HC Deb 14 June 1932 vol 267 cc233-47

Motion made, and Question proposed, "That the Clause stand part of the Bill."


I do not think the Committee will part with Clause 2 without having obtained one or two explanations from the Minister. The Clause is concerned with transfer values and reserve values. Of all the technicalities connected with this Bill, this is probably the greatest of all. I will not attempt to go into the details, but I will touch upon one or two broad principles embodied in this Clause, and, if the Committee will bear with me, I will try to indicate how much depends upon this Clause, because it is the means whereby the whole of the financial arrangements set out in other Clauses are to be dealt with. The Committee will probably understand the position when I say that when the right hon. Gentleman the Member for Carnarvon Burghs (Mr. Lloyd George) established his scheme in 1911–12, he created what is called a book credit of approximately£80, 000, 000. That sum was to be wiped out by way of a redemption from contribution income over a period of about 60 years. Whenever the Ministry of Health has found itself in any difficulty with regard to the finances of this scheme, it has adopted the practice of extending the period of redemption, and in extending the period of redemption the Ministry has been able to get over a large number of financial difficulties connected with the scheme.

In this Clause, they are adopting a method of dealing with the various changes in the financing of the scheme, and I am going to put one or two questions to the Minister that have occurred to me. There are, in connection with the scheme, the contingencies fund, the central fund, the reserve suspense fund and reserve values. In this Clause there is an indication of what is going to happen. We are entitled to ask the Minister to show those of us who do not understand high finance and the very technical problems connected with reserve values, contingencies and redemption and so forth, exactly what Clause 2 in simple language means. That, I feel sure, will help the Committee. Everything connected with the scheme turns upon what the actuary has done. On more than one occasion he has adopted certain systems of getting over difficulties by rearranging his actuarial calculation. The Committee ought to appreciate that there are means sometimes of getting over insurance difficulties by altering the actuarial basis of the scheme. I do not mean that the actuarial basis is fundamentally altered by Clause 2, but it does affect the problem with which I am dealing. This is what the Actuary says in his Memorandum, in paragraph 2 of page 2, and this is all we get: There are no means of estimating closely what will be the number of such persons in 1933, but it is believed that it may be put at approximately 80, 000. These are the persons referred to in Clause 1. Then he goes on to say: On this assumption the cost, exclusive of State grant, of providing medical benefit for this class in the year 1933 is approximately£50, 000, and, as provided by Clause 2, this amount is to be obtained by reducing the transfer values payable to the reserve suspense fund in respect of the persons concerned on the cessation of their title to medical benefit. It will indeed be very interesting to hear from the Minister what is actually the meaning of "reducing the transfer value payable to the Reserve Suspense Fund." That is to say, there is a value which the actuary puts upon the insured person for this purpose. There is not of necessity any money transaction in connection with fixing the reserve value of an insured person. It is proposed, I understand, to reduce mentally and to put on paper the actual reserve value for the purpose of making these complicated changes. Therefore, we are entitled to ask the Minister to be good enough to explain to us a little more clearly what it all means. The Memorandum from which I have read was the Memorandum of the Ministry itself, and will, I think, be more accurately drawn than if the Minister had himself actually drafted every word of that complicated document. I accept every word that he said this afternoon that, although he must accept responsibility for the Memorandum, he did not of necessity pen the words that are in it.

Let me see what the Memorandum says with regard to this problem. The Committee will always remember that we are dealing in Clause 2 with the finances covering the persons referred to in Clause 1. This is what the Minister says —this is apart, of course from what the actuary says, and I must confess that it is a little plainer and in more lay language—on page 5, the third paragraph down: The Bill provides for the extension of insurance until 31st December, 1933, of persons who would otherwise, by reason of prolonged unemployment, cease to be insured before that date. The pensions rights of such persons will be fully protected, and under Health Insurance they will be entitled to medical benefit. There are some persons in the next Clause who will not be entitled to medical benefit, but I am not dealing with that Clause at the moment. This is what the Minister says about Clause 2: The cost of providing that benefit will not be met from the Exchequer"— He need hardly have told us that, because the Exchequer told us long ago that it had decided to wipe its hands, so far as it could, of financing this scheme. It is almost worth while setting those words to music for grand opera purposes, because it was the Chancellor of the Exchequer in the Tory Government of 1926 that took away from this fund£2, 750, 000 per annum, and almost destroyed the actuarial principles of the scheme.


