The spirit of give and take

For a technical report of a government committee, the popularity and influence of the Beveridge Report has probably never been exceeded in British history. It sold 100,000 copies within weeks of publication, and racked up over 600,000 sales in total, an astonishing number by any stretch of the imagination. Beveridge took to the airwaves to promote its arguments and a summary version was distributed to the troops. By early 1943, almost everybody had heard about it.

It was this runaway success that has endowed the report with the status of a founding document for the post-war British welfare state, but in reality it rested on earlier achievements, notably those of the Edwardian Liberal administrations. Indeed, it was for Churchill at the Board of Trade that Beveridge first cut his teeth as a public administrator, directing the national system of labour exchanges while helping shape the landmark 1911 National Insurance Act. These Edwardian reforms – the creation of a state pension and an embryonic national insurance system – were the direct antecedents of the plan upon which the Attlee government built the new welfare state. Beveridge himself described his report as a particularly “British revolution” that was a “natural development from the past.” Indeed, he went further: it gave expression, he believed, to the deep instincts and popular sentiments of the British people.

Beveridge was a liberal but his genius was social democratic. He universalised social security, taking the pre-war patchwork of entitlements and creating a national system for the population as a whole. Benefits would be paid at a flat-rate as a right of citizenship, on the basis of contribution from all. This universality of social citizenship was the common basis of post-war welfare states built throughout Europe, despite the different institutional and practical forms they took. Universality was perfectly compatible, in Beveridge’s view, with a continued role for friendly societies and trade unions in the administration and provision of insurance benefits, and a “vital place for local authorities”, as the report put it. Only with hindsight would its critics attack the post-Beveridge settlement for bureaucratic centralisation and, although the core role of the contributory principle would wane, the majoritarian nature of social security would not be dismantled – at least until now.

The report was replete with gendered assumptions, however.  Beveridge’s archetypal household has a male full-time worker, with a wife and children at home. Women mostly appear as dependants or widows, not workers. Consequently, post-war economic and social developments cut away the ground from the report’s foundations. The rise of female employment, the breakdown of nuclear families and the growth of older people’s care needs, all drew women into the worlds of work and care without providing the requisite public services and social insurance reforms for either. At the same time, the rise of mass unemployment and structural labour market change in the 1980s pulled the golden thread of work out of the social fabric on which Beveridge rested.

Other northern European welfare states responded to these social changes more rapidly than in the UK. In the Nordic countries, social democratic governments proved more pervious to the demands of nascent feminist movements in the 1960s and 1970s, creating high quality, universal childcare services and expanding care of the elderly to enable women to participate fully in the labour market and reconcile the demands of work and family life. High standard pre-school education also underpinned a new wave of social mobility in these countries, while aggressive retraining for workers displaced by industrial restructuring ensured that intergenerational disadvantage did not become deeply entrenched.

Two significant political achievements flowed from these reforms. First, the middle classes remained firmly committed to the welfare state, as they benefited directly from high quality services for their families; and second, the employment rate of women reached consistently high levels, underpinning the tax base upon which the fiscal sustainability of Scandinavian welfare states still rests.

A contemporary rethinking of Beveridge must therefore take as its starting point the twin goals of restoring full employment and completing the feminist revolution in welfare services. The affordability and consent of the post-war welfare system rested on consistently low levels of (male) unemployment. This generated the revenue to finance social security and minimised people’s dependency on it, while keeping the contemporary disease of widespread fears of ‘free-riding’ in check. The UK labour market has proved remarkably resilient despite the economic convulsions of the last few years, at least in terms of headline numbers.

However, employment rates for certain groups – particularly young people, mothers and older men – remain low by international standards. This increases the scale of need with which the welfare system has to deal and reduces the resources on which it can draw, through national insurance contributions and tax. It is hard to have a generous, protective social security system when well over four million people were reliant on it to replace an earned income even after 15 years of uninterrupted growth and strong employment performance. Conversely, the fact that we lack a generous, protective welfare system, which reaches across low and middle income households, undercuts its majoritarian foundations. The contrast with the NHS – well funded and wildly popular – is stark.

