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Nigel Harris

The Decline of Welfare

(Winter 1961)

From International Socialism (1st series), No.7, Winter 1961, pp.5-14.
The notes have be reorganised to coincide with normal practice – the original numbers are given where they have been changed.
Thanks to Ted Crawford & the late Will Fancy.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

J. Chamberlain (1885): ‘I ask what ransom will property pay for the security which it enjoys?’ [1] – (1917) ‘Curzon was against any extension of the franchise; ... on this, Henderson thumped the table: did he want the workers to get their rights by compromise or revolution? ...’ [2]

Q. Hogg (17 February 1943, Debate on the Beveridge Report): ‘If you do not give the people reform, they are going to give-you social revolution. Let anyone consider the possibility of a series of dangerous industrial strikes, following the present hostilities, and the effect it would have on our industrial recovery ...’

It is not inevitable that in a class-society widespread poverty must exist, but historically in Britain it has seemed almost inevitable. The primary causes for such poverty, at times encompassing as much as two-fifths of the population, have been in the first instance irregular employment or employment on short-time – the margin of unemployed has always kept what wages were paid depressed. It is in the light of these causes that we should initially judge contemporary prosperity – current ‘affluence’ is more the result of continuous high employment, with a high labour demand bidding up wages, than of any ‘fringe’ benefit such as the ‘Welfare State’. A by-product of this prosperity has been a fragmentation of the traditional ‘solidarity in poverty’ which earlier characterized the working-class, and a resultant neglect of that margin of poor which stubbornly resists absorption. It is in relation to this margin that welfare is of maximum importance. To estimate the size of the margin accurately is impossible – but Townsend guessed in 1958 that it might cover as much as a fifth of the population. He defined the margin as those who, left to themselves, would starve.

Welfare in Britain is a complex of legislative measures, passed for many different reasons and at different times over the last hundred years – when combined, the measures compose both the Fabian administrator’s view of ‘the common interest’ and, an older Tory tradition, an attitude of care towards dependants that stems from feudal mythology. Generally, the elements contained in the body of welfare legislation are very wide – laws limiting exploitation, setting minimum standards of work and quality of goods, controlling public health etc. Thus, the Factory Acts, Shop Acts, Mines Acts, minimum wage legislation, laws on the arbitration of disputes as well as trade union legislation are often included in the bundle. So also is the Government commitment to high employment (Cmd 6527 1944), the organization of Labour Exchanges, unemployment insurance etc. More commonly, the health service, housing policy, education, the dole, national assistance etc., are items most people would think of. However, there are preconditions necessary for these items to be in any way useful or to fulfil the large claims made for them – namely, that benefits received through these services are not taken away in other payments to the State – whether such payments be direct contributions to the cost of these services, or to general prices (purchase taxes) or taxation. Thus, to understand the impact of welfare it is necessary to look closely at the taxation system, and at other aspects of government pricing policy – viz. the prices of the products of the nationalized industries, or the subsidizing or not of other prices (e.g. agriculture, rents, house building etc.). The subject is vast, complex and astonishingly dull – we can here only draw out some of the main lines of welfare itself, but some indication can be given of how benefits received in one form are taken away in another.

The motives at stake in any given piece of welfare legislation are complicated and disparate. Many factors, from the crudely opportunistic to the sincere reforming, operate to dilute a measure or produce one that is irrelevant to the problem which needs to be solved. However, whatever the prior reasons, the effects of welfare legislation add up to an evasion of the overall problem – they serve as a substitute for the transformation of society, a refusal to face the issue of the distribution of wealth and power: if all got enough income in the first place, comprehensive welfare schemes would be only marginally necessary. As it is, the problem of poverty remains untouched – its effects being partly ameliorated. As socialists, we are concerned with remedial measures – not how to moderate the impact of poverty, but how to create a society in which poverty cannot arise in the first place. For that reason, the welfare legislation of Britain, like nationalization measures, is not necessarily related in any way to socialism although such measures may be approved on humanitarian grounds. Indeed, contrary to Labour’s propaganda claims, welfare legislation is restricted neither to Britain nor to socialist parties – it is common to most heavily industrialized countries, including those without significant socialist movements. Furthermore, some of these countries achieve a higher level of welfare – in 1957, Germany spent some 17-18 percent of a smaller national income on welfare, while in 1951 when Labour was still in office Britain spent only 11-12 percent (compared to 9½ percent in 1938). John Saville in 1957 suggested a correlation between low-wage countries and a high proportion of the National Income devoted to social charges – with Britain half-way along the scale (see table [3]). His figures are now rather out-of-date, and recent changes have contradicted his hypothesis – both scale of benefits relative to earnings, and the faster increase in general wages in Europe has pushed Britain further down the scale. He also notes that employers’ contributions in this country are significantly lower than on the Continent – a suggestion of the relatively cohesive and resistant ruling-class in Britain relative to most other European countries where revolutions of one kind or another have made inroads in the traditional ruling-class. Certainly, on specific services the conclusion that there is very little peculiar to Britain is unavoidable – Germany has a better insurance coverage for illness, and spends half as much again as Britain on social security. Britain spends a lower proportion on housing than all but three of fifteen other European countries. Shonfield confirms the overall impression with a table (see note [4]) showing German labour costs relative to British. The German national pension scheme takes 14 percent of the total labour costs, 2 percent goes to unemployment insurance and over 2 percent to sickness insurance. Comparably, the total figure is 3 percent in Britain. A percentage system (against a flat-rate one) ensures that contributions and benefits rise realistically with national income and inflation. It is not possible here to go into the impact of the German scheme, taking, as it does, the maximum from workers’ current pay (and penalising the lowest-paid), but the comparative conclusion seems inescapable: far from leading the world in socialism, Britain is not keeping up in capitalism.

