The Cost of Social Reform


By LORD WOOLTON, British Minister of Reconstruction

Delivered in the House of Lords, London, England, July 20, 1944

Vital Speeches of the Day, Vol. X, pp. 731-733.

I THINK I shall carry your Lordships with me when I say that we are very much indebted to the noble Earl for having introduced this subject. It has certainly led to one of the liveliest debates I have heard in your Lordships' House for quite a long time. While from time to time one might have judged that there was a great divergence of opinion between those who have spoken, I do not think when we get down to fundamentals there was an awful lot of difference. It is true that the noble Earl who introduced the debate was perhaps a little cautious but his speech I thought was full of understanding of the social needs of the post-war world. He referred with great sympathy to the need for housing and he did not even attack the Government's proposals, that he has not seen, regarding social insurance. I speak from memory, and I may be wrong in my memory, but I think the Prime Minister referred to that scheme as gigantic. I do not remember that he said it was expensive.

Facing the Facts

Certainly he said gigantic. In one respect, however, the noble Earl was certainly wrong in stating that the Prime Minister said he would present it next week. We shall present it—the noble Lord, Lord Latham, would like me to say "Shortly after"—we shall present it for the consideration of your Lordships when you return refreshed. It seemed to me that the speech of the noble Earl was somewhat characteristic of a man from the North whose native caution demanded that before he even contemplated a journey, however enticing that journey was going to be, he should feel in his pocket and make quite sure that he had the money to pay the fare to get there. There have been private rows in your Lordships' House this afternoon and I do not think it is a good thing to intervene in private rows. The noble Lord, Lord South wood, contemplated, it seemed to me, potential wealth while the noble Earl, Lord Stanhope, was not talking of potential wealth but of present wealth. That seemed to me to be the difference between them. I had not suspected that noble Lords who spoke were attacking the Government. The noble Lord, Lord Strabogli, who was good enough to give me support—support that I appreciated the whole time except when he mentioned Mr. Schacht—seemed to think the Government was being attacked. I was insensitive to attack. I thought that all your Lordships were asking us to do was to look facts in the face. That was the basis of the noble Lord, Lord Meston's speech. He was just asking the Government, as is their duty, to look facts in the face and there is nothing reactionary about looking facts in the face, especially if they happen to be rather uncomfortable facts.

The noble Lord, Lord Strabolgi, said we might have to contemplate the possibility that through some unhappy circumstance the war might last for another year. Of course we might. We have not finished the war yet. No sensible man would get up at this Box and say that he knew what the financial future of this country was going to be. We have no means of knowing what the ultimate cost with which we shall be burdened by the war will be. The noble Earl, as I gathered from his closing remarks, will not be disappointed in regard to this, and will not expect me to make an estimate of our future financial position. He was good enough to tell me beforehand, with great courtesy, for which I thank him, the lines on which his remarks were going to run today. Since there is much virtue in consistency in Ministers, I read up the report of the first debate we had in this House after I became Minister of Reconstruction in order to be quite sure that I had not committed myself then to any views that I do not hold now. I find that I said then—if you will forgive the egotism of my quoting:

"The country is still in danger. The danger to its physical life has not passed, unfortunately, and its commercial life will remain in danger for some years to come. We shall need all the commercial wisdom and foresight in the immediate post-war years if we are to rebuild our national prosperity. From the commercial danger of the nation"—and that is why I refer to this—"there follows the danger to all those hopes for a better world that depend on the solvency of our national finance."

I quote those words—and I hope that your Lordships will forgive me for doing so—because they indicate the approach that I have made to the problems to which the noble Earl has called our attention today.

Wealth Produced by Work

I think that the question that faces us is this: How can we best secure the commercial prosperity and the social stability—and they must run together, we shall not get commercial prosperity unless we get social stability—of the nation? How can we best get this? The answer is difficult, but this I am quite clear about: we can dismiss the idea that we are going to do it by a restriction of expenditure. Cutting out of waste there must be. We must reduce the number of people who regulate and control our personal lives and our commercial enterprises, but, in the end, it will not be merely by an economy campaign, but by the expansion of our trade and the development of our national resources, both human and material, that we shall regain our position in the commercial world. The root of the matter is to be found in the amount of business we can do, and not in the amount of money that we can avoid spending. But what we spend must be nationally productive. We must avoid the creation of a state of affairs in which the overhead charges of getting ideal conditions are such as to prove beyond the earningcapacity of the country. On the other hand, our social structure must be one that gives the conditions that will make possible the maximum of production—and production moreover, of such a high standard of efficiency that it will be competitive in the world's markets.

