HL Deb 27 November 1928 vol 72 cc323-36

Order of the Day for the Second Reading read.


My Lords, in moving the Second Reading of this Bill I shall probably meet your Lordships' convenience if I confine my remarks to the briefest possible compass. I hope, later, that I shall be able to reply to any points of inquiry or of criticism which may be raised in the debate. The Bill I am presenting to your Lordships is a very simple one. It contains only one operative clause, by which it is proposed to increase from £30,000,000 to £40,000,000, the borrowing powers granted by Section 7 of the Unemployment Act, 1922. Your Lordships are aware that owing to the heavy rate of unemployment the deficit in the Fund is mounting up by something like £350,000 a week and that the existing borrowing powers are approaching exhaustion. It will be evident, therefore, that there must be some extension of the borrowing powers under the Act of 1922 to enable the payment of benefit to be continued. I would draw your Lordships' attention especially to the provision in the Bill for a review by Parliament of the exercise of the powers conferred by it upon the Minister if it is still desired to make use of them two years hence; that is, after the close of the year 1930. I beg to move that the Bill be nom read a second time.

Moved, That the Bill be now read 2a.—(The Marquess of Londonderry.)


My Lords, the noble Marquess has not made a very long speech in introducing this Bill. It is a simple Bill and I have no intention of opposing the measure in itself. In fact, it is necessary that some Bill of this sort should be introduced to save the Unemployment Fund from bankruptcy and from having to cease the payment of benefit. I shall not discuss on the present occasion any question of the remedies for unemployment, which clearly would be out of order or, at all events, not germane to this particular Bill. Nor has your Lordships' House much power of amending the Bill because it is largely, as I understand, a Money Bill.


It is a certified Bill.


I am obliged to the noble and learned Lord. I should like, however, to say a few words regarding the position, especially in view of the Bill of last year and the discussions we had regarding it. The Government last year appointed the Blanesburgh Committee, and accepted, or said that they accepted, the proposals of that Committee, which were unanimous, and they proposed to introduce and put on the Statute Book a permanent Act having regard to the many temporary Acts which had been passed from time to time by both Houses of Parliament. In their unanimous Report the Committee stated emphatically that their proposals should not be brought into force until, and were intended to be applied to the average future when, normal times had arrived. On that ground, some of us urged in your Lordships' House that it was premature last year to introduce a permanent Act in view of the abnormal conditions which then prevailed. Unfortunately, our criticisms have come true. There is now an appalling increase in the numbers of the unemployed and those who come on the Funds under the Unemployment Insurance Acts. Last year the Minister of Labour, in introducing the permanent Bill, which was to deal with normal conditions, said that he put the average percentage of unemployment in the future at 8 per cent., and he actually went so far as to say that he thought that was excessive and that it might be reduced to 4 per cent. At that time it was about 10 per cent. That means that be under-estimated the numbers. Had his estimate come true the numbers, which were then about 1,000,000, would have been reduced to 800,000. They are now 1,300,000. That enormous miscalculation was made last year when the Act was made permanent.

There are three or four alternative ways of dealing with this matter. Unfortunately, unemployment has to be met. There is the alternative always of reducing the benefits and increasing the contributions. I do not think anybody would suggest that in the present circumstances. Of the other alternatives the first is that the State in the very abnormal conditions should take over the present debt of something like £30,000,000, and start the Fund again on the basis on which it was before the War. The second, which was urged last year and has often been urged, is that the State should make an equal contri- bution to those of the employers and the men. And the third is to do as the Bill does, utilise the credit of the State.

