The conservative origins of the welfare state

As this article from 1981 reveals, there is little basis to the claim that the welfare state was a great victory for working-class people.

The seventieth anniversary of the publication of Sir William Beveridge’s report, Social Insurance and Allied Services, is a fitting moment to consider the origins of the welfare state in Britain. This article, published in the June 1981 issue of the Revolutionary Communist Party’s then-monthly newspaper, the next step, throws light on the Beveridge moment.

In 2013, UK work and pensions secretary Iain Duncan Smith’s new system of benefits, Universal Credit (UC), is meant to start to make it more lucrative to go to work than to claim stipends from the state. Already there are fears that the IT behind the system will, as is usual with state IT projects, topple over. Already, too, chancellor George Osborne has trimmed £3.8 billion from the UC budget. Intended to draw a line under decades of tinkering with Beveridge’s legacy, UC will certainly be a very complex initiative. However, its critics, at least, are dead simple. For them, the welfare state can only be a Good Thing.

As shown below, Beveridge’s proposals were in fact a conservative simplification of what had become an irrational welfare apparatus. Along with the other major theoretical guru of the Labour Party in the twentieth century, Keynes, Beveridge was a Liberal. Nonetheless, British radicalism still refuses to question the reactionary nature of the welfare measures enacted, after Beveridge, by the Labour government of 1945-51.

In 2012, of course, the enduring collapse of the left means that there is no longer any talk of the welfare state being a ‘gain’ for the working class, in the way there was at the time this article was first published. Instead, what remains of the left today repeats mantras from the 1970s: Fight the Cuts, Save Our Hospitals, Save Our Schools. Meanwhile, New Labour’s rhetoric against the iniquities of UC is profoundly ambivalent: a senior confidant of Labour leader Ed Miliband has defended those recipients of welfare who are ‘strivers’, while inveighing against ‘people who milk the system’.

Liberal Democrat business secretary Vince Cable has accused George Osborne of ‘demonising’ the unemployed. But if the Tories’ policies on welfare are indeed divisive, polls also suggest that they are popular. It is not that people in any number milk the system, but hundreds of thousands of families have clearly had their energy and will to organise sapped by benefits, and millions more like to draw a flimsy contrast between services dispensed by the public sector (reputedly caring) and those offered by the private sector (always rapacious).

By contrast with the Beveridge era, giant firms now depend on the state for their contracts to administer the welfare state. Such firms even pretend to get people who are on benefit back into work. Charities also deliver significant social services on behalf of the government. And other aspects of the welfare state have altered, too.

In its different forms, employment nearly absorbs a full 30million people in the UK. At the same time, the number of welfare recipients has also increased dramatically, and, with that, the meaning of welfare has changed. To take perhaps the most notorious case: at the end of October, an astonishing 2.495million people in the UK claimed that their work was limited by ill-health or disability, and so received Employment and Support Allowance. Or, to take a broader example from the period August to October 2012: between the ages of 16 to 64, the number of people whom the Office for National Statistics terms ‘economically inactive’ – unable to work or not looking for work – stood at 9.07million, reflecting what the ONS calls an ‘inactivity rate’ of 22.6 per cent.

Even if Britain’s burgeoning population of 2.22million students is stripped out of the absolute total, that still leaves a massive 6.85 million people without work in their lives. No doubt many in this group have work opportunities denied them, or are in no position to work. Yet it can safely be presumed that a minority, at least, could in fact find and do work, but elect to receive welfare instead.

For nearly three decades after Beveridge, plain old unemployment in the UK stood below one million. But in the early Seventies, it rose about one million and after January 1975, joblessness has always run into seven figures. Between August and October 2012, it stood at 2.51million, or 7.8 per cent of the economically active population. There’s no getting away from it: in Britain, large-scale unemployment has become a deeply engrained fact of life – even if it does not amount, quite, to the veritable scourge that unemployment represents in countries such as Spain and Greece.

Beveridge, a mandarin, could never anticipate the scale of welfare uptake today. Certainly the real economic culprit here is a system and policy regime that contrive, year after year, to keep nearly one in every 12 people unemployed. Yet a social fact must also be recognised: continued personal reliance on welfare, evinced by millions in Britain, has nothing in common with progress.

The temporary succour of a safety net is one thing. Rather different is what Frank Furedi has termed the normalisation of welfare dependency, something that makes welfare the defining feature, more or less, of people’s lives. Welfare, a necessary evil, has for many people become welfarism, which is wholly harmful.

Leaving Universal Credit to one side, some cuts could be a good thing. A start could be made by cutting out illusions in the welfare state.

