Beveridge: time to reboot?

Industrial solutions for industrial problems

Beveridge intended to move the nation on from the oppressive principles of the old Poor Law. His central idea was to establish a ‘national minimum’ that would be available based on contributions and ‘as of right’. His account of the reasons for social problems had also evolved from the old assumptions. In Beveridge’s first report on employment in 1909, he argued that unemployment was not only caused by individual laziness, which had previously been seen as the singular cause, with hardship attributed to moral weakness rather than external circumstances. Beveridge saw it as also being created by the wider structures of the new industrial economy, and not soluble by the pre-existing local, individually focused responses. It was an industrial problem that required an industrial solution.

This initial report, published a year after the first Ford car came off the production line, was the seed from which our modern public services grew. The central requirement of Beveridge’s approach was the ability to deliver standardised solutions at scale. Employment services to connect millions of workers to jobs in new industries. Public health services to arrest the spread of contagious diseases through mass immunisation and treat the victims of industrial accidents and war injuries. Education services to equip the workers of the future with the skills required by large-scale employers.

Beveridge was no populist. Harold Wilson described him as being from a privileged background, and as an “intellectual giant” and an “intellectual snob”. His ideas were not created in partnership with those who would be using the systems he designed. He was a social reformer but also a product of the Edwardian age of deference. His plan did respond to the rise of the new working class, but it also baked in the old power structures. Rich, white men would continue to lay down what the lower classes should have, how they should behave and how they should be punished if they failed to meet the moral standards of those in charge.

Before the reforms of the 1940s, public services were made up of a patchwork of voluntary and mutual organisations, church support and some limited local government funding and services. It was all underpinned by the oppressive Elizabethan Poor Law. By the interwar years of the twentieth century, this system was manifestly failing to protect people from hardship or help them build a better life, and it was wholly unsuited to the new industrial age.

Industrialisation collected workers in large numbers of people in cities, working in factories or production lines, crowded together in slums. These were rife with disease, threatening not only the poor but also the middle classes and elites living nearby. Terrible living conditions were believed to breed immorality and weakened the soldiers needed to fight the Boer War and the first and second world wars.

Five giants stood in the way of progress

Beveridge believed there were five ‘giants’ holding up progress:

• want
• disease
• ignorance
• squalor
• idleness

The archaic language can easily be translated into modern terms:

• poverty
• illness
• inadequate education
• poor quality housing
• unemployment

The welfare state has achieved enormous advances in tackling these giants as they manifested in his time, but they are straining to overcome their modern incarnations.

Consider ‘want’ or poverty. The core requirements for a life lived free of this scourge are remarkably stable across history and geography. Most people, in most places, aspire to a secure, healthy home; steady, rewarding work; giving their children a good start in life, and the skills to thrive; reasonably good mental and physical health and access to healthcare when they need it. But poverty has never been merely material. Respect, dignity and feeling part of society are equally important. Those trapped in poverty speak passionately about the humiliation and fear they face and there is plenty of research demonstrating the detrimental impact of these on both physical and mental health.

The changing profile of those in poverty

The majority of those in poverty today live in ‘working households’. Pensioners now have the lowest poverty rates, while workers and working-age families with children face increasing and deepening hardship. The central problem in our labour market is no longer unemployment, but poor-quality work – low-paid, insecure, with little training and few prospects for progression. Parents are hemmed in by lousy jobs, high rents, inadequate childcare and transport and little access to useful training. Disabled people and their families make up half of all those in poverty in the UK but are continually overlooked, despite low incomes and high costs creating appalling hardship and suffering. As we face another recession, experience tells us that it is likely to hit young people hardest, especially those from Black, Pakistani and Bangladeshi backgrounds, who are disproportionately likely to see unemployment rise and pay fall and to suffer worse and longer ‘scarring’ effects than other groups.

Welfare state struggles to address modern poverty

Our welfare state was not designed to meet these new challenges or address the drivers of modern poverty. Our education system is pretty good at ensuring most people are literate and numerate and includes world-class higher education institutions. But it’s terrible at enabling adults to skill up and reskill as old jobs disappear, and new career paths open up. The NHS is still, mostly, effective at preventing illness by mass immunisations and fixing broken legs; but today’s health problems are chronic physical conditions such as diabetes or mental health difficulties such as depression and anxiety. Employment services are still oriented to tackle unemployment and not to help those already in work to access better quality jobs or higher pay. And they tend to perform poorly in supporting disabled people, carers or single parents to find decent work with the right flexibility or helping employers redesign jobs to open them up to these growing segments of the workforce.

The strain on institutions not designed for the modern age is compounded by out-of-date approaches to regulating markets and taxation. At the heart of market capitalism is the idea of the active consumer. It assumes that the market will organise itself to meet the needs of the consumer and companies will innovate to get an edge over the competition by improving services or reducing costs. Traditional regulation, therefore, has two goals:

1. Ensure consumers can make well-informed choices and businesses can’t get an edge by exploiting workers or cutting corners unsafely.
2. Prevent monopolies where companies dominate such a big share of a market that they can inflate prices or cut standards because consumers don’t have alternatives.

But in the new digital economy, the active consumer can’t be the engine of innovation in the same way. Companies manipulate the prices we see and the products we are offered, innovating to guide the consumer more effectively rather than improving products or reducing costs. Global tech giants don’t stick to a single market or wait for competitors to grow before gobbling them up. Their power lies in the data they harvest from users and the networks they control.

The UK’s taxation system is also lagging behind reality. It has helped to distort both the labour and housing markets, leading to higher poverty. And has become increasingly concentrated on taxing earnings and general consumption whilst utterly failed to tax wealth effectively, undermining public finances and fuelling inequality.

The making of the modern welfare state: a process not a moment

So, is it time to tear up the Beveridge Plan and start again? Absolutely not. The making of our modern welfare state was a process, not a moment. Today we mark the publication of the 1942 Beveridge report, but that report was the culmination of three decades of experimentation and debate and it marked the start of further evolution during the post-war period.

A longer historical lens also helps us understand where we are and how to move forward. The historian Carlotta Perez studies the interaction between technological, economic and social change. She argues that each major technological breakthrough creates a period of crisis as society adjusts. There are distinct phases to its progression - excitement, recession, widening inequality, social unrest and the rise of populist leaders. Finally, new social norms emerge and new institutions are developed to match the enormous economic and social changes which have taken place. The 1920s and 1930s were one such period of  crisis and renewal, and we are now in another phase, struggling to come to terms with the requirements of a new digital, low-carbon age. Beveridge era reforms represented the new social norms that restored stability to an industrialised society. Our job now is to draw on the ideas bubbling up across the UK and internationally, to refresh our institutions and achieve a new form of stability for the digital age.

‘Giants: a new Beveridge report’ is available to buy online and at all good bookshops.

Helen Barnard is Associate Director of the Joseph Rowntree Foundation (JRF) and Director of Research and Policy at Pro Bono Economics. Helen is a leading national expert on poverty, inequality and social policy. Her extensive body of written work and regular media contributions have covered poverty, destitution, labour markets, housing and social security. Helen is a Social Metrics Commissioner and member of the Poverty Strategy Commission. She is also a trustee of the National Centre for Social Research.

Follow Helen on Twitter: @Helen_Barnard