This article examines state provision of unemployment insurance (UI) in Britain. State intervention in insurance is normally perceived as stemming from the failure of private markets to meet socially expressed needs, but an examination of the historical development of state provision, and present practice, of UI in Britain suggest that this was not a central concern of state intervention. It is argued that an alternative explanation must stem from a theoretical model of the actions of the state, and various models primarily within a Marxist framework are described. The problems inherent in approaches which emphasize the relation between the needs of capitalist accumulation and the actions of the state are discussed, and it is argued that a more realistic account must take note of the heterogenous nature of the labour market in capitalist society and how, in such a society, the ideology which underpins social welfare policy is constructed. The article briefly examines recent political developments and argues that proposals for reform of UI must be located within a broader political strategy for economic and political transformation.