That does not arise on Clause 2.


I knew, after making that statement, that I should not be likely to be allowed to proceed. I was suggesting that it was almost time somebody put into music for grand opera purposes what the Minister says with regard to Clause 2: The cost of providing that benefit will not be met from the Exchequer"— I hope that is clear to every Member of the House. If necessary, I will return to that point later on, in order to emphasise it to the full. He continues: but in consideration of any extra liability that may be imposed on their funds, Approved Societies will be compensated by means of an adjustment of the transfer values which fall to be transferred to the Reserve Suspense Fund on members ceasing to be insured. 6.0 p.m.

I want to know whether, in handling the reserve value of any one of those 80, 000 persons, those persons are going to benefit by affecting the reserve values of other members of the approved societies, or is the adjustment going to be made in respect of the reserve value of each one of those persons? Let me put it thus: If there is not enough money to make up the ledger account in respect of one of those 80, 000 persons, is the actuary going to increase the reserve value in order to make up any deficiency, and to balance the account? Suppose that the reserve value of an insured person is£10. The reserve value is a made value. It is only redeemed from contribution income over each year. Is the Ministry going to appreciate the£10 into£12, in order to get over any difficulties in connection with adjustments on this Clause? I have put one or two problems to the Minister. He knows very much more about it than I do. In any case, he can refer to his brief if he cares to do so, because I am sure he is provided with full information on the subject. I conclude by saying that we are not satisfied with this Bill. We have fought almost every line of Clause 1 and as Clause 2 is the financial pivot upon which all the provisions turn in relation to Clause 1, we shall be compelled, unless we get a very clear and satisfactory reply from the Minister, to oppose this Clause as well. Perhaps the Minister will be good enough to explain, in as simple language as he can, exactly what Clause 2 means, and also the provision as to the year. The year 1933 is stipulated in Sub-section (2) of Clause 2, and I should like very much to know what there is sacrosanct about the year 1933 as regards this Clause, rather than 1935 or 1940.


I will try to give the hon. Member the explanation which he requires, but which, if I may say so, he appears to me not to need, for I should like to congratulate him upon his perfect acquaintance with the very difficult matter of reserve values, and the very clear account of them which he has given to the Committee, and upon which, indeed, I can hardly hope to improve. Perhaps, however, it may be assistance to the Committee if I say that this Clause is simply and solely concerned with the finding of finance for the concession of the extension of one year's medical benefit to persons who would otherwise be out of that benefit at the end of 1932. That is what, for the sake of convenience, we call the medical benefit year, which is given as a concession—the extension of insurance rights from the end of 1932 to the end of 1933. This Clause provides for the finding of the money for that concession, and that is the sole purpose of the Clause. The amount involved is about£50, 000.

The hon. Member asked for an explanation of the actual machinery by which that finance is found. Under our insurance scheme benefits and contributions balance only in the case of those who come into insurance at the age of 16. In the case of anyone who comes into insurance at an age over 16, the prospective benefits exceed the prospective contributions, and, in order to make the scheme solvent, the approved society which accepts such a person has to be credited with a sum which is called the reserve value. On his entry into insurance, the society is credited with that reserve value, which is an asset to meet the deficit.

When the person goes out of insurance, the reserve value which has been credited to his approved society is, naturally, transferred back, if there is any of it left. In the case of persons who will go out of insurance at the end of 1933 in the normal course, their reserve values will be transferred back from their approved societies. In order to finance the year of extended medical benefit, for which no funds are otherwise available, it is proposed to reduce the amount of reserve value which is transferred back from the approved societies. The approved societies will retain a part of the transferred value, and, their assets being thus increased, they will be able to meet the additional liability of the medical benefit year. The fund to which the transfer values are put is called the reserve suspense fund. Owing to the reduction of the value transferred, the reserve suspense fund will receive a smaller sum, and, as a consequence, the period of redemption of reserve values will be slightly increased. The approved societies will experience an advantage in being able to retain an asset which enables them to meet their medical benefit liabilities, and the disadvantage will be borne by the reserve suspense fund in a reduction of the amount. The hon. Member asked me whether there is a separate account for each individual, or whether it is spread over other persons. The answer is that the adjustment is made in the transfer value of the individual. With this explanation, I hope the Committee will see that there is nothing contentious about the Clause, and will be prepared to pass it.


