Commission for Social Justice: Investors' Britain might just work: Central to the Borrie report is a link between prosperity and personal well-being. Ronald Gass assesses the vision

The two classical approaches to social justice in Western democracies are running out of steam. Cash benefits as the means of overcoming poverty have proved incapable of preventing social exclusion. Those who depend on benefits find it hard to get back into the system and fall off the ladder of opportunity.

Equality of opportunity through education - the route to reward based on merit - has failed to overcome the disadvantages of family and class for major groups in the population. The workplace, as well as the school, now has to contribute to equality of opportunity.

The Borrie Report on Social Justice recognises both these failures. It seeks to reconnect work and welfare and it seeks a new partnership between work and education. At a time when the economy is dominating political debate throughout the Europe, it pleads for a just society based on the redistribution of opportunities, not just the redistribution of income.

Does this amount to a credible alternative to the traditional policies of left and right?

The answer is to be sought in a fascinating chapter in the report, outlining the three futures between which, says Borrie, Britain must choose. The first scenario, described as Deregulators' Britain, consists of unbridled entrepreneurship in pursuit of wealth creation which, judged by the experience of the Eighties, fails to 'trickle down'. The second scenario, Levellers' Britain, is the search for social justice primarily through tax and benefit systems. This is the familiar ground of welfare-state orthodoxy.

Having dismissed the radical right and traditional centre-left versions of the future, Borrie plumps for the third option: Investors' Britain.

The Investors, according to Borrie, believe that the extension of economic opportunity is not only the source of economic prosperity, but also the basis of social justice. The Investors support investment in the skills of people through lifelong learning while giving priority to jobs, based on the principle that working for a living is the basis of opportunity.

They also affirm the 'Intelligent Welfare State', which brings together work and welfare, investment in social capital in order to have strong local and regional communities, and shifting the taxation system so as to 'invest in ourselves'. In a nutshell, you don't get 'active citizens' unless you invest in people and develop public policies to support them. It all comes close to the 'active society' concept pioneered by the OECD some years ago, but lost in the zeal for free markets, not least labour markets.

So far so good. But it has to be said that the Borrie architecture would crumble without a high rate of job creation. Without jobs there can be no social justice, to use the Commission's own jargon. The logic therefore leads to a debate on full employment. The snag is that the dominant macroeconomic view is that the only open route to jobs is through labour market flexibility, the codeword for getting people into the labour market by cutting costs to employers. Borrie, on the contrary, argues for a national minimum hourly wage.

Can this circle be squared? What comes to the Commission's rescue is the evidence from Clinton's America that pricing people into work creates a serious problem of the working poor. As Labor Secretary Robert Reich made clear at the Detroit Jobs Summit in March, the tax system now has to be used to lift workers above the poverty line. In France, former President Giscard d'Estaing has thrown into the arena the proposition that it is not the minimum wage that accounts for the high unemployment of workers with low skills, but the add-on employment- based taxes. This is where costs to employers could be reduced.

But if the Borrie recipe for full employment can resist attack by employers on the minimum wage proposal, it is rather less convincing on where the new jobs are to come from. Borrie argues that the high- productivity, competitive- traded sector would generate wealth but not employment growth.

A softer non-tradeable sector (mainly services), meanwhile, would use that generated wealth to support housing, education, personal and leisure services as the means for creating jobs. This more or less goes down the same road as the European Commission's White Paper on Competitiveness, Growth and Employment.

Rapidly changing societies certainly need a big service sector, as in the US and Japan, as an employment buffer. But the effects of the global, competitive economy are impinging on every sector and it could therefore be dangerous to accept that the mainstream competitive economy will not create jobs. In any case, many of the service sectors, such as travel, leisure, education and training interact with manufacturing activities such as transport and information technology. Services and manufacturing often go hand in hand. Moreover, service industries such as tourism are themselves an integral part of the global economy.

Europe's job creation gap has arisen because we have not faced up to the reality that in a period of rapid structural change about 10 per cent of jobs are destroyed every year. A much higher rate of enterprise generation is needed to keep the system going. Yet most public subsidies go to the dinosaur enterprises, and not to entrepreneurial talent exploiting new technologies.

What Borrie does is to recognise that in such a world the obsolescence of human capital is the most serious threat. The macroeconomists have slipped into writing off human capital like machines: an absurd position. The proposed Learning Bank to give everybody three years' education and training after A-level and to be drawn on over the life-cycle, is a sound proposal, if it can be afforded.

One of the most revolutionary proposals in the report is to finance this through a new social insurance system to cover the unemployment, maternity leave, sickness and retirement risks, but also to offer help with lifelong learning and parental leave. In other words, life-cycle social insurance will bring together work and welfare systems and relate them to household realities.

Add to this a National Community Regenerator Agency, the decentralisation of power to local communities and to Scotland and Wales, a national voluntary community service scheme and a hypothecated National Renewal Fund to finance important capital investment projects and you have the Borrie mix to make a good society based on two pillars: individual success through work and community strength to provide the social framework. 'Countries do not become strong because they are rich, they become rich because they are strong.'

This is the ideology of a resurgent Blairite left.

In all fairness, it should be said that there are parts of this vision which come from, or are at least common to, progressive conservatism. But anyway, may a long-term exile give three rousing cheers that the UK is putting social justice back on the European agenda.

The writer is former director of Social Affairs, Manpower and Education at the OECD, and now a consultant for the OECD and European Union.

Beatrix Campbell's column will appear tomorrow.

(Photograph omitted)