The benefits of Britain: Social security

Author: Rod McInnes

The 1908 and 1948 Olympic years were landmarks in the development of Britain’s social security system.

The 1908 old-Age Pensions Act introduced the state pension, while 1948 saw the launch of the comprehensive system of social security recommended by the Beveridge report of 1942.

The old-age pension, like other parts of the welfare system, began modestly and then expanded in scope. The first pensions were means-tested benefits for the very poorest people of ‘good character’ aged 70 or over – at a time when average life expectancy was well below 60. Just 2% of the population received a state pension in 1910.

Contributory pensions for the over-65s were introduced in the mid-1920s, and in 1940 the age of eligibility was reduced to 60 for women. By 2010 – the year in which the female state pension age began increasing in order to be re-equalised with the male age – 20% of the population was receiving a state pension.

The contributory principle, defined by Beveridge as “benefit in return for contributions, rather than free allowances from the state,” formed the core of the post-WWII model, delivered through the expanded and centrally administered National Insurance system. Alongside this, the 1948 National Assistance Act abolished the vestiges of the centuries-old Poor Law system and established a new non-contributory means-tested financial safety net, the precursor of Income Support. Universal child benefits (then known as Family Allowance) were also introduced in this period.

The relative importance of means-tested support has grown substantially since 1948, thereby eroding the contributory principle. Originially providing a minimum subsistence income for the workless, means-tested support has expanded to boost the incomes of working families, currently through tax credits. In light of this, the Institute for Fiscal Studies has called the contributory principle today a ‘pretence’, and argued for national insurance contributions to be merged with income tax.

The latest London Games almost coincide with the advent of the next major reform of welfare provision, Universal Credit, which will replace the existing array of means-tested support, including tax credits.

From cradle to grave. The chart shows benefit and tax credit expenditure by category as a percentage of national output in each fiscal year. Note: Figures from the 2012 fiscal year onwards are projections.

This article is taken from Olympic Britain, a new book from the House of Commons Library. It tells the story of the profound economic and social change in the UK since the two previous London Olympics, in 1908 and 1948, using statistics and expert analysis. Digital copies are freely available on this page of the Parliament website.