ABSTRACT The post-war settlement rested on confidence that state welfare combined with neo-Keynesian economic management supported economic progress and enhanced social stability. New approaches from the 1970s onwards inspired by monetarism saw extensive state welfare as a damaging economic burden. The welfare settlement that is currently emerging in European debates argues that a welfare state centred on social investment, combined with appropriate de-regulation and use of social benefits to support employment mobility can again contribute to economic and social objectives in a virtuous spiral of growth and justice. In practice, however, most European states have been far more successful in what might broadly be called negative activation (less regulation, restrictions on passive benefits and targeted help for high-risk groups), than in investment to enhance the knowledge base and improve mobility. The differences between the new social investment welfare state and more limited de-regulated welfare system seem to be less marked in practice than the tenor of policy debate implies.

Market principles are becoming more prominent in citizen experience of public policy across Europe, as a result of economic globalization and the Maastricht commitment to ‘open markets’, and cost-constraint, privatization and labour market activation pursued in response to the various pressures confronting welfare states. These principles (inequality, competitiveness, allocation through ability to pay) contradict those traditionally associated with social policy (equity, solidarity, social justice). This paper examines the impact of current changes on welfare values in the various types of European welfare states (including accession states), using international attitude survey data. It shows that most citizens remain committed to mild egalitarianism. Citizen ideology will thus continue to buttress resilience to pressures for restructuring in the various welfare state regimes. The paper goes on to consider the impact of social change by examining the values of groups with particular interests who are likely to expand in significance as a result of labour market and population changes. This analysis shows that change does not lead in one direction. There is every likelihood that tensions between market and welfare values will be compounded by social change.