NATIONAL HEALTH INSURANCE AND CONTRIBUTORY PENSIONS BILL. (Hansard, 4 July 1932)

§ THE PAYMASTER-GENERAL (LORD ROCHESTER)
My Lords, I beg to move that this Bill be now read a second time. My task in commending this Bill to your Lordships' House for a Second Reading is neither a pleasant nor an enviable one. No task is pleasant which is confronted with such Herculean difficulties as those in which the country is so unfortunately placed to-day—difficulties that are being gradually, but nevertheless certainly overcome, if one may judge by the success already attendant upon the Conversion Loan campaign. The main object of this Bill is to make certain changes in the national health insurance scheme in order to ensure its financial stability. As the financial provisions of the scheme are somewhat intricate the Bill is necessarily of a rather technical character and not perhaps altogether easy to follow. I must therefore crave the indulgence of your Lordships while I endeavour to explain in some detail its general provisions. Fortunately, when carefully studied in conjunction with the White Paper the Bill is not so complicated as it appears at first sight.
490 The national health insurance scheme has now been in operation exactly twenty years. It covers 17,000,000 insured persons and is administered through 7,500 approved societies and branches. I am sure your Lordships will agree that it is rendering a very important and most useful service to the workers of this country in providing cash benefits and medical benefits in periods of sickness, maternity benefits, and in more recent years dental, ophthalmic and other additional benefits for the members of those societies which, on an actuarial valuation, are found to have a disposable surplus of assets over liabilities.
I submit that it would be difficult to exaggerate the value and importance of the national health insurance scheme. In fact, it is not over-stating the case to say that it is far and away the finest, the safest and actuarially the soundest social insurance scheme in the world. I scarcely think the magnitude of the scheme is always realised. Some idea of its dimensions may be gauged from the fact that the amount contributed by insured persons and their employers last year was £25,870,000, while in addition the State paid to the assistance of the fund £6,320,000. The rest of the revenue is derived from interest on accumulated funds amounting to about £5,000,000 a year. I am most anxious not to weary your Lordships with unnecessary figures, but permit me to add just these. In the course of the twenty years that will be completed next week of the scheme's existence the stupendous sum of £434,000,000 sterling has been paid out to insured persons in the form of benefits, and in addition reserves to the extent of £117,000,000 have been accumulated, the greater part of which are ear-marked against the positive actuarial liabilities of the scheme.
Whatever criticism I may have to meet as to certain details of the Bill, so vast are the ramifications of the scheme and so gigantic its obligations that I am sure your Lordships will agree there can be no question as to the absolute and imperative necessity of ensuring not only its solvency, but also the unqualified financial strength and stability of the whole scheme. Up to six or seven years ago the scheme was exceedingly prosperous—in fact, the great majority of societies had a disposable surplus, after making allocations to reserves on a generous 491 basis, and most insured persons were thus able to get additional benefits. Gradually a change has come over the scene. Largely as a result of prolonged and widespread unemployment the contribution income of the approved societies has steadily fallen, while sickness claims, especially among women, and more especially among married women, have steadily risen. A position has now been reached in which, unless some change be made in the financial provisions of the scheme, it will certainly drift into a state of insolvency, and to prevent that is the sole raison d'être of this Bill. The Minister of Health in the late Labour Government, in a praiseworthy effort to grapple with the situation, issued circulars early last year to approved societies and medical practitioners, with a view of securing a more careful supervision of schemes and an improved standard of medical certification. Shortly after the present Government assumed office the Report of the Government Actuary on the third valuation of approved societies was issued. That Report made it abundantly clear to the Government that something more radical than administrative reforms was necessary, if the financial stability of the scheme was to be assured. As a result of careful examination of the whole subject by the Government the present Bill was introduced. It is dictated by sheer necessity. It is designed to protect the interests of those who are contributors to the scheme, and to preserve the contributory principle of the national health insurance system on a strictly actuarial basis.
