§ Order for Second Reading read.
§ 11.11 a.m.
§ The Financial Secretary to the Treasury (Mr. Henry Brooke)
I beg to move, That the Bill be now read a Second time.
I am particularly pleased to see my hon. Friend the Member for Holland with Boston (Sir H. Butcher) in his place, because this Bill is founded on a Private Member's Bill which he introduced in the last Parliament. My hon. Friend was fortunate in the Ballot, and he used his good fortune to bring forward an excellent Bill for extending the powers of friendly societies. But it was one of the casualties of the Dissolution, because the Friday which was to be devoted to its Second Reading was not reached in the last Parliament. The Government—I think I can say with the good will of my hon. Friend—have taken over his Bill, introduced certain improvements into it, and now present it to the House.
We felt that this was the right course. The friendly societies had seen the Bill a good many months ago, and had been kept waiting for it all this time, and it would have been hard on them for it to have been left once more to chance in the Ballot for Private Members' Bills. We think this is a Bill worthy to be placed on the Statute Book, and so the Government have taken it up.
We do not often discuss the affairs of the friendly societies in this House, and therefore, before I come to explaining the Clauses of the Bill, I think hon. Members will pardon me if I go briefly over the history of the friendly society movement so that we may see the present day problems of the friendly societies in their true perspective. The first society which we know of that included the word "friendly" in its name was the Goldsmiths Friendly Society, founded as far back as 1712. But there is evidence that the term "friendly society" was in common parlance and readily understood by people before that. Indeed, one body which was undoubtedly a friendly society in the modern sense, though it did not include those words in its title, was founded some 400 years ago.
1483 This is a very ancient product of the native genius of the British race. Ordinary people, friends and neighbours, got together in groups and thought out how they could combine for their mutual benefit. They bound themselves to make certain contributions to a common pool out of which funds for the benefit of individuals could be made available in certain circumstances.
From the beginning, the main purpose has been the payment of sickness benefit which has been extended by many societies to include provision for old age, death benefits and a wide variety of other kinds of payments made under the society's rules, if certain contingencies or misfortunes occurred to a member. The main Act of Parliament to which we should look back is the Act for the Encouragement and Relief of Friendly Societies which was passed by Parliament in 1793. The movement developed a great deal in the nineteenth century. It was fully investigated by a Royal Commission in 1874, and I think I am right in saying that is the one official and comprehensive investigation of the friendly societies movement that has ever been made, although, of course, we have valuable reports published every year by the Registrar.
The names—old-fashioned names we may think—have survived very pleasantly into this modern day. There are the Oddfellows, the Foresters, the Shepherds and many others. There was usually some good reason why the original name was adopted. Often it originated in some quite small local meeting from which a society has subsequently grown and spread widely. It is believed that the Loyal and Ancient Shepherds Friendly Society was actually founded by a small meeting of neighbours which took place on Christmas day, 1826. They needed a name for their society, and they called themselves "ancient shepherds" because of the date of the birth of the society. They called themselves "loyal" to show that they were non-political and meant no harm to the State. At their peak number, the friendly societies were covering at least one-fifth of the whole population of Britain against sickness or other misfortune.
In 1911 came the development of National Health Insurance, as distinct 1484 from that individual private arrangement which people had made for themselves previously through the friendly societies. In 1911 the Government of the day adopted the approved society system to administer National Health Insurance and obviously, the impact of that Act had far-reaching effects on friendly society development. But the reason why I think it well to consider the position of friendly societies today—and I hope and have every reason to believe that we can do so with good will from all parts of the House—is that when in 1946 the then Government brought in its all-in scheme of compulsory National Insurance, including sickness insurance and covering in its compulsory provisions the whole of the population, quite clearly, the friendly societies were put in a position where they had to think hard about their future.
I am not for one moment criticising the National Insurance Acts. Let me say in passing that all this history seems to me an excellent example of the way we do things in this country. Individuals have the initiative to get together to do something for themselves which is necessary. They do that, and the work grows. It becomes so well established that it is suitable to be taken over and extended more widely, indeed universally, by the State; and that releases—and this is my point—individual energy for fresh pioneering work in other directions.
The effect of the 1946 Act was threefold. The range of compulsory insurance was increased, the administration of insurance was taken away from the friendly societies and the contribution which the individual had to pay for State insurance was also greatly enlarged. To put it quite bluntly, the friendly societies had to take a knock, and since that time a number of people in the friendly society world and outside it have been thinking what new place the friendly societies can usefully find for themselves in the modern world.
The numbers of members of friendly societies have fallen by about one-quarter since the time of the 1946 legislation, but when I say that there are still over six million members of friendly societies in the country, the House will see that this is not by any means a movement that has been killed. It is rather one that is quite clearly deep-rooted in 1485 British life, and I feel quite sure that most hon. and right hon. Gentlemen would like to look at the law to see whether it can be improved so as to give friendly societies wider opportunities in the future.
§ Mr. H. Hynd (Accrington)
I know that the Minister does not want to be misunderstood, but it seems to me that what he has just said might quite possibly be misunderstood. He spoke about the movement not having been killed. I am sure the right hon. Gentleman does not wish to give the impression that the object of the National Insurance Act was to kill the friendly society movement, but that suggestion might be read into what he said. I hope that he will make that point clear.
§ Mr. Brooke
I am grateful to the hon. Gentleman for that observation. I took great care to say that I was in no way criticising that legislation. Indeed, I indicated that this was what I considered a normal, sensible development of voluntary provision in this country. When voluntary provision becomes so extensive that the job can be done by State administrative machinery, then the law can be altered, the State can relieve the pioneers of a great deal of routine work, and the pioneers on whom we so much depend in our common life can free themselves to take new opportunities.
This Bill seeks to give the friendly societies new opportunities. I think that a number of hon. Members are likely to have read the important book entitled "Voluntary Action" which Lord Beveridge wrote some seven years ago. He was assisted to write that book by the support of the National Deposit Friendly Society. Its outstanding importance is that it is the one modern study of the friendly society movement as it exists today. I think that my hon. Friend the Member for Holland with Boston, if he speaks later in the debate, as I hope he will, will not mind my saying that this Bill must clearly owe a number of its ideas to the suggestions of Lord Beveridge.
