Beveridge: Workmen’s Compensation. Change 4

Change 4. Supersession of the present scheme of workmen’s com­pensation and inclusion of provision for industrial accident or disease within the unified social insurance scheme, subject to (a) a special method of meeting the cost of this provision, and (&) special pensions for prolonged disability and grants to dependants in cases of death due to such causes.

  1. The system of workmen’s compensation, introduced in a limited form in 1897 and generalised in 1906, is the oldest of the varied schemes which have come under review by the Committee and differs in principle from the methods adopted for dealing with all other forms of interruption of earnings.  It places upon each employer a legal liability to compensate any employee for loss of earning capacity due to accident or industrial disease arising out of and in the course of his employment, and, breaking away from the general principles of the common law, provides compensation irrespective of any direct or indirect negligence of the employer and in spite of negligence by the employee.  It fixes the compensation accordingly, not on the indemnity basis applicable under the common law to cases of injury due to the fault of another, but on the principle of a division of loss between the employer and the employee, and relates the amount of the compensation, subject to a maximum, to the average earnings of the employee.  The employer’s liability to pay compensation is excluded only where the injury was caused by serious and wilful misconduct of the employee himself and did not result in death or serious and permanent disablement; for everything else, including accidents over which the employer had no control, even accidents caused by the wilful misconduct of the employee himself if they result in death or serious and permanent disablement, compensation must be paid.  The employer may insure himself against his liability in any way he pleases, or, except in coal mining (where compulsory insurance has been in force since 1934), he may not insure at all.

  2. This system has conferred great benefits in the past.  It may be claimed for it that it has enabled employees in the great majority of cases to obtain the compensation provided for them without serious difficulty and without unreasonable delay and that by preserving the connection between the employer and the injured employee, it has facilitated the return of the employee, on recovery, to his former employment.  At the same time it has given employers freedom in their arrangements for insuring against their liabilities and so has enabled the large employers and employers in organised industries to cover these liabilities on economical lines;   it has enabled all employers to cover, by one and the same policy, their workmen’s compensation liability and their liabilities at Common Law. By making it possible for the Premiums or levies to be adjusted to ascertained risks, it has given a financial incentive towards prevention of accidents, to the benefit of employers and employees alike. The existing scheme of workmen’s compensation has conferred benefits and has certain merits. If the conclusion is reached now that that system should be superseded in a unified Plan for Social Security, this conclusion rests not on a denial of any good in the present system, but on the possibility of replacing it by a better system. Neither in this, nor in any other field should the good be allowed to be the enemy of the better.

Disadvantages  Of  Workmen’s  Compensation   System

79.    There are disadvantages in the present system of providing for the results of industrial accident and disease which could and should be eliminated by change to a new system.  The disadvantages include the following:—

(i) The present system rests in the last resort upon the threat or the practice of litigation: a misfortune which is often not in any sense the fault of the employer and which he could not have prevented, is treated by methods applicable to fault. This method imports the risk of contention between employer and employee and of legal expenses on a scale exceeding that of the other forms of social security in this country or of compensation for industrial accident or disease in other countries.  The authors of the original Act contemplated that disputes would be settled by friendly and informal arbitration, but this hope has not been realised and disputes are now generally settled by formal proceedings in the Courts.  In a few mining areas joint committees of employers and employees have been established for settlement of claims, but even these do not always prevent formal legal proceedings in cases where agreement is not reached.

(ii) No machinery is provided for assisting the employee in presenting his claim and, except where he has effective backing from a Trade Union, Approved Society or other association, he is apt to feel that it depends upon his own strength and vigour in pressing demands to secure a fair deal. He suspects injustice often when there is no ground for the suspicion. He feels often, rightly or wrongly, that he is being subjected to improper pressure to reduce his claim, to accept an unfair lump sum settlement, to go back to light work which is not really beneficial or for which he is not ready.

(iii) No complete security is afforded for the payment of compensation. Insurance of the employer against his liability is not compulsory except in the mining industry. No doubt, in the vast majority of cases employers are adequately insured and failure to obtain compensation either in whole or in part is a comparatively rare occurrence. But the security is less absolute than that for benefit either under health insurance or under unemployment insurance.

(iv) The system fails to secure maintenance of necessary income. The Act, subject to certain safeguards, recognises the right of employer and workman in all cases to agree to settle a claim by payment of a lump sum, and this right—which finds no counterpart in systems of most other countries—is extensively exercised, particularly yi cases of permanent or prolonged disability. Divergent views have been expressed as to the advantages or otherwise of this practice, but from the point of view of social security it is impossible to justify. It is certain that in many cases, whether because the sum agreed proves insufficient for the purpose or because it is injudiciously expended by the workman or used by him to meet pressing, but temporary, needs, the lump sum fails to provide any permanent source of income. It should be added that, in the process of bargaining about a lump sum, the injured workman is discouraged from recovery or from taking any kind of work lest he should prejudice his bargain.