The Second World War and the working class, part 6: The welfare state

Reprinted from the next step, June 1981

In part five of our series on the Second World War and the working class, we noted the contrast between the grim reality of the war and the popular image of it – as a victory for the working class. Here we look at one aspect of this ‘victory’: the establishment of the welfare state.

In most imperialist nations, unemployment benefit, secondary education and healthcare are only available through a mixture of private fee-paying or insurance schemes (for those who can afford them) and state handouts (for those you cannot). But in Britain, these three services are, at least on paper, available to everybody free and as a right. People on the left therefore like to explain this country’s uniquely ‘universal’ system of welfare as a major reform, rested from the bourgeoisie by a powerful and confident proletariat. They see the creation of the welfare state as one of the main achievements of Clement Attlee’s crusading postwar Labour administration. And today, a third of a century after it was first set up, they persist in celebrating the National Health Service (NHS) as a massive ‘gain’ for the working class.

The Revolutionary Communist Party’s view of the welfare state is very different from that of the left. The modern welfare state was conceived in the 1930s and born in the war – periods in which the bourgeoisie confronted, not a powerful and confident proletariat, but a politically defeated one. The Attlee regime merely ratified what Tory-dominated governments had done before. To call the NHS a gain, therefore, is to see the outcome of a capitalist strategy as a result of the class struggle.

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The welfare state was not the creation of the labour movement. The working class has certainly never owned or controlled Britain’s hospitals or schools, still less its council estates or dole offices. The state did not improve workers’ welfare because workers put pressure on it; it did so because further neglect of the welfare of the working class threatened to bring the creation of profit to a halt.

The content of the welfare measures granted by the state was and remains dictated by the needs of capital. The form of those measures was and remains dictated by the demands of the labour bureaucracy. The social services are thus capitalist through and through. It is one thing to fight for better jobs, wages and conditions of those who work in them, or to fight for higher dole payments, lower classroom sizes and decent hospitals for those who use them; it is quite another to ‘save’ the civil service, the Inner London Education Authority (ILEA) or the NHS. If socialism is to be won, these branches of the bourgeois state must be broken like any other.

During the Depression, the state had to assist the accumulation of capital. It tried to reorganise industry along more efficient lines and, through a programme of rearmament, to stimulate investment. But this wasn’t all. To facilitate the production of surplus-value, the state became more and more involved in the reproduction of labour-power.

Why the state steps in

The need for some measure of state provision for the welfare of the working class arises out of the very nature of capitalism. Take the example of unemployment benefit. While the individual capitalist has no interest in the welfare of the jobless, the state, as representative of the capitalist class as a whole, has. Governments are obliged to give the unemployed section of the population something to live on, if only to keep the reserve army of labour ‘intact for future use’. Likewise, it falls to the state to keep the health and education of the workers up to a certain level.

The state only embarks on welfare measures when the condition of the economy and of the working class makes this absolutely necessary. If unemployment-benefit schemes, schools and hospitals can be run profitably, they are left in private hands. Furthermore, governments only undertake such ‘social’ expenditures as they can bear. They always discourage demand for services and administer welfare as parsimoniously as possible.

By the early 1930s, however, unemployment and the depression of wages below the value of labour-power had become chronic in Britain. At the same time, trade-union insurance funds, institutions of workers’ education and ‘friendly societies’, which offered cheap medical treatment, were in steep decline. Yet the kind of welfare measures initiated by Lloyd George before the First World War and extended after it were obviously insufficient. The state had to step in to improve things.

Sorting out the unemployed

In 1931, the UK prime minister, Ramsay MacDonald, was faced with a rise in the numbers of unemployed that threatened to put the state’s benefit scheme £80million in the red. He therefore raised insurance contributions and cut benefits. Through the Anomalies Act, MacDonald made 134,000 married women immediately ineligible for the dole; through the hated Means Test, he went on to strike off another 100,000 workers from the dole (see John Stevenson and Chris Cook, The Slump: Society and Politics During the Depression, Cape, 1977). But unemployment had become such a permanent feature of the British economy that the state was forced to stop considering what were termed ‘transitional’ benefits as temporary, and to finance them out of general taxation rather than through borrowing.

So began a series of measures to rationalise and – paradoxically – extend unemployment relief. The Unemployment Act 1934 standardised benefit rates. It also separated the administration of benefits from that of contributions by setting up the infamous Unemployment Assistance Board. As the economy picked up, some cuts were restored and children’s allowances were raised. Eventually, in 1937, those unemployed who had previously failed to qualify for ‘transitional’ or ‘standard’ benefits became eligible for the first time (Sean Glynn and John Oxborrow, Interwar Britain: A Social and Economic History, Allen & Unwin, 1976).