Parliament did not create the friendly societies, and neither can it breathe new life into them. The friendly societies are very much alive, but they are restricted in certain respects which I shall describe. What Parliament can do, and, I submit, should do, is to open up to 1486 them new opportunities by removing certain legal obstacles which now restrict them. That is what this Bill seeks to do, and I ask the House to keep that in mind while I run through its Clauses.
Clause 1 needs to be read in conjunction with Section 8 of the Friendly Societies Act, 1896. That is the principal Act, and it permits five separate kinds of societies to be registered under it. They are friendly societies, cattle insurance societies, benevolent societies, working men's clubs and what are called specially authorised societies, that is, societies authorised for some purpose by the Treasury.
The important point is that under the law a registered society cannot normally combine two of those purposes. It must, with only one small exception, stick only to one of them. A friendly society cannot start running a working men's club, and so forth. Moreover, only the first of those classes registered under the Friendly Societies Act, that is, friendly societies themselves, enjoy Income Tax exemption. I think that the House will readily begin to realise, therefore, what complications there may be when one seeks to extend the scope of friendly society work.
Clause 1 allows a society or branch of any description, whether it is a friendly society, club, or what, to lend its surplus funds to a society or branch of any other class. I stress "surplus funds" because quite clearly it would be wrong if people who had been paying in money for sickness benefit purposes were suddenly to find that the funds had been reduced because the money had been applied for some other purpose.
A well conducted friendly society will have a surplus, and we have reason to know that friendly societies will, in certain cases, appreciate the opportunity of going outside the present restrictions placed upon them. If this Bill goes through, any society with a surplus will be able to set up a subsidiary society to run a club or an old people's home, or several societies will be able to combine in so doing.
Clause 1 is designed primarily for friendly societies, but there is no reason in principle why it should not work in the other direction, and why, for instance, a working men's club should not use its surplus funds to conduct a friendly society. We shall see what happens.
1487 At this point, I will say something about the tax position. I know that there is one change in the law which many friendly societies would like to see made. Indeed, many of us would like to see it made in our own cases. It is that we should get additional tax relief. But this Bill does not propose to give additional tax relief. Friendly societies at present enjoy an exemption from Income Tax. That dates from the last century, and it means that registered friendly societies can claim exemption from tax if they do not assure to any person more than £500 or if they do not assure an annuity exceeding £104 a year. Provided that they keep within those limits they are entitled to exemption from Income Tax under Schedules A, C and D. It may be that some societies would like an increase in those limits, which were last raised in 1948. If I remember rightly, the annuity limit was doubled, and I believe that the lump sum limit was increased from £300 to £500.
There seems to be a measure of agreement between the political parties that a further extension of Income Tax exemption could not be afforded. In a debate in another place in 1949, Lord Pakenham, speaking for the then Government, made it clear that he could not hold out any hope of a further extension of Income Tax exemption for friendly societies. Since that time the whole Income Tax structure has been reviewed by the Royal Commission on the Taxation of Profits and Income. Its report made no recommendations in favour of a change in the tax exemption to friendly societies, and I understand that the friendly societies themselves made no representations to the Commission for a change in that respect.
In these circumstances, I want to make it clear to the House that I cannot hold out any hope of an extension of the friendly societies' Income Tax exemption. At the same time, I can give a firm assurance that the Government have no intention of curtailing in any way the present exemption enjoyed by the societies. The Bill is so drafted as to ensure that if societies wish to undertake the new activities which the Bill will make possible, they will not be in any danger of losing tax exemption in respect of their existing activities.
1488 Clause 2 allows a friendly society to invest, to the extent of its surplus, in the share or loan capital of a housing association, whereas the present law confines a society's investment to trustee securities, savings bank deposits, real property, and certain other limited classes of security.
Clause 3 extends the range of friendly society benefits to include unemployment benefit and a marriage grant. Unemployment benefit is not at present among the benefits which friendly societies can provide under Section 8 (1) of the principal Act, though it is a specially authorised purpose under subsection (5). Some specially authorised societies have been registered for this purpose, and, by a concession which has no basis in law, the Inland Revenue has for a long time allowed them the same tax exemption as friendly societies. Incidentally, Clause 3 regularises their position and provides for them to be re-registered as friendly societies. The marriage grant represents a slight extension of the provident business which friendly societies can engage in free of tax.
Clause 4 may attract the attention of the House, because it provides for a new class of old people's home societies to be registered under the Friendly Societies Acts. At present, friendly societies can provide old-age homes only for their own members, and only by way of mutual insurance against possible need. The new class of society under the Clause will be able to provide such homes for all-corners, on what I might call a "pay-as-you-use" basis. I hope the House will agree that the provision of homes for the aged is a field very much akin to the traditional purposes of friendly societies and that, with the benefit of the Clause, friendly societies will find that they can do valuable work in meeting a need which is acknowledged by us all to be of growing importance.
In passing, I should say that a home for old people run by a friendly society under the Clause would come within the scope of Part III of the National Assistance Act, as I read it. In discharge of its functions under that Act, therefore, a local authority could, if it wished, make an arrangement with or directly assist a friendly society running such a home.
§ Mr. Eric Johnson (Manchester, Blackley)
Are we right in assuming that these old people's home societies will be exempt from Income Tax, as the others are?
§ Mr. Brooke
No. They will not be exempt from Income Tax.
Clause 5 raises from £100 to £200 the amount of which a member may dispose at his death by nomination without the formalities of a will. This Clause also applies to members of registered trade unions. A similar increase was given to co-operative societies by the Industrial and Provident Societies Act, 1954, and this provision brings the friendly societies into line.
Clause 6 is a little complicated. At present, broadly speaking, a society which collects premiums on life assurance contracts is subject to the special obligations imposed by the Industrial Assurance Acts. The Commissioner can already exempt a society from its obligations if it does not collect on life contracts more than 10 miles from its registered office, but he cannot do so if it collects on any form of life contract outside that radius. Some of these contracts may be 90 per cent. sickness benefit and only 10 per cent. life assurance, and we have been seeking to find a means of safeguarding friendly societies from extra restrictions if they wish to press forward with this type of benefit, which, although a combined benefit, is in the main a sickness benefit. Clause 6 will allow the Commissioner to exempt societies which collect on combined life and sickness contracts outside a 10-mile radius, provided that at least 60 per cent. of the premiums under such contracts are for sickness benefits.
