HL Deb 22 July 1929 vol 75 cc155-66

THE LORD CHANCELLOR acquainted the House, That the Bill was endorsed with a Certificate from the Speaker that it is a Money Bill within the meaning of the Parliament Act, 1911.

Order of the Day for the Second Reading read.


My Lords, this Bill is rendered necessary in order to keep the Unemployment Insurance Fund within the limits of its borrowing powers. As your Lordships are aware the Unemployment Insurance Fund has accumulated a large deficit in recent years. The deficiency now amounts to about £36,500,000, whereas the legal limit of borrowing for the Fund is only £40,000,000. It is therefore clear that there is not much margin still remaining, especially in view of the fact that with the present contributions the Fund is estimated to balance on a live register of one million unemployed. At the present time, unhappily, the number of unemployed is nearly 1,150,000. It is, I think, obvious that the position of the Fund will for the time being grow somewhat worse unless something is done, and, indeed, in a comparatively short time the legal limit of borrowing, £40,000,000, may be reached. That is the position with which the Government are faced.

I can put it in another way. If the number of unemployed is taken at a round figure of 1,200,000 the Income of the Fund will be £43,000,000, and of that £43,000,000 £31,000,000 will come from the employers and the workers combined, and £12,000,000 only from the Exchequer contribution by the State. The employers and workers, then, are between them finding £31,000,000—the employers £10,500,000 and the workers £14,500,000—and the Exchequer only £12,000,000. This Bill proposes to alter that. It proposes to increase the Exchequer contribution by £3,500,000, which will make the Exchequer contribution in future £15,500,000. Obviously also the total income of the Fund will be increased by £3,500,000 and so raised from £43,000,000 to £46,500,000. The position would be that the employers would be finding £16,500,000, the workers £14,500,000 and the Exchequer £15,500,000, making up the £46,500,000. Therefore the proportions would not be exactly, but very nearly, equal thirds. Broadly speaking, that is what this Bill does.

I think there is every justification for the proposal of the Government, and that I can soon demonstrate. In view of the figures I have given and the near approach of the borrowing limit I think it is clear that something ought to be done to protect the position. One of three courses was open to the Government. The first would have been to have increased the borrowing limit of £40,000,000 so that even more money might be borrowed for the Fund. There are many objections to that course. In the first place I think it would be agreed that the borrowing limit of £40,000,000 is a large one. It might be borne in mind that the Fund itself has to bear interest on the borrowings at the present time to the amount of somewhere about £2,000,000 a year, which has to be added to the Fund. Therefore the borrowings tend to drive the Fund more and more into deficiency. The Government, in view of those circumstances, decided against that plan. The second plan would be to increase the contributions of the employers and workers. The arguments against that are, I think, so overwhelming and conclusive that I scarcely need to state them. Those arguments are based upon the conditions obtaining at the present time. There really only remains the plan in the Bill of increasing the Exchequer contribution. I think it is clearly the best thing to do. There was some discussion on the Bill in another place, but there was no Division against the proposal.

As I indicated, the Bill will materially assist the Fund. It means this, amongst other things, that, whereas without it the Fund balanced on a live register of a million unemployed, it will, with this increased contribution from the Exchequer of £3,500,000, balance on a live register figure of 1,090,000. Please do not imagine that the Government intend for a moment that that is the figure at which the unemployed ought to be stabilised or will be stabilised. That is not so. I merely give that figure, because it is the statistical figure, in order that your Lordships may have, as you are entitled to have, the statistical implications of the measure. Another point which I should like to make clear is this. The Bill enacts that this increased Exchequer contribution shall date from April 1 last. That is an important point. Taking that into account, with the still unexhausted balance of the. Fund, there is created a state of things which will enable the Fund to operate within the limits of its borrowing powers for some months, even if unhappily—I am not saying for the moment it will happen—the number of unemployed should rise considerably above its present figure. That will be the position for some months, whatever happens in the meantime. The Government are making an exhaustive review of the whole question of unemployment insurance, and are also straining every nerve, as your Lordships know, to reduce unemployment; but, of course, time must be required.