(v) Demarcation disputes are inevitable, if compensation for disabilities has to be provided from different funds by different authorities, according to what may often be a difficult decision as to causation.

(vi) There are differences of principle in defining dependants under workmen’s compensation from that adopted for unemployment insurance or for contributory pensions.

(vii) The costs of administration are higher in relation to workmen’s compen­sation than they need be or than they are in compulsory social insurance. The relatively high percentages of administrative costs recorded in the case of some insurance companies are not, in fact, typical of work­men’s compensation as a whole, since the greater part of insurance is undertaken by mutual indemnity associations and mutual insurance companies. The information collected in Appendix E shows costs of administration for employer’s liability insurance, ranging from 45 per cent, of the premiums paid to insurance companies such as those represented by the Accident Offices Association down to 7 per cent of the premiums paid to some of the mutual indemnity associations in coal mining ; insurance through mutual companies generally appears to cost about 20 per cent, of the premiums. Even this figure is substantially higher than the administrative costs of any form of compulsory State insurance. Procedure by negotiation between the parties, followed, if no agreement is reached, by litigation is inevitably and needlessly expensive as compared with procedure for determining claims by an administrative authority subject to appeal to special tribunals. The costs incurred by or on behalf of workmen in presenting claims are not included in the figures cited above, and are sometimes considerable.

(viii) The inclusion of certain industrial diseases, as well as accident, for purposes of compensation, while necessary in principle, makes the fixing of liability on individual employers particularly inappropriate. The onset of disease is often gradual. If a workman has been engaged by a number of employers in succession, it may be difficult or impossible to decide with any certainty in which particular employment his disease began. There is risk, moreover, that an employee showing symptoms of an industrial disease may be discharged. Difficulties are experienced also, when an employee affected by disease of a recurrent nature changes or seeks to change his employment between successive attacks.

(ix) In the 45 years of its existence, the present system of dealing with the results of industrial accident and disease has contributed little or nothing to the most important purpose of all, which should have come first, namely, restoration of the injured employee to the greatest possible degree of production and earning as soon as possible. This failure was a natural, perhaps an inevitable, consequence of the principle adopted, of fixing liability for compensation on the individual employer. The Holman Gregory Committee, who more than 20 years ago recommended that the cost of any medical and surgical aid required by injured workmen over and above the medical treatment already available under national health insurance should be provided at the cost of the employer, recognised that this could not be done with advantage, either by increasing the monetary compensation of the workmen or by placing the onus of providing treatment upon the individual employer. They held that the solution lay in an extension of medical services already available under the National Health Insurance Acts, with the proviso that the expense of the additional services should be provided by the employers. No action in the direction suggested by the Holman Gregory Committee has yet been taken and the Accident Offices Association in giving evidence to the Royal Commission on Workmen’s Compensation in 1940, described rehabilitation as not being their concern, though they modified this attitude somewhat in evidence to the present Committee. A few of the indemnity associations and mutual insurance companies have recently taken systematic steps to provide medical treatment or post-medical rehabilitation, but such action is a rare exception. Failure to provide adequately for the restorative treatment of persons injured in the course of their employment is a special case of the general in­adequacy of treatment in the British social services. Industrial accidents, more commonly than not, call for hospital treatment at the medical stage and after that they require, in many cases, post-medical rehabilitation. Hospital treatment is just that for which no provision worth mentioning was made under national health insurance. Post medical rehabilitation has only just begun to receive practical attention. Failure to make provision for restoration of persons injured in employ­ment is an illustration also of the objection to splitting social insurance into separate sections. The industrially disabled are a proportion only of all casualties by accident. An investigation made for the Departmental Committee under the Chairmanship of Sir Malcolm Delevingne in 1936-39 showed that in a large sample of fractures treated in hospitals only 30 per cent, arose through industrial accidents, while 15 per cent, came through road accidents and the remaining 55 per cent, were of a miscellaneous character arising through sport, accidents in the house and in other ways. What is needed is not a special arrangement for the industrially disabled, but rather a com­prehensive scheme covering all casualties, however caused. Such a proposal, however, could not arise out of the scheme of workmen’s compensation as it stands today.

