Shake-Up of Welfare in Britain Urged : Thatcher Government Says Social Security Has ‘Lost Its Way’

The Conservative government of Prime Minister Margaret Thatcher, declaring that Britain’s costly social welfare system has “lost its way,” today announced a proposed shake-up that would phase out earnings-related state pensions.

A government green paper, which Social Services Secretary Norman Fowler billed as the most comprehensive review since the social welfare state was introduced by a Labor government in 1945, gave no estimate of the savings involved.

But British newspapers estimated the savings would amount to $1.3 billion of the $52 billion that social security now costs Britain annually.

One-Third of Budget

Social security consumes nearly one-third of the national budget and is a prime reason Thatcher’s pledges to cut state spending and reduce taxes remain unfulfilled.

After what promises to be a stormy public debate, the government proposed to put its final recommendations for change in a white paper later this year and implement reforms by April, 1987.

Opposition socialists have dubbed the Conservative review a bid to dismantle the welfare state.

The Conservatives stopped short of fundamentally slashing the welfare system, which is based on a 1942 paper by Sir William Beveridge that called for social insurance from “the cradle to the grave.”

‘Lost Its Way’

“To be blunt, the British social security system has lost its way,” the green paper said. “Since World War II it has grown five times faster than prices, twice as fast as the economy as a whole, and is set to rise steeply over the next 40 years.”

The major change proposed is the phase-out of the earnings-related pension plan, which now provides pensions of about half of average earnings to 12 million of Britain’s 56 million people.

The plan means many Britons draw more than double the basic state pension of $46.54 a week for single people.

Thatcher has warned that a combination of Britain’s aging population and declining North Sea oil revenues will make the cost of the program “horrendous” by the end of the century.

Cut-Off Times

The Conservatives propose to end the program for women now under 45 years old and men now under 50, meaning current pensioners and people due to retire before the year 2000 would not be affected.

The proposals also included a series of measures aimed at trying to ensure that out-of-work families on welfare, which includes rent-free housing, are not better off than the lowest-paid workers.

No changes were proposed in basic welfare payments, now averaging $84.50 a week for a family with two children, or in a range of benefits paid to the sick and disabled.

A controversial tax-free child allowance of $9 a week, paid to rich and poor alike and costing the state $5.6 billion a year, was also left unchanged.