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The Beveridge Plan

ISSUE:  Autumn 1943

In the English language the word Beveridge is already well on its way to losing its capital letter and becoming the common name for “freedom from want.” The British people of all classes have rushed to buy copies of this paper-covered Government document, have evidently read the essential parts of it, and have immediately decided what they think of it. The vast majority have apparently decided that this is what they want. The Government shows signs of feeling that it is up a tree surrounded by a vast crowd of common folk who have no intention of letting it get away. The Government, being responsible for administration, quite properly wants to discuss details, and Sir William himself was only tentative in many of his specific suggestions. But the people are in no mood for talking it over, They are convinced that powerful diehards and “interests” would like to emasculate the plan under cover of small modifications. The people want beveridge and no fooling.

At first sight it looks like a miracle that so complex a social organism should be born full-grown, like Athena, from the forehead of one English gentleman, however distinguished. Reforms don’t usually happen that way. Actually, of course, this is not a miraculous birth, but a coming-of-age. Social Security has been growing in England for many years, starting with Workmen’s Compensation in 1897, compulsory health insurance and unemployment insurance in 1912, and contributory pensions in 1934. Beveridge has undertaken to codify institutions that have already passed through infancy and adolescence, and to fill in the gaps so that England may have a general system of security against want. Undoubtedly the dramatic success of the Report was helped by the fact that it was personified in one highly respected man, rather than in a committee. The equally vital Scott and Uthwatt reports in England, and the Burns report in America, present a noticeable contrast. Sir William himself wrote articles and made speeches on behalf of his brain-child. There are technical advantages in being a person rather than a chorus—given the right pedestal and the psychological moment—and as much so in a democracy as in any other political system.


The plan itself can be summarily described here, since the whole report is available in America. Beveridge means that England guarantees basic subsistence for all her people, and with the least possible use of a means test. The elimination of the means test is fundamental.

The British people have learned by experience, as many of us learned in the New Deal, that the means test is humiliating, and that there is no security for a free people if decent folk who become casualties are treated as outcasts. Insurance benefits must therefore be paid to rich and poor on the same terms, just as the banker and the bootblack stand in line without shame at the Red Cross soup kitchen after an earthquake. But subsistence is all that is guaranteed; the banker and the highly paid worker take their own risk so far as maintaining their privileged amenities.

The proposed financing of social security is based not on economics but on British custom and feelings. About a quarter is covered by “contributions” from the people as insurance policyholders, another fifth by charges against employers as representing their interest in the efficiency of their workmen, and the rest by taxes on the citizens in recognition of the public interest in national stability. With this distribution of the payments, those who become casualties do in fact feel that they have a right to their benefit money, more so than if they had merely paid for it by way of general taxes. It is purely a matter of visibility, and the elaborate bookkeeping required by a contributory system is considered justified by its effect in giving people and government the sense of knowing where everyone stands and what his rights are.

The people are classified for payment of contributions, not by wealth but by function. There are six classes: I. Employees. II. Employers and self-employed workers. Ill, Housewives. IV. Others of working age not dependent on working for a living. V. Children under working age. VI. Retired men over 65 or women over 60. Married women who earn money can voluntarily class themselves in classes I or II.

Contributions are collected from classes I, II, and IV only. Benefits due to housewives are regarded as covered by their husbands’ contributions, but since bachelors pay the same, there is a slight tax on bachelorhood. Adult men in classes I and II pay 4s. 3d. a week, women 3s. 6d.; in class IV men pay 3s. 9d. and women 3s.

In view of the difference in living costs, we can translate English money as roughly worth about $6.00 to the pound, rather than the exchange rate of $4.00. The above payments on this basis run from about $1.25 to 90 cents a week. This is about two-thirds of the average working-class payments for insurance under the present system, not all of which will be replaced by the Beveridge plan. Englishmen are already well used to insurance.

Employers pay 3s. 3d. for each adult male employee, 2s. 6d. for women.

Note that there is no graduation for differences in wages or income; low wages are taxed equally with high salaries, and a millionaire in Class IV pays sixpence less a week than his gardener. But this system differs from private insurance in not requiring payments from workers when they are out of a job; also, 50 to 60 per cent of the total budget goes on general taxation, which is where the millionaire makes up that sixpence.