  1. The pioneer system of social security in Britain was based on a wrong principle and has been dominated by a wrong outlook. It allows claims to be settled by bargaining between unequal parties, permits payment of socially wasteful lump sums instead of pensions in cases of serious incapacity, places the cost of medical care on the workman or charity or poor relief, and over part of the field, large in the numbers covered, though not in the proportion of the total compensation paid, it relies on expensive private insurance. There should be no hesitation in making provision for the results of industrial accident and disease in future, not by a continuance of the present system of individual employer’s liability, but as one branch of a unified Plan for Social Security. If the matter were now being considered in a clear field, it might well be argued that the general principle of a flat rate of compensation for interruption of earnings adopted for all other forms of interruption, should be applied also with­out reserve or qualification to the results of industrial accident and disease, leaving those who felt the need for greater security, by voluntary insurance, to provide an addition to the flat subsistence guaranteed by the State. If a workman loses his leg in an accident, his needs are the same whether the accident occurred in a factory or in the street; if he is killed, the needs of his widow and other dependants are the same, however the death occurred. Acceptance of this argument and adoption of a flat rate of compensation for disability, however caused, would avoid the anomaly of treating equal needs differently and the administrative and legal difficulties of defining just what injuries were to be treated as arising out of and in the course of employment. Interpretation of these words has been a fruitful cause of disputes in the past; whatever words are chosen difficulties and anomalies are bound to arise. A complete solution is to be found only in a completely unified scheme for disability without demarcation by the cause of disability.

The Case For Special Provision For Industrial Disability

81 Nevertheless, apart from the historical ground that compensation for industrial accident and disease has been established for more than forty years upon the different principle of being related to earnings, three arguments based on merits may be advanced for distinguishing between disability arising through industrial accident or disease and other forms of disability if it appears practicable to make such a distinction. First, many industries vital to the community are also specially dangerous. It is essential that men should enter them and desirable, therefore, that they should be able to do so with the assurance of special provision against their risks. Those who in taking such risks suffer prolonged or permanent disablement or death, should have a claim to compensation relating to their earnings, not-to a subsistence minimum for themselves and their families. Second, a man disabled during the course of his employment has been disabled while working under orders. This is not true generally of other accidents or of sickness. Third, only if special provision is made for the results of industrial accident and disease, irrespective of negligence, would it appear possible—as on grounds of equity and for the avoidance of controversy it is desirable—to limit the employer’s liability at Common Law to the results of actions for which he is responsible morally and in fact, not simply by virtue of some principle of legal liability.

82.The first of these arguments is a strong one.  If an occupation is specially hazardous it should carry special remuneration—”danger money.” But to give danger money only in the form of higher wages, that is to say, only so long as no accident has occurred, is of little value;  it does not ensure that more money is available when alone it is needed, i.e., when the danger has resulted  in accident. This argument standing alone would justify provision of compensation on special terms in occupations with more than an average risk of accident or disease, while leaving accident or disease in other occupations to the general provision for disability however caused.  If an occupation is such that the risk of accident in the place of employment is not materially greater than the ordinary risks of the streets or home, there may appear to be no strong reason for making special provision for the former, better than that which is made for the latter.

83.  But the second and third of the arguments named above, though weaker than the first argument, are not easy to disregard. Moreover, to distinguish in the provision for disability, not only by the cause but also by the occupation or industry, or by occupation and industry in combination, is to multiply distinctions where there should be as few distinctions as possible. If compensation for disability due to industrial accident or disease is to be related to earnings at all, this had better be done, irrespective of the industry or occupation in which the disabled employee was engaged.

84.  The question may be asked whether, before a final decision is taken on this point, any regard should be paid to the possible relation between compensation for industrial casualties and compensation for casualties due to enemy action.  Such action may affect either persons serving in the Armed Forces of the Crown, or others such as members of the mercantile marine, or civil defence services, or  civilians  pursuing their  normal avocations. Compensation for disability incurred during armed service is related to the service rank of the injured person, but it is not related in any way to his previous earnings in civil life.  It is possible, therefore, that of two men with equal civilian earnings of whom one undertakes military service and is totally disabled,   while the other, remaining in civilian employment, is similarly disabled by an industrial accident, the latter will obtain more as industrial pension than the former as war service pension.  But it is equally possible that a man will obtain more as war service pension than he would have obtained if he had remained in civilian life and had suffered an industrial accident.  On general grounds the scheme for social security after the war should be framed with regard to permanent peace conditions, to suit those conditions as well as possible;  it should not be distorted from what will be best in itself by consideration of the special problems and exigencies of war. This applies both to war pensions for armed service and to the other cases of compensation for enemy action that are mentioned above.

