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PART I

THE PIPERS AT THE GATE OF DAWN

CHAPTER 1

‘Thank you, Sir William’

In every country it is unfortunate not to be rich; in England it is a horrible misfortune to be poor.

Alexis de Tocqueville, Voyages en Angleterre et en Irlande en 1835

‘They used to tell me I was building a dream …’

E. Y. Harburg, ‘Brother can you spare a dime’, American song of the Great Depression, opening line

At this stage of the war, the main ideas of reconstruction were in their first bloom, but largely, also in a state of suspended animation. Like the sleeping beauty, they awaited the prince’s kiss. In almost every field of reconstruction, Beveridge’s report of December 1942 was to be the decisive breath of life.

Paul Addison, The Road to 1945, p. 171

IN JUNE 1941, Sir William Beveridge was called in by Arthur Greenwood to be offered a job. Greenwood was the Labour Minister for Reconstruction in Britain’s wartime coalition government. Beveridge was an egotistical sixty-two-year-old civil servant who believed his destiny was to organise key parts of Britain’s war effort. He was asked instead to chair an interdepartmental committee on the co-ordination of social insurance. The task hardly sounded inspiring. With tears, not of joy but of bitter disappointment, in his eyes, he accepted.¹ It was the strangest of starts to one of the greatest of adventures – the founding of Britain’s modern welfare state.

Beveridge’s reaction was perhaps not surprising, for he was no ordinary civil servant. He was already well known as a radio broadcaster, academic, public servant and newspaper columnist; a man with more careers behind him than most ever enjoy. He was also by any standard, despite his detractors (of whom there were plenty), a member of the Great and the Good, at a time when such a class was perhaps more easily defined than at the start of the twenty-first century.

Born the son of a British judge in India in 1879 into a house staffed by twenty-six servants, he was schooled at Charterhouse. At Oxford he read mathematics and classics before, in 1903 at the age of twenty-four, he became in effect an Edwardian social worker and researcher at Toynbee Hall, the university foundation for the poor in the East End. It was there that ‘he learned the meaning of poverty and saw the consequences of unemployment’.² The impoverishment of this part of London was to affect others in the tale of Britain’s welfare state, including Clement Attlee and Sir Keith Joseph, even if the conclusions each was to draw from the experience were to be rather different.

At Balliol, Beveridge recalled, the Master, Edward Caird, used to urge his charges ‘to go and discover why, with so much wealth in Britain, there continues to be so much poverty and how poverty can be cured’.³

Oxford and Toynbee Hall triggered in Beveridge a lifelong interest in unemployment and broader social questions, turning the young man into a social reformer, but one whose academic training convinced him that policy should be based on exhaustive research and detailed analysis. In his autobiography, Beveridge characterised his own progress at the time as being from ‘Oxford to Whitechapel, Whitechapel to Fleet Street, Fleet Street to Whitehall’.⁴ On the way, however, there had been a visit early in 1907 to Germany, where he had studied the systems of compulsory social insurance for pensions and sickness, though not yet for unemployment, which Bismarck had introduced in the 1890s. It was an important and fitting lesson, for Bismarck’s is the only name to rank above Beveridge’s as a welfare state designer, although of a rather different model.

Late in 1905 the twenty-six-year-old Beveridge, on a recommendation from Caird, was installed as a leader writer at the Tory Morning Post, a newspaper which eventually merged with the Daily Telegraph. There he was given licence to write on social policy and advocate labour exchanges and unemployment insurance, drawing on the forms of social insurance he saw in Germany. That work brought him to the attention of the thirty-three-year-old Winston Churchill, who four years earlier had crossed the floor of the Commons from the Conservative to the Liberal benches. In July 1908, Churchill brought Beveridge into the Board of Trade as a fulltime civil servant. Over the next three years, Beveridge played a crucial role in the creation of a national network of labour exchanges of which he became the first director; and then in the formation of the world’s first, if initially highly limited, statutory insurance scheme against unemployment. The measure was introduced in 1911 by David Lloyd George and by Churchill, who by 1906 had become so imbued with the cause of social reform that he declared Liberalism to be ‘the cause of the left-out millions’.⁵

In government service, Beveridge had seen Lloyd George as Chancellor introduce the first state pensions, dubbed by their grateful recipients ‘the Lord George’ (because only a Lord could afford to be so generous), and had seen the spectacular row over the 1909 ‘People’s Budget’ which raised the money to pay for them. The pensions, Lloyd George declared, lifted ‘the shadow of the workhouse from the homes of the poor’. Churchill, more temperately, declared of the first relatively meagre means-tested payments: ‘We have not pretended to carry the toiler on to dry land. What we have done is to strap a lifebelt about him.’