I want to emphasise, my Lords, that this Bill does not take away one single penny from the moneys available for benefits for insured persons, nor does it, on the other hand, involve any increase in the contributions, either from employers, employees or the Exchequer, so far as the national health insurance scheme is concerned. The Bill falls into three main parts. Firstly, it deals with the heavy expenditure on sickness and disablement benefits of insured women, and particularly married women. Secondly, it deals with the serious loss of contribution income by reason of unemployment among insured persons. Thirdly, and incidentally, it deals with the continuance in insurance of persons who have paid no contribution for long 492 periods by reason of unemployment, and who are due to fall out of insurance at the end of this year, when, but for this Bill, their health insurance and widows' and orphans' and old age pensions rights would cease.
As regards the first point, Clause 3 of the Bill makes certain adjustments in the rates of sickness and disablement benefits payable to insured women. In the case of unmarried women and widows the present rate of 12s. a week for sickness benefit remains unaltered, but the rate of disablement benefit is to be reduced from 7s. 6d. to 6s. per week. In the case of married women the rate of sickness benefit is to be reduced from 12s. to 10s. a week, and the disablement benefit from 7s. 6d. to 5s. a week. Needless to say it is with great regret that the Government have found it necessary to propose these reductions, but they are satisfied that if the solvency of the scheme of national health insurance is to be maintained some such adjustment of women's benefits is absolutely essential.
I have already mentioned that the national health insurance scheme is administered through 7,500 approved societies and branches. Each one of these is a separate, self-governing financial unit. The recent Report by the Government Actuary shows that, taking all the societies and branches together, there was a total surplus on the third valuation of nearly £36,000,000. At first sight this figure seems very impressive, and suggests that there is no need to feel uneasy about the financial stability of the scheme. The Government Actuary points out, however, that the surplus is attributable in very large measure to the reserves carried forward from the previous valuations and the interest earned on those sums, and that if these items are excluded, and also certain other sources of profit which have now ceased to exist, the balance of profit earned over the valuation period was very small, so that in fact many societies may now be said to be living solely on their past accumulations. The Government Actuary in his Report calls particular attention to the very serious growth during recent years in the expenditure of approved societies on the sickness and disablement benefits of their women members, and he reports that the claims of women for these benefits have risen to such an extent as to exceed the actuarial provision made 493 for them by no less than £850,000 a year. The continuance of this state of affairs would inevitably result, in the near future, in the insolvency of the whole scheme so far as women's insurance is concerned, and it therefore becomes a matter of vital importance that there should be, without delay, such a readjustment of the benefits payable to women as is necessary to prevent the outgoings from exceeding the revenue of the scheme.
Admittedly adjustments there must be, and there are three alternatives before the Government. The first would be an increased Exchequer grant, the second an increase in the weekly contributions paid by insured women and their employers, and thirdly, a reduction in the rates of benefit payable to women. The first alternative, I think your Lordships will agree, is absolutely ruled out by the state of the country's finances. As to the second, the Government Actuary has advised that if the present rates of benefit are to be maintained the contributions would have to be raised by 1½d per week. I am sure your Lordships will agree with the decision of the Government that in the present economic condition of the country no increased Exchequer grant is feasible, and that no increase in the weekly contributions, either from the employers or the employees, can be contemplated for this purpose. The Bill accordingly provides for a reduction in the rate of benefit payable to women.
The loss of £850,000 a year to which I have referred is attributable in almost exactly equal measure to unmarried and married women, but as the unmarried outnumber the married in the scheme in the proportion of about four to one, the loss is relatively very much greater in the case of married women than in the case of unmarried, and regard is had to this fact in the proposals contained in the Bill, which provide for rather larger reductions in married women's benefit than in those of the unmarried. It will be remembered that in the case of the insured married woman, the husband, as a general rule, is also an insured person, and a portion only of the family earnings is suspended when the woman ceases to work; added to which the husband's benefits are not being reduced under this Bill.
