(c) crown copyright
Catalogue Reference:CAB/129/5
Image Reference:0023
flS
DOCUMENT I S
. , .
IHI
H
IB I I I Bill t II I I
S E
I
THE PROPERTY
111
I
I II I
-
1 -I, T i l
OP H I S
-
I I
'
BRITANNIC M A J E S T Y ' S
'
'
-l'
II I ' II
I
. j" '
I I
] ].l '
. I L .1 t T
I II
GOVERNMENT)
-
L
-
"\
II
I I
I M W M
an*
G -R E T
CP.(45)
525
5TH DECEMBER,
COPY NO.
j
­
1945.
CABINET
NATIONAL INSURANCE
Memorandum by
the
Chancellor
SCHEME
of
the
Exchequer
I .
1.
The f o l l o w i n g t a b l e c o m p a r e s t h e c o s t of t h e p r o p o s a l s
i n the Lord Privy S e a l ' s paper ( C P . (45)315) with t h a t of the
p r o p o s a l s i n the White P a p e r .
The f i r s t two c o l u m n s o f
f i g u r e s c o v e r S o c i a l I n s u r a n c e and A s s i s t a n c e and I n d u s t r i a l
Injury Insurance.
They exclude Family Allowances and the
National Health Services
The t h i r d c o l u m n c o v e r s t h e same
s e r v i c e s as t h e f i r s t two b u t i n c l u d e s a l s o t h e
contribution
o f £.37 m i l l i o n a y e a r w h i c h i s t o b o p a i d f r o m S o c i a l
I n s u r a n c e funds t o w a r d s the c o s t of t h e N a t i o n a l H e a l t h
Service.
T h i s column t a k e s no a c c o u n t o f t h e L o r d P r i v y
S e a l ' s p r o p o s a l s on c o n t r i b u t i o n s . . .
e
1948
1948
1958
1968
Cost^pf
Exchequer.
£m.
£m.
£rn.
486
210
292
562
661
765
185
283
385
393
393
393
White
Paper
Present
Proposed s
"
"
"
11
C o n t r i b u t i o n s of
i n s u r e d p e r s o n s and
their employers.
Total
Expenditure.
2.
The new p r o p o s a l s t h u s i n v o l v e , as compared w i t h t h e
W h i t e P a p e r p r o p o s a l s , e x t r a e x p e n d i t u r e of £76 m i l l i o n i n
1 9 4 8 , m e t "by a n i n c r e a s e o f c o n t r i b u t i o n s ::f £ 1 0 1 m i l l i o n
o f f s e t by a d e c r e a s e of E x c h e q u e r c h a r g e of £25 m i l l i o n .
B u t t h e E x c h e q u e r c a r r i e s t h e w h i l e of t h e i n c r e a s i n g c o s t
and the E x c h e q u e r c h a r g e r i s e s by about £100 m i l l i o n o v e r
e a c h o f t h e two d e c a d e s f r o m 1 9 4 8 ,
Nor i s 1968 b y any moans
the peak.
An i n c r e a s e o f £10 m i l l i o n e a c h y e a r f o r t h e
n e x t twenty i s a most f o r m i d a b l e p r o s p e c t f o r the E x c h e q u e r .
5.
I n t w o r e s p e c t s , I dm n o t i n a g r e e m e n t w i t h t h e L o r d
P r i v y S e a l ' s p r o p o s a l s on b e n e f i t s .
F i r s t , the
unlimited
d u r a t i o n of unemployment b e n e f i t i s f r a u g h t w i t h p o s s i b i l i t i e s ­
of abuse s u f f i c i e n t to involve a r e a l r i s k
rf b r i n g i n g
Government a d m i n i s t r a t i o n i n t o d i s r e p u t e .
I am a n x i o u s t o
s e e t h a t b e n e f i t i s g i v e n t o a l l t h o s e who a r e i n t h e
i n d u s t r i a l f i e l d a n d u n a b l e , t h r o u g h no f a u l t
of t h e i r o w n ,
to o b t a i n work.
B u t we m u s t r e c o g n i s e t h a t t h e l o n g t e r m
u n e m p l o y e d i n c l u d e s o m e who h a v e m a d e n o a d e q u a t e
efforts
t o g e t w o r k a n d o t h e r s , p a r t i c u l a r l y m a r r i e d w o m e n , who a r e
not really effectively in the industrial field.
I s h o u l d be
r e l u c t a n t t o s e e t h e a b a n d o n m e n t of t h e a u t o m a t i c
termination
o f b e n e f i t a f t e r a g e n e r o u s p e r i o d u n t i l we h a v e a s a t i s f a c t o r y
a d m i n i s t r a t i v e c o n t r o l of t h e e a s e s o f l o n g t e r m u n e m p l o y m e n t .
