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The Pursuit of Welfare Ends and Market Means and the Case of Work/Family Reconciliation Policies

Jane Lewis

There has been a huge debate about what New Labour is, what it stands for and whether its policies are more Right than Left. The first point of departure is largely about the extent to which there is something ‘new’ about New Labour: whether it is more accurate to see it as an extension of the Thatcherite consensus (e.g. Hay, 1999); whether it represents a move beyond both the political Right and the old Left, as Giddens (1998) argued in his early formulation of Third Way politics; or whether there is at least a ‘new mix’ that is identifiable (Driver and Martell, 2002; Deacon, 2002). Of these, the last position is the most persuasive. There is certainly a new policy mix that has taken in traditional Labour concerns alongside policies that would not have characterised the post-War Labour agenda: for example, a commitment to public services together with a welcome for more blurring between public and private finance and provision; a return to Labour’s traditional concern with employment but implemented via more contractualist policies;[1] and a commitment to abolish child poverty within a generation alongside an extension of means testing.

In part, New Labour’s policy approach has to be explained in terms of its policy inheritance (regardless of whether one takes the view that it has continued along the Thatcherite road or not). For example, Heffernan (2001) has argued that privatisation was too costly to reverse, certainly a commitment to the mixed economy of welfare has persisted. In addition, the dramatic growth in inequality in wealth and income during the 1980s (exceeded only by New Zealand) and in child poverty (Hills, 1995, 2005; Bradshaw, 1990; Piachaud and Sutherland, 2000) represented huge challenges. After their 1992 defeat, Labour accepted the political impossibility of reversing what had become under successive Conservative Governments a low tax, low wage, low skill, flexible labour market (Soskice, 1999). But the nature of the policy mix since 1997 also owes much to New Labour’s commitment to promoting what may be broadly termed ‘social solidarity’ alongside markets (Hutton, 2003). Labour has had firm ideas about first, how social provision should look and second, what the state can and cannot do, although as the consideration of work/family reconciliation policies (and childcare policies in particular) in the second part of the paper will show, the details of the particular policy field and the local context in which key ideas about policies and about governance have been worked through matters enormously.

New Labour has not been alone in respect of the broad trend of its approach to ‘welfare’. There is a considerable degree of consensus as to the extent of welfare state ‘recasting’, ‘recalibration’ or ‘restructuring’ (Ferrera and Rhodes, 2000; Esping Andersen et al., 2001, Pierson, 2001) that has taken place from the 1990sin Western Europe (and also in North America) in face of what are often referred to as the ‘common challenges’ of ageing, globalisation, and labour market change. This has involved first, a significant change in the conceptualisation of social provision, in particular towards more ‘active’ welfare measures and a tightening of conditionality in respect of the work/welfare relationship, which has arguably always been central to the development of Western European welfare regimes (Esping Andersen, 1990; Supiot, 1999); and second, in methods of governance, towards a more mixed economy of welfare and a more regulatory role for the state.

The trend in all western welfare states has been towards a re-working of the relationship between social provision and employment, with the emergence of what Goodin (2001:39) has called ‘a new constellation of work-and-welfare variables’. Policymakers have sought to shift the emphasis such that claimants on the welfare system are ‘encouraged’ into work and the work is made ‘to pay’ (Lodemel and Trickey 2000). Gilbert (2002) has characterised these trends in terms of a series of shifts from social support to social inclusion via employment, from attention to measures of decommodification to ways of securing commodification, and from unconditional benefits to benefits that are heavily conditional on work or training. In respect of services, more attention has been drawn to the importance of ensuring that social expenditure can be justified in terms of social investment (Lister, 2004).

At the end of the 1990s, these broad trends were identifiable (to a greater or lesser extent) in most Western European countries at an historical moment when social democratic governments held (what proved to be brief) sway. However, it was also possible to identify sharp lines of division between the nature of Left-of-centre politics in different Western European states (e.g. Pollack, 2000). Whereas in many continental European countries the emphasis was placed on ‘defensive’ ‘modernisation’of social protection systems (e.g. in the Scandinavian countries,Timonen, 2003), in the UK the approach of New Labour was more ‘offensive’, stressing the need for change and adaptability. In regard to policies themselves, there is a degree of consensus in the comparative literature on Third Way politics and welfare state restructuring in Western European countries that there has been more similarity between how the actual policies look than between the political ideas informing them (Green Pedersen et al., 2001; Bonoli and Powell, 2004). In the European context it is also difficult to know how much influence to attribute to the EU level, where social policy acquired new significance in the late 1990s and 2000s. Certainly, the message coming out of the EU was similar to that propounded by New Labour: that social provision had to ‘modernise’ in order to assist, rather than to detract from, economic growth and competitiveness.

