Public Goods, the Social Wage and Universalism

My X thread about Deborah Meaden's comments on the winter fuel allowance has done numbers, as the kids say, but I suspect that those who criticised it, and perhaps some who appreciated it, didn't get the joke at the beginning or ultimately the point at the end, though the latter may be down to not reading the entire thread. Excuse me if I ignore the cardinal rule of both comedy and the British royal family and try to explain. 

Meaden trots out the classic argument of the rich against universal benefits: I don't need it so the taxpayer's money is being wasted. This is often accompanied by an assurance that the unnecessary government largesse is routinely donated to charity, so virtue triumphs in the end. You'll note that this argument and its corollary are less often heard when tax cuts for the wealthy are being justified, though the rationale is the same. If you're already incurring the top rate of tax on a large part of your income, why do you need more money? In that instance the argument in favour of tax cuts focuses on incentives: that the prospect of keeping more of your earnings will make you more productive, which can only help the wider economy. This is a consequentialist argument: what matters is the outcome, which is presumed to be good. There are similar consequentialist arguments against universalism, which can be summarised using Albert O. Hirschman's The Rhetoric of Reaction: giving money to people who don't need it discredits the benefits regime and so lowers public support for the needy (perversity); in benefiting everyone, no one gains in relative terms (futility); and an income guarantee weakens the effect of any incentive to expand income and so undermines the wider economy (jeopardy).

Meaden's argument is different in that it isn't simply consequentialist but utilitarian (a narrower form of consequentialism), which means it concerns itself with calculable efficiency, the greatest possible good,  rather than just an assessment of good versus bad. Specifically, it seeks to maximise aggregate utility through discrimination: "Lots of people should not get winter fuel allowance…lots should", as she put it in her tweet. The former group have a negligible marginal utility because they are rich, the latter have a high marginal utility because they are poor, and there is an implied gradient between the two where everyone can be positioned. One paradox of utilitarianism (among many) is that achieving this macro optimality requires a granular focus on the micro foundations - the utility calculus of the individual - hence Meaden's focus on her own circumstances. Solipsism is a hallmark of vulgar utilitarian reasoning: "I don't need X" or "I never had Y growing up". Jeremy Bentham's "felicific calculus" may have inspired the concept of utility in the emergent field of economics, but its ambitions to be a coordinating mechanism for society soon gave way among theorists (from Jevons to Hayek) to price as the only reliable signal of utility in aggregate. But while absent in the market, utilitarian calculus lived on in the realm of discretionary welfare, notably in the form of personal need assessments and means-testing.

Public goods, in the sense employed in economics, bypass the problem of individual assessment by operating wholly at the macro level. We assume, quite reasonably, that there is an aggregate benefit for society delivered by the provision of certain goods and services, such as roads. Economic theory holds that these goods are characterised by two features: they are non-excludable (i.e. freely available to all), and they are non-rivalrous (i.e. my use does not compromise your use). In reality, most public goods are imperfect in terms of this abstract defintion (or "impure", in the jargon). Nationalised utilities in the postwar era charged for use of gas and electricity, which meant you could be excluded (i.e. cut off). Today we still have toll roads, albeit with electronic turnpikes, such as part of the M6, the Dartford Crossing and the Humber Bridge. These are still classed as public goods, because the charges are treated as an impost (a supplementary tax based on use), but you will be excluded if you can't pay the toll. Likewise, roads are rivalrous because, as Adam Driver said in the 2023 film Enzo Ferrari, "two objects cannot occupy the same point in space at the same moment in time." In other words, congestion makes vehicles rivalrous (think of parking spaces).

In the UK, the logic of public provision was extended in the postwar era to many areas of the economy and public life previously subject to the market, giving rise to the concept of the social wage: the benefit that we individually gain from collective effort, whether in the form of public goods (roads, libraries), welfare services (the NHS, state schools) or direct financial payments (state pensions, unemployment benefit). In reaction, conservatives challenged both the extent of the social wage and the categorisation of its components, particularly in areas where the public sector was seen to be pushing back the private sector, such as health and education. Central to this reaction was the insistence that genuine public goods are few and far between and that what is left over within the scope of the social wage should be treated as a discretionary benefit and therefore means-tested (returning to the approach of the inter-war years). At the margin, among market fundamentalists, this reaction has led to continuing attempts to narrow the scope of public goods even further by either converting them to state-supplied commodities (e.g. road-pricing) or by privatising them altogether (e.g. railways and water companies). 