The first unemployment insurance in 1911 covered only about 2.75 million men, or roughly one in six of the workforce, in industries at high risk of cyclical unemployment such as iron and steel and shipbuilding. It ran out after fifteen weeks. But with it came the first state-backed insurance scheme for health. Lloyd George’s famous ‘Ninepence for Fourpence’ was more comprehensive, covering all male workers earning less than £160 a year. For the worker’s compulsory fourpence (just under 2p) a week, the employer had to add threepence and the state twopence. The scheme was administered by ‘approved societies’ and provided the services of a ‘panel’ family doctor, but no right to hospital care or medicine; with that came sick pay of ten shillings (50p) a week, but no cover for wives and children other than a maternity grant. What marked out the health and unemployment measures of the 1911 National Insurance Act from anything that went before was that both were contributory, compulsory and state organised, with employers, employees and the taxpayer each contributing: the so-called tripartite system. What they were not was comprehensive.

The same Liberal Government had also introduced the first tentative legislation on free school meals (for large families only), school medical inspections, and the first overtly redistributive budget – the ‘People’s Budget’ – to pay for it all. The House of Lords, then still the power-base of the landed aristocracy, was faced by a new supertax and what were, in effect, wealth taxes. They threw out what Lloyd George had declared to be ‘a war budget’ – one ‘for raising money to wage implacable warfare on poverty and squalidness’. He added the hope, which he almost lived to see realised, that ‘before this generation has passed away we shall have advanced a great step towards that good time when poverty and wretchedness and human degradation which always follow in its camp will be as remote to the people of this country as the wolves which once infested its forests’.⁶ The result, after a long battle, was the 1911 Parliament Act which removed for ever the right of the Lords to delay financial legislation.

Beveridge was thus not only a close Whitehall observer but a key player in the formation of what has been dubbed the ‘ambulance state’ – the lifebelt precursor to the modern welfare state which thirty years on he was to do so much to help create.

With the arrival of the First World War, Beveridge moved in to the Ministry of Munitions, where he was involved in deeply controversial moves to mobilise manpower and where he worked directly with Lloyd George. In 1916 he went to the Ministry of Food, becoming one of the chief architects of rationing and price control. He finished his first Whitehall career in 1919 at the age of thirty-nine as the ministry’s Permanent Secretary.

Peace saw him leave the civil service to become director of the London School of Economics, transforming it into a great base for the social sciences. During a spell as Vice Chancellor of London University he commissioned its massive and Teutonic Senate House (the building Hitler earmarked to be his London headquarters). In 1937 he went back to Oxford as Master of University College. His academic appointments did not, however, to use the title of his autobiography, remove him entirely from power and influence. In 1934 he was appointed chairman of the Unemployment Insurance Statutory Committee, whose job it was to keep the insurance fund solvent, and in 1936 he was brought back to Whitehall to help devise the rationing that operated from 1940. In 1941, when Greenwood called him in, Beveridge had a knowledge of the origins and scope of social services in Britain that was probably unequalled.

He was connected everywhere. R. H. Tawney, the great Christian socialist thinker, was his brother-in-law and friend. He knew well Sidney and Beatrice Webb, founders of the Fabian Society, who in fact had introduced him to Churchill. (Churchill’s aside,’I refuse to be shut up in a soup kitchen with Mrs Beatrice Webb’,⁷ appears to have been no barrier to the appointment.) It was in fact Mrs Webb who had first proposed a free health service for all in her minority report of the Poor Law inquiry of 1909. Clement Attlee and Hugh Dalton, two men to whom would fall the job of finding the cash for Beveridge’s plan, had been lecturers on his staff at the LSE. Dalton was to be Attlee’s first Chancellor of the Exchequer in 1945. As well as having worked with Churchill, Beveridge was a friend of John Maynard Keynes, whose new economics were to make the welfare state possible, and he knew Seebohm Rowntree, whose landmark studies of poverty in York in 1899 had first helped drive the 1906 Liberal Government into its reforming zeal and whose follow-up study in 1936 was to influence Beveridge’s own report. In a line to the future, his research assistant at Oxford was a bright young economist called Harold Wilson.

