HL Deb 13 April 1932 vol 84 cc10-7

Order of the Day for the Second Reading read.


My Lords, the sole object of this Bill, to which I ask your Lordships to give a Second Reading to-day, is to extend until June 30 next year the period in respect of which transitional payments may be made in certain cases; and to provide that the cost of such extension shall be met by the Exchequer. The end of June, 1933, is chosen for the purpose, because the Unemployment Insurance Act, 1930, will expire then and legislation will be required by that date in any case. This is a strictly temporary measure, and would not in fact be needed at all if the Unemployment Insurance (No. 2) Act, passed in July last year, instead of providing for an extension of six months only had substituted a period expiring at the same time as the Unemployment Insurance Act, 1930, and had in addition provided for all transitional payments to cease as and from the date of such expiration.

There is an element of urgency about the matter because, apart from the passage of this Bill, certain persons now receiving transitional payments will cease to do so after Monday next, the 18th instant. A benefit year begins to run, in the case of each individual, for a year from the date upon which he first makes application for benefit. In the existing state of the law a man whose benefit year began on April 18 last year would begin a new benefit year on Monday next, but a man whose benefit year began only a day later last year, that is on April 19, would cease altogether to receive payments next Tuesday; in other words, the difference of a day last year would mean the first man could receive another full year's payments, while for the second man all payments would cease on Tuesday next, supposing there was no new legislation. If, therefore, the power to make transitional payments beyond Monday next is to continue, it is necessary to have this Bill.

When the main Unemployment Insurance Act of 1920 came into operation, towards the end of that year, the industrial slump was just commencing and a good many people were being thrown out of employment. The result was that many of the newly insured workpeople had not obtained the contribution qualification that would entitle them to benefit under the Act. In these circumstances the Government of the day decided that the proper thing to do was to waive the strict insurance condition and grant benefit to these people. This was first called uncovenanted benefit. Later it was described as extended benefit, and was continued under that name until 1927. In that year an Act was passed, following upon a Report by a Committee over which my noble friend Lord Blanesburgh presided, which recommended that the provision of benefit outside the strict insurance scheme should come to an end after a further period of something over a year. The period which was to elapse between the then state of affairs and the new scheme which Lord Blanesburgh's Committee had recommended, was called the transitional period, and the benefit payable during that period became known as transitional benefit.

Transitional benefit was extended from time to time by a series of Acts passed by different Governments down to last October when, under the National Economy Act of last year, an Order-in-Council was made which brought into existence what are now known as transitional payments. Prior to the National Economy legislation of last year there was only one class of unemployed persons entitled to transitional benefit—namely, those persons over 18 years of age who had not paid 30 contributions in the last two years, but who had satisfied the other conditions. The Unemployment Insurance (National Economy) (No. 2) Order, made on the 7th October last, abolished transitional benefit but provided that two classes of persons might receive transitional payments if they would, but for the Order, have been entitled to benefit. The first class was the original transitional benefit class just referred to. The second class consisted of persons who became entitled to 26 weeks benefit in a benefit year. These persons are disentitled to benefit for the remainder of their benefit year and for so long thereafter as they have not paid ten contributions since becoming entitled to 26 weeks benefit. The National Economy Order did not place any limit on the period during which the second class might receive transitional payments and no legislation is therefore needed now for them but only for the first class, and that is the reason for this Bill.

The cost of the present extension of the period during which transitional payments may be made will depend partly on the rate of unemployment between now and June 30 next year. It is therefore difficult, as your Lordships will appreciate, to estimate but it may be about £20,000,000. The Estimates now being submitted to Parliament show a total provision of £41,750,000 for transitional payments. Of this about one-third represents the cost of the payment to those people who have the proper insurance qualification but who have drawn 26 weeks benefit in the year. The remainder (say, £28,000,000) is in respect of the old transitional benefit class; that is, those who have not the insurance contribution qualification, and it is those in the latter class who are the subject of this Bill. The cost of transitional benefit was originally borne by the Unemployment Fund, but by the Unemployment Insurance Act, 1930, the cost was transferred to the Exchequer. The various extensions of the transitional period (which was originally twelve months only) brought the expiration of the period down to the present month.

Both the Royal Commission and the May Committee referred to transitional benefit in their Reports, but no big change in the conditions under which transitional benefit was paid was made until the present Government decided that, from November 12 last, transitional benefit as such should come to an end, and that insurance benefit should be limited to twenty-six weeks in a benefit year. This was effected by the Order-in-Council of October 7, which provided, in its place, transitional payments which were to be allowed subject to a needs test, which was to be administered by the public assistance authorities. Prior to the institution of the needs test the cost of transitional benefit had been increasing owing to the continuance of exceptionally heavy unemployment. Thus, while at present rates of benefit the charge on the Exchequer in April last year was about £400,000 a week, it had increased to £520,000 by the end of October last. The inclusion of the "twenty-six weeks" class increased the charge for transitional payments to £820,000 for the week ended November 21 last. Owing to the operation of the needs test and the Anomalies Regulations the weekly charge fell for some time. For the week ended January 23, the amount was about £760,000; since that date the weekly charge has increased, and for the week ended March 5 it was about £811,000, or an average increase of £7,500 a week for six weeks.

