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

One issue should perhaps be dealt with here because it stands outside the narrative. In the mid-1980s, Correlli Barnett’s brilliant and detailed polemic The Audit of War helped influence Tory hostility to the welfare state. Barnett saw the ‘New Jerusalem’ of the welfare state itself, along with the historic and continuing failure to organise high-grade technical education, as the twin causes of Britain’s relative economic decline. His thesis has been widely debated elsewhere and by others far better informed than I. But while the second half of his argument has force, the first seems overstated. Other Western countries also developed modern and much more extensive welfare states after the Second World War, most ended up spending appreciably higher shares of their income on them than Britain did – and almost all achieved higher growth rates.2

Britain, physically less scarred by war, had laid the foundations of its welfare state earlier. But to argue that it crippled the economy seems, in Sir Alec Cairncross’s phrase, ‘badly out of focus’. Cairncross calculates that spending on education, health, housing, pensions and unemployment benefit reached about £1.5 billion in 1950 – half as much again in real terms as before the war. But defence expenditure never ran below £750 million after 1945, roughly twice as much in real terms as in 1938, and reached more than £1400 million again in 1952. Food subsidies, which are arguably a part of the welfare state but are also an economic regulator put in place to keep prices down, cost approaching £500 million in 1949 – more than any single social service.3 Almost £2.5 billion in cash compensation or commitments to interest-bearing stock went through the national accounts after 1945 to pay for nationalisation.4 To argue that any one of those caused Britain’s relative post-war decline would be as logical or illogical as to argue that the welfare state did. The causes are complex, not singular or bipolar. They involve such measurables as the loss of markets and capital base during the war, and Britain’s post-Imperial role after 1945 as the world’s third largest military power and international policeman. They equally involve such immeasurables as to how far the country felt it needed to strive, having just won the war, and why labour relations, and hence productivity, were so bad. Indeed, to argue that the welfare state should not have been established, or should not have been established yet, is to ignore political reality. A country which had covered large tracts of East Anglia in concrete to launch bomber fleets, and the south coast in Nissen huts to launch the largest invasion the world had ever seen, could hardly turn round to its citizenry and say it was unable to organise a national health service; that it couldn’t house its people; or that it would not invest in education. Furthermore, compared to pre-war levels, the big surge in welfare state spending started in the late 1950s, not in the immediate post-war period which Barnett rightly identifies as one of the critical periods when Britain failed to invest in its industrial base. But that begins to jump ahead in the story.

Before we start, a word about definitions is needed. There is no agreement about what constitutes ‘the welfare state’. Even the origin of the phrase is the subject of learned dispute.5 It was popularised in Britain in 1941 by an Archbishop of York and only adopted by Clem Attlee in time for the 1950 election. The Oxford English Dictionary used to be a little slow, but the phrase only reached the dictionary’s addenda in 1955 and with a definition we would now use in 1964.6 At times its boundaries have been drawn so tightly as to exclude most of the social security budget, limiting it to what the Americans call ‘welfare’: payments to the poor plus what we, in the national accounts, still call ‘welfare foods’. At others, as in Pauline Gregg’s 1967 book The Welfare State, it has been drawn to embrace virtually the whole of the economic and social history of Britain from 1945, including nationalisation, the neo-corporatism of NEDO, and beer and sandwiches at Number Ten – the aspects of Britain as a welfare state that Baroness Thatcher plainly did want to roll back in 1979, and over which she was largely successful.

The phrase also suffers the drawback of being static, as though ‘the welfare state’ were a perfect work, handed down in tablets of stone in 1945, never to be tampered with. Even to use the phrase is to set artificial frames. As an entity it does not exist – it is a collection of services and policies and ideas and taxes, including tax reliefs, whose boundaries expand and contract over time. It can never, at any one moment, be said to have been assembled or dismantled. Beveridge hated the phrase and refused to use it, disliking its ‘Santa Claus’ and ‘brave new world’ connotations.7 I would rather not have had to.

