Policy Papers


‘Adapting the machine’: welfare policy after World War One and Covid-19

Michael Robinson |

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Executive Summary

  • The Ministry of Pensions was established in 1916 to provide compensatory pensions and rehabilitative assistance to disabled First World War veterans. The Ministry was initially influenced by a social and political climate which supported compensation to and the reintegration of returning war veterans.
  • By 1921, total war pension spending reached £106 million totalling 7% of overall government expenditure. Ministry officials feared the potential for incremental growth in government liability and associated costs.
  • In 1921, a seven-year time limit on claims – a cost-reduction policy – was introduced in response to economic pressures. Public sympathy for the ex-service population, however, prevented the closure of the Ministry and increased the value of pensions.
  • In February 2020, the Department of Work and Pensions announced the delay of the full rollout of the Universal Credit system until 2024 following criticism of the system's draconian policies.
  • This announcement preceded the current Covid-19 emergency which will have an enormous impact on the system including a return of the debate surrounding increased allowances and time-limited policy.
  • Politicians and policymakers today remain mindful of welfare ‘creep' and the potential for Covid-19 related policy changes to have the unintended consequence of incremental growth in eligibility and economic cost following its implementation. Their response will continue to be shaped by the existing economic and political context.

Introduction: Ministry of Pensions and DWP

The Ministry of Pensions and its policy remit during the Great Depression, 1929 until the outbreak of the Second World War, offers interesting parallels with Universal Credit in light of the current forecast of a deep economic recession in the aftermath of Covid-19. Attention will be drawn to the rates of allowances and the imposition of time limits on welfare distribution which both remain contentious and potentially fluid in times of political volatility and economic unpredictability.

In 2013, it was announced that a Universal Credit scheme would amalgamate the six existing benefit schemes, Income-Based Job Seeker's Allowance, Income-Related Employment and Support Allowance, Income Support, Working Tax Credit, Child Tax Credit, and Housing Benefit, through the Government's Department of Work and Pensions (DWP). By 2018, Universal Credit provided benefits for around 1,600,000 enrolled claimants. The new system has been beset by controversy, opening a new and divisive chapter in the history of Britain's welfare state. Advocates for reform emphasise the necessity to reduce 'dependency' by facilitating claimants' ability to enter the labour market. The political Left, alongside welfare rights and poverty campaign groups, argue that Conservative governments, in both coalition and majority administrations, have implemented a draconian Universal Credit procedure to balance the nation's economy by punishing the poorest and most vulnerable members of society.

Labour's 2019 election manifesto went so far as to label Universal Credit as a ‘catastrophe’, criticising the system for driving claimants and their families into poverty and increasing food bank usage. They ambitiously promised to scrap the Universal Credit system and replace it with a more humane structure which would end poverty and guarantee an improved minimum standard of living. Labour pledged, for example, to remove the controversial five-week wait on claims and the two-child benefit cap on family welfare while introducing additional personal and outreach programmes facilitated by an increase of 5,000 front-line staff. The Conservatives’ new Universal Credit scheme was meant to be fully operational by April 2017. By February 2020, however, there were some 900,000 claimants still awaiting transferal from the older programmes, and a further delay for the scheme's full rollout to September 2024 was announced, at an additional cost of £500 million. This announcement preceded the Covid-19 outbreak, which looks set to complicate the Universal Credit system further.

The provision of state-funded pensions, wage subsidies and disability welfare by the British state has a relatively recent history. A series of policy developments included the 1906 Workmen's Compensation Act (for industrial related injuries) and the introduction of a means-tested Old-Age Pension for individuals over seventy in 1908. The 1911 National Insurance Act provided medical treatment and sickness and unemployment benefits for workers in most industrial occupations. These measures were part of the 'new liberalism' strategy of David Lloyd George, Chancellor between 1908-15, who became Prime Minister (1916-22). It was a response aimed at retaining the vote of the working man amid the rise of the Labour Party, which won twenty-nine seats in the 1906 General Election.

