The Five Giants [New Edition]: A Biography of the Welfare State

Jim Griffiths, to whom would finally fall the implementation of Beveridge, capped that from the Labour benches with an even stronger call for immediate implementation. In the cruel but clever way of politics Herbert Morrison – possibly as a punishment precisely because he had been the most overt supporter of Beveridge in the War Cabinet – had been given the task of winding up for the government at the end of the third day. Faced with defending a negative policy that he had tried to make more positive, he produced what Jim Griffiths was to call ‘the best debating speech Morrison ever made’, underlining those parts (sixteen of the twenty-three recommendations) that the government did accept even if it did not yet intend to act.25 The speech did enough to stop the Conservatives from rebelling. But 121 MPs from the Labour, Liberal and Communist parties together with 11 independents voted with Jim Griffiths. Among them was David Lloyd George casting his last ever Commons vote. It proved one of the biggest revolts of the war against the government. More than one historian has seen it as a defining moment in Labour’s 1945 election victory.26

The debate finished on 18 February and in the course of that month six by-elections, ‘a general election in miniature’,27 were held. The Beveridge report featured strongly in each campaign. In four of the six seats the Conservative vote dropped by 8 per cent even though Labour and the Liberals did not stand. The Home Intelligence department of the Ministry of Information was reporting ‘a disappointed majority’, adding ‘the Government is thought to be trying to kill or shelve the report.’28

Churchill reacted. On 21 March 1943, in a broadcast entitled ‘After the War’ – his first wartime broadcast to concentrate on the home front – he continued to warn against imposing ‘great new expenditures on the State without any relation to the circumstances which might prevail at the time’.29 But recognising ‘a duty to peer through the mists of the future to the end of the war’ he promised a four-year plan ‘to cover five or six large measures of a practical character’. These would be put to the electorate after the war and implemented by an incoming government.

He did not mention the Beveridge report by name, an omission that can only have been deliberate. But he promised ‘national compulsory insurance for all classes for all purposes from the cradle to the grave’. It was, he said, ‘a real opportunity for what I once called “bringing the magic of averages to the rescue of the millions”.’ To that he added the abolition of unemployment. ‘We cannot have a band of drones in our midst, whether they come from the ancient aristocracy or the modern plutocracy or the ordinary type of pub-crawler’, and the voice of Keynes could be heard in Churchill stating that government action could be ‘turned on or off as circumstances require’ to control unemployment. There was, he accepted, ‘a broadening field for State ownership and enterprise’ and his vision included a housing drive, educational reform, and much expanded health and welfare services. ‘Here let me say there is no finer investment for any community than putting milk into babies.’30

Thus it was Churchill, rather than Beveridge, who defined social security as running ‘from the cradle to the grave’ – a phrase used by both the Daily Mirror and the Daily Telegraph on publication day – as he signed the wartime coalition up to it. What Lord Woolton, the future Tory party chairman, was to call ‘the shandy gaff’ of Conservatism and Socialism, which was to dominate post-war politics for thirty years, was beginning to emerge.31

Churchill’s initial opposition to Beveridge needs explaining. First and foremost his attention was fixed firmly on winning the war, without worrying much about what was to come afterwards beyond hazy notions of some continuation of the coalition with himself at the head. This was, after all, still only ‘the end of the beginning’. D-day remained eighteen months away. Second, he had to hold together a coalition which contained Labour but also a Tory party that was itself divided on the plan. Third, his doubts over the affordability of the proposals can be seen as genuine. And fourth, despite the fact that Beveridge had constructed something that Churchill would recognise and had himself implemented thirty years earlier – social insurance – the new plan was very different in character.

The social insurance Churchill had helped introduce had been designed, broadly, for the working classes, with the Poor Law in reserve as the ultimate safety net. The better off had been excluded from the state-organised unemployment and health schemes. Beveridge’s plan was thus not ‘the cause of the left out millions’ which Churchill had espoused as young man, but the cause of all the millions.