The classification for benefits is made on a basis of estimated cost of subsistence, but not related to the need of the individual as measured by his other income. The millionaire has paid his 3s. 9d. and if he passes 65 and is not working for money, he is entitled to his pension. So long as the millionaire gets the pension, the gardener can have one, too, without means test or humiliation.

The benefit system is naturally somewhat complicated, though far less so than our own, which attempts to provide not subsistence but a partial maintenance of each worker’s previous living standard. Beveridge gives figures that are tentative and based on his guess at the postwar price level, subject to revision when more is known about the cost of living.

The plan proposes to start the old-age pension at 14s. a week for a man or woman and 25s. for a couple, working up gradually in twenty years to 24s. single and 40s. double. The transition is mainly to allow time to readjust the numerous existing pension rights, and the means test is retained for dealing with cases of hardship during the adjustment. In the debate in Parliament, the Government spokesmen rejected this proposal, and suggested a somewhat higher flat pension with no increases. The whole point seems somewhat academic, since no one can predict the cost of subsistence in 1965, and no doubt the size of the pension will be a political question from time to time in any democratic country. As there is no question of setting up a reserve, those who pay premiums in their working years cannot be said to acquire a specific pension right in terms of money, but rather to have a right to a corresponding share of the national product, whatever its price level may happen to be.

Unemployment benefits are tentatively fixed at 24s. a week for a single worker, plus 16s. for a wife, unless she is employed. Disability benefits are the same. This basic figure of 40s., or say, $12.00 a week, is the estimated cost of “subsistence” for a couple without children; it is also the figure proposed for old-age pensions at the end of the transition. There are some qualms about a uniform benefit rate, in view of the considerable difference in cost of living between London and the farm country, but Beveridge is inclined to stick to the flat rate and suggest measures such as housing development to reduce London rents. One conservative Member of Parliament remarked sensibly that the depressed areas are just the places where ample subsistence benefits would bring in some money that would help the hard-pressed local business and governments. In America, the same could be said of the effect of a flat-rate old-age pension in helping to raise the income of the deep South.

Both unemployment and disability benefits under the Beveridge plan would be without time limits, but after a short time an unemployed worker would be required to take a training course for some skill with a better market. Sick and injured workers would not only be given treatment but would be required, as a condition of continued benefit payments, to co-operate in efforts to restore them to earning power. The Government apparently will reject Beveridge’s suggestion of abolishing the time limit, and prefers to throw the long-term cases onto direct relief with a means test, to weed out the clinging vines.

The cost of medical treatment itself is outside the Beveridge plan, and it is assumed that the present widespread system of health insurance will be revamped into a universal guarantee of medical services for all the population. This project has been undertaken by the Government, with the usual mixed comments from the doctors. It seems far closer to realization than in the United States. Beveridge proposes to take over the services of the “Friendly Societies” and labor union health systems for administering to their members the social security disability funds as well as their own benefit payments.

The only other large item in the benefit schedule is an allowance for children, made necessary by the original assumption that social security covers only the cost of basic subsistence. Beveridge proposes that all families regardless of income should be paid 8s. a week (say, $2.40) for every child except the first, and also for the first when the parents are receiving unemployment or sickness benefit. The effect of this provision, in case of trouble, is simply to fit the payments more closely to expenses, so as to limit the basic payments to subsistence for single persons or couples. In ordinary circumstances, this is a bonus on children, of which England has nowhere near enough to maintain its population. It is assumed that children in general are desirable, all Englishmen being genetically alike. One has to keep in mind that in a stratified society where the elder son for centuries has taken the lion’s share of the property, the “lower classes” are necessarily blood relations of their betters, and there is no social objection to the idea of encouraging large families at all economic levels. Special cases, such as prolific morons, do not come into this scheme, as they will be on direct relief under a means test. Such cases will still be budgeted by the relief authorities as they think proper.

