The post-war years are often considered as a ‘golden age’ of full employment, political consensus, widespread affluence, and social security. Preceded by the privations of world war, global depression, and political polarisation, the establishment of the welfare state by the Labour Governments of 1945-51 is seen as the foundation and realisation of a post-war settlement. Yet one group remained impervious to these modernising efforts: ‘problem families’. These were, in the eyes of welfare authorities, families that remained stubbornly backward in an era of modernity. They constituted an underclass in the New Jerusalem. Indeed, much of the expansion of the welfare state during the post-war years through increases in local officials, policies, and resources, was a direct response to the problem of the ‘problem family. This paper explores the development of these processes and the lives of ‘problem families’ in the town of Burnley and its hinterland from 1940 to 1970. Using statutory and voluntary organisation records, correspondence with central government, and the social work case files of ‘problem families’, I show how the concurrent growth of state services and the lived experiences of families point to the uneven and unequal realisation of the post-war settlement and its ‘golden age’. Ultimately, it demonstrates that ‘problem families’ were not, in fact, the underclass of New Jerusalem, but those who lived in and with poverty despite the welfare state.