UNEMPLOYMENT INSURANCE BILL. (Hansard, 20 June 1939)

§ THE EARL OF BIRKENHEAD

My Lords, I beg to move that this Bill be now read a second time. I would like to begin by reminding your Lordships that on March 4, 1937, the Minister of Labour announced that he proposed to appoint a Committee to investigate the extent to which holidays with pay were being given to employed workpeople, and the possibility of extending the provision of such holidays by statutory enactment or otherwise, and to make recommendations. Your Lordships will remember that the Committee, under the Chairmanship of Lord Amulree, reported early in 1938. The Committee, amongst other things, recommended that the provisions in the Insurance Acts respecting unemployment benefit and payment of contributions during the period of paid holidays should be reconsidered with a view to amendment, as well as the question of benefit during an unpaid holiday. Following upon that, the Unemployment Insurance 560 Statutory Committee were asked, in April, 1938, to consider and advise upon the question whether any change should be made in the Unemployment Insurance Act in relation to holidays and periods of suspension from work. That Committee presented its Report on October 7 last.

The Committee, after a description of the present law and practice and of the many complicated problems arising in connection therewith, said: It is not, we are sure, in accord either with the purpose for which unemployment insurance was established or with responsible public opinion that unemployment benefit, directly or indirectly, should become a form of holiday pay. … Holidays in our view should not count as unemployment either for benefit or to maintain continuity. On the other hand, they should not be allowed to break continuity of unemployment. The way to a satisfactory solution of the problems … lies in drawing a sharp distinction between holidays and unemployment. The principle is clear and should now be embodied in the statutory conditions defining unemployment. They therefore recommended legislation to secure that insured persons on holiday should not be treated as unemployed and to empower the Minister to deal by means of regulations with points of detail. Further, in view of the fact that one effect of their recommendations would be to prevent holidays from counting as part of a continuous period of unemployment, they suggested a relaxation of the rules governing the requirement of a fresh waiting period after a spell of employment. I will deal with that in rather more detail in a moment. As regards the point of suspension from work, the Committee recommended that payments made by employers during suspensions should not be a bar to the receipt of benefit, provided the payments were made in accordance with rules approved by the Minister. These recommendations are given effect to in the Bill.

Clause 1 starts by laying down the principle that an insured contributor shall not be deemed to be unemployed for the purposes of the principal Act on any day on which he is on holiday. Of course your Lordships will be aware that it has long been the position that an insured contributor cannot get benefit in respect of any customary or recognised holiday, or in respect of any holiday for which he receives payment, but there are cases in which, under the present law, benefit can be drawn by persons who are actually on 561 holiday. I could give your Lordships many examples. In the absence, for example, of a specific agreement between the employer and the workers, it may and very often does take some time for a period to become recognised as a customary holiday. Then there is the case where a holiday is governed by express agreement but in practice additional days are observed as a holiday. The additional days (if unpaid) can count as unemployment. In addition to the fact that persons actually on holiday can draw benefit, there is the fact that unpaid holidays, even though they may not count for unemployment benefit, may nevertheless be treated as a period of unemployment for the purpose of preserving continuity of unemployment.

The Statutory Committee summed up the effect of the present law and practice thus: The position revealed by our inquiries is in many ways unsatisfactory. … The extent to which, under the present law, holiday leisure can be converted into unemployment for the purpose of insurance is already producing many anomalies and is bringing the insurance scheme into disrepute. Both the disrepute and the anomalies will be accentuated in time to come by the contemplated and highly desirable development of holidays with pay. The report of the Committee on Holidays with Pay has rightly called attention to the necessity of redefining the position in regard to unemployment insurance as an accompaniment to the recognition of paid holidays as a normal incident of employment. Obviously a workman in receipt of pay for the holiday ought not to be able to draw unemployment benefit as well. But to allow decision for of against unemployment benefit in a holiday period to turn directly on Whether or not the workman is receiving any pay from the employer for that period would set up undesirable reactions. First, it would act to some extent as a deterrent to the grant of paid holidays, or at least as an excuse for evading such a grant. Employers unwilling to meet the expense of holiday pay would leave their workmen to draw benefit; other employers of more public spirit would be at a disadvantage. Second, it might lead to arrangements designed to give pay for holidays in substance without doing so in form. … There are indications already of movements in this direction. … Unless the position is defined there is likely to be continuous pressure upon employers granting pay for holidays to grant it in a form making possible the drawing of unemployment benefit as well. And there will be a sense of injustice if employers giving holiday pay from their own funds find other employers giving holidays without pay, in reliance on the benefit which their workmen may contrive to draw. In order to clear the ground for the development of holidays with pay from the employer as an incident of employment, and 562 to forestall the undesirable developments suggested above, it is essential to secure that holidays, whether or not they are paid for by the employer, cannot be taken with pay from the Unemployment Fund, on the plea of being unemployment. The Committee, my Lords, recommended that the necessary legislation should take the form of laying down the general principle that holidays are not unemployment, while leaving details to be worked out in regulations to be made by the ordinary procedure involving Report by the Committee after receipt of representations from employers and workers and their representatives. The Bill goes upon these lines.

