CHAPTER 1: THE CRISIS AND THE MEANS TEST The Labour government and the means test The

story of the Unemployment Assistance Board begins with the fall of Ramsay MacDonalds Labour Government in August 1931, though the Board itself did not come into being until three years later. Those three years saw the start of mass means-testing of unemployed people. At first this was a makeshift expedient. With the creation of the UAB it was to become a permanent part of the structure of social security in Britain, affecting in due course not only the unemployed but very large numbers of sick, disabled or retired people and single parents. The single issue which finally tore MacDonalds Cabinet apart was unemployment insurance. Created by the National Insurance Act 1911, the insurance scheme had been expanded in 1920 to cover nearly all industrial workers (agriculture and domestic service were excluded); but its benefits were limited in duration. Successive governments had extended the duration of benefit during the 1920s by a series of temporary measures, but the combined effects of rising unemployment and benefit extensions on the finances of unemployment insurance were catastrophic. The insurance fund already had a debt of 39 million in March 1929 and the number of registered unemployed nearly doubled during 1930. By March 1931 the debt had grown to over 75 million, even though in 1930 the transitional benefit paid to those whose insurance rights had expired had become a direct charge on the Exchequer.
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In December 1930, the government appointed a Royal Commission, chaired by Judge Holman Gregory, to make recommendations both on the future of unemployment insurance and on arrangements for those not covered by it. The Commission was asked to make an interim report, which it did on 1 June 1931, recommending cuts in the level and duration of benefit, increases in contributions, and measures to counter anomalies which made benefit too easily available to certain groups, including married women and part-time or seasonal workers. An Act was hastily pushed through, giving the Minister of Labour power to deal with the anomalies, but the political difficulty of implementing the Royal Commissions other recommendations seemed too great. Meanwhile, in February 1931, the government had been forced to accept a Liberal demand for an independent committee on national expenditure - the May committee (its chairman, Sir George May, had been the secretary of the Prudential Assurance Company). Its report, published on 1 August, estimated the impending budget deficit for 193132 at 120 million and recommended economies amounting to 96 million, of which 66.5 million would have come from unemployment insurance, including a 20 per cent cut in benefit rates and the replacement of transitional benefit by means-tested assistance from the

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public assistance authorities, which had recently taken over the administration of the Poor Law from the boards of guardians.
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The May report not only led to a collapse of confidence in sterling but ensured that unemployment insurance would be at the centre of the debate on remedial action. A cabinet committee rejected the 20 per cent cut but accepted the proposal to limit insurance benefit to 26 weeks, leaving the long-term unemployed to apply for Poor Law outdoor relief (the term used to distinguish it from indoor relief in the workhouse). The full cabinet rejected this on the grounds that the local authorities would be unable to bear the financial burden but, even if the Treasury had borne the whole cost, the idea of deliberately throwing large numbers of unemployed people onto the Poor Law would have been deeply repugnant to a Labour government.
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Another committee, chaired by the Minister of Labour, Margaret Bondfield, was given until noon the following day to find other ways of saving 20 million on transitional benefit. They suggested that it should be subject to a means test applied by the Ministry of Labour through such local machinery as may be devised, thus avoiding the use of the public assistance machinery, but the expected saving was a mere 5 million. The cabinet dithered a few days longer while the crisis worsened. In the end, a cut in benefit rates was accepted by a narrow majority, but the government could not have survived the resignations that would have followed. Instead, the whole government resigned on August 24, to be replaced by a predominantly Conservative national government, with MacDonald staying on as Prime Minister and three other ex-Labour ministers in the cabinet.
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The national government: a compromise solution The national governments first task, and the purpose for which it had been formed, was to carry through the economy measures on which the Labour government had been unable to agree. As from 12 November 1931, unemployment benefit rates were cut by about 10 per cent, from 17s. to 15s.3d. per week for a man and from 15s. to 13s.6d. for a woman (similar cuts were made in the lower rates paid to those aged under 21), and the duration of benefit was limited to 26 weeks. A means test for transitional benefit was proposed, and a cabinet committee discussed how and by whom it was to be administered. MacDonald warned that he and his Labour colleagues would be placed in a most difficult position if it was decided, in effect, to transfer persons in receipt of transitional benefit to the Poor Law. The committee decided, however, that it would be indefensible to set up new means-testing machinery when the public assistance machinery already existed. Besides, a means test administered by the public assistance authorities was expected to save far more money than one administered by the Ministry of Labour (the idea of transferring the cost to the local authorities had been dropped). MacDonald, therefore, suggested a compromise: the Ministry of Labour should receive applications and pay

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the benefit, but the amount payable would be assessed locally by the public assistance authority. Despite the admitted dangers of a scheme in which the Ministry would bear the cost of payments assessed by the local authorities, the cabinet agreed.
