Edited by Giuliano Bonoli and Toshimitsu Shinkawa
Chapter 6: UK Pension Reform: A Test Case for a Liberal Welfare State?
Peter Taylor-Gooby BACKGROUND: THE UK POLICY CONTEXT The UK combines a majoritarian polity with a liberal welfare system. State pensions have always been relatively weak compared with those elsewhere in Europe. The self-consciously right-wing Conservative government of Mrs Thatcher undertook a radical expansion of private pensions in the 1980s, seeking to extend them from the dominant form of provision for higher-income people to the dominant form for the whole population. This involved cut-backs in state pensions and deregulation of the private sector in accordance with a general philosophy of ‘rolling back the state’. The New Labour government from 1997 onwards retained the themes of constrained state spending and reliance on competitive markets, but sought to redirect the liberal system towards welfare goals by expanding specific services, most notably the National Health Service, providing targeted benefits for poorer groups and regulating the private sector more strictly. This approach was legitimated as consonant with social democratic citizenship ideals through an ideology of equality of opportunity presented as a ‘third way’. In pensions, the government has expanded means-tested provision as a pensioner ‘tax credit’, but is finding difficulties in designing a regulation regime that both delivers secure affordable pensions and is acceptable to the private sector. UK experience offers an interesting test case of whether it is feasible to combine welfare and market liberalism. The case is particularly valuable, since the UK contains the most centralised system of government authority in Europe, currently administered by a reforming centre-left party with an exceptionally strong...
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