Clause 7 corrects a mistake made in the Adoption Act, 1950. That Act inadvertently repealed a provision in the Industrial Assurance and Friendly Societies Act, 1948, which said that an adoptive parent was to be deemed a parent for all purposes of friendly society and industrial assurance law. The Clause puts the law back, beyond doubt, to what it was before 1950.
Clause 8 deals with a small point—increasing from 1s. to 2s. the charge which a registered society may make for providing a person with a copy of its rules. The charge of 1s. was fixed in 1896, and prices have gone up since then.
1490 A similar increase was given to industrial and provident societies in the 1954 Act, and here again we are bringing friendly societies into line.
§ Mr. Douglas Houghton (Sowerby)
The right hon. Member will realise that this is another increase in the cost of living.
§ Mr. Brooke
Clause 9 is an important one, and the only costly one from the point of view of public funds. It will entitle anyone claiming benefit from a registered society or trade union to get from the Ministry of Pensions and National Insurance a copy or abstract of any medical certificate supplied to the Ministry for National Insurance purposes. This right is subject to any exceptions or conditions which the Minister may prescribe by regulations.
Some hon. Members may be familiar with the story behind this. In practice this facility has been granted to members of registered friendly societies and trade unions in accordance with a pledge which was given at the outset of the National Insurance Scheme, but there is no statutory authority for doing it, and it costs money. The Public Accounts Committee in one of its Reports has drawn the attention of the House to the lack of statutory authority for these payments. I hope that the House will agree that it would be appropriate to provide statutory cover for what is already the practice.
I think I have—I hope at not too great a length—run over the main purposes of the Bill. If I have the permission of the House to speak later, I will willingly answer any questions.
The friendly societies have made a unique contribution to British life throughout the centuries. We ought to recognise an obligation, as Members of Parliament, to see that people who still have the same pioneering, benevolent and mutual spirit as the members of friendly societies have shown that they possess are given by us full opportunity, within any reasonable safeguarding limits, to find new directions into which their energies and activities for mutual benefit can be channelled.
That is all the Bill does. I express the earnest hope that, if the Bill commends itself to Parliament, the friendly societies will take the fullest advantage of it and 1491 Will think and think hard how they can extend their activities and offer new attractions to their members, so that they may have as glorious a chapter of history in front of them as they have written in the past.
§ 11.43 a.m.
§ Mr. Alfred Robens (Blyth)
The House is indebted to the Financial Secretary for taking us carefully through the Bill and making it clear to us. I agree with him that the friendly societies have made a unique contribution to the social welfare of our people.
One of the great attributes of the British people through the years has been a great reservoir of good will. There have always been people ready to combine with others in the public interest and give their time and energy voluntarily to doing something for somebody else. It is a great characteristic of our people and it is one of the reasons why this country is great. It is the sort of thing that we ought to encourage. I find no lack of people ready to do things. What they do not know is what they ought to be doing.
I hope, with the right hon. Gentleman, that the friendly societies may take on a new lease of life under the provisions of the Bill, which we will subject to careful examination. I hope they will not say, "Our life as friendly societies is over." but rather, "A chapter is over." The State is now doing the things which the pioneers of the friendly societies tried to do for themselves and for the people around them as long as 400 years ago.
There is still a great field of voluntary work to be done—a good field. It may well be that in the past, when a number of people have produced an idea and shown that it has been successful, the State has said "We will apply the idea to the whole of our people." It may also well be that the friendly societies, with the new liberties that they will get from the Bill, will find some new field of pioneering work. They may develop this work, and perhaps some of us who may be in the House at that time will be able to thank them for the work they have done, and for their experiments which have proved successful, and to say again, "We can now take this over as a State service."
1492 I join with the Financial Secretary in paying tribute to the friendly societies for the great work that they have done. They derived from the old guilds, and were an expression of revolt against the social conditions of the time. This is political history. At about the time of the Industrial Revolution, the country was very upset. The old arrangements between workers and management changed very much and became completely wrong. Therefore came the rise of trade unions, which were groups of men who organised for industrial purposes, and of the Cooperative movement, which was started by groups of men and women who organised for economic purposes and for protection against the tied shops. We saw also the development of the friendly societies for social purposes. These three aspects of our lives, the social, the industrial and the economic, were taken care of by a spontaneous uprising of the people, very largely as the result of their changed social conditions.
Years have gone by. Everybody now accepts the idea that the State must take care of people who are no longer able to take care of themselves. The work, for example, that the local authorities have done in the provision of homes for the aged is remarkable. To anybody who wants to know whether the people of Britain are caring for their old folk, I say, "Go into a local authority area and ask to see some of the very lovely places for the care of the old people." It is not something which is talked about a lot. I have visited many of these places. It strikes me as the one great characteristic of our people that they can put so much into a wonderful job of work without wanting publicity, praise, or any other acknowledgment.
If, arising from the Bill, friendly societies can, with the local authorities, develop the work of caring for the aged under these new conditions, the old institution and workhouse atmosphere will be completely abolished. They will be able to provide for old people in conditions rather more like those of retired gentlemen and gentlewomen in private houses. It is rather wonderful to see the new look about the care of the aged.
The friendly societies may be able to show us how a group of people can experiment with new ways of looking after old people without interfering with their 1493 freedom. They may be able to give them the feeling, which we want them to have, that they have worked all their lives and that, in the evening of their days, we shall take care of them without intruding ourselves upon their privacy and upon their individual liberty. I hope with the Financial Secretary that the friendly societies will take advantage of the Bill to see what they can do along those lines.
The right hon. Gentleman was good enough to go through the Clauses of the Bill, and I do not want to spend much time upon them. We can deal with them much more carefully in Committee. I would suggest, however, that between now and the Committee stage the right hon. Gentleman might look at Clause 2—which provides that a friendly society may subscribe to housing associations from its unapplied surplus funds—to see whether friendly societies might not be entitled to invest in some co-operative enterprise. I think that that is worthy of consideration.
The objects of many of the co-operative enterprises are similar to those of friendly societies, which might, in fact, in some cases form themselves into a co-operative enterprise. Of course, I do not expect the right hon. Gentleman to make up his mind immediately on hearing my suggestion, but I would ask him to consider whether it could not be made possible for friendly societies, if they so wished, to invest in a co-operative enterprise.