Gradually unemployment relief became more universal. Yet the whole system still stood in need of a drastic overhaul. The Means Test was costly to administer, and governments ran up annual deficits to the tune of £40million to pay for benefits. One thing became very clear: though universal relief made sense, it would only be possible if Britain had full employment.

During the war Britain got just that.

A brighter Britain

The rise of the new industries, of rearmament and of private and public administration in the 1930s meant that Britain’s schools had to change – even though MacDonald had made education just as much a target for cuts as unemployment benefit. In 1936, a full decade after the Hadow report had recommended it, the school-leaving age was formally raised to 15. Five years in preparation, the Spens report (1938) concluded that technical schools should be set up to complement grammar and modern schools, and went so far as to raise the question of comprehensive (‘multilateral’) education. By 1939, two out of every three secondary-school places had been covered by the reorganization Hadow had also proposed, while nearly half the places in grammar schools were state-funded.

Progress of a sort had been made, but ‘if there was one field where the existing arrangements were clearly trailing behind informed opinion, it was education’ (Paul Addison, The Road to 1945, Cape, 1975). A universal system of state education could not be established until a new round of capital accumulation had begun.

Fighting fit

Healthcare, too, came more under state control, and became more universal, as each year passed. As unemployment persisted, special arrangements were made to ensure that those unable to keep up their National Health Insurance contributions could get medical attention. In 1935, an Unemployment Arrears Fund was inaugurated, and in 1937, the minimum age at which workers could receive benefits was lowered from 16 to 14. By 1939, half the population above 14 and 90 per cent of the working population were insured for their health.

State healthcare was also extended to cover more dependents. After 1934, which saw the highest maternal mortality rate in a decade, the Midwives Act was passed. This required local authorities to provide trained personnel for expectant mothers. The state began to spend more on ante-natal clinics, and started to supply cheap or free milk to pregnant women. Government-subsidised milk for schoolchildren was instituted in 1934.

Meanwhile, the state moved to streamline Britain’s hospital sector. Since privately-run ‘voluntary’ institutions were extremely inefficient (most had fewer than 100 beds), the state found itself more and more forced to help them make ends meet. On the other hand, state hospitals became more comprehensive after the Public Health Act 1936, which empowered them to run out-patients’ departments. By 1937, therefore, the Voluntary Hospitals (Sankey) Commission felt ready to propose the amalgamation of the debt-ridden voluntary hospitals with municipal establishments.

Health and healthcare were in a mess. In 1935, 60 per cent of army recruits were found to be in no condition to engage in battle – a shocking state of affairs as Britain drifted toward war. Two years later, Political and Economic Planning, an influential Tory policymaking body, called for urgent action to repair the fitness of the nation. It also complained about the bewildering variety of agencies dispensing healthcare. The British Medical Association duly drew the logic of this and called for a unified, national health service in 1938 (A J Willcocks, The Creation of the National Health Service, RKP, 1967).

It was clear, however, that simply to rationalise state healthcare would not be enough to resolve matters. Social investigators like Sir John Boyd Orr (Food, Health and Income, 1936) and Seebohm Rowntree (Poverty and Progress, 1936), as well as journalists like George Orwell, showed that, so long as poverty and unemployment were allowed to continue, disease would flourish and labour-power deteriorate. If the workforce was to be kept in a proper physical state, then state intervention was necessary.

The turn to full employment

In the Second World War, the trickle of welfare innovations that had begun in the 1930s became a flood. At the same time, because the labour bureaucracy won itself a place in government, it was able to present every capitalist reform as the definitive fulfillment of working-class aspirations. This was especially true of the bourgeoisie’s adoption of full employment as a policy.

Ever since 1929, the bureaucrats had been arguing that increased state expenditure would spur investment; and after 1935, they had got their way. Unable to reverse the slump by conventional means, the bourgeoisie had started a massive programme of public works – rearmament. By wartime, it was convinced that only Keynes’s strategy of demand management could provide the conditions for sustained capital accumulation.

In practice, this meant maintaining the full employment of the war years after hostilities had ceased. The bosses were fully convinced of the benefits. The Association of British Chambers of Commerce, for instance, projected a peacetime ‘reservoir of public works’ for the ‘absorption of unemployment should the need arise’ (ABCC, Post-war Industrial Reconstruction, 6 May 1942). After the war, the British Iron & Steel Federation drew up its plans for conversion back to civilian production ‘on the assumption that a full-employment policy for the country is broadly achieved’ (Ministry of Supply, Iron and Steel Industry, HMSO, 1946). As for the bureaucrats, they also favoured full employment, knowing it would strengthen their hand in negotiations with the employers and so make their position more secure.

