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9
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MEMORANDUM KY THE MINISTER OF LABOUR.
UNEMPLOYMENT INSURANCE.
I, The Cabinet decided oh 14th August that it was undesirable
to commit the Government to the introduction in the Autumn
session of a Bill-dealing w i t h Unejiipr-o^ient Insurance, but
came to no other c o n c l u s i o n as t o t h e f u t u r e p o l i c y of the
Government In t h i s c o n n e c t i o n , . I t i s , however, n o t possible to
defer much longer t h e d e f i n i t i o n of at' Ifcast"'' tho broad lines
of p o l i c y to be a d o p t e d because t h e whole p o s i t i o n will be
fundamentally altered when t h e proseny temporary scheme of
donation for c i v i l i a n workers expires"at the end of next
November, D e f i n i t e a c t i o n w i l l t h a n have t o be taken, and if
the evils of. h a s t y i m p r o v i s a t i o n ore t o be a v o i d e d the broad
* .
lines of policy ought to be settled now as t h e interval of two
months Is none too long for working them out in detail.
.
2. The ,goveming factor in the present situation is -that the
unemployment now existing.is provided for by the scheme of Out-of- .
Work Donation to ex-service 'men and civilian workers respectively.
These schemes are temporary; that for civilian workers comes
finally to an end on November 24th nextj t h a t for ex-service men
covers only one year after individual demobilisation, and will
therefore come to an end for great numbers of men before the
end of this year.
4
:
3, The possibility of allowing these schemes to expire without
putting something in their place needs only to be examined to be
dismissed. -There are at present over 500,000 persons drawing
donation, of whom 350,000 are ex-service men. This is the best
time of the year for employment, and whatever progress may be
made in the revival of trade during the course of the present
year, the only reasonable assumption to make is that during the*
"
coming winter t h e numbers of the unemployed'will be larger, and
t h e y may be much larger, than they are at present. The only
existing alternatives' to Out-of-Work Donation are the unemployment )
b e n e f i t of 7s a week, and Trade Union benefits, both of which
cover o n l y a small proportion of t h e working population, or
Poor Law Relief. In face of the precedent of the donation scheme,
I think we must start from the assumption that to allow the
donation scheme to expire and to put nothing'in its place is
impossible, '
H
4, If this assumption-be admitted there are really only two '-.*-,
alternatives open. One is to continue the payment of donation;'
in some form indefinitely. The other Is to take measures at once- '
with a view to substituting for it some scheme of State aided :
contributory insurance against unemployment. I assume that the
first alternative cannot be seriously contemplated, and It is in
order that it may be /possible to avoid it that I wish to press .
for an Immediate decision on certain broad points of policy,which
will enable steps to be..taken at once with a view to the institution
of a contributory scheme.
1,
5. Judging from the attitude assumed by the Trade Unions
towards this question at the National Industrial Conference. I
feel sure that they will not willingly acquiesce In a
contributory scheme so long as they have any hopes of getting
a non-contributory scheme. On the other hand, once these hopes
are removed, I anticipate that I can secure a sufficient measure
of agreement among the interests concerned to enable the'dovernr;
to pass a Bill on a contributory basis. I therefore ask,in the
first plaoe for a decision of the Cabinet in this sense.
:
6. Given this decision, and the Cabinet^ provisional approval
of the measure as sketched below, j shall proceed to consult
the Industrial organisations concerned in the hope of having a
draft Bill ready by the end of the recess. Any delay at this st
will mean the postponement of thejpill till next year, and a
corresponding prolongation of the period during which provision
for unemployment must be made by way of donation.
1
7, The broad lines of policy which I recommend for adoption
are based upon the report of an inter-departnental Committee, w
included a representative of the Treasury, They are as follows
(a) There should be general provision for payments during
unemployment, the funds being provided from contributions paid
employers, employed and the State.
, (b) Any well-organised Industry, which Is able and willing
do so, will be allowed to set up a scheme for itself, subject to
due approval, under which It will raise its own funds end'
administer them in accordance with Its special needs.
