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The details of the Beveridge report²are concerned with National Insurance³, which Beveridge planned to cover people “from cradle to grave”. The scheme was based in six“principles” of insurance:

● comprehensiveness

● classes of insurance

● flat rate benefits

● flat rate contributions

● unified administration

These objectives were never achieved; the inadequacy and poor coverage of the benefitsmeant that other benefits had to be filled in, and these systems were administered under different rules by different agencies.

Despite the deficiencies, National Insurance still accounts for over half of the expenditure on social security in the U.K.. But the failure of the scheme to cover the population led to increasing dependency on means-tested benefits, and in particular the basic benefit—National Assistance, later renamed Supplementary Benefit and then Income Support.

The Basic Means-tested Benefits

The basic “safety net” is provided by some key means-tested benefits: Pension Credit, Jobseeker’s Allowance, Employment and Support Allowance, and Income Support. These benefits dispose of only a limited proportion of all the money spent on social security, but they are particularly important, because they guarantee a minimum level of income for many recipients. There are four basic elements.

● The scale rates, or “applicable amount”. These are supposed to cover all a claimant’s normal needs—like food, fuel and clothing—apart from housing costs.

● Extra weekly payments for people in particular situations, or “premiums”.

● “Housing costs”, mainly mortgage relief and insurance for owner-occupiers; rent is dealt with through the Housing Benefit Scheme.

● Deductions. People can have their benefit reduced for voluntary unemployment or striking; there may also be deductions made to cover past debts.

The calculation is based on the sum of these elements, minus the claimant’s existing income.

The number of people dependent on these basic means-tested benefits has grown steadily over the years. The response of governments to the increasing numbers of claimants has been of two kinds. One has been to try to change other benefits to float people off the safety net; the number of pensioners claiming in the 1990s fell because of improved insurance-based pensions. The other response has been to try to adapt the system to its “mass role”, changing it from an individuated, complex benefit to a general system capable of coping with millions of claimants.

Some other means-tested benefits are available to people across a much wider range of income. The benefit is withdrawn as people’s income increases. The rate of withdrawal is called a “taper”. Housing Benefit, for example, is withdrawn at 65%; that means that for a netincrease in income of £10, £6.50 is withdrawn. The most important benefits which work this way are Child Tax Credit, Working Tax Credit, Housing Benefit and Council Tax Benefit.

These benefits have the general problems associated with means testing—complexity, problems with coverage and the problems of adjusting to frequent changes in circumstances. There have been particular problems with Tax Credits, where changes in the course of a year have led to claimants being ask to repay thousands of pounds. The other fundamental problem is the “poverty trap”. People who have an increase in earnings suffer from the withdrawal of benefits as their earnings increase. This is often represented as a disincentive to work, but there is not much evidence whether it really has that effect; more to the point is that it is unfair, with some low-paid earners facing marginal rates of taxation of over 90%.

Unemployment was initially provided for through the Beveridge scheme. National Insurance was intended to deal with a wide range of marginal employment, including casual labour, seasonal work and short-time working. It was never intended, however, to deal with long-term or mass unemployment. As long-term unemployment grew in the 1970s and early 1980s, unemployed people became increasingly dependent either on Income Support or on alternative benefits, such as benefits for incapacity or single parenthood.

By the mid-1990s, the system had virtually ceased to apply, with only 8% of unemployed males receiving National Insurance. Unemployment Benefit was replaced by Jobseekers’Allowance, which has contributory and non-contributory rules, but is principally a means-tested benefit.

Throughout this period there was also an increasing emphasis on trying to engage people in the labour market as the main route out of poverty. The term “welfare to work” refers to a series of measures intended to encourage unemployed people into work, including advice, training and supervision. The programme of “welfare reform” is based on three principles. The first is conditionality, or subjecting unemployed people to sanctions for non-compliance with the rules. The second is personalisation, giving people support to speed their return to work. This kind of individualised response has two main problems: imposing responsibility on benefit claimants for the general lack of employment, and trying to deal with millions of claimants as if they could all be dealt with flexibly and individually. The third principle is contracting out provision, which is an attempt to provide services to large numbers of people.

The Beveridge scheme provided for universal pensions at a low level. Pensioners were likely to be on low incomes, and in the 1970s more than half the people in the lowest 20% of the income distribution were elderly.

From the 1950s on, numerous schemes were proposed to offer higher pensions through earnings-related contributions and benefits. This was the subject of bi-partisan agreement in the 1970s, and led to the introduction of the State Earnings-Related Pensions Scheme （SERPS）. Subsequently, however, governments came to feel that this represented too large a commitment to state pensions: the Conservative government argued that “it would be an abdication of responsibility to hand down obligations to our children which we believe they cannot fulfil.”They arranged for SERPS to phase out gradually and sought instead to encourage more private and occupational pension provision. From April 2002 SERPS was replaced by the Second State Pension, which makes more generous provision for people on lower incomes and those whose contributions are incomplete. The final income of pensioners relies increasingly on individual and independent provision.

The Pensions Credit has now replaced the previous means-tested support. The “Guarantee Credit”, replacing Income Support and the Minimum Income Guarantee, offers a basic means-tested minimum. The Savings Credit allows extra income to be retained for people within a narrow band of income. It is complicated, and take-up is uncertain; the government thinks that half all pensioners should qualify.

Tax allowances for children were first introduced in 1909, and Family Allowances in 1945. Titmuss, in 1955, made the important argument that tax allowances and benefits were really two aspects of the same thing, a principle which has gradually gained acceptance since then. Child Benefit, combining the two, was passed into law in 1975 （though, because it was controversial, it was not implemented for two years after that）.

Child Benefit is flat-rate, not age-related. The case for age relation is that children become more expensive as they grow older. The case against is that poorer families tend to be those with younger children, mainly because the woman in the family is unable to work; and it is simpler not to relate the benefit to age. The basic arguments for Child Benefit are:

—it is paid to the mother, who may have no other income—it is not means-tested andtakeup is very high （perhaps 99%）—it is simple to administer—it avoids problems like the poverty trap and stigma—it helps to protect the position of the working poor.

The arguments against are:

—it is not well targeted. Poorer families tend to be smaller and younger, but Child Benefit gives most to larger families—the redistribution is horizontal—from people without children to people with children—rather than vertical, from rich to poor, Child Benefit may redistribute from a poor single person to a better-off family.

One of the most important objections to Child Benefit has now been removed. For most of its existence, Child Benefit was deducted directly from means-tested benefits, leaving it without value to the poorest families. The system has now been revised so that support for children is now distinct from the rest of the benefit system; it now comes largely from a combination of Child Benefit and Child Tax Credit.