FUNDING THE WELFARE STATE

Abstract

This paper examines the flow of funds for social security, health, education and housing services in the UK. It looks at the changing routes by which tax and other revenues fund such services; allocation of these funds, in particular the implications of the growth of decentralisation and 'quasi-markets' in public service delivery, cross-sectional, life cycle, and inter-generational distributional effects of welfare benefits and services taking into account revenue sources; and the effects of an aging population on likely future costs. The paper concludes that, while the future pressures on public welfare spending are much less severe in the UK than in other comparable countries, there remains a conflict between these upward pressures and political aspirations for lower taxes. The likely resolution of this conflict lies in greater use of indirect funding routes, including user charges compulsory transfers which by-pass government, and earmarked revenues for particular services. Copyright 1995 by Oxford University Press.