Any project for rehabilitating a strategic role for the welfare state in a centre-left governing project must rest on the pursuit of full employment. In the first instance, this is about running a fiscal policy with the goal of higher and stable rates of employment. This imperative must be balanced against the considerable pressures on the public finances, which are only set to intensify. We have been deficit spending – sensibly – for a number of years, but this can’t continue indefinitely. The priority, therefore, should be to shift public expenditure towards areas that are most pro-jobs. This would certainly include higher capital spending, for instance by switching money overtime from housing benefit in to house building. Re-profiling of this kind – towards employment rich expenditure – should be a key test for the next spending review.

The Bank of England could take employment into account in decisions about monetary policy (as the Federal Reserve does in the US), aligned to a pro-jobs fiscal policy. It might also think about ways to use the tax system to tilt the balance of employer’s hiring decisions in favour of those who face disadvantages in the labour market (such as the long-term unemployed and disabled people). This would complement on-going measures that expect those in receipt of benefits to take active steps towards employment. In this vein, society could decide to put a limit on the length of time we were prepared to allow someone to be unemployed, at which point they would be guaranteed a paid job but required to take it up. Finally, to shield workers from the impact of capitalism’s inherent tendency towards instability, the ‘automatic stabilisers’ could be strengthened, such that an employer national insurance contribution cut kicks in whenever unemployment tops a certain level.

Advancing high quality, affordable childcare is also vital for repairing the consent and affordability of the welfare state. There is strong and consistent evidence that the cost and availability of childcare is a major barrier to higher levels of female employment. An extra million women in work – an increase that would bring the UK up to the best performers in Europe – would help to secure the financing of the welfare state (not to mention public services). Perhaps even more importantly, an offer of better, cheaper childcare, which is open to all parents – free for some, very affordable for others – would go some way to broadening support for welfare. If this were embodied in community institutions – like nurseries, schools and children’s centres – they would also play a role in helping families of different backgrounds to overcome isolation and build a common life together. Making progress in this area will not be cheap however, requiring resources to be found from elsewhere, such as holding down future increases in cash benefits for children.

And what of Beveridge’s contributory principle? Popular attachment to the idea of putting in what you take out is still very strong (indeed there is good evidence from the social sciences that co-operative reciprocity is a recurrent feature of all stable human societies). Conversely, public hostility to ‘unearned’ welfare is high and rising. This makes restoring the contributory basis of social security entitlements an attractive one for political strategists. But the rise in means-testing and the growth of social needs not met through work have combined to reduce the role of the contributory principle to a residual one in the British welfare state (outside of the basic state pension). Meanwhile, tax-funded universal services, most notably the NHS, have proved more politically durable than universal benefits.

Nonetheless, consideration should be given to new ways of animating the instincts of the contributory principle in the current welfare system, reflecting the major shifts in the worlds of work and family life since Lloyd-George and Beveridge. There are perhaps three possible areas to explore.

The first would be to provide greater protection to people who have contributed into the system, most closely reflecting the traditional model of social insurance. This could take the form of a higher rate of job seekers allowance (JSA)/employment support allowance (ESA) (or universal credit, in time) for those who have recently worked. Given the cost implications of such a move, an alternative would be to offer significantly greater financial support on a short-term basis for people who have paid in, but with the money recouped once they are back in work (such as IPPR’s proposal for national salary insurance).

The second direction would be to expect greater contributions from people in receipt of support. There have been a number of extensions of such ‘conditionality’ over the last 15 years, but entrenching a job guarantee in the welfare system to be both more protective and more demanding. For those who are not ready for paid work yet, benefit conditionality could focus on ways to counter the isolation and loneliness of unemployment.

The third area for developing the notion of contribution would be in the relationships and acts of reciprocity among those involved in delivering or experiencing the welfare system. For example, thinking about the social connections of unemployed people, not just their CV, is vital given how many job opportunities never get registered with Jobcentre Plus.