But Beveridge was not an easy man. José Harris, in her biography, is reduced to summing him up as ‘rather baffling’. To some, she says:

he seemed wise and loveable, to others overbearing and vain. To some he was a man of dazzling intellect, to others a tedious bore. To some he was endlessly generous and sympathetic, to others harsh and self-centred to the point of complete insensitivity. By some he was seen as a humane, radical and visionary reformer, by some as a dangerous bureaucrat, by some as a sentimental idealist with his ‘head in the clouds and his feet in the pond’. He has been described to me personally as ‘a man who wouldn’t give a penny to a blind beggar’ and as ‘one of the kindest men who ever walked the earth’.⁸

Others have been terser and harsher. Angus Calder in The People’s War describes him as ‘the outstanding combination of public servant and social scientist’, but adds: ‘He was also vain, humourless and tactless.’⁹

He tried to run the LSE as an autocracy, inducing a mutiny by the staff in favour of a constitution. Lionel Robbins, a young lecturer at the school who would later produce the Robbins report of 1963 which initiated the great post-war expansion of British universities, once said: ‘I doubt if it ever occurred to him to regard the great men of those days as his equals, let alone, what some of them certainly were from the academic point of view, his superiors.’¹⁰

Arrogance, brilliance and a belief in statistical evidence did not prevent him from espousing unlikely ideas. Harold Wilson, when Prime Minister, would recall having to talk him out of a firm belief that fluctuations in unemployment were linked to the price of wheat which was in turn affected by a sun-spot cycle.¹¹ The weather, it seemed for a time, was all that there was to blame. He drove himself and others hard. Wilson, staying with him in his pre-war days at Oxford, recalls him rising at six to take an icy bath, following it with a couple of hours’ work before breakfast. If he was far from easy either to know or to work with, he was also no more consistent than the rest of us. Over his lifetime his views varied from strong support for the free market to a dirigiste view of the advantages of central control and planning during the First and Second World Wars, via a distinct if intermittent sympathy with Fabian socialism. At times he favoured generous social welfare, at others he believed ‘the whip of starvation’ was a necessary precondition for economic advance.¹² After his report was published he was to become briefly a Liberal MP, and it is as a liberal and indeed Liberal document that his great work is best read: an attempt to bridge the desire for security and an end to poverty on one bank with encouragement for individuals to stand on their own two feet on the other.

A mere four years before his clarion call for full employment, social security from cradle to grave, a national health service, and a war against ignorance and squalor, he had been for two long walks with Beatrice Webb, then in her eighties, over the downs near her Hampshire home. Her diary records:

His conclusion is that the major if not the only remedy for unemployment is lower wages … if this does not happen the capitalist will take his money and his brains to other countries where labour is cheap … he admitted almost defiantly that he was not personally concerned with the condition of the common people.¹³

If his desire for reform appeared to have waned, the war was to change that. But its arrival in 1939 left him bitter and frustrated. His talent and past experience, he felt, demanded a role in government. He bombarded government departments with offers of assistance, stringent criticism and unsolicited advice. He complained bitterly that ‘the present crew have no conception at all of how to plan for war.’ Along with other veterans of First World War administration, he gravitated to Keynes’s Bloomsbury house during the autumn and winter of 1939. The ‘ancient warhorses’, to use José Harris’s phrase, denounced Chamberlain’s incompetence to each other and devised alternative strategies.¹⁴

When Churchill became Prime Minister in May 1940, Beveridge wrote to remind the old bulldog of their ‘old association’ and to offer his talents. He followed up with letters to Attlee, Ernest Bevin and Herbert Morrison, the key Labour ministers in the newly formed coalition government. None wanted the awkward and arrogant ex-Permanent Secretary around. Bevin, whom Beveridge was later to feel had betrayed him, did offer him charge of a new welfare department in the Ministry of Labour. ‘I didn’t feel that welfare was up my street,’ Beveridge said. ‘… organisation of manpower was my goal.’

One by one, Keynes and the others were absorbed into Whitehall as part of the flood of academics whose presence was to do so much to help win the war against Nazi Germany. But Beveridge, who hardly helped his case by the style in which he proffered advice and sought work, remained outside. Finally, in July 1940, Bevin asked him to carry out a brief survey – in a firmly non-executive capacity – of wartime manpower requirements. At last Beveridge was doing the work he wanted to do. The survey done, in December he again became a full-time civil servant as under-secretary for the military service department at the Ministry of Labour. There he drew up the list of reserved occupations exempt from call-up; but he continued to demand from Bevin an ever larger role in running manpower.

