A brief history of the Welfare State in the UK

Profoundly affected by Covid19, the UK struggled to provide an efficient response to curb the spread of the virus. The massive financial plan presented by the government heavily relies on welfare state provision – supporting the NHS or introducing benefits for employees and small businesses. However, the crisis did not endanger the welfare state system, it only exposed its deep-rooted flaws. Hence, I seized the opportunity given by the current context to go back in time and discuss the evolution of the welfare state through the 20th and early 21stcenturies to better grasp its origins and its challenges. 

The welfare system 

The UK welfare state is a ‘safety net’ which aims to provide support to ‘from the cradle to the grave.’ The three major themes of the welfare state revolve around education, housing and healthcare. Its provision to millions of British citizens is carried out through a set of programmes and grants schemes. Among them, benefits entitled to working parents, the unemployed and disabled people, housing benefits (to help pay rent or afford heating expenses) and basic national state pension. The welfare state was initially designed to protect and ensure a greater level of equality among its citizens, yet some argue that the system is too costly for the government and entails higher tax rates. They denounce welfare dependency, where benefits recipients might not have any incentives to find a job and therefore, it worsens the already high unemployment rate and low rates of productivity. Those critics advocate for an overhaul of the system. In fact, the UK welfare state initially tended to follow the Beveridge model, rather than the Bismarck one. The former system is characterised by flat-rate contributions and tax payments to finance public health insurance. Hence, the state budget represents a major role in its funding. The Bismarck one is based on an insurance system financed by both employers and employees contributions, based on the salaries. However, a gradual convergence of the two systems of social security can be observed in Europe.

The emergence of social security

After the Napoleonic wars, the country faced economic hardships and a high unemployment rate. The levels of poverty soared. Hence,  provision of relief to the less fortunate came in the form of the 1834 Poor Law Amendment Act, which reformed the workhouses. Workhouses usually provided food and shelter for those  in desperate need in exchange for tedious, repetitive and sometimes dangerous work. Oliver Twist, although a fictional novel, provides an accurate account of those unforgiving institutions. Nonetheless, their role was more extensive as they could also function as schools, hospitals, and asylums. The 1834 Act strengthened the principle of ‘less eligibility’, which ensured that ‘the condition of a pauper in the workhouse should be not as attractive as that of the poorest labourer outside the workhouse.’ In fact, the Act was designed to deter the able-bodied poor (who were socially regarded as responsible for their own situation due to their idleness), from depending on the workhouses and rather encourage them to seek a job instead. A distinction was established between the deserving poor – who deserved help, pity, and compassion, and the undeserving poor, perceived as mere burdens on society. Besides the paternalistic and degrading workhouses, which stripped their inmates of their individual freedom and autonomy, the end of the 19th century was characterised by the emergence of Friendly Societies and of Trade Unions. Those organisations, alongside private or volunteer charities, were an alternative source of support for the unemployed and the poor. In short, the late 19th century was a mixed welfare economy.

The foundations of social security welfare were laid in the early 20th century. A series of reports (conducted by Seebohm Rowntree in 1901 and Charles Booth in 1892-1897) exposed the plight of poverty and the increasing number of working-class people falling below the poverty line. As a consequence, the question of poverty became a pressing electoral issue. The Liberal Party, in government from 1906 to 1914, launched a series of laws to tackle the problem by targeting the three main vulnerable groups: the children, the elderly and workers. Free school meals were first established in 1906, and the Children’s Charter in 1908 condemned cruelty or neglect. The pension scheme for the elderly aged over 70 was passed in 1908. In 1911, the government drafted the momentous National Insurance Act, a contributory system providing workers with health insurance (echoing the Bismarck model). However,, WWI led to a hiatus in the desire to reform..  

The influence of the Beveridge Report 

Published in December 1942, the Beveridge Report or the ‘Report on Social Insurance & Allied Services’ identified the ‘five giant evils’ of society, which William Beveridge aspired to eradicate: Want, Disease, Squalor, Ignorance and Idleness. Hence, he advocated a national, compulsory, flat-rate comprehensive and universal insurance scheme covering healthcare, unemployment and retirement benefits. In fact, the Liberal politician denounced means-tested benefits, leading to the stigmatisation of the benefits recipients. Furthermore, he proposed to make children’s education free, develop council houses and strive to achieve full employment. Following the publication of his decisive report, major progressive legislative measures were enacted. The first one, the 1944 Education Act, made secondary education free for all and created the notion of selection at 11. Then, the National Insurance Act of 1946 established a comprehensive social security system to grant benefits ‘from the cradle to the grave.’ Two years later, the National Assistance Act extended the provision of benefits to those not covered by the previous Act. The second National Insurance Act of 1946 covered industrial injuries and introduced paid compensation to injured or disabled workers. Last but not least, the National Health Service Act of 1946 established the NHS, although was officially implemented in 1948 owing to firm reluctance from certain doctors.

William Beveridge (1879-1963), Economist and Liberal politician.