85.    On balance, the reasons for distinguishing between accident and industrial disease in any employment and other causes of injury, at least where death occurs or disability is prolonged, outweigh the reasons on the other side in favour of complete uniformity.  The proposal made in Part V, accordingly, is that provision for industrial accident and disease in a unified Plan for Social Security can, and should be, combined with the advantages of making discriminating provision for the results of industrial accident and disease where these lead tP death or prolonged disability.  All forms of short-time disability up to 13 weeks will be dealt with by cash disability benefit, that is to say, by payments at the same flat rates irrespective of earnings. On the other hand, after 13 weeks of disability, compensation will be paid on a different principle, taking account of the earnings that have been lost; there will be industrial pensions for prolonged incapacity due to accident or disease arising out of and in the course of employment.   There will be industrial grants for dependants, in addition to the general widowhood provisions, where death results from such disease or accident.  This proposal does not mean that there will be no need for Security Offices to determine, so far as they can, the causes where disability lasts for less than 13 weeks. It is essential, with a view to diagnosis and prevention, that the Ministry of Social Security should record and analyse all its experience.    But there will, as a rule, be no need to make a decision as to cause before giving benefit; attribution of a case of disability to industrial accident or disease will make a practical difference in the treatment of two cases only:—-

(a) If death results or disability lasts more than 13 weeks. Less than 10 per cent, of all claims to workmen’s compensation now last as long as that, though the cost of compensating such cases is a much larger proportion of the whole. On the scales suggested in para. 401, it is estimated that nearly three times as much in total will be paid as pension for disability due to industrial accident or disease after the first 13 weeks as will be paid in benefit for such disability during the first 13 weeks.

(b) If the disabled person has begun work so recently as not to have paid the minimum number of contributions required to qualify for disability benefit in general (para. 366). This will affect, as a rule, only juveniles at the beginning of their industrial careers, but it must be provided for. That is to say, there will be no contribution condition where disability arises through industrial accident or disease.

Retention of compensation adjusted to earnings in cases of prolonged disability will mean that there must be machinery for assessing compensation, but this can become administrative, subject to appeal to special tribunals, in place of being legal machinery.

The Case For A Special Method Of Meeting Cost Of Industrial Disability

86. Provision for industrial accident and disease by workmen’s com­pensation in Britain differs from the provision made by social insurance for other interruptions of earning, not only in the basis upon which the com­pensation or benefit is calculated, but also in the method by which the necessary funds are obtained.    The form in which provision for industrial accidents was made when workmen’s compensation began in 1897, had two consequences.  First, it threw the whole cost in the first instance upon the employers; second, it adjusted the burden in each industry to the degree of risk in that industry.  This method was justified in  1897 by the  Home Secretary of that time, in introducing the Workmen’s Compensation Bill on the ground that ” when a person on his own responsibility and for his own profit sets in motion agencies which create risks for others he ought to be responsible for what he does.”  This principle, enunciated when the Workmen’s Compensation Act was being applied to a limited class of industrial under­takings, is clearly appropriate only to a system of individual liability and is not even verbally applicable to workmen’s compensation with its present extension to a large range of employments which are not conducted for profit, including both all employments under public authorities and those of domestic and institutional service. More important than this, the principle that each industry should bear its own risks of accident, conflicts with the principle which has found growing acceptance in other fields, of pooling of risks in social insurance.    This view, now dominant in regard to unemployment insurance and asserted by an overwhelming majority of general opinion in regard to health insurance, has been advanced also in regard to workmen’s compensation by the Mineworkers’ Federation, representing the industry in which this issue is of primary importance.  Under the wage system in mining, compensation for industrial accident and disease enters into the ascertainment of costs and, therefore, affects wages whenever these are above the minimum, so that the miners may claim that the cost of the exceptionally high risk of accidents in their industry is borne by themselves.    The proposals of the Mineworkers’ Federation as put to the Royal Commission on Workmen’s Compensation were as follows:—

“The contributions to the fund should be payable only by the employers. The cost of maintaining the Compensation Fund should be borne equally by all the industries in the country, and the contributions should be at a fixed flat rate calculated on a weekly basis in respect of each worker employed.

“We consider that it would be inequitable to impose the heavy burden of unequal contributions upon the industries in which the incidence of accident and disease is inevitably high. The amount in respect of each workman should be assessed so as to cover the whole of the liabilities to be provided for.”

