Keynes, Beveridge and Attlee

Our government claims to want strong public services, but refuses to fund them adequately on the grounds that to do so would be “financially irresponsible.” Most of the media accept this line. And even the opposition parties seem afraid to challenge it.

This article briefly sets out what economists have known for at least 80 years: that governments which issue their own currency can afford to do anything for which the physical resources are available to supply the goods and services in question. In other words: where there is a will, there is a way. And it points out that governments have found that way whenever they were determined to do so.

The View from the 1940s

After Churchill’s famous “we shall never surrender” speech[1], there was little discussion about whether the UK could afford to fund going to war: the question was how to pay for it. And this question was addressed by John Maynard Keynes[2] in 1940. Keynes tackled not just what he showed was the relatively simple question of where the money could come from but also the thornier one of what physical resources needed to be dedicated to the war effort. He went further: he showed that he could

“… snatch from the exigency of war positive social improvements … an advance towards social economic equality greater than any we have made in recent times.”

Keynes explained his approach more simply in 1942[3]:

“Assuredly we can afford this and much more. Anything we can actually do, we can afford. Once done, it is there. Nothing can take it from us. We are immeasurably richer than our predecessors. Is it not evident that some sophistry, some fallacy, governs our collective action if we are forced to be so much meaner than they in the embellishments of life?

Some people reacted to this by claiming that if the government were to spend more than it raised in taxes, disaster would inevitably follow.  The national debt would balloon, and the interest on that debt would then grow to the point where it would stifle economic growth. In 1943, the economist Abba Lerner published his classic paper, Functional Finance[4], which explained Keynes’s points in more detail, but still (for an economics paper) clearly and simply. In it he sets out why, even if deficit spending were used to boost economic growth:

  • The national debt does not have to keep on increasing;
  • Even if the national debt did grow, the interest on it would not have to be raised out of current taxes;
  • Even if the interest on the debt were raised out of current taxes, these taxes would constitute only a fraction of the benefit enjoyed from the government spending, and would not in any case be lost to the nation but merely transferred from taxpayers to bond-holders;
  • High taxes would not discourage investment because appropriate deductions for losses would diminish the capital actually risked by the investor in the same proportion as his net income from the investment was reduced.

In 1942, the National Government of Great Britain commissioned Sir William Beveridge, the Director of the London School of Economics, to produce a report[5] on the reconstruction of Britain after the war ended. Beveridge’s report set out a blueprint for a better, fairer, more prosperous society, which would reward the nation for the shared sacrifices during the war. Specifically, Beveridge aimed to free Britain from what he called Five Giants:

  • Want [poverty],
  • Disease,
  • Ignorance,
  • Squalor and
  • Idleness [unemployment].

The report was published in November 1942, and was overwhelmingly popular with the public.

After the war, Attlee’s government would have had plenty of excuses for non-delivery: at the end of the Second World War, Government debt to GDP stood at over 250%; the cost of servicing that debt was over 5% of GDP; more than half of national income had been diverted to the war effort and over 5 million people mobilised into the Armed Forces; some 5% of national wealth been destroyed, and 1% of the population lost (and the equivalent figures were even worse in some other countries).

Nevertheless, in 1948, at a time when the ratio of government debt to GDP was still over 200%, Attlee’s government founded the NHS. Also in 1948, it passed the National Assistance Act, which abolished the poor law system and established a social safety net to protect the poorest and most vulnerable, completing the work of the National Insurance Act of 1946.

The social contract in the UK was transformed. Everyone, whatever their background and current financial state had access to high-quality healthcare. Everyone had access to a safety net for times when things in their lives went wrong. Everyone played a part in building this new world.

And the UK economy benefited hugely: the Golden Age of Capitalism was the most successful period[6] in the UK’s economic history.

The 21st Century View

The 21st century view has been far more ambiguous. For most of the time, politicians have ostensibly retreated into the pre-Keynesian view that governments should run like households and seek to ‘balance their books.’ And most of the media has tended to endorse this fallacy[7].

But when it was obviously necessary to act to save the economy, for example after the Global Financial Crisis or during the height of the pandemic when much of the economy had to be shut down, governments suddenly remembered that they have the extraordinary power to create money.

After the Global Financial Crisis, the government – via the Bank of England’s Quantitative Easing programme – created around £445 billion[8] of new money to prevent a collapse in the banking system.

During COVID, the government created around £450 billion more to prevent a collapse in household finances when people would otherwise have had no income.

In total, during the 21st century, the government has created £895 billion[9] of new money – when it had the will to do so.

And the view from economists is supportive. The argument for government spending to pay for healthcare, save businesses from bankruptcy, create new jobs and prevent a climate apocalypse has been made by the proponents of Modern Monetary Theory, for example Stephanie Kelton in her book The Deficit Myth[10]. This book explains in detail how money is created and shows that the idea that governments should – or even responsibly could – budget in the same way as a normal household is no more than (admittedly compelling) rhetoric.

