The death of the welfare state
With the UK spending far, far more than it earns each year, we're running out of money to pay for the welfare state.
A lot of people moan about the welfare state, but you’d miss it if it wasn’t there. In the old days, if you didn’t have a job, or a pension, or if you fell ill, you lived in grinding poverty or ended up in the workhouse. If you fell ill and couldn’t afford a doctor, your life was blighted by sickness. People died a lot younger.
So appreciate what we’ve got, because with the UK spending far, far more than it earns each year, on top of a backlog of debts, we’re running out of money to pay for it.
Farewell to welfare
If you or I fell on hard times, we could always fall back on the state. But what happens when the state is broke? They’re finding out in Greece and Spain. And Ireland too, which last year slashed pay for state workers by between 5% and 15%, and is taking a knife to social security and healthcare spending.
The same thing will happen here, with tax hikes on top, and there’s no point blaming the new coalition government, because if it doesn’t act we will end up like Greece. The rules of the game are about to change. That means you have to change also.
Social good
The welfare state is a wonderful thing, whatever its shortcomings. It gives us the NHS, free at point of use. Unemployment and sickness benefits that stop people starving if they can’t find work. The state pension, which may not be riches, but will pay out for the rest of your life, regardless of stock market performance.
Yes, it also attracts fraud, encourages benefit dependency, is horribly complex and confusing, and costs a packet. But don’t think for a moment we’d all be better off without it.
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What a state!
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See the guideThe first problem is, Labour has spent all the money. But there’s a much bigger problem, just round the corner. We are all getting older. The baby boomers are set to retire and there’s a dwindling number of workers to pay their state pensions.
There are plenty of short-term solutions. We can ignore the problem. We can bulk up the workforce with immigration, but that is yet another Ponzi scheme, because one day they will retire and expect state pensions as well. Or we can follow Japan’s lead, and develop robots to look after the soaring numbers of sick and elderly.
Alternatively, state spending gets it.
The pips are already squeaking
Pension, health, unemployment and long-term benefits are all in the firing line, as are schools, roads, defence and just about everything else. Plus the retirement age will rise higher, and faster than expected.
The process is just beginning, with George Osborne’s recent £6bn spending cuts package, and the emergency budget on 22 June. You can already hear the squeals over plans to abolish the child trust fund, which involved shifting taxpayers’ money into the hands of middle class parents, and the campaign against plans to increase capital gains tax (CGT), by people who think it’s the state’s job to give second homeowners a tax break. That kind of largesse looked affordable during the boom years, not now.
We can expect VAT to rise to 19% or 20%, which will cost you money every time you go shopping. The biggest burden will inevitably fall on the middle classes, who will lose some of the estimated £31 billion worth of state benefits they now claim each year, starting with tax credits, and face tax rises to boot.
No hiding place
It’s not going to be pretty, so what can you do about it? You can burn effigies of City bankers or Gordon Brown, if it makes you feel better, but it won’t help. You could march against the cuts that affect you, but if you’re successful, the axe will only fall elsewhere.
You could emigrate, but France, Spain, Germany, Italy, Greece, the US, Japan and most other developed countries are sitting on the same demographic timebomb, and often worse. If you are planning to flee, make for emerging countries such as Brazil, India, Russia or China, which still have relatively young populations and low levels of debt. And lower wages.
Taking up the slack
I hate to be the bearer of bad news, but if the state can’t provide, you will have to do it yourself. Buy less, save more. Buy a lot less, and save a lot more.
Ah, you say, but pensions are rubbish, and you have a point. They do attract tax relief (although that is also being squeezed). Or you could choose ISAs instead. Just save, please. I’ve got friends in their 30s and 40s with iPads and no pensions. They have to change their priorities.
Ugh, you say, I can barely afford to pay my bills today, let alone save for a future pension. Fair point. Jobs are scarce, pay ain’t great, and prices are rising. You might have to brace yourself for working on to age 70, but at least you won’t be alone. More and more pensioners are doing exactly that. Some even like it.
And if you can’t help yourself, push your kids to do well at school, because getting a decent education is going to be more important than ever. This isn’t the time for slackers.
Recent question on this topic
- 1883 asks:
Apparently 'we' owe billions to' them' .How many billions are involved, who are 'we' and who are'them'? What would happen if we simply did not pay?
- SoftwareBear answered "It depends what you're referring to. The tax payers bailed out the banks with billions. The..."
- liesarenocomfort answered "There is personal debt uk citizens owe to banks/credit card cos etc£1464bn..."
- Read more answers
Are you getting it?
Most people don’t get it. Bankers and benefits claimants don’t get it. Civil servants earning more than the Prime Minister don’t get it. The FSA doesn’t get it (it recently paid its staff £33 million in performance bonuses despite its manifest failure to prevent the credit crunch). Public sector trade unions don’t get it. University chancellors don’t get it. Second homeowners don’t get it. Parents don’t get it (95% receive some kind of benefit). MPs clearly don’t get it (or maybe they do, as they are busy fiddling the rules in their favour). Even the Queen doesn’t get it, demanding an extra £6 million to pay her household bills.
Or maybe they do, and are desperately trying to squeeze what they can out of the system while they can.
It’s not my fault!