The welfare state during the post-war and Thatcher years

In order to rebuild the country after WWII, the Labour government of 1945-51 built 1.25 million council houses. They strove to replace old slum housing and to provide decent homes to those having lost their houses to bombs. The Town & Country Planning Act of 1947 set the target of building 300,000 new homes per year. In 1951, due to the increasing expenditure of the medical treatments, services and growth of the number of patients, the NHS resorted to introducing charges for dentures and glasses. Therefore, the free, comprehensive and universal ideal of Beveridge could not keep up with the increasing expenses outweighing the allocated state budget (around 10% of GDP). The politician also assumed that the country could maintain full employment and consequently, when the UK faced harsh economic hardships in the 1970s with more than one million unemployed, the amount of benefits they could claim became a serious concern for the state budget. The stagnation (high inflation and economic stagnation) jeopardised the provision of the welfare state. 

When Margaret Thatcher became Prime Minister in 1979, she pledged to roll back state intervention and, in accordance with her neo-liberal stance, develop privatisation and free market policies. Furthermore, she made unemployment and sickness benefits liable to tax. In short, Thatcher promoted the Victorian values of self-reliance and a degree of noblesse oblige, instead of entrenching the dependency or ‘nanny-state’ culture. 

The Quasi-Marketisation of the Welfare

A set of market-based reforms was launched in the 1980s. The first overhauled the structures and agencies of the civil service. New strategies and models, usually applied in businesses, were implemented in the third sector. For instance, it resulted in the rise of various agencies like the NHS Trusts. The third sector was no longer only reserved to the public domain, and the private sector could now run hospitals, propose insurance schemes and other alternative services. However, these options are mainly reserved for those who can afford them and it thus widens the social class gap. This plan was meant to foster competition to ultimately improve the efficiency of the services delivered. This marketisation was carried out under the label of New Public Management. In his book Why We Need Welfare, the social policy specialist and professor Pete Alcock is overtly sceptical of these policies. He exposes the consequences of managerialism, which conferred more responsibilities to managers striving to reach the targets instead of focusing on professionals’ opinions. To Alcock, the neo-liberal principle of granting individuals a greater range of choice, labelled as the provider culture, is to tamper with the provision of a caring and collective welfare state – an ideal he heartily endorsed. 

Another considerable shift can be observed through the public attitude towards welfare state recipients. The compassion and empathy they had once inspired following the publication of the series of reports, which were pivotal milestones in the construction of the welfare state,  gave way to scorn, animosity and individualism. According to surveys, an increasing number of participants tend to hold the recipients responsible for their own poor situation in ‘meritocratic’ Britain, which overlooks the by-products of socio-economic inequalities and undermines the concept of social determinism. Furthermore, some even deem them burdens for the state, living off the welfare benefit schemes and draining  collective efforts. However, it is important to highlight the underlying influence of media hammering on the benefit fraud cost, which ultimately contributes to the rise of acrimony. 

The quasi-marketisation was also enforced in the education sector. The Office for Standards in Education (Ofsted) was created in 1992 to inspect schools and to publish ranking reports. Therefore, they gradually encouraged a degree of competition between institutions to guarantee the best academic results and educational content, in order to attract more pupils. 

The welfare state today

Contentious reforms were enforced under the coalition government (composed of the Conservatives and the Liberal Democrats) in 2010-2015, altering and reshaping the welfare state provision in order to cut expenditure. Such revisions were carried out in accordance with their austerity agenda to recover from the 2008 financial crisis. They adopted a targeted approach of welfare provision which restricted the Child Benefit conditions in 2013, set a benefit cap and implemented the Bedroom Tax in 2012 (or the Reduction in the Spare Room Subsidy). By tightening means-tested provision, the stigma of benefits recipients worsened (accentuating the Us vs Them myth) and the rate of non-take-up of benefits also rose. Therefore, it demonstrates an overt distance with the Beveridge model which abborhed means-tests. Universal Credit was established in 2012 to replace the six means-tested benefits and tax credits (Income-based Jobseeker’s Allowance, Housing Benefit, Working Tax Credit, Child Tax Credit, Income-based Employment & Support Allowance and Income Support), and combine them into one monthly payment. 

The government pursued the austerity agenda through the controversial rise of university tuition fees, whose cap tripled to reach £9,000 a year (and rose again in 2017 to £9250). The latter would have contributed to the marketisation in higher education, where universities compete by setting different tuition fee rates. Hence, the pressure to appeal to students would lead to massive enhancements of the quality, price and relevance of universities’ provision. However, this motive was a failure owing to the choice of universities to set their tuition fees at the cap price. They dreaded that fixing a lower price would suggest they were of second-class quality. The marketisation process was illustrated in 2014 with the implementation of The Research Excellence Framework (REF), a method which assessed the quality of research in UK universities to inform and provide a transparent account to research funders.

Upcoming Challenges

The welfare state is a crucial safety net to millions of British citizens, and the demographic projections all warn about the ageing population. It ultimately implies that an increasing number of citizens will become a strain on tax revenues. In fact, their vulnerable health often requires heavy medical treatment, which eventually demands the most effective (and therefore most expensive) technology. Thus, the welfare state,competing for tax allocation with other sectors, might not sustain a growing number of elderly recipients nor the cost to fulfill their needs if the current Beveridge social insurance system is not reformed.

Will this Covid-19 crisis drive substantial long-term changes in the welfare state, in the form of more state intervention and reforming measures, thanks to a new awareness of hospitals’ lack of resources? Or will the changes be temporary, acting as a precursor to drastic budget cuts under economic pressure? It remains to be seen. 

Océane Guyard