The history of British welfare falls into fairly clear phases – the long slow growth through the nineteenth century, with a jump up during the Disraeli period, leading to the first great innovating phase with the Liberal administration of 1906-15. The inter-war period saw the Conservatives accepting the Liberal measures, while reinterpreting them in ways which have only been really effective in the post-1951 phase. Tory stagnation gave way to War and the second wave of innovation under Labour – followed by the fifties and a period of digestion which, supported by the totally new phenomenon of continuous high employment, allowed the Conservatives to consider the emasculation of most of what had gone before. The two key creative periods in the whole process were those of Liberal and Labour administration, differing in important respects from each other. The Liberals operated very much as a buffer state between ruling-class and ruled – the social basis of their own political power was dwindling quickly as the old enterpreneurial group either disappeared or crossed to the Conservatives, and the last period of Liberals in office, bright as a meteor before extinction, sought to substitute working-class support. On the other hand, however, they were still a ruling-class party, offering concessions to the narrow margin of ‘under-privileged’ from a position above, and concerned to protect the important interests of the ruling-class. They were not concerned to refashion society either through welfare legislation or taxation policy – but rather to offer a helping hand to the very poor. Labour, on the other hand, was ostensibly the voice of the threatening class, concerned in its propaganda to urge the radical change of society – welfare, as taxation, was one of the means to redistribute wealth. However, the State that was to operate the change was itself neutral – and therefore bound to treat all equally: as a consequence, the welfare schemes were not so much a helping hand to the few as a universal service for all. War experience with overall controls, rationing and ad hoc welfare, meant that most of the legislation associated with the formation of the ‘Welfare State’ was designed and some even executed by the War-time Coalition Government (e.g. Butler’s Education Act, the Beveridge Report, White Paper on Employment Policy etc.) – it was modest and, relatively, non-political. Large parts of it had been initiated by the Conservatives and they allowed the rest without major protest – something that did not happen with the Liberal innovations. The Liberals found much more difficulty in both instituting welfare and protecting the ruling-class – and as their schemes referred directly to those in need, the relative advantage from their legislation to the working-class was considerably more Labour with egalitarian aims, attempted their universal scheme against a back-cloth of inequality, and in so doing, left that inequality basically untouched.

In the period considered, what reasons, intentions, results or effects can we see in welfare legislation; why does a ruling-class in general feel it necessary to concede welfare, or what forces within that class compel its acceptance? At any one point of time, as earlier suggested, the factors are complex – ranging from the sincere if narrow concern of reformers like Shaftesbury to the struggle between big business and small.

The preceding historical resume has suggested one reason for the Liberal legislation – a party’s search for a social base, for survival. War is a time when, from necessity, the government is hypersensitive to demands from below- – both to keep the war-effort at a maximum, sustain physical fitness and morale, and to sidestep impulses that could lead from a strike to a revolution. Overall, we can see the long-term search to render the social structure stable and relatively invulnerable to periodic crisis while ensuring that the supply of labour is both adequate and efficient.

This search for a supply of efficient labour has been one of the few continuous threads in the history of welfare. The Inspector General of Recruiting noted after the Boer War ‘the gradual deterioration of the physique of the working classes from whom the bulk of recruits must always be drawn’. [5] Later, during the first World War, Factory Inspectors noted that total output increased with an increase in food intake and decreased alcohol opportunity (not the most illuminating point) and so provided one of the reasons for the Government to encourage factory canteen building, allowing the cost to be written off against excess profits duty. In the same way, ad hoc concessions of shorter hours were made – the Health of Munitions Workers Committee Report of 1916 (Cmd 8186) noted that ‘it is significant that... no employer who has once adopted the shorter scale of hours ever desires to return to a longer period’ [6], so obvious was the resultant increase in output. The aim of the Government was always, first, to attempt to get employers to introduce most measures themselves without statutory intervention (so getting firms to foot the cost, and allow the postwar ‘return to normal’ without Parliamentary complications) – B.S. Rowntree, the early pioneer and first Director of the Welfare Section of the Ministry of Munitions argued persuasively in that light: ‘Real betterment of conditions springs in the last analysis from the conviction in the mind of the employer that here lies his plain duty, a duty which does not conflict with his business interests but promotes them, since it is obvious that workers who are in good health and are provided with the amenities of life are more efficient workers’. [7] The reduction in absenteeism which resulted from such measures adequately justified the policy.

In the Second World War, Rowntree’s sentiments were not forgotten – Beveridge noted that ‘each individual citizen is more likely to concentrate upon his war effort if he feels that his Government will be ready in time with plans for that better world’. [8] Samuel Courtauld (Chairman of the rayon firm) went even further in discussing the Beveridge Report: ‘social security of this nature will be about the most profitable long-term investment the country could make... it will ultimately lead to higher efficiency among them (the workers) and a lowering of production costs’. [9] Indeed, the legislation that followed the War was often justified to doubtful Conservatives in efficiency terms – the ‘safety net’ was to keep everyone on the labour market.

