Beveridge: Changes 15 & 16 Special Schemes

Change 15. Amalgamation of the special schemes of unemployment insurance, for agriculture, banking and finance and insurance, with the general scheme of social insurance.

137. At the introduction of unemployment insurance in 1911 for a limited group of industries, importance was attached to adjusting the premiums as far as possible to the risks, by giving rebates to regular employers, by refund of their personal contributions at 60 to men who by then had drawn less in benefit than they had paid, and in other ways ;  it was contemplated moreover that, after experience had been gained, different rates of contributions, involving separate insurance stamps, should be fixed for different industries, and the Act of 1911 contained a section providing for this. On the generalisation of unemployment insurance in 1920, while the hope of having differential rates of compulsory  contribution  for  different  industries  by  means  of  distinctive insurance stamps was abandoned, the principle of differentiation was retained, through a provision authorising the Minister to approve special schemes of insurance, to be set up by agreement between employers and workpeople in particular industries.  These industries would thus contract out of the general provisions of the Act. At one time it was contemplated that contracting out would be extensive;   the Actuarial Report of 1919 indicates an expectation that roughly one-third of the insured population would be segregated from the General Scheme.    The possibility of contracting out by establishing special schemes was considered by a number of industries, but the onset of   the depression in 1921 put an end to all such projects, except in two cases:  the industries of insurance and of banking and finance.    The former of these established a special scheme in 1921, the latter at about the same time formulated proposals for a scheme which materialised in 1924.

138. In the summer of 1921 power to contract out by any fresh industries was suspended, until the Unemployment Fund should again be solvent.    By the time that the Committee under Lord Blanesburgh appointed in November, 1925 considered the matter, views as to the nature of unemployment insurance had undergone change.   The power of the Minister of Labour to approve special schemes and allow industries to contract out had been suspended in 1921 on grounds of expediency.  The Blanesburgh Committee in 1926 objected to this power on principle, and they found themselves supported in their objection by all   the   principal   associations   of   employers   and   of   workpeople.    “All industries are, in a sense, inter-related and the effects of the lessening of production in one are felt to a greater or less degree by the others.”     “As soon as an industry or other unit is shown to be within the scope of compulsory State insurance, there is no justification for allowing that industry or unit to derive any advantage from its lower than average risk of unemployment.”

139. The Blanesburgh Committee recommended accordingly that power to approve special schemes contracting out of the general scheme should cease and this recommendation was adopted in the Unemployment Insurance Act of 1927.    The Committee recognised also that as a matter of principle “the special schemes for the insurance industry and the banking industry ought not to be allowed to continue.”  But they came at the same time to the conclusion that these schemes “should not now be interfered with.    The provision of the  1920 Act, under which they were sanctioned, was quite legitimately  taken advantage of by those concerned, and it would not . . at this distance of time, be fair to withdraw from them the privileged position so acquired.”    The Royal Commission of 1932 also decided to leave the position unchanged.

140. The actual provisions of the two schemes as they are today may be summarised as follows:  The Insurance Special Scheme covers about 150,000 persons, with rates of contribution of 7/7 a quarter for men and 6/6 a quarter for women, paid by the employers.    There is no contribution by the employees or by the State.    The standard rates and conditions for receipt of benefit are the same as in the general scheme.    Special higher rates and benefits for periods after exhaustion of the ordinary Benefit may be granted at the dis­cretion of the Insurance Board; in practice, higher rates are granted to those who prove that they are regularly employed in the insurance industry and that they are seeking to continue in it.   The Banking and Finance Special Scheme covers about 60,000 persons.    The rates of contribution are 2/2 per quarter for men and women alike, payable by the employers.    There is no contribution either, from the employee or from the State.    Conditions for the receipt of benefit are the same, and the rates for adults are the same as under the general scheme, with higher rates for young persons and juveniles, and higher allowance for dependent children (5/- a week each in place of 4/- a week for each of the first two and 3/- for each additional child).    There is also power, at the discretion of the Board, to pay allowances to persons who have exhausted their rates of benefit.    Both schemes maintain an effective employment register.

