In December 1942 William Beveridge, a senior civil servant, identified five 'giant evils' that plagued society:
He published his findings in a popular report titled 'Social Insurance and Allied Services'. Britain's National Insurance system had previously been looked after by different agencies (including charities and government departments) and was in a fragmented state. In recommending new ways to relieve the five 'giant evils', Beveridge became known as the Father of the Welfare State, although he disliked the term.
Beveridge had social security in mind: in return for paying a national insurance contribution, the citizen would gain security against the major ills. Beveridge insisted on the contributory element to the programme, as he did not want to damage people's sense of independence and personal responsibility. Neither did he want to redistribute wealth between classes, believing people should be free to better themselves if they had the ability and possibility to do so.
The first of Beveridge's proposals came into effect before the war ended. In 1944 a Ministry of National Insurance was set up in Newcastle, and in June 1945 the Conservative government passed the Family Allowances Act. The payments were 5 shillings for every child per week, lower than Beveridge had proposed, and only given from the birth of the second child. Campaigners were pleased, but further progress had to wait for the general election in July 1945. The result was a landslide victory for the Labour Party under Clement Attlee. Attlee had campaigned hard under the banner of the creation of a Welfare State and now seized upon Beveridge's proposals as a basis for radical action.
Beveridge recommended that means testing, and other fragmented approaches to helping those in need, be replaced by one system. All workers would pay into a national insurance scheme run by the government instead of insurance companies. There would be a flat rate contribution and everyone would be entitled to a flat rate benefit. The flat rate for unemployment or sickness insurance would be high enough and long lasting enough that there would be no need for public assistance. In order to remove poverty there would be extra benefits that provided for children and health care.
Overall, there was very little opposition to government plans. As British historian Kenneth Morgan put it:
'The Welfare State, the other main government initiative of this period, also excited only limited controversy. All parties and all commentators, it seemed, emerged from the war beneath the mighty intellectual shade of William Beveridge and the 'cradle to the grave' philosophy.'
- Kenneth Morgan, The People's Peace, 2001
This was surprising, as Beveridge himself did not want people to become dependent on the Welfare State, and wanted benefits to be fairly limited.
The National Insurance (NI) Act was passed in 1946. NI now became compulsory for all workers except married women. Most people paid the fairly substantial 4s 11d a week (almost as much as received for each child in family allowance per week). In return, workers received benefits for 'interruption of earnings' as a result of illness, and for unemployment or old age. For the elderly, a state pension was paid when men reached 65 and women reached 60. Older workers were encouraged to continue working and two thirds of men decided to carry on rather than take up their pension. Mothers received a lump sum on the birth of each child and if they had been paying NI, received an allowance for 18 weeks. A death grant gave widows help with funeral expenses and as an extension to the scheme, the Industrial Injuries Act gave compensation for people injured or killed at work.
The hope was to have all of Beveridge's plans in operation by 1948 - but this did not prove possible. The benefit provided was not based on a national minimum standard of living. Government fixed one rate, promising to review it every five years. Although Beveridge had proposed benefits for divorced women, women looking after parents and sickness benefit for housewives, these measures were not included.
All these benefits only applied to insured workers, so in 1948 the National Assistance Board (NAB) was set up to cover those not insured. The NAB took over the old Public Assistance Committees (PACs) and for the first time, without the earnings of their families being considered, claimants were interviewed to see what kind of help they needed. Means testing was ended.
Labour governments also tackled some of the other ills Beveridge identified. The slum clearances (that had effectively begun after the Luftwaffe bombing in the Second World War) continued and a huge house-building programme was instituted. In 1948 Labour set up the National Health Service (NHS) and since there was already a free, compulsory state education service, the people of Britain now probably had the most comprehensive Welfare State system in the world.