You can blame the bankers, capitalism, Gordon Brown, feckless single mums, the underclass, and even me if you like (just use the space below) but it won’t change anything. The state can’t afford to provide what it once did, that leaves only one person: you.
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I have chronic rheumatoid arthritis had it since age 2 now 45, I have been in and out of hospital all my life and my most recent visit has put me off hospitals for life. MRSA where did this come from? they stopped Matrons who made sure wards were kept clean and sanitised, put usually poor paid migrant workers to do the job, thats why the hospitals are filthy. My neighbour had a heart attack went into hospital recovered needed fluid removing from his lung then he was returning home, a foreign doctor put the needle in his wrong lung and killed him? a law case is pending, my mum went for a cataract op, a foreign doctor put in the wrong lens? a law case is pending, I went in for a knee arthroscopy, I had to go through many embarrassing tests to make sure I wasn't carrying MRSA I was told to go to the ward at 10am, which I did, usually I would have been given a bed and told to get into bedclothes, but no I ws stuck in a cupboard (thats the only way I would describe it) with another 8 people I sat there all day until 6.30pm when I was eventually shown to a bed, I had asked 5 times to speak to an aneathatist as I cannot be put to sleep like any normal person as I have neck problems jaw problems etc. I got into my nightclothes and was taken by a nurse - walking to theatre across the corridor. I had been promised I would have an epidural all day, when I went in the once again foreign anaethatist decided she could put the tube down my throat, I woke (luckily) as the doctor was just about to cut into my knee, as I was brought round, the anaethatist was stood over me with her coat and hat on holding her shopping bag. I never ever want to go in hospital again. Do all these foreign employees actually hold proper licences, credentials to actually work in these places? Perhaps the Government should get a task squad for that before they waste money on other things, I watched border control on TV the other week where they shown thousands of certificates what anyone could buy and say they were accredited doctors, one in the paper today was signing on while earning £350 an hour and falsley claimed benefits for his house his wife!! The NHS must have more solicitors claiming from them than enough. Looking back the hospital downcline began when Maggy privatised everything and the nurses porters went on strike. Maggie Thatcher has a lot to answer for! And it's not gonna get better.
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I think most of expect we are going to have to make sacrifices here but it would be less painful if we knew it was across the board and that everyone had somehow to give up say 5% of their income. Thats just a simplistic way of saying it. I also think that we need to look at the profits still being made by some of the big companies and introduce windfall taxes. While we are all being asked to tighen our belts the supermarkets and other retailers are making massive profits. It would make that belt tightening a lot easier if they simply reduces their prices - thas a way of sharing the burden!
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smallcat - they thing is people should be looking for work and showing that they want to work - the point I was making was that people should not just sit back with the opinions well there are 10k vacancies in this town and 100k people looking for work so what is the point - "I won't bother looking", which is a point another poster made.[i] As a tax payer I don't mind helping those who are trying to help themselves but I do mind paying for those who use any excuse not to look for work and I am sure other tax payers would agree.[/i] [i] [/i] People have free access to the internet in the community if not at home so they do not have to pay to get on the bus or train to look for work in the next town- they can do it locally. Ok so not all jobs are advertised but for the price of a book of stamps they can send out quite a few speculative letters - all cheaper than getting on the bus or train in the way you state. Think of it from another point of view - just because someone can't find work in their own town and they don't want to travel 10 miles to the next town for work should the tax payer / government accept this and just carry on paying that person £65.45 per week? A long time ago I remember someone posting on here that people claiming dole have to be prepared to travel upto 60 minutes to get to work and after a few months this was extended to 90 minutes. The reason I remember is because so many people thought that was unfair.I'm not sure if things are the same now.Once you are in work yes you do have to pay travel costs to get there but as they say "thats life" and its not always something we agree with. With regards to Landlords - it's their property and they can charge what they want and they can decide who they want to live in their property - I'm sure thats no more or less than you would want if you were a landlord. The housing mess is mostly down to Thatcher selling off Council Houses, I don't think that should ever have been allowed. I know it has allowed people to become homeowners who may not have got mortgages but was that the right thing to do? We now have a massive shortage of social housing. I school friend of mine lived in a council house - his dad was an accountant, his mum worked but I can't remember what she did. They had the chance to buy their council house - took up the offer, years later sold it at a huge profit and now they live in a village in a huge house. Whilst this is very nice for them, it took their house out of the council housing stock preventing someone with a low income or benefits getting it. Multiply that by thousands and there begins the housing problem. Of course , then there is the question what is someone who would have been earning enough to get a mortgage being given a council house in the first place? I agree with you abou paying for education that would be a nightmare. Education will get worse with Academies - teachers union rights not recognised, teachers and parents not having any say in switching to academies, creaming off the good kids, not having to take children with learning difficulties or health problems mean the number of teaching assistants in academies will reduce. We are always hearing about parental choice when deciding what school to put your children but in reality we don't really have much choice. We will have even less if academies come in - if you want your child to get into the all girls / boys school and they aren't good enough ,they will go to the mixed sex school which may not be what you want. It all seems an easy way for schools to get money but when the boiler breaks down, equipment breaks down or the lead gets stolen from the roof they can't run to the council for help with finances - they have to meet the costs themselves.If something unexpected happens and leads to a huge bill who then pays for the school books and basics? The country is in a mess and whatever solutions the Government start coming up with not everyone is going to like them.
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23 June 2010