For this book it is defined in the strictly limited sense of representing the antonyms to the ‘five giants on the road of reconstruction’ which Beveridge identified, the policies and services created to combat Want, Disease, Ignorance, Squalor and Idleness. Even here, boundary problems proliferate. Is legal aid part of the welfare state or not? Is planning, given that the New Towns clearly were? Is training, given that much of it has always been employer-funded, and yet it is a subject closely linked to education and one in which governments inevitably get involved?

The imperfect solution to these quandaries has been to be deliberately eclectic and to write about what most interests me. This decision extends to the book’s coverage of the mainstream services of health, education, social security, housing, social services, and, in lesser detail, employment policy. Thus it is possible to read The Five Giants and scarcely know that nurses exist or that Commonwealth immigration, which greatly affected the welfare state and was greatly affected by it, took place. The development of family planning – a profoundly controversial subject at the time – rates only a sentence or two. Social work is covered, but sketchily, it being one of those subjects where if you scratch too far below the surface you fall into an extremely large hole. The book distorts by omission. Welfare foods and food subsidies which at times consumed large sums of taxpayers’ money are barely mentioned; nor is the tobacco concession of two shillings and fourpence a week that, up to 1957, went to those pensioners who were prepared to swear that they smoked, in order to compensate them for a hike in tobacco tax in the 1940s. School examinations are only touched on. By no means all changes to benefits or housing subsidies have been charted, and training receives the lightest of looks. The list could go on. The excuse is twofold. First, even in a book this size, not everything can go in. As one former permanent secretary put it: ‘You have to remember that every minister who went through here wanted to leave his or her mark on the system and very few of them failed entirely.’8 He was speaking of social security; but his remark could apply to any of the government departments or subjects covered. And second, I had a tale to tell. There is a lot of detail here. But too much detail, too many by-ways and sub-plots, can spoil a story worth telling. The Five Giants, then, is not a book of accounting, or even of analysis, though there is a little of each within it. It is primarily a biography of a subject still very much alive. I hope it proves worth reading.

NICHOLAS TIMMINS

January 1995

PART I

THE PIPERS AT THE GATE OF DAWN

CHAPTER 1

‘Thank you, Sir William’

In every country it is unfortunate not to be rich; in England it is a horrible misfortune to be poor.

Alexis de Tocqueville, Voyages en Angleterre et en Irlande en 1835

‘They used to tell me I was building a dream …’

E. Y. Harburg, ‘Brother can you spare a dime’, American song of the Great Depression, opening line

At this stage of the war, the main ideas of reconstruction were in their first bloom, but largely, also in a state of suspended animation. Like the sleeping beauty, they awaited the prince’s kiss. In almost every field of reconstruction, Beveridge’s report of December 1942 was to be the decisive breath of life.

Paul Addison, The Road to 1945, p. 171

IN JUNE 1941, Sir William Beveridge was called in by Arthur Greenwood to be offered a job. Greenwood was the Labour Minister for Reconstruction in Britain’s wartime coalition government. Beveridge was an egotistical sixty-two-year-old civil servant who believed his destiny was to organise key parts of Britain’s war effort. He was asked instead to chair an interdepartmental committee on the co-ordination of social insurance. The task hardly sounded inspiring. With tears, not of joy but of bitter disappointment, in his eyes, he accepted.1 It was the strangest of starts to one of the greatest of adventures – the founding of Britain’s modern welfare state.

Beveridge’s reaction was perhaps not surprising, for he was no ordinary civil servant. He was already well known as a radio broadcaster, academic, public servant and newspaper columnist; a man with more careers behind him than most ever enjoy. He was also by any standard, despite his detractors (of whom there were plenty), a member of the Great and the Good, at a time when such a class was perhaps more easily defined than at the start of the twenty-first century.

