The Fascinating History of Welfare Reform in the UK

- by Becky Hall

A Guide to the Welfare System in the UKChapter 1

In London’s East End in 1889, 35% of the population lived below the poverty line. Comparably, in 2017, only 7.8% were in persistent poverty. Discover the fascinating history of British welfare reform and the development of the welfare system as we know it today.

In this chapter, we look at the history of welfare reform in the UK. We start from its very beginnings with the first Poor Laws. Then, we will look at the development of workhouses and their reform after the Royal Commission of 1832. We will see what other help was available before the Liberal government’s welfare reform laws (1906-14). The impact of the Beveridge Report of 1942 is far reaching, and we will examine the effects in depth. From the post-war period, we look at successive decades to see what has changed. How has the organisation of welfare provisions changed? As well, how did society view the welfare system over the years?

The Roots of the Welfare System

During the Late Medieval period, the UK developed Poor laws to deal with beggars and vagrancy. This was the beginnings of welfare provision in the UK. The monasteries of the time used to do lots of charity work. After the dissolution of the monasteries in 1536, there was a gap in the provision of help for the poor.

As a result, from 1587-1598 the laws of that time and the Tudor period were codified. A compulsory tax collected in every parish at a local level provided relief for the poor.

The First Workhouses

The first workhouses were established in the early 18th century. The idea behind them was that money could be earned by taking advantage of the inmates’ labour. The ideas was to make them work at such jobs as picking oakum and crushing bones to make fertiliser. However, the problem was that many of the inmates were the elderly, disabled, sick and children that were incapable of working.

Poor Laws 1834

Key People
Charles Booth was an English sociological researcher and reformer. In his report about London’s East End in 1889, he estimated 35% of its population were living below the poverty line.

The Royal Commission on the Poor Law of 1832 complained that there was widespread abuse of workhouses and they promoted squalor, idleness and criminality. They recommended making them so uninviting that no one would choose to go into one.

In the Poor Law Amendment Act two years later, they implemented the recommendations of the Commission. Conditions in the workhouse became exceedingly harsh to discourage the able-bodied. Unfortunately, it became apparent that it was impossible to make conditions worse for the inmates than it would have been outside the workhouses. In those days, conditions for the poor were so bad that it would mean practically starving them. Instead, they used other measures to ensure the experience of the poor was an unpleasant one. For example, they forced them to wear uniforms and separated the men and the women, even married couples.

Under this Act, a ‘poor rate’ on the property-owning middle classes financed the workhouses. They also tightened up entry requirements. For instance, they forced the inmates to accept employment or turn to private charities.

Other Aid: The Late 19th Century

With access to the workhouses being blocked, many poor people would turn to help from other organisations. The end of the nineteenth century saw the start of Friendly Societies (or Mutual Societies). These were groups supplying aid and support according to shared religious, political or trade affiliations. Running parallel with them was the creation of the first Trade Unions (first legalised in 1824) which were another source of aid for the unemployed and poor.

In this period, there were reports by Seebohm Rowntree (in York) and by Charles Booth (in London’s East End) documenting poverty and working class life. Rowntree was the first to say that poverty was a result of low wages rather than blaming the poor for their plight. Their reports had a direct influence on public opinion that there should be some intervention to help the poor.

Liberal Reforms 1906 to 1914

The laws passed by the Liberal Party government (1906-14) aimed to take the stigma out of needing help from the state. They chose principle of insurance finance, so as not to upset the party’s political support (by raising taxes). Contributions from the worker, employer and the taxpayer paid for this. These Acts of Parliament are the foundation of the modern welfare state as we know it today. The laws targeted three main groups who were vulnerable: the young, the old and workers.

The legislation encouraged local authorities to provide free school meals for the poorest children while the Children And Young Person’s Act of 1908 (also called the Children’s Charter) aimed to protect children and made cruelty to them or their neglect punishable by law. For the old, pensions were provided from 1908 for anyone over the age of 70. Finally, the National Insurance Act of 1911 established a contributory system against illness and unemployment. Workers were entitled to sick pay of 10 shillings a week for 26 weeks and free medical treatment. Labour Exchanges were also set up in 1909 to help the unemployed find a job, indirectly helping them to avoid high cost payday loans.