There have been substantial changes, then, in what welfare systems look like and also in what the role of the state is expected to be.Indeed, a huge literature has grown up in response to the perceived fragmentation of the modern state. Rhodes’ (1997) picture of the ‘hollowing out of the state’ – upward to the supranational level, outward through privatisation, and downwards through the creation of quangos and agencies – is one of the more extreme interpretations of the nature of the changes that have taken place, but one that has captured the imagination. It has become commonplace to read in the literature on ‘new governance’ that the modern state can ‘steer’ but not ‘row’ (e.g. Pierre, 2000; Prakesh and Hart, 1999).

In the case of New Labour, Wickham-Jones (2003, p.26) has argued that the Labour Government has resigned itself to ‘utter acceptance of the market economy and the forces of globalization’, which has profoundly limited its room for manoeuvre in policymaking. Logically, this would lead to a scaling down of policy ambitions. However, Wickham-Jones also acknowledges New Labour’s considerable legislative activity in the social policy arena. Indeed, as Pollitt and Bouckaert (2000) have pointed out, New Labour has tended to make large claims for what they will achieve. Indeed, the Pre-Budget Report for 2004 continues to refer to the ambition to provide ‘world class public services’ (Cm 6408, 2004, 1.22).

Put simply, New Labour has ‘wanted to do things’. However, it has also shown that it is both aware of and a strong believer in the ‘limits’ to action by government (e.g. Brown, 2000). Crucially, it believes that it can carry forward its commitment to welfare ends using new forms of governance that are also more compatible with market competition. However, there is potential for tension between these. It remains an open question as to whether the commitment to new forms of governance in fact signals the more fundamental tensions perceived by Wickham-Jones: between social policy and economic policy, and between welfare ends and market means, tensions that are also increasingly present in other European countries and at EU level.

The first section of the paper argues that it is possible to see that New Labour has had a strong vision of what constitutes the big picture of welfare. I also suggest that Labour has had a strong sense of the limits to state intervention. I locate New Labour’s approach in the context of what has been happening at the EU-level. This serves to reinforce my interpretation of the approach that has been taken to social policy as something genuinely new, but nevertheless profoundly shaped by a policy hierarchy that puts the pursuit of competitiveness and growth firmly at the top.

The second part of the paper takes as an example the development of work/family reconciliation policies, and particularly childcare services. Prior to 1997, the UK had no explicit family policy (Land and Parker, 1978). New Labour published a major document on ‘supporting families’ in 1998 (Home Office, 1998), and in the same year launched the first national strategy for the provision of childcare services (Cm 3959, 1998). In addition, in 1999, Tony Blair made his famous and ambitious pledge to eradicate child poverty in 20 years; child poverty had increased threefold between 1979 and the early 1990s, putting the UKsecond only to the United States in this respect (Hills, 2005). There was therefore much more attention to the provision of transfers and services in respect of children. Indeed social care services, particularly in regard to childcare, proved to be more generally one of the few areas of expansion during the period of Western European welfare state restructuring (Daly, 2000). New Labour’s commitment to supporting families and to childcare services has continued to increase, and is a major election commitment in 2005. As a policy area, it provides a useful lens through which to tease out both the new approach to welfare and the nature of the commitment to social provision on the one hand, and the tensions between this commitment and the chosen means of achieving it on the other.

Ideas about Social Policy and the Role of the State

New Labour has consistently urged the ‘modernisation’ of social provision. The meaning of modernisation is often elusive. Reference has often been made to the need for greater efficiency and better quality, especially in relation to services, but the perceived need for modernisation relates to external more than internal challenges. The new approach to ‘welfare’ has been built on a re-drawing of the always vexed relationship between economic and social policy and goes way beyond New Labour and the UK. Thus the first section that follows sketches the change that has taken place in this regard at EU-level, where it has been explicitly set out in the documents produced by the European institutions. A long (and rare) commentary on these by the UK Treasury in 2002 (Cm 5318, 2002) shows the extent to which the UK Government is in sympathy with the approach taken at EU level since the late 1990s, albeit that its adherence to the ‘sound money, sound finance’ paradigm which has come to dominate (e.g. Dyson, 2000) is at the extreme end of the spectrum of member states, firmly prioritising as it does economic over social policy. However, as the second section shows, this does not mean that New Labour lacks core ideas about social policy, in terms of policy principles, particularly social inclusion, and modes of governance, particularly the use of ‘new public management’ methods, which have also characterised thinking at the EU-level.