I should like to raise one or two points which still appear to me to need some explanation. I confess that, unlike the hon. Member who opened the discussion on this Clause, I am not quite able to follow the technical details and ramifications, and I am obliged to the Minister for the clear exposition that he has given of the Clause; it has helped us considerably to understand this matter. He has put before us one or two points which I must confess I now appreciate for the first time, and I thank him for his clear explanation. He said that, in the case of each person who is over the age of 16 on joining, a certain sum is credited to a fund known as a reserve value fund. I should like to ask how the calculation is made of the amount which is set against each person. Is it based upon the person's age? A person joining at the age of 21 is, naturally, a much more valuable "life" than a person joining at 40; is there a scale?

The second point about which I am not quite clear is as to who provides the reserve value fund. Does, it come from the Government, or do the approved societies provide it out of their own. funds? Perhaps the Minister would make it clear who actually provides the fund, and by what means it is financed. There is also another point. The Minister says that this Clause is for one purpose, namely, to pay for the extra cost of medical benefit which will be given to these people, covering the sum of£50, 000. I understood him to say yesterday that he intended to give another extra year as a concession, and, when he was asked if he had any extra money left, he replied that, by searching and scraping, he had got another£50, 000 for an extra year's sickness benefit. I understood that that was a year extra beyond what is provided in the Bill—


Medical benefit.


Yes; I understand that the Clause is solely for the provision of medical benefit. Where is the Minister going to get the funds? Under what Clause, if this Clause does not cover it, will the extra year which he promised yesterday be provided for? Yesterday he told us that he had been able to get, for what he termed the first benefit that ought to be chargeable, a certain sum, by dint of searching, which would provide for the granting of an. extra year. This Clause covers the extra year given under the Bill as now drafted, and I understood from him that the year of which he spoke yesterday was an extra year in addition to that. Am I right?


Perhaps I can assist the hon. Member. I think the two years that he has in his mind are really only the one year—the additional medical benefit year 1933, which is financed by Clause 2.


I thought, from my reading of the Minister's answer, that he intended to give these people one extra year's medical benefit in addition, that is to say, that he intended to extend the period given under the Bill to 1934 instead of 1933. I see that I have been mistaken as to the generosity of the Government. Who is actually paying for this extra year's medical benefit? The Minister said that each man is given a reserve value, and, so long as he is in the approved society, he is credited with it. If he becomes unemployed for a time, and at the end of that time is about to be passed out of insurance, the Government say that they want to keep him within the Act for medical benefit purposes, and, seeing that a number of people with reserve values have passed out, they will allow the approved societies to use those reserve values to pay the£50, 000 which is the estimated cost of the medical benefit year. In other words, the people who are paying for this are not the approved societies or the Government, but the people themselves, because it is to come out of their reserve values which have not been used up. Their reserve values are not now needed, since they have passed out of insurance, and the Government come along and use their reserve values to provide another year of medical benefit.

We have been told that the Minister has been generous, but what has happened in effect has been that some unemployed people have not used up their reserve values, and those reserve values have been taken from them in order to provide for other unemployed people having an extra year's medical benefit. As I see it, 80, 000 people may be affected by this proposal. I am not sure as to the number; perhaps the Minister could give us an approximate idea of the number of people who have reserve values. There must be a good number without reserve values, but there must be a number who have them, and perhaps the Minister could give us an idea of what it is. In the case of those who have reserve values, those reserve values are transferred to the approved societies, and they are going to use the money of unemployed people who have been out of work for a long while, to pay for other unemployed people who have not a reserve value at all. That is high finance. The funds of the society cannot pay. The Government cannot pay. The person who is to pay is the man who is now to be thrown out of insurance. You say, "We will take that value and provide you and the other unemployed with free medical attention."