Clause 3 of the Bill contains a relaxation of the rules governing the requirement of a fresh waiting period after a spell of employment. At present a fresh waiting period is not necessary provided that the interval between the two periods of unemployment does not exceed ten weeks. This Bill provides that a fresh waiting period should not be necessary if the interval between two periods does not exceed twenty weeks. This extension of the interval will, it is estimated, cost something in the nature of £600,000 a year. There will, however, of course, be a saving of some £400,000 a year under the rule that henceforward holidays are not to count as unemployment. The net result of the two provisions will be that insured contributors will benefit to the extent of some £200,000 a year. These two provisions which I have just dealt with are not to come into operation until January, 1940, so as to give plenty of time for the framing and preparation of the necessary regulations, including consultation with persons and bodies concerned.

I should like to say a word on the question of suspension from work. There are, of course, a number of firms or groups of firms who, during temporary suspension from employment or for a period after the termination of employment during which the employee can be looking for fresh work elsewhere, make a payment to the employee (or ex-employee), sometimes of an amount which, with benefit, would bring the weekly income up to the same level as his previous weekly wage, and in some cases of less. The general rule has been that where these payments can be said to form part of the terms and conditions of 563 the employee's service, benefit is not payable. This is rather a difficult question, and it might be well to quote the words of the Statutory Committee upon this point. They say: The question thus raised is one of considerable difficulty. On the one hand it may be argued that it is against sound policy to arrange that men when out of work shall get exactly the same as when in work, since this will discourage men from seeking work elsewhere and increase unemployment. On the other hand unemployment benefit has never been regarded as necessarily a sufficient income during unemployment. … On the whole, we believe that there is a case for amendment of the law in the direction of providing that supplementary payments during suspension, made in accordance with regulations of the Minister of Labour, should not be treated as wages so as to destroy a claim to benefit. Clause 2 of the Bill makes the necessary provision for giving effect to this recommendation.

Clause 4 confers further advantages upon the insured contributor. There are, for example, cases where insured contributors who have no dependent children within the meaning of the Act, have residing with them, and are maintaining, a grown-up daughter or sister, who runs the house for them. Under the present law the insured contributor could not get dependant's benefit in respect of such a person. Clause 4 will enable him to. Secondly, under the existing law, if the wife of an unemployed man has one lodger who lives as a member of the family and is provided with board and accommodation, the fact that the wife is doing the work of looking after this lodger is not a bar to dependant's benefit. There are cases, I understand, however, where, although only a single lodger is taken, he is provided only with accommodation, not with board. Under the existing law this is a bar to dependant's benefit in respect of the wife. It does not seem that this is right, and the clause makes the necessary amendment. It is estimated that Clause 4 will benefit insured contributors to the extent of some £100,000 a year.

I would ask your Lordships to turn now to Clause 8, which is rather an important clause. Clause 8 makes certain amendments as regards training courses, and has two main objects. The first is to give the Minister power to provide training courses for unemployed juveniles 564 between the ages of sixteen and eighteen in special circumstances which are defined in the Bill. The existing training provision for juveniles under eighteen, while it has been shown to work excellently in the ordinary run of cases, does not entirely meet the needs of certain of the older boys in areas of severe juvenile unemployment. Their best chance of employment is to acquire some kind of skill in a particular occupation in which they can obtain employment in another area. In the older age group—sixteen to eighteen years—there are some boys who at the junior industrial centres have been introduced to craft work and have shown considerable aptitude for it. For such lads the best hope of employment would be by means of a vocational training course, such as is given to young men in the Government training centres.