(c) Voluntary associations in other industries (e.g. trato
unions) may also be allowed under proper conditions to adminlsta
in accordance with speoial schemes the funds derived from their
membership; these associations must be formed on an occupational
basis and must not be carried on directly or Indirectly for profl
(d) Apart' from the industries referred to In (b) the-contr
utions of employers and employed will be -raised by means of sts
affixed to contribution cards as in the case of the Health
Insurance schemes this method may also be applied if desired to
any industry under ( b ) t
(e) The weekly rate of benefit to be paid to Insured
workpeople other than those coming under special schemes ( p a m
(b) and (c) ) will be IBa for men and 12s,6d for women; the
rates under the special schemes must be on the whole at least
as favourable to the workpeople.
(f) In order to meet the case of individual workpeople whi
do not suffer from unemployment, such workpeople if they reacht
age of 65 will be entitled to receive a refund of not less than
amount of the contributions which they have paid together with
interest (less any benefit received).
8. Two other points of policy have to be decided and I
submit for consideration alternative proposals with regard to
each:­
(1) Should the scheme apply to the whole of the employed
population (i.e, be practically coterminous with the Health
Scheme), or should Agriculture and Domestic Service be excluded?
The arguments on both sides are set out In the attached ex­
tract (Appendix A) from the report of the Departmental Committee.
My view is that on the whole the balance of advantage lies in
launching the scheme on the basis that it is to be universal
and allowing Agriculture and Domestic Service to make out a good
case for exclusion, if they are able to do so.
(2) What should be the rate of the State contribution to
the funds of the scheme?
Broadly speaking the choice lies between making the State
contribution one third or one fourth of the total revenue. The
arguments on each side are set out in the attached extract
(Appendix B) from the report of the Departmental Committee. The
estimated annual cost to the Exchequer, which varies according
to whether Agriculture and Domestic Service are or are not included,
is shown in the following table, which also gives the weekly
contributions from employers and employed and from the State
respectively, on which the estimates are based, together with
corresponding figures for the existing scheme of unemployment
insurance.Weekly contribution from
Employers &
Employed
jointly.
(1) Agriculture and
Domestic Service
included*
(ii)
do
3d.
do
(iv)
do
do
excluded
do
Existing Scheme
13d. )
(men
(
do
(women
3d
)
fmen
7d.
2id. )
[women
6d.
2d.
men
women
Bd
8d
4
)
a.
/
to
Estimated
annual
amdunt of
State con?
tribution.
5,970,000
/
3,980,000
/
4,200,000
I
3,260,000
4
1
3
X Year 1917-1918.
I
2
)
2d, )
women
ill)
State.
Ration of
State contribution
to total
revenue.
/
1,007,541 X
0
9, Scheme ($). Cli) and (1U) are baaed on weekly
contributions from employers and employed of 6d for men and 5
for womenj scheme (iv) requires 7d for men and 0d for women.
If therefore my proposal that Agriculture and Domestic Servic
should be Included in the first instance is adopted, tho
contributions from employers, and employed to be originally
proposed will be 6d* and fid, if agriculture and Domestic
Service are subsequently excluded it will not then be practioi
to raise the contributions from employers and employed
lh other industries to 7d and 6d, and the State contribution
therefore if originally fixed at one-fourth would have to be
raised to one*third.
10. Having *egard to the precedent of the non-contributoi
donation and the propaganda in favour of non-contributory
provision for unemployment, I.am not sanquine that a State
contribution of less than one-third will be ultimately
possible. 1 should be prepared, however, to begin negotiate
with the industrial organisations on the basis of a State
contribution of one-fourth (Agriculture and Domestic Service
being included), on the understanding that if Agriculture and
Domestic Service are excluded the State contribution will
be raised to one*third; this would mean a comparatively small
increase in the estimated actual amount of the annual State
contribution, viz, from £3,980,.000 to £4,200,000.
Xreland. The above proposals relate to Great Britftl
With regard to Ireland I propose that the scheme should apply
compulsorily only to the trades already covered by the
Unemployment Insurance Acts, and that provision should be madi
for its extension to other trades by administrative order.