Well-to-do parents must of course get their children’s allowance, so as to avoid class distinctions, and under the income tax it all comes out in the wash one way or another. Beveridge suggests that if it seems wrong to subsidize children in well-to-do families, there could be a reduction of the income tax exemption for children, without spoiling the effect of making the general allowance universal.

The Government has accepted the idea of children’s allowances, but has suggested reducing the money payment to 5s. (say, $1.50) a week, and giving all children one free meal at school, instead of the other 3s. for all children after the first. At present about a third of the school-children get one meal at school, but their parents pay if they are able. The Government’s proposal is in line with the principle of abolishing the means test, and at a point where the means test has its most vicious impact. It is also in line with British experience of food rationing. The health of the British people has been so noticeably improved during the war, that they can easily see the advantage of feeding every child one Well-planned meal, whether his mother knows about vitamins or not.

Another feature of the Plan is that long-term disability caused by industrial accident should continue to be compensated in proportion to lost earning ability, but without argument as to responsibility. Hazardous industries would be taxed for part of this extra cost, just to keep them interested in safety.

Minor items, in terms of cost, are provisions of a marriage grant, of pensions for widows with children, and of a funeral grant. Widows without children rank as unemployed and are expected to take training for a job. The Government regards this plan as harsh, especially for older widows, and the terms are likely to be improved.

The funeral grant puts a well-deserved crimp in the industrial insurance business, which in England is immense, with twice as many policies as there are people in the country. Beveridge adds a long appendix pointing the linger at the extravagance of private industrial insurance. The average premium in the large companies is 3d., collected weekly. In 1939 some 65,000 agents spent their time trudging about collecting pennies, and the cost of overhead ate up more than a third of the premiums. The Government accepted the idea of a universal funeral grant, at an overhead cost of about 5 per cent. But it tacitly rejected Bev-eridge’s proposal to take over the whole mess of industrial insurance into a public corporation, much to the wrath of the Labor Party members. Incidentally, no one seems to have remarked on the effect on manpower of getting caught in a war with an institution of this kind using up 65,000 men.


The Report was submitted on November 20, 1942, and on February 16 the Government was ready for discussion in Parliament. Sir John Anderson and Sir Kingsley Wood, Chancellor of the Exchequer, for the Government, said the report was entirely acceptable in principle, but that of course the financial side of it would have to await the end of the war, when they could see what the debt services and other charges on the taxpayer would be. Also, they did not accept the suggestion of immediately setting up a Ministry of Social Security and suggested perhaps some kind of Board might be the thing. They refused to tackle the insurance companies.

The debate was hot. The Labor members were angry and distrustful, and so were the Press and the public. At about that time, I happened to sit in a crowded restaurant with a Canadian and his girl. The girl had an evening paper and was looking at the story of the debate. As the Canadian was in a conversational mood, I ventured to ask his girl what she thought of the situation. She shrugged. “Oh, they talk a lot, but they won’t do anything. It will all go back and be the same as it was before the war.” I believe the attitude of the ordinary working people varied between angry determination, as expressed by the Labor members, and resignation to the idea that “they” are in the saddle and will never give the common man a chance.

On the third day of the debate, Mr. Herbert Morrison, Labor member of the Government, stepped into the breach with a sensible speech that tried to recall to his angry friends the fact that Beveridge himself had proposed his figures merely for illustration, subject to correction for postwar conditions, and that for the first stage the Government had actually accepted all the essential features of the Report. It was not the moment for pouring oil. There was a vote on an amendment expressing lack of confidence in the Government, which drew most of the Labor and Independent Party members and half the Liberals—including the two Lloyd Georges who are not in the Cabinet. The Labor Cabinet members and some others stuck with the Government, and there has been considerable hard feeling in the Party since.

Although all the Conservatives and half the Liberals voted with the Government, their votes did not by any means represent opposition to the Plan, but rather a more confident belief in the honesty of the Government’s intentions, Many of the most sensible speeches in support of the Plan were by members of the Conservative Party. Of course, the diehard speeches in opposition to the whole idea were made by Conservatives. On the whole, it appears that a substantial majority of the House of Commons will favor the Beveridge Plan on the terms that Beveridge himself proposed, as a tentative scheme subject to minor changes that will not ruin the general intention of the plan. It is probably not a bad thing that the Government should feel, however, that the people are in no mood for if’s, and’s, and but’s, even though if’s, and’s, and but’s are quite necessary.