My hon. Friend the Member for Bridge-ton (Mr. Maxton) talked about the manipulation of finance and the rich making an attack on the poor. This manipulation seems to me to be about the worst I have yet known. The whole cost of giving the extra year's benefit comes from the reserve value of men and women who are put out of insurance entirely. The Minister estimates the cost at£50, 000. I should like to ask him how much he expects to get from the reserve values. Does he expect to get it all? If not, what is the sum that he expects to get? If he does not get it all from the reserve value, who is going to make up the balance? Is the balance to come from the reserve fund created by the other insured contributors or, if not, where is it to come from? The Minister said this Clause was mechanism. The hon. Member for Westhoughton (Mr. Rhys Davies) said that, unless he got a very clear explanation of what it meant, his party would divide against it. My own view is that the Clause must be divided against because it makes the medical benefit payable by these people in the main. I thank the Minister for his very detailed and fair explanation but the explanation only shows how bad the Bill actually is.


I will answer the hon. Member's questions as clearly as I can. First, what does the amount of reserve value depend upon? It depends principally on the age and the sex of the person who comes into insurance. How many persons are there with reserve value? Anyone who comes into insurance over 16. I have not the figure in my head but it can be ascertained from the National Health Insurance reports. Who finds the money for the reserve value? It is not necessary to find any cash for reserve value. It is a paper credit that is used in order to adjust the relation between capital and revenue account. This paper credit is converted into a cash credit over a period of years by application of a small part of the contributed income. What is the amount to be found for the purposes under discussion? A sum of£50, 000 is required. This sum will be found by means of an adjustment of part of these paper credits. Who will be actually paying for it? Not, as the hon. Member supposes, other insured persons with a transfer value. The only effect of the adjustment is to postpone for a period, short or long, the period required for the ultimate redemption of reserve values. What becomes of any balance that may be left of reserve value as a person finally goes out of medical benefit? If any, it will be transferred to the Reserve Suspense Fund.


We have to thank the Minister very heartily for a very concise statement of the exact position. We gather now that this reserve value is not money or credit. It is a notion. It is a financial fiction, a figment of the imagination of the actuaries who are responsible for the solvency of the Health Insurance Fund and, when they get the notion that it might be insolvent, they just take another notion and make it solvent. It seems to me that it is only a matter of adjusting ideas and the Government have no difficulty at all. I really feel that while the right hon. Gentleman's explanation was concise, and was delivered with a rapidity which? think must be unparalleled for any statement of the kind in the House, he really puts before us a very important consideration which the Committee has to take notice of. He suggests to my mind that there was no danger of insolvency at all or, on the other hand, that from the very beginning the fund was never solvent, because he has told us that no one who entered over the age of 16 was individually a solvent member of the fund unless he were credited with an amount not paid by him. If he came in over the age of 16, he was never contributing his proper quota to the general fund unless from the beginning, varying according to his age and entry, a credit was attributed to him by those who administer the fund. He, as an individual, would only contribute his quota to make the fund financially solvent if he was credited with something that he did not personally con-tribute. [Interruption.] I wish the Parliamentary Secretary would either stop shaking his head altogether or would make it more expressive, because it is most disquieting. His vertical nods and his horizontal nods always seem to me to come at an inappropriate moment. When I am expecting a vertical nod, I get a horizontal nod.

The whole solvency of the fund from the beginning depends on reserve values which are credited to people entering over the age of 16, and now the right hon. Gentleman tells us that these reserve values, on which the solvency of the fund depends, are figments of the imagination. Here we are asked to pass this Measure so that in 1932 the fund may be made solvent, when the Minister by his explanation proves to us that it has been insolvent from the very beginning. This makes the situation infinitely worse, because we have been impressed with the fact that, working from a financial basis that we never accepted as of being sound, these sick people and aged people had to be deprived of some rights so as to secure financial solvency. Now we are told that financial solvency, in so far as we ever have financial solvency, can be secured by book-keeping entries. We have always admitted that we are absolute tyros in this matter of finance. We do not grasp the details at all. But we always get the essentials, and the essential thing to us in this Clause is that put by my hon. Friend the Member for Gorbals (Mr. Buchanan), that the unemployed man has a value even when he is unemployed over an extended period, and the financial solvency of the fund is to be maintained by making the reserve values of the unemployed men collectively support the benefits that particular unemployed men are going to be deprived of.

6.30 p.m.