Born the son of a British judge in India in 1879 into a house staffed by twenty-six servants, he was schooled at Charterhouse. At Oxford he read mathematics and classics before, in 1903 at the age of twenty-four, he became in effect an Edwardian social worker and researcher at Toynbee Hall, the university foundation for the poor in the East End. It was there that ‘he learned the meaning of poverty and saw the consequences of unemployment’.2 The impoverishment of this part of London was to affect others in the tale of Britain’s welfare state, including Clement Attlee and Sir Keith Joseph, even if the conclusions each was to draw from the experience were to be rather different.

At Balliol, Beveridge recalled, the Master, Edward Caird, used to urge his charges ‘to go and discover why, with so much wealth in Britain, there continues to be so much poverty and how poverty can be cured’.3

Oxford and Toynbee Hall triggered in Beveridge a lifelong interest in unemployment and broader social questions, turning the young man into a social reformer, but one whose academic training convinced him that policy should be based on exhaustive research and detailed analysis. In his autobiography, Beveridge characterised his own progress at the time as being from ‘Oxford to Whitechapel, Whitechapel to Fleet Street, Fleet Street to Whitehall’.4 On the way, however, there had been a visit early in 1907 to Germany, where he had studied the systems of compulsory social insurance for pensions and sickness, though not yet for unemployment, which Bismarck had introduced in the 1890s. It was an important and fitting lesson, for Bismarck’s is the only name to rank above Beveridge’s as a welfare state designer, although of a rather different model.

Late in 1905 the twenty-six-year-old Beveridge, on a recommendation from Caird, was installed as a leader writer at the Tory Morning Post, a newspaper which eventually merged with the Daily Telegraph. There he was given licence to write on social policy and advocate labour exchanges and unemployment insurance, drawing on the forms of social insurance he saw in Germany. That work brought him to the attention of the thirty-three-year-old Winston Churchill, who four years earlier had crossed the floor of the Commons from the Conservative to the Liberal benches. In July 1908, Churchill brought Beveridge into the Board of Trade as a fulltime civil servant. Over the next three years, Beveridge played a crucial role in the creation of a national network of labour exchanges of which he became the first director; and then in the formation of the world’s first, if initially highly limited, statutory insurance scheme against unemployment. The measure was introduced in 1911 by David Lloyd George and by Churchill, who by 1906 had become so imbued with the cause of social reform that he declared Liberalism to be ‘the cause of the left-out millions’.5

In government service, Beveridge had seen Lloyd George as Chancellor introduce the first state pensions, dubbed by their grateful recipients ‘the Lord George’ (because only a Lord could afford to be so generous), and had seen the spectacular row over the 1909 ‘People’s Budget’ which raised the money to pay for them. The pensions, Lloyd George declared, lifted ‘the shadow of the workhouse from the homes of the poor’. Churchill, more temperately, declared of the first relatively meagre means-tested payments: ‘We have not pretended to carry the toiler on to dry land. What we have done is to strap a lifebelt about him.’

The first unemployment insurance in 1911 covered only about 2.75 million men, or roughly one in six of the workforce, in industries at high risk of cyclical unemployment such as iron and steel and shipbuilding. It ran out after fifteen weeks. But with it came the first state-backed insurance scheme for health. Lloyd George’s famous ‘Ninepence for Fourpence’ was more comprehensive, covering all male workers earning less than £160 a year. For the worker’s compulsory fourpence (just under 2p) a week, the employer had to add threepence and the state twopence. The scheme was administered by ‘approved societies’ and provided the services of a ‘panel’ family doctor, but no right to hospital care or medicine; with that came sick pay of ten shillings (50p) a week, but no cover for wives and children other than a maternity grant. What marked out the health and unemployment measures of the 1911 National Insurance Act from anything that went before was that both were contributory, compulsory and state organised, with employers, employees and the taxpayer each contributing: the so-called tripartite system. What they were not was comprehensive.

