12th May 2009

Professor Pat Thane (Institute of Historial Research, University of London) and Professor Noel Whiteside (University of Warwick) examined the historical foundations of the British welfare state and to draw comparisons with, and learn lessons from, other welfare states across the developed world. The seminar took place as part of the Fabian Society and Webb Memorial Trust research project Fighting Poverty and Inequality in an Age of Affluence. It examined the historical context of the UK’s approach to anti-poverty policy, exploring understandings of how the UK welfare model has developed and questioning how we can shape and direct the development of policy in a more progressive direction in the future. Tim Horton (Fabian Society) chaired the discussion.

Two key points immediately stood out. First, the British welfare state has historically been based on the assumptions of the Poor Laws, stretching back to 1601 in England, and has rarely deviated from this philosophy – that of a deeply residual system, aimed only at the very poorest, and providing only a minimal safety net. This has also involved an emphasis on both classification and incentives: benefit levels are set so that welfare claimants are significantly worse off than those in work, and those that do claim are easily fitted into the categories of the deserving and undeserving.

The second key point was that welfare systems do not necessarily need to be based on the targeted relief of poverty. In continental Europe and Scandinavia, far more universal systems evolved, with an emphasis on welfare systems as a means of nation building and social solidarity rather than simply the amelioration of poverty. The goal of continental welfare models was wage replacement / insurance, rather than poverty alleviation. The result is that welfare payments are not residual and offer far more than a safety net preventing poverty, and without unemployment leading to the categorisation of a class of persons as ‘the poor’. The most striking difference is the way in which the continental system of welfare payments is linked to earnings and contributions via insurance schemes.

The British welfare model therefore differs from its continental counterparts in being geared specifically towards poverty alleviation – and in many ways, paradoxically, this is what underpins its relatively poor performance in poverty prevention.

The more universal nature of the continental system has ensured that it has deep support across all sections of society: all citizens can be part of the same system, and payments out are at a level that makes it genuinely attractive to the middle-classes. Typically, the funds used for social security payments are seen as common pooled earnings, available to all who have paid in. Moreover, in continental schemes there is much more involvement of citizens in governing welfare schemes: because continental systems are based on insurance funds that need to be managed, this has led to the crucially important role of ‘social representation’ in the system. Unions, for example, are closely involved with overseeing the management of social security funds. There is therefore a deep sense of ‘ownership’ and political legitimacy of social security systems on the continent, which, in turn, has made these systems extremely resilient. On the other hand, a disadvantage of the continental model is its potential to exclude certain members of society (those not in work).

In contrast, the British system has not maintained a meaningful insurance element to welfare payments; and, indeed, National Insurance is largely seen as another form of general taxation. As such, social security payments are seen to be targeted and redistributive income transfers directed at a certain class of persons (‘the poor’) rather than insurance payments. At the same time, with the Beveridge settlement, the state took over the administration of social insurance from organisations such as the Friendly Societies and unions. Britain thus lost an element of continental style ‘social representation’ and close stakeholder involvement in the management of welfare.

A good example of this historical process is to be found in the case of pensions. Not only was there no real (or perceived) link with a genuine insurance scheme, there was also no buy in from the middle classes for the simple reason that the state pension was set too low from the start, and was therefore only of marginal benefit to the poorest pensioners. This low base made it necessary for those able to do so to make other arrangements, and the Conservative governments of the 1950’s encouraged people to take up private occupational pensions. Labour proposed a higher pension level in 1958, including an earnings-related scheme (hoping to replace private occupational schemes) and introduced the earnings link and SERPS in the 1970’s, but these attempts to rectify the deficiencies of the system came too late.

One of the main conclusions of the seminar was that this central feature – the lack of adequate universal provision and hence the lack of broad support – of the British welfare state accounted for the recurrent crises of legitimacy it has experienced during the past sixty years.

Yet it was also observed that the original terms of the Beveridge settlement did seek to replicate the positive aspects of the continental system. Beveridge did have a nation-building objective in mind and he placed a great deal of stress on the importance of the contributory National Insurance. But the Labour government of 1945 failed to see the vision through in important ways. There was also a very notable exception to the residual nature of the British welfare state: the National Health Service – universal and extremely robust in terms of popular support and legitimacy.

Here, the role of the UK Treasury was discussed. Because of centralisation in UK, the Treasury has dominated social welfare provision and reform. It was the Treasury that objected to most of the proposals in the Beveridge Report. The dominance of the Treasury has played a significant part in differentiating Britain from other European nations in the general course that the evolution of the welfare state has taken.

Attendee list: Laura Beers, Cambridge University; Eugenio Biagini, Cambridge University; Lawrence Black, Durham University; Phillip Blond, DEMOS; Christine Blower, National Union of Teachers; rriet Bradley, Bristol University; Gary Brisley, Royal College of Nursing; Jeremy Corbyn MP; Joan Costa-Font, LSE; Ruth Evans, History and Policy; Anooshah Farakish, Unite; Helen Fawcett, University of Strathclyde; Helen Goodman MP; James Gregory, Fabian Society; Jade Groves, Policy Network; George Jones, LSE; Sunder Katwala, Fabian Society; Hilary Land, Bristol University; Chris Leslie, New Local Government Network; Seema Malhotra, Fabian Executive; John McFall MP; Rena Menne, SMF; Lucy Parsons, REFORM; Gabrielle Preston, Child Poverty Action Group; Gareth Stedman Jones, Cambridge University; Samantha Williams, Cambridge University; Daniel Zeichner, UNISON.