  1. This argument for pooling of social risks is in accord with the general stream of public opinion and has force. It must be realised, however, that pooling of a risk between industries makes it difficult or impossible to maintain that the cost should be borne by employers only. In so far as industries depend upon one another, both employers and employees in each industry depend upon all other industries. There is no reason why the employer of a bank clerk or of a domestic servant, rather than the clerk or the domestic servant himself, should contribute to the cost of accidents in mines and in ships In so far as there is community of interest between different industries, making it fair that all industries should share equally in providing for a risk which affects them unequally, this community of interest applies to the employees as well as to the employers. It is clear also that even if the risks of sickness and unemployment are pooled completely between all insured persons, as is proposed in this Report, there is a good social reason for taking a different line, in part at least, about the dangers of industrial accident and disease. Though a high risk of accidents is inevitable in mining, shipping and some other industries, it does not follow that all accidents are inevitable; the number and severity of accidents can be diminished or increased by greater or less care on the part of those who manage industry. It is as just and socially desirable that part of the risk of industrial accident and disease should be borne separately by the employers in each industry, on the ground that part is within their control, as it is that part of the risk should be pooled, on the ground that some accidents are inevitable.

  2. In meeting the costs of industrial disability, as in respect of the form of cash benefit for the persons disabled, the right course lies in a combination of methods. In part the risks should be pooled and met by the general insurance contribution.   In part they should be kept separate and placed on employers, in order to give a definite financial incentive for prevention of accident and disease. It is not necessary for this purpose that employers in each industry should bear, as at present, the whole of its particular costs, provided that they bear some of it. Nor is it necessary to give a special financial incentive for prevention of danger in all employments; in many employments the risk of industrial accidents is less than the risk of accident outside the place of work or is almost negligible. The special charge on employers designed to stimulate prevention of accidents and disease can in practice be confined to industries in which there is need for special precautions.

89.   This is the proposal made here. One part of the funds required for benefits, pensions and grants in respect of industrial accident and disease will be obtained as part of the weekly contribution paid by an insurance stamp in respect of every employee, whatever the nature of his employment. Another part will be obtained by a levy on employers in industries scheduled as having materially more than the normal risk of accident or disease in industry as a whole.   This levy will be based on the wages paid and on the degree of risk and can be raised or lowered, as the risk in any such industry or in any particular place of employment is found to be above or below expectation. The levy will cover not the whole of the excess cost in the scheduled industry above the normal, but only a prescribed proportion; if it covered the whole there would be no pooling of risks between the hazardous and the non-hazardous industries; the former would pay their costs up to the normal by insurance contributions and beyond the normal by levy.  What proportion of the excess cost above the normal in the hazardous industries should be borne by levy and what part should be pooled is a matter for argument. Provisionally, it is suggested the levy should cover two-thirds only of the excess cost, leaving one-third to be borne by the general contributions of employers and insured persons and the State to the Social Insurance Fund. This plan introduces in a defined field of scheduled industries covering the most hazardous occupations, the principle of merit rating, with the object of giving to employers a financial incentive for diminution of accidents, and to the Ministry of Social Security a basis on which to press for preventive measures.

Statutory Associations In Scheduled Industries

90.    Exactly what industries should be scheduled as hazardous in whole or in part is a matter for further detailed enquiry. It may be assumed that six of the seven groups for which compensation statistics are now collected by the Home Office, namely, mines, quarries, docks, shipping, constructional work and railways (apart from their clerical staff), would be scheduled. Some forms of factory work, such as woodwork, metal extraction and shipbuilding, would be scheduled, while others would not. It might be found desirable also to schedule certain sections of the building industry and also of agriculture. This is a matter in which trial and experience will be the best guide.

91. The proposal made in the preceding paragraphs for an industrial levy leads also to an important suggestion as to the machinery of administration. The risks dealt with by workmen’s compensation are to a marked extent risks incidental to particular industries and occupations.   In all these industries, as in many others that are less hazardous, employers have provided against their individual liabilities for compensation, by forming mutual indemnity companies specially associated with those industries.    Within the framework of a general scheme of social security covering disability due to industrial accident and disease as well as all other forms of disability, there is advantage in recognising the specialised character of industrial accident and disease by setting up, at least in every industry scheduled as hazardous, and, therefore liable to the special levy proposed, a statutory association of employers and employees to deal with this problem.   Such a statutory asso­ciation might have the following among other functions:—

(a) Promotion of safety in the industry, in co-operation with the department or departments responsible for safety regulations by research into the causes of accidents, by propaganda and instruction, and in other ways.

(b) Promotion of measures for rehabilitation and re-employment in that industry, in co-operation with the general national organs for that purpose covering all industries.

(c) Advice on the making of all regulations affecting safety in the industry, the scheduling of industrial disease, and methods of assessment of earnings.

(d) Collecting from individual employers their quotas of the total levy required in the industry as a whole, in accordance with a scheme to be prepared by the association and approved by the Ministry of Social Security.

(e) Establishment of schemes to supplement the benefits statutorily secured to all injured employees.

