The Welfare State - How It Happened and Why It's Not Working

The Beveridge Report and the Welfare State

In November 1942, Londoners queued to see the Social Insurance and Allied Services report, known as the Beveridge Report.
Authored by Sir William Beveridge, it outlined plans for a free national health service, full employment, family allowances, and poverty abolition through social insurance.
The welfare state was intended to be universal and comprehensive.
Half a million copies sold quickly, with continuous reprints due to intense public interest.
The report was translated into twenty-two languages, influencing welfare states globally.
Beveridge aimed for radical social change, meeting public expectations after traveling the country and hearing desires for a utopian society.

Impact and Early Challenges

The Beveridge Report led to significant public investment, new services, professional training, and home construction.
It transformed Britain from a Dickensian society to one with improved health, longer life spans, good education, and security for the unemployed.
The welfare state's emergence wasn't straightforward; its ideas had been developing for a long time.
Social reformers believed philanthropy was insufficient and sought systemic reform.
Thinkers like Beatrice and Sidney Webb, Beveridge, and R. H. Tawney gathered at the London School of Economics to develop and debate new systems.
World War II exposed service defects and fostered social awareness among Britons, with a new understanding of inequalities.
Despite this, reforms faced resistance from civil servants, politicians, doctors, economists, and philosophers like Friedrich Hayek.
Hayek argued for reducing the state's role post-war, as outlined in The Road to Serfdom.
Beveridge countered by emphasizing the public's desire for a fairer nation, using compelling visions and images like the war on the five giant evils: want, ignorance, disease, squalor, and idleness.

Public Support and Economic Outcomes

Beveridge chaired an inquiry without a specific mandate to design the welfare state, facing criticism as a self-publicist.
Despite this, he garnered public support, leading to the welfare state's implementation.
Economic doubts proved unfounded initially, with the welfare state contributing to post-war recovery through a healthy, educated workforce.
Critics still focused on cost and the state's role, even with the British model's success and international replication.

Cost Concerns and State Expansion

In 1950, Health Minister Nye Bevan faced scrutiny over rising health service costs, leading to his resignation over introduced charges for dental care and glasses.
The state's economic activity grew from 20% of GDP in the 1930s to 45% by 1945, alarming some.
Beveridge grew ambivalent, concerned about the state's increasing dominance over voluntary organizations.
He lamented the shift to civil servant administration and the sidelining of friendly societies.

Crisis and Division in the 1970s

Economic stagnation and rising unemployment in the 1970s led to strikes and IMF demands to cut welfare spending.
Public support for the welfare state began to erode.
The economic crisis polarized views, with neoliberals advocating privatization and socialists defending state-led services.
By 1980, Margaret Thatcher and Ronald Reagan led a neoliberal shift, promoting 'new public management' focused on commercial practices.
New public management included competition, audit, innovation cycles, numerical targets, and cost controls.
These practices were widely adopted across successive governments, framing them as common sense.
Public services, including bin collections and healthcare, were commissioned through private competition frameworks.

Debates on Market-Led Reforms

Whether these arrangements improve social outcomes or save costs is debated.
Supporters claim numerical targets reduced hospital waiting times and improved school exam results.
Skeptics emphasize waste in quasi-market systems, with up to 50% of resources absorbed by bidding processes, favoring large corporations.

Shifting Focus and Modern Challenges

Debates on managing institutions divert attention from bigger social shifts. Current institutions may not meet current needs.
Beveridge rejected the Poor Law for the 20th century; similarly, fixing the 20th-century welfare state may not suit modern lives.
There is a need for a new revolution.
Three reasons why the welfare state cannot work in this century:
- New social challenges unforeseen when the welfare state was designed.
- A crisis of care.
- Poverty and inequality have not been adequately addressed.

Twenty-First-Century Problems

New challenges include global warming, mass migration, demographic changes, chronic disease epidemics, security concerns, and escalating inequality.
The welfare state, designed as an industrial system, struggles with modern problems.
The NHS, a vertical institution with rigid hierarchies, concentrates power at the top, functioning like a factory.
This system worked for episodic illnesses but struggles with chronic diseases like diabetes and obesity.
Chronic conditions affect fifteen million people and account for 70% of health expenditure.
Living well with chronic conditions requires behavior change, which the NHS isn't set up to support.
Reorganizing services and diagnosing diabetes earlier were insufficient to change patient behaviors in places like Bolton.
Schools are also vertical organizations needing to develop collaboration, creativity, and lateral thinking skills.
Modern life requires continuous learning, which cannot be acquired simply with the addition of more subjects to the curriculum.
Work is no longer stable. Periods out of work are normal as people move between jobs.
Technology makes increasing numbers of roles redundant, and most new jobs are not advertised.
Modern problems are continuous, requiring participation. Whether we think about diabetes or climate change, good aging or good education, we have to be active agents of change.
Solutions require collaboration between communities, the state, businesses, and citizens using new ideas.
Post-war institutions weren't designed to help in ways of collaboration.

