NEW CLAUSE.—(Employers' contributions.) (Hansard, 23 April 1934)

§ Lord E. PERCY
I beg to move, "That the Clause be read a Second time."
This Clause, which I hardly expected to see reached, proposes that it shall be the duty of the Statutory Committee to consider and report upon the present method of assessing contributions to the Unemployment Insurance Fund. We have an alternative Amendment down to the Second Schedule which would at last bring that question within the purview of the Statutory Committee without laying upon them a definite statutory duty to take it into consideration. But on this occasion we wish to suggest the more drastic proposal that they shall actually be given the statutory duty to consider it. It must strike anyone who has considered the broad and ultimate effects of the insurance scheme as peculiar that this subject is not, even under the Bill, within the purview of the Statutory Committee 1514 at all, that it remains a subject on which the Government and Parliament alone can make an alteration in the law and lies outside the power of the Statutory Committee even with the Minister's concurrence. Surely that must make the future administration of the fund almost impossible.
I have noticed in these Debates that speaker after speaker has got up and has spoken of the happy financial position of the fund as if it was one on which we could congratulate ourselves. But how is that prospectively prosperous financial position to be gained? It is to be gained because every increase in employment not only relieves calls upon the fund, but increases the income of the fund, because this House is directly taxing the employer for every single extra man he employs, and that tax is directly proportionate to the number of men he employs. We speak very often airily of various fundamental alterations in the organisation of industry which would enable more men to be employed.
We talk about shortening hours, increasing staffs and spreading work over a larger area. How do we suppose that such a reform can possibly be carried out, quite apart from these other difficulties, when you tax industry in proportion to the number of men it employs? You tax capital in proportion as it is used to employ labour. You say to the employer, the capitalist, not as I, a poor benighted Tory, would be inclined to say to him, "You possess capital. It is the first duty of capital to employ labour, and unless your capital carries out that duty we shall tax your capital because you do not use it to employ labour"—instead of taking a benighted Tory view like that, you say to the capitalist, "If you use your capital so as to gain the maximum of profit with the minimum employment of labour, good luck to you, but if you try and use your capital for the maximum employment of labour and the minimum profit, then we shall tax you in proportion as you employ labour." That is the principle upon which, at the present moment, the whole finances of unemployment insurance, let alone health insurance, is based There is no doubt that in some degree this method of assessing contributions to the Unemployment Insurance Fund is one of the direct causes of unemployment. It is a direct discouragement to capital to employ labour.
1515 It may be said: "What is your alternative? Is there any alternative?" At this hour I will not go at length into alternatives, but I have attempted to go at length into them elsewhere. It may be true that there is no real alternative, unless you can get such an organisation of industry as will enable a body representative of industry to compound for a lump sum in insurance contributions for a period of years: a block grant, as it were, irrespective of the actual number of men employed. Such an organisation of industry may not exist at the present time, but I believe that the only way, if we are ever going to get the kind of organisation of industry which many of us and many industrialists look forward to, is rather by using measures for the proper administration of the social services than by attempts to bludgeon industry into what is called rationalisation by threatening them, with a big stick, with the withdrawal of protectionist duties which at present protect them from foreign imports. I indicate that as a line of a possible future solution.
It cannot be that the only way of financing an Insurance Fund of this kind is by a direct tax on the number of men employed. For the future of this system, for the greater employment of men in this country, not spreading employment for a larger number of people by reducing the hours of labour, it is essential that there should be some alteration in this respect. At the present time no provision is made for it and no consideration of the problem is contemplated in this Bill. It is outside the purview of the Statutory Committee, and yet how can the Statutory Committee consider the future finance of the fund if at any moment His Majesty's Government, or a Government of this country energetic enough to consider this subject at all, can come down and spoil all our calculations by a revolution in the system of contributions to the fund? I am afraid that unless we provide for this side of finance, for the contributions side as well as the benefit side, we shall find the Statutory Committee and the Government of the future at cross purposes, the fund will hang up between the two, and we shall see industry going in the direction of greater unemployment because of the effect of this tax on employment under the fund. I move the 1516 new Clause in the hope of eliciting an assurance from the Government that they are contemplating some action, or some provision for action, in regard to this matter.