The provision in Clause 1 to enable a friendly society to perform loan functions is eminently desirable. When the Financial Secretary was speaking of the days of the working men's clubs, I reflected on how very hard the old names die. It is not very long ago since the annual conference of the Working Men's Club and Institute Union was held in, I think, Leicester. Presumably to modernise the title, the executive recommended to the 900 delegates that they should delete the words "Working Men's." Out of 900 delegates only four were in favour. That was a very healthy sign. We should not be ashamed of having working men's clubs. It was a sign of a very healthy democracy—and a very good indication that we do not lose our affection for names as we go through life—that these delegates did not want their clubs elevated in any way at all. They liked "Working 1494 Men's Club" and were determined to keep it.
§ Mr. Robens
I think that the number of people who are not working men is getting fewer and fewer. Whether as a chief executive in a great firm or just a junior in an organisation, everyone, broadly speaking, has come into the ambit of the term "working men."
§ Mr. Robens
Friendly societies were started to help the lower income groups. At one time we thought only of the manual workers as the lower income group—as indeed, they were. Today the manual workers—the skilled workers, engineers, miners, steel workers and the rest—are moving very much into the higher income groups, and in the lower income groups we are finding people whom we never thought of in terms of friendly societies. Those, of course, are what are called the white-collar workers.
That brings me to the right hon. Gentleman's point about the insurance Clause. That Clause, I agree, is technical. The exemption from taxation was designed to assist the lower income groups in relation to endowment and life assurance policies and that, obviously, cannot be permitted to continue extending indefinitely. What were the lower income groups are now no longer so. They are an entirely new section of society. I am glad that the Financial Secretary made it clear to the friendly societies just how far the Government had been prepared to go, and how far his predecessor had been prepared to go, and that there was really not much hope, if any at all, of further extending these Income Tax concessions. Their purpose still continues, but the type of people who were involved in the old days are not necessarily the same people now. What we want to do is to try to cover the same income level.
On this side of the House we shall give the Bill a friendly welcome, and we can examine the details together. Friendly societies have had a very long, valuable and most interesting history. In their day and generation they have made a great contribution to the building up of this British way of life. The introduction of 1495 the Welfare State and of the various Acts of Parliament dealing with social insurance and the like have meant change, but, I repeat, for the friendly societies that does not mean the end of the day but the beginning of a new chapter.
In other words, the societies are now at the cross-roads. If we help them in a Parliamentary way now, and if they are driven again by the energy and desire to do voluntary work, as they have been through the years, they will explore the fresh fields presented to them. We wish them well.
I do not wish to divulge what those fresh opportunities are, but I hope that if my hon. Friend the Member for Sowerby (Mr. Houghton) catches your eye, Mr. Speaker, he will deal most extensively with the fresh fields available for friendly societies to conquer. With his forty years of personal experience of those societies, I am sure that he would interest the House very much indeed. There lies ahead an exciting and experimental period which will bring a great reward of personal satisfaction to those taking part in the work.
As I say, we welcome the Bill. It is a tribute to the hon. Member for Holland with Boston (Sir H. Butcher) that the Government have taken what was his Private Member's Bill into their own hands. We shall help the Bill and the friendly societies as much as we can, and we shall examine the Measure in a cooperative way. Let us hope that we shall produce an Act of Parliament which will enable the friendly societies to go on exploring these new fields and make a further contribution to our British way of life and democracy.
§ 11.58 a.m.
§ Sir Herbert Butcher (Holland with Boston)
I wish first to offer my sincere thanks to the two right hon. Gentlemen for the kind words they have used about this Bill, which is not so entirely different from that which it was my pleasure to introduce as a Private Member's Bill in the last Parliament. I am also extremely grateful to my right hon. Friend the Financial Secretary for the care he has taken to explain the Bill. Had that task fallen to my lot, I am quite satisfied that I should not have done it half so well, nor with such clarity. The historical 1496 part of his introduction made it evident that he and I had been engaged on the same kind of research. In my notes I also had the story of the shepherds. I thought that the way they adopted the adjective "loyal" was either a hang-over from the Christmas lunch or, alternatively, was one of the things which were done in those days.
This is not one of the great Bills that come before Parliament and create an enormous amount of interest. Certain Clauses are very much of a machinery character, and my right hon. Friend dealt with them adequately. The right hon. Gentleman the Member for Blyth (Mr. Robens) put his finger on the spot when he devoted quite a substantial amount of time to the opportunities which Clause 4 gives to the societies. It is very difficult to find words to express the good work being done by local authorities in establishing homes for the elderly people within their area. At the same time, those of us who visit those homes know very well that in the care of the aged—which is now receiving a larger share of our thoughts—there are other and useful directions in which friendly and sympathetic experiment can and should be made. Clause 4 clears away any obstructions which may at present hamper the friendly societies in moving forward, and it presents them at one and the same time with an opportunity and a challenge. I believe that the good will and neighbourliness which have inspired them for so many years will continue to do so.
It would be most ungrateful of me if I did not pay tribute to the societies for the help I have received from them in gathering my thoughts in preparing the Bill. I should like to pay tribute also to the Report prepared by Lord Beveridge, at the instigation and with the assistance of the friendly societies, and one society in particular, as well as to the constant consultations which have taken place between those responsible for the day-to-day work of the societies themselves, and the skilled and sympathetic officers of the registry department of the friendly societies.
It may be that this Bill should have been brought forward earlier. The fact, however, that it has come forward in such a spirit of good will is another tribute to the way in which this country 1497 does things by consultation at all levels so that when a Measure reaches the High Court of Parliament it receives, I hope, a unanimous welcome and the details can be examined on a basis of good will.
I hope that this will be a useful Bill. I know the friendly societies would like to have seen the Income Tax provisions carried rather further than they are, but, as has been said, Income Tax is one of the matters from which we always feel we would like more relief than we are likely to receive.
I am most grateful to my right hon. Friend for the way in which he has adopted and improved this Bill which it was my privilege to present in an earlier Parliament. It is nice to think that the Government are not so pressed with Parliamentary business, so that they have been able to find time so early in a new Session to bring forward this small but useful Bill. I am most grateful.
§ 12.3 p.m.
§ Mr. Eric Johnson (Manchester, Blackley)
I should like to pay my tribute to my hon. Friend the Member for Holland with Boston (Sir H. Butcher) for his initiative in introducing this Bill as a Private Member, and I should like also to express my gratitude to the Government for taking it up. This is a most valuable Measure which will have the support of the whole House. Anything which helps to extend the field of activities of the friendly societies is to be encouraged in every way.
