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1965 Cabinet memorandum on benefit costs

Cabinet Memorandum 12 July 1965. Benefits and Assistance
Cabinet Memorandum 12 July 1965. Benefits and Assistance
CAB 129/122      C (65) 101

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The Labour Party was elected in 1964 under Harold Wilson. In this extract the Chancellor, James Callaghan, sets out the government's spending plans from 1965 to 1970. He provides useful background on previous spending and gives a very clear sense of how the government tried to fund welfare measures. The 'income guarantee' referred to in the document was a promise to old age pensioners, made in Labour's 1964 election manifesto. The income guarantee ensured that all retired persons and widows received a certain level of income by right, without having to apply for assistance or other benefits.

Questions to consider

  1. What were the main elements of welfare spending?
  2. Does the scale of the increase in spending seem surprising?
  3. What challenges were emerging for 1966-67?
  4. What does this source reveal about the range of services offered by the Welfare State?


Benefits and Assistance

22. The basic programme increases from £2,120 million in 1964-65 to £2,860 million in 1969-70, an increase of £740 million or 35 per cent. The proposed additional programme for 1969-70 is £185 million; of which the main elements are the income guarantee (£100 million), wage-related sickness benefit (£30 million), improvements in widows' benefits and family allowances (£45 million), and a contingency allowance for other improvements (£10 million).

23. The basic programme provides for an uprating of benefits and assistance at the same rate as the increase in average earnings. The increase of benefits in April, 1965 was significantly more than would have been required by this formula, and the Minister pointed out that in the previous thirteen years the increase had been slightly more than the formula.

24. The Committee considered first the problem of 1966-67. The issue is one of selection between three projects:-

  1. uprating of benefits. At the present rate of increase of earnings, there would be a case for an increase of 5s. (£130 million a year) in April, 1966, or of 7s. 6d. (£200 million a year) in October, 1966.
  2. wage-related short-term benefits. This would need to cover at least unemployment and sickness benefit. The cheapest proposal is £30 million a year, of which £20 million is included in the basic programme, but there are others under consideration costing up to £55 million. The economic Ministers attach weight to this project as an aid to industrial redeployment.
  3. income guarantee. This project is now taking shape in a Committee under the chairmanship of the Chancellor of the Duchy. It is expected that a project could be ready for introduction in October, 1966. The cost is estimated at £100 million a year, assuming a guarantee level of £4 8s. plus rent. The Minister regards this project as a whole, and would be unwilling to plan to introduce it in smaller steps, based e.g. on age.

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