The two, however, did not get on. Beveridge, condemned by so many as autocratic, in turn applied the same adjective to Bevin’s mountainous personality. The bull-necked ‘tsar’ of the Transport and General Workers Union, in Kenneth Morgan’s memorable epithet,¹⁵ had been brought in from the general secretaryship of the union to provide the sound base for labour relations in wartime that the First World War had so notably lacked. Bevin saw his remit coming firmly from ‘my people’. And while he used a range of Beveridge’s ideas during the months they worked together, it seems plain he did not trust with any executive responsibility a man he almost certainly associated with the coercive and at times damaging manpower policies that Beveridge had helped draw up in 1914–18.¹⁶

At the beginning of June 1941 someone else got the job Beveridge wanted: Godfrey Ince, who went on to become the department’s permanent secretary, was made Director General of Manpower. Beveridge was taken off administrative work and put in charge of a study on the way skilled manpower was being deployed into the forces. Four months before, however, in February, the Trades Union Congress had been to government to lobby about the hopelessly untidy mess of sickness and disability schemes by which workers were then covered. An inter-departmental committee was proposed to Cabinet in April. Bevin, having initially opposed the idea, suddenly saw it as a way of getting rid of someone whom he had clearly come to see as a pain in the neck.¹⁷ It was Greenwood who formally made the job offer, but Beveridge recorded twenty years later that it was Bevin who ‘pushed me as chairman of the Social Insurance Committee by way of parting with me … my removal from the Ministry of Labour … was “a kicking upstairs’”¹⁸ away from the work he believed he was cut out to do. Hence the tears that started to his eyes.

Indeed, so disillusioned was Beveridge that he appears for some months to have done little or nothing about his new task. His appointment, announced on 10 June 1941, attracted much parliamentary and press comment. But Beveridge spent the next months touring military bases and finishing his study on how the army was wasting skilled engineers. His reaction is perhaps understandable. The terms of reference – ‘to undertake, with special reference to the inter-relation of the schemes, a survey of the existing national schemes of social insurance and allied services, including workmen’s compensation, and to make recommendations’ – scarcely sounded like the dawn of a revolution or the making of a place in history.

While Home Office and Ministry of Health officials had higher hopes, the Treasury saw the committee merely as ‘a tidying up operation’, one of its senior officials declaring that the terms of reference had been made ‘as harmless as they can be made’.¹⁹ Bevin’s parting shot, according to Beveridge, was that the inquiry ‘should essentially be official in character, dealing with administrative issues rather than with issues of policy’.²⁰ Arthur Greenwood, however, saw it as something a lot bigger and in an early example of spin-doctoring gave briefings to that effect, inspiring Fleet Street so to write it up.²¹ The day after the committee was formally announced several newspapers reported in remarkably similar terms that it would be ‘the widest and most comprehensive investigation into social conditions … with the object of establishing economic and social security for every one on an equitable basis’.²²

Certainly something, if only at a tidying-up level, needed to be done. If, forty years on in 1984, Norman Fowler concurred in his civil servants’ judgement that the social security ship needed to be hauled in ‘to have the barnacles scraped off it’,²³ in 1941 the social security system – if it could even be called that – was a vessel full of holes and rotten planks through which it was only too easy to fall. It was showing all the strains and anomalies that piecemeal growth of voluntary and state provision over the previous forty-five years had produced since the Workmen’s Compensation Act of 1897.

Seven different government departments were directly or indirectly involved in providing cash benefits of one kind or another. To modern eyes, some of these seem mighty strange: Customs and Excise, for example, administered ‘the Lord George’, the first state pension. But by 1941 there were three different types of pension, and three different types of unemployment benefit, all operating under different rules. War victims and their dependants were helped by the Ministry of Pensions, but the civilian disabled, widows and orphans were the responsibility of the Ministry of Health. The Home Office had its finger in the pie through running workmen’s compensation in some industries. For many, however, cover for industrial injuries was provided by for-profit insurers who scandalously tried to buy off claimants with inadequate lump sums when disaster struck. ‘Indoor servants’ in private houses were excluded from the state unemployment insurance scheme; those in ‘establishments and institutions’ were included. Health insurance now provided panel doctors for those in work who earned less than £420 a year, but that still covered less than half the population. Wives and children remained excluded. Sickness benefit was provided through non-profit-making ‘approved societies’ whose benefits varied as widely as their performance. A good one might provide a nursing home, dental treatment and spectacles, a poor one only the minimum sickness benefit guaranteed by the state. And beneath and alongside all this, local authority committees, the inheritors of the Elizabethan Poor Law, paid means-tested benefits to those in need.