I think hon. Members will recall the Beveridge Report—I refer to the earlier Report and not to Lord Beveridge's book—which referred to the need for encouraging the scope for voluntary insurance. With prophetic foresight, Lord Beveridge said in that Report that probably the war saving movement would be continued in some way or other after the war, and he added that the same purpose could and should be served by the development of organs of voluntary insurance. That is precisely what the friendly societies have done throughout their long and very glorious history. I am sure we are all glad of this opportunity of saying how much we value their work in the past. It would be true to say that the admirable scheme of National Insurance which we enjoy today might not be as good as it is without the pioneer work of the friendly societies.
1498 In common with other hon. Members, I would like to say a word or two about Clause 4 which adds to the list of registered societies mentioned in the Act of 1896, societies for providing homes for old people. I must confess that I am not quite sure about the tax position. Perhaps my right hon. Friend will make it a little clearer, because it seemed to me on reading the Bill and the Act of 1896 that the old people's homes societies would be added to the list of friendly societies, and as such would become exempt from Income Tax. That apparently is not so, but perhaps my right hon. Friend will be kind enough to clear up that point for me.
This is a most valuable Clause because it enables the societies to make a useful contribution to the provision of houses for old people. This is a difficult and serious problem, especially in a great city like Manchester where we are faced with slum clearance. We have great difficulty in finding new sites for building new houses. In my constituency we have a first-class home for old people in Nuthurst House. The right hon. Member for Blyth (Mr. Robens), referring to the question of old people's houses, paid tribute to the local authorities. If the right hon. Gentleman ever comes to Manchester—I know he still takes an interest in that city—I shall be very pleased to show him Nuthurst House in my constituency which I am sure he will be interested to see. The accommodation is excellent.
There is, however, another side to the picture. We have also Springfield Hospital, which is really a mental hospital, part of which is set aside to provide accommodation for old people. That is a most regrettable state of affairs. Quite apart from anything else, it is most undesirable for old people to be given accommodation of that type. I am not criticising the hospital in any way. Everything possible is done to make the old people happy and comfortable. None the less they have a dread of being put into an institution of this kind.
Here it seems to me that this Clause will be especially valuable. I was glad to hear my right hon. Friend say that the old people's homes societies would be able to work very closely with and get some valuable help from the local authorities in providing such accommodation, and the help which the Bill will give to the old people's homes societies 1499 will make a great contribution to the solution of this difficult problem of accommodating old people. I feel sure that this Clause alone would justify the Bill and would bring support from the whole House, and I am glad to have had this opportunity of adding my few words of praise and welcome to a most valuable Measure.
§ 12.9 p.m.
§ Mr. Cyril Osborne (Louth)
I welcome the Bill and, like my colleagues, I should like to pay a tribute to those who have worked for so many years in the friendly society world.
It seems to me that the most important Clause in this Bill is Clause 2. The greatest danger to all friendly societies and voluntary societies is inflation. People who subscribe to pensions and funds for support when they grow old find that the money which they subscribed, say in the 1930s, will now buy about one-third of what they had thought it would buy. Inflation is the greatest danger to this type of voluntary organisation.
I ask my right hon. Friend whether it is not possible to widen the investment scope in Clause 2. I welcome the fact that under Clause 2 societies will now be able to invest in shares, other than those not fully paid up, in the housing associations. I think that is a good thing. The day of thinking that funds are safest because they are in trustee securities has gone—and, I think, gone for ever.
Trustee securities today are about the worst investment that this type of society can hold. There is no hope whatever of giving real security to the members of societies like these if inflation continues. So far as I can see, political parties on both sides of the House and throughout the Western world have made up their minds that if they are faced with the old choice of unemployment and deflation or full employment and inflation, they would rather have full employment and inflation. We ought to face that idea.
If the friendly societies are to have their funds tied to securities which have a fixed rate of interest, they cannot give to their members, when the time comes, the benefits, in terms of real purchasing power, which they were entitled to expect. Therefore, I plead with my right hon.
1500 Friend—glad as I am to welcome this extension of investment power—to realise that this is nothing like big enough.
May I recall to his mind what the Church Commissioners did only a few years ago? I believe they sold some millions of their gilt-edged securities and invested them in first-class equities, to the immense benefit of the Church and the purposes for which the Church Commissioners hold their funds. What has proved so wise in that case is something which should, I think, be made available to all friendly societies.
We face the fact that the purchasing power of the £ today is about one-third of what it was twenty years ago. So far as I can see, inflation is going on slowly year by year, whichever party is in power in this country, and will continue throughout the whole of the Western world. Therefore, to say to the friendly societies that they shall have a much wider field in which to operate and collect funds for their members and make certain promises to them of benefits in their old age, knowing full well that the money which is taken from them is to be invested in securities which twenty years hence will be worth only half or two-thirds their present value, is a legalised type of fraud. We should face that.
I ask my right hon. Friend, not necessarily now but at some time, to consider giving powers to such societies as these to put their funds into the fully paid-up shares of the banks and insurance companies. If the "Big Five" banks and the great London insurance companies were to fail—companies that have survived 200 years of experience—then securities themselves would be worthless. We saw this in the case of German trustee securities in the early twenties, when inflation ran away with all real values.
If my right hon. Friend considers giving the friendly societies the power to invest in the banks and insurance companies and similar first-class equities, he will do two things. He will increase the income which that type of investment will automatically produce through the working of inflation, which will not happen through trustee securities, and, what is more important, when the members of those societies want to claim their benefits he will have something useful to 1501 give them because, if there is anything certain on this side of the investment grave it is that banking and insurance shares must increase in value. I beg of him to look at this matter from that angle.
The right hon. Member for Blyth (Mr. Robens) pleaded with my right hon. Friend to extend Clause 2 to include cooperative enterprises. I would welcome that, but I think it would only be playing with the problem. The problem which we have to face is that the inflationary effects upon our financial structure are here and will continue, and if we are to help those people, who are perhaps the most deserving of our voluntary workers in the country, and the people who support them—who are the best of our citizens—then we ought to see that their funds are not frozen, their income is not fixed, and that they are not be defrauded of their capital when repayment is made.