The First World War was unprecedented in the scale of its impact on adult men who survived. Static industrial warfare involving mass citizen armies combined with advances in medicine to ensure the survival of millions of wounded men, albeit with their bodies and minds damaged by their war service. Disabled veterans of prior conflicts had aroused little public and political sympathy. Non-commissioned service in the British Army was seen as an occupational refuge for the unemployed and poverty-stricken working-class. Veterans subsequently had little state protection and often had to rely on charity. By contrast, the British Army during the First World War grew through millions of volunteers and conscripts from all social classes. The nation's concern for those disabled because of war service intensified as a result. The Ministry of Pensions was thus established in 1916 to provide compensatory pensions and rehabilitative medical assistance to disabled ex-servicemen. The Ministry was headed by a Minister of Pensions who oversaw the system on behalf of the Government. Pre-dating the National Health Service and universal flat-rate pensions by two decades, the Ministry's welfare and medical interventions for over one million ex-servicemen cost a total of £1,192,000,000 between 1916 and 1938, equivalent to approximately £85bn in 2020. The Ministry of Pensions was finally merged with the Ministry of National Insurance in 1953 under the Transfer of Functions (Ministry of Pensions) Order.

Politicians and officials were keen to present the Ministry and its allocation of state resources as due to the Government's benevolence and its moral fulfilment to provide 'a home fit for heroes' for returning veterans. However, the state's relationship with disabled ex-servicemen was also heavily influenced by political and public lobbying. In a 1931 internal report, civil servants working for the Ministry of Pensions noted the department’s consistent strategic manoeuvring throughout its operations since its formation in 1916: '[we] steadily adapted the machine to the requirements of public opinion'.

With the economic repercussions of Covid-19 driving the newly unemployed to turn to Universal Credit, there is the potential for the event, like the First World War preceding it, to have a dramatic influence on welfare policy. Indeed, the potential for the social and economic implications of Covid-19 to induce a debate on the future of the welfare state and to shape attitudes towards its recipients is beginning to be discussed by poverty campaign groups and social policy academics such as Lunt and Patrick. DWP policy will continue to remain motivated by economic projections, but political repercussions will also continue to have influence. The ability for the current Covid-19 climate to allow political and public opposition to alter policy has already been demonstrated. The Conservative Government has, for example, recently performed U-turns in removing migrant NHS and care staff from being required to pay an international surcharge for medical treatment, and by providing free school meals to disadvantaged primary school students outside of term time following a high-profile campaign led by English international footballer Marcus Rashford.

The Ministry of Pensions, 1919-1929

During the inter-war period, and even during the First World War, civil servants at the Ministry of Pensions and the Treasury remained aware of both the political and economic consequences of any changes in pension policy. There was particular concern about rising pension costs as veterans aged. Such apprehensions would be labelled now as welfare ‘creep': the unintended consequence of incremental growth in eligibility and economic cost following policy implementation. Ministry and Treasury officials looked overseas to America with an awareness of history evident in their internal discussions. The American Civil War pensions system, introduced in 1862, was cited both during World War I and in its aftermath to illustrate the apparent dangers on the horizon. The 1890 US Dependent Pension Act greatly expanded state liability for all disabled veterans unable to undertake manual labour, even if their disability was not war-related. The subsequent surge in veterans receiving a pension accounted for more than forty percent of the federal Government's expenditure. Ministry and Treasury officials subsequently held discussions on the abolition of the Ministry as early as 1919. There was a proposal that functions could be transferred to the Treasury and the new Ministry of Health (created in 1919 to take over health policy from the former Local Government Board). These proposals were blocked in fear of a backlash from a powerful veteran voting bloc and broader public concern for veteran wellbeing in the immediate aftermath of the war. Winston Churchill acknowledged during a Cabinet meeting in 1919 that veterans ‘naturally obtained much sympathy throughout the country'.