(i) The Relationship between Economic and Social Policy at the EU level

Following the publication of the Commission’s White Paper on competitiveness and growth in 1993 (Commission, 1993), the 1994White Paper on European social policy affirmed the importance of shared social values ‘held together by the conviction that economic and social progress must go hand in hand. Competitiveness and solidarity have both to be taken into account in building a successful Europe…’ (Commission, 1994, p. 9). Social policy was defined as the ‘underpinning’ and employment identified as the ‘key’ to social and economic integration, with the aim being to provide a framework of basic minimum standards – through Community law - as a bulwark against ‘negative [market-based] integration’ (see Scharpf, 2002) and social dumping. The message regarding the relationship between social and economic policy was fundamentally the same in the next major social policy document, issued in 2000 (Commission, 2000), when social policy was defined as ‘a productive factor’ (p.5) and the links between the triangle of social, economic and employment policy were drawn more tightly, albeit with social policy given a nominally equal place in the triangle. Indeed, social policy was given what was described as a new role. While in the past its task had been ‘minimising negative social consequences’, in the future its focus would be ‘modernising the European social model and investing in people’ (p.6). However, the means of promoting a re-oriented and reformed social policy would be soft, rather than hard, governance in the form of the Open Method of Coordination (OMC), which aimed to use guidelines for action, benchmarks, monitoring and peer review as a means to policy learning and policy ‘coordination’. At the same time, interpretations of European competition law by the European Court of Justice have cast doubt as to how far and for how long exclusively public finance and/or provision of social welfare services can be defended (Hervey, 2000; Leibfried and Pierson, 2000).

The Commission’s first Communication (in 1997) on ‘modernising’ social protection outlined the context for change in terms of demographic, labour market and family change (Commission, 1997). The second, in 1999, drew more attention to the completion of the single market and establishment of a single currency, which in turn gave new emphasis to sound public finances and the reform of labour markets: ‘these two strands of policy, focussing as they do on the sustainability of public finances and on the restructuring of expenditure, taxes and social charges in order to support employment and job creation, have considerable implications for social protection policies’ (Commission, 1999). This document went on to point out that the Council’s Broad Economic Policy Guidelines for 1999 had called on member states to review the cost and labour market implications of pension and health systems, to make tax and benefit systems favourable to labour market activation (the phrase ‘make work pay’ was used at the insistence of the British, although as Barbier (2003) has pointed out it was poorly understood in translation in many member states), and to reduce the overall tax burden. Only expenditure that could be classified as ‘social investment’ could be justified in a framework that stressed the importance of price stability and tight budget controls. Thus the close relationship between social and economic policy was both restated and redrawn, with the development of the European Employment Strategy seen as the crucial link between them. The conclusions of the Lisbon European Council, issued in March 2000, just prior to the publication of the 2000 Social Policy Agenda, elaborated a new vision of the ‘European social model’ engaged in building ‘an active welfare state’, ‘investing in people and combating social exclusion’ (Council, 2000). In the 2000 Social Policy Agenda to all intents and purposes a reformed set of social policies were still being construed as a necessary underpinning in the social, economic and employment policy triangle. While the existence of a ‘European social model’, however ill-defined, was recognised and valued, to survive it had to change, and to do more to promote employment in particular.

The EU-level approach to employment and modernisation was endorsed by Tony Blair in his Foreword to the Treasury’s White Paper on economic reform in Europe (Cm 5318, 2002). The whole ‘Lisbon process’ was seen in this document as part of economic policy. The UK’s goals (just ahead of the Barcelona Council in 2002) were stated in terms of increasing productivity by investing in physical and human capital, completion of the single market , boosting employment rates and thereby tackling social exclusion. A modern social agenda in terms of social inclusion via employment, childcare and pension reform in particular was part and parcel of a strategy to achieve economic competition and growth (ibid., 3.2). The White Paper accepted that EU-level policy was about economic growth and social cohesion, and that both were necessary (ibid., 2.51), but there was no attempt, as in the Commission’s 2000 Social Policy Agenda, to portray social policy as a genuinely equal partner. Furthermore, the White Paper was in favour of the Open Method of Coordination as a mode of governance within the EU, the methods of the ‘new public management’ in the form of targets, performance indicators and ‘naming and shaming’ having become central to New Labour’s modus operandi (Power, 1997).

Interestingly, the European Commission’s Report on the first five years of the European Employment Strategy referred to the methods of the OMC as ‘management by objectives’ (Commission, 2002), although the majority position in the academic literature on the OMC tends to stress the possibility it offers for policy learning between member states (e.g. Trubek and Trubek, 2004; de la Porte and Pochet, 2003).

(ii) New Labour, Social Provision and Governance