If my right hon. Friend will look at that matter I think he will be doing the greatest possible service to those who are working so well in the friendly society world. I should like once again to say how much I welcome and support the Bill.
§ 12.16 p.m.
§ Mr. Douglas Houghton (Sowerby)
My heart sank when I heard the trailer—I think that is the word in the film world—given to my speech by my right hon. Friend the Member for Blyth (Mr. Robens) when he spoke from the Front Bench on this side of the House. I do not claim to be an authority on friendly societies. I certainly claim a long membership of one of them—a most enterprising society and the one mentioned by the right hon. Gentleman himself. That society was the stimulus behind the interesting and comprehensive survey made by Lord Beveridge in his book "Voluntary Action." I shall come back a little later to a suggestion that perhaps a fresh inquiry is now needed having regard to the years which have passed since Lord Beveridge did this job and the very short lapse of time between the introduction of the comprehensive scheme of National Insurance and the beginning of this work in 1949. The years have passed and we are able to see the implications of the Welfare State and the wider and more 1502 comprehensive social provisions and their bearing on voluntary effort and on additional social provision in many directions.
Let me turn now to the Bill. Have not the Government been a little unfair to themselves in trying to give full credit to the hon. Member for Holland with Boston (Sir H. Butcher)? Is it true that the Government were so indifferent to this problem that they were prepared to leave it to the chance of the Ballot for Private Members' Bills before doing anything? Surely something was done about this after the Beveridge inquiry. The Government were surely giving thought to these problems. The impression which one gained from the speech of the Financial Secretary was that the hon. Member for Holland with Boston had rendered a public service by going into these matters most deeply and conscientiously, which I am sure he did, and that since his Private Member's Bill had been lost in the last Parliament the Government now thought it incumbent upon them to take up the Bill and present it as a Government Measure. I think that the truth probably is that there was a combination and a harmony of efforts between the Government and the hon. Member for Holland with Boston.
§ Sir H. Butcher
I do not think that the hon. Gentleman was in his place when I spoke. I said that I had a substantial amount of conversation on these matters, and I certainly made no claim for the exact and precise details of the Bill.
§ Mr. Houghton
I am grateful to the hon. Member. I was in my place and I heard what he said, but I am trying to save the Government from a possible misunderstanding of the facts.
Do not let us beat about the bush. We know that when Beveridge wrote his book the Departments concerned gave close attention to a great deal of what he said. Thoughts were put on paper, suggestions were made and proposals for legislation were in the air. That is perfectly proper. Possibly due to the crowded state of Government business towards the end of the last Parliament, legislation was not introduced, and if the opportunity arose of a private Member taking some of private Members' time to sponsor a Government Bill, so much the better. I think that puts the matter in a truer perspective.
1503 I am not begrudging either the Government or the hon. Member for Holland with Boston the credit for having taken the initiative in this matter. It was clearly desirable that someone should take it. All I have in mind in making my observations is to suggest that the Government had a responsibility for the legislation and probably more responsibility for it than the Financial Secretary's speech would lead us to suppose.
The three important Clauses of the Bill from the point of view of friendly societies are Clauses 5, 6 and 9. Clause 5 increases from £100 to £200 the amount which a member of a registered society may dispose on death by nomination. It is always very important among people with small resources to be able to dispose by nomination of benefits lying to their credit in a society without encountering the difficulties of will-making and intestacy. It is an important Clause and the friendly societies undoubtedly welcome it.
Clause 6 is welcome because it clears up perhaps some existing doubt or even some existing irregularity in the matter of the power to collect contributions and subscriptions without coming into conflict with the provisions of the Industrial Assurance Acts. It clarifies the position and makes it very reasonable from the point of view of the societies.
Clause 9 is also important because it gives statutory authority to a practice which has been carried out over recent years, which has been a great value to the societies and which it is desirable should continue. We must regret it if some Government Department has been spending public money on something for which it had no statutory authority, but I am sure that in such a good cause the House will overlook this fact and speedily regularise what has been done. Obviously it is important, not only from the point of view of the society but also from the point of view of the member, that we should avoid requiring too many certificates and duplications of evidence of sickness and claims to benefit. I am sure that the Clause will be welcomed.
The other Clauses relax present prohibitions on the use of funds and the scope of the activity of the societies, and as 1504 far as they go they are undoubtedly welcome. It is not easy to predict to what extent use can be made of these new opportunities. I think we shall have to wait to see how they develop.
The hon. Member for Blackley (Mr. E. Johnson) intervened in the Minister's speech and asked a question about Clause 4 and the tax liability of the new class of societies called old people's home societies. I was astonished when the Financial Secretary gave a negative reply when his hon. Friend asked whether these new societies would enjoy the benefit of tax exemption along with the old friendly societies. I do not see why they should not. As I understand it, the tax position of these new societies will be, first, that they will pay tax on profits they make, if they make any; and, secondly, and perhaps more important, that they will pay tax on property they own and interest they receive from investments.
They will suffer tax probably on the same basis as the trade unions, so it may be important that they should be exempt from tax on income from property and from investment. We must ask a little more about why the Bill does not propose to put the new class of society on the same footing as that on which the registered friendly societies now stand.
Other opportunities are given to the friendly societies to invest in housing associations or in classes of societies which have special purposes. I feel certain that they will take every opportunity of using funds and of extending the scope of their work.
When they have done all that, the real issue of the future of the friendly societies remains to be dealt with. As the Parliamentary Secretary and my right hon. Friend the Member for Blyth said, this movement has a long and noble history in society. The friendly societies were the pioneers in the provision of social security. It is interesting to recall that those of us who are over 55 years of age were born at a time when there were only two measures of social security in this land—workmen's compensation and the poor law. The rest was voluntary effort—the money box, the friendly society, the thrift society——
§ Mr. Houghton
—the trade unions; there was a wide assortment of voluntary effort of one kind or another, including the building societies when they really were building societies and when a man could not get his house until he had saved in the building society a substantial proportion of the cost. When he had done that he was able to borrow the remainder. Today he deposits the smaller amount and borrows the large remainder, the reverse of the original conditions of the building societies. There is no doubt that those who founded them, worked in them and were members of them were the salt of the earth.