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Payments under the new scheme were to be known as transitional payments instead of transitional benefit, to differentiate them from benefit payments earned by contributions under the insurance scheme. The financial crisis of unemployment insurance was believed to have resulted in large part from the blurring of this distinction. Acceptance of the principle of means-testing, however, did not imply that recipients of transitional payments must be treated by the local authorities in all respects in the same way as those applying for outdoor relief. For example, under the Relief Regulation Order 1930, at least half of any outdoor relief to an able-bodied man in England or Wales was to be paid in kind; relief could be given as a loan; and local authorities were required to make such arrangements as might be practicable for setting able-bodied men to work. Moreover, while the authority was not obliged to investigate the moral worth of applicants, it was a well-established principle, embodied in a Local Government Board circular of 1910, that outdoor relief should not subsidise dirt, disease and immorality. Neville Chamberlain, now Minister of Health (the ministry responsible for overseeing the administration of the Poor Law) tried to persuade the Minister of Labour, Sir Henry Betterton, that the public assistance authorities should be allowed to offer relief in the workhouse to an unemployed man of unsatisfactory character, in the same way as if he were applying for outdoor relief. The ensuing discussion revealed a basic disagreement as to the nature of the new scheme:
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The Minister of Labour said that Mr Chamberlains proposal seemed to him to raise a fundamental question. The Ministry of Labour could not agree to the application of tests other than the needs test. They understood the principle of the transitional payments scheme to be that an unemployed man to whom it applied would, if he fulfilled the necessary insurance qualifications, be entitled to his money, subject only to a needs test. The Minister of Health said that he feared that there was a difference of opinion, as he had understood that the essence of the transitional payments scheme was that it was not to be an insurance scheme. Bettertons Parliamentary Secretary, Milner Gray, defused the debate by pointing out that most of the bad characters would fail the insurance conditions, including that of availability for work, and Chamberlain agreed not to press the point. In general, despite the Ministry of Healths fears of the Poor Law being contaminated if public assistance authorities were asked to apply different standards, it was agreed that, apart from the means test, the conditions attached to transitional payments must be those appropriate to unemployment insurance rather
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than to public assistance. Thus, there could be no question of payment in kind or the imposition of test work, and the circular issued to Ministry of Labour offices at the start of the scheme stressed that applicants for transitional payments should be dealt with at the employment exchanges in the same way as claimants for insurance benefit.
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The one crucial and unavoidable difference between transitional payments and insurance benefit was the means test. In theory at least, applicants were to be subject to the same test of destitution as if they had been applying for relief under the Poor Law. That test was to be based not merely on the resources of the applicant and his wife but on income and means from every source available to the household the household means test. The methods used for investigating the means of public assistance applicants and their households were undeniably deterrent in character, if not in intention. Applicants were visited at home by a relieving officer, then summoned for interview by a sub-committee of the Public Assistance Committee (known as the guardians committee in the county areas and the relief sub-committee in the county boroughs). Cases were reviewed at regular intervals, usually involving another home visit and possibly another appearance before the sub-committee. Some of the Ministry of Labour officials were alarmed at the idea of respectable unemployed men being treated in this way, but the decision to leave the administration of the means test to the local authorities implied the acceptance of their established procedures. Accordingly, the Order in Council of 7 October 1931, inaugurating the new scheme, required the public assistance authority to make such inquiries and otherwise deal with the case as if they were estimating the need of an unemployed able-bodied person who had applied to them for public assistance, but as if such assistance could only be given in money. There was to be only one significant departure from Poor Law practice. It was customary, at least in some areas, for the guardians committee to meet at the workhouse or institution.1 * To compel transitional payment applicants to attend for interview at the workhouse - the most hated manifestation of the Poor Law - was likely to be bitterly resented. When the Order in Council was submitted for cabinet approval on 6 October, Chamberlain and Betterton were asked to consider whether interviewing of applicants in Poor Law institutions could be prohibited, other than in exceptional cases with the ministers permission. The following day, Betterton gave the House of Commons an undertaking to this effect. In the event, permission was given in only a few cases.