The discussion above has covered in addition to the question of efficiency, the powerful impetus given to welfare moves by War – not merely to increase effectiveness, but also to divert pressures. Working-class action as for example during the rent strike in Glasgow (1915) prompted the introduction of legislation that has often remained on the statute-book long after the pressure has receded – the present Conservatives are only now beginning to dismantle the 1915 rent measures (as Ford’s are seeking to cancel their war-time concession of a tea-break). Even after the first World War, however, given the continuous level of unemployment and industrial militancy, it was impossible for the State to reduce its welfare commitment without courting revolution: wave after wave of Conservative backbenchers launched attacks on successive Chancellors to cut expenditure, and failed. Expenditure in general and the dole in particular, far from gradually dwindling into a form of insurance solely paid for by the working-class, expanded into a straight Exchequer subsidy to the workers. Even the 1931 crisis could not force its abolition. The precondition for that abolition (as an Exchequer payment), full and continuous employment, has only been present since the end of the last war. John Saville [10] has argued that welfare was primarily big business’s search to make its labour efficient and defeat small business. The thesis is undoubtedly plausible in the earlier period but has a declining relevance today – at the moment, State welfare helps small business to be competitive by ensuring that the fringe benefits only provided normally by big business are available to all. Large organization business has now a declining interest in State schemes. Both to retain or attract its labour force, and evade the elaborate tax restrictions, its interest lies in private welfare: a point more dramatically illustrated by the figures of growth in private welfare schemes which will be discussed later.

Welfare legislation as a whole takes the controversy over the distribution of wealth off the potentially more dangerous factory floor bargaining where solidarity can attain the maximum, and conceals it in the mist of administrative bureaucracy – all demands for change henceforth have to go through the fine mesh net of party and parliamentary politics, and the reforming attention of the working-class is either lost or riveted firmly to the conventions of Cabinet government.

Finally we can mention some subsidiary reasons for welfare. One of Beveridge’s aims was to rationalize the complex of unrelated statutes passed earlier, and so cheapen the cost of welfare benefits. Educational changes are at least partly related to the demand for certain types of highly-skilled labour. Nursery schools are a direct incentive to married women to work in a high labour-demand market. Effects of a broader nature are produced by recently introduced hierarchic schemes (the new pensions plan, rent differentials) – additional help is given to the fragmentation of class consciousness.

Before leaving the question, the ideological function of welfare should not be missed, especially as epitomized in the phrase ‘the Welfare State’. Under its auspices, ‘reformed capitalism’ can abandon its bad old past and claim both to have rectified its errors and, now corrected, to be the most efficient form of social organization available. The People, alias the Labour Party, having stormed and taken the commanding heights through capturing political power, have proved the authenticity of the traditional claims of Parliamentary democracy, can effectively control the new interest-free managerial controllers of British industry and organize prosperity both through wage bargaining and welfare legislation.

Given the wave of welfare legislation, how has postwar and high-employment capitalism assimilated it? The answer is complex and multi-dimensional:

1) Labour’s initial social security schemes were, as mentioned, on a flat-rate benefit and contribution basis, and universal in scope. So they have certain automatic effects:

1. being universal, the relative advantage of the working-class and even of the poor, was destroyed immediately.
    
2. in paying for the scheme, a flat-rate system of contributions (National Insurance stamps) bears upon all equally, and so must inevitably penalise the poor majority vis-à-vis the rich minority – numbers are taxed not means.
    
3. with a flat-rate benefits system, inflation such as we have had continuously since the War, erodes its value (witness the pensioners). The result has been an absolute decline in the value of benefits and an even bigger decline in their value relative to earnings. Thus sickness and unemployment benefits are now relatively lower than at any time since 1911.

2) The Conservatives have not been content to let inflation destroy benefits, but have sought other means of emasculating the system. It is necessary initially to take some note of the means used to finance welfare. The money for benefits comes partially from direct contributions (National Insurance) and partly from the Exchequer, which in its turn derives its revenue from direct (mainly income) and indirect (e.g. purchase) taxes. The important factor to note is that direct taxation is based on a progressive scale – i.e. payments relative to the means of the payer – whilst indirect is merely a flat-rate that falls on all who use a particular service or purchase a particular good – i.e. it is a tax on needs. Now, how have Conservatives sought to change welfare?

1. by making the majority of the beneficiaries pay more, so that in some cases, the State makes a profit on welfare. Making people pay more can be done in any of the following ways:

1. by cutting the Exchequer grant, and either increasing the National Insurance stamp, or letting a smaller service be paid for by a larger proportion of contributions.
    
2. by changing the progression of the income tax scale or enlarging the group exempted from surtax etc.
    
3. by increasing the volume of revenue received from indirect taxes relative to direct taxes.
    
4. by imposing specific charges on particular items in the service (viz. health). Labour first imposed such charges on health in 1949 (just after the service had started) to pay for rearmament. Charges rose again in 1951 and 1952 in response to specific crises; the Conservatives waited, their electoral strength not yet safe enough to begin the real shift – that came after their second electoral victory when weekly contributions were doubled in 1957; another increase in 1958, and 1960 and 1961 – the long counter-revolution is with us.

2. by straight amendment or abolition of necessary parts of welfare – thus subsidies on food, housing and rent either have been stopped or are in the process of being stopped, and the prices of the nationalized industries are being allowed to rise so that consumers pay the same sort of prices as were paid in 1939 before nationalization and welfare. In thus raising the cost of living for the working-class they are again taxing needs not means.
    