The noble Earl was fearful as to whether he had been guilty of platitudes in his speech. If I may respectfully say so, his fear was unfounded. I trust that the observations which I have just made may not make it appear to him that I myself have fallen into this error. Those observations really are the application of sound business principles to the affairs of State. I wonder if your Lordships will bear with me for a few minutes while I elaborate this a little in relation to the development of our whole reconstruction program? Wealth is produced by work, and to enable the people of this country to give the maximum amount of work we must secure for them those conditions that will enable them to work well. Those of us who have had experience in industry know that if we can get healthy factories with plenty of air and light, reasonable hours of work, adequate holidays and recreational facilities and some reasonable sense of security among the workpeople, so that they know they will not be thrown into unemployment if things should happen to go a little badly, then we secure a happy and contented staff, a high level of production, and we have a good chance of making a commercial success out of our enterprise. It all involves the spending of money, it all involves overhead expenses, but these charges are productive charges. That, I think, is the modernist's view about industrial conditions as opposed to the older views of two or three generations ago.

The Economics of Insecurity and Sickness

I have raised this question because I want to ask your Lordships: Does not that parallel fit the nation? Will we not get the same conditions from a nation as we should get when we look at it in the narrower field of an individual unit like a factory? A fortnight ago in the debate on the Employment Paper, I drew your Lordships' attention to the cost of industrial disputes in the years between 1922 and 1939. The figure was 250,000,000 lost days of work. I do not know what monetary figure we can put upon that loss of 250,000,000 days lost in consequence of industrial strife. We can only guess at it, but it cannot be less than £100,000,000, and it was all lost. . . .

I am very modest in my estimate. Not only was that money lost but it left a great amount of unhappiness and acrimony behind it. Social instability is a very expensive overhead charge for any nation. And now let us look at health. The noble Lord has told us in round figures that we shall have to find, from rates, taxes, and contributions from the Insurance Fund, for the early years of the Service £148,000,000 a year. We shall have to spend that to maintain a higher standard of health. It is a vast expenditure but it will not be all new expenditure, even if we adopt the proposals of Sir William B eve ridge, and if we take the figures which the noble Earl quoted. Before the war, the cost to public funds was £61,000,000. But of the increase of £87,000,000, some £40,000,000 must be reckoned as being merely transferred from one type of payment to another type of payment. And of the remaining difference of £47,000,000, some of this must be put against the inevitable increase in the cost of the existing services due to the rise in prices, between the period before the war and the period after the war. But what do we lose now through absence of men and women from work due to sickness? This is one of our industrial expenses—an overhead charge—that I believe we can reduce.

Do you know how much it has cost this country to have people away through sickness-absenteeism? At current rates of absence the loss may amount to as much as £280,000,000 per annum. I am going to reduce that figure, because it must be remembered that the present rates of absenteeism are abnormally high as a result of war conditions—long hours of work, the increase in the number of married women in industry, the withdrawal of the younger and stronger men from industry to the Armed Forces, and so on. If one assumes more normal absence rates the loss which might be expected after the war amounts to a sum of £180,000,000, which we shall lose from sickness and absenteeism in a year unless we can do something to improve the general standard of health. The White Paper which we have discussed in this House on the Health services, and which is the foundation of the noble Earl's figure of £148,000,000, contains proposals which are directed to that improvement in the standard of health which, while it is going to cost us a great deal of money, will, I believe, prove a very profitable economic expense.

I should like to direct the attention of your Lordships to a Paper which has already been referred to in the course of this debate, a most instructive Paper entitled "An Analysis of the Sources of War Finance and the Estimates of National Income and Expenditure for the years 1938-1943" (Cmd. 6520). You will find on page 20 of that Paper that in 1938 we were making from national funds payments due to unemployment and the relief of poverty amounting to £113,000,000. In 1943, when we had full employment, the figure was £17,000,000. These losses from strikes, sickness, absenteeism and unemployment are all unproductive overhead charges which, considered from an economic point of view alone, we cannot ignore when we compare the future cost of Health Services with the past, and in the aggregate they amount to vast figures.

No Prosperity without Sweat

I hope that I have not dealt too long for your Lordships' patience on this subject. I have done so because I am anxious to show that there is this close association between improving the general social conditions of the country and improving the earning power of the country. To make these improvements, even at some cost, may be a beneficent and humane action on the part of the State, but I believe that it is one which will be commercially profitable. To do these things, however, is not the same as to promise a new heaven on earth for our soldiers when they return, and I am glad that the noble Earl said what he did on that point. The statement that our fighting men are fighting for better conditions of life when the war is over is an inadequate estimate of their patriotism; I agree with the noble Earl there. They are fighting to beat the enemies of this country, and that is enough. But they do share the hopes which we at home have too, that there will be a better and a fuller life afterwards, a life in which the individual is less liable to the malevolent effects of outrageous fortune and of mischance. I think that it is the unfairness of misfortune which has created so much social instability. We who are in the Government believe that by an extension of a system of contributory insurance—I emphasize the word "contributory"—the magic of averages may come to the rescue of the individuals who suffer from misfortunes which arise from illhealth or from the failure of employment.

