Decentralising welfare

With welfare a hot issue, I thought it might be helpful to summarise my tactical ideas on this topic. Note that the focus of these ideas is on long term joblessness, although various other problems could be solved the same way.

A reminder of what I was trying to achieve:

Turning off the welfare taps would not happen, and if it did there would be social unrest like you have never seen. [..] a reformer needs to provide some level of service of the existing kind and either reduce it slowly, introduce healthy incentives, or both. The services would need to include job seekers allowance, disability benefit and practical assistance programs such as job centres and training programs, but would need to be slowly changed to ensure recipients are genuine and that the schemes really work cost effectively.

© Helen Cobain

© Helen Cobain

And here in bullet point form are the key steps and details of the plan:

  1. make welfare a hyper local service – still state run and state funded but run at the parish or borough level. Because we basically cannot get this right and to incentivise market based restructuring later, we deliberately choose to make each provider a little too small to be self-sustaining.
  2. change funding flows to cut out middlemen – payments would start to flow direct from payroll departments to local providers. A tapering subsidy would ensure stability. The choice of provider would follow a simple rule e.g. based on your postcode. The payments would be treated as deductable, since they replace a tax, and the scheme is therefore revenue neutral.
  3. make the choice of provider free – this allows competition and new innovative market participants to enter, with some stability ensured by the subsidies and the fact payments are still compulsory. Failing providers would be allowed to go bankrupt. Frankly, things would already be a lot better if you stopped here and you might certainly leave things alone for a bit.
  4. make payments voluntary – including higher and lower amounts. The scale of payments would then always be proportionate to need as perceived by the payer. I’m certain the media (and trade associations) would ensure payers are well informed as to that level.

What has been done at this point is a transition back to voluntary Friendly Societies as the main service provider, but we have also achieved a “big bang” that opens up the market to all sorts of innovate players, including for profit welfare providers, non-geographic providers, the whole lot. There would be no restrictions on who provided welfare.

If you like this plan, please share it via social media. I certainly consider it important and if you agree it is an important idea why not press the “Important” button and make that known anonymously (you are asked to login, for stats etc).

Alternatively, if you think there is something wrong with this proposal, say so in the comments. It’s important we have well-formed alternatives rather than just being grouchy.

Simon Gibbs

Simon is a London based IT contractor and the proprietor of Libertarian Home. Working with logic and cause-and-effect each day he was naturally attracted to nerdy libertarianism and later to harshly logical Objectivism. Find him on Google+ 

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  6 comments for “Decentralising welfare

  1. Paul Marks
    Jul 16, 2013 at 12:02 pm

    Interesting.

  2. Jul 16, 2013 at 12:03 pm

    I like the idea very much. I think the problem has been the dislocation of fairness and responsibility. Localising and also turning welfare into a service then changes the perception. It was an absolute disaster what government did to friendly societies, we need to revive that concept… The challenge with any of this reform is that it requires risk, and that doesn’t work for a lot of politicians.

  3. RogerC
    Jul 17, 2013 at 2:03 pm

    Sounds interesting, but I’d like a little more detail and some clarification.

    In point 2) you say the choice of provider would be “based on your postcode”, but in point 3) you say “Make the choice of provider free”. Exactly what is meant here? A choice of local providers, with that choice restricted by your postcode? Who chooses, the employee, the employer, the parish or the borough?

    In point 3) you say that payments would still be compulsory, but in point 4) you say that payments would be voluntary. Have I got the wrong end of the stick? Is “the payer” in point 4) the person paying in to the scheme, or the welfare provider paying out to the claimant?

    I’m not sure how making welfare providers “hyper local” tallies with the idea of non-geographic providers.

    In general, I love the idea of friendly societies and believe that the welfare state needs to go back to an account-based or insurance-based model, at least for unemployment relief. I would dearly like to see the state relinquish its monopoly in this regard, in the same way that I would like to see the market for healthcare and schools opened up. There’s no reason why the state could not still offer these services, but it should do so on the same basis as every other provider, i.e. by voluntary agreement and payment for a service provided, with no subsidy via taxation.

    • Jul 17, 2013 at 2:42 pm

      The plan is a plan, so is an ordered sequence of changes that do not happen at the same time.

      So, first you make it hyper local, then you change things so it need not be local, and then you make it so people can opt out entirely, but you give time for local managers to learn their trade.

      The payer in point 4 is you and me, in point 2 I anticipate that PAYE systems would be changed to initially make it an employer’s responsibility to process the payment. Some employers might eventually close that function and it would be more like a BUPA membership – something that lots of companies do because it is desirable.

      The verbose version is here http://libertarianhome.co.uk/2012/01/nudge-as-a-transitory-measure/

      • RogerC
        Jul 18, 2013 at 7:37 am

        Thanks, that clarifies it for me. I hadn’t realised it was a Four Step Master Plan!

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