§ Mr. LAWSON
It is a pity that this new Clause has been delayed until this hour of the night, because there could have been a very useful discussion upon it. I do not want to stand between the Committee and the Parliamentary Secretary, but I want to say that this matter has been raised upon more than one occasion. I remember a very instructive speech by the right hon. Member for Epping (Mr. Churchill) when, with the courage and independence of thought which has been characteristic of the Noble Lord to-night, he found himself in the company of other courageous and independent Gentlemen on this side of the House. We have always been advocates of a non-contributory system. The Noble Lord and other hon. Members who supported him find themselves in this respect in company with hon. Members on this side of the House. They have laid a scheme to which they were not tied in detail before the Royal Commission, in which they said what many thinkers in this House have said, that there ought to be a non-contributory system and that the funds ought in effect to be levied in the same way as funds are levied for the social services. Therefore, if it is possible to get a vote upon this Clause, I wish that we may have one.

Mr. HUDSON
We have not time to go into this Clause with the fullness that it deserves. The right hon. Gentleman who moved it has made a deep study of this matter and will forgive me if I am presumptious enough to say that he made a most interesting speech. It will suffice for me to say to-night that the Royal Commission which was set up to consider this, among other matters, gave it very full consideration. I agree that to a great extent the present contribution partakes of the nature of a poll tax, and is exposed to the obvious criticism that the more employment an individual employer gives, the higher his contribution has to be. On the other hand, it is open to argument that the employer gets a definite service from the fund and the whole system. The large employer of 1517 labour, especially, requires a large reserve of labour, and it is only fair that, in return for this reserve being maintained at his disposal, he should contribute in proportion to the service he receives. A very good case can be made out for the employer's contribution, and there is an equally good case for exacting a contribution from the employé, and again for suggesting that the State should contribute, as being interested from the social point of view and also as a trustee.
In every important industrial country, even including parts of the United States, there is an unemployment insurance scheme with contributions based on very differing systems. I am not prepared to say that some of these might not, in conceivable circumstances, be an improvement on our own, but the fact remains that ours has been in existence for 22 years, that a Royal Commission has spent a large number of months in examining the matter and has received evidence from a large number of persons in the country and decided that the existing system, with certain emendations, is the most suitable system that could be made. I should like to say, in conclusion, that the right hon. Gentleman was not quite accurate in saying that the Statutory Committee did not consider such a change to be within its powers. It is quite within the powers of the Statutory Committee, if my right hon. Friend asked for their advice, to make an inquiry into the whole matter and tender advice for such changes as they might consider desirable, not on their own motion, but in answer to specific requests by my right hon. Friend. With that assurance I hope that, as we cannot go into the matter very fully, my right hon. Friend will feel able to withdraw the Clause.

§ Mr. NOEL LINDSAY
I rise to support this new Clause. My hon. Friend the Parliamentary Secretary says that he regrets that there has not been time for a fuller Debate on this most important question. If that be so, what is the objection to accepting the Clause? He said that there is power, if the Minister submits this question to the Advisory Committee, for the Advisory Committee to consider it. Can he give us an assurance that when the pressure which will 1518 be on the Advisory Committee is a little subsided he will then submit this question to them? The new Clause merely lays on the Statutory Committee the duty of investigating the matter. It is one of the most serious problems in the financial and general structure of the insurance scheme, and I ask the right hon. Gentleman between now and Report to consider the question of submitting it to the Statutory Committee or else to accept the Amendment. I do not intend to emphasise its importance. There is hardly an employer in the country who does not constantly complain of the heavy burden which this contribution lays upon him, and the right hon. Gentleman must know that there are probably thousands of employers who with a possibility of expansion if risks are taken hold back because they know that every extra man they take on means an additional burden. In large works and factories, in shipbuilding yards, the accumulative effect of this tax is enormous, land it is a tragic thing that at a time when we are bending all our energies to provide a constructive policy of employment we should, by a short sighted policy which has never really been properly investigated, take away with one hand what we are giving with the other.
When this provision was first introduced there was a logical reason for it. It was regarded as being an incentive to an employer to provide employment and thereby get his reward. If he provided steady employment he received a rebate. That incentive has disappeared, no longer does an employer who keeps his men in work get a rebate, and with its disappearance has gone the whole logical reason for the employers contribution. I am glad to find the hon. Member for Chester-le-Street (Mr. Lawson) in agreement with us on this point. He speaks of a non-contributory scheme. We do not advocate a non-contributory scheme as far as workpeople are concerned. I am prepared to see the one-third, the employers contribution, made up from the Exchequer. I do not desire to impose any additional burden on the workmen, but I think it is right that a workman himself should have a personal interest in the Insurance Fund. That is a very different thing from supporting a non-contributory scheme.

§ Lord E. PERCY
I will not attempt to divide the Committee at this hour, but if we have the good fortune to have our Amendment on the Second Schedule discussed to-morrow I shall suggest that we should then test the opinion of the Committee on the narrower issue as to whether it should fall automatically within the purview on the initiative of the Statutory Committee.