The politics of negative expansion

This thesis analyses a particular social policy episode: that of the turn to tax credits (instead of benefits) to support low-income groups in France and Britain in the 2000s. It asks about the rationale that led left-wing governments in both countries to deviate from institutional traditions in matters of income-support, and to instead use policy instruments pertaining to a seldom-studied domain of social policy: fiscal welfare, or tax provisions serving a social policy purpose.
Drawing on original archival sources and interviews with policymakers, the thesis reconstructs the genesis of the change of instrument in both contexts. It advances a novel explanation for the turn to fiscal welfare for income-support purposes: namely, that it was driven by left-wing governments' adoption, at that time, of a logic of negative welfare expansion. While welfare expansion is often synonymous with spending increases, negative expansion entails decreasing taxes instead. It involves taking less from low-income individuals instead of giving more to them.
In both countries, policymakers saw negative expansion through fiscal welfare as functionally equivalent to positive expansion through benefit increases, which allowed bypassing constraints on traditional income-support. Tax cuts were economically respectable instruments, at a time when concerns with economic credibility led politicians to avoid spending increases. Tax credits could also be used as a means of unifying different constituencies, at a time when governments aimed to assemble cross-class coalitions centred around middle-class voters.
As well as building a novel argument about the origins of the policies, this thesis also puts forward and investigates the notion that this turn had unanticipated political consequences. In particular, it argues that taking less is not the same as giving more when it comes to the formation of policy preferences and attitudes to redistribution. Using a mix of regression analyses and quasi-experimental designs, this thesis shows that the change of instrument failed to alter attitudes to redistribution towards low-income groups in the UK. Further, despite their generosity the British tax credits failed to generate lasting support among beneficiaries of the policy themselves. These findings suggest that the turn to tax credits led to an erosion of the overall support for policies benefiting low-income groups. Over time, policies implementing a negative expansion risk shifting the balance of preferences away from income-support.
This thesis also sheds light on the understudied phenomenon of fiscal welfare for low-income groups. Using microsimulation, it produces original estimates of the budgetary incidence and actual redistributive effect of fiscal welfare for low-income groups in six countries. The budgetary costs involved are in the same order of magnitude as amounts spent on family benefits. Looking at the redistributive incidence of these schemes reveals an important pattern: often times, schemes ostensibly designed to benefit low-income groups actually have a regressive impact.

Keywords: Politics of social policy
Fiscal welfare
Welfare expansion
Attitudes to spending and taxation
New Labour
Redistribution
Left-wing parties
Parti Socialiste
Advisor: Nolan, B
Ebbinghaus, B