The reductions proposed in the Bill are the very smallest which can be made in 494 order to meet the needs of the situation. As a matter of fact, they are not in themselves really sufficient on the basis of a continuance of the recent sickness experience amongst women, and the Government Actuary has advised that even at the reduced rates of benefit proposed in the Bill the contributions should be increased by a halfpenny a week. The Government have decided, however, against demanding any increase in contributions, nor do they desire that any reductions in benefits should be made which are not absolutely imperative, and it is hoped and believed that the position will to some extent be met by improved administration and more careful supervision of claims on the part of the approved societies, and in this way such a reduction effected in the volume of claims as will be sufficient to secure financial stability at the rates of benefit proposed in the Bill, and thus obviate calling for any increase in contributions, even to the extent of the halfpenny suggested by the Government Actuary. Before leaving this subject, let me add that although the new rates will become standard rates of benefit for women from January next, any approved society which on valuation is found to be in the position to increase those rates by reason of having a disposable surplus will still be at liberty to do so.
I now pass to the clause in the Bill dealing with the serious loss of contribution income by reason of widespread unemployment amongst insured persons; that is, Clause 4. It has always been a cardinal feature of the national health insurance scheme that the rates of benefit payable to insured persons are graduated according to the number of contributions paid in respect of each person during the preceding contribution year. From the inception of the scheme until the year 1928 insured persons who were in arrear with their contributions were required to redeem their arrears by a cash payment, failing which the rates of benefit were reduced during the following benefit year. I think your Lordships will agree that this was undoubtedly a hardship to persons who were suffering from prolonged unemployment, and in 1926 the Royal Commission on National Health Insurance recommended that provision should be made which would protect an insured person from incurring any loss or penalty by reason of arrears due 495 to genuine unemployment, but no recommendations were made as to how societies were to meet this additional liability.
In 1928 the present Chancellor of the Exchequer, then Minister of Health, when introducing the National Health Insurance Bill of that year, made an effort to grapple with the problem. He found that there was a sum of money available amounting at that time to £500,000 a year from stamps sold at post offices, but not claimed, owing to a certain number of insured persons not returning their contribution cards to their approved societies. In other words, insured persons—through their employers—were purchasing stamps from the Post Office and putting them on the cards, as they were compelled by Statute to do, and then neglecting to return the cards to their societies, because, forsooth, they did not appreciate the value of being included within the scheme. The consequence of that has been that the money which accrued to the Post Office was sent to the Ministry of Health, but they on their part had not to meet the liability in respect of which those stamps had been purchased. Mr. Chamberlain made an arrangement with the approved societies under which, in return for the £500,000 a year being handed over to the societies under an appropriate scheme, all arrears due to proved unemployment would be totally excused. At that time the unemployment figures were falling, and the residual liability to be met by societies out of their own funds only amounted to about £200,000 a year in round figures. Experience has shown that this total excusal of arrears is too generous under present conditions, and the consequent loss to societies is really more than they can bear.
Two things have happened since the Act of 1928. There has been a steady rise in the unemployment figures, and it is found that for the year 1931–32 the grant of £500,000 will only suffice to provide one-fifth of the losses from arrears. The burden to be borne by societies consequent on unemployment will thus amount to no less than £2,000,000 in respect of the past year. Further, the amount of money in the unclaimed stamps sales account is already falling, largely owing to the very interesting fact that the great popularity and attractive- 496 ness of the benefits of the contributory pension scheme, which is interlocked with health insurance, is making insured persons much more careful about returning their contribution cards to their societies. The result is that, instead of being able to count upon £500,000 a year from this source this year, the sum now available is only about half that figure. It is obvious, therefore, that the arrears scheme of the 1928 Act must be recast, and power is taken in Clause 4 of the Bill, under which only part of the arrears due to unemployment need be excused. It is proposed in future that arrears due to unemployment shall only be excused to the extent of one-half; the remaining half, less an allowance of two contributions, is to be met by the insured person himself if he wishes to cover himself for full benefit. I should mention that arrears due to sickness are not counted against the insured person.
