Nicholas Timmins - The Five Giants [New Edition] - A Biography of the Welfare State

The first 5s. od. (25P) family allowances were paid on August Bank Holiday 1946 and by 5 July 1948 three million families were in receipt of them at a cost of £59 million a year: ‘surely one of the best investments the state ever made,’ Griffiths judged. 25He had his own bitter memories from the Welsh valleys of ‘the tragedy of the “compo” man’ – the compensation negotiators from the private insurers who would often persuade the victims of mining and industrial accidents to settle for inadequate lump sums rather than try to take the companies to court under the tortuous law which surrounded workmen’s compensation. Griffiths’s first legislation was the Industrial Injuries Act 1946 which effectively nationalised routine compensation, taking it away from the employers and private insurance companies. Weekly benefits and disablement pensions were paid, and tribunals rather than costly litigation used to settle cases. 26

The National Insurance Act followed shortly. When news of his appointment had reached his native village, the minister recalled, one old neighbour asked another, ‘What is this job Jim Griffiths has got?’ The prompt reply was: ‘Why man, boss of the Prudential.’ Griffiths related:

I came near to agreeing with him when I read the first clause of the National Insurance Bill: ‘Every person who, on and after the appointed day, being over school-leaving age and under pensionable age, is in Great Britain and fulfils such conditions as may be prescribed as to residence in Great Britain, shall become insured under this Act and thereafter continue to be insured throughout his life under this Act’. In plain English it was to be all in: women from sixteen to sixty and men to sixty-five … [it] brought in everybody from the barrow boy to the field marshal. 27

This Act was the core of the Beveridge report: state-run insurance, paid for by employers, employees and the general taxpayer, from cradle to grave. Flat-rate contributions in return for flat-rate benefits, but twice as many of them as the schemes they replaced: unemployment and sickness benefits, maternity grants and allowances, allowances for dependants, retirement pensions and the £20 death grant which was enough, just, to pay for a minimal funeral.

The basic benefit rates were set at 26s. od. (£1.30) for a single person and 42s. od. (£2.10) for a married couple. And in one of the two key breaks Griffiths made with the Beveridge plan, old age pensions were to be paid in full from the Appointed Day. As an economy measure, Beveridge had recommended they should be phased in, starting (in 1942 prices) at 10s. od. (50p) a week and rising by two-year instalments over twenty years to the full rate. ‘I found this unacceptable,’ Griffiths said. The proportion of pensionable age population had risen from 6 per cent at the turn of the century to 13 per cent by 1946. But ‘the men and women who had already retired had experienced a tough life. In their youth they had been caught by the 1914 war, in middle age they had experienced the indignities of the depression, and in 1940 had stood firm as a rock in the nation’s hour of trial. They deserved well of the nation and should not wait for twenty years.’ 28The new pensions started within three months of the 1946 Act becoming law and although it was a mighty expensive decision, almost certainly nothing else would have been politically tenable. Even the wartime coalition, with Churchill at its head insistent that expenditure could not be committed until the war was over, had in 1943 rejected phasing in. 29

The final plank in the new vessel, the National Assistance Act, followed, piloted jointly through Parliament by Griffiths and Bevan. It redesigned the means-tested safety net to be stretched beneath the minimum platform of insurance benefits that Beveridge had devised. The most hated part of the old system, the whole household means-test, had already been abolished in 1942 and replaced by means-testing of individuals and couples. The Bill’s self-declared and bold aim was ‘to terminate the existing poor law’. It nationalised the responsibility for cash payments, removing them from the old local government-based Public Assistance Committees, and renamed them National Assistance. The local authorities, however, did retain welfare services for those who by ‘age, infirmity or any other circumstances’ were in need. 30These included old people’s homes, which were already steadily replacing the old workhouses, meals on wheels, and other services – the precursors of the social services departments.

Apart from paying pensions in full, the other key change from Beveridge was the level at which benefits were pitched. Beveridge had insisted they must provide ‘subsistence’ – enough to live on – despite the difficulties of defining that sum. Thomas Sheepshanks’s civil service committee, set up in 1943 in the wake of Sir William’s report, had abandoned subsistence, using different arguments to reject the principle for different benefits, while the Treasury had argued that subsistence simply could not be afforded. 31The benefits Griffiths paid were higher than those the coalition had subsequently proposed in its 1944 White Paper, and he told the Commons: ‘I believe we have in this way endeavoured to give a broad subsistence basis to the leading rates.’ 32In his 1969 autobiography, he still appeared to believe that was the case. 33

But as Brian Abel-Smith has recorded: ‘The index measuring the cost of living had been fiddled by both governments. The prices of sub-items which figured in the index were held down while comparable items were allowed to increase in price. By the time the full scheme was introduced in 1948 … benefit rates were nearly a third below what Beveridge had recommended as necessary for subsistence.’ 34More important, he adds, they were only just above the means-tested National Assistance payments, and those applying for assistance usually had their rent paid in full. Those on the non-means-tested insurance benefits did not. As a result, many more people than had ever been intended were to fall back on to the safety-net of means-tested benefits, because retirement, unemployment and the other insurance benefits were pitched too low and did not provide separately for housing costs (one of the problems Beveridge had wrestled with and failed to crack).

In addition, the benefits were not indexed to increase with inflation. Griffiths did consider linking benefits to prices, but officials took a narrow, compartmentalised view of the national insurance fund and persuaded him that contributions would have to change each time benefits were increased. ‘In the end I provided in the Act that the minister should review the scale of benefits every five years.’ 35

All this attracted little attention at the time. But the impact of the decisions was profound and forms part of the next fifty years’ history of the welfare state. Their effect by the early 1990s, as summed up by Professor Abel-Smith, was that ‘in so far as freedom from want is attained in Britain, it is by undergoing a means test, not through national insurance. Beveridge’s residual safety-net has grown to become the key agency, providing ultimate protection to more than eight million persons.’ 36But on 5 July 1948 such considerations were not even a cloud in the sky. The safety net was a safety net. In 1938 there had been 1,600,000 claimants of means-tested benefits. By July 1948 the figure was virtually half that, and many of the 842,000 affected were claiming only small supplements to insurance benefits. 37

If the great day was a spectacular political and social achievement, it was also a magnificent administrative one. Organising the new National Health Service had been a large undertaking. It was nothing to setting up family allowances and insurance cover for the entire adult population. Work had started in 1944 after the Ministry of National Insurance was created with just ninety-seven staff. At its most mammoth, in the 1970s, its successor department was to employ well over 100,000. Even in 1948 a vast central office had to be created to handle the 25 million contribution records there would be, plus the records for 6 million married women eligible under their husband’s contributions, and the expected 300,000 references to them each day. Former prisoners of war were roped in to help build Newcastle Central Office on the massive sixty-acre site that was to become the nerve centre for Britain’s social security system. H. V Rhodes, the ministry’s Director of Organisation, has told the tale of how the operation was put together amid austerity, desperate materials shortages and hopelessly scattered manpower. Looking back in 1949, he said, was ‘rather like reviving a nightmare’. 38