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1 *The term workhouse died slowly. The Webbs noted as perhaps the most striking feature of the Poor Law Institutions Order 1913 the complete omission of the words Workhouse and pauper, which thus, after several centuries of unquestioned usage, finally passed out of the official vocabulary. In their stead, we have inmates of various kinds of institutions ... for the reception and maintenance of poor persons. (English Poor Law History, Part II, pp. 733-4). C H Exley, however, commenting on the use of the term institution in the Poor Law Act 1930, a few years later, wrote: The idea of dropping the word workhouse is laudable, but unfortunately the word reappears constantly throughout the Act (The Guide to Poor Relief, 4th edn., 1935, p. 20).

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At the end of October 1931 the National governments legitimacy was confirmed and its life extended by a general election which reduced Labour representation in the House of Commons to 46 members, compared with 287 two years before. The government was left with an impregnable majority and, although MacDonald continued as prime minister, 472 of the governments 556 parliamentary supporters were Conservatives. Two weeks later, on 12 November, the transitional payments order came into effect. It was to remain in force for over three years. As a hastily devised scheme to save money, transitional payments must be counted a success. Over the whole country, in a period of just over seven months in 1932, out of nearly a million applicants, about half were paid at the full unemployment benefit rate, nearly a third at a reduced rate, and 18.3 per cent got nothing at all. By October 1932, the estimated annual saving had risen from 10 million to 15 million. But the scheme also had glaring defects. Apart from the hardship caused to the long-term unemployed and their families, there were two major problems, both resulting directly from the role assigned to the local authorities in a scheme financed by central government. The first was the existence of indefensible differences between different areas in the administration of the means test. There was not just one household means test, but as many different tests as there were local authorities: more, indeed, since many of the local differences existing before 1930 had been inherited by the public assistance authorities and were reflected in the policies of different guardians and relief committees within their areas. The second problem was the virtual refusal of some local authorities to comply even approximately with the terms of the Order in Council. The creation of the Unemployment Assistance Board can be seen, in large part, as a response to these problems.
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The quest for consistency It was realised from the start that the standards applied by different local authorities in assessing need varied considerably. The experience of past attempts to devise a uniform relief scale, either for a group of local authorities or for the country as a whole, was not encouraging. A conference of parish councils in the industrial areas of Scotland, convened in September 1921, had agreed on a scale. Shortly after, following the revolt of the Poplar guardians, the Metropolitan Common Poor Fund was created as a means of redistributing the cost of outdoor relief in London, within the limits of a scale laid down by the Minister of Health, Sir Alfred Mond. But neither of these scales survived for long: the Mond scale remained in force only until September 1922, and the Webbs were to write some years later that its effect had been disastrous, as implicitly sanctioning a scale of relief which automatically applied as it often was - frequently involved making the recipient household better off when the man was unemployed than when he was in full time work. The possibility of a national outdoor
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relief scale was discussed by the 1929-31 Labour government but action was deferred pending the report of the Royal Commission on Unemployment Insurance. Transitional payments, therefore, were launched into the sea of inconsistencies represented by local public assistance policies and practices. Within a short time, local variations, both in the scales for assessing needs and in the treatment of income and savings, had become a serious embarrassment. Authorities in similar areas, Betterton complained, were applying entirely different standards, reflecting variations in Poor Law practice. It was agreed that the Ministry of Healths chief inspector, Sir Arthur Lowry, should hold conferences of local authorities in areas such as the north-east (where men from the same shipyard received payments varying by as much as 4s. or 5s. a week because they lived in different areas) to consider how unjustifiable variations could be eliminated.