Coinciding with the large-scale demobilisation of veterans and acting on the recommendations of a cross-party Select Committee, the coalition Government passed a War Pensions Act in 1919 in response to intense public and political lobbying on behalf of the welfare of disabled veterans. It guaranteed disability pensions as a statutory right, introduced independent appeal tribunals for dissatisfied claimants and a rise in pension rates. Levels of incapacity were measured by graded benefits: the previous maximum one-hundred percent pension of 27s 6d per week for ex-non-commissioned officers suffering from more severe disabilities such as the loss of two or more limbs or paraplegia injuries was increased to 40s. Reflecting the elevated status of the disabled First World War veteran in British society, the Ministry's maximum pension was comparatively higher than other welfare systems such as the National Insurance sick leave benefit of 10s per week for the first thirteen weeks (5s thereafter), and Old Age Pensions which amounted to 5s per week. The 1919 Warrant fixed pensions to reflect the war-related inflation of prices under the proviso that the allowances would be reduced once the cost of living reduced post-war.

1921 was the highpoint of the Ministry's activities, in which almost 1,200,000 veterans received a pension and specialised hospitals and rehabilitative centres assisted over 150,000 veterans. The annual war pension budget was £106,600,000 – around seven per cent of national government expenditure. A Committee on National Expenditure facilitated a drive for retrenchment in public spending in the early 1920s. This was the 'Geddes Axe', named after the chair of the Committee, Sir Eric Geddes. It enforced a host of subsequent reductions in social spending in education, health, housing, welfare, and unemployment benefits. The Ministry restricted its future liability in its resulting 1921 War Pensions Act by introducing a seven-year time limit on claims from a veteran's military discharge or from 1 September 1921 depending on which occurred first. The Ministry's seven-year time limit was successfully strategic in its prevention of further liability and so reducing costs. Between 1921 and 1939, Ministry annual spending decreased by over sixty per cent (£106,600,000 to £39,400,000).

Ministry costs were almost reduced even further. In 1922, interim Prime Minister, Bonar Law, returned to the possibility of closing the Ministry by transferring its responsibilities to the Treasury and Ministry of Health. However, with the 1922 General Election on the horizon, and in the face of effective British Legion lobbying and the advice of senior Ministry officials, Law stopped short of advocating for such a position. The Ministry also dropped its contemplated reduction of its pension rates to match the reduction in the cost of living as set out in the 1919 War Pensions Act. This reversal again followed a vocal and organised lobbying campaign funnelled through the press and local MPs. While unable to close the Ministry down completely, internal Whitehall correspondence and minutes show that officials remained steadfast in their commitment to combat ongoing and long-term costs. In particular, they were concerned about ex-servicemen suffering from longer-term deteriorating conditions such as mental illnesses, breathing problems and joint pain.

Lobbying attempts by the British Legion and supportive MPs to introduce bills during successive governments either to relax or remove the Ministry's seven-year time limit were repeatedly rebuffed. Their defeat occurred despite high profile press campaigns with one attempt in 1925 involving an 825,000 strong petition, the largest petition since the Chartists of 1848. The value of pensions, which did not fall in line with the drop in the cost of living as originally planned, by contrast, actually increased during the 1920s. A pensioner on a maximum pension was just three shillings short of a female cotton weaver's weekly wage by 1926, whereas it had equated to just more than half only six years previously. As Cohen has shown, this effectively dampened the Legion's charge that disabled ex-servicemen had been disregarded by the British state helping to rebuff calls for the seven-year time-limit to be altered or removed. However, the Ministry’s simultaneous time limit on claims and maintenance of allowance rates would prove a crucial long-term liability, especially during the Great Depression. Both issues provide relevant parallels to consider alongside the modern-day Universal Credit system as Britain faces another financial crisis.

Veteran Pensions and Universal Credit during Economic Downturns

In March 2020, Chancellor Rishi Sunak announced a strengthening of the Government's safety net to combat the economic costs of its lockdown policy, including the state-funded furlough scheme. The DWP has also had to adjust to the new economic climate. An additional 10,000 employees, doubling the Labour Party’s 2019 manifesto pledge in extra staff, were redeployed to the DWP to cope with the increase in claimants during the Covid-19 emergency. The number of recipients on Universal Credit soared to 2.7 million people between March to August representing almost a 121% increase in just six months. The rapid rise was instigated by the resulting constraints on employment opportunities especially for those in insecure employment and outside the remit of the government furlough scheme.

