The enemies of social security are not letting a good crisis go to waste. In his FT column this week, George Osborne’s biographer Janan Ganesh argued that “Europe must trim its welfare state to build a warfare state.”
There are signs that the Labour government, however reluctantly, is buying into this logic, with Rachel Reeves’s Treasury briefing the “world has changed,” making deep cuts to services and benefits inescapable. Payments to sick and disabled people, extraordinary numbers of whom already report going cold and hungry, will be reduced. A Whitehall review will soon confirm that Osborne’s two-child welfare limit is impoverishing ever-more kids, but it will not be scrapped. The most that might be done is to protect younger siblings in large families until they turn five—at which point their household would lose the benefit, an unhappy birthday present of a £3,000+ income cut.
Amid this dismal “debate,” it is useful to look back 85 years to a moment when Britain faced a considerably more terrifying rearmament challenge than it does today. In 1940—with neither the Soviets nor the Americans yet in the war, and Britain standing alone—John Maynard Keynes was not in the bullish “borrow and grow” mood that he had summoned to fight the Depression, the mode for which he is still best remembered today. Instead, he was deeply worried about resource constraints, shortages and potential inflation. This was the forgotten respectable Keynes, whom the Treasury invited in and suddenly found a desk for. He was crystal clear that households would have to make sacrifices in what they consumed to free up the resources for the warfare state.
Keynes, then, would agree with Ganesh up to this point—but not an inch further. The core of his influential 1940 pamphlet, How To Pay for the War, was not a call to curb Britain’s already well-established unemployment benefits and pensions. Instead, he suggested a compulsory scheme where forced savings were taken out of income and put into government IOUs or, as he put it, “deferred pay”. (A version of this did come into being, and “savers” were still being repaid their inflation-eaten postwar credits into the early 1970s.) That, however, was certainly not the end of the matter, because Keynes also acknowledged the need to “satisfy the ideals of social justice” at the same time as squeezing pay packets.
This required two further moves. First, considerably higher taxes which, unlike the deferred pay scheme, would be squarely aimed towards the top, with “the bulk” falling on those pulling in the then-comfortable sum of £250 or more. Secondly, and more counter-intuitively, Keynes demanded that living standards for families at the bottom-end be protected by a new system of family allowances, with a cash payment for each child without exception up to the age of 15. He conceded it may seem “paradoxical” to propose “an expensive social reform” in wartime, yet insisted that when living standards “depend very largely” on family size, the need for family benefits was all the greater in days of collective sacrifice.
The logic of Keynes, therefore, is precisely the opposite of the logic we risk following today. Instead of maintaining some version of the two-child limit due to exigencies of rearmament, he would argue that the inevitable collective sacrifices of this moment provide all the more reason to press on with its early abolition.
The folk memory of 1945—and especially the Labour folk memory of 1945—is the building of a New Jerusalem on the ashes of the battlefield: “we’ve won the war, now let’s win the peace.” One problem with this account is that it leaves the welfare state vulnerable to the attack, aired by Ganesh, that it was only ever “the product of strange historical circumstances, which prevailed in the second half of the 20th century and no longer do.”
Another problem with this history is that it is simply inaccurate. The reality is that the Second World War, unlike the First, was a “People’s War.” The peace was already beginning to be “won” before the fighting stopped, with the Beveridge report, the famous employment white paper that promised jobs for all, and the Butler Education Act. Yes, some of the other reforms had to await postwar legislation, but all the principles were already set, and the thinking had already been done—which is why the Attlee administration produced the most effective burst of social reform that Britain has ever experienced.
There’s no doubt the security situation in Europe is serious. Maybe—as the prime minister and chancellor seem to fear—we truly are in for a new age of sacrifice. But if so, rather than swallow the logic of Conservative pundits, the government should summon up the same spirit of truly shared sacrifice that Keynes proposed—and at a moment when the sacrifices needed were incomparably greater than today.