141. The case for amalgamating them with the general scheme is that implied   in   the Report of   the   Blanesburgh Committee. Unemployment insurance by industry is a line of development on which progress has ended. For historical reasons banking and insurance today hold a privileged position, allowing them the benefit of their specially low rate of unemployment.    This privilege is not accorded to any industry included in the general scheme of unemployment insurance, though there are other industries with rates of unemployment well below the average.    Nor has it been accorded to any of the classes of employees, such as institutional domestic servants or non-manual employees above the old remuneration limit of £250 a year, to whom the scheme has recently been extended.    Retention of this historical privilege by these two special industries can no longer be justified.

142. On the other hand, both schemes are undoubtedly administered with efficiency and satisfaction to the persons covered by them. It would be regrettable to lose unnecessarily the interest and the good will that they represent.    The suggestion is made in para. 378 that these schemes might administer statutory benefit to their members and become means of developing voluntary insurance to supplement statutory benefit.    This is an arrangement that it might prove possible to extend to other industries;   contracting out could not be extended.

Agricultural   Unemployment   Insurance   Scheme

143.    The position in regard to agriculture is, in principle, the same, though in some important respects different.    Agriculture was excluded from the general scheme of unemployment insurance in 1920.    When unemployment insurance was extended to agriculture in 1936, this was done by special legis­lation, providing benefits and contributions different from those of the general scheme.    This difference of treatment was based on three grounds:-

(a)    That agriculture should not be called on to contribute towards the debt (then exceeding £100 million) of the general scheme ;

(b)    That agriculture, owing to its low wages, could not afford the contri­butions of the general scheme ;

(c)     That the rate of unemployment in agriculture was lower than that in industry as a whole and that agriculture should be given the benefit of this lower rate of unemployment.

144. The special scheme for agriculture differs from those of banking and insurance in respect of contributions. Employer and employee contribute by stamps, as in the general scheme, though at lower rates; the State contributes the same proportion as in the general scheme. All contributions, general and agricultural, go to a single Unemployment Fund, but separate accounts are kept and agricultural contributions (from employer, employee and the State) are reserved for agricultural benefit. The rates of benefit in the agricultural scheme are a little less than those of the general scheme, while the rates of contribution are much less. The rules governing the period of benefit are different.

145.   The question of the amalgamation of the agricultural with the general scheme has been considered recently by the Unemployment Insurance Statutory Committee on a reference from the Minister of Labour and National Service.   The Report of that Committee has been communicated to the Inter-­departmental Committee and is to the effect that no immediate change should be made, but that the question should be considered in its wider aspect by the Inter-departmental Committee on Social Insurance and Allied Services.

146.   Of the three reasons named above for keeping agriculture separate, the first no longer applies, as the debt of the general scheme has been repaid. The second reason does not apply with anything like its former force, in view of the recent rise of agricultural wages, and it seems right to base social security   for   the   future on the assumption that   agriculture will have a status equal to that of other industries in respect of terms and conditions of service.   The third reason is contrary to the general principle which has now become accepted for unemployment insurance, namely that all industries stand together; that the contributions in one industry should not be increased on the grounds that it has an especially high rate of unemployment; that no industry should keep the advantage of its low rate of unemployment.   The principle underlying unemployment insurance today is that industries cannot to any substantial extent control their own volume of unemployment and that no industry, accordingly, should contribute less to unemployment insurance because  its  normal  rate  of  unemployment  is  below  the  average.   The Unemployment Insurance Statutory Committee stated that if they were now considering the extension of unemployment insurance to agriculture they would not, on the sole ground of the lower risk of unemployment in agriculture, propose that the contributions should be lower than in the general scheme.

147.   Two of the three reasons given for a special scheme for agriculture are no longer valid. As to one of the three, namely the level of wages and by consequence the level of benefits and contributions appropriate to agriculture, there may be uncertainty, that is to say it can be argued that the wages and conditions in agriculture will be materially different from those in other industries.   This, however, would be a reason, not for giving agriculture the privilege of its lower rate of unemployment, but for giving it a lower scale both of benefits and of contributions.   Sharing of risks between agriculture and other industries would be consistent with providing a lower rate of benefit in agriculture on the ground of lower cost of living; there is still a substantial difference between the rents paid by agricultural households and by industrial households.    In the discussion of benefit rates in Part III, the suggestion is made accordingly (paras. 214-215) that the question of having, either for particular occupations or for particular regions, rates of unemployment and disability benefit below the general level, with a proportionate reduction of contributions, should be the subject of a special enquiry in preparing the detailed insurance scheme.    One of the problems to be considered in such an enquiry would be the treatment for disability benefit of independent rural workers with low money incomes, such as small-holders, crofters and fishermen. No differentiation is suggested in the rate of pensions.