Between The Wars

This welfare reform helped a great deal during the period after the 1st World War when the country went through an economic slump followed by the Depression. In a time of mass unemployment, welfare was state or voluntary-based and was usually means-tested. The ruling classes were frightened by the communist revolt in countries like Russia and felt that the welfare reform would reduce the risk of mass social unrest in the UK. The end of an era occurred in 1929 when the workhouses were officially abolished and replaced by Public Assistance Institutions under the control of local authorities.

The Beveridge Report

Key People
William Beveridge was a British economist, progressive and social reformer. A qualified barrister, he left the law to focus on social and administrative reform, joining the Civil Service in 1908.

In 1941 the Labour MP and Minister without Portfolio in the war coalition government, Arthur Greenwood, was put in charge of an inter-departmental committee to consider Britain’s social insurance system and what kind of Britain they envisaged after the war. In the context of the war, it was seen as a ‘reward’ for everyone’s sacrifices. From these beginnings, the Beveridge Report was born. In the report it said:

“Organisation of social insurance should be treated as one part only of a comprehensive policy of social progress. Social insurance fully developed may provide income security, it is an attack upon Want. Want is one only of 5 giants on the road of reconstruction: the others are Disease, Ignorance, Squalor, and Idleness.”

Officially called the ‘Report on Social Insurance & Allied Services’, the Beveridge Report recommended a national, compulsory, flat-rate insurance scheme which would be able to provide benefits for the sick, unemployed, retired or widowed and specified a minimum standard ‘below which no one should be allowed to fall’. Beveridge himself was opposed to means-tested benefits as he believed they created high marginal tax rates for the poor. Unemployment benefit was also set at the subsistence level and was set at six months to prevent abuse; the theory being that any longer in normal times is unnecessary, and after this period the unemployed would find work or retrain.

(The state) “…should not stifle incentive, opportunity, responsibility; in establishing a national minimum, it should leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and for his family.”
Beveridge Report, 1942

‘From The Cradle To The Grave’; Enacting The Beveridge Report

The Beveridge Report was put into effect after the end of the 2nd World War. It was adopted in 3 main pieces of parliamentary legislation: the National Insurance Act 1946, the National Insurance (Industrial Injuries) Act 1946 and the National Assistance Act 1948. The Whitehall establishment disapproved of Beveridge’s inquiry and the way he published his report. Ironically they excluded him from working on his plan.

The National Insurance Act of 1946 was a comprehensive social security system covering Guardian’s (Orphan’s) Allowances, Death Grants, Unemployment Benefits (for six months), Widow’s Benefits, Sickness Benefits and Retirement Pensions. It quite literally covered every stage of a person’s life; ‘from the cradle to the grave’ as the slogan said.

The National Insurance (Industrial Injuries) Act of 1946 made industrial injury insurance compulsory for employees. The Ministry of National Insurance paid compensation to anyone left injured or disabled as a result of work-related accidents and was paid at a higher rate than sick pay.

The National Assistance Act of 1948 saw the provision of benefits for citizens whose resources were insufficient to meet their needs and who were not covered by the Act of 1946. The ‘Times’ newspaper called this the “last defence against extreme poverty” and benefits were kept low below the subsistence level.

Other Social Services: The NHS & Council Housing

The National Health Service Act of 1946 allowed citizens to receive free medical, dental and optical services. In his original report, Beveridge had recommended local health centres and regional hospital administration. But instead, the NHS was state-run by central government. With the nationalisation of existing municipal and charitable foundations, healthcare was standardised rather than increased by the construction of new hospitals.

After the bombing of the 2nd World War and the need to clear slums, there was desperate need for council housing to house the workers. The Town & Country Planning Act of 1947 set a target of building 300,000 new homes per year.

