The Unemployment Act of 1934 established the Unemployment Assistance Board (UAB). The Board was responsible for paying unemployment assistance to those who did not qualify for unemployment benefit based on contributions. Unemployment assistance was funded directly by the Exchequer and was subject to a means test. In 1940, the UAB became the Assistance Board (AB). It was responsible for paying a supplement to those on a fixed income, which was inadequate to subsistence.
The Beveridge Report envisaged benefit as a right; contributions should be paid at a flat rate and benefits should meet subsistence requirements, independent of means assessment. Conservatives in the coalition government feared that subsistence benefits would act as a disincentive to work. The 1944 White Paper 'Social Insurance' recommended that benefits should be set at a reasonable level and be proportionate to what the majority could afford in contributions. The assumption was that the social insurance scheme was statistically sound, with benefit payments met from contributions rather than funded directly by the Exchequer. This formed the basis of the National Insurance Act of 1946.
The National Assistance Act of 1948 founded the National Assistance Board, which was responsible for public assistance. The Board established 'means-tested supplements' for the uninsured that were derived from national insurance contributions. Post-war inflation devalued national insurance benefits below subsistence level. Increasing numbers of the unemployed, particularly pensioners, therefore drew upon national assistance to increase their income, although the inadequate take up of the 'means-tested supplement' was a problem of social policy during the 1950s the Conservatives were unwilling to concede.
The Conservative Minister of National Insurance, Osbert Peake, was committed to Beveridge's ideal of 'subsistence level National Insurance benefits'. He argued in Cabinet for increases, but the Chancellor, Richard ‘Rab’ Butler, and Treasury officials opposed him. During the 1950s, inflation and the unwillingness of the Treasury to endorse compensatory increases meant that national insurance benefits fell below the official poverty line, and increasing numbers turned to national assistance.
The majority of the Conservatives preferred to deploy national assistance because the means test limited the number of claimants. Treasury officials opposed the principle that benefits should be universal and adequate for subsistence. From 1959, Conservative policy shifted away from universalism towards selectivism. The National Insurance Act of 1959 attempted to help the poorest section of society. At the same time, the scales were increased at a rate above inflation, emphasising the government's preference for assistance rather than benefits.