Has Beveridge's contribution to development of Britain's social welfare systems - judged from the vantage point of the 21st Century - been helpful or harmful?

Now the scale of reform Beveridge had in mind became clear and alarmed the government straight away. The Treasury called departmental representatives together and told them not to discuss point of principle in meetings with Beveridge, but merely to accentuate on points which justified the objective of the committee, namely the administration of a coherent social security system. But they could not stop the publication of the Report on 1 December 1942, which was an instant success. At the time the Beveridge Report seemed radical and was broadcasted by television and radio. The people gave the report and unprecedented reception, which made Beveridge a national hero overnight. The attention given to the Report had made it impossible for the government to deny its content. Beveridge himself had contributed to the popularity of his Report, because he was able to make full use of his experience in the media. But the popularity of the Report was mainly determined by some specific events during the war, which had created a climate for change. The two nations of Disraeli, the poor and the rich, had never been closer. The Blitzkrieg, the war by air, had not only destroyed millions of homes, which had to be re-built, but had also forced people to move away from the cities. People from the cities fled to country side which brought together people from different classes and backgrounds. An emergency health service was created for casualties and evacuees, and the war economy eliminated virtually unemployment. The success of Beveridge report and his universal and collective themes should be seen against this background. It took nevertheless until 1945, when Labour took over from the Conservatives, when the Beveridge Report was implemented. The climate after the war, but also the three assumptions of Beveridge had started a process of what was to be the British Welfare State. The report had galvanised the Ministry of Health into action and promoted the maintenance of full employment which were to be central to post-war policy.

Already before the scheme was implemented some weaknesses were identifiable. As mentioned above Beveridge method to provide for social security was through a contributory insurance system. The contributory principle excluded the unemployed and the self-employed who had to rely on means-tested benefits, something what Beveridge acknowledged and accepted. But over the years this group of people has been growing, making more people reliant on means-tested benefits. The flat-rate principle of Beveridge could be seen as another weakness, but we should realise that arguing for a progressive tax basis for social security would have been ahead of its time. The majority of the families did not pay income tax until the 1960’s, financing the social security system out of progressive income tax would have hit the rich really hard. But for Beveridge the flat-rate contribution was a matter of principle and not a short term administrative expedient. Another principle Beveridge had put forward in his Report was that of securing a national minimum. As mentioned above this was set at a level that would abolish absolute poverty but would still function as an incentive to work. This principle was not a weakness in itself as this was only a matter of discussion. But the difficulty to define and set the level which would eliminate poverty has proven to be a difficulty as it is mainly subjective. Beveridge took something close to Rowntree’s statistical measurement of primary poverty as a basis for setting his benefits levels. The critical flaw in this claim was that inadequacy of spending behaviour and the varying rent levels were not taken into account, still Beveridge decided to pay for flat-rate benefits set on Rowntree’s measurement of primary poverty. Although the ‘rent’ problem was an easy target for Beveridge critiques, it was the definition of poverty which turned out to be most damaging to his belief to diminish means-tested benefits. Beveridge himself never used to word poverty but instead use one of his five Giants ‘Want’ which was to be eradicated with a social minimum at a substance level. And there was the problem with pensions. It was critical to Beveridge’s plan that all benefits should be set at the same level, enough to meet all costs. This would have meant that the basic pension had to be increased considerably. At the time there was not enough revenue to cover these extra expenses and the Treasury was unwilling to contribute. He therefore proposed to set aside money for twenty years; pensions in 1965 could then be paid out at the same substance level as the other benefits. Feminist have also attacked to scheme, proclaiming that the woman has been traditionally left out as an independent persons. Beveridge view on woman seemed traditional in which their status equalled to a role in domestic arrangements. Wives were covered in his scheme as part of a team with their husbands.

The Labour government of 1945 claimed to have implemented Beveridge’s social security scheme and to a large extent this was indeed the case. The most important structural changes were adopted, the old complex variety of schemes and societies were replaced by the single National Insurance scheme under authority of central government. The benefits and contributions were based on flat-rates, like Beveridge had proposed. His proposal to create a Ministry of Social Security was rejected. Two separate institutions were implemented instead, a Ministry of National Insurance and a separate National Assistance Board, the latter one to deal with means-tested benefits. The goal of a national minimum was carried out, but not in the same way he had intended. There was some confusion about his claim that flat-rate benefits would be sufficient to eliminate absolute poverty and his subsistence principle was therefore rejected. Beveridge wanted to provide assistance for the unemployed and the sick for an unlimited time, this was rejected and time limits were set in place. And as mentioned above he wanted to wait for twenty years before pensions to be paid out. Something voters could not wait for, but although they received pensions straight away this was never on the level Beveridge envisaged.

Between 1951 and 1964 conservative governments tried to reject Beveridge’s proposals. They believed that his universal principles did not work and his aspiration to move to adequate flat rate benefits for all was a myth. The Conservative government had appointed a committee to review Beveridge’s Report. The result were in favour of their instincts, the attempt to provide all pensioners with an adequate pension with which they all could live was unachievable. The government could have frozen benefits, but the conservatives were afraid to loose too much of its electorate. Instead they proposed income related additional contributions which would eventually lead to higher pensions. This was more a means to raise revenue, which was in line with the Treasury’s determination to stop a growing contribution from general taxation to the National Insurance Scheme. Due to election competition the conservative government felt obliged to increase pension benefits and benefits for married couples. People wanted lower taxes, but did not want loose their services either. The result was that they had maintained and in some areas slightly improved social security, funding them more from contributions than had been planned. But they had officially abandoned Beveridge aspiration that social security was designed to meet a person’s need without, additional, means-tested benefits.