As regards the first alternative—that the State should take over the debt as it stands at present so as to free the Fund from this liability and great burden—it is I think a counsel of perfection, and would hardly be considered feasible at the moment. We ought to remember in discussing this question that these debts which have arisen in consequence of unemployment are a tremendous burden on trade and industry at the present moment. For every man employed the employers and the men between them—that is to say, industry itself—pay 1s. 3d. a week or, roughly, £3 5s. a year. That multiplied by thousands is a very heavy burden indeed on trade. Up to a little while before the last few years, when unemployment was falling, the debt had gradually been reduced and there was an early probability, as the Government thought last year, of the contributions and the payments showing a profit instead of a, loss, and of the burdens on trade being reduced, as suggested by the Blanesburgh Committee. That unfortunately has not come about. The present proposal of another £10,000,000 means that that hope will have to be much further deferred before any relief can be given to industry on account of the Unemployment Fund. Everybody is agreed that it would be an advantage if some relief could be given in some way of the heavy burdens at present on industry. The Government propose their Derating Bill, which amounts to about the same as this £30,000,000. It is a complicated measure; it is unequal; and it does not give relief to the most distressed industries to the full extent. If this debt could be taken over there would at once be direct relief to industry, and it would be given in the best way to the most depressed trades. But that is a counsel of perfection. With the present state of the Exchequer we can hardly expect that it would be adopted.

The other alternative is one which is feasible, and, in my opinion, equitable, and that is that the State should contribute an equal share to meet the burden of unemployment. At present the employer pays 8d. per week, the men 7d. per week and the State only 6d. per week. The Blanesburgh Committee not only attached enormous importance to this proposal, but practically the whole of their recommendations were on its basis. It ought to be remembered—I think it is an important point in this connection—that two years ago the Chancellor of the Exchequer, looking about to see whom he could devour, reduced the Government contribution to the Unemployment Fund from 6¾d. to 6d., and absorbed some £5,000,000 from that Fund on the ground that the debt was light, that instead of their being an annual deficit there would soon be an annual profit, and that it would not in any sense affect the solvency of the Fund. All those three arguments have disappeared. It seems to me only fair and just, the State having reduced its contribution two years ago on the ground that the Fund was solvent, that the State should now increase its contribution in order to place the Fund on a solvent, basis. The only reason given for not doing so at that time was that conditions were abnormal. That is a reason, it seems to me, not for refusing to assist the Fund, but rather for contributing more to it. If the conditions were abnormal then they certainly are more abnormal now.

The Government have adopted the third proposal, which is to utilise the credit of the State for the purpose of increasing the loan from the Treasury to the Unemployment Fund. My noble friend, in moving the Bill, implied that the State in so doing was giving a material contribution to the Unemployment Fund. That really is not so. No doubt they are utilising the credit of the State, but they are charging 5 per cent. interest on any loans which they make, which is a considerably higher interest than that at which they can themselves borrow. Therefore, far from assisting the Unemployment Fund, they really are robbing it to the extent of the difference between the rate of interest they are asking and the rate of interest at which they can themselves raise the money. We have no power, unfortunately, in this House to deal with the Bill from a, financial point of view, but I venture to make these remarks because they seem to be very germane to the discussion we had last year, and show that it was a mistake last year to endeavour to put the Unemployment Fund on a permanent basis. I am quite certain that next year, or the year after, whatever Government is then in office, the Government will have to deal with this matter in a different way in order to place the Fund on a permanent basis.

There is one other point, if noble Lords will allow me a minute more, about which I wish to ask the noble Marquess, who said he would answer any questions put to him after the debate. The point is this. As noble Lords are aware, there are two methods of payment of unemployment benefit. There is what is called the standard rate, which is based on past contributions, and there is the extended benefit, which is paid whether there have been contributions or not. This payment is based more or less on the hope that the contributions will be paid after the man obtains employment. Those are the dual systems at present in existence. Last year, when the permanent Act was passed, this very important point arose. Under the Act as it now is, no one can receive in the future—after next April 1 think it is—the benefit unless he has already made thirty contributions to the Fund. We pointed out that there are a large number of persons out of benefit who have been receiving payments from the Unemployment Fund, and that those persons, through no fault of their own, will be in the position of receiving no benefit. They ought to be treated with the utmost tenderness. Unless something is done for them either in this Bill or by a Departmental instruction, which I believe can be given, a very much larger number of these persons will next year be out of benefit through no fault of their own.