It came as no surprise that some of those disputing the intentionally ridiculous comparison of public goods (roads) with a benefit (the Winter Fuel Allowance) should also be advocates of road-pricing. For them, "confusing" the two was a purity violation (to borrow a term from moral foundations theory), but not because they are champions of public goods but because they want to advance the narrowest possible interpretation of them. Their apparent inability to see a joke (clearly the WFA is not actually a public good) is similar to the media suspicion that advocates for public goods want to impose broadband communism or nationalise sausages - i.e. not entirely sincere. This po-faced response also points to a narrow conception of public policy discourse in which the mathematical calculus of liberal economics is all that matters: utility is not a laughing matter. This narrow perspective also means that such critics cannot see that Meaden's comments are not the self-evident common sense that they imagine but actually a highly political statement and one founded (consciously or not) in the ideological presumption that social policy should be determined by aggregate utility, i.e. utilitarianism.

The intersection of reactionary conservativism (minimse public goods) and liberal utilitarianism (maximise efficiency) has resulted in the steady erosion of the principle of universalism. A feature of this has been the tendency of liberals to adopt the conservatives' framing, talking about universal benefits as if they are public goods that had been erroneously categorised. This explains why the discussion of the viability of such benefits tends to centre on excludability (as a positive) and rivalry (as a negative). For example, "It is absurd to give the wealthy cash that they do not need" leads to the insistence that they be excluded so that the needy can have more (or, more likely, that the benefits "bill" can be reduced). The idea that the cash can simply be clawed-back through taxation is rarely entertained and then only to complain about its "redundancy", despite the obvious operational superiority of using an existing mechanism over creating a new means-testing regime. In contrast, rivalry tends to occur within the arena of universal benefits through engineered scarcity: the competition to get through on the phone to book a doctor's appointment, or going private to beat the waiting list. This framing of benefits as if they were public goods is adopted partly to avoid a frontal attack on universalism, which obviously remains popular (e.g. the NHS), but it also reflects the extent to which half a century of neoliberalism has shifted the discourse of social policy away from the collective to the individual through the vocabulary of representative agents, marginal utility and incentives.

The joke that opened the thread was an ironic response to Meaden describing the Winter Fuel Allowance as a "universal scheme". The WFA isn't universal - I don't get it and you probably don't either. You might counter that this is because it is for pensioners only, but then why describe it as universal? Well, you might retort, child benefit is universal but the childless don't get it, do they? Indeed, but they have no need of it. I, on the other hand, have fuel bills to pay but do not qualify for the WFA. The truth is that it was introduced by Gordon Brown (no fan of universalism) in 1997 as a targeted electoral bribe, to be paid to a Tory-inclined cohort and therefore a priority to be won over by a Labour government. But while she described the WFA as universal, Meaden's argument against it employed the language of the miscategorised public good: to paraphrase, "rich people like me should be excluded from it". I parodied this by pointing out the insanity of extending this logic to an actual public good, roads. In doing so I was also highlighting the absurdity of centring the public policy debate on the personal circumstances of individuals who are definitionally atypical of society: the rich.

The wider point is that not only are there very few "pure" public goods, which are both non-excludable and non-rivalrous, but there are nowadays very few genuine universal benefits either. Most of what we imagine to be universal, like the state pension, depends on National Insurance contributions. The truly universal - available to everyone regardless - are the minimal benefits when all other contributory benefits have run out, and the state has long aimed to restrict these to a minority who, by virtue of their dependence on them, are seen as recalcitrant and therefore worthy targets for public contempt. It's also worth noting the long-running campaign of the media to make even these minimal benefits discretionary: not to be paid to the feckless, to single mothers popping out babies and certainly not to asylum-seekers. The two-child cap, which was heavily promoted by rightwing newspapers, is literally a pointed refusal to accept that benefits should be universal. That it is targeted at the demonstrably innocent isn't simply an example of cruelty, it is a clear statement that need is irrelevant. Deborah Meaden's insistence that she doesn't "need" the WFA and her advocacy for means-testing are actually old hat. The bleeding-edge of social policy thought is the denial that society has any obligation to the needy.