3. by allowing most benefits other than National Assistance to decline with inflation, and pushing those in need on to National Assistance (e.g. the old age pensioners). The important aspect of this is that, with the same stigma as old Poor Law charity, National Assistance involves a restrictive means test to cut down the numbers of beneficiaries (unlike pensions which are issued to anyone over a certain age). Beveridge envisaged National Assistance as the very last resort of those living on an adequate pension or other specific benefits: now (cf. The Economist, 11 March 1961) the trend is to place entire reliance on NA (which can be denied to those requesting it). In addition, the means test is now estimated to be harsher in many respects than that existing in 1932. [11]
    
4. by making both contributions and benefits hierachic, ie formerly universal schemes are now correlated with income at the lower ranges (within the working-class only). Thus the new Conservative pension scheme has graduated contributions between £9 and £15 per week – this will be discussed later. Suffice it here to note how the size of payments (compare differential rent schemes) tends to fragment any solidarity existing between low and medium paid workers, while allowing maximum extortion from each isolated income stratum.
    
5. by changing what is free and what is paid for. The imposition of specific charges on those who need items the most has already been mentioned. However, members of the Bow Group, a sensitive if extreme barometer of Conservative trends, have called for the extension of payments to cover education and school meals (Crossbow, New Year 1961, p.51), and for the abolition of school milk. Also, they have called for an extension of free services upwards where some relative advantage is still retained by the working-class – thus the demand for the extension of free drugs to fee-paying patients (Times, November 28, 1960) and the abolition of the means test for university education.
    
6. by shifting the emphasis from subsidized State services to private firms’ insurance schemes. Combined with the trend to large monopolistic units, the social scene is becoming transformed into the corporative state: within each medieval corporation, all possible life needs of each individual are to be encompassed. Initially, large firms today have instituted welfare schemes for salaried and managerial staff, but such has been the success in giving these disguised forms of pay-rise in evading the tax-man, that they are now being extended to wage labour also. At the highest level, such schemes can involve such things as: pensions, tax-free lump sums on retirement, grants for loss of position, season tickets, meal vouchers, expense accounts, holiday expenses, entertainment, life assurance, sick pay, school fees and higher education grants, housing, cars, petrol, free-clothing, travel, etc. Few of these extend beyond the managerial stratum. Durham [12] estimated in 1958 that the cost per employee for staff pension schemes was 700 percent larger than for work pension schemes, which adequately illustrates where the emphases of private welfare fall. At the upper end, figures become astronomical – £40,000 lump sums on retirement, £60,000 grant and £4,000 pa pension for loss of office (Times, 22 Jun, 1959). AEI have just purchased a house for their managing-director, Lord Chandos, for which he pays £500 p.a. rent: the price of the house has not been disclosed for obvious reasons, but it was purchased in 1947 when property values were half what they are now, at a price of £200,000. In the first instance, all such schemes are a means of pumping up managerial incomes while avoiding income-tax – but as they extend lower down the income-scale, they are a means used by big firms to attract scarce and specialized labour (so getting a competitive edge on smaller firms) while avoiding the full taxable labour cost – in addition, the prospect of a pension or gratuity on retirement curtails rebellion and any tendency to leave the firm if good behaviour is a precondition of getting benefits. Tax allowances subsidize occupational welfare to a high degree – the Exchequer contribution on this score is estimated at about £1,500 million while the general schemes themselves cost employers between £550 and £880 million (looked at in another way: Exchequer allowances contribute about £170 million to private occupational pension schemes, while National Insurance pensions cost about £80 million).

At the moment occupational pensions cover about half of the non-agricultural male working population but they are spreading rapidly. The schemes are profitable to all concerned except the ordinary taxpayer or people not in the schemes – so much are they approved on high that the Phillips Committee favoured an increasing reliance on private pension schemes as against the State scheme – the new Tory pension plan explicitly allows for people to contract out of the State scheme in favour of their works arrangement (some 4½ million did so).

All of the elements mentioned above may change together – or just a few: the overall impression being, perhaps, that benefits have in fact risen. National Assistance rates increased in 1959, but were more than offset by the removal of food and housing subsidies, the loss of the tobacco concession to pensioners [13], increased health charges and raised transport fares. The overall effect on particular items is fairly clear – for example, in 1957-8, the Exchequer contributed 77 percent of National Health Service expenditure and contributions some 9 percent (the rest came from charges, 5 percent, payments for superannuation schemes, 5 percent, and local rates, 4 percent). All other elements remained the same in 1958-9, except that the Exchequer contribution went down to 72 percent and contributions (NI stamp) went up to 14 percent: a straight shift of 5 percent onto a regressive form of financing. [14]

The general aim of the Conservatives is fairly clear – not to destroy ‘the Welfare State’, but to ensure it has no re-distributive aspects. It is to make a system involving two elements – (i) for services which all will use, all will pay for on an equal flat rate – numbers will subsidise means, (ii) for services which only the poor are likely to use, the working-class will pay through a scheme of internal class transfer payments – the upper working-class will carry the lower. Finally, whatever of either elements can be shifted on to private welfare schemes, the State will give active encouragement. Summing up, G. Howe of the Bow Group made the point: ‘Over the whole field of social policy our firm aim should be ... a reduction in the role of the State’.