Such c o n t r o l no one has y e t been a b l e to d e v i s e .
The
p r i n c i p l e s h o u l d b e , I t h i n k , t h a t a n y - m a n o r woman,
including
a n y m a r r i e d w o m e n , who h a d d r a w n b e n e f i t f o r a c e r t a i n p e r i o d
s h o u l d Be r e q u i r e d , a s a c o n d i t i o n of d r a w i n g f u r t h e r
benefit,
t o change e i t h e r h i s o c c u p a t i o n or h i s d i s t r i c t of
residence,
or both.
B u t I am t o l d t h a t t h i s p r i n c i p l e i s
difficult
to apply in practice.
4.
S e c o n d , a s r e g a r d s o l d age p e n s i o n s , I q u e s t i o n t h e
n e c e s s i t y f o r c o n c e d i n g a p e n s i o n of 2 6 3 / - a week t o a s i n g l e
pensioner.
P e n s i o n e r s are accustomed to r e g a r d i n g a p e n s i o n
f o r a m a r r i e d c o u p l e a s made up of two e q u a l p e n s i o n s one
for
each spouse.
Indeed I t h i n k t h a t method of d i v i s i o n i s
generally preferred,
I s h o u l d s t i c k t o i t now.
I agree
to
t h e f i g u r e of 4 2 s / - a week f o r t h e d o u b l e p e n s i o n b u t , on t h e
view just expressed, the single pension should be
fflLs/-.
This
w o u l d mean a n i n i t i a l s a y i n g t o t h e scheme of £ 2 7 m i l l i o n
a year.
I t would save, in a d d i t i o n to t h i s , £750,000 a y e a r
o u t o f t h e f o r m i d a b l e a n n u a l I n c r e a s e of £ 1 0 m i l l i o n a y e a r
mentioned above.
5*
F u r t h e r I s t r o n g l y d i s s e n t from the propose.! t o pay a
p e n s i o n o f 1 0 s / - a week a t 3 5 ( 6 0 f o r women) w h e r e
the
pensioner, has not r e t i r e d .
This v i o l a t e s the p r i n c i p l e of
r e t i r e m e n t pensions and i s i n c o n f l i c t w i t h the
frequently
d e c l a r e d p o l i c y of t h e LaBour P a r t y .
I t i s of the utmost
i m p o r t a n c e t o i n d u c e workers t o r e m a i n a t work as l o n g as t h e y
a r e e f f i c i e n t p r o d u c e r s a n d t h e B e s t way t o s e c u r e t h i s i s
to
g i v e h i g h e r p e n s i o n s o n r e t i r e m e n t f o r t h o s e who p o s t p o n e
retirement.
I agree that the addition proposed in the
B e v e r i d g e r e p o r t o f I s / - a week ( 2 s / - f o r man a n d w i f e )
for
e a c h y e a r o f p o s t p o n e m e n t i s i n a d e q u a t e ^ I am w i l l i n g t o g i v e
t h e maximum o f i n d u c e m e n t w h i c h bhe s a v i n g s o n p o s t p o n e m e n t
justify?
a n d I am a d v i s e d t h a t we p c n l d m a k e t h e i n d u c e m e n t
2 s / 6 d s i n g l e and 5s/-- double f o r each y e a r .
I do n o t
think
we n e e d g i v e m u c h w e i g h t t o t h e p r e s e n t e x p e c t a t i o n o f a n
u n c o n d i t i o n a l p e n s i o n a t 6 5 , i n view of t h e v e r y l a r g e
net
a d v a n t a g e s o f f e r e d 'to c o n t r i b u t i o n s ^ J a y t h e n e w s c h e m e i s b y
and l a r g e markedly more advantageous to t h e c o n t r i b u t o r
than
the p r ? e s e n o e n s *
6.
The L o r d P r i v y S e a l p r o p o s e s t h a t t h e c o n t r i b u t i o n of t h e w o r k e r s s h o u l d be b r o u g h t down from 5 s / 2 d a week t o 4 s / 6 d a w e e k f o r a man i n G l a s s I a n d t o a p p r o p r i a t e
figures for other, c l a s s e s .
B e f o r e c o n s i d e r i n g t h i s p r o p o s a l we m u s t f i r s t s e t t l e what the b e n e f i t s are to b e .