The DWP has made more than twenty operational changes to cater for the increase in claims in the aftermath of the nationwide lockdown. One of the most significant alterations involves the basic Universal Credit allowance being increased by £20 per week or £1,000 per year for a time-limited period of twelve months until April 2021. Further adjustments include the removal of the need for claimants to prove they are actively seeking work in return for payment, identity checks being conducted online instead of face-to-face, and information on rent costs and self-employability taken on trust as opposed to official verification. Newspapers such as the Daily Mail warned of the potential for the loosened controls to allow fraudsters to capitalise with fake claims. By contrast, poverty campaign charities welcomed these procedural alterations and the rise in rates. So, too, did Labour MP, Stephen Timms, recently appointed Chair of the Work and Pensions Select Committee, who praised the DWP for its ‘fleetness of foot’ in its rapid reorganisation to help distribute money to a large number of claimants. Still, opponents demanded further changes to the system, including the removal of the five-week wait for a universal credit claim to be processed and a general increase in flexibility in the system's rules and regulations regarding eligibility. Shortly after the increase in payments, Labour’s Shadow Work and Pensions Secretary, Jonathan Reynolds MP, also advocated for the continuation of the raised allowances beyond the twelve month allocation, stating: ‘If the Government believes this level of support is necessary during lockdown, why do they believe people will need less money when the (lockdown) ends and the normal cost of living would apply?’.

Sunak warned by early May that Government funded programmes such as its furlough scheme was 'to be wound down as it's not sustainable' in the long-term. To help combat spiralling costs, the furlough scheme will end on 31 October 2020 with a new jobs support scheme starting on 1 November 2020. The latter programme, scheduled to run for six months, will see the Government partially subsidising the salaries of firms unable to take all of their employees back full-time. Limitations to the DWP’s recent adjustments will also play a role in restricting state expenditure. Yet, some temporary measures have become permanent. For example, one of the DWP’s Covid-related adjustments was to increase the number of front-line staff. During his summer statement, Sunak announced that the DWP would receive £1bn to increase the number of work coaches working in jobcentres. Thérèse Coffey MP, Secretary of State for Work and Pensions, recently assessed that the proposed increase of 25,000 new staff in the year to March 2021 represents an overall staffing increase of a third. Contention surrounding the year-long increase in DWP looms, however, with the economic implications of Covid-19 looking set to continue beyond next spring.

In early October 2020, the Office of Budget Responsibility predicted that unemployment could soar with as many as four million people being out of work due to the job market uncertainty caused by Covid-19. A coalition of some fifty charities, including the Joseph Rowntree Foundation, Barnado's and the Child Poverty Action Group, subsequently implored the Government to continue the temporary uplifted Universal Credit payments beyond its current time-limit. They stressed the need for the increased rates to be made permanent describing the extra allowance as a ‘lifeline’ which helps prevent households from plunging into poverty. While no mention of the extension was made in Sunak’s recent Winter Economy Plan, Coffey’s response to an opening question by Timms at the Work and Pensions Select Committee meeting in late September 2020 signified potential manoeuvrability on the issue. Whilst welcoming the increase in Universal Credit payments, Timms queried whether it would be ‘inconceivable’ to cut the benefit with the economic impact of the pandemic set to continue for the foreseeable future. Coffey responded that the DWP remained in ‘active discussions’ with the Treasury about the issue. The Ministry of Pensions’ operations during the Great Depression provides evidence as to the importance of policy barriers via its time limit on claims but, also, the trade-offs in claimant provisions which may be sustained beyond their initial remit during economic downturns. Supposedly temporary time-limited measures can be extended and made permanent if they are supported by a broad enough coalition of politicians, charities, and the general public. 

The Great Depression, 1929-1939, and the extensive unemployment of the era resulted in widespread poverty. The period stimulated a resurgence in pleas for Ministry-funded assistance on behalf of veteran communities. Verifying previous projections by Ministry and Treasury officials, many of these war-related claims were for transient and progressive disabilities such as psychoneurotic or breathing problems, rendering claimants subsequently unemployable. Despite outcry from the British Legion on the poor treatment of those they termed the 'prematurely-aged ex-serviceman', the claims often lacked supporting medical evidence and documentation due to the length of time between ailment and war service. Even charities usually sympathetic to veterans recognised the increased difficulty in tracing the linear and direct relationship between their new claim for disability and their military service. The lack of supporting evidence subsequently failed to challenge, and even helped to validate, the Ministry’s seven-year time limit on claims.