The proposal in the Bill will result in a scheme of arrears very much the same as that in operation prior to 1928, when insured persons were enabled to pay arrears penalties roughly of the value of half the missing contributions in order to qualify for full benefit. If, as we all hope, there is an improvement in the unemployment position later on the Bill provides that the arrangement can be varied to give more generous treatment to insured persons by allowing excusal of more than one-half of the arrears due to unemployment. The scheme will have the effect of reducing the total burden of approved societies from £2,000,000 to £1,000,000 a year. In order to protect those societies which find themselves unable to bear their share of the burden of £1,000,000, Clause 7 of the Bill provides that any society that is likely to be in deficiency on valuation, as a result of this liability, will receive a grant from the Reserve Suspense Fund of a sum representing the loss due to excusals of arrears, and this grant will be given in priority to any claim upon the societies' own contingencies fund. I think you will agree that it would be obviously unfair to cast upon a society the slur of being in deficiency, when that deficiency was due to the generous response of societies in giving help to their unemployed members. In order, therefore, to meet this new liability on the Reserve Suspense Fund, Clause 7 of the Bill provides that all future moneys available in the 497 stamps sales account shall be transferred to the Central Fund, which Fund guarantees the solvency of the Reserve Suspense Fund.
I now pass to the third main provision of the Bill, which is a much more pleasing one for me to deal with, as it provides for the continuance in insurance of persons who have paid no contributions for a long period by reason of unemployment, and about 80,000 of whom are due to fall out of insurance at the end of this year. Under the Act of 1928 an insured person who ceases to be employed is given a period of free insurance of between two and a-half and three years. Towards the end of 1930 the late Labour Government introduced a temporary measure, the Prolongation of Insurance Act, 1930, to keep in insurance for another year those unemployed persons whose rights under the permanent scheme of 1928 would have expired at the end of 1930. As the approved societies were unable to bear this further liability, the cost of the extension was borne by the Exchequer. After the present Government assumed office a similar problem arose as regards persons whose insurance was due to terminate at the end of last year, and, pending a detailed examination of the whole subject, the present Government passed a further Prolongation Act extending the insurance rights of these persons until the end of the present year. Under the able advocacy of my noble friend Lord Gage, your Lordships passed that Act, I think I am correct in saying, without even a Division, and I hope your Lordships will be equally as considerate on this occasion.
Unless something further is done some 80,000 men and women will pass completely out of insurance at the end of this year owing to unemployment. They will be losing all their insurance rights, including the right most appreciated and valued of all, the right to widows' and old ago pensions. The Government, in examining the problem, have two objects in mind. First, we must not do anything which will have the effect of inflicting it mortal injury upon the contributory principle, and second, we must remember that the loss of insurance rights, and particularly pension rights, is a hardship to the unemployed, and we ought to go to the utmost limit possible in protecting those rights without sacrifice of the contributory principle and without sacrificing the essential solvency of the 498 scheme. Fortunately, the first provisions of the Bill, which ensure financial stability, justify the Government in stretching a point in order to give some further extension of insurance to all unemployed persons who are due to go out of insurance at the end of this year in order that they may be maintained in health insurance for a year up to the end of 1933, but they will only be entitled to medical benefit during that year.
In the case of last year's Prolongation of Insurance Act, to which I have already referred, the persuasive powers of my noble friend Lord Gage were such your Lordships passed it notwithstanding that it entailed the Exchequer finding the additional money. The Exchequer has been appealed to again on this occasion, but in vain, for the Government is not prepared to put up the £50,000 which is the cost of this concession, and as the approved societies are unable to do so, Clause 2 of the Bill provides that the societies will be compensated for the extra liability by a slight adjustment of the transfer values which are debited to societies when members cease to be entitled to health insurance benefits. The continuance of health insurance for 1933 ensures the continuance of pension rights during that year. In view of the relatively greater importance of the widows' and old age pension rights the Government in addition propose under the Bill to continue the pension rights of those persons during the year 1934 and, if a person remains unemployed throughout that year, the pension rights will be continued until the end of 1935, so that there will be two years of additional pension rights at the end of the additional year of medical benefit.