The above is correct however only if we restrict our view to direct cash benefits and to the period since the War. If we widen the picture, the balance turns much more firmly against the working-class. Before the War, Abel Smith [15] says, the working-class were the main beneficiaries, receiving dole, pension and sickness benefits considerably superior in value to those now given – benefits have approximately doubled and now go to all, while prices have nearly trebled and wages gone up fourfold. The non-working-class add to their incomes from unemployment and pension benefits; all but 4 percent of them are educated through the State educational system, attend Universities which derive only about one fifth of their income from direct fees (the rest derives from the Exchequer in one way or another) – so much so that John Vaizey (The Cost of Education) estimated that a parent earning between £500 and £2,000 per annum gained about 80 percent more from the educational system than one with an income below £500 p.a. Abel Smith concludes: ‘The Middle Classes get the lion’s share of the public social services, the elephant’s share of occupational welfare privileges, and in addition can claim generous allowances to reduce their tax liability. Who has a Welfare State?’ Titmuss confirms: ‘Those who have benefited most are those who have needed it least’. [16]

Only a full survey of class relations in relation to taxation, inflation, cost-of-living etc. could show the entire picture, and it is not possible here to even attempt an approximation – suffice it to note the income escape clause of tax allowances benefits the non-working-class almost entirely. In any case, the straight cost of just social security (unemployment, sickness, maternity, pension benefits) is more than adequately covered by contributions: ‘the present national contribution, taking the employer’s and employee’s part together (without Exchequer assistance) will pay for 2½ percent more than the cost of all benefits’. [17] ‘It is still true that nobody – or practically nobody – gets anything for nothing’ (Economist, 1950). [18]

How far has welfare measured up to its claims to help? The excellent recent survey by PEP [19] sets out to answer this question – it unfortunately is now well out of date (1957) and is concerned only with families with dependent children. Even so it gives some impression of what has been achieved – apart from 49 percent of those surveyed who either had not heard of or who had no idea of the meaning of the phrase ‘the Welfare State’, for all classes, the health service was praised most highly, followed by family allowances. People complained most of housing policy, national insurance charges and education. Maximum impact was felt in terms of help just off the bottom – about a quarter of the unskilled operatives had been on National Assistance at some time or another, but no one really thought it of decisive help. The situation is somewhat clearer if we look at a few specific services:

1) Housing. Housing is the ugliest problem in Britain today. Its history is one of struggle, politically, between private owners and builders and Local Authorities. Increasingly, the private sector has become victorious and now bids fair to achieving maximum exploitation through the market to remedy what Enoch Powell called ‘immoral and socially damaging’ public housing.

Between the Wars, some 4 million houses were put up, and ¾ million cleared in slum areas. However, in 1945, ¾ of a million had either been destroyed or rendered scarcely habitable. Apart from this, the Girdwood Committee in 1951 estimated that 60 percent of the houses in England and Wales were built before World War I, and so were increasingly obsolescent. Cullingworth (The Guardian, March 24, 1961) recently added to this – we have 2 million houses over 110 years old (out of 15-16 million) and 2 million over 80 years old – such that in many cities, the rate of slum clearance never quite overtakes the rate of slum creation. Even given no creation, at present rates of clearance, Birmingham will take 25 years to clear existing slums, Manchester 45 years, Liverpool 60 years. The 1951 census correlated these factors, showing 2 million households without piped water, 6½ million without a fixed bath, 3 million without a WC (in Glasgow, it is estimated that nearly half the households have no WC). To this we can add a 1955 survey showing 24.6 percent of the population living more than two to a room, 3.2 percent living 4 to a room. More up-to-date information shows that trends are getting worse – of the 13.4 households in England, surveyed by the recent Rowntree Trust Housing Survey [20], 56 percent had no fixed bath, renovations being made are minimal, and virtually no new private dwellings for rent are being built. The impact of this is primarily on newly created households with children in the unskilled worker category – in London ‘the price ... (is) ... so high that accommodation can no longer be found on the open market by an unskilled worker who is a family man’ [21] – even with absolute cramming of existing housing, three families a day become absolutely homeless in the London area and are shunted off into the grim prisons of LCC relief institutions [22] until they can bear it no longer and will allow their families to be broken up. The 1957 PEP survey [23] confirms the overall impression from the subjective – one third of their families had a housing problem, and a quarter of them a very serious one.

The 1945 government estimated that 34 million houses would be built in the following ten years (in fact, only 2 million were built), and set afoot in 1946 a building programme in which the Exchequer gave three quarters of the cost plus a special ‘needs’ grant where demanded. The program lasted until 1947 when the first balance of payments crisis put heavy pressure on raw material imports. Building was held at 200,000 per year. In 1949, the distinction between classes of building disappeared and private tenants could get government help, although still of second priority beside Council housing. A process of diluting minimum standards ,to save materials, also began – and was continued by the Conservatives (thus minimum space area fell from 1,050 square feet in 1951 to 901 square feet in 1958). In 1953, the first stage in rent decontrol was introduced along with the decontrol of the selling price of houses built under government licence. In 1954, the licensing of house building ceased (so unleashing private demand on the raw material, labour and site markets), and most rating authorities revalued local sites so that rents were compelled to rise (they are estimated to have doubled in London). In 1955, the government directly restricted housing expenditure by Local Authorities and ordered the freeing of 100,000 requisitioned houses by 1960 – up to 5 times the annual rent was to be paid to owners to encourage them to keep on existing tenancies. Some Councils had either to abandon the tenants or buy up the derequisitioned property at very inflated prices with their already depleted precious housing allowances. 1955 saw also the abolition of the general needs housing subsidy, housing allocations, and an instruction to Councils to set their building programs in future in relation to interest rates on the open money market: all of which measures cut the Council building program by half. 1956 increased the scramble for decontrol and continued the penalization of councils – improvement grants were extended to private owners and landlords, and increased scope given to landlords to increase rents. 1957 tied [24] the whole process into a neat legislative bundle, involving the staggered decontrol of rents, or, as a backbencher put it, ‘the removal of the injustices of forty years’.