The Lessons of Grenfell Tower

The media discussion of the Grenfell Tower Inquiry Phase 2 Report has increasingly focused on the operational failures of the building firms involved, with calls for criminal prosecutions, and on the deficiencies of the regulatory regime, with dismay at the risks entailed in cutting red tape and a consequent demand for tougher government intervention. What has been increasingly lost in this orchestrated campaign is the role of the local authority, the Royal Borough of Kensington and Chelsea (RBKC), and in particular its policy towards social housing. A good example of this was the Guardian's immediate analysis by Peter Apps, a housing expert critical of the industry, which doesn't mention RBKC once. This could be justified given the tenor of the report itself. The execuitve summary, which is probably all that many journalists will have read, largely limits itself to criticising RBKC's poor oversight of the Tenant Management Organisation (TMO) that had in turn failed to "observe its basic responsibilities" towards the tower's occupants. What the report doesn't do is question the very existence of the TMO. Why was this arms-length function deemed necessary by a council that had the primary responsibility for its tenants?

It is clear from the report that the TMO existed to outsource responsibility and thereby remove day-to-day management of the tower as a concern for councillors and council officers. One telling example of what this meant in practice is the report's observation that "RBKC took little or no account of an independent and highly critical review of fire safety carried out for the TMO in 2009. It did not even know about a further independent and highly critical report produced in 2013 because the TMO had failed to disclose it to RBKC." This, like a number of other observations in the report, essentially charges RBKC with ignorance when the actual charge should be wilful neglect. The strongest criticism of RBKC's performance in the lead-up to the fire was reserved for council officers: "RBKC’s building control department failed to perform its statutory function of ensuring that the design of the refurbishment complied with the Building Regulations." In other words, there has been a scrupulous determination to avoid questioning the political logic of social housing management in the borough in favour of a focus on the regulatory regime.

Where the report cannot avoid addressing the failures of the council is in the response to the tragedy, but again the tenor is very much that this was an organisation simply overwhelmed by the challenge or unsuited to the immediate demands placed upon it: "RBKC’s systems and leadership were wholly inadequate to the task of handling an incident of such magnitude and gravity, involving, as it did, mass homelessness and mass fatalities." A telling comment is that the victims and survivors of the fire received far more effective support through community groups than they did from the council, but that this was ultimately down to the council's dismissive attitude towards the community rather than any difference in resources or competence: "one of RBKC’s failings was to make too little use of the local voluntary organisations and to fail to have adequate standing arrangements to enable them to be called on in the event of a major emergency." In other words, there was a lack of trust not only between tenants of the tower and the council, which the report could pin on the TMO, but a more wide-ranging lack of trust between the community of North Kensington and RBKC.

There are two unusual characteristics of RBKC that need to inform an understanding of the tragedy and its aftermath, both of which I highlighted in the post I wrote a year after the fire: Candide in Kensington (a critique of Andrew O'Hagan's whitewash of the council in the London Review of Books). The first is that the council is very small both in terms of population and territory. It is, in fact, the smallest borough in London by population if you exclude the oddity of the City of London. If it were to be merged with the neighbouring (also small) borough of Hammersmith and Fulham, the combined authority would still only be the sixth largest in London, about the same size as Wandsworth. A larger authority would not only have greater capacity in terms of emergency housing, but it would likely also have more officers devoted to building control and health and safety. The limitation of size has been recognised for years, however this hasn't advanced beyond the pre-fire "Tri-borough" arrangement for shared services (also involving the City of Westminster) where the focus was very much on cost-cutting during the post-2010 austerity years. There is no real justification for the separate but adjoining boroughs, but it has historically suited both main parties, with the Conservatives having exclusive control of Kensington and Chelsea (except for the northern wards) and Labour dominating Hammersmith and Fulham for all but a brief period between 2006-14.

The second characteristic is the longstanding antipathy towards the direct provision of council housing, one reason why the borough was notorious for slum landlordism up until the 1960s. Historically, it always preferred to operate at arms-length through charities and housing associations rather than directly providing and maintaining council homes. This is the root explanation of the TMO, a desire to outsource its residual responsibilities as a landlord and an implicit acknowledgement that it "doesn't do" council housing. That the phase 2 report essentially buys into this narrative of council incompetence (the recommendations are largely about training council staff up to be able to better manage its services and contingency planning) means that the political worldview behind its poor performance is not brought into the light. The borough is a stark example of social segregation, with the richer southern wards politically dominating the rump northern wards and treating the social housing residents of the latter as at best an afterthought and at worst as importunate and ungrateful (as many were characterised by O'Hagan). That the report locates this lack of trust between authority and people in the TMO is an evasion and an example of the unwillingness of public inquiries to address the political context of failures, something seen in the torturous Hillsborough saga and more recently in the Contaminated Blood scandal.