Before I sit down I should like to explain, as I think your Lordships would wish to know, how it is that the Unemployment Insurance Fund is in this unsatisfactory financial condition and how it is that this large deficit has accumulated. I am quite aware that in doing so I may be charged with being controversial, not for the first time, but I feel I ought to give the facts, and for my part I have always felt that this sin of being controversial on the floor of Parliament is rather an artificial one. I must say that nearly the whole of this deficit of £36,500,000 is due to the action of the late Government, which introduced legislation in its last term of office. Those are the facts. The blame for the present state of things does not rest upon the present Government—I do not think any one would suggest that—nor upon the Labour Party, because we opposed every one of the steps taken by the late Government which have really brought about this deficiency.

The deficiency is, as I have said, £36,500,000. It is estimated that the total loss to the Find from cuts in income made by legislation of the late Government amounts to £32,000,000 over the three and a half years which I have taken for this calculation. To that has to be added £2,500,000 of accumulated interest in respect of the contributions which were not made. Thus through the definite action of the late Government the Fund was worsened to the extent of £34,500,000. That is nearly the whole of the deficiency. Of this sum of £34,500,000, no less than £15,500,000 was due to the Economy Act of 1926. Your Lordships will recall that that Act cut down the Exchequer contributions and over three and a half years there is a loss to the Fund in respect of that Act of £15,500,000. Then there was the Unemployment Insurance Act, 1925, which again over three and a half years has meant a loss to the Fund in contributions of £14,700,000. Then there was the Pensions Act of 1925. That has meant a loss to the Insurance Fund of £1,200,000 in the period; and there was also the Unemployment Insurance Act, 1927, which meant a loss of £600,000.

If you add all these sums together—£15,500,000 from the Economy Act, £14,700,000 from the Unemployment Insurance. Act, 1925, £1,200,000 from the Pensions Act, 1925, and £600,000 from the Unemployment. Insurance Act, 1927—you arrive at the total which I have given of £32,000,000 odd. I am always speaking of a period over three and a half years. Add to that the interest which, owing to the fact that these contributions were not made, had to be borne by the Fund of £2,500,000 and you arrive at a total of £34,500,000 as against a deficiency of £36,500,000. Those, my Lords, are the facts about the Bill. I do not say they are all the facts—I could have put the case even more strongly—but I think I have said enough to show the position. I now beg to move that the Bill be read a second time.

Moved, That the Bill be now read 2a.—(Lord Arnold.)


My Lords, perhaps you will allow me to say a few words regarding this matter. It is a question in which I have taken very considerable interest since the initiation of the first Act. I have more than once in this House urged upon various Governments that this question of the proportion of the Government contribution ought to be considered and decided in favour of the principle which is now accepted—namely, equality of contributions between the employer and the employed and the State. I have urged that more than once as a matter of justice. It has now become a matter of necessity because, as the noble Lord who introduced the Bill has pointed out, unfortunately what is called the balancing point of this Fund is now below the point at which it is possible to carry on without a very considerable annual deficit. At the present moment the income is something like £43,000,000, made up, as the noble Lord explained, of £31,000,000 from the employers and men together and £12,000,000 from the State. Unfortunately, with the number of unemployed at the present figure the cost is six or seven million pounds over the income balancing point. If we can get back to it, as we all hope we may—and I am sure we all desire to express our good wishes to Mr. Thomas in the efforts he is making to reduce the number of unemployed—the Fund would not require to be further increased.

Unfortunately those conditions do not seem likely to come about at the present moment. There being, therefore, a deficit of something like £5,000,000 in the next six months which has to be met, the Government propose to borrow up to the legal maximum—that is, from £36,500,000 up to the £40,000,000 which they are entitled to borrow—and to meet the other £3,500,000 by increasing the State contribution towards the Fund. That, I think, is a very reasonable and proper way of dealing with the matter. It is certainly necessary because the position of the Fund at the present moment has become very serious and almost amounts to bankruptcy. During the War there was a large balance. During the War the Fund was increased very largely, but as an aftermath of War there was a very largely increased number of unemployed and the system which is called extended benefit was introduced in addition to the standard benefit. As your Lordships know, the principle on which the original Act was based was that contributions and benefits, less expenses, should practically be in the same proportion and that the contribution should be paid before the benefit became due. After the War it became necessary owing to the large increase in unemployment, and the impossibility in some cases of fulfilling the condition that a man should have paid his contributions, to introduce what was called extended benefit—that is, a system of allowing benefits in the hope and trust that the contributions would be paid when the man got into work.