The impact of these complicated and ad hoc moves was to destroy Council housing and make private building the main source of accommodation – a table has been added to show the relevant relationships. [25]

Overall, the building performance is poor by world standards (see note [26]), but within that performance, private house building has forged ahead: 15 percent (1952), 28 percent (1954), 45 percent (1956), 51 percent (1959), 60 percent (1961). The boom has been such that, in mere figures (i.e. regardless of the class distribution of new housing), we are nearing the realization of the 1945 target – or as Dr Charles Hill has it ‘A national housing shortage no longer exists’. Duncan Sandys threw back at Labour a quotation from Bevan: ‘We are not very far from the total amount of accommodation which the nation requires’. Alongside such confidence, we can put the one and a half million families on Council waiting lists (England and Wales only, March 1959), amongst which there are two million people in very urgent need, or the National Housing and Town Planning Council’s Report for 1959: ‘the housing situation is generally as bad now as it has been since records were instituted.’

The simple reason being that new housing is almost entirely concentrated in the middle and upper income brackets: private building erected 1,000 new blocks in the London County in 1959, of which The Economist (21 November, 1959) estimates the vast majority were luxury flats.

But the process is by no means ended. For the last general election, the Government promised a five years delay in full decontrol, and also that tenants could sue for 12 months stay of eviction order to ‘ease the pains’, but we can be sure there will be no delay after that. Rents have already risen some 60 percent, in the 150,000 decontrolled houses in London. The process now, having killed the extension of public housing, is to extract the maximum from what council housing is left through differential rent schemes (or, as the Conservatives put it, ‘rent rebate schemes’), and shift working-class areas out of central urban regions to cheap housing on the outskirts (in London, this means recovering rent increases through fares into the city). Labour finds difficulty in combating the first trend – Crossbow (Autumn, 1960, p.7) throws back at them their own statements: ‘Rent relief should be given only for those who need it and only for so long as they need it’ (1929), and the 1956 NEC had ‘no objection in principle to schemes designed primarily to give relief to lower paid council house tenants’. The last Government White Paper (15 February, 1961) outlines the means to introduce rent differentials, with subsidies to give Councils an incentive. With it, a mere £25 million goes to non-profit-making building associations to build working-class housing (whipping us back to Peabody), and permission to landlords to raise rents from 8½ percent to 12½ percent of value.

2) Health. Townsend’s [27] ‘submerged fifth’ are said to consist of 5 million pensioners, half a million widows and persons with large families and low incomes, 300,000 in mental hospitals, 2 million war pensioners, quarter of a million industrially disabled, half a million unemployed (1957), on whom depend a further million and a half. As a side note on the ‘affluent society’, the point has been adequately enough made by Townsend. Sickness finds its surest basis in this section of the population. This country has seen a startling improvement in the general standard of health – the infant mortality rate has dropped from 151 per 1,000 in 1901 to 22.5 (England and Wales). Comparative weights and heights of children have improved, some diseases been almost totally wiped out (e.g. rickets), more people survive to old age. It is true as well that there are new diseases – an increase in coronary heart disease, diabetes, duodenal ulcers, an increasing injury rate (especially from road accidents), and increasing psychiatric troubles; in addition, if correlated, an increasing crime rate, especially in relationship to crimes committed with violence or sexual intent of some kind. Overall, the British record in health is not by any means superior to comparable countries – the 1959 Annual Report of the Chief Medical Officer of Health concludes from a survey of mortality rates amongst males of over 65 in eight countries (including Canada and US) that Britain has the highest rate of all (Pt II, Cmd 1207).

However, for us, the decisive factor in relation to the National Health Service is the class distribution of bad health. The figures are difficult to obtain, but the general conclusion seems to be that relative standards of health between top and bottom (ignoring the important improvements in the majority in the middle) have either not changed significantly or even deteriorated. Certain diseases are in any case much commoner amongst the working class than elsewhere – notably tuberculosis, pneumonia, bronchitis, rheumatic heart disease, cancer of the stomach (on the other hand, Class I has the highest rate for coronary heart disease). Margot Jeffries [28] concludes that a comparison with 1921 ‘shows that relative differences between classes are as great today as they were then’. But other facts can be suggested to show that relative differences between top and bottom (or between the majority and the margin of poor) are even sharper: thus, the mortality rate for unskilled workers, aged 20 to 64, given that the rest of the population is constant at 100 is – 125 (1921-3), 111 (1930-2), 118 (1949-53). For infant mortality, the figures are even more dramatic: 122.6 (1921-3), 125.2 (1930-2), and 138.2 (1949-53). That is, considerably fewer people are dying at earlier ages, but more and more of those who do die come from the unskilled workers. The Economist (15 March 1958) sums up: ‘an infant born into Class V (unskilled workers) is twice as likely to die as one born into Class I (managerial-professional). If neonatal (i.e. 0-4 weeks old) deaths ... are excluded, the chances of a Class V infant dying are four times as high as those of an infant born into Class I’.