On March 28, Mr. Churchill came forward with his four-year plan for postwar England, but the people apparently still want Beveridge. Unfortunately, the Chancellor of the Exchequer had taken the bloom off the four-year plan by citing the many needs of postwar England as reasons for not committing the Government to the costs of social security except in their order of priority. The people still want Beveridge. Various organized bodies have met and given their support to Beveridge. The Co-operative Insurance Society, representing the great Co-operative Movement, publicly announced its readiness to sacrifice itself for a more comprehensive plan. The Guild of Insurance Officials voted down a motion condemning “ill informed and exaggerated criticism” and expressed “the view that the Beveridge Plan was a progressive step towards social security.” The trade unions changed their stand on workmen’s compensation to make way for Beveridge. Beveridge seems to be doing as well as could be expected.

The debate in Parliament and in the Press has been unsatisfactory to an American who would like to see England clarify some points that need clarification in America. There are diehards in England, but the educated classes in general are much less foggy in their minds than the corresponding classes in our country, so that one is often tempted to wish they could write up some of the simpler facts of economic life on a billboard, merely to serve as examples to some of our more naive politicians and business men.

No one, for instance, took the trouble in the Parliamentary debate to point out that England’s postwar economic burden is not the sum of the debt service, social security, reconstruction, defense, and the other items in the Budget. Instead, the Labor M. P.’s tended to brush the finance problem aside. This is no way to educate a diehard.

One wishes that someone would point out that some parts of the national Budget represent a burden on the national income, and others are only a burden on Parliament and the Exchequer. Reconstruction, housing, education, health services, and defense are activities in which the . s. d. stand for the use of labor and material, in competition with the labor and material demands of food production, manufacturing, and entertainment. They all have their place, but what is devoted to public services via taxes must be at the expense of something in the private budget of the people, unless there is unemployment, in which case it comes out of unemployment. No one, incidentally, brought up the fact that the job of solving the employment problem, cited as one of the competing demands on the treasury, is not itself an expense at all, but merely an obligation to make the total budget sufficiently large. As for the debt service, England’s internal public debt is well distributed among the taxpayers. For all practical purposes, the taxpayers will pay their own interest to themselves, with no noticeable effect on the current supply of food, clothes, and cigarettes, or even of capital for investment. By the same token, most of the Beveridge Plan deals with insurance, which is no burden on the national production but merely a transfer of claims. The premiums, both “contributions” and “taxes,” are savings, and the benefits are the expenditure of the savings, They balance. The fact that they are not done by the same people at the same time is what insurance is all about. Insurance can be overdone, i. e., saving too much when young, and living too high when old, but even in excess it would not be an expense to the nation, but only a wrong allocation of the national output.

There seems to be remarkably little fear that workers in general would lose their desire to work and prefer to “live on the dole,” though there is some concern about how to treat the few incorrigible ne’er-do-wells. British workers are well used to insurance, such as it is, and will not mistake it for a rich uncle. Many Conservatives seem to recognize that fear of starvation is not necessary for their own sons and daughters, and that basic security rather favors than stifles initiative. In fact, an interesting letter to the Times from Lord Eustace Percy, Rector of King’s College, Newcastle, objects to the whole Beveridge Plan as still tainted with charity, and suggests it is time to give every Englishman a personal endowment. A Conservative M. P. two days later extends Lord Percy’s argument to the point of abolishing most of the free social services as involving a “concealed means test,” and dividing up enough of the national income so that everyone could pay fees, just like a Lord. One can’t always be sure about these English, but I think this is not tongue-in-cheek. A gentleman might well say, “The certainty of a regular unearned income makes me feel full of beans, so that I can go out and lick my weight in wildcats. Well, why not have the whole country as ripsnorting as I am?” He wouldn’t say that, not in England, but he might think something of the sort. There is a point there. Some services have to be public, because it is so extravagant to handle them privately. But others don’t, if everyone has an assured income, and it would limit the growth of bureaucracy, if we could just distribute the money instead of brushing everyone’s teeth for him.