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A conference of representatives of seven Tyneside authorities met on 12 April 1932 with Lowry in the chair and Wilfred Eady (future Secretary of the Unemployment Assistance Board) as chief representative of the Ministry of Labour. It soon became apparent that what the local authority representatives had come to talk about was not the need for greater uniformity but the principle that transitional payments must be assessed in the same way as outdoor relief. Speaker after speaker declared that there was not an authority in the country that was adhering strictly to this principle. As a Sunderland representative put it: ... it seems to be generally recognised throughout the country ... that we are dealing with two distinct classes of people ... the ordinary chronic unemployed, and the decent, hard-working unemployed, who are unemployed through no fault of their own. ... it is obvious to everyone of us ... that there has been discrimination between the transitional payments and Poor Law relief.
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A committee appointed by the conference to look into ways of reducing local variations was narrowly dissuaded from passing a resolution calling on the Minister to produce a special scale for transitional payments. After lengthy discussion, the committee decided that it could make no progress. It was asked to try again and by the end of May had produced a scale based on the unemployment benefit rates, at the price of the withdrawal of the Durham representatives. The Ministry of Health complained that the committees recommendations for disregarding fixed amounts of disability pensions, blind pensions and workmens compensation were ultra vires and that the scale did not include a less eligibility clause providing for a maximum payment related to local wage rates. These defects were duly remedied and the proposals were recommended for adoption by the remaining six authorities, but in midJuly Newcastle formally rejected them on grounds of cost and a few days later Sunderland followed suit. For practical purposes, a Ministry of Health official reported sadly, the matter can be considered dead.
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No further local conferences were held. Instead, the Ministry of Health proposed to issue a circular aimed at imposing a degree of uniformity but stopping short of prescribing a national relief scale. To secure the local authorities backing, figures were produced showing that the total amounts of relief paid by different county boroughs in nine hypothetical cases would vary from 72s. to 252s. A sub-committee appointed by the Association of Municipal Authorities agreed that the differences were out of all proportion to the varying circumstances obtaining in the different areas and that action was needed. When a draft circular was submitted to representatives of the Association on 8 December 1932, however, the public assistance officers present insisted that only a scale prescribed by the ministry could control the lavishness of elected representatives on relief committees. The question remained unresolved. By then, however, proposals for a long-term solution, involving the removal of responsibility for outdoor relief from the local authorities, were already being discussed by ministers. The time for tinkering with the Poor Law was past.
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Modifying the destitution test Meanwhile, other measures were being taken to reduce local differences in the administration of the means test for transitional payments (albeit at the price of condoning differences between them and applicants for outdoor relief), concentrating on two particularly controversial aspects: the treatment of capital resources and disability pensions. The principle on which the poor law means test was based was that of the relief of destitution: if a person had other resources, whether income or capital, he or she was expected to make use of them before seeking relief from public funds. That principle was strongly defended by Sir Alfred Hurst, a Treasury under-secretary, commenting in November 1931 on the Trustee Savings Banks fears of the effects of the means test on working-class saving habits: ... the indiscriminate State charity of recent years, masquerading under the name of Unemployment Insurance, has been weakening the moral fibre of the nation. Many men are beginning to lose that sturdy independence of which we used to boast as one of the foundations of our national greatness - an independence that would make a man go to almost any length in personal effort and sacrifice in order to support himself and his family. The doctrine, epitomised in the phrase Work or Maintenance, that it is the duty of the State to look after a man irrespective of his own personal efforts and needs, has in recent years been finding wider acceptance. The mere fact that we should at the present day be even discussing whether a man should have public charity as long as he has savings at his back seems to me symptomatic of the extent of the mischief.
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To many other people, however, including those directly affected, it did not seem reasonable to require unemployed men and their families to

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spend every penny of their savings and even to sell their homes and spend the proceeds, before applying for transitional payments. With the 1931 general election imminent, members of the government were seriously concerned about the effects on public opinion. The education minister, Sir Kingsley Wood, enquired whether applicants would be expected to sell their war savings certificates (government bonds in which patriotic citizens had invested their savings during the war). The same question had been posed by the Treasury; the Chancellor of the Exchequer, Snowden, was reported to be sympathetic. The question whether an unemployed man would have to sell up his home was said to be giving some concern to the Prime Minister. Finally, in the closing days of the election campaign, the treatment of both home ownership and small savings was raised by the Home Secretary, Sir Herbert Samuel.