And finally Churchill had been infuriated by Beveridge’s determination to get the government to act immediately, as revealed both in the repeated pleas in the text of the report and in the pre- and post-publication publicity that he had sought. The Prime Minister was reported ‘to have taken strong exception to the report, to have refused to see the author and forbidden any government department to allow him inside its doors’.32 Churchill proved, however, on one level as good as his broadcast word, while on another getting his way. A month after the broadcast a Whitehall committee chaired by Thomas Sheepshanks was set up to consider implementation of Beveridge’s report, eventually producing a White Paper on Social Security in 1944.33 The same year the government published White Papers on a National Health Service and on Employment Policy, set up a Ministry of National Insurance, and delivered the 1944 Education Act. A housing White Paper followed in March 1945 and on 11 June, as virtually the final act of the coalition government, the Family Allowances Act became law. It provided five shillings (25P) a week for the second and all subsequent children to every family in the land – real money at a time when the average male manual wage was £6. The first universalist benefit of the modern welfare state had been created, even if its actual payment fell due under a Labour government. Yet only to that, and to the Education Act whose financial impact in mid-1945 was yet to be fully felt, did Churchill commit significant sums of the taxpayers’ money ahead of a general election.

Beveridge himself – who in March had spoken from a Liberal Party platform on the theme of ‘a people’s war for a people’s peace’34 – set to work on a follow-up report on how to achieve full employment. But he found himself frozen out of Whitehall, the Treasury officials whom he had invited to join his study withdrawn. The government refused to commission his report: indeed, it worked frantically to get out its own White Paper, which proposed a ‘high and stable level of employment’ ahead of Beveridge’s Full Employment in a Free Society. Jose Harris judges that the way he had courted massive advance publicity for the 1942 report ‘was seen by many people inside Government as a flagrant breach of Whitehall conventions and as an attempt to usurp the powers and functions of the regular policy making machine’.35 He was not to work in Whitehall again until 1949, when the Labour Government appointed him to head an inquiry into the BBC monopoly.

CHAPTER 3

A very British revolution

It was the totalizing ambition of his [Beveridge’s] report that made its proposals so striking; the complete coverage against risks for all people. All for one and one for all. The Three Musketeers meet the Government Actuary.

Peter Baldwin, ‘Beveridge in the longue duree’, York Papers, Vol. A, p. 30

A LAYMAN READING the Beveridge report today is likely to be impressed not just by the way it provides the blueprint – if one that was far from entirely followed – for the modern social security system; nor only by its trumpet calls for the creation of the other giants of the modern welfare state. Even more striking, it contains almost all the key arguments that have raged about the welfare state since its publication.

You could almost believe, listening to the debate about its future down the years, that despite very changed circumstances there is nothing new under the sun. Indeed, from one of the many faces of the prism through which the report can be viewed, its proposals for social security may best be seen not as a great innovation but as an attempt at a knife-edge balance between competing and quite possibly irreconcilable goals. Beveridge also confronted a series of issues that neither he nor anyone in the succeeding fifty years has managed satisfactorily to settle. Chief among this group were: the seemingly easy question of what is meant by poverty; how to cope with housing subsidy; and the treatment of women within the social security system. Chief among the competing goals were the desire to provide security as of right, set against incentives for work and saving; and the balance between individual freedom and compulsion – compulsion for the good of all and for the good of the individual.

It may be a truism, but before you can abolish poverty you have first at some level to decide what you mean by it. Poverty was not a word Beveridge used. Throughout the report he settled for the then common synonym ‘Want’. It was his bold claim that Want could be ‘abolished’ which gave the report much of its popular appeal. As Tom Wilson put it, ‘the general public understood what was intended, and that was enough to win their enthusiastic support.’1 But poverty has to be defined, and a minimum income quantified, if it is to be avoided.