The ruling class opted for full employment for political as well as economic reasons. Workers would not tolerate a repetition of what had happened after the First World War – when sacrifice had been rewarded with joblessness. The labour bureaucracy was equally aware of the problem of workers’ aspirations for jobs. The social contract it concluded with the bourgeoisie meant that it had to offer the rank and file something in exchange for reductions in living standards.

When Sir William Beveridge, a veteran welfare administrator, drew up a blueprint for the modern welfare state, he took account of the requirements of capital and the labour bureaucracy. Full employment was the premise on which he based all the proposals in his best-selling report, Social Insurance and Allied Services. Published on 2 December 1942, the Beveridge Report became a historic document. This was not, as Beveridge thought, because its author was a genius, but because it codified the welfare principles developed in the previous ‘historic’ 30 months.

Universality in adversity

British workers underwent less poverty and exploitation during the war than did their brothers on the Continent. But what they did go through was bad enough to make state palliatives essential.

The bourgeoisie fought its war on the backs of the working class. It conscripted women and children into industry to provide it with more sources of surplus-value, cut the value of labour-power by introducing rationing, and squeezed extra profits out of workers by lengthening the working day and accelerating the pace of the labour process. These measures had a devastating effect on the condition of workers and their families.

The state was obliged to make some provisions for the working class to ensure its physical survival. Free milk for children was introduced in the week after Dunkirk. Then came free school meals, free healthcare for schoolchildren, nursery facilities, child minders, free vitamins and a decisive swing towards the granting of family allowances after the war. It was the same story on other fronts. The scope of unemployment benefit, health-insurance benefits and pensions was extended and, after a 10-year career, the Means Test was abolished. In addition, the government was forced by the rise in the number of industrial injuries to consider paying workers automatic compensation for them. It was in this context that Beveridge prepared his report on the welfare crisis facing the bourgeoisie.

Arise, Sir William

Beveridge proposed six reforms:

(1) Comprehensive state benefits to cover for unemployment, ill-health, disablement, industrial injury, old age, death of parents or husband, funerals and maternity;

(2) The unification of administrative responsibility, collapsing nine different government departments, three sets of local authorities, scores of approved societies and 10 separate insurance schemes into one ministry, one weekly insurance stamp (payable by the insured person and his employer) and one scheme;

(3) The rationalisation of contributions and benefit rates into six population groups, including housewives, the old and children;

(4) According to needs, the establishment of a minimum rate to be applied to all types of benefit;

(5) According to family size, flat-rate benefits to be paid irrespective of their duration and of the level of normal earnings;

(6) Flat-rate contributions to be higher than before, but to be ‘within reach’ of every employee.

Taken together, these amounted to a system of insurance that was universal. Benefits were to be paid ‘as of right and without means test’; all workers were to have a regular subsistence income.

Beveridge seemed generous, but he was not. It was the prospect of full employment after the war that allowed him to make benefits so widely available. He anticipated that full employment would reduce ill-health and the demand for other services – and thus the burden of benefits – on the Exchequer. The cost of running his streamlined system would be low, too. In a letter, Keynes told the Fabian Beatrice Webb that it was ‘the cheapest alternative open to us’. Churchill announced on radio that it would bring large savings in administration.

Despite all this, the labour bureaucracy managed to convince the masses that the Beveridge report was a major step forward (the Communist Party was particularly enthusiastic). This was a measure of how far the working class had been politically defeated. George Orwell’s remark at the time was characteristically percipient:

‘People seem to feel that this very moderate measure of reform is almost too good to be true. Except for the tiny interested minority, everyone is pro-Beveridge – including left-wing papers which a few years ago would have denounced such a scheme as semi-Fascist’ (London letter to Partisan Review, 3 January 1943, in The Collected Essays, Journalism and Letters of George Orwell, Penguin, Volume 2, 1971).

Beveridge did not make education and health part of his brief. But developments in these sectors proceeded rapidly.

Training up for battle

In wartime, demand for skilled and youthful labour was enormous. It was clear that once the war was over, a reconstructed, full-employment British economy would require an upgraded education system.

The Economist called for ‘a complete change in the social aspect of education’ (18 January 1941). Churchill called for a more egalitarian approach to education – in a speech to his old school, Harrow. The White Paper Educational Reconstruction (1943) took forward the Spens report’s ideas on a tripartite school system. The Norwood, McNair and Perry committees laid the basis for the 11-plus exam, teacher training and polytechnics respectively. Above all, the Education Act 1944, developed by the Conservative education minister RA Butler, established a Ministry of Education to provide, through local authorities, ‘a varied and comprehensive educational system in every area’, abolish grammar-school fees, raise the school-leaving age at last and extend day-release classes.

