A weak brew

The Beveridge Report, Social Insurance and Allied Services, was published in December 1942; 70,000 copies were sold within hours and in a short time there were few adults who did not know of, and generally approve, its main recommendations. Produced in the depths of wartime, the Report promised to abolish want by solving the peacetime problems of poverty and unemployment, a prospect that was to inspire workers to improve their contribution to the war effort.

Sir William Beveridge was Chairman of an Interdepartmental Committee set up in June 1941 by Arthur Greenwood, a Labour Party Minister in the coalition government, to undertake a survey of “the existing national schemes of social insurance and allied services, including workmen’s compensation, and to make recommendations”. State run insurance schemes for the elderly and unemployed were not new: pensions for some old people were first paid in 1909 and were non-contributory until their scope was extended in 1925. A National Insurance Act in 1911 had introduced (for workers below a certain income) a restricted system of insurance for sickness and unemployment, with employees, employers and the state all contributing. There were also voluntary associations and schemes run by individual employers.

Most of the Beveridge Report was concerned with the reorganisation of social insurance into a more economic and comprehensive national scheme. Its specific proposals covered every aspect of life but did not include the practical details of how a comprehensive health service should be organised.

Beveridge considered that practically all the acute poverty in Britain had two causes — the “interruption or loss of earning power and failure to relate family income to family needs”. It was considered that, because so many wage earners were “far above want”, poverty could be abolished by “a redistribution of income within the working classes at all”. His solution was a “double redistribution of income” through social insurance and children’s allowance.

The enthusiastic reception given to his Plan was, according to Beveridge (The Times, 9 November 1953) due to “the subsistence principle, the guaranteeing to every citizen, in virtue of contributions and irrespective of need or means, of an income in unemployment, sickness, accidental injury, old age, or other vicissitudes, sufficient without further resources, to provide for his basic needs and those of his dependants”. (Quoted by J. C. Kincaid, Poverty and Equality in Britain.) This central idea, the subsistence principle, was what had made his Report more than just a rationalisation of existing services. Flat-rate benefits were to be linked to flat-rate contributions; the obligation to contribute would be the same for everyone regardless of income and adequate financial support, at a minimum subsistence level, obtained as of right and without the hated means test.

Beveridge was obliged by the Treasury Chiefs to give figures for subsistence incomes. His estimate of the minimum necessary for families to live on was based on calculations made by Seebohm Rowntree, for his research into poverty in York in 1936. Using contemporary knowledge of dietary requirements Rowntree had worked out a minimum budget for a family of 5 — the equivalent of £2.90 at 1938 prices. He was concerned to show that families on a lower income, no matter how efficiently it was managed or how restrained their behaviour, were unable to provide for their barest physiological needs. Seven per cent of working class families in York were suffering “primary poverty” — dreadful deprivation for which the sternest moralists could not say they were to blame. “Secondary” poverty included families whose income was so little above Rowntree’s poverty line that “inefficient” budgeting put them in the same condition as those in primary poverty.

The benefit rates recommended by Beveridge ) for a family of five — £2.65 at 1938 prices) were at a lower level than Rowntree’s “human needs” minimum budget, mainly because he did not allow for personal sundries like a newspaper, haircuts or birthday presents. He did allow a tiny margin (of one sixth) 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”. The rate for old people was even lower than for working adults. Beveridge thought if “dangerous to be in any way lavish to old age” until adequate provision had been made for the health of the young. The proportion of old people in the population was increasing and the aim should be to discourage retirement and the claiming of pension. The benefit paid widows and blind persons should be limited by the assumption that they could find work.

The low level of benefits was claimed as a merit of the scheme since it would not interfere with the freedom and responsibility of individuals to make their own provision above that level; it would not discourage “thrift”. If the scheme were financed by contributions it would be convenient to administrate and the Social Insurance Fund could be self contained. People preferred to pay and, mindful of their moral welfare, citizens should realise that benefits linked to contributions provided a motive for supporting measures for prudent administration. They “should not be taught to regard the State as the dispenser of gifts for which no one needs to pay”. However if employees had security and were properly maintained during inevitable intervals of unemployment or sickness, this would help to make them efficient producers.

The acceptance of the Report, by capitalists and politicians, as a basis for post-war planning was influenced by the belief that healthy, contented workers would make a more efficient labour force, and by the fear that without social reform there might be social disorder. It was widely thought that there would be unemployment in the post-war period — Beveridge assumed up to 1,500, 000 — and those fighting and working to win the war needed to know that “their” country would have something better to offer in the future than the pre-war means-tested poverty. Another merit from the capitalist point of view was that the proposals were “moderate enough to disarm any charge of indulgence” (The Times, 2 December 1942), though some criticism was still made on that ground.