The Crisis of Care

Care for the old, young, unwell, or less able is an unresolved challenge, intensified by demographic change.
Beveridge assumed care would be unpaid women's work, but seismic social change challenged this.
Balancing work and caring roles is difficult. Negotiating the logistics of childcare puts strain on relationships.
Nearly half of British children are no longer living with both their parents by their teenage years.
Modern work demands geographic mobility, leaving families at greater distances and challenging care for elderly relatives. Post-war model of care organized around women's unpaid work was never satisfactory and today it cannot hold.
Neither the state nor the market has been able to provide adequate alternatives and the result has been a painful mess.
Lack of care available as we age regularly hits newspapers regularly. There are more pensioners in Britain today than young people under the age of sixteen.
Oldest old (over age 80) are the fastest-growing population.
Services emphasis the National Health Service, and social services have a more precarious status.
Local governments face shrinking budgets and growing elderly residents and have tried to manage by tightening criteria and opening services to the market.
90% of care in Britain is provided by nineteen thousand private sector organizations that cannot deliver what they promise on the budgets provided.
Personal care means a note by the front door reminding the care worker — who is unlikely to always be the same individual that the white flannel in the bathroom is for the face, the blue flannel for the bottom.
Reducing the provision of social care does not save money. Instead, it has terrible repercussions on our health services. Without support at home older people increasingly find themselves in hospital, often languishing as 'bed blockers'.
It is estimated that up to 40 per cent of hospital beds are occupied by older people who do not need to be in hospital, at an annual cost of £900 million.

Modern Poverty

The welfare state has not eradicated poverty. Dependency on food banks and lack of basic possessions persist.
A third of British children grow up in poor households, often with working parents earning too little.
Researchers see this pattern as persisting for the foreseeable future.
The Joseph Rowntree Foundation added destitution as a category, with 1.25 million people struggling for basic needs.
Most people who are poor are in work. The welfare state subsidizes the private sector by topping up wages that are too low to live on.
In fact, $1 \text{ per cent}$ of the welfare bill goes to support the unemployed ( $\pounds3$ billion a year) and over $30 \text{ per cent}$ (almost $\pounds70$ billion a year) goes to support those who are in work but who are paid too little to survive.
There is a yawning gap between the rich and the rest. The real value of wages has fallen for professional groups and for the low-paid
Spiral inequality is transforming the nature of British poverty.
The elite are further cushioned by high savings and high house prices and are people with connections and social standing.
The precariat - about 15 per cent of the population live on incomes of less than $\pounds13,000$ a year.
*Incomes rising to match aspirations, leading the well-off on a hedonic treadmill
Modern poverty damages dignity, causing psychic pain, frustration, and a lack of autonomy, leading to physical effects and shorter lives.
The cost of participating socially or succeeding at job interviews is high.

The Welfare State's Shortcomings

The welfare state might still catch us when we fall, but it cannot help us take flight. It cannot support us to confront the challenges we face today and it cannot change the direction of our lives.
The insight that our welfare state is struggling in the modern era is not new. Welfare reform has been on the political agenda for almost four decades
Reforms on offer have not changed lives or the welfare model. Pulling the industrial levers of power seems to make very little difference.
New public management has profoundly altered our relationship to the welfare state.

The Reshaping of the Welfare State

The welfare state has been reshaped as a service industry
Today that vision has gone and in its place has grown an obsession with the business of service delivery. Now that we are the customers and the culture is one of a business, we have normalised the idea that for every problem there must be a service.
Reforms intended to rationalise the welfare state have driven up demand and a mushroom of low-cost services have been generated.

A Fatal Flaw

For those who work within our welfare services, they are encouraged to rate our doctors or bin collectors much as we might rate a film or a visit to a restaurant.
New public management has amplified an error that was already present: A fatal flaw that Beveridge made the subject of his third and final report.
In 1946 Beveridge published a report on voluntary action, in which he voiced his concern that he had both missed and limited the power of the citizen and of communities.

Beveridge's Error

The people's William didn't like the way citizens were prevented from contributing time or money to the cost of services; he worried that some core groups were not benefiting from his reforms.
Beveridge had earlier designed people and their relationships out of the welfare state and realised too late that he had made a mistake.
When the welfare state was created, the prevailing wisdom was that neutral, depersonalised transactions would be key to levelling opportunity and combating poverty.
The ideas of Beveridge and his contemporaries may have been right for their time. Bureaucracy and an arm's length culture can and have worked powerfully against prejudice. But these ideas were starting to cause concern to Beveridge, and they are certainly not right for now.

A Potential Future Path

Beveridge's insight that solutions start with people and relationships marks a potential future path. Current hunger for change is proof that existing institutions don't quite work.
To solve today's problems we need collaboration: a system where participation is easy, intuitive and natural, and start in people's lives.