More broadly, the attitude of the RBKC points to the political elephant in the room, which is the UK's troubled relationship with housing. The fundamental problems of the UK housing market are not inadequate supply and high prices - these are merely epiphenomena - but a lack of capacity in the system, which is the consequence of the end of central planning (i.e. the expansion of council housing) and the concomitant financialisation of housing as an asset class with the take-off of Right to Buy and mortgage deregulation in the 1980s. It cannot be stressed enough, that the UK has only properly housed the population, whether owner-occupiers or tenants, during the postwar era of central planning, and then only towards the end of the era when supply caught up with demand. Basically, the late-1970s. All states make provision for spare capacity, but not always in the same areas. For example, the UK has always sought to maintain a domestic defence industry, notionally to ensure national security but also to reinforce its geopolitical delusions. Doing so entails a need to keep that industry busy, hence the easy encouragement of military adventures and the selling of arms to dodgy regimes. Continuing to build social housing capacity would have left us with a public good and fewer property millionaires; continuing to produce arms for sale has left us open to the charge of aiding and abetting genocide.

Other states are more concerned with capacity issues such as food security or medical supplies. The former can give farming interests an outsize influence on land planning and retail prices; the latter can mitigate the dangers of a public health crisis. The criticism this weekend over the poor preparedness of the NHS for the Covid-19 pandemic should be read less as an attack on the serial incompetence and cheese-paring of Conservative ministers since 2010 and more as a long-overdue recognition that the state has been reducing its capacity, and therefore its contingent capabilities, across the board since the 1980s. This, as much as formal deregulation, has been a consistent theme of all governments since Margaret Thatcher. And it is not simply a naive belief that the free market will provide, but a conscious desire to reduce the public responsibilities of the state. Of course, the state never shrinks, not just because its prime directive is self-presevation but because the reduction in provision simply promotes costly demands elsewhere. Thus the lack of council housing investment has been more than offset by the increase in the cost of housing benefit, which simply means that state resources have been diverted from the needy to rentiers.

Might there be a sea-change in government policy? Labour have certainly talked up the issue of planned capacity in some of their proposals, such as Great British Energy, but the substance to date has looked a lot like marginal or cosmetic gestures while the insistent drumbeat from both the Prime Minister and Chancellor has been that austerity remains the only game in town. The idea that fiscal responsibility will stimulate private sector growth ("expansionary fiscal contraction") was comprehensively disproved under the Cameron and Osborne regime, but even if it proved true this time, an expanding private sector will simply compete with the state for real resources, which means the likelihood of major investment in capacity isn't on the cards. The idea that you "fix the roof while the sun is shining" is about as intelligent as equating the economy with a household. The greatest historic investments in British public capacity, in areas such as housing and transport, occurred during periods of relative economic turbulence, such as the 1930s and 1970s, as much as during periods of growth. You have to build capacity regardless, rather than waiting for a fiscal surplus that will only lead to the competing demand for tax cuts, and that means accepting that real resources must be diverted from private consumption.

It took over six years after the Grenfell Tower fire for all of the former residents who survived to be permanently rehoused, though often in inadequate accommodation, with the council reluctant to prioritise their needs and its new housing provision continuing at a snail's pace. It is hard to see any evidence that the RBKC and the TMO have changed their attitude over this time. Talking of her recent discussions with the residents, Gillian Slovo noted that "They told me about a council, the Royal Borough of Kensington and Chelsea, and its managing agent, the Tenant Management Organisation (TMO), that treated them as if they should have no voice in the way that they lived. They drew a picture of one of the richest boroughs in England ignoring them because they lived in social housing." The current leader of the council, Elizabeth Campbell (who lives in the ultra-rich Royal Hospital ward), has predictably apologised in light of the report's findings - how could she do otherwise? - but the commitment to learning and improving will be meaningless until such time as she and other politicians are prepared to address the two key characteristics of RBKC: that it is too small to be effective and that its reluctance to invest in council housing will always leave it in conflict with the community of its northern wards. Both are issues of capacity.