In the Parliamentary debate a few of the members appeared to think that the Beveridge Plan would endanger employment by hurting the export industries, but it was a Conservative member who pointed out that the increase in payroll tax will be a minute percentage of total production costs.

One wishes, however, that someone would make clear in a way to enlighten the Americans, the fact, well enough known in England, that full employment is not directly dependent on foreign trade. Certain prewar industries, to be sure, depended on the export market, but there is so much dislocation of labor now that mere immobility of labor will be less important in adjusting postwar export industries to their market. Foreign trade, as many influential people here recognize, is only a way of getting the money to buy foreign food and materials, and the less labor has to be devoted to working for the foreigner, the more can be used to produce for the home market. Ideally, the export industries should be streamlined to make export goods at the lowest possible cost with the fewest possible manhours per unit of product, i. e., they should offer as few jobs as possible for all the output that can be sold. The place to make jobs is in domestic industry and public services, that benefit the home folks. Foreign trade determines how much the Englishman will have to eat, but the domestic distribution of income determines whether or not he has a job. The Beveridge Plan is therefore, as Sir William pointed out rather unem-phatically in the Report, one of the elements making for full employment.

In America, this distinction is much less well understood. Many Americans still think that for full employment we must look to foreign markets to take our surplus production. It is true we have a surplus of cotton and must either sell it abroad or transfer land and labor to something we need at home. But it is also true that if we are not to go on hogging all the world’s money, we must buy as much as we sell, plus enough to represent interest on our foreign investments. Taking exports and imports together in our markets, since we are the world’s creditor nation, there will be less than no net employment in foreign trade for American labor. The only way the creditor can work for the debtor is by giving things away—or by lending the debtor more money, which is really the same thing, as we found out when we tried it in the twenties.

This sounds like a digression, but is not. Something like the Beveridge Plan on a more generous scale is indicated for the United States, as a means of distributing enough money to enable us to hire our own workers; for they are not going to be hired by foreigners via an excess of American exports. The English people have been a creditor nation a long time, and understand the principles better than we do. One would like to see them formulate these matters so clearly, for their own use, that their example could be used for educational purposes in America.


No doubt the perusal of the Beveridge Report will have an educative effect on the thousands of Americans who have bought copies of the American edition. They will be impressed by the calm, almost Olympian wisdom with which Sir William analyzes the facts—the needs, the resources, and the habitual behavior of the British people. Here is none of that irritating search for abstract logic so dear to the Continental European, and so conducive to irreconcilable conflicts. This is an Englishman discussing how his countrymen can make what they want out of the materials at hand by the methods that will least upset their habits and customs. Even industrial insurance, the vast extravagance of which fills Sir William with wrath, is condemned in brackets, with the proviso that if the sovereign people want to indulge in that sort of thing it is their privilege to go on doing so.

But since an essential part of the Beveridge Plan is the British people’s habitual way of doing things, it is not a mechanism like a tractor or a logarithmic table, equally adapted to all nations and cultures. The Plan has lessons for Americans, but it is a tailor-made suit, and we are not supposed to buy it across the counter.

First of all, we can recognize that in our new, partly developed country, it is natural for Americans to think more of public works as the remedy for unemployment, with unemployment insurance benefits only to fill in around the edges. We have a lot of eroding land to save, a lot of room to plant trees, a lot of slums to replace with decent housing, and a lot of improvements to make in education and health. That is the gist of the Burns Plan—that whenever business can’t hire a man, the nation has a lot of jobs to be done, and he can come and get one. It is the American way, and it is what we shall do, when our people can take time from reading war news to give some attention to their own affairs. But this is not the only way to tackle unemployment, and the British people starting at the other end may do a better job of it than we can. After all, our public works are limited by the slow growth of our imagination, and an old-age pension, with its possibility of distributing five or six billion dollars a year, may turn out to be the biggest single item in any practical American plan for keeping our markets up to our productive capacity.

