Peter Jenkins on the death of the Welfare State

At an international conference I attended the other day someone spoke of European civilisation as the civilisation of Christendom, the Renaissance and the Welfare State. A somewhat flowery way of putting it, perhaps: but then it can certainly be argued that the Welfare State is the principal flower in the post-war blossoming of Western Europe. Moreover, the speaker presumably intended to place the modern Welfare State among the greatest achievements of European civilisation, an order transcending frontiers.

To talk about the Welfare State in this fashion is to use the term as a shorthand for something more than the nets of social security and health care which the modern state provides. Until recently, the term ‘Welfare State’ also meant a state which had accepted full employment as its goal. And that implied, again until recently, that its economy would be managed in the Keynesian manner. In turn, this meant that there would be a problem of combining the goals of welfare and full employment – which required economic growth – with stable prices and the free practice of collective bargaining. Thus the post-war Welfare State was characteristically a social democratic state whose success was closely geared to the strength and flexibility of a social consensus. The term is indeed used synonymously and interchangeably with terms such as ‘welfare capitalism’ or ‘reformed capitalism’ or ‘mixed-economy welfare state’, and when we use each or any of these terms we know more or less what we mean. We are describing the post-war order which swathes the whole of Northern Europe and extends imperfectly into France and northern Italy. We are also describing an era which may be ending.

Certainly full employment is no more. And Keynesianism is out of fashion. At the same time, there is in most countries, not merely in Britain, a more specific ‘crisis of the Welfare State’. This ‘crisis’ – the quotation-marks are to suggest that its dimensions have been somewhat exaggerated – has its demographic roots in an aging population, a bulge of school-leavers, and slow or nil population growth. The upshot of those trends is that a declining working population is required to support a growing superstructure of dependency. In addition, the cost of medical technology, like military technology, rises faster than inflation, thereby exacerbating the demographic pressures on health services.

These difficulties have been made much worse by the slowing of economic growth since 1973. Rising unemployment has added enormously to the cost of social security. In Britain, for example, in spite of a hard-nosed expenditure-cutting government, the cost of social security has pushed up 17 per cent in real terms since 1979. This has resulted, as it has elsewhere, in the present fiscal difficulties of the Welfare State. Not only that: it has also undermined the idea of the Welfare State in the more general sense in which I am using the term. We are no longer talking about full employment. A return to the post-war standard is not for the moment a realistic goal. The pace of economic growth no longer enables us to prescribe welfare while avoiding the hard questions of distributive justice. The social consensus, which both underpinned and was reinforced by the Welfare State, is disintegrating. Monetarist counter-inflation policies, which have replaced the Keynesian approach in most, though not quite all West European countries, are inconsistent with the other goals and assumptions of the Welfare State. The true monetarist cure for inflation is the abandonment of full employment. Thus, for the time being at least, when we speak of the Welfare State, we are no longer speaking of the distinctive social and political order of the post-war past.

There have been some other casualties too. The post-war Welfare State represented the apogee of the 20th-century faith in social science. That god, too, is dead. The very vocabulary of Keynesianism, the notion of ‘managing’ an economy, turned economics into a branch of social engineering. The post-war recovery of Europe released a great wave of social and technological optimism which inspired high hopes of government. Today the fashion is for minimalism, and governments have tried to put in hand a counter-revolution of diminishing expectations. Social pessimism is the mood as we approach our fin-de-siècle.

If the Welfare State can be said to have a single origin, it lies in conscience about poverty – social conscience reinforced by patrician prudence. Paul Barker’s collection of essays shows how eclectic were the founders of the Welfare State. It is scarcely worth disputing the paternity claims between the Asquith government of 1905-1914 and the Attlee government of 1945-1951. War and coalition were also its midwives, and its ancestry can be traced back to the great Victorian philanthropists, and even, perhaps, to the cruel though well-meaning Poor Law of 1834. In top-and-tail essays Asa Briggs and David Donnison make what they can of a disparate assembly which ranges from Josephine Butler and Charles Booth to R.I. Morant and William Beveridge.

As Donnison points out, equality was seldom their explicit goal. Nor was the growth of a centralised bureaucratic state. Nor were trade-offs between social justice and economic efficiency. These were among the consequences of reform, but always the starting-point was the simple determination that ‘something must be done.’ What we now call labour market policies, and pursue chiefly for reasons of efficiency, were first seen – by Beveridge and Webb – as devices for alleviating that portion of systemic poverty which derived, as Rowntree had shown, from low wages and unemployment.

In his first career as reformer, Beveridge had taken up the cause of Labour Exchanges, which Churchill created at the Board of Trade in 1910. In his second career, at the wartime Ministry of Labour under Bevin, Beveridge – a Liberal, not a socialist – went so far down the interventionist road that he concluded that only the direction of labour – or what he euphemistically called the ‘organised mobility of labour’ – could reconcile those contradictions between full employment, stable prices and free collective bargaining which he feared would vitiate the post-war social reconstruction. He was right, but he felt obliged to reject the conclusions of his own logic as being incompatible with personal and political liberty. Beveridge was in this respect the seminal figure, for he crossed the barrier between social and economic policy and, going beyond Keynes, anticipated many of the problems of the post-war mixed economy.

For a while, it seemed as if Butskellism – which was the official Keynesianism – had solved everything. Moreover, it was widely supposed that the Welfare State with its provision ‘from the cradle to the grave’ had brought to pass the reformers’ dream of eradicating poverty. The term ‘Welfare State’, Briggs reminds us, became current at the time of the Attlee government and it was easy to see the creations of that time as the culmination of ‘a Whig-like interpretation of history’. Yet Richard Titmuss, both champion and critic of the new order, always placed the words ‘Welfare State’ in quotation-marks in case anyone should suppose that what had been achieved was the end of the story.