My noble friend who has just spoken raised what he calls very truly a controversial question as to the reason for the present position. He omitted to say that what really put the Fund in an impecunious position for many years was this question of those to whom benefit should be paid. As I have pointed out, it is very largely due to the number of those who in present circumstances and the circumstances of the last few years have received benefits without having paid their contributions. That is the main reason why there has been this great increase in the expenditure of the Fund without there being, at the same time, a proportionate income.


Hear, hear.


I agree with him to this extent, that three years ago the then Chancellor of the Exchequer, looking about for hen roosts, raided the Unemployed Fund to the extent of about £5,000,000. He did that at a time when it was thought likely, and almost certain, within a very short period, to make a profit and it was pleaded that the solvency of the Fund was not affected. Unfortunately, the reasons which prevailed at that moment when reducing the income of the Fund no longer exist. The deficit has increased from £8,000,000 to something like £36,500,000. There is not a profit but an annual loss, and the Fund is really almost insolvent. That, I think, is in itself a good reason for reverting to the position which existed before this raid was made on the Fund. I did deprecate that and I think it was a mistake from every point of view.

But my noble friend forgot one other thing. One of the reasons for the income of the Fund having been reduced has been that the number of those unemployed was increased largely a few years ago and is even now considerably above what was estimated. I think he has forgotten that there was a General Strike and a coal mines strike lasting nearly a year—a General Strike which the Labour Party fomented and were responsible for even though they afterwards found it was a failure, and a coal strike for which I do not want to say they were responsible, but in regard to which it seems to me they did not take the action which a strong Labour Party would have taken in pointing out to the unfortunate miners the impossibility of the position into which they had got. The deficit was largely due to the General Strike and to the coal strike. If they are going in for controversy I think one is entitled to point that out to my noble friend. As regards the general position, unfortunately, there it is and it has to be met. I have no doubt whatever that the Government have taken the right course. May I have the noble Lord's attention? If I may say so, the present Leader of the House always objects very strongly if anybody says anything when he is speaking. I do not see why what is good for him should not be good for other members who are speaking.


I do not wish to interrupt the noble Earl, but occasionally there must be consultation between my noble friends and myself in regard to an important speech such as the noble Earl is making.


I do not want to press the point. The noble and learned Lord is always very courteous to me. I was saying that, in my opinion, the Government's proposal is right in the unfortunate and lamentable circumstances in which we find ourselves in regard to this Fund. As the noble Lord, Lord Arnold, pointed out, there were three courses open to us. One was to borrow further sums, but that would only have added to the Slough of Despond into which the Fund has already fallen. The other alternative was either to increase the contribution or to reduce the benefits. I think we all realise the very great burden that this Fund places upon trade at the present moment. I do not know if noble Lords are aware of the fact, but, in respect of the ordinary adult, the contributions from the employers and from the men throw a direct charge on the trade of no less than £2 10s. per man for carrying out the insurance policy, and when you multiply this by thousands it becomes a very largo sum indeed. I do not think that anybody would desire either to increase the contributions or to diminish the benefits. I agree with my noble friend there. But this, as he says, leaves us with the only alternative of coming to Parliament for additional contributions. I think it is unanswerable that, with the Fund in its present position, this should have been done before on the justice of the case and must now be done of necessity.

If my noble friend would allow me a few minutes more, I should like to make a further point. As he said, and as the Minister of Labour said in the other House, this is only a temporary measure to tide over an acute period in the next six months and the whole matter will have to be reconsidered from the point of view of the solvency of the Fund itself. I wish that such an inquiry could have been held earlier, because we have gone from bad to worse in this matter and the Fund is now in a deplorable position. I hope that when this reconsideration, which I very much favour, is carried out, at least as far as the present basis of the Fund is concerned, it will be based on two principles: that the employers, the men and the State should contribute more or less equally in proportion to the income that is going to be applied to this insurance; and that this should be done upon an insurance basis—that is to say, that contributions should be received before benefits are paid and that the benefits, subject of course to the expenses, should be proportionate to the amount of contributions paid. I have no doubt, and it is easy to see from the debates in the other House, that great pressure has been brought to bear on the Government and on the Minister of Labour practically to get rid of the insurance basis and to make it a question of work or full maintenance without any question of insurance, but I have great faith in the present Minister of Labour, who sat on the Blanesburgh Committee, who signed the Report and who, as we know, is a woman of great courage who knows her own mind and is prepared to stand up to any opposition that she may meet. Accordingly I have no fears about the basis of insurance.

