Investment in public services is an investment in social infrastructure

Living standards depend not just on what people earn from paid labour, ​‘but on the social income which they receive as citizens’. So said R.H. Tawney, the economic historian and social critic, all of 45 years ago. He was one of the first to draw attention to the value of the ​‘social wage’ – made up of all the essential things we don’t have to pay for directly because they are funded through taxes and provided by the state. Healthcare and education are obvious examples. Roads, public parks, street lighting, refuse collection, policing, legal services and child protection are also part of what we enjoy – and often take for granted — in welfare democracies: services available to all according to need, not ability to pay.

A new report out this week considers a radical expansion of the social wage by developing ​‘universal basic services’ (UBS) in new areas such as transport, childcare, adult social care and information. This approach is said to offer an equitable, efficient and sustainable way of meeting needs, which helps to build social solidarity and provides a strong collective underpinning for the welfare system as a whole. 

The report points out that poor families across the OECD would lose three-quarters of their income if they had to purchase current services directly. Indeed, public services have been found to reduce income inequality by an average of 20%. Paying for them should be treated not simply as public expenditure, but as investment in social infrastructure, just as paying for roads and railways is investment in material infrastructure. Neither society nor economy could function without both kinds of support, and there is evidence to suggest that investment in more and better public services would yield handsome dividends in social, environmental and economic terms.

public services have been found to reduce income inequality by an average of 20%

High quality childcare, for example, is widely acknowledged to enable children to do better at school and to reduce risks of ill health, anti-social behaviour and poverty in the longer run. Frequent, well-connected bus services make it much easier for people to travel to work, meet family and friends and gain access to other essential services. Public transport systems leave a far smaller ecological footprint than multiple private car journeys. More generally, the report argues that collective consumption through shared public services will cause far less damage to the natural environment than private consumption in the market place.

When services-in-kind that meet everyday needs are available to everyone, low-income households escape the punishing dilemma of either forgoing the benefits they bring, or running up debts to pay for them. So there’s a good chance of reversing current trends towards deepening poverty and widening inequalities.

As the report notes, the idea of exercising collective responsibility to meet shared needs is not a new one. It lies at the heart of the post-war welfare state. It underpins what’s left of public services today. But it has been crushed almost to death in the recent decades, as flag-bearers for free-market economics have favoured lower taxes, a smaller state and privatisation of public resources.

There are signs that the ideological tide may be turning. A recent survey of social attitudes found that British people were growing tired of ​‘austerity’. Two-thirds said they were willing to pay more tax in return for more spending on health and education, representing the highest level of support for public services since 2002. Joseph Stiglitz observes that 40 years of market fundamentalism had manifestly failed the vast majority of people; what was needed instead was ​‘a new social contract – guaranteeing citizens health care, education, retirement security, affordable housing, and decent work for decent pay’.

The report makes clear ​‘UBS’ is a political strategy that involves transforming the way services are designed, controlled and delivered. It seeks to strengthen existing services as well as develop new ones. It should go hand-in-hand with radical reform of social security, because people will always need money as well as services. It points to other countries where useful lessons can be learned, such as Norway for childcare, Germany for long-term adult social care and public transport in Talinn, Estonia.

‘UBS’ is a political strategy that involves transforming the way services are designed, controlled and delivered

Crucially, UBS is not about uniformity or a bigger, more powerful state doing more things to people. It’s about building a wide range of organisations, customised to suit the type of service required, with residents fully engaged in co-producing activities that meet their needs and with sustained support from public authorities. This points to ​‘a new dynamic between top-down and bottom-up politics’ where the state retains three vital functions: ensuring equality of access, setting and enforcing standards, and collecting and distributing funds.

How much will it cost? Expanding the social wage as proposed in this report is estimated to cost around 3 – 4% of GDP. This doesn’t account for the value of longer term benefits likely to accrue from well-designed, high-quality public services. It’s less than the 6% of GDP spent on bailing out the banks after the financial crash.

The report offers no definitive analysis or blue print for action. Even though the idea is old, the debate is new. This is a resource and provocation for researchers, policy-makers, and people involved in local action who want to explore the potential of a bigger and better social wage.

This piece was originally published in The Times Red Box

Image: Stephen Baines (CC BY-NC-ND 2.0)