Farewell to Speenhamland?

The picture below shows the modern frontage of the long defunct George & Pelican Inn in Speenhamland. Now just a suburb of Newbury in Berkshire, Speenhamland gave its name to an important development in English social and economic history.

In May 1795, the magistrates of Speenhamland (then an independent town) held a meeting at this large and rambling coaching inn in order to deal with consequences of the anticipated poor grain harvest that year. Their solution to the problem became known as the Speenhamland System and, although without official government support, it was widely adopted in southern England.

The Speenhamland System was not, of course, created in vacuo. For a start, it wasn't entirely new and even then, as now, there was already a well established system for dealing with poverty. New developments had to build on what already was in place. The existing Poor Law, as it was usually known, was a collection of regulations and statutes going back to the mid C16th but principally codified by the Act for the Relief of the Poor passed in 1601. The breakdown of feudal society after the Black Death in 1348 had created a more mobile underclass and throughout the C15th the needs of the indigent were met mainly by charity provided by the often wealthy religious orders. However, the dissolution of the Monasteries in the 1530s removed this safety net.

Punishments for vagrancy and begging were severe in Tudor times and chiefly based on nimbyism. The itinerant poor were warmly encouraged to leave town by a variety of physical abuses such as branding, whipping and ultimately hanging. However, the Poor Law, for the first time, made it necessary for local communities to collect taxes from the wealthy and distribute the funds to local people deemed to be deserving, i.e. those who demonstrated a willingness to work and those who were clearly unable to work, whilst continuing to ordain punishments for the undeserving. This precursor of the welfare state was administered at the parish level and decisions about who was deserving were left to local knowledge which could be fair or unfair depending on people and geography.

Senior officials in the C16th were not blind or unfeeling to the problems of the poor. According to Elton's England under the Tudors, Thomas Cromwell had commissioned a comprehensive plan of public works and financial support both for absorbing unemployment and helping the incapacitated, but had to water it down as the chaotic process of dissolution unfolded and the expected exchequer flows fell victim to corruption and inefficiency (a medieval problem of big government, perhaps). By 1601, however, the tripartite distinction between the workless, the workshy and the incapacitated was firmly in place and with various emphases remains to this day.

The Poor Law, both before and after the great reform of 1834, struggled to provide a system of poverty relief that was affordable, compassionate and fair, just as the welfare state struggles today. Five hundred years of experience tell us that is not an easy problem to solve. Adam Smith drew attention to the largely ineffective attempts in the C17th to prevent abuses of the system whereby parishes would attempt to evade their financial responsibilities by exporting the poor elsewhere, even bribing them to move on.

The Speenhamland System of 1795 was an attempt to fix one specific difficulty. Hitherto, poor relief was aimed at the unemployed or unemployable. Little thought was given to the working poor. With the growth of enclosure, war in Europe and rising food prices, times were getting steadily tougher for low earners. The Speenhamland magistrates were not free to make arbitrary changes to the national Poor Law, so they decided to extend relief to those who were in work but could not command a living wage. Workers were given various top up payments linked to the price of bread.

The immediate effect was beneficial to workers and the system spread rapidly from district to district. It helped to damp down social unrest, but the long term result was that taxpayers subsidised employers who were thus able further to drive down wages, knowing that the public purse would tend to remedy any deficiencies. Although not a disaster, the situation had become sufficiently serious after the Napoleonic Wars to prompt fundamental reform. In 1832 a Royal Commission was established to address this and other abuses, such as church tithes, which were seen as damaging the independence of labour and maintaining "universal pauperism". In tandem with declining pay, the concurrent mechanisation of agriculture only added to the unemployment problem.

The result was the Poor Law Amendment Act of 1834 which greatly reduced the operation of the traditional "outdoor relief" and greatly boosted "indoor relief", i.e., workhouses. It became very difficult for the poor to obtain public benefit except by admission to the workhouse, a kind of voluntary imprisonment, where the work undertaken was not only hard but, apart from domestic duties, often of little real value. As is well known from Dickens and others, conditions were degrading and harsh, deliberately so, in order to discourage layabouts. By the end of the C19th, public feeling was running against the system which was seen as inhumane and inefficient. Various social trends and enactments such as the establishment of Friendly Societies and Trade Unions, the Old Age Pension and National Insurance, led to a falling off in workhouse admissions, but the system was not finally killed off until 1930 and I can remember my grandparents talking about workhouses in London as they remembered them (not as inmates, I might add) in the 1920s.

The workhouse system got rid of Speenhamland market distortions but at a tremendous social cost. It focussed on sticks rather than carrots and was not economically productive. The modern welfare state, which started to emerge in Britain in the 1930s but which was given definitive form after the Second World War, has not unfortunately evaded the problems of Speenhamland. The desire to help the poor and yet to limit the cost of public benefits by means-testing has tended to counteract the desire to make work pay. Tax credits of various sorts continue to transfer taxpayers' money to low wage employers. The current system of housing benefit, likewise, tends to boost the income due to landlords who otherwise would be not be able to raise their rents beyond a true market rate. The new coalition government has already attempted to address the issue but it is far from clear that it knows what it is doing.

Central to any attempt to prioritise work is an enforceable minimum wage. The Tories fought against its introduction, but the fact they have now apparently accepted it seems to show that they recognise the detrimental effect of employer subsidy. The level of minimum wage is, of course, a delicate issue which I can't really do justice to here, except to say that it must be high enough to provide subsistence in every part of the country, but not so high that it discourages employers from taking on staff.

The government has proposed a system of Universal Credit that is designed to replace the myriad system of benefits and tax credits that exist today. It is hoped that it will incentivise work by the use of a taper to allow people to work and yet not suffer too much by its withdrawal. The current Jobseekers Allowance, for example, is withdrawn at a rate of 100% for earnings of over £5 per week and goes entirely as soon as the claimant works more than 16 hours a week. However, if the government is not careful, we will arrive back in Speenhamland as employers take advantage of the taper (as yet unknown) to help themselves to public largesse by driving down pay rates to the minimum.

The National Minimum Wage in the UK currently annualises to £12334.40 per annum for a forty hour week which, with a standard tax code, gives £10435 net or £870 per month. For a single person in London that is quite an austere living, but manageable if you flat-share and refrain from too many consumer goodies and a hectic social life. You have no hope of home ownership on those earnings but, despite Thatcherism, there is no reason to see this as a God-given right. More worrying, perhaps, is the impossibility of saving or starting a decent pension (NEST will help, but only a little).

Universal Credit may just work, but as yet we have few details. It will depend upon maintaining a viable minimum wage and not letting it decline in real terms. At present, its level is set every year by the Low Pay Commission, a quango, and the decision-making process is not transparent. At the very least it should be linked to RPI but preferably to median wages. Capitalism cannot avoid the poor but it can, if encouraged, help them intelligently.