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It was impossible to deny that, if local authorities adhered strictly to the terms of the Order in Council, unemployed people would be compelled to sell or mortgage their homes and spend their savings. Samuel was, nevertheless, authorised to issue a carefully worded statement, denying that a public assistance committee would not be allowed to make transitional payments to a man who owned his house unless he sold or mortgaged it (the tortuous double negative was designed to avoid admitting that a house owner might be refused any help). Armed with this authority, he went off to his Lancashire constituency, where he found local people extremely concerned about the effect of the means test on savings as well as homes. An exchange of telegrams yielded little comfort, neither the Ministry of Health nor the Treasury being prepared to say more than that the treatment of savings was a matter for the local authority to decide in the light of the circumstances. Samuel then spoke to Snowden on the telephone and apparently obtained his authority for the statement reported by The Times on 26 October 1931 - the eve of polling day: He (Sir H Samuel) had been in communication with the Chancellor of the Exchequer on this point and had already given public assurance with regard to the house owner that he would not be required to sell or mortgage his house and use up the proceeds before obtaining unemployment pay and he could now give the further assurance with regard to savings, that while the interest on the savings would naturally be taken into account in considering whether a man really needed unemployment pay, the savings themselves need not be drawn upon. The capital might remain intact, and the man would receive what might be necessary to tide him over until better times came.
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Ministry of Health officials were appalled. The bald statement that a man would not be required to sell or mortgage his house went far beyond what Samuel had originally been authorised to say. Moreover, neither this nor the statement that savings need not be drawn upon was in

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accordance with public assistance practice. If Samuels assurances were to be honoured without a breach of the law, new legislation would be needed. There was also the effect on the Poor Law itself to be considered. It is, Robinson warned Chamberlain, about the most slippery of slopes.
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Samuels statement was immediately picked up by the local authorities. After the election, ministers in the reconstituted National (now in all but name Conservative) government agreed on a letter to Lanarkshire County Council, circulated the following day to other local authorities, acknowledging that conditions may exist in which the enforced realisation of assets would be an unreasonable requirement and in those cases it would not be improper for the Public Assistance Committees, while taking full account of the income value of such resources, to recommend the grant of transitional payments for the time being. Though cautiously worded, the letter gave implicit approval to discrimination between public assistance and transitional payments applicants and thus contributed to the problems that were to emerge over the next two years.
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The other point on which the government was under strong pressure was the treatment of war disablement pensions. A minor concession had been made in 1918, when it was decided that under the Poor Law a disablement pension should not be regarded as available for the maintenance of persons other than the recipient and his wife and children. A further relaxation was sanctioned by a Ministry of Health circular of 1930, reminding public assistance authorities that the disability for which a pension had been awarded might itself call for a greater measure of assistance. The circular did not go so far as to say that part of the pension should always be disregarded in assessing the need for outdoor relief, but a number of local authorities interpreted it in that way. The British Legion was now demanding a total disregard of disablement pensions in relation to transitional payments.
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By October 1932, Betterton had decided that, if transitional payments were to continue through another winter, a bill must be introduced dealing with disablement pensions as well as capital resources. The means test was by then becoming a focus of public discontent, culminating in riots in a number of areas. In September and October 1932 there were serious disturbances in Birkenhead, Liverpool, West Ham, Croydon and South Shields. In Belfast the police opened fire on rioters, killing two men. The Great National Hunger March against the Means Test, organised by the communist-led National Unemployed Workers Movement, reached London at the end of October and a week of disturbances followed, for which the police were probably as much to blame as the marchers. It was also becoming increasingly difficult to persuade the local authorities to administer transitional payments in accordance with the law. As a Sunderland alderman told Whitehall officials, We are absolutely submerged in an ocean of mud that is continuously being thrown at us; and the way to lose your seat in the Town Council is to be a member of the P.A.C.