92.   The   statutory  associations should be bilateral, combining the management and the labour in each industry.    In so far as they dealt with matters that might be regarded as solely the concern of the employers (such as the method of fixing the employer’s quotas in individual cases) it could be provided that decision should rest with the employers’ side alone; this power would make it possible for the employers in each scheduled industry as a body, subject to approval by the Ministry of Social Security, to adopt whatever system of levy, by individual merit rating or otherwise, they thought most conducive to the prevention of accidents or disease, and the consequent reduction of the levy. The distribution of the levy, however, though one of the necessary functions of a statutory association, is not its only or its main one.   The main purpose of the proposal made here is, within the framework 01 general social security to utilise the knowledge, the initiative and the interest of those concerned in each industry, first, in making it as safe as possible, and, second, in mitigating as far as is humanly possible the consequences of those accidents and injuries that defy prevention.

Views Of Organisations Giving Evidence

  1. The Trades Union Congress General Council urged to the Royal Commission on Workmen’s  Compensation that workmen’s compensation should become a social service separate from all the other services, with compensation related to earnings in all cases and financed by a direct levy on all employers varying with the degree of risk.  This involves complete duplication in the raising of funds, not from some industries only but from every one of hundreds of thousands of employers, many with a few employees or perhaps one or two only and with hardly any risk of accidents.   It involves distinguishing  the  cause  of  disability  and  making  an  immediate  wage assessment, sometimes for the purpose of giving little or no greater com­pensation for a few days or weeks in every case of apparent industrial accident or disease, in place of doing so at leisure in about 10 per cent, of the cases. As has been stated already, one of the most important sections of workmen in this connection—the Mineworkers’ Federation—while agreeing in other respects with the Trades Union Congress, opposed the suggestion of making each industry contribute according to its risks;  they urged that the cost of all accidents wherever occurring should be borne by all employers equally.

94.On the side of the employers, as on that of the employees, there were differences of opinion. Several associations of employers—in mining, ship­ building, cotton spinning, and the iron and steel trades—urged the retention of the present system; in each of these industries there are strong mutual indemnity associations which take the burden of workmen’s compensation off the individual employer at low administrative cost. Another association of employers—the Shipping Federation—urged  the complete   absorption  of provision for industrial accident and disease in a unified scheme of social security, with flat rates of benefit in all cases and with funds raised for all purposes by equal contributions of employers and employees and at least as much from the National Exchequer.  They argued

(a) that there was no justification for removing administration of workmen’s compensation from employers while requiring them still to pay the whole cost, and

(b) that there was no justification for making the more dangerous industries pay higher premiums on account of their special risks.

Compensation, in their view, covered innumerable cases where prevention was entirely beyond the control of the employer; prevention of accidents was a matter for factory legislation which had been developed very largely since the first Workmen’s Compensation Act of 1897.  In view of the divergence of opinions between employers in the different industries on the question of amalgamating workmen’s compensation with the other social services, the British Employers’ Confederation stated to the present Committee that they were not in a position to express a Con­federation view on the question. They desired, however, to make it clear that “notwithstanding this divergence of opinion, the employers in all in­dustries are unanimous on the principle that, so long as workmen’s compensa­tion is paid for entirely by employers, the administration of that service should continue to remain in the hands of the employers.”

95.In addition to all the employees’ organisations and the Shipping Federation among the employers’ organisations, nearly all the bodies not directly concerned with the administration of workmen’s compensation who expressed an opinion to the present Committee urged that the present system, based on individual liability and litigation,  should be replaced by social insurance in one form or another. This view is accepted here and leads to the proposal for supersession of the present scheme.  In framing a new scheme, the Report takes a middle line between the strongly conflicting views set out above.  It accepts the argument of the Mineworkers’ Federation for the pooling of the cost of industrial accident and disease. It accepts, as limiting the applica­tion of this argument, the view of the Trades Union Congress General Council that these risks should remain, in part at least, a charge on particular industries or particular employments. It recognises the value of the work done by mutual indemnity associations in the main hazardous industries and provides for a Substantial measure of industrial self-government and co-operation in adjusting the unified scheme to the different circumstances of different industries. It avoids the demarcation difficulties, delays and disputes which are inevitable if industrial accident and disease are dealt with separately from all other forms of interruption of earnings. Ninety per cent, of all cases of industrial accident and disease, those causing disability for less than thirteen weeks, will be dealt with in exactly the same way as other disability, by a flat rate of benefit. For most industries the cost will be met wholly and for the other industries to some extent as part of the single security contribution. Administration both on the side of contribution and on the side of benefits will be simplified, cheapened and, so far as possible, unified. Differentiation between disability due to industrial accident or disease and other cases of disability will be maintained only where it serves an important purpose; in respect of benefits, by making special provision for cases where earning is stopped for a long period or completely in respect of contributions, in those industries in which it is just and desirable to emphasise the need for precautions, by making a special charge.