The Ministry and Treasury were also better able to defend their time limit and resist any political fallout during the economic depression of the 1930s by drawing attention to their favourable pension rates. Britain was the only belligerent nation that did not reduce its monetary assistance to war victims during the economically depressed 1930s. The maintenance of Ministry rates also persisted despite the simultaneous cutting of government salaries and reductions in unemployment benefits. Even with the longer-term retrenchment patterns, the monetary value of British pensions remained too electorally volatile for politicians and policymakers to reduce despite 1919 legislation advocating for their eventual decrease. The political currency attached to disabled veterans remained secure with successive political parties vying for veteran votes by pledging not to cut pensions when in office. While the British Legion may have been unsuccessful in removing the Ministry's time-limit, its opposition to the latter's proposed reduction of pension rates in the early 1920s proved critical to the livelihood and wellbeing of enrolled claimants throughout the inter-war period.

There may be a lesson here for those advocating for the wellbeing of claimants of Universal Credit. Governance and policymaking remain a balancing act today just as it did during the inter-war period. Labour's 2019 manifesto pledge to abolish and replace Universal Credit remains unrealistic as the system moves toward full rollout. The British Legion's example may, however, indicate the potential for effective lobbying and political pressure to sustain Universal Credit's increased allowances beyond its supposed one-year time limit. This battle over welfare allowances will echo the struggle over the continuation of the inflated Ministry of Pensions allowances for decades after the 1919 War Pensions Act.

Conclusion

The intense debate regarding eligibility, assessment and distribution of state-funded benefits persists. Today, as during the inter-war period, welfare systems and their allocation or denial of resources will help shape the national economy. The British state's liability for an ageing and increasingly economically unstable veteran population would have increased during the Great Depression, as the boundaries between war-related and socio-economic deprivation became blurred, without the reduction enabled by the seven-year time limit included within the Ministry of Pensions' 1921 Act. Those who were already on the Ministry’s pension roll, however, benefited from public and political support by having their pension rates stabilised even as the cost of living decreased. This demonstrates instances of trade-offs between policymakers and advocates for claimants which has relevance today.

The DWP now looks set to come under similar pressure to continue its adjusted regulations such as its increased rates. Once again, as Britain braces itself for a period of increased unemployment, the stage is set for the Government to come up against lobbying organisations and opposition MPs to either induce welfare policy changes or uphold existing time-limited legislation. The Conservative Government's reaction will not only be dictated by ideology but by political pragmatism. The Conservative Party will remain conscious of public opinion and of its recent election victory, which relied on winning former Labour seats in the previous 'Red Wall', promising 'One Nation' Conservatism. They will be wary of an opposition Labour Party ready to capitalise on any measures perceived as being too draconian. Like the First World War and its impact on popular perceptions of the disabled veteran, Covid-19 has the potential to play an essential role in altering public perceptions of those in receipt of state welfare. Politicians and civil servants will have to consider these externalities and may be wise to follow the Ministry’s ethos, which 'steadily adapted the machine to the requirements of public opinion'. Everyone from the upper echelons of Government, opposition benches, Whitehall staff, charities and the public will, once again, have a role to play in shaping this adaptation.


Further Reading


Barr, Niall., The Lion and the Poppy: British Veterans, Politics, and Society, 1921–1939 (Westport, Praeger: 2005)

Clark, Adam et al., 'Ten years of the work capability assessment in relation to employment support allowance and universal credit', House of Commons Library, 18 April 2019, CDP 0092.

Cohen, Deborah., The War Come Home: Disabled Veterans in Britain and Germany, 1914–1939 (Berkeley: University of California Press, 2001)

Lunt, John Hudson Neil., and Patrick, Ruth., ‘New Times, New Welfare Attitudes?’, Published Online 10 July 2010, http://www.transformingsociety.co.uk/2020/07/10/new-times-new-welfare-attitudes/

Peden, George., The Treasury and British Public Policy: 1906–1959 (Oxford: Oxford University Press, 2000)

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