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Despite these pressures, Chamberlain urged Betterton not to go ahead with legislation pending decisions on a permanent scheme to replace transitional payments; but to no avail. Betterton proposed that, in line with the expected recommendations of the Royal Commission, the bill should provide for at least half of any disability pension or workmens compensation payments, as well as the value of the applicants home and the first 25 of savings, to be disregarded in the assessment of transitional payments, while an assumed income of 1s. per week would be taken into account from every additional 25 of savings up to a limit of 300 (anyone with more savings than that would be assumed not to be in need). The proposal was supported by MacDonald, who expressed alarm at the way in which the agitation against the means test was spreading, especially among the governments younger supporters. At the next meeting of the committee, having ascertained that time could be found for a bill in the current session of parliament, Betterton argued that it would be easier to get a limited measure through straight away than to announce it then and introduce it after the publication of the Royal Commissions report. The ensuing cabinet committee discussion followed familiar lines, Lord Hailsham (Secretary of State for War) insisting that transitional payments were just as much public charity as outdoor relief:
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Reference had been made to the stigma attaching to burial by the parish, but the persons concerned should equally be ashamed of living on the parish, which, in effect, they were doing when they received the transitional payment. There were very strong and cogent reasons for saying that a person should exhaust his own resources before accepting public relief which, directly or indirectly, came out of the pockets of other persons who were little, if any, better off financially than himself. Betterton insisted, as he was to do on many subsequent occasions, that the type of person assisted under the Poor Law was different from those receiving transitional payments, many of whom had long industrial records and were more likely to have accumulated savings. In the end it was agreed that the bill should go ahead in the current session and, while dealing primarily with transitional payments, should empower the Minister of Health to extend similar treatment to Poor Law cases.
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This legislation, the Transitional Payments (Determination of Need) Act 1932, was seen at the time as a radical breach of Poor Law principles. Davison, writing in 1937, commented: It is some measure of the odium which then surrounded this vexed problem [of the means test] that the authorities should have been impelled to abandon the test of absolute need and substitute for it an easy-going, but strictly illogical compromise. ... Probably the extra cost to the Treasury was not substantial, but the interesting point of these concessions is that they indicate a tendency to revert to the pre-crisis system of payments as a matter of right and not as a matter of need.
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The reactions of the local authorities were more vehement. The aspect of the Bill which aroused their wrath was the permissive extension of the disregards to public assistance cases at the expense of the ratepayers. The chairman of the Leeds PAC, G.W. Martin, wrote in a personal letter to Hilton Young: The tendency ever since the War has been to relax the conditions for the receipt of relief and we have been comforted by the thought that the National Government was prepared to call a halt in this retrograde movement. By one ill-advised step the Government will not merely undo all the good that has been done by intensive work in the past few months but will really force the Local Authorities to the other extreme of profligate and unnecessary spending. He was particularly appalled by the proposed treatment of savings, predicting that very large numbers of people would apply for relief as soon as it became known that possession of money was no longer a bar to public assistance. Members of the County Councils Associations public assistance committee were reported to be terribly upset ... They say that it will completely upset the Public Assistance arrangements of the country. But the decision had been taken: if the price of preserving the means test for the unemployed was a further sacrifice of Poor Law principles, then those principles must be sacrificed.
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The effects of the Determination of Need Act were not, in fact, very great. So far as disability pensions were concerned, it legalised the practice already adopted by many local authorities of disregarding them in part. The provisions regarding savings were a more radical departure from the principle of destitution, but they did not have the effect on public assistance practice that the local authority associations feared. By 1940 only 30 local authorities in England and Wales had adopted the savings rule for outdoor relief purposes; most of the others were still refusing relief to applicants with any substantial amount of readily available capital. If the influence of the Act on public assistance was small, however, its importance for future legislation was considerable. In particular, the rules adopted for the treatment of savings, entirely disregarding savings below a certain level and taking into account only a notional tariff income from savings above that level up to a relatively high maximum, have been followed ever since, mitigating one of the most widely criticised effects of the means test: its tendency to penalise thrift.
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A years experience of transitional payments had shown that a system of payments to the long-term unemployed financed by central government, subject to a means test administered by the local authorities and based broadly on Poor Law principles and practice, could be made to work, provided that the local authorities were prepared to co-operate. In a number of areas, however, that co-operation was not forthcoming. The problems this posed for the central government departments concerned are the subject of chapter 2.

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Reinventing the dole: a history of the Unemployment Assistance Board 1934-1940 by Tony Lynes is licensed under the Creative Commons Attribution 3.0 Unported License. To view a copy of this license, visit http://creativecommons.org/licenses/by/3.0/ or send a letter to Creative Commons, 444 Castro Street, Suite 900, Mountain View, California, 94041, USA.

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