The 1950s & 1960s: A Golden Age

Throughout these two decades, the social welfare programme was left intact with only a few changes. However, consequently, the NHS could not afford to cover all the necessary expenditure. For example, in 1951 charges were set for dentures and glasses, while in 1952 prescription charges were put into effect to reduce the burden on the state budget. The system worked well because it was a time of full employment with workers’ contributions under the flat-rate scheme covering all the benefits.

Key People
Margaret Thatcher was the Prime Minister of the United Kingdom from 1979 to 1990 and the Leader of the Conservative Party from 1975 to 1990.

The 1970s & Thatcher’s Changes

During the 1970s, economic stagnation meant the government faced enormous difficulties in sustaining the welfare system. The main problem being that Beveridge had envisaged the system working in a country of full employment. Once unemployment hit a million in the late 1970s, benefits were a heavier burden to the state than it could afford. As Margaret Thatcher said;

“I think we’ve been through a period where too many people have been given to understand that if they have a problem, it’s the government’s job to cope with it. They’re casting their problem on society. People have got the entitlements too much in mind, without the obligations. There’s no such thing as entitlements unless someone has first met an obligation.”

The election of Mrs Thatcher’s Conservative government in 1979 meant that the role of the welfare state was questioned and examined in a way it had not been done since its creation in the 1940s. The philosophy behind their welfare reform was to reduce the value of benefits in relation to wages; for the first time, unemployment benefits did not rise to keep pace with wage increases. Also from 1980, both unemployment and sickness benefits were liable to tax for the first time.

This retrenchment in welfare policies was part of their political philosophy to roll back state intervention and encourage free market policies. Margaret Thatcher represented the Victorian values of thrift, self-reliance and charity; the idea being people would first look after their families and then help their neighbours. Welfare had a place, they believed, but only as a safety net for those most in need.

Welfare Reform Since the 1990s

There have been two main welfare reform changes, which have their roots in the 1980s. One has been in the restructuring of the civil service under ‘new public management’ so it is run like any other business. This has led to the creation of agencies like the NHS Trusts. Finally, the state has given responsibility for the provision of services and purchases (for reasons of efficiency and cost-effectiveness) to outside agencies encouraging competition and privatisation.

The second change concerns the attitudes towards the recipients of benefits themselves. In the years immediately after Beveridge, society looked at claimants of welfare as the ‘deserving poor’. There was an almost a paternalistic view of them. Gradually, this picture is changing. People are blaming those on benefits for their bad situation. There was a ‘damaging cult of welfare dependency’ or welfare was a ‘lifestyle choice’.

This view has been transmitted through the media and politicians until it even affects public opinion. It is very reminiscent of how the poor were thought of in the 19th century. Thomas Malthus (in his ‘Essay on the Principle of Population’) said that poor relief caused poverty because it destroyed poor people’s work ethic; does that argument sound familiar?

The Welfare Reform Acts of 2012 and 2016

Both of these Welfare Reform Acts have been called the most groundbreaking change in welfare provision in the UK since the Beveridge Report. These welfare reform bills contain measures to cut expenditure: the Removal of the Spare Bedroom Subsidy (RSBS or the Bedroom Tax), the introduction of Universal Credit to replace other benefits, the benefit cap and the regular assessment of claimants for the disability allowance, Personal Independence Payment.

When considering the different issues relating to the lives of those who claim benefits, we will examine these changes. We will look at the impact and costs – both financial and human.

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About The Author
Becky Hall
Becky never thought she would be a financial blogger. But Fate arranged that Becky had to put her accounting degree on the back burner right after she graduated with a first in Business and Accounting. While doing bookkeeping as a freelancer for private clients, Becky noticed how many cashflow problems can be solved with a little bit of education. Trying to keep her clients out of debt, Becky began writing resources which she distributed to clients. What began as writing advice for clients evolved into a passion and now Becky found her platform at Cashfloat. When she isn’t writing, calculating or budgeting, Becky can be found at her piano playing something classical.
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