Family allowances were the subject of a White Paper in 1942, but there was disagreement among Labour and Conservative politicians about the way they should be implemented. The Beveridge Report, written by the civil servant William Beveridge, proposed an allowance of eight shillings per week for all children (apart from for a family's first child if one parent was working), which graduated according to age. It was to be non-contributory and funded by general taxation. After some debate, the Family Allowances Bill was enacted in June 1945. The act provided for a flat rate payment funded directly from taxation. The recommended nine shillings a week was reduced to five shillings, and family allowance became a subsidy, rather than a subsistence payment as Beveridge had envisaged.
During the late 1940s, although family allowance was substantially devalued by inflation, there was little support for increases within government. In 1952, the Conservative government reduced food subsidy, which had been in place since the war. From October 1952, family allowance was increased by three shillings per week in order to advance the potential effect on nutrition. The Chancellor, Richard ‘Rab’ Butler, regarded cuts in family allowance as a potential means of economy, but John Boyd-Carpenter, at the Ministry of Pensions and National Insurance, successfully resisted this. As a means of encouraging families to keep children in education, the Family Allowances Act of 1956 extended the family allowance to all school children. The government was, however, anxious to make economies, and the bread subsidy was abolished.
Family allowances remained a target for the Exchequer. In 1957, the Chancellor, Peter Thorneycroft, proposed cuts in public expenditure including family allowances. He argued that in removing the allowance for a second child, more money would be available for larger families where nutritional problems were more severe. Boyd-Carpenter effectively presented counter arguments. Thorneycroft resigned after the Prime Minister, Harold Macmillan, vetoed his proposals. In 1961, Cabinet agreed that the majority of apprentices be excluded from the family allowance provisions, but dismissed proposals that family allowance for the second child be abolished. Family allowance provisions therefore remained intact in the Family Allowances and National Insurance Act of 1962.
Believing family allowance was not widely supported among its constituency, the Labour government of 1964 was unenthusiastic about the issue. However, in 1966, pressure groups (especially the Child Poverty Action Group) forced it to address family allowance. Cabinet debated the respective merits of an increase in the existing family allowance, or a new means-tested family supplement that was supported by the Chancellor, James Callaghan. In 1967, the Cabinet endorsed a nominal increase for the fourth child, prompting the Minister of Social Security, Margaret Herbison, to resign. A general increase in family allowances was agreed for 1968, but it was funded out of the family tax allowance. This 'claw-back' of funds from higher-earning families proved politically unpopular.
Following the Conservative electoral victory in 1970, Sir Keith Joseph introduced Family Income Supplement (FIS). It was designed to replace further increases in family allowance with a means-tested supplement for the poorest families, and was in some ways similar to the scheme devised by Callaghan under Labour. There was a low take-up rate of FIS, which proved unpopular, especially as it was accompanied by the withdrawal of subsidised milk for children by Margaret Thatcher ('the milk snatcher') as Education Secretary. Having opposed FIS during its period in opposition, Labour's Barbara Castle was responsible for a Child Benefit Bill, which was enacted in 1975. The bill replaced family allowance with a benefit for each child, which Castle insisted was paid to the mothers. The act was not implemented immediately because of the economic crisis of the mid-1970s. Replacing tax allowance, child benefit was finally put into force.