The l i m i t a t i o n on t h e d u r a t i o n of unemployment b e n e f i t to t h i r t y weeks and t h e r e d u c t i o n of p e n s i o n s f o r a s i n g l e p e r s o n f r o m 2 6 s / - t o 2 1 s / - would e a c h s a v e a b o u t 7d a week on t h e
total c o n t r i b u t i o n ( h a l f on t h e w o r k e r , h a l f on t h e e m p l o y e r ) . If,, t h e r e f o r e , t h e s e two a m e n d m e n t s w e r e m a d e , t h e w o r k e r s '
c o n t r i b u t i o n would be r e d u c e d to 4 / 7 . ,
I n any c a s e , i f
the
c o n t r i b u t i o n i s t h o u g h t t o b e t o o h i g h , we m u s t c o n s i d e r
some a p p r o p r i a t e a l t e r a t i o n i n t h e b a s i s on w h i c h t h e
contribution i s b u i l t up.
I cannot contemplate merely an
a r b i t r a r y t r a n s f e r of so many p e n c e a week f r o m t h e w o r k e r
to the taxpayer.
This would soon l e a d t o pressure f o r a
bigger arbitrary transfer.
The p r a c t i c a l q u e s t i o n i s how
heavy a b u r d e n can be imposed, w i t h o u t r u n n i n g grave
future
r i s k s , on t h e t a x p a y e r and on t h e
contributor.
1
IV,
7o
I t h a s b e e n c l e a r f r o m t h e t i m e o f t h e Be v e r i d g e R e p o r t
t h a t o. c o m p r e h e n s i v e s c h e m e o f S o c i a l I n s u r a n c e w o u l d i n v o l v e
major financial considerations both at
-nee a n d , i n
increasing
degree, in the future.
Now we h a v e r e a c h e d t h e d e c i s i o n
s t a g e of i n c o r p o r a t i n g p r o p o s a l s i n a B i l l .
8a
S o c i a l I n s u r a n c e on g e n e r o u s l i n e s i n v o l v e s a s u b s t a n t i a l
t r a n s f e r of p u r c h a s i n g power from p r o d u c e r s t o non­
producers.
And t h i s i s i n a d d i t i o n t o many o t h e r
large
t r a n s f e r s of a s i m i l a r c h a r a c t e r a l r e a d y b e i n g made
Whether
t h e t r a n s f e r s i n v o l v e d w i l l be a c c e p t e d by t h e -producers,
w h e t h e r i n t h e f o r m of c o n t r i b u t i o n s o r t a x a t i o n ,
depends
p a r t l y on t h e v p l u m e o f p r o d u c t i o n
ait of which the
transfers
h a v e t o b e m a d e a n d p a r t l y on t h e a m o u n t of t h e
transfer,
The e s s e n t i a l c v n d i t i o n f o r a s u c c e s s f u l c a r r y i n g of a l l
these
b u r d e n s i s a h i g h l e v e l of p r o d u c t i o n i . e . f u l l
employment
o f t h e m a x i m u m n u m b e r of' p o t e n t i a l w o r k e r s o a t h a h i g h
standard of p r xluctivit,y
c
e
9.-'
The p r e s e n t p r o p o s a l s h o v e , h o w e v e r , t h e s p e c i a l
feature
t h a t owing t o t h e g r o w t h I n t h e n u m b e r s of t h e p o p u l a t i o n , o v e r
65 and ( a f t e r a s h o r t t e r m ) t h e d i m i n u t i o n i n t h e numbers
b e t w e e n 16 and 65, the b u r d e n w i l l become s i g n i f i c a n t l y
heavier
a s t h e y e a r s go o n .
This i s , as I see i t , a r e a l d a n g e r p o i n t .
The m e a s u r e s w h i c h may h a v e t o b e talc en from t i m e t o t i m e
c a n n o t be s e t t l e d now.
B u t w h i l e wo c a n n o t f o r e t e l l
the
f u t u r e , we m u s t i r y n o t t o p r e j u d i c e i t .
One p a r t i c u l a r
m e a s u r e w h i c h may h e l p a g r e a t d e a l w i l l p r o b a b l y b e
e n c o u r a g e m e n t o f w o r k e r s t o r e m a i n on t h e a c t i v e l i s t
longer
t h a n t h e y do
now.- I t i s f o r t h a t r e a s o n t h a t I
should
- 3 ­
especially deplore the under lining in the new scheme of the age of 65 as an age for pension and in particular the institution, alongside retirement pensions at the age of retirement, of a pension at 65 irrespective of retirement.
Pensions should be given at retirement,
-The future can settle when retirement is to be. H.D, Treasury Chambers, S.if. 1..
5TH DECEMBER, 1915.