The other day it was estimated that at least 200,000 more persons will suffer from the provisions of the permanent Act than would have suffered if it had not been passed. The alternative for them is to live on their own resources. Obviously they have none, and therefore there is nothing for them but to go to the Poor Law. One of the objects we have had in view in the last few years has been as far as possible to dissociate the Unemployment Fund from the Poor Law. I do ask my noble friend to give us some information in regard to that point. It was pressed on the Minister of Labour in the other House, but never once, in his two speeches on the Second and Third Readings, did he refer to it. It affects a very large number of persons and I would be glad if the noble Marquess, in his reply, would give us some information about it. As far as the Bill itself is concerned, I give it my support.


My Lords, I wish to make very few observations on this Bill and to ask a question or two of the noble Marquess in charge of it. The Fund, as I understand, up to the present has had borrowing powers up to £30,000,000, which sum, I think it is right to say, is exhausted, the £30,000,000 having been spent. Does that mean that if this Fund were an ordinary insurance company's fund it is actuarially unsound to the extent of £30,000,000 and that in fact the Fund is bankrupt? Is that the plain English of the situation? That is how I understand it. If that is so, and now you are asking to borrow another £10,000,000, that really means the Fund will be so much the more unsound, that it will be unsound to the extent of £40,000,000 after this Bill is passed. If that is the position, what do the Government contemplate is going to be the ultimate solution of it? Is this £40,000,000 ever going to be paid back by the Fund itself to the Treasury, or is it going to fall ultimately upon the taxpayer, as, of course, it must fall incidentally upon him because this £40,000,000 comes out of the taxes? If that is the position, surely the Government ought not to contemplate leaving the matter in this state. They ought to contemplate some permanent solution and the noble Earl who has just spoken has pointed out one solution, by the increase of Government contributions. That is a solution which has much to commend it not only, one might say, from the point of view that there is a strong feeling that the central Government is not bearing its full share of the unemployment burden, but also from the fact that these new rating proposals are not considered to afford real relief to the necessitous unemployment areas, but are considered to fall very far short of what is necessary in those cases. I should like to know what the ultimate mind of the Government is upon this matter. Do they propose merely to hand over a bankrupt Fund to their successors with a debt that is never likely to be paid, or have they in mind some ultimate solution of the problem?

There is one other question I should like to ask. Of the £30,000,000 which the Fund now owes with interest, £25,000,000 was incurred during the life of the present Government. I take that figure from the speech of the Minister who introduced the Bill in another place. I have no doubt that noble Lords opposite will say that is due to the wickedness of our political associates, to the coal strike and the General Strike. I do not propose to discuss that now. Your Lordships know perfectly well what our answer to that would be, that the coal strike was prolonged by the vacillation of Mr. Baldwin and by the way he ultimately let the miners down, and that the General Strike was almost forced on the country by the way the Government conducted negotiations. But do not let us go into those matters now. I am only saying that if that allegation is made, that, as noble Lords opposite know, would be our answer. But it was also said in another place that this £10,000,000 was not likely to last for more than something less than a year. I think ten or eleven months was the time given. The Bill, with—what shall I say?—remarkable optimism, has in it a clause which provides that if the £10,000,000 is not expended within two years fresh powers must be sought from Parliament. But there is surely not the remotest chance that that ten million pounds will not be expended probably in one year, let alone two years. Perhaps, when the noble Marquess replies, he will answer that. I only rose to put these questions, and to say that it does appear to be a make-shift way of dealing with a very serious situation. You have a bankrupt Fund and you are talking now, not of curing the bankruptcy but of borrowing more money.


My Lords, the two noble Earls who have addressed themselves to the subject have asked me a number of questions which I will endeavour to answer. The noble Earl, Lord Buxton, asked me what was the Government's attitude towards equal contributions. He and I know quite well that the recommendation of the Blanesburgh Report was that these contributions should be equalised. I can only give him what probably will be an unsatisfactory answer, that the Government considered that it was impossible to put that extra burden on the country. That is the reason why, at the present moment, contributions have been left as they were. The noble Earl asked me whether the State would take over the scheme. Perhaps your Lordships will agree with me when I say that the scheme is one of insurance.


