Why a Social Guarantee Matters now More Than Ever

The Social Guarantee maintains that the primary purpose of the economy is to meet everyone's needs within the limits of the natural environment. It offers a principled framework for policy and practice to address three interlinked crises that are all rooted in a failed economic system: soaring living costs, widening inequalities and the climate emergency.

This is a radical departure from orthodox economics, which seeks to satisfy wants and preferences and clings to the claim that human wellbeing is best served by competitive markets. Unlike wants and preferences, human needs can be identified objectively: they include housing, nutrition, health and social care, education, water and energy, secure primary relationships, transport, and internet access. Underpinning all of them is a safe and sustainable natural environment, without which any amount of need satisfaction would ultimately be futile.

What it aims to achieve

The Social Guarantee supports a social floor below which no one should fall and safeguards the ecological ceiling which must not be breached, while promoting equity in the space between.

It combines in-kind benefits which constitute a ‘virtual’ income, derived from collective action, with a cash income derived from a fair living wage, backed by a minimum income guarantee. Its main focus is on in-kind benefits or ‘universal basic services’, which is shorthand for the range of collective measures without which it would be impossible to achieve sufficient access to life's essentials.

This ‘virtual’ dimension of income is routinely marginalised by policy makers. Indeed, the main thrust of policy development over the last decade has been to starve public services of funds in the name of ‘deficit reduction’, so that instead of being improved, they've been diminished or eliminated altogether. The Social Guarantee aims to reverse that trend.

Why it matters now

It is hardly controversial to say that the NHS is a national treasure that must be saved from disaster, that social care needs fixing, that schools are in jeopardy, that public transport is not fit for purpose, that privatised utilities are a disgrace and that housing and childcare are increasingly unaffordable. But these are treated as separate issues and, if national-level policy makers address them at all, it's in a piecemeal fashion that takes little account of the part they can play in tackling some of the crises that beset us today.

Collectively provided services can play a crucial role in offsetting impact on household incomes, both by enhancing the ‘virtual’ element of income and by generating employment. Imagine how much better off we would be if we could rely on our democratic institutions to ensure we all had access to services according to need rather than ability to pay.

Take childcare: if a lone parent with one child (aged 2–4) did not have to pay for it directly, their disposable cash income would increase by £7,500 a year; a couple with two children (aged 2–4) would gain by more than £13,000. Investment in childcare and adult social care would not only create more jobs in the sector, but also enable parents and carers to take up paid work if they chose to do so. And by generating more employment outside markets and providing security, universal services act as a counter cyclical buffer, helping to build resilience in the face of market downturns and recession.

Furthermore, the effect of services that are free and affordable to all is highly redistributive. Housing typically demands the biggest chunk of household income and is a major determinant of inequalities. Applying the Social Guarantee framework would involve a range of collective measures to counteract these effects, including investment of public funds to increase and retrofit the housing stock, land acquisition by public authorities to keep prices down, and fair allocation and rent-capping to support equal access.

Finally, implementing the Social Guarantee framework can contribute to ecological sustainability by influencing public attitudes and consumption patterns; by transforming provisioning systems; and by underpinning political programmes to bring about a green transition.

Could Labour adopt the Social Guarantee?

There's an appetite for an approach like this that is clearly visible in the efforts of a wide range of policy makers beyond Whitehall. So, what might deter politicians from embracing the Social Guarantee?

There would certainly be capital costs to build the necessary infrastructure and expenditure on providing services. And since the Social Guarantee aims to deliver the social component of a green transition, these costs are inextricably linked with the costs of urgent climate mitigation measures, such as retrofitting the housing stock. Tax expert Richard Murphy has estimated a total annual cost of £144 billion, or approximately 7 per cent of GDP.

There is also an ideological challenge to face. Coping with Covid-19 has greatly accentuated conflicting attitudes towards the public realm. The ideology that favours free markets and small states may be losing credibility, but it still stirs up doubt and defensiveness among centre-left politicians. The Social Guarantee is unashamedly about more collective action: rather than central government controlling every detail of public service, the framework favours a plural economy of providers, including local non-profits and social enterprises. It promotes devolution and citizen engagement. Through social licensing for all providers, it seeks to ensure that the public interest is paramount.

Lessons from the shortcomings, as well as the strengths, of the post-war welfare state have shaped the Social Guarantee so that it can be part of a new settlement fit for today's conditions and politics. It remains to be seen whether Labour will embrace it, but it is there for the taking.