The UK is distinctive in having the most liberal market-oriented welfare system in the European Union and the most majoritarian governmental system, capable of rapid and decisive action. The 1997 New Labour government abandoned the traditional neo-Keynesian/social democratic approach of the party and embarked on a programme of market-oriented welfare state reform. This reflects many aspects of policy direction (pursued more gradually and under different circumstances) elsewhere in Europe, and advocated in the European Employment Strategy and OECD proposals. The UK is thus a suitable test case to assess the impact of a new departure in welfare policy: welfare ends through market means. This paper shows that New Labour has achieved real successes in mobilising the workforce, broadening opportunities for women and reducing poverty. However, the approach faces intractable problems in stimulating and regulating private providers of welfare, and limitations in the extent to which it is able to reduce poverty among those of working age who are not in the labour market. These result from the incompatibility between welfare and market objectives: secure, adequate incomes for all, and work incentives for citizens and market freedom for providers.
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