In the year 1935 the Government Actuary is required by Statute to examine and report to Parliament on the financial position of the pension scheme, and it is fervently hoped that by that time the unemployment position in the country will have so much improved that the great majority of these persons will have returned to full insurance. In view of the fact that the balance to the credit of the Pensions Account is substantial, the Bill makes no provision to recoup the account by way of additional Exchequer grant or otherwise for any loss arising from the extension of pensions rights. It was estimated last year that the 499 annual Exchequer contribution to the Pensions Account fixed by the Widows', Orphans' and Old Age Contributory Pensions Act of 1929 would be adequate for at least ten years and the proposals of the present Bill do not involve sufficient additional cost to modify this position.
I have now dealt with the main clauses of the Bill and I do not propose to weary your Lordships further with detailed reference to the minor clauses many of which are of an administrative character. It is proposed that at the end of 1935 we shall revert to the ordinary permanent proceedings of the scheme with some slight modifications. There will be no further special years of prolongation after the transitional period, but it has been found possible, as part of the permanent scheme, to grant the unemployed the continuance of their pension rights for one further year after the expiration of their health insurance rights. Certain other provisions of the Bill will enable persons who resume employment shortly after they have ceased to be insured, to get back to full insurance on somewhat easier conditions than the ordinary new entrant into insurance. In addition, the position of certain elderly persons who have lost employment and find it difficult to get back to work has been eased with a view to preserving their old age pensions at 65 and their medical benefit.
I hope your Lordships will agree that the Bill is a courageous attempt on the part of His Majesty's Government to grapple with a problem which brooks no delay, and that its three main objects have been achieved—the financial stability of the scheme, the unimpaired maintenance of the contributory principle, and the largest possible measure of protection consistent with those principles for the unemployed who, through no fault of their own, are threatened with the loss of insurance rights. In conclusion, let me say it is of course very easy to criticise the reduction in benefits embodied in the Bill, but I would remind the House that the alternative is not between existing benefits and reduced ones, but between reduced ones and endangering all benefits. It is therefore with confidence that I submit the Bill to your Lordships' consideration and move that it be now read a second time.

§ LORD MARLEY
My Lords, the House has obviously enjoyed the emphatic and exhaustive explanation of this Bill which has been given by the noble Lord who moved the Second Reading, and I think the House is to be congratulated on taking more interest in the Bill than another place. During the Second Reading in another place the House was twice counted out there being only thirteen members present. In this House there are no fewer than nineteen. We on these Benches of course oppose this Bill. We look on it as being an attack on the workers. It attacks the workers' standard of life, by lowering the benefits which they receive from health insurance. It is an attack on the unemployed, who are specially selected to be hit, and it is an attack on women. The excuse given by the noble Lord is that the Government wishes to maintain the solvency of the insurance principle. It would be interesting to have an explanation as to why in 1926 the Government grants were reduced by no less than £2,750,000 a year. Had that reduction not been made then the Fund would have been practically solvent at the present moment.
Of course, the principle of the insurance will not hold water, because in the ordinary sense of the word it is not an insurance scheme at all. An insurance scheme involves equal benefits for equal payments, and in this scheme we do not have that. In the first place we have approved societies coming in, and in the case of a society whose members are in a healthy occupation, that society may have a big surplus and pay considerably increased benefits. On the other hand you may have a society whose members are engaged in an unhealthy occupation and, although their need is greater, they get a less payment because there is no surplus. Dependents—wives and children—have never been included. Therefore, in that sense of the word it is not an all-comprehensive insurance scheme. In particular it is extraordinary that women are so offensively attacked by the measure now before the House. Women are attacked merely because their claims have been higher than those of other sections of the community. You might equally well argue that certain sections of men's occupations show higher claims than other sections. Why not attack them? In any case most of the claims of married women arise as a result of illness due to 501 childbirth, and there is no doubt that women's extra claims are often brought about by economic causes. In a family where the amount of money coming in week by week is reduced, it is always the mother who is first to go without and therefore it is the mother who first falls sick and whose claim on the fund is most insistent.