So far as diet is concerned, sharp differences continue. P.W.B. Douglas and J.M. Bloomfield made a survey of 5,000 children born in 1946, and decided that one quarter of all families with children under five, were unable to provide an adequate diet. The children themselves were shorter than the national average and weighed less. They also concluded that diet deficiencies had steadily increased since 1950 in the lowest group (i.e. those with under £10 per week in 1956). Another Report (Domestic Food Consumption and Expenditure: Annual Reports of the National Survey Food Committee for 1950 and 1956) showed that the average deficiency in the same group (on British Medical Association minimum standards) were: 6 percent in energy value, 19 percent in total protein, 15 percent in calcium, 6 percent in iron, 14 percent in riboflavin. They suggested that a quarter of the children in the country had over 10 percent deficiencies in at least two of the BMA categories. The problem, quite simply, was one of income – the PEP survey [29] mentioned earlier, found in 1957, that 22 percent of the families it questioned earned not more than £10 per week.

These figures suggest that insofar as welfare benefits were to ensure a basic minimum standard, they have failed; insofar as they were universal, they have not changed relative standards. Most of the points on the financing of the system have been made earlier. As with housing, the service started promisingly – hospitals were taken over although not the drug sources (so ensuring that the drug manufacturers would combine to bleed the Exchequer, and the national insurance payer). Immediately after the beginning of the service, the project to institute health centres throughout the country was abandoned and the hospital building program cut – the last item never quite recovered, and only two hospitals have been built since 1939 (the health service share of gross fixed capital formation amounted to 0.8 percent in 1958, compared to 1.7 percent in 1938-39). Charges were introduced on most essentials in 1949, and continued to climb from there until the last hammer blow in April 1961 when prescription charges were doubled, 10d put on the insurance stamp, increased charges put on teeth and spectacles, and welfare foods sold at cost price. Since 1951, the health charge has increased 260 percent, against a 74 percent increase in wages. The April changes were excused as a means of financing a new £5 million hospital building program – in fact, the new charges are estimated to realise an increase in Government revenue of £65 million.

3) Direct Benefits. In any week, the Ministry of Pensions and National Insurance now pays out about 12 million benefits and allowances. The last annual report (Cmd 1458) shows that last year some 3½ million families were getting family allowances, and 5½ million pensioners drawing pensions. The Economist (August 26, 1961) estimates from the figures that about one out of every two households in Britain is getting its income supplemented each week under one or another of the schemes. On top of this, the National Assistance Board paid out 1,857,000 weekly grants last year, over a million of which went to pensioners.

National Assistance has now become the most important system of direct payments – as has been mentioned, it was originally intended as the very last resort, but as other welfare benefits have been allowed to devalue (benefits given without a means test as a universal right), so people have been shoved into NA which is governed by a means test. The 1961 Report of the NAB (Cmd 1410) shows to whom the benefits went: 1.3 million old people (23.5 percent of all OAPs), quarter of a million sick (13.3 percent of these getting sickness benefits), and 130,000 unemployed (17.5 percent of all those unemployed). The people concerned included some 130,000 people owning their own homes; of the total, the NAB prosecuted only 88 for idling or getting money under false pretences – despite the Director of the Conservative Political Centre (The Future of the Welfare State, 1958) who attacked the Government for ‘squandering public money on providing indiscriminate benefits for citizens, many of whom do not need them and some of whom do not want them’.

The importance of National Assistance, given full employment, is mainly in relationship to pensioners (apart from relatively temporary needs). Like most earlier welfare benefits, pensions were primarily intended to help the poor only and to be financed from the Exchequer as a consequence. In 1925, Churchill began the long process of converting the pensions part of the 1911 Act into a contributory one – a trend continued through until today: the new Tory pension scheme is merely a means of extorting more money to pay back to the retired, the State taking no financial part.

Labour, as mentioned, made a crucial change en route in universalizing the system, so destroying any relative advantage and adding much incentive to the Tories to let the scheme run down under inflation. The Exchequer paid 50 percent of the cost before 1948; in 1954, they paid 17 percent. The numbers of pensioners receiving national assistance considerably understates the numbers needing it – Townsend [30] in his survey of Bethnal Green estimates that 20-25 percent of those retired there would have been immediately entitled to assistance but did not draw it – which, with the earlier figure, suggests that something like half the pensioners in the country are living below the accepted minimum subsistence line. This fact can be put alongside earlier ones cited on the existence of private pension schemes – the Exchequer allows tax concessions of £200 million on private pensions, which is more than its contribution to National Insurance. The means of financing the State scheme, as has been suggested, is horizontally, from young to old, not from rich to poor. The new Conservative scheme clarifies the nature of the trend in pensions by making it directly financed by recipients, and in the £10-15 per week income range, graded in both benefits and contributions according to income. The scheme is still not based on a sliding scale, and so any pension under it will be steadily eroded by inflation. No increases of significance in the actual pension are to be made [31], but the Exchequer contribution is cut – its liability declined by 28 percent in 1961-2. The increase in the National Insurance fund in the same year is estimated at about 14 percent – contributions have been raised 33 percent. The Economist (18 October 1958), as always, saw the point: ‘The main feature of the scheme, in some ways its whole essence, is that it is expected to save the Exchequer £99 million in its first year of operation, rising to no less than £428 million in 1981-2’.

Other benefits come in as pale shadows of those mentioned earlier – almost totally destroyed by inflation. That both sickness and unemployment benefits are totally inadequate does not need to be emphasized. A Bristol University survey found that ‘benefits and allowances... were insufficient for all reasonable needs of those whose main source of income they were’. Of the sample, 61 percent of the families interviewed were forced onto National Assistance within six months. Although grants in kind increased during the Labour period, cash benefits never caught up with inflation so that ‘The individual payments to adult workers for sickness and unemployment are worth less today than before the Second World War.’ [32] Relative to earnings, the benefits are smaller than at any time since 1912.