R.S.H0RNE.
5th September 1919,
H . A i r g u y n t f o r and aifainafr exoludlnff A g r i c u l t u r e
and Domestic l o r v i e o . ,
The arguments for excluding these groups nay be s t a t e d as
: follows:­
(1) They a r e exposed to, a very lew r i s k of unettpley^iit.
Owing t o s p e c i a l ftiroumatanoes and leek of o r g a n i s a t i o n they
a r e n e t In a p o s i t i o n to take adrantage of the provisions
f o r s e g r e g a t i o n , and i n so f a r ee they remain i n the Central
fund they and t h e i r employers w i l l hare t o pay a c o n t r i b u t o r ,
g r e a t l y In excess of the awn d r a m out i n b e n e f i t s , unless,
and u n t i l they qualify for a refund a t age 66Y (aee p a r a ^ p h
( i i ) Their inolusion a f f e c t s i n t e r e s t s s t r o n g l y
r e p r e s e n t e d i n P a r l i a a o n ^ and much Parliamentary opposition
may be expected i f these groups are n e t exoluded.
( I l l ) The problem of d e a l i n g with i s o l a t e d workers l i k e
a g r i c u l t u r a l l a b o u r e r s and domestic s e r v a n t s p r e s e n t s p e o l a l .
difficulties.
The arguments a g a i n s t exclusion a r o : ­
(a) I f any groups a r e exoluded however well J u s t i f i e d
/
exolusion may be i n i t s e l f t h e r e must obviously be a danger
of p r e s s u r e from o t h e r groups with a low r i s k of iinemployment
f o r e x c l u s i o n , not merely i n the sense of s e g r e g a t i o n but
i n the sense of complete exemption from the l i a b i l i t y to
make p r o v i s i o n f o r unemployment * Miners and seamen and bank
c l e r k s might very well urge t h a t the exemption extended t o
a g r i c u l t u r a l l a b o u r e r s and domestic s e r v a n t s ought a l s o
to be extended to them, In t h i s wtf g e n e r a l provision--agaJtot
unemployment would break down from the o u t s e t .
(b) Tho e x c l u s i o n of a g r i c u l t u r e and domestic s e r v i c e would
make i t neoessary to find and I n t e r p r e t a workable d e f i n i t i o n
of what i s covered by these terms, and t h i s would be a t a s k
of g r e a t d i f f i c u l t y .
(o) In view of the f a c t that these groups a r e now e n t i t l e d t o
Out-oMTork donation t h e i r exolusion from insurance may
provoke o p p o s i t i o n .
(d) w h i l s t t h e r i s k of unemployment i n these groups i s
a d m i t t e d l y low, t h e r e I s s t i l l some r i s k , and there i s no
guarantee t h a t t h i s r i s k may noFoe" i n c r e a s e d i n f u t u r e by
unforseen changes. So f a r a s the r i s k i s l e s s than normal
f u l l advantage can be taken of i t by the formation of
v o l u n t a r y a s s o c i a t i o n s , while i n d i v i d u a l s who experience
e x c e p t i o n a l l y 11 t t l a unemployment w i l l o b t a i n refunds on
reaching the age of 66.
( e ) Tho exclusion of the t h r e e m i l l i o n persons employed i n
these groups who a r e exposed to r e l a t i v e l y low r i s k would
r e a c t unfavourably on the f i n a n c i a l b a s i s of t h e scheme. I n
view of the faot that the decision on this point turns
mainly en political considerations, m have confined
ouraelvee to submitting' tne ftXtarnative arguiaents and do
not mafce any recommendations. '
16, Rate of 3tate Oontribution* The rate;of the State
contribution to the existing Unemployment Insurance scheme
one third of the contributions paid by eaployers and
employed * that is to aay oija. fourth of the total revenue
of the unccaplaymant food is contributed ,by the State (apart
from i n v e s t on baJanoeah Adminiotratin expenses ara
mat out of this fund, subject to a maximum of one tenth of
the annual income. /'/.:,./
t
It would not appear poflaihie to reduce this rate ef
contribution and the question we have considered la whether
It ought not to be increased, a s regards earlier oonsidera­
tton ef proposals for generalinsurance i t may be mentioned
that both the Civil War Workers Committee and the Labour
Resettlement Committee assumed that equal contributions ahou
be paid by employers, employed, and the State, i.e,, that
the State should pay she third of the whole Income and not
one fourth as at present.