There is no doubt that sickness will be increased by Clause 3 of the Bill now before your Lordships' House. We believe that the Government should have examined the scheme as a whole. They should have extended payments to dependents and they should have restored the Government grants which were reduced in 1926. Whatever else we may say about economy, it is clearly a false economy to save money on the health of the people. In the end this Bill must mean more bad health for the ordinary people of the country. We have had a number of interesting reports on health recently, including a report by the Archdeacon of Northumberland and six other clergymen who have said that in visiting they have observed that mothers are suffering from under-nourishment, particularly in families where there are several children. This report has been endorsed by clergymen in the Shoreditch rural deanery who have pointed out that many people in their area are suffering from under-nourishment. From that there must arise sickness and therefore this Bill will mean further sickness. Again, the reduction of maternity benefit must tend to check the fall in maternal mortality which has taken place during the last ten or twenty years. I am very glad to see the noble Marquess, Lord Salisbury, in his place because he said in your Lordships' House last Wednesday that of course we must discriminate as to economies. He went on to say: I would be sorry if there had to be any grave changes in the health services. They certainly stand first for expenditure. Therefore we hope that the noble Marquess will be with us in opposing this Bill, which does mean a grave change in the health services of the country by cutting down benefits from national health insurance.
We on these Benches believe that it is only by means of a public medical service, free and open to all, that the health of the individual can be preserved, disease prevented, epidemics controlled and the 502 physical welfare of the community promoted. That is the only way in which you can really secure a healthy population able to carry on their productive work in the interests of the national wellbeing. We are not going to divide the House against this measure, because we have agreed for business purposes not to do so, but that does not mean that we are not entirely opposed to the whole theory of this reduction of health insurance benefits. We realise that if we had a Division we should be beaten, as is usual in this House. We realise that, but we know that while that is the case at present there will come a time when the Tellers in the Not-Contents' Lobby will have a curious crowd of new voters —thousands of children who are not content with the present system, who are not content with reduced benefits and reduced allowances, who are not content with bad health. Tens of thousands of mothers will crowd the Not-Contents Lobby. I do not know what the Tellers will say on that occasion, but that is what will happen in days to come—I cannot say when. Meanwhile we can only oppose this measure which we believe to be unjust, unfair, and not good for the nation as a whole.

§ LORD ROCHESTER
My Lords, I am sure that the noble Lord who has just spoken is as anxious as we are on this side to do the very best that is possible within our resources for the beneficiaries of the national health insurance scheme. I listened to his speech with very great care, because I was anxious to know whether he had any constructive proposal to make to meet the undoubted problem that we have to face. As far as I was able to gauge his position it was that if the £2,750,000 had not been withheld by the Exchequer in 1926 then, I think his words were, we should not find ourselves faced with the present problem. That statement, if the noble Lord will forgive me for saying so is not—I am not quite sure how far one may go in your Lordships' House, but the relationship between that statement and the truth is so distant as to be scarcely recognisable. The fact is that if the Exchequer grant had not been reduced in 1926 the Royal Commission recommended extended benefits and therefore the money would not be available now. What would have happened would have been that insured people would have had 503 that money in additional benefit, either cash or medical treatment benefit.
The Royal Commission set out in full their recommendations under that head on page 276 of the Report. They said: the balance of the margin should not be devoted to decreasing the present weekly contribution, but should be applied to its full extent towards meeting the cost of extending the statutory benefits. And on page 280 of the Report they set out the order of priority of extension of benefits. They said: The extensions of statutory benefits, to be made as and when funds are available to meet the cost, should be placed in the following order of priority:—(a) extension of the scope of medical benefit; (b) the provision of allowances in respect of dependants of insured persons in receipt of sickness or disablement benefit. I suggest there can be no question that if these Exchequer grants had not been withdrawn they would have been used in accordance with these recommendations in extended benefits, so that we should not have the money available now.
In regard to the other point, if the noble Lord will put down on the Paper any Amendment he suggests to meet the difficulty to which he has referred, I can assure him on behalf of the Government that it shall be given the consideration it deserves. But I hope your Lordships will give the Government this Bill this afternoon because time presses, we are getting towards the end of the Session, and we want to secure the remaining stages if possible this week.