There is a temptation to see the welfare state as an idea that exists in opposition to liberalism, in both its economic and political forms. There are what look like good reasons for this belief. The most obvious is left’s attachment of the welfare state – a project they have assumed ownership of in both a historical and a moral sense. However, it is worth recalling that the history behind the British welfare state – a story I recover in my recent book, Bread for All – offers much food for thought for those who do not position themselves on the left of the political spectrum. Liberals should be thinking hard about what a modern welfare state looks like, not only because they were involved in its creation but also because the success of their political ideas might be dependent on it. To be more specific, there is a good case to be made that effective management of the welfare state – understood in terms other than driving down its costs to the state – is part of securing support for economic liberalism more generally.
A number of aspects of the early history of the welfare state – the history that goes back a century or more before the Labour Party victory in 1945 – lend themselves to this view. One – and the most obvious – is that it was Liberal governments of the early twentieth century that first legislated for the modern welfare state, in the form of old age pensions and national insurance, which were intended to cover interruptions to earnings caused by illness and down turns in trade. Indeed, it was members of the breakaway unionist branch of the Liberal party who helped forge the first Tory contributions to the interwar welfare state. Neville Chamberlain, for instance, remodelled pensions on a version of the contributory model the Liberal Party had used for national insurance (albeit one with the important difference that the only employees and employers paid into the fund) and reformed funding for local authorities to free up spending for local services.
The liberal motivation for supporting and legislating for the welfare state was multi-faceted. There were deep seated concerns about the moral dimensions of capitalism – the kind of worries that had motivated restrictions on child labour during the nineteenth century. But, for the likes of William Beveridge and John Maynard Keynes, both Liberals who chose not to join the Labour Party, these concerns were always tied to broader worries about the future of capitalism, which they thought might collapse or simply be rejected by voters without some kind of intervention. Economic management of some kind was essential, they argued. Unemployment could not be eliminated but it could be kept to levels that meant national insurance was viable. Moreover, a range of other welfare services could be provided that had dual moral and economic benefits. Universal healthcare, free at the point of use, promised to relieve individual suffering but would also mean citizens who were fit and ready for work. Education would offer opportunities to aspirational people throughout society but it would also equip them with the skills and knowledge that business needed in a competitive global market. Good quality housing would make home life more stable, injecting hope and morale into the workforce.
This strategy secured wide support during the third quarter of the twentieth century and, as opinion polls show, much of it continues to command support today. And it is worth noting that the first era of the welfare state was also a time of two-party politics – something that appears to be back in Britain. Jeremy Corbyn’s 2017 general election manifesto might have been slightly incoherent – a rushed effort to hold together as many factions of his party as possible – but it offered some kind of welfare spending to different parts of the electorate, while the Conservative Party offered more of the same: nothing. As David Runciman has observed, a general rule of thumb in politics is that something beats nothing.
There is, of course, an argument to be had about political optics of austerity, especially after seven years of it being official government policy. But people are turning away from liberalism, in both its political and economic forms, and that austerity – the cutting back on state spending on measures that fall, one or another, into the realm of the welfare state, not to mention the economic strategy that accompanies that spending – is an important reason why. Liberals need to re-energise their approach to welfare and fast if they are to respond effectively.
Chris Renwick is a Senior Lecturer in Modern History at The University of York
He has recently published Bread for All: The Origins of the Welfare State