The crucial criterion of any system of welfare today for Socialists is its impact on working-class incomes and its function in redistributing incomes. As humanitarians, we must support measures to try and help the sheer misery of the poor, but this support does not of itself change society or relate directly to our aims as socialists. On socialist criteria, the Welfare State was never a State: it failed both in conception (in leaving untouched the basic problems) and in subsequent execution. The measures concerned were not transitional ameliorative ones, and certainly not remedial (i.e. getting rid of the causes of poverty) – they were, paternalistic ends in themselves. Inflation has done more damage than anything else, but even without inflation, the balance of advantage would have tilted. The Belgians had their Loi Unique in one document, and fought it in a General Strike; we are having ours spread over fifteen years.

Notes

1. The Welfare State – John Saville, in New Reasoner 3, Winter 1957-8.
cf. also the replies by Dorothy Thompson and Stephen Hatch, NR 4, Spring 1958, and The Pensions Plan, by Dorothy Cole, NR 8, Spring 1959.

2. The Decline and Fall of British Capitalism – Keith Hutchison, (Cape, 1951) quoted p.188.

3. Comparison of Earnings and Social Security charges in W. Europe:

4. Labour costs:

5. Essays on the Welfare State – R.M. Titmuss, 1958.

6. State Intervention in Great Britain, 1914-19 – Samuel J. Hurwitz – Columbia, 1949.

7. History of the Ministry of Munitions, V, Pt.III, p.12.

8. Report on Social Insurance and Allied Services – Sir William Beveridge, HMSO, 1942, p.71.

9. Manchester Guardian, Feb. 19, 1943.

10. J. Saville, op. cit. (see note 1).

11. R. Titmuss, op. cit. (see note 5).

12. The LSD of Welfare – W. Durham, 1958. [originally note 10]

13. For other examples of incomprehensibly mean measures, see Casualties of the Welfare State – A. Harvey, Fabian Society, 1960. [originally note 11]

14. Health Services in Britain – COI No.20, HMSO 1960. [originally note 12]

15. Whose Welfare State? – Brian Abel Smith, in Conviction, MacGibbon and Kee, 1958. [originally note 13]

16. The Irresponsible Society – R.M. Titmuss, Fabian Society, 1960. [originally note 14]

17. Smith, op. cit. (see note 15)

18. ‘The working-class pay for their own social security benefits by compulsory contributions and a high level of indirect taxation’ (Saville: New Reasoner above). [originally note 15] Saville also quotes Findlay Weaver in the Review of Economics and Statistics (Aug. 1950):

‘The outstanding feature of the postwar growth in redistribution is not that of taking from the “classes” and giving to the “masses”. The main feature is that the benefits of redistribution cut across income groups and are largely related to consumption. As a general proposition the working-class pays enough additional in beer, tobacco, and purchase taxes, and other indirect levies to meet the increased cost of the food subsidies and health and education expenditures, while the increase in direct taxes they pay covers the rise in their transfer money receipts ... Most of the post-war increase in personal taxes has been levied indirectly on consumption and has fallen on those who smoke and drink or consume non-utility clothing and household goods. The incidence of these regressive taxes mainly on the working-class who are also the chief recipients of the benefits of redistributive governmental expenditures’.

19. Family Needs and the Social Services – Political and Economic Planning – Allen and Unwin, 1961. [originally note 16]

20. Housing since the Rent Act – D.V. Donnison, C. Cockburn, T. Corlett, 1961. [originally note 17]

21. Families without a Home (Gaps in the Welfare State) – Jeremy Sandford, Observer, Sept. 17, 1961. [originally note 18]

22. op cit. Families without a Home. cf. ‘Of all the ones I visited, Norwood House by Gipsy Hill was perhaps the least luxurious. Mothers and children here live in stalls of seven-foot high hardboard, without ceilings, in a great hall, and with curtains across the entrance’. [originally note 19]

23. PEP, op. cit. (see note 19)

24. Saville, op. cit. (see note 1)

25. Houses in Progress in England and Wales (in ’000s of houses) [originally note 20]

New permanent houses built by:

26. 1954 was the highest year for house building in Britain since the War, but it was still a lower rate than in Italy, Denmark, Sweden or Norway. Houses built per 1,000 of the population, 1945-57: France: 5.4; W. Germany: 11; UK: 6; Soviet Union: 8; US: 7.4. Source: L’Allegmagne Sans Miracle – Heinz Abosh, Editions Minuit, 1960. [originally note 21]

27. A Society for People – Peter Townsend, in Conviction (cf. above). [originally numbered 20, but actually note 22]

28. Health and Social Class I – Margot Jeffries, Universities and Left Review, Summer 1957. [originally note 23]

29. PEP, op.cit. (see note 19)

30. The Family Life of Old People – Peter Townsend, Routledge. [originally note 24]

31. Increases are correlated with earning power to come. For example, a 60 year old at present getting £11 per week, if he continues to get it until 65, will get 1/- increase per week on retirement. An 18 year old who earns £15 for the rest of his working life (till the year 2008), not allowing for deductions for periods of sickness or unemployment, will draw the princely sum of 41s extra. [originally note 25]

32. Titmuss, op. cit. (see note 5)

 
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