have seen every European welfare state moving to change their system in line with their own unique cultural and historical traditions. “Nordic countries are still those with the highest employment rates and equality measures. Systems in southern countries still tend to be the most fragile, while Germany and others on the Continent are holding onto systems based on social-insurance-based income,” she says.

“But at the same time you can see certain challenges and priorities are very similar," Dr. Meyer adds. "One is that all countries are thinking more about measures that will integrate people in the labor force – welfare to work.”

“So, in most countries, benefits that deactivate workers, such as early retirement, are being phased out, while those that activate people into the workforces are being brought in. Enhanced child care is on the table in many places.”

James Plunkett, director of policy at the Resolution Foundation think tank, notes that much political debate about welfare reform in Britain had turned on a long-running theme drawing on language such as “scroungers and strivers” – language particular to the British view of welfare.

While British workers pay a certain percentage of their income – known as the "replacement rate" – into an unemployment fund that they can tap if they become unemployed, that rate is so low that it gives the workers a sense that unemployment payments are "not meant for everyone," thereby creating a stigma against taking such payments, he says.

“In other countries," he adds, the welfare system "is seen more as a general insurance mechanism for everyone.”

“[I]n a country like Denmark for example, there is almost no stigma attached to being on unemployment benefit. It's quite common to graduate and be on unemployment benefit for a time. I suspect that is a more common experience whereas here there is more stigma attached to it.”

Ahead of the game?

When it comes to the much larger budget surrounding pensions Britain may at least be a step ahead of other continental countries, including Germany, despite an often repeated narrative that holds that past reforms by German governments to streamline labor laws and revamp unemployment benefits have put it on the kind of stable footing envied by European peers. 

Meyer, whose particular area of expertise is pensions, said that reforms in Britain by Labour in the second half of the last decade, and taken on by the coalition, have improved pension benefits in the future for lower income groups.

“In contrast, arising from the German pension reforms during the late '90s and early 2000s, there is increasing recognition in the German poverty debate that changes have led to a significant deterioration in future benefits for pensioners. If you take the perspective of pension, which is one of the largest parts of the Western welfare state budget, Germany has deteriorated and future poverty risks have increased while poverty rates for British pensioners have improved."

With its latest pension reforms, Meyer says that Britain is now closer to the sort of welfare approach taken by Nordic countries and the Netherlands.

"They have a basic state pension close to the poverty line and an occupational compulsory pension on top. In that sense the UK is not ahead but catching up. However, it is ahead of those countries that have now cut their previously very generous state pensions considerably, such as Germany and Italy."

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