Cradle to grave in New Zealand - was the Welfare State born in 1938?

When did New Zealand's Welfare State of taxpayer-funded benefits for the elderly and others begin?

New Zealand's "cradle to grave" Welfare State got the nod on this day in 1938, when the Parliament approved an enormous extension of tax-funded benefits.

Does that make today the birthday of our Welfare State? The US Government was told in the following year New Zealand's Social Security Act was the first attempt at such a comprehensive national system.

But Kiwi academic Michael O'Brien has argued it is inaccurate to characterise the act as the "beginnings and basis of the New Zealand social security scheme". The building blocks had begun 40 years earlier.

Welfare has evolved a lot since the first Labour Government's 1938 act, but its foundations remain clear in the current system.

I can promise the people of this country that before very long they will have reached a condition of social security unsurpassed in any other country of the world.

Michael Joseph Savage, prime minister 1935-40

Q - What was the Social Security Act 1938?
A - It created a comprehensive system of tax-funded benefits. The act said they were designed "to safeguard the people of New Zealand from disabilities arising from age, sickness, widowhood, orphanhood, unemployment, or other exceptional conditions".

Q - Did it cover medical care too?
A - Yes. Treatment in public hospitals was free and the state funded about two-thirds of the cost of a GP visit, the rest being paid by the patient.

Q - Did earlier social welfare benefits exist?
A - Yes. The Liberal Government introduced a tax-funded old-age pension in 1898. Access was strongly linked to sobriety and good moral character and the payments were means tested. A widows benefit was introduced in 1911, family assistance in 1926, and a limited form of payment to the unemployed existed in the Great Depression of the early 1930s.

Q - What changed under the 1938 act?
A - It renamed "pensions" as "benefits". It introduced invalids and temporary-sickness benefits and formalised unemployment payments. Family assistance was extended. Universal superannuation was promised to start in 1940 for those aged 65 or older. It would rise gradually and eventually replace the old-age benefit, which was subject to reductions based on a person's or couple's income and assets.

Q - How much was the super?
A - It was to begin at 10 pounds a year (about $997 today), rising to 78 pounds ($7778) by 1968.

Q - Who could get the benefits?
A - Citizenship was the main decider, but morality still played a part, and Maori suffered discrimination under the new Social Security Department's discretionary powers.

Q - How was the act viewed overseas?
A - A report for the US Government in 1939 described it as "the first attempt on a national scale to combine under one integrated system of economic security protection against all hazards which are covered by social insurance in other countries. Only the workmen's compensation legislation remains separate".

Michael Joseph Savage, prime minister 1935-40, is considered the father of the Welfare State.

Q - How was it portrayed here?
A - The Welfare State is considered the legacy of Michael Joseph Savage, the prime minister who oversaw the passing of the 1938 act. This is what he said of the legislation:

"I can promise the people of this country that before very long they will have reached a condition of social security unsurpassed in any other country of the world."

Herald report on the Social Security Act passing the Upper House before being reported back to the Lower House in a sitting that ended at 1.30am on September 14, 1938. Source: National Library of NZ

Adam Hamilton, Opposition leader in 1938.

Q - What did the conservative Opposition say about it?
A - Opposition Leader Adam Hamilton said the Government was wrong to claim the benefits were free, because everyone would be in the tax-gatherer's net and have to pay for everything they received.

Q - How much did the scheme cost?
A - The first year was estimated to cost 17.85 million pounds (about $1.78 billion today), up from 7.5 million pounds (about $748 million) for the previous social services.

Q - How was it funded?
A - At first around 55 per cent was to come from the state's Consolidated Fund. The rest was to come from a new 5 per cent income tax plus an annual fee of one pound (about $100 today) for men over 20, and 5 shillings (about $25) for women and teens aged 16-20.