Beveridge’s answer was a ‘subsistence’ income, a term he defined as meaning ‘benefit adequate to all normal needs, in duration and in amount’.2 He instantly conceded that there were ‘unavoidable difficulties’ in putting cash figures on such a concept. He had, none the less, to do so; and to set his benefit rates Beveridge drew extensively on the work of Seebohm Rowntree, the British Medical Association, a League of Nations study, and figures from the government-run Family Budget Survey which covered food, clothing, fuel, light, household sundries and rent. In several places the report suggests that the benefit levels he recommends are scientifically based,3 and he specifically criticises the levels of benefit set before the war precisely because ‘none of them were designed with reference to the standards of the social surveys.’4 But his report is also full of the uncomfortable recognition that any definition of poverty is subjective. The science behind his benefit levels gave them some justification, but it remained an imprecise and subjective science.

Plainly a homeless, shoeless, starving figure in the December snows is poor. Victorian England had plenty of those, and many more people living at standards not much better. Rowntree and Booth in the 1890s did much to categorise and quantify what was only too plainly to be seen. Move much above that level, however, and poverty becomes subjective and relative. Even the precise amount of food needed to avoid poverty is open to argument, and it would be hard to contest that the poorest Edwardian slum dweller was not better off than the starving victims of Somalia’s or Rwanda’s wars in the 1990s. It was the rediscovery of this blindingly simple concept that was to put one of the final nails in the coffin of John Moore’s career as Secretary of State for Social Services forty-seven years after Beveridge wrote his report.

Beveridge was well aware of the problem. ‘Determination of what is required for reasonable human subsistence is to some extent a matter of judgement,’ he conceded early in the report. ‘Estimates on this point change with time, and generally, in a progressive community, change upwards’5 – the very point with which John Moore was to have such difficulty. Equally, Beveridge conceded that neither could ‘any single estimate, such as is necessary for the determination of a rate of insurance benefit, fit exactly the differing conditions of differing households’.6 For all the evidence he cites for arriving at his cash benefits, there is no real attempt to hide the essential arbitrariness of the exercise. Time and again he uses phrases such as: It is reasonable to put the allowance for clothing as …’7 or ‘It is suggested that [a particular sum for other items] … should be adequate.’8 The argument about whether his benefit scales, or those introduced by the Labour Government, actually provided a subsistence income, and whether mere subsistence – freedom from physical want – was in itself a sufficient goal, was to rage on long after his report was published.

There were other difficulties. People on his subsistence income might not necessarily spend their money with ‘complete efficiency’. The basic calculations, he said, assumed that the recipient ‘buys exactly the right food and cooks and uses it without waste. Some margin must be allowed for inefficiency in purchasing, and also for the certainty that people in receipt of the minimum income required for subsistence will in fact spend some of it on things not absolutely necessary.’ He thus threw in a margin of 2s. od. for a couple and 1s. 6d. for a single adult.’ In addition he touched on an issue which would grow in importance as even the full employment enjoyed in the post-war years failed completely to wipe out long-term unemployment.

Strictly the figures for clothing and one or two minor items relate only to short periods of unemployment and disability, during which expenditure on renewals can be postponed; more will be needed in prolonged interruption of earnings. On the other hand, there should be room for re-adjustment in such matters as rent or retrenchment in the margin [the margin referred to above which allowed for inefficient or inessential spending]. On the whole, it seems fair to balance these considerations against one another and make no change in the benefit as between short and long interruption of earnings during working years.10

Beveridge, to be fair, stated quite openly that he was designing his system to cope with ‘normal cases’, a phrase he repeatedly used. He was bringing Churchill’s ‘magic of averages’ to the average person. Insurance could not in fact cope with everything, and beneath the insurance plan there had still to be a safety net — National Assistance, or what later became income support. That would still be needed ‘to meet abnormal [my italics] subsistence needs’.11 Under Beveridge’s assumption of full employment, long-term joblessness would be abnormal.

