Can the nation afford it?

Questions drawn up arising from the Beveridge Report  to be discussed within the Ministry of Labour, 2nd December, 1942 (LAB 12/6)

I. Some of the basic questions of Government Policy.

1) Can the nation afford the Plan?
1945                        1965

The additional cost falling on the Exchequer is           £86,000,000         £254,000,000
–ditto–  on employees                                                 £54,000,000         £49,000,000
–ditto–  on insured persons                                         £125,000,000       £125,000,000

The financial side of the Plan may be represented as redistribution of national income and part of the increased cost would arise in any event owing to the rising age of the population, but it will be argued that industry cannot bear the increased contribution costs nor the burden of taxation necessary to meet the Exchequer’s share of the security fund.

Industry will urge that the whole financial basis of the Plan turns on the validity of Assumption C (Maintenance of Employment) and that there is nothing to show that that assumption is justified. There is already a fear that industries disorganised by war will be in a difficult position in meeting post-war competition and there will be pressure for decreasing tax on employment rather than increasing it.

2) Can the individual afford it?
The contribution for adult males ranges from 3/9d.-4/3d. a week. Can this be borne without making necessary a national minimum wage, especially if income tax is to be maintained anywhere near the present level?

What would be the repercussions on the wage structure?
What would be the effect on individuals already heavily insured under voluntary schemes?
What would be the effect on individual’s willingness to maintain contributions, e.g. to his Trade Union?

3) Is it right for the state to invade the voluntary field to the extent proposed?
“Comprehensiveness” is a basic principle of the Plan. No risk is to be left as to justify social insurance. Against this, it will be argued that it is wrong to stimulate the tendency of the individual to look more and more to the state as universal provider. This raises a host of questions including the fear following:-

4) Should the state oust the Approved Societies?
The case for this is argued strongly in paragraphs 49-76 particularly on the ground of inequality of benefits. This is undeniable, but there will be the counter argument that the individual is being deprived of freedom of choice in a matter where personal contacts are important.

5) Should Industrial Assurance be made a public service?
This is a bracketed item but clearly will attract much attention as another example of the State’s invasion of private enterprise. The waste of the present system is manifest and the inclusion in the Plan of a universal funeral grant will in any event restrict the scope of assurance to the point where it may no longer be worthwhile.
6) What will be the effect on Trade Unions?
It is suggested that unions might continue to act as State agents for the administration of benefits. Does our experience of Unemployment Insurance favour this?
There will also remain a good deal of scope in the voluntary field, but it may well be considered that this will be insufficient and that the unions may have real difficulty in maintaining their contribution income.

7) Is it desirable to put Women’s Compensation on a contributory basis?
The T.U.C. proposal was for a separate compensation service financed by direct levy on employers varying with the degree of risk. The Plan makes compensation part of a general insurance scheme and puts part of the cost on the employee (estimated at about 1½ d of the contribution). The case for the change is strongly argued in paragraphs 79-89 and the Government will need to consider inter alia how it will affect the plans for rehabilitation of disabled persons. The change would be another blow to the Insurance Companies who carry compensation business.

8) What would be the position of the medical profession and health services?
A comprehensive health and rehabilitation service is Assumption B of the Report. It is recognised that the Plan for medical treatment may also restrict the scope of private general practice as not to make it worthwhile to preserve it. This will be regarded as tantamount to nationalising general practitioners and dentists, and the proposals for institutional treatment will raise the same objections in the case of hospitals (paragraphs 431-437). Such a change in organisation is not essential to the Plan but is clearly favoured as best meeting the needs of the situation.

9) Is the policy on Children’s Allowances to be accepted?
This is Assumption A and the basic principal of Family Allowances is held to be generally accepted. Allowances are to be non-contributory, are to cover all children when the parent is not earning and all except the first when he is earning.
One of the counter arguments has always been that there is no guarantee that the State’s money will benefit the children and that it is better, therefore to spend the money on extending State services for children. The Plan does not exclude this, but regards cash allowances as indispensible.

There is probably little doubt that the administrative costs of extending State services are much heavier than under a Family Allowance system (we estimated in connection with the “Butler Plan” that as much as 1/9d. out of 6/9d. per head would go  into expenditure which would not be borne under an allowance scheme.

How is the proposal likely to re-act on the wage structure and the basis of wage negotiations?

Will the danger of benefit equalling earnings in fact be avoided in the case of the low wage earner? (e.g. a married man with one child will get 45/-d. benefit and no allowance while earning).

10) Is unification under a new Department desirable?
If the recommendations of the Report are accepted, a Ministry of Social Security is essential. Even if the Plan is not accepted as a whole, a good case can be made out for the unification of pensions and insurance services and the Government will need to consider it.

Return to Attlee’s Britain 1945-1951