Benefit “in return for contribution”, said Beveridge, was what the British people wanted: entitlement to something for which they have paid, as in the private or mutual insurance field. That concept of entitlement and ownership would be underwritten by the rule that contributory benefits would not be means-tested. Indeed it was commonly recognised that the hated means test penalised the instinct to do better as well as the basic freedom enjoyed by millions, to save “pennies for the rainy day”, as Beveridge put it. Costs would be controlled as demand for higher benefit could only be met by one for higher contributions.

These principles are not the relics of a bygone age. They have returned to play an important part in today’s fiscal and economic debate, as politicians and economists consider strategies to help Western economies meet the costs — and expectations — of their ageing societies and pay their way in the future. In a recent Politeia study, Paying for the Future, Ludger Schuknecht and his colleagues in Germany’s Finance Ministry proposed that top-up co-payments and insurance schemes to meet additional need should be promoted along with structures to encourage competition among providers. Western economies must also continue to cut deficits and public spending levels if their economies are to compete and grow. Schuknecht’s economic analysis suggests that contributory systems are more effective at meeting need, although governments tend to prefer tax-funded systems because they and their officials think they can control the costs. 

Schuknecht and his co-authors are economists, too dispassionate and polite to speculate on the further implications of their findings. But their study raises the question of whether state-owned and state-run systems are also preferred by politicians because they are more open to political interference and can allow the use of public funds to “buy” voters, despite the distortions in the labour market which follow, as recipients play by the rules or dumb down their efforts so as to qualify for benefit, and the dependency this entrenches. That trend is less likely where benefits are “owned” by the contributor and managed by a third party beyond the clutches of the national exchequer; but even here the authors propose that governments should desist from making subsidies.

Germany is not Britain. Their memory of the Nazi regime means Germans are suspicious of collective experiments. Like France, Germany promotes voluntary institutions, competition and independent provision in healthcare and pensions, and diversity in education, far more so than Britain, which has difficulty in shaking off the language and indeed the policies of 1940s collectivism.

German economists have been at the forefront of recent analyses of the implications of a smaller state and lower levels of public spending for economic competitiveness and growth: it is here, as part of this bigger economic picture, that proposals for greater competition among benefit providers, and for schemes to promote co-payments, top-ups and additional insurance fit. On the other hand, they have also shown themselves to be the guardians of the conditionality on which a sustainable system of welfare rests. It was another German economist, Lars Feld, one of Germany’s official economic advisers, who criticised the relaxing of conditions for the pensions system in the 2013 German coalition deal.

Britain’s benefit system has no such guardians. Though obliged to pay a national insurance contribution, people have had no protection, legal or otherwise, against governments which over the decades abandoned the Beveridge rules. By whittling away contributors’ entitlement to benefits, governments stripped the system of the main assets bequeathed by its founder: its contributory principle and the conditions linked to benefit. They also bent the rules to favour those who had not observed them.