It may be claimed that whatever the form of the new scheme, employers should continue to bear the whole cost of industrial disability in future, as they have done in the past.  To this there are three objections. First, as stated above, this claim is inconsistent with the argument for pooling costs in full or in part between different industries.  Second, if employers are to bear the whole cost it is hard to justify taking the administration out of their hands;   it is hard, therefore, to give to the responsible organisations of workmen the chance of taking a part, not in litigation, but in co-operative treatment of industrial disability. Third, it is undesirable that, while most forms of interruption of earnings are met by benefit to which the insured persons, with others, have contributed and out of a fund in whose stability and economical administration they are directly interested, there should be one form of interruption for which the funds are provided wholly by someone else.  Such an arrangement will lead to constant pressure to push up the compensation for that particular misfortune, though it needs in reality no more than other forms of misfortune.  The actual contribution involved in this question is small.  The employee’s share of the insurance stamp that will be required to provide for industrial disability at the higher rates now proposed is less than 1/d. a week and, as is pointed out in para. 291, it would be easy to justify the same distribution of the total contribution, even if the employer was assumed to bear the whole of industrial disability. But the claim that he should  do so is today no more than a claim of historical privilege and cannot in principle be admitted.

Unification Of Responsibility With Differentiation Of Treatment

97. The proposals made in regard to provision for industrial accident and disease are a leading illustration of the general principle underlying the Pan for Social Security, of unification of responsibility in order to avoid needless and harmful differences, combined with classification, that is to say, with giving to each need the treatment most appropriate for that need. It is important to notice that the two main differences proposed between provision tor industrial accident and disease and provision for other forms of disability are not in themselves connected. The industrial levy is designed, not to meetthe cost of industrial pensions after thirteen weeks as distinct from disability benefit during the first thirteen weeks, but to meet a proportion of the additional cost both of disability benefit and of industrial pensions in industries which are specially hazardous, over and above the average cost in other employments. Industrial pensions will be paid to employees in all industries who are disabled by an accident arising out of, and in the course of, employment, if the disability lasts beyond thirteen weeks. The industrial levy will be imposed not on all employers, but only on employers in scheduled industries.

98.   If the proposal made is accepted in principle—of including provision for industrial accident and disease within the general framework of social insurance but treating it in  some ways differently—several  important questions will  remain for discussion and settlement.  These include  the treatment of partial incapacity and the relation between any payment made for this and other security benefits and pensions, such as those for unemploy­ment, disability or retirement; the rules by which earnings should be assessed, the treatment of special schemes and contracting out; the methods by which grants on death through industrial accident or disease should be assessed; distributed and  administered;  the definition of  industrial  accident and disease; the methods of transition from the existing system to the new system and the relation between claims for security benefit and claims against the employer for negligence. The last of these questions is considered briefly in paras. 258-264 as one aspect of the problem of alternative   remedies. Retention of the employer’s common law liability unchanged, in spite of the development of workmen’s compensation, marks a departure in Britain from the practice of other countries, where the making of provision for the results of industrial accident and disease by way of social insurance has normally been accompanied by restriction of the employer’s liability to cases of wilful or gross negligence. It is obviously desirable as a matter of social policy to remove provision for the consequence of industrial hazards from the arena of litigation and conflict between the parties to production, so far as this can be done without condoning reprehensible carelessness by the employer. One of the objects of the greatly improved provision for the results of industrial accident and disease that is now proposed is to secure this, and a review of the law of employers’ liability is a natural corollary of making this provision. Some of the other questions named above are dealt with in Part V. It is clear, however, that to many of these questions no final answers can be given without further enquiry, and discussion with the organisations concerned. The fitting of workmen’s compensation into the general Plan for Social Security should be accepted in principle; smooth fitting will require careful adjustments of detail.

New Scale Of Compensation For Industrial Accident And Disease

  1. The foregoing discussion is concerned with the methods of maintaining income when earning has been interrupted by accident or industrial disease arising out of and in the course of employment. Detailed discussion of the amount to be paid must be reserved for another section. But it is appropriate here to take note of the fact that the existing system of workmen’s compensa­tion in Britain compares unfavourably with the systems of other countries, not only in methods, but in relation between the basic rate of compensation and the earnings which have been lost.   The basic rate in Britain as fixed by the original Act of 1897 and continued in the Act of 1906 was a weekly pay­ment not exceeding half the average earnings lost subject to a maximum of 20/-. In 1923 the maximum was raised to 30/- and special provisions were introduced to allow the lower paid workers, with average weekly earnings of less than 50/-, to receive a higher proportion on a scale ranging from one half to three-quarters. In 1940 the compensation was further improved by a flat rate addition of 5/- to the weekly benefit and by the provision of allowances under 15 years of age at the scales in force for unemployment subject to these special provisions and additions the rule of half earnings has remained unaltered. A higher proportion of earnings has been adopted in nearly all other countries. In a memorandum submitted by the International Labour Office to the Royal Commission of Workmens Compensation the practice of other countries is summarised as follows:-

