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Last Updated: Thursday, 4 August 2005, 22:58 GMT 23:58 UK
Is the UK a model welfare state?
By Steve Schifferes
BBC News economics reporter

Slum street, 1930s
Poverty has been reduced in Britain - but has fallen faster elsewhere

As part of a series on the welfare state and poverty, the BBC news website examines how the British welfare state compares to those of our main economic rivals.

The British Welfare State is sometimes held up as a model for other countries.

The comprehensive system of "cradle to grave" social insurance and health care devised in the 1940s was an inspiration to other European countries devastated by war.

Its principles of universal provision and flat rate contributions were widely praised, and copied.

How Britain's welfare state measures up to our rivals

But its founding ideals were never fully realised.

And over time, other countries have produced more comprehensive welfare systems which have proved better at tackling poverty.

Three models of welfare

Social policy analysts generally bracket Western welfare systems into one of three types - the corporatist model, the social democratic model or the liberal one.

City hall, Stockholm
Universal benefits from state
High benefits and high taxes
Emphasis on redistribution
Active employment policies

The corporatist model is typical of continental Europe. It is work-oriented, being based on individual contributions.

The social democratic model is found mainly in Scandinavia, stresses universal values and is paid for by taxation.

And the liberal model found in the UK and US is based on a clear distinction between the deserving and undeserving poor, with limits on benefit payments potential workers.

Job seekers
Deserving v. undeserving poor
Limited benefits and low taxes
Encouragement to stay in work
Use private sector if possible

Professor David Gordon of Bristol University characterises the UK as a system of "truncated justice" - everyone is treated equally, but the equality is at a very low level of provision.

Underlying the different approaches are different popular attitudes towards poverty and the role of the state.

In the US, and to a lesser extent in the UK, there is a scepticism about the state's effectiveness in tackling poverty.

German health spa, Baden Baden
Companies, unions as partners
Workplace-based benefits
Emphasis on social solidarity
Key role for voluntary sector
There is a belief that people can better themselves through their own efforts, and may be poor because they do not try hard enough.

In contrast, in much of Continental Europe poverty is viewed as either inevitable or as a result of social injustice.

The continental systems bring together traditional religious charity, and modern socialist thinking about reducing inequality.

This is why in Germany and the Netherlands, both right and left have been keen on extending the welfare state.

Comparing poverty rates

Although Britain introduced its welfare state before most other countries, poverty in Britain has remained stubbornly high.

Around one in five households in Britain are poor, compared with only one in ten in Sweden and one in eight in Germany.

single parent and child in Scotland 2003
Single parents in the UK were particularly likely to be poor
And child poverty is particularly high in the UK, with one in four families with children on the breadline - partly due to the larger number of UK single parents who are not working.

Recent reforms such as child tax credits - it is hoped - will reduce this disparity.

In measuring poverty, governments in Britain and Europe prefer to use a relative scale - arguing that what makes someone poor is lack of the basics that others have.

In the USA, poverty is still measured in absolute terms, based on a budget for food.

Elderly people in US
Older people in the US were helped out of poverty by Social Security

In absolute terms, UK poverty rates have fallen sharply in recent years, according to Professor John Hills of the London School of Economics, and are well below US levels using the same measuring system.

UK figures are also worse than those in continental Europe because inequality of income is greater in Britain - so the poverty bar (60% of earnings) moves higher and higher.

But Britain's low state pension levels mean that there could be more pensioner poverty in the future if occupational pensions continue to decline.

Even the US has a more generous old age pension system (social security) than the UK.

It provides earnings-related state pensions rather than a flat-rate system, and since it was introduced during the New Deal in the l930s, old age poverty rates have fallen.

Restructuring and resistance

All welfare systems have been facing pressures for retrenchment in recent years.

Healthcare workers at protest in Paris
Plans for spending cuts have drawn protests in France and Germany

Economic crises since the 1970s have made it harder to expand welfare, especially for the UK and the US who began pension restructuring in the 1980s.

By the 1990s, these pressures were also evident in Sweden and Germany which traditionally had generous benefits.

The budget crunch everywhere has been exacerbated as people live longer and retire earlier, contributing less in taxes.

To cope, some Scandinavian countries have switched from universal tax-funded pensions to pensions dependent on individual contributions and linked to statistics on longevity.

Toulouse protest by French teachers, 2003
Mass demonstrations over reform have toppled governments
Because the rules will only have an effect years in the future, they have not sparked widespread protest.

The pressures are particularly strong on generously-funded pension and health care systems in France and Germany, where there is strong popular resistance to change.

But no country is finding it easy to restructure its systems of state support.

Former British prime minister Margaret Thatcher
Even Mrs Thatcher found it difficult to reform the welfare state
Mrs Thatcher met strong resistance, even from her own cabinet, to privatising the NHS, and was only able to make limited inroads into welfare benefit payments.

In the US, President George W Bush's plans to reshape the welfare state have hit unexpected difficulties.

His plan partly to privatise social security, by allowing workers to put part of their contributions in private accounts, seems to be bogged down.

"The more the plan was explained the more unpopular it became," said Princeton economics professor Paul Krugman.

Nurse and doctor with patient on stretcher (generic)
In the UK the private sector will play a bigger role in health and education

He and many other economists argue it would have increased, not reduced, the huge US budget deficit.

Tony Blair is attempting a mix of tough new powers to force people back to work and more generous benefits for children and the elderly.

And he wants the private sector to play a bigger role in the provision of health and education - as it does in many other European countries.

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