William Beveridge discusses his report at the Ministry of Information. Photo: AP/Rex/Shutterstocks
On 30th November, 75 years ago, in the middle of the Second World War, an anticipatory queue formed on London’s Kingsway, the then headquarters of Her Majesty’s Stationery Office.
Barely a fortnight earlier, Winston Churchill had ordered that the church bells be rung in recognition of Montgomery’s victory at El Alamein. It was the first domestic cause for rejoicing after three years of a war where there had been nothing to celebrate aside from the retreat from Dunkirk, the Battle of Britain, and stoic defiance of the Blitz. It was El Alamein—the first victory—that brought forth Churchill’s famous declaration that “Now is not the end. It is not even the beginning of the end. But it is perhaps the end of the beginning.”
The lengthening queue on Kingsway, however, was not focused on the end of anything; they were after a new beginning. They were there for the somewhat unlikely purpose of buying an often-immensely technical 300-page government-commissioned report, written by a retired civil servant, with the uninspiring title “Social Insurance and Allied Services.”
Much of the report was as hard going as the title suggests. But its 20-page introduction and 20-page summary, which were sold as a cheaper cut-down version, punchily dug the foundations on which the post-war welfare state would rest. These parts of the report were stuffed with inspirational rhetoric—“five giants on the road to reconstruction,” “a revolutionary moment in the world’s history is a time for revolutions, not for patching”: language that no government report, on any subject, has rivalled since.
In the context of the welfare state today, after seven years of austerity and with more to come, it is pretty hard to imagine news about anything other than cuts. The NHS is in the midst of the biggest squeeze in its history. Social care is in crisis. Spending per pupil is due to stop rising, and to fall in real terms. And entitlements to working age benefits—having been cut—are due to be cut again. Even back in the New Labour years, when the government was mobilising serious resources to make work pay and avoid the poorest families falling behind, there was almost an element of embarrassment about the endeavour. Certainly, nobody queued down Kingsway, Whitehall or anywhere else to hear about Gordon Brown’s tax credits, which were expressly designed to disguise a poverty-reduction programme as tax cuts, the calculation being that the war on want would be unpopular and so must be waged with stealth. Compared to 1942, it is another world.
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Here is not the place to tell the tale of how Beveridge’s vision of a modern welfare state was constructed nor the struggles that have followed over the succeeding 75 years, in which it steadily expanded to take up a much larger slice of a far bigger economy (see chart opposite). All of that is covered in my newly-updated book, The Five Giants. What I want to do here instead is to ask what on earth the Beveridge of 1942 would have made of the welfare state as it stands, 75 years on. It is not an easy question to answer with any precision, as so much has changed that he simply could not have foreseen. When he reported, the worry was not about an ageing population, but a declining one, and in his view it fell to “housewives as mothers” to put this right through their “vital work… in ensuring the adequate continuance of the British race.” Women may have been pouring into factories and flying unarmed Spitfires in the emergency of war, but expectations were still shaped by the pre-war world, where only one married woman in eight had worked. Thus, for married women, “provision should be made... with reference to the seven [the seven who did not work] rather than the one.” So married women gained less benefit in their own right than men. Gender is only the start. In 1942 the school leaving age was 14, and a vanishingly small proportion, just 3 per cent, of 18 year olds went on to university. Income tax rates were high. But only the decidedly better off paid any income tax at all. Britain still had a global Empire, but it had neither a remotely global economy nor any significant Commonwealth immigration. The closest thing Britain had to a computer was being operated in secret by Alan Turing, the BBC’s fledgling television service had been suspended for the war, and relatively few homes had a telephone. We were much younger: with fewer than 200,000 people aged over 85, against 1.5m today. And we were much poorer, with average inflation-adjusted income per head around a quarter of today’s figure. And so on and so on. But with all that said, Beveridge would recognise and be proud of the National Health Service, which, a few charges in England aside, fits his ideal, although he would be amazed at its size. He believed that the costs would fall once a mighty backlog of treatment had been dealt with. Instead, as in every other developed country, expenditure on endlessly-evolving modern medicine has risen faster than the economy. But healthcare, the overwhelming bulk of it still coming through the NHS, now consumes around one pound in 10 of our much enlarged national income. He would be much less happy about the condition of its Cinderella sister, social care. The 1945 Labour government claimed to have “abolished the Poor Law.” But its shadow lives on in the way social care remains first “needs tested”—a certain level of disability is needed to qualify—and then means-tested. If Beveridge was around today, cracking that and integrating this neglected service with health would be a target. He would recognise and broadly approve of the basic state pension, although he would have been decidedly cross at the way its value was allowed to sink for 30 years after Thatcher broke the earnings link in 1980. He would, however, endorse the cross-party way in which over the last