The National Health and National Insurance Acts passed by the post-war Labour Government were along the lines recommended in the Beveridge Report. The scope of schemes already in existence was enlarged and extended, and made national in operation. The Bill for the one new measure, allowances for children, was presented in Parliament during the closing weeks of the coalition government and became law during the short Conservative Ministry of May-July 1945. Family allowances were paid at a lower rate that Beveridge had wanted but the school meals and milk service were counted as payment in kind.

Before the Report was published negotiations took place between Beveridge and Treasury Chiefs, including Keynes, who agreed to a scheme which limited the Treasury contribution to £100 million a year or 20 per cent  of the total costs of benefits paid out. In the interests of “financial soundness” the needs of poor people were to be measured according to an amount of money fixed by prior agreement. To satisfy Keynes’ condition for support, and because he worked on insurance principles, Beveridge had planned for pensions to be paid at the full rate only after the scheme had been in operation for twenty years. (Those already near pensionable age could be covered by assistance pensions subject to a means test.) The Labour government decided to pay the full amount when the national insurance scheme began to operate in 1948, and also reduced the qualifying time to ten years. (Years of contributions made to earlier schemes were counted.) This intention had also been outlined in the 1944 White Paper.

When the National Insurance Act was passed in 1946 the figures for benefit rates and allowances were based on 1938 minimum needs with some allowance for the increase in prices between 1938 and 1946. James Griffiths, Minister of National Insurance, justified the rates as being “broadly in relation to the cost of living”. The “subsistence” basis, so important to Beveridge, became a broad subsistence basis. By 1948 prices had risen still further and the actual purchasing power of insurance benefits paid to adults was 25 per cent lower than even the Beveridge minimum. The cost of living continued to rise and with only a small increase in National Insurance benefits the gap widened, so that means-tested national assistance benefits were actually higher than social insurance benefits. In 1953 Beveridge was calling on the Conservative government to raise the benefit rates to adequacy for subsistence, or to say “that they have formally abandoned security against want without a means test, and declare that they drop the Beveridge Report and the policy of 1946.” (J. C. Kincaid.)

An important difference between the recommendations in the report and the policy accepted by both the Coalition and Attlee governments concerned unemployment. Benefit was made payable for only 30 weeks, with the possibility of a further limited period based on an exemplary employment record. Beveridge had wanted those out of work to receive benefit for the full term of their unemployment. After a certain period they might be obliged to attend a training centre, nor should those in receipt of unemployment benefit be allowed to hold out indefinitely “for work of the type to which they are used or in their present places of residence, or if there is work which they could do available at the standard rate for that work”.

Compiled by a supporter of free enterprise capitalism, the Beveridge Plan for ending poverty by social insurance was a moralistic scheme whereby workers whose employment was interrupted or ended would be given support by the state at a minimum subsistence level, and as cheaply as possible. Cheese-paring social reform was used in the post-war years in support of argument for wage restraint. It is difficult to reconcile the extravagant claims made about the Welfare State with either the aims of Beveridge or the legislation passed in the years since the war. Poverty today is not the result of a decline in once effective services, the social security system never having been intended to give more than the minimum of support to members of the working class not provided for by employment. Trying to get means-tested benefits adds to the problems of the poor; but even if insurance benefits had been increased to take recipients above some poverty line, it would have made little difference.

Forty years after Beveridge high unemployment, not to mention the plight of single parents, means so many people needing supplementary benefit that in some areas queues form outside DHSS offices before they open and the staff are unable to cope with the pressure of work. Many thousands of families live in deep poverty despite the father being in full time work, and are entitled to Family Income Supplement and other benefits. According to EEC official statistics 6.3 per cent of British households live below the poverty line, when poverty is defined as living on less than half the average income in this country (Guardian, 12 October 1982). Some conditions may be better now than forty years ago, but this can be of little comfort to the mother who in 1982 has to decide whether to get shoes for her child with the money from supplementary benefit meant for her own food. The patience—if that is the word—of reformers is such that an increase in child benefit is being out forward as the way to end family poverty.

Poverty is a working class problem. The vast majority, the working class, who do all of the work of society do not own the means of production. Working class lives are restricted by this fact even without the additional burdens borne in times of unemployment, old age and sickness.