Social Security and Welfare are government benefit payments to people in need; they constitute a large part of government spend
Benefit payments are government transfers of money to individuals, to give them economic security. An RSA report, Addressing Economic Insecurity, defines economic security as “The degree of confidence that a person can have in maintaining a decent quality of life, now and in the future, given their economic and financial circumstances.” It argues that benefit payments should aim to give people enough flexibility to make the best employment choices – thereby benefiting the whole economy. That is an economic reason for paying an adequate level of benefits.
The moral perspective on these forms of social protection is reviewed in the next chapter, where Social Security and Welfare are seen as ‘socio-economic rights’ (4.2.4.3).
Benefit payments neither consume nor create wealth in terms of the economy as a whole: they redistribute it from taxpayers to the beneficiaries, so that the latter can consume. And, since poor people tend to spend their money more quickly than wealthier people, increasing the level of benefits boosts economic activity.
Levels of benefit spending
The British government’s Office of National Statistics publishes annual Public spending statistics, which reported that the “function with the largest expenditure in 2021-22 was social protection”, which amounted to more than 30% of “total public sector expenditure”.
State pensions are the biggest element of benefits in both Britain and America.[1] People are living longer in most Western economies, creating budget pressures which have been politically difficult to manage – as people don’t want to work longer before they retire (6.7.1.3).
Income support programmes, which include unemployment benefits, cost more when an economy is in recession and are therefore harder to forecast than other benefits.
Ways of paying social security and welfare
The different ways of making benefit payments to individuals can be chosen for administrative convenience, or to ensure that they reach those who really need them:
· Child benefits in Britain, for example, were paid in cash to mothers to make it more likely that it would help the child.
· Some American income support is paid as ‘food stamps’ – again, to ensure that it is used as intended.
· The costs of administration can be reduced by using the infrastructure of the tax system to make payments, as advocated by Milton Friedman in the form of Negative Income Tax. Britain's system of 'tax credits' used this principle.
· More recently, Britain attempted to unify all benefits into a single payment – although this proved difficult in practice, as reported in a BBC article: What is universal credit - and what's the problem?
(This is an archive of a page intended to form part of Edition 4 of the Patterns of Power series of books. The latest versions are at book contents).
[1] This was confirmed in a British Office for Budget Responsibility report, Welfare spending: pensioner benefits, showing “pensioner spending” forecast in October 2021 as 46% of the total Social Security budget in 2020-21.
The US Government Spending website, which reports on a different basis, showed pensions as 17% of total government spend.