148.   The case for the retention of the special scheme for agriculture by which it can obtain benefits approximating to those of the general scheme at one-third of the present cost is a claim of privilege.     In this case the privilege is recent, dating from the Act of 1936, while the privilege of the insurance and banking schemes is older, dating from 1921 or 1924.    The view taken in this Report is that no claim of privilege should stand against the unification of social insurance today.

Change 16.   Abolition of the exceptions from insurance

(a) of persons in particular occupations, such as the civil service, local government service, police, nursing, railways, and other pensionable employments, and in respect of unemployment insurance, private indoor domestic service;

(b) of persons remunerated above £420 a year in non-manual occupations.

149. The argument for the first of these changes is much the same as in regard to the preceding change.    If those industries which have a small risk of unemployment are required to stand in, together with all others,   those industries which claim to have no risks of unemployment may also be required to stand in with the others.    Any distinctions within the scheme lead to difficult demarcation problems.   Where, as with the central government and with railway companies, some of the employees contribute for unemployment insurance while the others are exempt, the additional objection may be made that the industry escapes contributing its full share to the Unemployment Fund.   Where one section of domestic service, namely indoor servants in private houses alone are excluded, while other domestic servants, such as those in establishments and institutions are included, anomalies and passage into and out of insurance are unavoidable.   The view taken here is that, as regards unemployment, all industries should stand together ; as regards pensions and sickness insurance, if there are any occupations which have already made provision for these circumstances, they should do so in future in the light of the basic provision being made for all, including their members, by the national Plan for Social Security.   All that is needed is that they should be given time to re-adjust their own schemes.

150.  The proposal made here will mean that employees in the excepted occupations and their employers will have their contributions for social security increased very substantially and more than employees and employers in other occupations.   The greater part of the security contribution is required as provision for contributory pensions, which under the plan will be paid up to a subsistence minimum to all citizens.    But the full rate of contributory pensions will not be reached till the end of a substantial transition period.   Within that period there is time for readjustment of occupational schemes of superannuation to the fact of the national scheme and, if this is desired by the insured persons and their employers, for a reduction of any contributions made to the voluntary schemes.    It will probably be desirable by legislation to simplify the necessary procedure for such readjustments, subject to suitable safeguards.

151. Of the pensionable employments which are excepted, other than the civil service, the two largest are the railway service and local government service. The railway companies and the principal organisations of railway employees asked that the existing exceptions should be continued.    On the other hand, the largest group of employers in local government service, namely the Association of Municipal Corporations in England and Wales and the representatives of one of the most important organisations of employees namely the National Association of Local Government Officers, advocated the inclusion of all persons now excepted in the general insurance scheme on the same terms as all others. The same view was taken by the Association of County Councils in Scotland.

152. The second change proposed, that is to say, abolition of exception on account of remuneration above the rate of £420 a year in non-manual occupations, rests on four distinct reasons :—

(i) Abolition of the remuneration limit follows from the argument for the abolition of exceptions in particular occupations, including the civil service and other pensionable employments.    It would be unjust to require lower paid civil servants to contribute to a scheme of which they felt little or no personal need, while exempting higher paid persons in the same occupation on the ground that they were paid more,

(ii) Abolition of the remuneration limit avoids all the difficulties which arise through persons passing out of the insurance field in middle life or afterwards as their remuneration increases.    In place of the com­plicated   and   unsatisfactory   devices   for   continuance   of   voluntary insurance, all such persons will remain permanently insured compulsorily.

(iii) Abolition of the remuneration limit puts an end to the troublesome questions as to the rate of remuneration in fluctuating occupations and as to the definition of non-manual work, which were discussed by the Unemployment Insurance Statutory Committee in 1936 when they recommended the raising of the remuneration limit from its then figure of £250 to £420 a year.

(iv) Any remuneration limit, since it cannot in practice take account of family responsibilities, is bound to produce anomalies. If, for instance, medical service’ free of charge on treatment, but in respect of compulsory contributions, is limited to people with an income below £420, this will mean that a bachelor with an income of £410 a year gets his treatment without charge, while a man with an income of £430 and a family to support is required to pay for his own treatment and that of all his family.