The Minister said on an earlier Clause that there was going to be no reduction. Nothing was going to be taken away during this financial year. It is clear that benefits are to be progressively reduced and from this moment the policy that the individual insured person holds in National Health Insurance is to have a lesser value than it had before this Measure was introduced. The value, in each particular case, depends on certain contingencies arising and on certain dates being reached, but the individual value of a policy holder in National Health Insurance, from the date this Bill becomes law, is a thing of less value than it was before the Measure was introduced. The chances of getting an Old Age Pension are less, the chances of the widow and orphans getting their pensions or allowances are less. His chances of getting the amount of his sick benefit and medical attention and maternity benefit for his wife are being diminished by this Bill. The diminution of the value of the policy occurs on the day that the Bill becomes law. The Minister's defence is that we ought to be very grateful because they could have done a whole lot worse. The Measure could have been infinitely worse than it is. Everybody knows that every Measure which is brought into the House of Commons could be worse than it actually is. The whole machinery of Health Insurance could have been swept away. That would have been worse.

The DEPUTY-CHAIRMAN (Captain Bourne)

The hon. Gentleman is now delivering a speech against the Third Read- ing of the Bill, and is getting beyond the Clause.


No, Captain Bourne, I have a speech for the Third Reading as well. At the moment I am trying, as far as possible, to deal with what are really book-keeping entries. We were stupid enough to believe that money was going to change hands. We are now learning from the Minister not that money is changing hands, but that alterations are to be made in the figures in the books emanating from certain changes in the ideas which occupy the minds of the Government actuaries. The point I wished to make when you, Captain Bourne, thought that I was going beyond the scope of the Clause was simply that all this loss in value is taking place in respect of the unemployed sick man. I agree that it might have been worse. AS the Minister explains, it is eased in certain directions, but this fact is not due to any donation or additional Government contribution or to any additional effort on the part of approved societies, many of which are wealthy corporations. While these societies may not be making much in their approved society branch of the business, they are getting into positions which enable them to do lucrative business. I can think of one or two societies which are among the wealthiest financial corporations in this country. It is not they who are to stand the racket for the year of benefit to the unemployed man. It is not they who are going to find the£50, 000. The unemployed men themselves are going to contribute, so that there is a chance of pension, medical benefit, and maternity benefit being continued for a little longer than otherwise would be the case, and so that the actuarial conception, which has been the sound and sure foundation upon which the solvency of the National Insurance Fund has been built from the beginning, may remain unsullied and untarnished during the financial and industrial storm which the nation is supposed to be weathering just now.

I am sorry that we have not a man in our ranks, and also that there does not seem to be one in any other part of the Committee with expert actuarial knowledge which he is prepared to put at the service of the poor. I am certain that anybody who knew this business from the inside could turn the Measure inside out and make the Minister, his Department and his financial advisers the laughingstock of every one who knows anything about financial affairs. It is pitiable that there is not one of the 615 Members of this House with knowledge of this description. A doctor will put his skill, as my hon. Friend the Member for Gorbals said, at the service of the penniless sick without reward, and the lawyer will go into the courts and defend

the poor client without any fee, but there is not one person with expert knowledge in the realm of finance prepared to stand up and defend the poor against an outrageous attack on the few miserable reliefs which are left at the present time.

Question put, "That the Clause stand part of the Bill."

The Committee divided: Ayes, 299; Noes, 44.

