By Frank Field
Last updated 2011-03-10
Histories of the welfare state usually begin around 1945. The 1940 - 50 period does mark a particular point in the history of welfare in Britain. But to begin the story here distorts the record. It promotes the idea of welfare developments in this country as part of a collective train journey which began with Lloyd George and ended with Mr Attlee, Labour's 1945 Prime Minister, safely steering the train into a collective welfare state terminal.
The theme of most welfare histories is 'the coming of the welfare state' as though all previous forms of welfare were temporary and incomplete, that it was inevitable Britain's welfare should be ultimately dominated by state provision, and that, somehow, the journey is now at an end. However, if we step back only 100 years - and use this as a vantage point to look forward - we would have a very different perspective. In the 19th century Britain's welfare was characterised by voluntary provision, with mutual and friendly societies delivering a whole range of benefits. Local authorities and voluntarily run hospitals, together with a national system of panel doctors were financed from health insurance contributions, which were set by the state and collected through mutually owned societies.
If we move back further still we gain yet another perspective of how welfare was delivered collectively, free of the state. In mediaeval times many hospitals were church run, though the word hospital should not be understood in today's terms. Back then such places were communities where the elderly and frail in particular were looked after.
Parishes, the first basic administrative units in Britain, also had a responsibility to their poor. The Elizabethan Poor Law enshrined this right with the practice of sturdy and less sturdy beggars being sent back to their parish of origin ostensibly for help. This system, although modified, remained largely intact until the offensive launched by the Utilitarian reformers. For them, no fiddling with the facts was beyond the pale if it could discredit the old regime. The new poor law of 1834 was the result of this campaign, and where the principle of 'less eligibility' was enforced - help in the new system would only be offered if a person came into the 'House', as the poor law institution was known - a standard of living awaited them which was below that on which the poorest labourer could survive.
Lloyd George did not therefore invent the welfare state. As we have seen it was already very much in existence. But he did, along with a young Winston Churchill, refine the concept and drive it forward into the arms of the state - surprising for a Liberal politician. But we have jumped too far ahead in our story.
...a means-tested old age pension was introduced for those of 70 or more. At the time average life expectancy for men was 48 years!
The 1906 landslide victory of the Liberal Government was not based on a programme of welfare reform. Indeed, it did its best not to discuss it. But reform came. In order to protect the friendly societies a non-contributory, means-tested old age pension was introduced for those of 70 or more. At the time average life expectancy for men was 48 years!
National health and a more limited coverage, unemployment insurance, were introduced by the 1911 Act. Contribution and benefit levels were laid down by Parliament, but friendly societies and mutually-owned bodies operated the health scheme.
The insurance principle was advanced to finance this new welfare because the Liberal Government was anxious not to raise income tax and alienate the bedrock of its support. It therefore followed Bismarck's lead. In Germany Bismarck had faced even greater resistance to a tax-based welfare. The German Chancellor did not then have the power to levy taxes on income. The insurance principle, now regarded as a crucial aspect of state welfare, was originally met with considerable hostility. Lloyd George won over the initial opposition with his tripartite financing from worker, employer and taxpayer. Hence his cry to the workers of '7d for 3d'.
Neville Chamberlain added to this insurance base with the Widows', Orphans and Old Age Contributory Pensions Act of 1925. Pensions were paid from 65 and widow's benefit introduced. But these inter-war years were dominated by unemployment. And it was the financial chaos resulting from botched attempts to provide income for the mass unemployed, while maintaining an insurance fund, which helped reposition trade unionists, and others, on the question of state or voluntary based welfare. The use of a household based means-test for unemployment assistance added grist to the mill for this campaign.
An enquiry was established in 1941 to propose how best to tidy up state welfare. Beveridge seized the opportunity, rewrote the script, and then redesigned the contours of British welfare. The publication of his report was fortuitously delayed. When it was produced in November 1942 it followed hard on the heels of the Allies' first major victory of World War Two. Implementing Beveridge was immediately seen as part of winning the peace.