Then there was rent, an issue which resolutely refused to be normal. In 1947 owner-occupiers made up just 26 per cent of households. A mere 13 per cent of households were council tenants, the remainder renting privately in one form or another.12 Then as now there were wide variations in rent for the same quality and size of housing – more than a tenfold difference. Beveridge struggled with whether to pay an average allowance for rent. The effect of that would be to leave those in more costly homes below subsistence level once they had paid it, and those in cheaper homes than the average better off financially. The alternative was to pay rent in full for pensioners and the insured unemployed as already happened for those on means-tested national assistance. That, however, raised problems of incentives, about which Beveridge was particularly hard-nosed when it came to the elderly. If rent was met in full for pensioners, ‘it will appear indefensible that those who just before retiring have been able to secure good accommodation at a relatively high rent should thereby retain this advantage for the rest of their lives, in kind if not in cash, as compared with those who have been less fortunate or less foreseeing. On the other hand, if those who are already drawing pension on the basis of one rent are free to move to more expensive accommodation and have their pension increased accordingly, pensions will come to look like subsidies to landlords.’ Had Mrs Thatcher’s government in the 1980s taken a similarly tough view, it would not have designed the poll tax specifically to take account of little old Tory ladies rattling around on their own in large houses from which their children had fled; and history might have been different.

Rent was one of three ‘special problems’ Beveridge identified, and after many hours of work and nine pages of discussion in the report, he recognised that he had failed to solve it – that it involved bigger questions such as housing policy and the distribution of industry. Beveridge went for a flat rate allowance within unemployment benefit,13 admitting he was having ‘to make the best of a difficult situation’. The Labour Government in 1948 dropped that idea and instead met actual housing costs, subject to a means-test. How housing costs should be handled was to remain a permanent thorn in the flesh of the welfare state.

Women also posed problems, given the scheme Beveridge had devised. Indeed in his original ‘heads of a scheme’ he acknowledged: ‘The treatment of married women is one of the most troublesome problems in social security.’14 Feminist writers (and not only feminist writers) have bitterly attacked Beveridge for his views and recommendations. There is some justice in that, but only some. The assaults tend to ignore that Beveridge was of his time and that if he failed to foresee radical changes to come, then that foresight was also denied to many others. In fact his recommendations did much to improve women’s position. Before his report single women enjoyed virtually the same right as men to unemployment benefits if in work, but only means-tested assistance if they had never worked or had not paid enough contributions. On marriage, women became ‘adult dependants’ on their husbands and, apart from the maternity grant, they had no rights under the health insurance scheme. ‘None of these attitudes is defensible,’ Beveridge declared.15

By the time he was writing, women were pouring into the workforce: an extra 1.8 million were recruited into industry alone between 1939 and 1943, in addition to those who joined the armed forces and took other work. In 1940, the qualifying age for their pension had been dropped to 60, to encourage them to undertake war work. It was the start of a dramatic change in women’s role and status. But Beveridge shared the widespread assumption that after the war, as after the First World War, women would simply go home to be housewives. The 1931 Census (the most up-to-date figures Beveridge had available) showed that more than seven out of eight married women did not work. As he told the committee, ‘provision for married women should be framed with reference to the seven rather than the one’;16 so he assumed in the report that ‘during marriage most women will not be gainfully employed’.

Beveridge also shared another common concern. Britain was seen to have ‘a population problem’ – not as in the 1970s of potentially too many people, but of potentially too few. During the 1930s the birth-rate had fallen. In fact by 1942 it was rising, a product of a record number of marriages on the eve of war and a sharp rise in illegitimacy,17 but Beveridge was not to know that. ‘In the next thirty years,’ he said in the report, ‘housewives as mothers have vital work to do in ensuring the adequate continuance of the British race,’18 adding later: ‘with its present rate of reproduction, the British race cannot continue; means of reversing the recent course of the birth rate must be found.’19 He not only expected married women to be housewives, he also wanted incentives for marriage and child-bearing. He therefore recommended a marriage grant (that was never implemented), maternity grant, maternity benefit for thirteen weeks for those in work, family allowances and widow’s benefits; and in addition women and children were to fall within the ambit of the new, free, national health service. The package as a whole ‘puts a premium on marriage, in place of penalising it’, he declared.20