The same Liberal Government had also introduced the first tentative legislation on free school meals (for large families only), school medical inspections, and the first overtly redistributive budget – the ‘People’s Budget’ – to pay for it all. The House of Lords, then still the power-base of the landed aristocracy, was faced by a new supertax and what were, in effect, wealth taxes. They threw out what Lloyd George had declared to be ‘a war budget’ – one ‘for raising money to wage implacable warfare on poverty and squalidness’. He added the hope, which he almost lived to see realised, that ‘before this generation has passed away we shall have advanced a great step towards that good time when poverty and wretchedness and human degradation which always follow in its camp will be as remote to the people of this country as the wolves which once infested its forests’.6 The result, after a long battle, was the 1911 Parliament Act which removed for ever the right of the Lords to delay financial legislation.

Beveridge was thus not only a close Whitehall observer but a key player in the formation of what has been dubbed the ‘ambulance state’ – the lifebelt precursor to the modern welfare state which thirty years on he was to do so much to help create.

With the arrival of the First World War, Beveridge moved in to the Ministry of Munitions, where he was involved in deeply controversial moves to mobilise manpower and where he worked directly with Lloyd George. In 1916 he went to the Ministry of Food, becoming one of the chief architects of rationing and price control. He finished his first Whitehall career in 1919 at the age of thirty-nine as the ministry’s Permanent Secretary.

Peace saw him leave the civil service to become director of the London School of Economics, transforming it into a great base for the social sciences. During a spell as Vice Chancellor of London University he commissioned its massive and Teutonic Senate House (the building Hitler earmarked to be his London headquarters). In 1937 he went back to Oxford as Master of University College. His academic appointments did not, however, to use the title of his autobiography, remove him entirely from power and influence. In 1934 he was appointed chairman of the Unemployment Insurance Statutory Committee, whose job it was to keep the insurance fund solvent, and in 1936 he was brought back to Whitehall to help devise the rationing that operated from 1940. In 1941, when Greenwood called him in, Beveridge had a knowledge of the origins and scope of social services in Britain that was probably unequalled.

He was connected everywhere. R. H. Tawney, the great Christian socialist thinker, was his brother-in-law and friend. He knew well Sidney and Beatrice Webb, founders of the Fabian Society, who in fact had introduced him to Churchill. (Churchill’s aside,’I refuse to be shut up in a soup kitchen with Mrs Beatrice Webb’,7 appears to have been no barrier to the appointment.) It was in fact Mrs Webb who had first proposed a free health service for all in her minority report of the Poor Law inquiry of 1909. Clement Attlee and Hugh Dalton, two men to whom would fall the job of finding the cash for Beveridge’s plan, had been lecturers on his staff at the LSE. Dalton was to be Attlee’s first Chancellor of the Exchequer in 1945. As well as having worked with Churchill, Beveridge was a friend of John Maynard Keynes, whose new economics were to make the welfare state possible, and he knew Seebohm Rowntree, whose landmark studies of poverty in York in 1899 had first helped drive the 1906 Liberal Government into its reforming zeal and whose follow-up study in 1936 was to influence Beveridge’s own report. In a line to the future, his research assistant at Oxford was a bright young economist called Harold Wilson.

But Beveridge was not an easy man. José Harris, in her biography, is reduced to summing him up as ‘rather baffling’. To some, she says:

he seemed wise and loveable, to others overbearing and vain. To some he was a man of dazzling intellect, to others a tedious bore. To some he was endlessly generous and sympathetic, to others harsh and self-centred to the point of complete insensitivity. By some he was seen as a humane, radical and visionary reformer, by some as a dangerous bureaucrat, by some as a sentimental idealist with his ‘head in the clouds and his feet in the pond’. He has been described to me personally as ‘a man who wouldn’t give a penny to a blind beggar’ and as ‘one of the kindest men who ever walked the earth’.8

Others have been terser and harsher. Angus Calder in The People’s War describes him as ‘the outstanding combination of public servant and social scientist’, but adds: ‘He was also vain, humourless and tactless.’9

He tried to run the LSE as an autocracy, inducing a mutiny by the staff in favour of a constitution. Lionel Robbins, a young lecturer at the school who would later produce the Robbins report of 1963 which initiated the great post-war expansion of British universities, once said: ‘I doubt if it ever occurred to him to regard the great men of those days as his equals, let alone, what some of them certainly were from the academic point of view, his superiors.’10