Take over the debt.


Take over the debt on the existing scheme! But the scheme is one of insurance and an insurance scheme carries with it, if I may use the expression, the rough with the smooth. The suggestion which the noble Earl put forward is really one which would turn it into a Poor Law scheme. It is one which calls upon the Government to pay the deficit if there should be one, and that does not fulfil the principles of an insurance scheme. The noble Earl spoke also of the interest which was payable on the debt. At one time the scheme, like most insurance schemes which we are aware of, was in credit, and interest was earned upon that money at that time. Now, the Fund being in debt, the same rate of interest is paid, as the Government have had to borrow the money, so there is not a loss on that as the noble Earl seems to imagine there was.

The noble Earl who spoke next took away all the arguments which I was not proposing to make with reference to the manner in which the debt has accumulated, but he certainly has made an attack on the scheme, and he asks the Government what they are proposing to do, whether they are proposing to hand over a scheme in a bankrupt condition to their successors when their successors should come into office. The scheme was inaugurated when noble Lords opposite were in office, and I am not aware that they laid down any provisions as to what they would do. The insurance scheme was in debt at the time, and I have no quotation that I can make from what noble Lords opposite said as to what was going to be done to relieve the situation permanently.


How much was it in debt at that time?


In 1924 the amount of the debt was not less than £6,000,000—it was nearly £7,000,000. Since then circumstances have arisen to which the noble Earl thinks he has a very good answer if it is said that the debt arises from them. I have an equally good answer, but I think the noble Earl and myself have agreed to put those arguments on one side this afternoon. I have answered as well as I can the questions raised, and if the answers are not considered satisfactory that does not surprise me. If there is any question I have omitted, perhaps the noble Earl will remind me.


Though it may seem rather academic there is a point which is most important, as it affects those who have to pay the money. It is a question affecting those people under the permanent Act which comes into force next year. A very large number of persons will go out of benefit because they have not been able to pay thirty contributions. I want to know, in view of the fact that a large number of persons will be affected by that, how the Government are going to deal with it.


And may I remind the noble Marquess that I asked how long the Government expect this £10,000,000 to last?


I beg the noble Earl's pardon for omitting that question. The noble Earl, Lord Russell, rather led me away into thinking of other matters and questions to which I might have retorted. The Unemployment Insurance Act, 1927, provides in Clause 5 that after the transitional period it will be a condition for the receipt of benefit that at least thiry contributions, or in the case of ex-Service men fifteen contributions, have been paid in the two years preceding. Fulfilment of this condition will be verified every benefit quarter. The noble Earl takes a pessimistic view of how unemployment will operate. Personally, I am inclined to think that we shall find that the returns of the Fund will improve as time goes on.

It is quite true that we have a few months before us in the near future in which we cannot look for any very favourable returns, but the question to which the noble Earl has Addressed himself is the transitional period which comes to an end on April 19 next. The qualification for benefit has been up to now the payment of eight contributions im- mediately preceding the date of claim, or the payment of not less than thirty contributions at any time by the claimant as an insured contributor. That has been the case up to now. It is quite impossible to forecast the effect of the Act in regard to the rule concerning thirty contributions at April 19 next, but the noble Earl is in error if he thinks that the difficulty will arise then. The actual moment of difficulty cannot arise until April in the following year because the effect of enforcing this new rule will be a very gradual one and claims for benefit made during the transitional period will run over a complete benefit year before the thirty-contributions rule comes into effect. The claims are made over a year and will come on gradually during the twelve months, and will not fall in at one moment on April 19. Consequently there will be another year, until April, 1930, before we need feel that the gravest part of the difficulty that the noble Earl anticipates will actually arise.


How long do the Government expect the £10,000,000 to last?