The prize was security 'from the cradle to the grave'. Although largely a synthesis of ideas (including Beveridge's) which had been around for some time, it was the blueprint for conquering Want, one of the five giants Beveridge declared should be slain by way of post-war reconstruction. Each giant was countered by:
But, as always, the world did not stand still. Although for sometime in the 1950s and 1960s welfare provision did just that. How to finance the NHS increasingly became a key political issue. Insurance benefits were not paid at a high enough level to prevent many pensioners from becoming poor, and by the 1970s full employment began taking a battering which it has had to endure until recently. The political caravan had once again moved off in search of new ideas.
There was never a coherent Thatcherite approach to welfare. Following the main haemorrhage of manufacturing jobs in the 1981-82 recession (exacerbated by the inept handling of the exchange rate), the formal abandonment of a full employment goal looked like a mere precaution against future political failure. The NHS budget continued to increase, driven upwards by a growing demand set by a combination of rising expectations, by health consumption becoming a lifestyle-type choice, by advances in medical technology, and by a rapid growth in life expectancy.
The NHS budget continued to increase...
Welfare bills were confronted in two ways. Insurance benefits were hacked back with an ever-growing number of individuals pushed on to means-tested support rising from one in six of the population in 1979, to one in three in 1997. But the biggest savings for taxpayers (paid for by less generous pensions) came in 1980 with the switch to increasing the state retirement pension only in line with prices, and not by earnings if these were rising faster - as they invariably did.
By 1979 occupational pensions had grown from the modest initiatives recalled earlier into the great welfare success of this country. Alongside these pensions the Tories planted individually owned schemes, known as personal pensions. The advent of these schemes was their major welfare innovation. This advance, however, has been hampered by miss-selling - i.e. persuading people to leave occupational schemes almost invariably against their best interest - often accompanied by the imposition of very high charges and the absence of an employer's contribution. Even so, by 1979, Britain had more assets owned by occupational and personal pension schemes than the whole of the asset portfolio owned by other European Community schemes combined.
And yet welfare bills continued to escalate in an apparently unstoppable fashion. Welfare was about to undergo another major rethink.
When welfare was run by friendly societies and mutually owned organisations few questioned the fact that welfare affected how people behaved. Welfare was not simply strictly policed; the range of benefits full recognised the danger that some people would claim benefit to which they were not entitled if the regime was slack. Welfare was seen not merely as a means of meeting a need, but by its organisation, and the means by its delivery, it was conceived as a tool for building good character.
The biblical view of human nature - its fallen status, yet conceived to be redeemed - was lost sight of in left-wing intellectual circles by the 1960s. Welfare was by them seen primarily as an act of altruism and this paternalistic view was advanced behind the cover of politically correct statements, so much so that even the Right lost the confidence to mouth, let alone act on, the broader, age-old understanding of mankind.
The resulting paralysis of both will and mind resulted in little concern for how different types of welfare (insurance or means-tested) affected behaviour; and to raise the question of fraud was to be automatically deemed politically unbalanced. 'Thinking the unthinkable' was the task for Labour's final years in opposition before 1997, and was part of the strategy of making Labour electable. It was never meant to be an activity undertaken in government.
Thinking the unthinkable in Opposition took place across five inter-related areas.
The present Government has now embarked on its programme of welfare reform. Time will tell how well it succeeds in implementing the unthinkable. Making reform workable is a more important objective. As I resigned as Welfare Reform Minister I will inevitably be seen as a biased observer. And bias in the welfare debate is something about which readers should continually be on their guard.
One notable academic observed that to study welfare was to highlight the values of the society within which that welfare was provided. I would argue that our values determine to a large extent what we observe. Hence it was observers believing in state collectivist solutions who have generally written up the story of the coming of the welfare state and the final arrival of state provision. Any deviation from this model is seen not just as defeat, but as essentially retrogressive. That view is now under attack.
As one of those who first questioned the inevitability, let alone the desirability of state provision being welfare's final stop, and who seeks to present welfare developments as a continuous story, I am open to the charge by those who believe in the correctness of state welfare solutions, of being equally biased.
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