S t a t e Contribution^
FOR LBIITIHG THE STATE C O m i B U T I O K
TO OffODUm "-flty. ffc (fo^Al WTRIBUtlOK. .'"
1 6 . The argomenta ag&inst i n c r e a s i n g the S t a t e o o n t r i ­
b u i i o n above o n e - f o u r t h of the t o t a l jooy be e t a t e d ad
follows:­
( i ) The a l t e r a t i o n s In the d i s t r i b u t i o n of the Stations!
Income which haye accompanied the- wqr/haiye l e f t - t h i s
employing and qoployed o l s s s e s i n industry speaking
g e n e r a l l y , no worse o f f and i n tmaf oases' itaateriaily
, b e t t e r o f f than b e f o r e . Oanpared witn ihem thd remaining
c l a s s e s o f Tax Payers ere r e l a t i v e l y muoh l e s s prosperous
than i n 1 9 1 1 . Without any a l t e r a t i o n i n the r a t e s o f
the S t a t e c o n t r i b u t i o n the wide e x t e n s i o n e f insurance
.
and i n c r e a s e of b a n e f l t s now proposed w i l l themselves
Impose a heavy a d d i t i o n a l charge upon the Tax Payers"
They may f a i r l y demur t o being asked i n a d d i t i o n to pay
f o r a l a r g e r share f f the b e n e f i t s to be enjoyed by
r e l a t i v e l y more f o r t u n a t e mambors of the community
t
( i i ) Apart from c o n s i d e r a t i o n s o f ectuitjr the e x i s t i n g
p o s i t i o n of th^ N a t i o n a l f l n a n o s s and the v a s t demands which
a r e fatting made Upon the Tax Payer from a l l quarters make
i t a matter o f p r e s s i n g n e c e s s i t y to avoid the p l a c i n g
upon the, Exchequer o f a d d i t i o n a l burdens Which the r e s o u r c e s
s f t a x a t i o n may j a w s unable t o meetV Tae c o s t of
p r o v i s i o n a g a i n s t unemployment should i n the main be borne
by the workers and t h e employers. L o g i c a l l y there weuld
be a s t r o n g oase a g a i n s t any i n c r e a s e i n the t o t a l S t a t e
subsidy paid to the Unemployment Pund under t h e e x i s t i n g
scheme * The maintenance of the same proportion f o r t h e
exchequer c o n t r i b u t i o n s a s p r e s c r i b e d i n 1911 w i l l i n c r e a s e
the e s t i m a t e l i a b i l i t y o f the taxpayer from £ 1 , 0 0 0 . 0 0 0 ,
a year to £3,200,000 a y e a r , i f a g r i c u l t u r a l l a b o u r e r s
and domestic s e r v a n t s are omitted from the scheme, or i f
they are i n c l u d e d , t o £ 4 , 0 0 0 , 0 0 0 a year* In a c c e p t i n g any
such l a r g e i n c r e a s e the S t a t e may be regarded a s having
beeft f u l l y a s l i b e r a l a s i t can s a f e l y afford t o be,
( i l l ) i n i n c r e a s e o f the e x i s t i n g S t a t e proportion would be
l i k e l y to evoke a demand f o r a s i m i l a r i n c r e a s e o f the
Health Insurance c o n t r i b u t i o n . The answer t h a t l a r g e
supplementary sums have i n f a c t fceen added to the grant o f
two n i n t h s e f the c o s t o f h e a l t h b e n e f i t s , c h i e f l y by tfce
way of a d d i t i o n a l remuneration to d o c t o r s , may be met by
the c o n t e n t i o n t h a t t h o s e g r a n t s did n o t i n f a c t Increase
tho b e n e f i t s provided f o r the insured person by Part I o f
the l o t o f 1 9 1 1 : they must be regarded rather a s p a r t
o f the c o s t of the P u b l i c H e a l t h S e r v i c e .