Labour in opposition had been drawing ideas to reform Beveridge principles, contrary to conservative thinkers they supported his aspiration the offer adequate universal benefits. They accepted the insurance based contribution scheme but believed that Beveridge had gone wrong with his flat-rate principle. To achieve adequate benefits the contributions increase and lay a heavy burden on the poorest. Since the Treasury was reluctant to provide contributions from general taxation, higher contributions had to come from higher earners. But due to incoherency in the party and due to pressure of trade unions this plan was not fully implemented. Instead they opted for wage related benefits added to existing benefits of Beveridge. But the fruits of this scheme were only to be picked up years later, under big internal pressure during the elections of 1964 the Labour party therefore promised to increase flat-rate pensions. Although they did manage to push through wage related unemployment and sickness benefits, periods of economical slowdown during Labour government had made it difficult to press ahead with radical reform in the 1960’s for Labour. But also conservatives were unable to push through major changes affecting social security. Finally, in 1975, Labour was able to implement an advanced national insurance scheme, with earnings related pensions and contributions. Built up over twenty years and with woman friendly and care-taker aspects the scheme was at that point the most advanced in the world, but because the scheme could not gather enough support by those who benefited from it when Mrs. Thatcher arrived a uncertain future lay ahead.

Throughout the 1950’s there was a growing concern within the government about the nature of the social security system But serious critique came only in 1965, when the poor and the poorest was first published. In this report Brian Abel-Smith and Peter Townsend claimed that the poverty increased instead of decreased. Poverty used in the Beveridge Report could be seen as absolute poverty, when families were simply not able to meet the basic costs such as food, shelter and clothing. Abel-Smith and Townsend took the National Assistance levels set by the government as a basis to define to poverty line. Because they had investigated family expenditure since the early 1950’s they could make the conclusion that poverty in their definition had increased. They recommended to increase family allowances, but even though this report did receive considerable attention the government, Labour at that time, could not implement such recommendations because of the poor economical situation.

 

The late 1970’s are often referred to as a period of continuity regarding social policies, a period in which more stayed the same than changed. During this period a stable growth in public spending as a share of the national income had continued.  Major institutional change took more than a decade to come but the climate of ideas and economic and social structure did begin to become evident. The Keynesian theory in which full employment was promised began to show cracks. As a result of the 1973 oil price increases the world became known with the first global recessions since the Second World War, with high unemployment and high inflation which was not possible according to Keynes. Periods of economical growth were not a certainty anymore and politicians started to emphasis on the economy instead of on the Welfare State. The development of the Welfare State prior to this worldwide recession had been characterised by continuously growing responsibilities for the state. It became evident that the Treasury was unable to control public expenditure. This climate was inherited by Margaret Thatcher who presided over the country from 1979 until 1990. She made virtue of the theory of Hayek, a neo-liberal who believed in an unfettered market system. According to people like Hayek, intervention would always lead to inefficiency. Governments, according to opponents of Hayek, are unable to influence levels of unemployment. If governments try to reduce unemployment below the market-determined level it would simply produce inflation. In the context of the economical adversity and the method chosen to tackle this problem by the Thatcher government benefits were reduced to a minimum. This was also in line with her complaints regarding the dependency environment the Welfare state had created. High benefits do not create an incentive to work, and high progressive taxation stops giving deserved rewards to the rich.

It is in this context, then, I would like to conclude that the departure of the maintenance of full employment and the related Keynesianism theory was a definite abandonment of Beveridge. Perhaps we could say that the Beveridge design was flawed from the outset. Its minimalist and flat-rate nature sat ill with Beveridge’s own aspiration, namely to provide universal and adequate benefits, the level of substance for benefits has been a subject to discussion and was traditionally set low which forced the government to contribute with means-tested benefits. Because full employment was never achieved and the term poverty redefined means tested benefits increased instead of decreased, something Beveridge had not envisaged. The Beveridge design fell between to objectives, it never won the support of the middle class and the poor as it was not meant for means-tested benefits targeted to the poor. The result was that Britain developed a complex means-tested system and neither Labour not the Conservative Party were able to change or reverse this process until the arrival of Thatcher, when full employment achieved by government planning seemed impossible. But were Beveridge surely was right was in seeing that a social security depended on a broader framework of social policy. Although it seemed radical and perhaps arrogant at the time, his three assumptions, without which he did not expect his social security scheme to function satisfactory, still seem necessary more than fifty years after his time. Beveridge has been helpful in a sense that he linked a broad scale of arrangements, but has been harmful as his design was flawed and to a certain degree contradictory.

Bibliography:

A. Cochrane and J. Clarke, 1993, Comparing Welfare States, Sage Publications, Milton Keynes

H. Glennerster, 1995, British Social Policy since 1945, Blackwell Publishers, Oxford

R. Lowe, 1993, The Welfare State in Britain since 1945, The Macmillan press, London

R. Segalman and D. Marsland, 1989, Cradle to Grave, The Macmillan press, London

N. Timmins, 1996, The five Giants, Fontana press, London

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