Rethinking the benefits of the welfare state

Fri, Nov 23, 2012, 00:00

LONDON LETTER:Backing for the welfare state has dwindled since its founding in 1942, writes MARK HENNESSY

Seventy years ago, during some of the darkest days of the second World War, the fruits of two years of work of a team of civil servants went before Winston Churchill.

The 300-page report by the Committee on Social Insurance and Allied Services was avidly read by broad swathes of the British public hungry for better times.

Yet the report grew from inauspicious beginnings. Three years earlier, its lead author, William Beveridge, had been put in charge of it by ministers keen on keeping him away from more pressing matters. He took up duty with tears in his eyes.

However, the report, which soon bore his name alone, made his reputation and laid the foundations for the welfare state – an institution today facing challenges, even if it has moved far from the architect’s original ideas.

Railing against the “five giant evils” of squalor, ignorance, want, idleness and disease, Beveridge proposed a national social insurance scheme that would protect people “from cradle to grave”.

Each would pay a weekly contribution. In return, each would receive benefits during unemployment or sickness, or later in retirement, that would offer a basic standard of living. But Beveridge did not believe in what has become known as “the dependency culture”.

Means-testing

The payment of contributions, soon simply called “the stamp”, brought entitlements. No contributions, or not enough of them, meant life on national assistance – a lower level of benefit that was to be rigorously means-tested.

Beveridge believed means-testing would wither away in time, as the British public saw the benefits of prudence and hard work and knew they would not starve if ill-fortune fell upon them. The state, said Beveridge, “should not stifle incentive, opportunity, or responsibility”.

Churchill was cool towards the idea, but ironically Beveridge was supported by Liberals and many Conservatives but opposed by Labour’s Aneurin Bevan, who condemned it as “the social ambulance service”.

Three years later, Labour was in power and implemented much of Beveridge, along with the National Health Service – perhaps two of the most influential social changes of the last century in British politics.

Public support for the National Health Service remains as high as ever, but backing for the welfare state – particularly from those who live on earned but low incomes – has fallen sharply.

Coalition troubles

The Tory/Lib Dem coalition is facing trouble on many fronts, but the cuts imposed on welfare benefits remain among its most popular actions.

In September the British Social Attitudes survey found that just 28 per cent want to see more spending on welfare compared with 35 per cent in 2008, and 58 per cent in 1991.

Liverpool Labour MP Frank Field has been one of the most imaginative reformers, believing that the system is now conspiring against those it should help. Welfare secretary Iain Duncan Smith’s plan for a universal credit system, due to come into force next year, is nothing more than Gordon Brown’s tax credits of a decade ago put on “speed”, Field has argued.

“Welfare spending affects how people behave. Means-testing encourages dishonesty and penalises those who save; it flies in the face of the duty-based welfare which Beveridge designed.”

He cites an example from his constituency where young people on benefit outlined their attitudes to finding work. “They told me they would not dream of taking a job that did not pay three times the rate they gain on benefits, despite having no qualifications to back up such a wage request. It cannot be right to strengthen a welfare system with means-testing at its core which can produce this outcome.”

In his view, three mutuals should be set up – covering national contributions and the benefits to come from them, the National Health Service, and pensions – but the latter would reward savers, not penalise them.

Since Beveridge’s time, he says, governments have failed, or not properly tried, to persuade voters to pay for services they demand, including welfare. Such days are gone, he argues, and they are not coming back.