Arrogance, brilliance and a belief in statistical evidence did not prevent him from espousing unlikely ideas. Harold Wilson, when Prime Minister, would recall having to talk him out of a firm belief that fluctuations in unemployment were linked to the price of wheat which was in turn affected by a sun-spot cycle.11 The weather, it seemed for a time, was all that there was to blame. He drove himself and others hard. Wilson, staying with him in his pre-war days at Oxford, recalls him rising at six to take an icy bath, following it with a couple of hours’ work before breakfast. If he was far from easy either to know or to work with, he was also no more consistent than the rest of us. Over his lifetime his views varied from strong support for the free market to a dirigiste view of the advantages of central control and planning during the First and Second World Wars, via a distinct if intermittent sympathy with Fabian socialism. At times he favoured generous social welfare, at others he believed ‘the whip of starvation’ was a necessary precondition for economic advance.12 After his report was published he was to become briefly a Liberal MP, and it is as a liberal and indeed Liberal document that his great work is best read: an attempt to bridge the desire for security and an end to poverty on one bank with encouragement for individuals to stand on their own two feet on the other.

A mere four years before his clarion call for full employment, social security from cradle to grave, a national health service, and a war against ignorance and squalor, he had been for two long walks with Beatrice Webb, then in her eighties, over the downs near her Hampshire home. Her diary records:

His conclusion is that the major if not the only remedy for unemployment is lower wages … if this does not happen the capitalist will take his money and his brains to other countries where labour is cheap … he admitted almost defiantly that he was not personally concerned with the condition of the common people.13

If his desire for reform appeared to have waned, the war was to change that. But its arrival in 1939 left him bitter and frustrated. His talent and past experience, he felt, demanded a role in government. He bombarded government departments with offers of assistance, stringent criticism and unsolicited advice. He complained bitterly that ‘the present crew have no conception at all of how to plan for war.’ Along with other veterans of First World War administration, he gravitated to Keynes’s Bloomsbury house during the autumn and winter of 1939. The ‘ancient warhorses’, to use José Harris’s phrase, denounced Chamberlain’s incompetence to each other and devised alternative strategies.14

When Churchill became Prime Minister in May 1940, Beveridge wrote to remind the old bulldog of their ‘old association’ and to offer his talents. He followed up with letters to Attlee, Ernest Bevin and Herbert Morrison, the key Labour ministers in the newly formed coalition government. None wanted the awkward and arrogant ex-Permanent Secretary around. Bevin, whom Beveridge was later to feel had betrayed him, did offer him charge of a new welfare department in the Ministry of Labour. ‘I didn’t feel that welfare was up my street,’ Beveridge said. ‘… organisation of manpower was my goal.’

One by one, Keynes and the others were absorbed into Whitehall as part of the flood of academics whose presence was to do so much to help win the war against Nazi Germany. But Beveridge, who hardly helped his case by the style in which he proffered advice and sought work, remained outside. Finally, in July 1940, Bevin asked him to carry out a brief survey – in a firmly non-executive capacity – of wartime manpower requirements. At last Beveridge was doing the work he wanted to do. The survey done, in December he again became a full-time civil servant as under-secretary for the military service department at the Ministry of Labour. There he drew up the list of reserved occupations exempt from call-up; but he continued to demand from Bevin an ever larger role in running manpower.

The two, however, did not get on. Beveridge, condemned by so many as autocratic, in turn applied the same adjective to Bevin’s mountainous personality. The bull-necked ‘tsar’ of the Transport and General Workers Union, in Kenneth Morgan’s memorable epithet,15 had been brought in from the general secretaryship of the union to provide the sound base for labour relations in wartime that the First World War had so notably lacked. Bevin saw his remit coming firmly from ‘my people’. And while he used a range of Beveridge’s ideas during the months they worked together, it seems plain he did not trust with any executive responsibility a man he almost certainly associated with the coercive and at times damaging manpower policies that Beveridge had helped draw up in 1914–18.16