Reference has been made to my own long membership of a friendly society. I remember the despondency which came over our house when my brother and I were both rejected in the first instance by a doctor for admission to the National Deposit Friendly Society. My mother thought the end of the world had come. There we were, on the threshhold of life, and yet, because we were thought not to be as fit as required, we were not to have an opportunity of making that essential provision without which the future could hold the prospect of destitution and, worst of all, indignity and humiliation. Later, apparently, with the aid of dumb-bells and Indian clubs, I got enough muscle on my arms to pass the doctor and I have been a member of that society ever since.
The work done then laid the foundations of the desire for social security and the knowledge that it could be accomplished to a higher degree with the aid of State enterprise and administration. There is no doubt that as national provision through State schemes extended in scope and in adequacy of benefit the need to do the same thing through friendly societies appeared to diminish. Yet, when we consider where we have got so far, we have to ask, have we really got social security in its fullest measure, or even in adequate measure?
I believe both the National Insurance Scheme and the friendly societies are approaching the crossroads at the same time. This House has yet to decide and the country has yet to decide whether it wants the National Insurance Scheme to go on or almost to stand still. At the moment neither party in this House has promised to carry National Insurance 1506 benefits beyond the restoration of 1946 purchasing power and, on our side of the House at all events, a promise to keep it at that—to keep benefits abreast of the cost of living. As I have said before in this House, the present level of benefits is based on the Beveridge inquiry of 1942 and on our experience of the inter-war years. All we have really got in our National Insurance Scheme is the translation of Poor Law standards into present purchasing power.
§ Mr. Osborne
Would not the hon. Member agree that even the 1946 level cannot be maintained if the funds which have to maintain it must be invested in trustee securities which themselves, under the continuing force of inflation, must depreciate in value? When he was rejected 50 years ago, I managed to get in to the society. If he and I were given the benefits to which we then looked forward, in terms of today's purchasing power those benefits would look ridiculous. The real problem is of inflation and investing of funds.
§ Mr. Houghton
I fully take the point, which was developed by the hon. Member in his speech, but I was referring to the maintenance of the purchasing power of National Insurance. That has an important bearing where supplementary provision is necessary in order to achieve adequate social security. If the country decided that it wished provision under the State scheme to become more adequate, to lift the benefits substantially in order to bring them more into the line with the present level of wages and incomes—if that were the purpose and course of National Insurance, with, of course, an accompanying increase in contributions or, alternatively, higher cost to the Exchequer—then the National Insurance Scheme and the State scheme would probably leave the friendly societies behind. But there is no indication at the moment that that is to be the course of the National Insurance Scheme.
Certainly as things are no one can say that the present level of National Insurance benefits is an adequate safeguard to the family against a long period of sickness. Still less can we say that it is adequate protection against difficulties and hardship in old age. When we have discussed the possibilities and fresh scope for friendly societies' investment in 1507 old people's homes, in housing societies and kindred bodies, I still come back to the central activity of the societies, which is the provision for sickness, disability and old age. The question is, are those three main objectives of the friendly societies still to be encouraged and expanded? I think they ought to be.
I do not believe that one can have too much provision for the hazards of life, especially when one is adding at the same time to the investment resources of the country. They are a form of saving with provision against certain risks. In present circumstances anything that contributes to the diversion of national resources from higher consumption to greater investment is worthy of the full support of both sides of this House.
Therefore, I think the Government—who especially espouse those economic purposes—should review the whole field of thrift and saving with a view to finding a greater encouragement for people to save. I think there is no doubt that the friendly societies would say as I do that much of that encouragement in the societies and outside has an important bearing on taxation and tax reliefs. I believe the Government will have to come to this sooner or later.
Everyone is looking for the advantage of tax relief, of tax-free income, of tax-free interest. The building societies base their strong appeal to invest money among classes of the community on being able to say, "Tax is paid by the society." We are familiar with the basis upon which building societies pay a compounded rate. We know also the greater appeal which insurance companies and societies have in inviting investment in life assurance, in endowment policies and the benefits of the tax concession for premiums paid on policies which have an element of death benefit. That is a very old relief given in the Income Tax Acts. It goes back many years and it has been maintained to the great advantage of those in the insurance business.
I know that tax relief on insurance premiums does not give the full equation of the rate of tax. That is because the insurance companies do not themselves pay the full rate of tax on a great deal of their incomes. A bargain had to be struck some time or other. I think it was during the war when the rate of tax went 1508 up so high that insurance companies felt that to pay at that level might imperil their financial stability. Concessions were given in the rate of tax and, in return, life insurance relief was held at something substantially less than the full rate of tax. That can be reviewed in present circumstances with ways and means of maintaining small savings at their current purchasing power.
There is no doubt about what the hon. Member for Louth (Mr. Osborne) said. I feel very uneasy about all the small investors and the future of the money they are saving and putting away. If full employment and an expanding economy is to make a steadily moving inflation, there is no doubt that nearly all fixed interest bearing securities will lose their purchasing power. Only industrial investments and the like would stand any chance of keeping the value of the investment abreast of the fall in the purchasing power of money.
I think it is a very important factor in this connection. If the Government say, "We will give tax relief to all payments to friendly societies for supplementary sickness benefits," that would be worth something. In fact, it would be worth a great deal more than is in this Bill. I think also that the friendly societies might be relieved of some of the restrictions on the limit.
§ Mr. Houghton
Quite frankly, I could not give an estimate of that. I realise that, as the right hon. Gentleman said at the beginning of his speech, if we begin to push back the boundaries and introduce into the Bill concessions to friendly societies, life will become very complicated indeed. I realise that. I realise also that the compulsory contribution for the sickness benefit in the National Insurance Scheme is not exempt from tax. The sickness benefit is not taxable, so that that part of the contribution which goes towards sickness benefit is not given the benefit of tax relief.
I realise that it may have to be comprehensive, but how are we to encourage savings at a time when people can see the value of their savings falling year by year? That is the fundamental issue. It spreads over the whole field of voluntary effort, friendly societies, thrift clubs, 1509 banks, savings banks, National Savings certificates and the rest, and it all comes very close to the purposes of this Bill.
The peroration of the right hon. Gentleman was most moving, and one felt that we ought to arise and go somewhere to do something about it, and move into this promised land of the new friendly society. But when we turned our eyes back to the Bill, important and valuable as its provisions are, we realised that they are only bits and pieces, after all, and that the right hon. Gentleman had no real foundation for this grand vista of the future.