The suggestion is that the actual sum required is £350,000 a week, but the noble Earl knows quite well, and I have already pointed out, that during the next two months we cannot anticipate any great reduction in the number of unemployed. The months of December and January are those which we have to look upon as the worst period of unemployment. After that period, although unemployment is at a very large figure at the present moment, we hope that it will be reduced during the spring months, and accordingly it is anticipated that the £10,000,000 will be utilised certainly for the best part of a year, and we hope for two years. Perhaps I am more optimistic than the noble Earl, and I sincerely hope that my optimism will be justified in the event.


May I ask the noble Marquess once more for information on one point? If I may say so, he really has not answered my question in regard to those who are likely to fall out of benefit. The point is that, when this Act was made permanent last year, it was based on a figure of 800,000 unemployed during the coming year and the following year. As a matter of fact the number is now 1,300,000, or half a million more than was anticipated, and what I want to know is what provision is made in the permanent Act for the those persons who will gradually fall out of benefit after the transitional period. What provision are the Government going to make to provide for the number of persons, far in excess of the estimate, who will fall out of benefit after the transitional period? The noble Marquess says that this will be some time later, but surely the Government attempted last year to pass a permanent Act, and it is their business to provide for these persons now, so that large numbers shall not fall out of benefit at once.


I gather that the noble Earl is making an indictment of the forecast that the Government made last year as to the number of people who would be unemployed. The noble Earl is aware that the Fund is solvent at 8 per cent., with a million unemployed, and he asks what will occur to the additional number of unemployed after April. I think I have given the noble Earl an answer to that. It is hoped that the number of unemployed will be decreased, and I do not quite follow what it is that the noble Earl wants to know beyond that.


Decreased to 800,000?


It is hoped that the number will come down in the course of the next few months. The noble Earl is aware that the causes of unemployment are confined to comparatively few industries and that every effort is being made in those industries towards the transference of labour to all parts of the country. The Government are naturally making every possible effort to relieve unemployment in all parts, but I do not quite follow what it is that the noble Earl, Lord Buxton, wants me to answer. The Government anticipate that the present number of unemployed will be reduced. It is very unfortunate that the figure of 1,300,000 has been reached, but the Government are optimistic that the number will be reduced in the course of the next few months.

On Question, Bill read 2ª.


My Lords, I beg to move formally that the Bill be committed. I desired to ask my noble friend in charge of the Bill to allow me to make this Motion because it has relation to the procedure of the House and to a point that I should like to place on record. We propose the course of not committing the Bill, not because it is a certified Bill but because it is purely financial in its character. I do not think that it would be well for your Lordships to establish as a precedent that, because a Bill is a certified Bill, the Committee stage should be dispensed with. That, I think, would be going too far, if I may venture to say so. But when a Bill is a purely financial Bill, then it may take its place with the Finance Bill proper, in which case, as your Lordships are well aware, it is our practice to dispense altogether with the Committee stage, for the very good reason that no Amendment would be possible having regard to the privileges of another place. I hope your Lordships will allow me, in making this Motion, to make this explanation, lest it should be thought that in the opinion of the present Government it is a good thing, merely because a Bill is certified, that the Committee stage should be dispensed with.

Moved, That the Bill be committed to a Committee of the Whole House.—(The Marquess of Salisbury.)


My Lords, I rise to express my concurrence with what has been said and done by the noble Marquess. I quite agree that it is desirable on this occasion that the Bill should not be committed, and that we should proceed to give it a Third Reading as soon as we can. I am very glad that the noble Marquess realises, as I do not think that noble Lords behind him all realised at the time of the passing of the Parliament Act, that there is real value in the discussions in your Lordships' House. We always used to say that there was an opportunity of discussion, even when Bills were Money Bills and were certified, and that your Lordships were able to exercise real influence on public opinion in the country through the discussions that take place here. I am glad to think that the noble Marquess at any rate so far agrees with us that he does not think it right, merely because a Bill is certified as a Money Bill, that it should go through this House without at any rate the possibility of discussion.

On Question, Committee negatived.