One of the tasks which faced the National Government last autumn was to effect economies in the unemployment insurance service without inflicting undue hardship on individuals. At the same time abuses had to be prevented. Steps had already been taken under the second head by their predecessors in what is known as the Anomalies Act, which deals with the problems arising out of the payment of benefit to married women, seasonal workers and other classes. A part of the economies which the National Government decided to adopt consisted in increasing the contributions from employers, employed and the Exchequer, and reducing some of the rates of benefit. But the measure to which perhaps most public attention has been directed was the institution of a needs test in the case of those individuals who had exhausted their benefit rights, or who had not the necessary insurance qualifications. I would emphasise that the test that is applied is the test of the individual's needs and not necessarily a test of his means. The broad principle observed in applying the needs test is clear; anyone who requires assistance from the State while unemployed, beyond what he can claim as a right under the insurance scheme, must show that he has need of it. If the insurance scheme is to have any meaning at all it is obviously impossible to allow contributors whose insurance rights have run out to obtain benefit on the same terms and of the same amount as the insured contributors who are still within their contracts.

The application of the needs test to those who fall out of benefit has been generally accepted as fair and reasonable, it being recognised that assistance outside insurance rights should only be given in accordance with need. While the Ministry of Labour is responsible for the payment at the exchanges of the transitional payments allowed to individuals, as your Lordships know the administration of the test is in the hands of the public assistance authorities. Those authorities are required to make such inquiries and otherwise deal with an applicant for transitional payments as they would deal with an applicant for public assistance. Now that is definitely laid down in the Order-in-Council of last October, which instituted transitional payments. There is only one modification of that general rule—namely, that the amount allowed must be paid in cash in the case of transitional payments. The assessment of the needs of an individual claimant is wholly in the hands of the public assistance authority. Those authorities know the local circumstances and represent the local electorate. They have experience in the relief of need, and they have a staff of experienced investigators.

Suggestions have been made that a separate machinery should have been set up for the application of a needs test for transitional payments. Apart from any other reasons, however, it would have been quite unjustifiable to create an improvised and duplicate machinery of administration, while the expert machinery of the local authorities was available. Problems have arisen in connection wtih such matters as disability pensions, savings, and the treatment of wages earned by members of a household. The claim has been made that regulations or instructions should be issued on these points, but it is not in the power of the Minister of Labour to make regulations or give instructions on these three points. They are matters on which public assistance authorities have both experience and principles to guide them. As the administration of the needs test is based upon public assistance principles, your Lordships will appreciate that if regulations were to be issued, they would be regulations affecting public assistance (commonly known as Poor Law relief) as well, and the existing independence of the public assistance authorities would then be subject to regulations from Whitehall. It is very doubtful whether local authorities would like this, or whether it is really desirable.

It has been said that the action of a number of public assistance authorities has had the effect of forcing some claimants for transitional payments on to the Poor Law. It is difficult to understand how this can have taken place, because that would mean that the standard set by the authority for transitional payments would be more severe than for public assistance, which would be illegal, being inconsistent with the Order-in-Council, and would be hardly likely to occur, since it would result in a charge being thrown on the local rates by the local authorities themselves which would otherwise fall on the National Exchequer. There has been a remarkable absence of friction and difficulty in instituting and operating the system. For that, the merit is largely due to the whole-hearted co-operation which has been forthcoming from the local public assistance authorities. In some instances the requirements of the Order-in-Council have not been quite fully appreciated and proper steps are now being taken in those cases where such authorities have failed to base their administration upon public assistance practice. Such cases are relatively few in number. The administration of the Order has also disclosed certain divergences in public assistance practice which have been the subject of criticism. Some of the divergencies, such as those which are based upon differences of economic conditions, are justifiable. Others which are less easily explained are engaging the attention of the Minister of Health, who has announced his intention by means of conferences of authorities in adjacent areas, to take what steps may be possible to secure a reasonable degree of uniformity. While it cannot be said that the needs test is yet working entirely satisfactorily in all areas, I suggest to your Lordships that it is working with very much less friction than anyone would have anticipated when it was instituted last November.

Finally, I would remind your Lordships that the Royal Commission is still considering the whole subject of the unemployment insurance scheme, and the arrangements which should be made outside the scheme for the unemployed who are capable of and available for work. The Report of the Commission will, no doubt shortly be made and it would be obviously unwise in advance of the receipt of that Report for the Government to attempt to do anything more at the present juncture than to continue the existing arrangements. It is, therefore, with confidence that I ask your Lordships for the Second Reading of this Bill, which will allow time for the consideration of the Report of the Royal Commission and the preparation of subsequent legislation which, for reasons I have already explained, will in any event, be essential, whether the recommendations of the Royal Commission afford a basis for such new legislation or not. Therefore, I move that the Bill be now read a second time.

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

On Question, Bill read 2a: Committee negatived.