Penny, Sir George Russell, Alexander West (Tynemouth) Taylor, Vice-Admiral E. A.(P'dd'gt'n, S.)
Percy, Lord Eustace Russell, Hamer Field (Shef'ld, B'tside) Templeton, William P.
Perkins, Walter R. D. Rutherford, Sir John Hugo Thomas, James P. L. (Hereford)
Patherick, M. Salmon, Major Isidore Thomson, Sir Frederick Charles
Peto, Sir Basil E. (Devon, B'nstaple) Salt, Edward W. Thorp, Linton Theodore
Peto, Geoffrey K.(W'verh'pt'n, Bilst'n) Samuel, Sir Arthur Michael (F'nham) Titchfield, Major the Marquess of
Pickering, Ernest H. Sandeman, Sir A. N. Stewart Todd, A. L. S. (Kingswinford)
Pickford, Hon. Mary Ada Scone, Lord Tryon, Rt. Hon. George Clement
Pike, Cecil F. Shakespeare, Geoffrey H. Vaughan-Morgan, Sir Kenyon
Potter, John Shaw, Helen B. (Lanark, Bothwell) Wallace, John (Dunfermline)
Procter, Major Henry Adam Shaw, Captain William T. (Forfar) Ward, Lt.-Col. Sir A. L. (Hull)
Pybus, Percy John Shepperson, Sir Ernest W. Ward, Irene Mary Bewick (Wallsend)
Ralkes, Henry V. A. M. Simmonds, Oliver Edwin Ward, Sarah Adelaide (Cannock)
Ramsay, Capt. A. H. M. (Midlothian) Sinclair, Maj. Rt. Hn. Sir A.(C'thness) Warrender, Sir Victor A. G.
Ramsay, T. B. W. (Western Isles) Skelton, Archibald Noel Waterhouse, Captain Charles
Ramsbotham, Herwald Slater, John Wells, Sydney Richard
Ramsden, E. Smiles, Lieut.-Col. Sir Walter D. Weymouth, Viscount
Ratcliffe, Arthur Smith, R. W. (Ab'rd'n & Kinc'dine, C.) White, Henry Graham
Rathbone, Eleanor Somervell, Donald Bradley Whiteside, Borras Noel H.
Rea, Walter Russell Somerville, D. G. (Willesden, East) Williams, Charles (Devon, Torquay)
Reed, Arthur C. (Exeter) Southby, Commander Archibald R. J. Williams, Herbert G. (Croydon, S.)
Reid, David D, (County Down) Spears, Brigadier-General Edward L. Wills, Wilfrid D.
Reid, William Allan (Derby) Spencer, Captain Richard A. Windsor-Clive, Lieut.-Colonel George
Remer, John R. Spender-Clay, Rt. Hon. Herbert H. Withers, Sir John James
Rentoul Sir Gervais S. Stanley, Hon. O. F. C. (Westmorland) Wood, Rt. Hon. Sir H. Kingsley
Roberts, Aled (Wrexham) Stevenson, James Wood, sir Murdoch McKenzie (Banff)
Roberts, Sir Samuel (Ecclesall) Storey, Samuel Worthington, Dr. John V.
Robinson, John Roland Strickland, Captain W. F. Wragg, Herbert
Rosbotham, S. T. Stuart, Lord C. Crichton- Young, Rt. Hon. Sir Hilton (S'v'noaks)
Ross, Ronald D. Stuart, Hon. J. (Moray and Nairn) Young, Ernest J, (Middlesbrough, E.)
Ross Taylor, Walter (Woodbridge) Sueter, Rear-Admiral Murray F.
Ruggles-Brise, Colonel E. A. Sugden, Sir Wilfrid Hart TELLERS FOR THE AYES.
Runge, Norah Cecil Summersby, Charles H. Captain Sir George Bowyer and Mr. Womersley.
Russell, Albert (Kirkcaldy) Tate, Mavis Constance
Adams, D. M. (Poplar, South) Hall, F. (York, W.R., Normanton) Maxton, James
Attlee, Clement Richard Hall, George H. (Merthyr Tydvil) Parkinson, John Allen
Batey, Joseph Hirst, George Henry Price, Gabriel
Buchanan, George Jenkins, Sir William Salter, Dr. Alfred
Cape. Thomas Jones, J. J. (West Ham, Silvertown) Thorne, William James
Cocks, Frederick Seymour Jones, Morgan (Caerphilly) Tinker, John Joseph
Cripps, Sir Stafford Kirkwood, David Wallhead, Richard C.
Daggar, George Lansbury, Rt. Hon. George Wedgwood, Rt. Hon. Josiah
Davies, Rhys John (Westhoughton) Lawson, John James Williams, David (Swansea, East)
Duncan, Charles (Derby, Claycross) Leonard, William Williams, Edward John (Ogmore)
Edwards, Charles Logan, David Gilbert Williams, Dr. John H. (Llanelly)
Graham. D. M. (Lanark, Hamilton) Lunn, William Williams, Thomas (York, Don Valley)
Greenwood, Rt. Hon. Arthur Macdonald, Gordon (Ince)
Grenfell, David Rees (Glamorgan) McEntee, Valentine L. TELLERS FOR THE NOES.
Griffiths, T. (Monmouth, Pontypool) McGovern, John Mr. John and Mr. Groves.
Grundy, Thomas W. Maclean, Nell (Glasgow, Govan)