It was Titmuss and his pupils who made the first post-war rediscovery of poverty. In the tradition of Rowntree, the process involved a redefinition of poverty. The poor were with us still, relatively excluded and deprived, under the supposedly universal umbrella of the Welfare State. The middle classes, always nifty in adjusting the just’s umbrella, had quickly become adept at making use of the services of the Welfare State. As Titmuss demonstrated, moreover, a second Welfare State consisting of a web of ‘tax expenditures’ was providing an additional range of state-subsidised benefits or privileges to the better-off. We have seen recently the great power of interest vested in these tax-relieved mortgages and occupational pension funds.

The return of large-scale, long-term unemployment has not only increased the element of poverty within the Welfare State but has also brought it more to our attention. Claimants for means-tested Supplementary Benefits increased from about three million in 1980 to 4.3 million at the end of 1982: this means that, including dependents and children, some seven million people – one in eight of the population – are dependent upon what was supposed to be only the safety net. Some 1.3 million households have an income lower than Supplementary Benefit level (£54.55 for a couple plus £6.50 per child and, say, £5 housing benefit), while 1.8 million families have incomes of less than 20 per cent above SB level. It is reckoned that 3.7 million children – more than a quarter of all children – are in families of ‘low income’, defined as 140 per cent of SB level. These poor people – some seven million of them, adult and child – are typically unemployed, low-paid, single-parent, sick or disabled. They are concentrated in the cities and more than two-thirds of them live in the Midlands, the North and Scotland.

If conscience was the first spur to social reform, prudence was the second. Joseph Chamberlain famously asked in 1885: ‘What ransom will property pay for the security it enjoys?’ The English ruling classes have been more skilful than most in avoiding being hanged from lamposts. But, as J.K. Galbraith notes in a new introduction to his reissued classic The Affluent Society, a shift of political power to the affluent has taken place since the book was published in 1958. Is he right to look back at the growth of the Welfare State as ‘a self-liquidating political movement’?

The coming of adult male suffrage was a key event in Europe. The poor now had votes. It was all the more necessary for property to pay its ‘ransom’. In Britain, Lloyd George was the greatest exponent of radical prudence. Labour’s great victory in 1945 was based on an alliance of the poor working classes of the North with sections of the urban middle classes and the more prosperous working class of the Midlands – all of them brought together by the common experiences of the war. The war had taught the middle classes something of how the other half lived: the Beveridge Report sold a hundred thousand copies within a month of publication. But if we are all affluent now – except the poor, that is – the basis for such a progressive alliance may no longer exist.

The story of the Labour Party in Britain since 1951 has been that of a disintegration of the reforming coalition of 1945; even at the elections when Labour has won power its vote has fallen in all but one instance – 1966. In 1979 the affluent workers helped Mrs Thatcher to power. In 1983 they did so again in still greater numbers. Tenure is overtaking occupation, and class, as the chief determinant of voting behaviour. Some 60 per cent of homes are today owner-occupied, the vast majority of them on mortgage. Some twelve million people are covered by occupational pension schemes of one kind or another. Inflation and the level of interest rates matter more to more people than the level of unemployment. In 1983 a Conservative government which had presided over a doubling of the unemployment rate was returned with an increased Parliamentary majority. Ten years earlier the ‘conventional wisdom’ – a phrase of Galbraith’s coining – was that no democratically-elected government could survive unemployment of above a million.

Something had happened. The crisis of the Welfare State is commonly presented as a fiscal crisis. Demographic explosion meets economic recession. But if there is a crisis, it is a political crisis. In Europe at large, the demographic expansion is containable within the existing framework of welfare provision. Even in Britain it ought to be possible, for we are low in the table of big welfare spenders. The question is: will the affluent majority reach down towards the poor or will it pull up the ladder. Galbraith believes that ‘in a generally affluent society we must expect the affluent to reward not poverty but affluence.’ They have in America under Ronald Reagan and they have in Britain under Margaret Thatcher. In Britain the old model of haves and have-nots has broken down; class solidarity has crumbled under the strain of mortgage payments and consumer debt, as we have just seen in the miners’ strike. The idea that the poor could advance clutching to the coat-tails of the Transport and General Workers’ Union – never the most promising of strategies – is now obsolete. If the poor must await the return of a Labour government the poor may have to wait a very long time.

Although there is as yet no new constituency for progress, there is a powerful constituency opposed to change. The Government is precluded from the kind of radical reform of the Welfare State it would like to make – away from universality and towards self-provision – by election pledges which the Prime Minister judged it expedient to make. She has promised to keep benefits in line with prices and not to dismantle the National Health Service. The Welfare State remains popular – a part of the consensus which remains unbroken. It is also defended by powerful vested interests which cut across the lines of party – doctors and dentists, the trade unions in the NHS and the DHSS. The Welfare State is our largest nationalised industry and is not for privatisation.

Meanwhile poverty is in the process of being rediscovered yet again. The Prince of Wales has said his equivalent of ‘something must be done’ and the Archbishop of Canterbury has placed his anathema on the social divisiveness of Thatcherism. The public is busy signalling its dissatisfaction with the Government’s answer – or lack of answer – to the problem of still-rising unemployment. The pollsters have reported that people (do they mean it?) would rather see more money spent on creating jobs than pay less money in taxes. The miners’ strike reintroduced the prosperous South to the declining North. The delapidation of the cities is causing a concern which cuts across both class and party lines.

So it may be that Galbraith is too cynical. There are signs of the awakening both of conscience and of prudence within our not so affluent Affluent Society.