The result was ‘different rates of benefit involving different contribution conditions and with meaningless distinctions between persons of different ages’ as Beveridge was to say in his report.²⁴ There he picked out just one example of the many he said could be found. A married man with two children, he recorded, received 38s. od. (£1.90) a week if unemployed. If he then became sick and unavailable for work, his benefit more than halved to 18s. od. An unemployed youth of seventeen, by contrast, received 9s. od.; but 12s. od. if he was sick. It was this considerable mess that Beveridge was set to sort out. He did so in the grandest of styles, and on a scale that no one who appointed him could possibly have envisaged.

The first hint of what he was planning, and that he had no intention of just tidying a few things up, came in July when he produced a paper for the committee headed ‘Social Insurance – General Considerations’. ‘The time has now come,’ he declared, ‘to consider social insurance as a whole, as a contribution to a better new world after the war. How would one plan social insurance now if one had a clear field … without being hampered by vested interests of any kind? The first step is to outline the ideal scheme, the next step is to consider the practical possibilities of realising the ideal, and then the changes of existing machinery that would be required.’

Beveridge aside, the committee was staffed entirely by officials. There was a civil servant apiece from each of the seven departments involved in social insurance. In addition, there was the inevitable official from the Treasury, one from the Ministry of Reconstruction, the Government Actuary, and a representative each from the Assistance Board and the Friendly Societies. They spent the summer drawing up background papers and inviting evidence, while Beveridge’s attention was elsewhere.

In all, 127 pieces of written evidence were to be received, and more than 50 private evidence sessions held with witnesses. But only one piece of written evidence had arrived by December 1941 when Beveridge circulated a paper entitled ‘Heads of a Scheme’ which contained the essence of the final report a year later. The paper proposed unifying the existing schemes, paying flat rate benefits at a rate high enough to provide ‘subsistence’ – that is, sufficient to live on, free of poverty – while the whole should be financed by contributions divided between the insured, employers and the state. As Point One, the paper opened with the key statement which was to stretch his terms of reference up to and beyond their limit and which was to underpin the whole report.

1 No satisfactory scheme for social security can be devised [without the] following assumptions.

A A national health service for prevention and comprehensive treatment available to all members of the community.

B Universal children’s allowances for all children up to 14 or if in full-time education up to 16.

C Full use of powers of the state to maintain employment and to reduce unemployment to seasonal, cyclical and interval unemployment, that is to say to unemployment suitable for treatment by cash allowances.²⁵

So there it was. The nation needed a national health service; tax-funded allowances for children; and full employment to make social security work.

The reliance on insurance – though insurance backed by the state, so-called ‘social’, as opposed to private, insurance – reflected what already existed even if less than half the population was covered in 1941. It also reflected what Beveridge had helped design for the unemployed in the years after 1908 and his own long-held beliefs. In 1924 he had written a tract for the Liberals advocating ‘insurance for all and for everything’. Always opposed to means-tests, he had like many of his compatriots become affronted by both their enormous expansion and the harshness of the particular tests used during the Great Depression of the 1930s. He wanted to see benefits paid as of right. One consequence of the insurance principle, the paper states, is that ‘no means test of any kind can be applied to the benefits of the Scheme’.

But while Beveridge believed that everything that could be insured for should be, he had also come to see that benefits for children could not be run that way. To combat poverty and at the same time provide work incentives, it was essential that children’s benefits be paid at the same rate whether the parent was in or out of work. For if only means-tested help was given for children, then the low-paid with large families would be better off out of work than working – unless benefit rates were to be set dangerously low. Equally, family allowances would also help to prevent poverty among the low-paid. Rowntree’s work had shown that low wages in large families were the primary cause of poverty in 1899 and even his 1936 study showed they still played a significant role. Thus, Beveridge concluded, children’s allowances had to be tax funded, not insurance based. He had additional motives for backing family allowances. The war had seen the cancellation of the 1941 census, and on the information available Beveridge believed erroneously that the birth-rate was still declining, as it had been in the 1930s. It was a trend he believed required to be reversed in the national interest.