The future as I see it—perhaps I am not quite at one with the noble Earl here, I do not know—is not going to be a bed of roses for any class in this country. Our potential wealth is very great, but the truth is that we have spent our substance. We have spent on this war the savings of years.

We have been able to conduct the war—a very long war now—and to pay for our vast Armies and their equipment by borrowing from one another and from our friends. The debt will remain when the war is over, and we shall all have to work very hard and with the full employment of an extended capacity in this country if we are going to meet the obligations of that debt. However, hard work is nothing new to the people of this country. I do not believe that there can be prosperity without sweat. History shows that we have been through this before. If we so will it as a nation, then I believe that we shall overcome, in due time, the burden of this debt. I do not believe that we shall be any less happy because we all have work to do. I think the nation will be happier if it can retain the national spirit that it has now, and the feeling that all the time we are working not only are we working for our private profit or our wages but that as a result of our labor the country is benefiting.

The Object of White Papers

We must, however, have the conditions which will contribute to a full expansion of individual capacity, and I am therefore a little less fearful than the noble Earl about the expenditure of money on Social Services. I believe that they will come to pay a very handsome dividend both to the Exchequer and to human happiness. I do not judge that there is very much disagreement between myself and the noble Earl as to these general principles, but I am sure that I must be irritating him a little, because he must be saying, "But have you counted the cost?" The answer is that we have; I can assure him that the Government have constantly before their mind the question of how much these things are going to cost. The Chancellor of the Exchequer today is daring enough in war, but, believe me, he is no spendthrift.

Moreover—and I think that this must satisfy the noble Earls, Lord Glasgow and Lord Stanhope—whatever plans we have we are submitting them to Parliament. This is not a question of the Government rushing into Social Service expenditure and coming to Parliament and saying, "Here is our legislation." We have very deliberately adopted the system of producing White Papers. The object of the White Paper is to enable a frank discussion to take place in Parliament before we embark on legislation; and before Government credit is too deeply involved we listen to the views, of Parliament. Parliament is therefore in no danger of being rushed into expensive commitments without a full knowledge of the expenditure which it is incurring, and the responsibility whether we do these things, and when we do them, must properly rest squarely on the shoulders of Parliament.

I do not want to enter today on the broad issues of taxation policy to which the noble Earl has directed our attention, although I do not mind telling him that I should had it rather a fascinating discussion to have with him, but I must keep within the bounds of my own responsibilities. A noble Lord referred to the fact that during the war taxation is performing a double purpose: it is financing the war very considerably and it is reducing the spending power of the public. Without this check, we might easily—I think weshould certainly—have been led into very high prices and into inflationary danger. I can assure the House that the Government are fully alive to the importance of reducing taxation when the war is over in order to encourage personal and industrial initiative and enterprise. But I beg the noble Earl, when he considers the social charges to which he has drawn attention, to recognize the great change which has taken place in the distribution of both income and taxation during the last few years. Since 1938 the number of people with incomes between £250 and £500 a year has risen from 1,745,000 to 5,500,000; the number of incomes between £500 and £1,000 a year has risen from 500,000 to 1,100,000; those with incomes from £1,000 to £2,000 have-risen from

195,000 to 295,000; while the number of people with over £10,000 a year has remained unchanged at 8,000. The figures are given in the White Paper that I referred to a short time ago—the White Paper on National Income and Expenditure. Moreover, the rates of taxation on all incomes has considerably increased. I mention these figures because we no longer depend on geese that lay golden eggs.

If we are to have State schemes of social betterment they cannot be financed by taxing the rich to a greater extent than they are taxed now, and anyhow there are not enough

 of them left to pay for these schemes. The cost will fall, broad based, on the public at large, who will be the recipients of the benefits of these schemes. It will be for them—and I refer now particularly to the observations of the noble Earl on the subject to which he directed most attention, that dealing with social insurance—it will be for them when the social insurance scheme is published to see, through their representatives in Parliament, whether they are willing to meet the cost, in contributions and in taxation, that will be necessary in order that they may have these benefits. Your Lordships will give a critical examination to these proposalswhen they are submitted to you after Parliament resumes. Today I have refrained from discussing further the financialaspect of them. I hope I have not kept your Lordships too long, and I am personally grateful to the noble Earl for having raised what I think has been an interesting debate.