I n any e a s e i t i s probable t h a t an a l t e r a t i o n of the
s t a t u s que i n favour of Unemployment Insurance would increasl
the d i f f i c u l t y o f r e s i s t i n g demands i n r e s p e o t o f t h e
Health Scheme.
(iv) The grant of a rate of State contribution whioh v?J
enable the benefit to be raided above 15/- a week for c*I
and 12/6 a week for womon would oertainly $roduoe a
I
demand for tho corresponding increase in the rates of I
sickness benefit under the Health Scheme, 1 person who I
is unemployed through siokneos requires at least as muolii
a persen who is wall but out of work,
1
This would no doubt involve an increase of the StaJ
subsidy in that scheme,
I
(v) Farther rates in excess of those abovejmentioned miJ
prove so attractive ae to encourage "malingering" and I
apart from the other evils thereby involved threaten the!
solvency of the Scheme.
In the administration of Health Insurance with ratJ
of benefit at 10/- a week for men and 7/6 a week for wonjl
it has not $roved easy to guard against these dangers, 1
may be that for the future rates of 15/- ant IS/6 will A
be excessive, but if any higher benefits are granted anil
during the next five er ten years there should he an
appreciable fall of prices and wages, it may well be doui
in view particularly ef the experience of Out-ef-Work [
Donation, whether any administrative checks, however
stringently devised, would provide adequate safeguards I
against abuse. The idea embodied in the proposals
I
contained in the Report as regards voluntary assooiatioii
is that benefits in excess of a moderate minimum should I
be administered by self-governing and self-supporting I
bodies, and this prinoiple io one which it is very
I
important to maintain,
I
Arguments against liriiting the state contributions w
one-fourth of the ' tot&T oo^ributlon.
17, The arguments against maintaining the present rate ill
the State contribution are:­
fa) Unless an attractive sohome with an adequate rate ol
benefit is put forward on a contributory basis with the 1
State bearing a considerable proportion of the cost, the
demand for a non-oontributory eoheme whioh is already m
strong will become more urgent, and it la obviously
desirable to oonolllate this opposition if it can be dorj
by a moderate increase in the State contribution.
(
(h) $here is no certainty that it will be politically I
possible to maintain the proposed rates of benefit of If 1
for men and 12/6 for wotneni.
I
taking the allowances for dependents into account I
the State has provided under the Qut-of-Work Donation
I
Scheme practically double this amount as a free $Aft and I
it will be difficult to porsuade insured workpeople that I
they ought to aocept a much sEsaller sum when they arc
I
themselves contributing a substantial part of tho cost. 1
(o) With regard to the grant for Health Insurance undeijl
rart I of the national Insuranoe lot, 1911, it is true I
that the expenses to be defrayed ou? of monies provided I
by Parliament ware originally limited to the oost of
I
2*
I
central administrations two ninths of the cost of
administration incurred "by approved societies and. two nintlje
of the benefit, In point of fact the State share was
never kept within this limit; The Government found itself
unable to provide the benefits promised, with the funds
available in view inter alia of the demands of the
medical profession, and from the outset largo supplementary
sums have been given to the Health Insurance Commissioners
and approximately one-third of the benefits and of the
003t of providing thorn has been found by Parliament. The
medical benefit under the Health Insurance scheme has not
boon and is not now a part of a State medical service,
but is one of the benefits for whioh insured persons arc
required to pay weekly contributions.
(d) In viow of the high levels which have now been ,
reached by wages and cost of living, and the improbability
Of any substantial reduction of either, it is difficult
to suggest"that benefit substantially higher than 15/- and
1.2/6 would, under the conditions of a contributory scheme,
involve any real risk of abuse by malingerers. -Similarly
the argument based on the assumption that unemployment
benefit must not exceed the rate of sickness benefit
cannot bo sustained in view of the faot that the two
benefits have always hitherto boon unequal.