There is one other point that I should like to put to the consideration of my noble friend, who will probably remain in charge of Insurance Bills and will therefore be taken into consultation with regard to them. In any reconsideration or examination of this matter, I think that the first thing that will have to be dealt with is this deficit of £40,000,000 and how and when it should be liquidated. At the present moment the deficit is a dead weight hanging over the Fund, and until it is paid off—and this will not be for a very long time, almost until the Greek kalends—the employers and employees will not benefit from the Fund's solvency. I should like to point out to my noble friend, who has given various reasons for the deficit, to which I added another, that none of these causes were the fault of the employers and men, who had been paying their contributions all these years under an actual promise by successive Governments that, as soon as the Fund came upon a paying basis, their contributions would be materially reduced. That, of course, was the view of the Blanesburgh Committee, and I think it would be very hard indeed if, before such a thing can happen, and this deficit of £40,000,000 can be met, there should be an interval of many years. Accordingly I hope that one of the first things to be considered in connection with this matter will be the liquidation of this deficit in order that the Fund may be brought back to the position in which it was before the War, before the extended benefit and other developments, so that it may really continue to be in the future, as I think it has been in the past, of the greatest possible advantage to working men who are unfortunately out of employment.


My Lords, before the Bill is read a second time I should like to add a very few words regarding the speech of the noble Earl. First let me assure him that not the slightest discourtesy to him was intended when I was speaking to my noble and learned Leader. I have always listened to the noble Earl with the very greatest interest and profit, and I was merely intimating that, in view of the important speech that he was making, I proposed to say something in reply. That is all that was happening. The noble Earl seems to think that I had not given a complete account of the reasons why this deficiency has been built up. I was rather careful to say at the end that what I had said was all that I would trouble your Lordships with at the moment. I had not forgotten extended benefits or what is called the General Strike. We are not allowed to forget that, and I will deal with it in a moment. The point is that there are items on the other side of the account which I have not dealt with. The noble Earl is probably aware that the late Government increased the waiting period and did various other things which meant that there is a great deal of money on the other side of the account if those things are taken into consideration, so that I do not think that anything that I said can be adjudged at all unfair. I made it quite clear that I was merely dealing with what the late Government did in regard to this Fund during its last term of office. That was my point, and what I said in that connection stands, I think, absolutely invulnerable.

As regards the General Strike, it is true that the Fund increased in debit between March and December, 1926, by about £15,000,000, but it is perfectly clear that, whatever may have happened in regard to that or in respect of extended benefit or anything else, in view of the figures that I gave, if there had not been cuts in income made by the last Government, the Fund could have borne all that and would scarcely have been in debit at this moment. I am not going into the controversial question as to who was responsible for the General Strike, but I must say, as the matter has been raised, that we do not agree with the suggestion that the blame rested with the Labour Party. We never have agreed with that view when the matter has been discussed from time to time in this House. The noble Earl said that the Labour Party should have taken a stronger attitude. Our argument is that the Government I ought to have taken a stronger attitude. In our view the matter went to the country. There has been a General Election since.


What has that to do with it?


It has this to do with it, that the matter was brought up again and again on the platforms, and the result of the Election shows that the country does not take the view that the Labour Party was responsible for it.


How can the noble Lord say such a thing?


The noble Marquess will allow me to make my case. We are held responsible for not having taken action which would have saved this increased debit, and it is a matter for argument whether the responsibility does lie with us. In our view, it does not. I say that the figures that I have given of the cuts made by the late Government are quite invulnerable, and I do not think I have put the case unfairly when all the matters are taken into account.

On Question, Bill read 2a, and committed to a Committee of the Whole House.