NATIONAL HEALTH INSURANCE BILL. (Hansard, 12 July 1921)

THE PARLIAMENTARY SECRETARY OF THE MINISTRY OF HEALTH (THE EARL OF ONSLOW)

My Lords, the object of this Bill is to meet the situation which has arisen owing to the increased cost of administration falling upon the approved societies. It increases the contribution of those societies towards the cost of insurance committees from 4d. to 6d. per person. The proposals in the Bill will produce a direct saving of £300,000 a year to the Treasury, but will' make no change in the normal contributions of insured persons or the normal benefits which those persons receive. As regards the cost of administration, I may say that the societies, up to the end of 1919, received 3s. 5d. per member per annum. Before the war the cost was only about: 3s. 1d., and they therefore saved 4d. per member per annum, and had accumulated a reserve by the end of 1910 of £1,000,000. But after that date, owing to the increase in cost, the savings were gradually eaten 1044 up, and in 1920 the cost of administration that was allowed was raised by is. That is to say, the societies were allowed to charge 4s. 5d. instead of 3s. 5d. This was found to be insufficient at the end of last year, and in January a Committee was appointed which went into the whole question exhaustively. This Committee fixed a fair charge at 4s. 10d., and that is the sum which it is sought to legalise in Clause I of this Bill. The result will be to leave a larger amount in the benefit fund and not to carry so much to reserve.

Coming to the manner in which the saving is effected by the Treasury, and as to how the 2d. is found to enable the societies to increase their contribution to the insurance committees from 4d. to 6d., I would point out that the charge upon those insurance committees is 7d. per insured person per annum. At present, this is made up by the contribution of 4d. from the societies and 3d. from the Treasury. The Treasury contribution amounts to £375,000 a year, and we propose to relieve the Treasury of £250,000 and place it on the societies. The 5d. which we propose to add to the cost of the administration of approved societies and the 2d. to the insurance committees, will he made up as follows: The weekly sums contributed by employed and employer pay a deduction of 2⅓d. per week in order to form a sinking and contingency fund. The contingency fund contributes one-eighth per annum of its total to a fund which is called the Central Fund. This Central Fund was instituted as a sort of reserve in order to make grants to societies who were unable to meet their deficiencies after they had exhausted all their reserves, and would have been liable to a levy or a reduction in the normal rates of benefit.

This Central Fund is in a very flourishing condition and has a credit balance of £2,000,000. It is not expected that the calls upon this sum will necessitate any further increase in this capital amount for many years to come, and it is proposed, by Regulation, to suspend the contribution of one-eighth per annum from the contingency fund contributed by the various societies. When the contingency fund has been augmented it will be possible to hand back a sum sufficient to pay seven-ninths of the extra 7d. required for the purposes of administration. By Section 3 of the original Act two-ninths of the cost of 1045 benefits automatically come out of the Exchequer. There is a further saving to the Treasury when the one-eighth contribution to the contingency fund ceases, as the Treasury will be relieved of the necessity of paying £150,000 per year towards the Central Fund and, therefore, the Treasury will save a gross sum of £400,000 a year.

They, however, will only save £300,000 of this amount because they will be called upon to pay two-ninths of the increased cost of administration, which will amount to £100,000. The Treasury will still have to pay one penny of the contribution to the insurance committees, but it is hoped that even this will be reduced by administrative action. Clause 3 of the Bill carries this out. The insurance committees which are in existence consist of not less than forty members. It is proposed to reduce the size of the committees and to save considerable sums in travelling and subsistence allowances. It will mean an immediate reduction of between £5,000 and £10,000 a year, and eventually more.