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Benefit-payments are classified as socio-economic rights. They are a point of contention between individualists and collectivists, who have sharply differing views upon the balance between individual responsibility and State provision (4.2.4.3).
Benefit-payments are a way of redistributing wealth, from those in work to those who either cannot work or who are low-paid. From a political perspective they present different challenges:
· People who are in work contribute towards the cost of pensions, either through identifiable deductions or more generally through the tax system. They contribute in the expectation of being able to retire at a specific age with a fairly predictable income. The dramatic increase in life expectancy since the Second World War has made the costs of pensions much higher than was predicted when people were first told what to expect. Subsequent attempts to reduce the costs, by delaying the retirement age or reducing the amount to be paid, have been politically difficult because people feel that a contract has been breached. And, since the number of pensioners is increasing, their votes are gaining in importance in democracies.
· Welfare payments and tax credits are a form of economic protection for those who are unable to work or to earn enough to support themselves and their families; the classification of who will be entitled to them and the formulae for calculating them are consequences of the political response to inequality, as described later (6.7.2.4). The resulting costs then depend on unemployment, which is linked to the overall performance of the economy (3.3.8.1).
Both categories of benefits represent a burden on taxpayers. The political system has to produce a settlement which is perceived to be fair.
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