“According to the typical practice of the European and Canadian laws pensions are granted at the rate of two-thirds of the wage loss for permanent incapacity whether total or partial In particular the percentages fixed by these laws are as follows, excluding the dependants allowances : —

  • 66 2/3 per cent. : Belgium, British Columbia, Ontario, Germany, Italy, Sweden.
  • 70 per cent.:  Netherlands, Switzerland.”

Royal Commission on Workmen’s Compensation, 1939: Memorandum of Evidence by the International Labour Office, paras. 114 and 117.

A percentage of 66 2/3 is also common in the American States.

100 In the Plan for Social Security it is proposed, accordingly, that the rate of industrial pension shall be two-thirds of the earnings that have been lost subject to a maximum fixed provisionally at £3 and to a minimum of being not less than would have been received as disability benefit. In addition to this, the injured employee will receive children’s allowances for all children.

101.  The question arises whether the new rates of industrial pension should apply to the existing cases of permanent disability due to accident occurring before the beginning of the scheme, and if so from what source and by what machinery the additional payments should be made.

102. As regards the main question, it will undoubtedly be in accord with the sentiments of the British people that the benefit of the new rates should be given to existing cases and this principle has been adopted in the past. The temporary increase provided under the Workmen’s Compensation (War Addition) Acts of the last war and the increase provided in this war by the Workmen’s Compensation (Supplementary Allowances) Act, 1940, were both applied to existing cases in receipt of weekly payments, liability being placed in each case on the employers responsible for the weekly payment under the principal Act.    This increase, as stated, was confined to men still in receipt of weekly payments, that is to say, there was no revision of lump sum settle­ments.   In accord with this precedent it is proposed that the new rates of industrial pension should apply to existing cases of prolonged disability in respect of weekly payments.    There would be no re-opening of lump sum settlements.   For accidents occurring within thirteen weeks before the beginning of the new scheme compensation would be paid under the existing law for the first thirteen weeks of disability.

  1. The subsidiary questions of the source and machinery for providing the new rates of industrial pension in existing cases of disability present several points for settlement. In the last war and in the present war, the giving of the increases at the cost of the employer already responsible was made possible by general agreement, with the employers’ representatives and with the insurance companies, in view of the continuance of the existing scheme of insurance and of premiums to the companies.  If the existing scheme is being superseded, whether on the plan proposed here or on any other plan, the cost of bringing existing cases of disability up to the new scales must be provided as an initial charge on the new scheme in some special way, either by the State or by a levy on employers.

104.  As to machinery of payment there are two main alternatives. Liability for the present payments rests upon the employers and insurance companies or indemnity associations which have accumulated reserves of meeting their liabilities;  the alternatives are :

(a)  That the existing payment should continue to be provided as at present by the insurance companies, with the Social Insurance Fund giving the additions involved in the new scales.  On this plan the Security Offices would presumably have to accept without question the assessment of the employee’s earnings and the amount of compensation agreed upon between employer and the employee or determined by any legal proceedings and would have to make its supplementary payments accordingly;

(b)   That the Social Insurance Fund should take over the whole responsibility for the existing cases, making a single payment at the new scales to the employee. This would be advantageous for the employee, but would involve   considerable   financial and other difficulties. The Social Insurance Fund would have to take over such proportion of the reserves of insurance companies and mutual indemnity associations of the Refractories Industries and Sandstone Industry, Silicosis Compensation Funds, and of such reserves set aside by individual employers as have been earmarked for purposes of this liability. The Security Office would be required to have power to recover any deficit from the individual employer concerned.

  1. The practical questions that will arise as to the treatment of existing cases of disability are difficult. They are raised here, not in order to suggest that there is no answer to them, but in order to ensure that all the problems involved in unifying social insurance and making it adequate are considered before they become actual problems, and that after examination of all aspects they receive whatever solution will yield the maximum of justice for the minimum of administrative complexity.   It should be added that if there is any prospect that weekly payments will be raised to new levels and that the increase will apply to all payments in force when the scheme begins, but will not lead to revision of lump sums, the attitude of employees towards the acceptance of lump sums under the existing law is likely to be affected. The application of the new rates and conditions of benefit or pension to existing cases other than those due to industrial accident or disease, namely, un­employment, non-industrial disability, widowhood and so forth is considered in para. 353.