We can learn from the British, what has been growing more and more evident to those who worked in the New Deal, that the means test is poison. The means test poisoned the WPA, making work a thing of embarrassment to the worker, and a butt of cruel jokes to the unintelligent.

The means test still poisons the system of “old age assist, ance,” putting shame on old people for no worse sin than having earned their own living without a boss, and having paid their taxes without a social security number. The means test poisoned the CCC and the NYA, not fatally, but enough to put them always under a cloud. We offered charity to people who wanted only an honorable chance to work, and to pull their own weight, and in old age to sit at peace under a modest vine and fig tree. We had to learn by doing, that charity is a sin, the end of which is ridicule and hatred and failure of well-meaning enterprises. The British have learned the same lesson.

We can learn from the British something about the virtue of simplifying the social security system. Any insurance system calls for a great deal of bookkeeping, with large buildings full of girls handling millions of punch-cards. This is “bureaucracy,” when the Government is doing it. When the insurance companies do it, it is not bureaucracy, but it costs several times as much. The British solution is to adopt uniform premiums and benefits for each of a few classes of people; but because the honest workman will not feel entitled to his benefit unless his payments are on record, there must still be individual records, with all the punch-cards, and filing cases, and clerks.

We set out to keep even more complicated records, in which everyone’s premiums and benefits are different, giving a maximum of paper work to all concerned, both in the bureaucracy and in the office of every employer. This also was in the interests of “justice,” the idea being that a benefit “by right” must depend on the fact that a lifetime of tax-paying was recorded to each person’s individual name. We might think about simplifying at least as far as the Beveridge Plan suggests, but we shall probably not do so, for too many vested interests are already established. Some day, however, we shall probably wake up to the fact that to have lived to any given age without being in jail is good enough evidence of having paid one’s share of taxes, and that we can junk the whole card catalogue. If the upper classes can train themselves to receive dividends without a shudder, a little practice should enable the honest worker, as heir, and in part creator, of the rich privilege of American citizenship, to take his insurance in the same untroubled spirit.

In particular, it is notable that in England the public free services are recognized as a part of social security. Most of these services are established because of their economy. Even mass-produced school lunches are a saving compared with an equal number of home-produced meals, if the mother has anything useful to do with her time. Simplicity is attained by not collecting nickels and dimes for the lunch, as it is by not collecting at the door the 35 cents or so per day for the school itself. The taint of charity quickly vanishes from free services; the taxpayers settle down to them as natural privileges untouched by shame. At the same time, the free services do make life easier for those who happen to be strapped at any given moment. The more we develop those services that are economical and in the public interest, without the complication of nickel-counting, the less burden is placed on the social security system as such.

Finally, one may hope, or at least one may wish, that Americans can learn a little from the more experienced British of the necessity for promoting consumption rather than production. The British business man knows what butters his bread. It is the customer who makes the wheels go round, not the investor or even the worker. If the market is there, someone will be glad to invest and plenty will be glad to work, but if the customer is not at hand, there is nothing doing. One would not expect many British business men to join an organization for guaranteeing postwar prosperity by promoting production, and when they meet an American who talks like that, most Englishmen are shocked and worried. For if America has not yet learned that the distribution of income is the key to prosperity, she is in for another severe lesson, and a collapse in America would hurt the market for British exports. England may still have a few diehards, and those few may still swing big money and influence. But the great majority of Englishmen know that social security and the other public services, based on a high income tax and high death duties, are the necessary guarantee of business prosperity and full employment.

The Beveridge Plan, because of its personal character and the vast prestige of Sir William Beveridge, has swept England, submerging for the moment the equally important plans for postwar housing, land-use planning, and education. But these other plans are not drowned; they will float in time. The mood of the country is New Dealish, and Beveridge has merely served as leader and mouthpiece of the country’s mood. The Catering Wages Bill, a strictly New Deal measure, passed in the middle of the Beveridge turmoil, with only a few diehards in opposition. England, including the majority of the Tory Party, seems to be on her way to a healthy postwar reconstruction. One can only hope that the common folk of America will be able to overcome our own diehards with equal intelligence and determination.


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