decade—via the Turner Commission, Labour legislation, coalition implementation, and, so far, Conservative preservation—it has been rebuilt as what he originally intended: a near-universal minimum platform on which private saving can be constructed. Auto-enrolment into pensions wasn’t even an idea back in 1942. But this form of personal provision on top of that from the state would decidedly appeal to this liberal statesman. Beveridge would approve, at least in principle, of welfare-to-work programmes. His report recommended that men and women “unemployed for a certain period”—six months in periods of average unemployment, longer when it was higher—“should be required as a condition of continued benefit to attend a work or training centre… to prevent habituation to idleness and as a means of improving capacity for earning.” Those recommendations were not implemented in the days of full employment after the war. They seemed unnecessary. It was to take until the later 1990s, and in a much changed labour market, for welfare-to-work properly to take off. He would, however, be mortified that, 75 years on, we still haven’t solved what he dubbed “the problem of rent.” He devoted nine pages to it while acknowledging that the solution he proposed was inadequate. He would be appalled at the way rising private sector rents have turned what is now housing benefit into the equivalent of running up a down escalator—the bill rises remorselessly even as the quality of accommodation covered descends—in a housing market that the Conservative communities secretary Sajid Javid has candidly described as “broken.” And he would, of course, have been horrified that seven years of austerity have seen the return of food banks, the modernised equivalent of the old soup kitchens—75 years after his plan to abolish Want.
But when it comes to the way Want is remedied today, Beveridge would be bemused at how far means-testing—through tax credits, housing benefit, and now universal credit—now extend up the income scale. This has been one of the most enormous changes since his time, occurring over the 1990s and 2000s as the emphasis on the benefits system shifted from supporting people on condition they did not work, to supporting them to be in work, a response to the way globalisation was driving down wages at the lower end. With his knowledge of the 1930s, he hated means tests on similar grounds to Frank Field who has repeatedly argued that they “promote idleness, encourage dishonesty and penalise savings.”
But it is the flipside of all the means-testing that would have alarmed him the most—a spectacular erosion of the contributory principle, which had been the rock on which Beveridge built his plan. “Benefit in return for contributions, rather than free allowances from the State, is what the people of Britain desire,” Beveridge declared. Today, National Insurance is still collected on a vast scale—it is the government’s second largest source of revenue after income tax. But the basic state pension aside—and even there the link is diluted—the connection between contributions paid and benefits received has come close to disappearing. Since the 1990s, insurance-based unemployment benefits have only been paid for six months, after which the means-test bites; more recently, other insurance-based benefits have been similarly curtailed. All of that would have met with Beveridge’s stern disapproval. So there are as many negatives as positives on our brief and selective score card that we have presumptuously filled out on behalf of the Beveridge of 1942. But then the welfare state never was—or never should have been—something handed down on tablets of 1940s stone, never to be tampered with. It has, inevitably, had to adapt to the changing world. And there have been big advances as well as setbacks down the years. There is, for example, now a huge range of benefits for disabled people never envisaged in the 1940s. There has been the massive expansion in schooling and—notwithstanding the tuition fees row—a mighty explosion in higher education. Having spent next to nothing on early years and childcare 20 years ago, the UK has today one of the highest levels of spend in Europe. In the 1940s, and for decades afterwards, the great worry was the elderly poor; today, while there are still some poor pensioners, the elderly are the social group least likely to be at the bottom of the income distribution, a remarkable story of progress. While the welfare state is under all sorts of financial stresses and strains, even after austerity it takes roughly two-thirds of government expenditure, and around a quarter of national income, just as it has since the 1980s. The composition of that spending has changed—parts have shrunk (free teeth and specs, for example) or even vanished. But new limbs have been added, and the beast is still alive. The prognosis for it in the coming 75 years, however, will depend on the argument for it continuing to adapt in changing times. The most pressing question for its survival is not what the 1942 Beveridge would think about this or that aspect of today’s welfare state, but how a modern-day Beveridge might set about restoring the system’s popular appeal. In the era of ration-books and emergency wartime taxes, Britain became more equal, which made the “all in it together” spirit required to build the welfare state that bit easier to achieve. But over more recent decades inequality has widened hugely again. Inheritance has begun to bear more heavily upon an individual’s life chances, in ways that would have stunned and troubled Beveridge—he would, reasonably, have assumed it would continue to become less important, as it had already been doing for decades by 1942. Even in the egalitarian 1950s, the truly comprehensive social insurance system Beveridge desired was never quite achieved. It would be a much more difficult sell in a world where the poor struggle to pay the premiums, and the rich feel they don’t need the cover.