I believe that the fundamental issue here is how to provide wider scope for friendly society activities and to give adequate attractions within the true purposes of the society. That is the task which confronts this House a little bit in this Bill, but to a much greater extent in subsequent consideration of the problem in its wider aspect, and I certainly think that a fresh inquiry would be a rewarding undertaking. Let us know more about how the friendly societies are faring in present circumstances, and what they think would best help them to continue and expand their traditional mission. We are without that information in the House today.
The right hon. Gentleman has not told us, for example, what the friendly societies have been saying during the last three years while this Bill has been under consideration. He has not told us what the friendly societies themselves would offer as a recipe for the solution of their problem, but I think, if I may say so, that I have got pretty near to it myself. I think the clue to it is encouragement in tax concessions to members of the societies. That may have wider implications, but I do not shrink from them at all. I believe that, if they have the will, there is no reason why the State should not take deliberate action to encourage the small saver, who, after all, has a big contribution to make to the investment resources of the country.
I trust, therefore, that while we welcome this Bill and will give it every facility in its passage through the House, we shall not rest content with our work when we have finished it, but that we shall re-read the peroration of the right hon. Gentleman, come back to it later and ask for some stronger indication of its fulfilment 1510 than he has felt it possible to offer today.
§ 12.44 p.m.
§ Mr. H. Brooke
With your permission, Mr. Speaker, and that of the House, I should like to comment very briefly on the points that have been raised. I will undertake straight away to read very carefully all the speeches that have been made, and to consider whether any of the suggestions that have been thrown out could be used to improve the Bill. I do not think that any hon, or right hon. Gentleman wishes me to say more than that, because these matters do require careful thought.
Some of the suggestions concern the widening of the investment powers in Clause 2, and I have a great deal of sympathy with what my hon. Friend the Member for Louth (Mr. Osborne) said about the effect of inflation on those who invest in fixed interest securities. At the same time, I think my hon. Friend will grant me that there is a difference between small friendly societies, and, say, the Church Commissioners, and that those who conduct the affairs of small friendly societies might not be as well qualified as, say, the Church Commissioners to invest widely in the kind of equity securities which he described. We have to keep in mind all the time the protection of the members of the societies, as well as the wider considerations which he brought forward.
Most of the debate touched at one point or another on the question of tax exemption. The right hon. Member for Blyth (Mr. Robens), for whose speech I should like to express my thanks, was absolutely right when he said that tax exemption was originally given to friendly societies because the ordinary member of a friendly society in those days almost certainly was not within the Income Tax field. Things have changed since then, and, however generous-spirited we are, we must pause to think before any additional tax exemption is given to certain classes of people because they have joined this or that society, who themselves by reason of their incomes may be liable to Income Tax in these days at quite a substantial rate. We must take care to be fair to everybody.
Reference was made by my hon. Friend the Member for Blackley (Mr. E. Johnson) and others to the impact of 1511 the tax on old peoples home societies. My reply to my hon. Friend was surely quite right when I said that these new societies would not be in the category which, under the principal Act, would escape tax, because my hon. Friend will remember that it is only the first category—the registered friendly societies—which enjoy the tax exemption.
In Clause 4 of this Bill, we are placing these old peoples home societies into a separate category and in a separate subsection from that dealing with the registered friendly societies. But I will certainly look into this matter further. What occurred to me when my hon. Friend spoke was what occurred also, no doubt, to the hon. Member for Sowerby (Mr. Houghton)—that anyone who made a profit out of running an old peoples' home might be so pleased that they would not mind so much paying tax on it.
I hope I did not mislead my hon. Friend the Member for Blackley or anybody else in what I said about the relation between this Bill and Part III of the National Assistance Act. Quite clearly, nobody can compel a local authority to give assistance to a home of this kind, and the point that I wanted to make was the simple one that, if this Bill goes through, there will be nothing to debar a local authority, if it thinks fit, from co-operating with a friendly society in exercising its powers under Part III of the Act.
The hon. Member for Sowerby, whose knowledge seemed to be extensive, despite his original disclaimer, asked why the Government had been so indifferent in not bringing forward a Bill like this before. He wanted to know what we had been doing these last three years. I do not know what the Government which he supported were doing in three of their years, because Lord Beveridge's book was published in 1948, but I can say what we have been doing.
Very soon after I was appointed to my present post a year ago there came to my notice the work which was in progress on this subject, and the moment that I heard that my hon. Friend the Member for Holland with Boston (Sir H. Butcher) was interested in using his good fortune in the Ballot to introduce such a Bill, I did what I think any Minister would do in similar circumstances. 1512 I told him that as far as I was concerned I wished the resources of my Department to be at his disposal so that his effort could be as productive as possible.
But the person who deserves the most credit for what we are doing now, if it is indeed good, is, I say quite frankly, not my hon. Friend, not myself, not anybody in this House, but Lord Beveridge. All this really springs from that fertile brain, and this is not the least of the contributions that that remarkable man has made to the development of our ordinary affairs in ordinary life to meet the ordinary problems of the day. I hope when this Bill goes to another place he will be by no means ashamed of the debate that we have had here this morning.
Whether what I am going to say in conclusion is something of which——
§ Mr. Osborne
Before my right hon. Friend comes to that, may I ask him one question? I understand him when he says to me that some of the smaller societies may not have the expert knowledge of the Church Commissioners and the great societies for the investment of part of their funds in first-class equities, and, therefore, it might be dangerous to give them the power to do so since they have not that expert knowledge. But, between now and the Committee stage, could my right hon. Friend consider the advisability of establishing some central advisory committee to give to these smaller societies the necessary technical advice for this purpose and, therefore, the power for wider investment which, I think, is so vital for them?
§ Mr. Brooke
I will consider everything said in this debate, but the main point which my hon. Friend is making is one part of a very large subject which is dealt with in the Nathan Committee Report, and cannot be considered apart from the much greater question of the investment powers of trustees generally.
I was just about to conclude my speech by remarking that I was not quite sure whether what I was about to say was a fact of which to be proud or ashamed, but it happens that this is the seventh Bill to which I have invited the House to give a Second Reading in the twelve months during which I have been a member of the Government.
§ Mr. Brooke
Financial Secretaries have always been thought to be in a peculiar position, but I should like to conclude by saying that the nature of the subject and the kindness of the House have made this the most pleasant occasion of all.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Committed to a Committee of the whole House.—[Mr. Godber.]
§ Committee upon Monday next.