Butler’s programme was hailed as truly progressive. But the large, all-in facilities his Act brought about were simply the cheapest way of rebuilding schools in cities ravaged by war, and the cheapest way of centralising resources in sparsely populated rural areas (Alun Griffiths, Secondary School Reorganisation in England and Wales, RKP, 1974). Going comprehensive made sense – for the ruling class.

The hospital as bomb shelter

From 1935 onwards the Government had been getting hospitals ready to respond to the effects of air raids. This initiative, through the pooling of existing state-funded beds, culminated in the creation of the Emergency Medical Service. But the EMS soon found itself pressed by ‘normal’ patients and by casualties from factories. The state had to pay the voluntary hospitals to keep the beds empty in case of war emergency. The result was that the voluntary hospitals became parasitic on the state system. Their nationalisation was imminent.

War made the establishment of a universal system of healthcare inevitable. The administration of charges on a local-authority basis was made almost impossible by evacuation and the exigencies of being ‘bombed out’. It was obvious that healthcare had to be provided for all, and that making it free was the most efficient way of providing it. This was the reality of what the architect of the NHS, Aneurin Bevan, boasted was ‘regarded all over the world’ as ‘the most civilised achievement of modern government’.

The great betrayal

The labour bureaucracy’s attitude to the measures adopted by Beveridge, Butler and the predecessors of Bevan was straightforward. Insofar as welfare reforms helped to oil the British military machine, ensure a smooth reconstruction of capitalism, and consolidate its own position, the bureaucracy favoured them. Insofar as they contained the slightest concession to working-class interests, it did not. The Communist Party backed full employment on the grounds that it would ‘increase profits’ and give the bosses ‘some measure of certainty in planning their production programmes’ (Harry Pollitt, Wages – What Should Be Done?, 1946). One bourgeois historian has remarked of the servile posturing of the labour bureaucracy:

‘The TUC [Trades Union Congress] delegation to the Beveridge committee was in fact in many ways a remarkable embodiment of the traditional sterling virtues of the labour aristocracy. The delegates were strongly in favour of contributory insurance: they were contemptuous of “dodgers”, of the “very poor” and of “the type of person who will not join a Friendly Society”, and to the surprise of Beveridge and his committee the leaders of the delegation favoured the withdrawal of public assistance from the wives and children of workers who went on strike’ (Jose Harris, ‘Social planning in wartime’, in J M Winter, War and Economic Development, Cambridge University Press, 1975).

The TUC’s attitude to Beveridge was consistent. Throughout the 1930s, it had only supported higher benefits because it thought they would improve purchasing power and so stimulate industrial recovery. Nor was the TUC’s outlook on education any better. It approved of the raising of school-leaving age, but only because it feared that the young could provide the employers with cheap labour – cheaper than that of its own members.

In fact, the Labour government failed to deliver on its welfare promises. Labour never achieved full employment. It never implemented subsistence benefits. Instead, it forced more than a million people to top up their inadequate benefits by recourse to a new National Assistance Board. Yet this board, because it applied a needs test, `threatened to bring back the old Poor Law under a new guise’ (Sidney Pollard, The Development of the British Economy 1914-50, Arnold, 1962). Likewise, it closed down nurseries by the thousand, drove women workers back into the home, left public and fee-paying ‘direct grant’ schools alone and private medical practice untouched, built no new hospitals or ‘health centres’ and failed to raise the number of hospital beds per thousand of the population above 1937 levels (John Jewkes and Silvia Jewkes, The Genesis of the National Health Service, Blackwell, 1961). These betrayals went unchallenged.

Conclusion

There are two points to remember about the welfare state.

First, the labour bureaucracy convinced workers that the formation of the modern welfare state was a major triumph - a view which is still ingrained in the labour movement today. Just as Marx poured scorn on all the protective legislation of the nineteenth century, so must we expose the real nature of the welfare legislation of the twentieth.

Second, the bureaucrats’ pro-capitalist line on welfare has continued right up to the 1980s. The leaders of all Britain’s public-sector unions can only bring themselves to oppose cuts on the grounds that reducing social services ‘puts Britain’s future at risk’. We must expose them as patriotic apologists for a system that has always provided third-rate services on the cheap for working-class people.

Illusions in welfare only strengthen reformism. Socialists have no choice but to destroy them.

James Woudhuysen is professor of forecasting and innovation at De Montfort University, Leicester, and co-author of Energise: a future for energy innovation.

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