For non-economists, the argument that a currency issuing government can afford to invest wisely, even when the national debt is at 100% of GDP or more is set out simply in Chapter 12 of Mark Thomas’s book, 99%: Mass Impoverishment and How We Can End It[11].

But politicians and the media have – by and large – reverted to the notion that the government finances constitute a brake on what can be done for the public good. And our government continues to rein-in public spending even though it is clear that most public services are struggling badly.

Why do we accept such a defeatist mindset today? One reason may be that the national mood was very different in the post-war period from today.  As Margaret McMillan, Professor of International History at Oxford University, explained[12], “The shared suffering and sacrifice of the war years strengthened the belief in most democracies that governments had an obligation to provide basic care for all citizens.” That shared suffering and sacrifice may have been necessary to win the war.  As evolutionary biologists David Sloan Wilson and Edward O Wilson[13] put it, “Selfishness beats altruism within groups.  Altruistic groups beat selfish groups.  Everything else is commentary.”

Along with a mood of altruism and solidarity, there was one of hope.  After six hard years, during the early part of which defeat seemed inevitable, the UK and its allies had emerged victorious.  Even more than is usual after a war, the victors felt that good had triumphed over evil.  Yes, there was a challenging task of reconstruction – but that was nothing compared with the challenges of the war itself.  The national mood then was one of hope and solidarity.

That all seems a long time ago.  The Global Financial Crisis (GFC) and the subsequent Great Recession, has affected the national mood.  Many people now expect the next generation to be worse off than the last, and although this outcome is not inevitable, their fears are not without reason[14].

The official response to the GFC has had two main planks: Quantitative Easing and Austerity.  The benefits of QE went disproportionately to the top 5% [15], while the costs of austerity were felt mainly at the bottom.  There is no sense of shared sacrifice, but an increasing tendency to blame.  We blame the baby-boomers; we blame Generation X.  We blame the unemployed; we blame the elite.  We blame immigrants; we blame native British.  This has weakened the sense of solidarity within society.  The national mood today is one of fear and isolation.

The Zeitgeist today is the opposite of the post-war national mood.  And that affects our priorities.  If I feel isolated and fearful, my main concern is to protect myself and my family; if I feel hopeful and part of a cohesive group, I want to work to create an attractive future for the whole group. It is that Zeitgeist, not any economic limitation, that prevents us from investing in our shared future.

But the national mood can change: all that is required is leadership.


There is no question that the UK economy is larger today than it was in 2010 (in terms of real per capita GDP): we are therefore richer than we were then. As Keynes points out, it is evident that there must be some fallacy or sophistry involved in claiming that what was affordable then – for example, an NHS whose costs are in line with those of other developed countries – has by some mysterious and never-explained process become unaffordable today.

The only obstacle is a lack of will.

If you would like to see a government with the will to deliver for the population as the Attlee government did in 1948, take a look at the 99% Organisation and join us.


[1] (Churchill, 1940)

[2] (Keynes, How to Pay for the War, 1940)

[3] (Keynes, 1942)

[4] (Lerner, 1943)

[5] (Beveridge, 1942)

[6] (Thomas, 2019)

[7] (Thomas M. , 2020)

[8] (Murphy, 2020)

[9] (Bank of England, 2023)

[10] (Kelton, 2020)

[11] (Thomas, 2019)

[12] (McMillan, 2008)

[13] (Wilson & Wilson, 2007)

[14] (Thomas M. E., 2019)

[15] (Islam, 2012)



Bank of England. (2023, 5 3). Quantitative easing. Retrieved from

Beveridge, W. (1942, 11). 1942 Beveridge Report. Retrieved from

Churchill, W. (1940, 6 4). WAR SITUATION. Retrieved from

Islam, F. (2012, 8 23). Bank of England: QE makes the wealthy even wealthier. Retrieved from

Kelton, S. (2020). The Deficit Myth. London: John Murray.

Keynes, J. M. (1940). How to Pay for the War. London: Macmillan.

Keynes, J. M. (1942). We Can Afford This. Retrieved from

Lerner, A. (1943). Functional Finance. Social Research, Vol 10, No. 1 pp38-51.

McMillan, M. (2008, 9 11). Rebuilding the World after the Second World War. Retrieved from

Murphy, R. (2020, 11 22). The history and significance of QE in the UK. Retrieved from

Thomas, M. (2020, 11 26). Twaddle and Illiteracy. Retrieved from

Thomas, M. E. (2019). Mass Impoverishment and How We Can End It. London: Head of Zeus.

Wilson, D. S., & Wilson, E. O. (2007, 12). Group Selection, A Theory Whose Time Has Come … Again. Retrieved from