In addition to the cash that was to be paid as family allowances to ensure ‘subsistence’ both in and out of work, Beveridge also wanted to keep tax allowances for children. In that decision lay the seeds of the great Child Benefit battle. He in part wanted them retained because he held mildly eugenidst views. Although he did not say so in the report, he believed the tax allowance, which is worth more to the better off, would encourage the middle and professional classes – ‘the more successful’ in society, as he put it – to have more children.21 (Similar reflections about the desirability of who should do the breeding were to sink Sir Keith Joseph’s chances of leading the Tory party thirty-three years later.) He thus clothed his recommendations for women in pro-marital and pro-women rhetoric. Marriage gave women a ‘new economic status’ and they should thus begin ‘a new life in relation to social insurance’.22 Recognition that housewives performed ‘necessary service not for pay’ even led Beveridge, after much agonising about whether it would encourage family break-up, to recommend a rather unsatisfactory separation benefit to be paid when marriages broke down – unless, of course, the woman was the guilty party. This, too, was never implemented.

Beveridge did not formally oppose married women working. Indeed, he proposed benefits for those who did through a special lower rate of national insurance contribution which they had the choice of paying – although it produced lower unemployment and disability benefits as it was assumed that the husband would already be providing a home to live in. But work by married women was likely to be ‘intermittent’, Beveridge believed, and he did not see the income from it as a crucial part of the household’s financial survival. All this stemmed from his view that benefits should provide only a basic income and that man and wife were ‘a team’. Thus the woman’s pension, and her entitlement to benefit during her husband’s unemployment and disability, came from her share in that partnership. This even stretched to the old age pension being notionally cast as a pension for a couple that was reduced for single people, rather than being seen as a single person’s pension to which extra was added for a dependant. Beveridge disliked the concept of wives as dependants, and he argued that his proposals ended that. The description ‘adult dependant’, he said, should be reserved ‘for one who is dependent on an insured person but is not the wife of that person’.23

His concept of the married woman’s role – and crucially his rhetorical recognition that she derived rights from her ‘vital unpaid service’24 – proved in tune with the times. Mass Observation recorded 70 per cent of women giving the report, with its recognition of the value of unpaid women’s work, unqualified support.25 Some did see through the rhetoric, recognising that the improvements Beveridge’s proposals undoubtedly brought did not fundamentally change the married woman’s position. Elizabeth Abbott and Katherine Bombas, for example, in a 1943 pamphlet for the Women’s Freedom League, argued that ‘the actual proposals … leave her as before, a dependant and not a partner’.26

In fact the framework Beveridge had chosen – a work-based scheme, founded on employee contributions – inevitably left women who did not work dependent on their husbands’ contributions. The other failures of the scheme included its inability to deal adequately with the large post-war rise in single parenthood, divorce and separation, but to blame Beveridge for that is a little like blaming medieval armourers for not foreseeing the effects of gunpowder. In 1938 there were just 10,000 divorce petitions. By 1945 the number had increased two and a half times, but still only to 25,00027 – a tiny fraction of their twentieth century peak of 183,000 in 1995.

Disability, too, presented difficulties. For those injured at work a separate industrial injuries scheme could be created. And for those not injured at work who simply became disabled, unemployment benefit was available if they had paid sufficient contributions. Others, however, would have to fall back on means-tested national assistance and local authority services. Carers do not feature in the report, in part because if married women are not expected in the main to work, they are there for other ‘vital duties’. And Beveridge could not have foreseen the extent to which medical science would preserve life among many more people who acquired their disability at birth or in childhood and so never had the chance of qualifying for non-means-tested benefits through insurance contributions.