Another but less specialised form of training is given in the Ministry's local preparatory centres. The power of the Minister to provide direct training in centres of this kind is limited to persons who have attained the age of eighteen, and the chief object of the subsection is to permit such training for juveniles of sixteen years and upwards. It is proposed to limit the experiment in the first instance to selected boys of over seventeen years of age who are suitable for immediate training in one of the courses provided at the centres. This extension of the Ministry's training scheme to boys under eighteen will not require any enlargement of the centres, as they will be admitted only as vacancies are available within the present programme. The method of recruitment will be the same as that now applied to adults, and it will be limited in the first instance to boys resident in the Special Areas, and certain other areas of heavy juvenile unemployment. The scheme is, of course, entirely voluntary. The second and the minor object of Clause 8 is to give the Minister of Labour express statutory authority for the training of serving soldiers. The Ministry of Labour took over the training of serving soldiers from the War Office during last year, but the Ministry so far has been acting on an agency basis for the War Office, since the Minister of Labour at present possesses statutory powers only to give training to the unemployed.

565 The remainder of the Bill consists of what may be described as minor amendments. Most of them relate to relatively small points of detail, mainly of a technical nature, and call for no comment beyond a brief reference to their contents. Thus, Clause 5 corrects an interpretation of the existing Acts which permit the receipt of benefit in certain cases in excess of the periods mentioned in those Acts. Clause 6 amends the law relating to special and supplementary schemes. Under the 1920 Act industries were empowered in certain circumstances to contract out of the general scheme. Later this power was abolished. Only two industries had contracted out before it was abolished—namely, the insurance industry and the banking industry. These two industries have their own unemployment insurance schemes, which are known as special schemes. The Acts also contain provisions for making supplementary schemes, that is, schemes for payments in respect of unemployment, in addition to payment of ordinary benefit, or for periods for which ordinary benefit is not payable. There are not at present any supplementary schemes in existence, but on more than one occasion the possibility of making a supplementary scheme has been discussed with the industry concerned, and the National Joint Council for the building industry has submitted a draft scheme for payments in respect of wet-time. In discussions which took place with the flour milling industry and in the discussions with the building trade it was seen that the present definition of the scope of a scheme in the Act: caused difficulty, and other difficulties have emerged in connection with the building trade scheme. It is desired to remove these difficulties and to make certain other slight improvements.

Clause 7 deals with the crediting of unemployment insurance contributions to children aged fourteen, who are receiving whole time education. Without this clause, owing to the differences of school attendance law, children in Scotland would be at a disadvantage as compared with children in England when the school leaving age is raised next September. Clauses 9 and 10 bring the Unemployment Insurance Acts into line with the Health Insurance Act in the matter of legal proceedings for non-payment of contributions, and evidence at statutory inquiries. Clause 11 makes more suitable provision for reciprocal arrangements with Northern 566 Ireland in connection with unemployment insurance. Clauses 12 and 13 make certain adjustments and corrections of the provisions governing the scope of the unemployment insurance scheme and, in particular, bring into insurance canteen workers employed on His Majesty's ships by the Navy, Army and Air Force Institutes.

The only remaining clause which calls for comment is Clause 15. This gives effect to a recommendation made by the Unemployment Insurance Statutory Committee in their latest Report on the Financial Condition of the Agricultural Account of the Unemployment Fund at the end of last year, that the existing provision under which farmers and their workers who enter into long hirings can obtain a rebate of unemployment insurance contributions, should be abolished. The Statutory Committee have pointed out that experience has shown that the administrative cost of giving the rebates appreciably exceeds the amount of the rebates themselves and that, in any event, the reason which led them originally to propose the concession has ceased to be valid: so far from Scotland having a lower risk of agricultural unemployment than England, it has a higher risk. Also the experience of the North of England, where, too, long hirings are common, confirms the experience of Scotland that the system of long hirings does not lead to a low rate of unemployment among agricultural workers as a whole. The Committee say: This greater temporary security of employment for some of the employees is now shown to be accompanied by a rate of unemployment among other workers in the same industry so high that the unemployment percentage over all employees taken together is actually higher in Scotland and in the North of England than it is in England and Wales as a whole. Clause 15 gives effect to the Committee's recommendation to abolish the system of rebates, but provides for a period of grace. To sum up, the Bill aims at placing unemployment insurance in relation to holidays upon a satisfactory footing, at making a number of changes in favour of the insured contributor, and at effecting certain minor amendments where experience has shown that the present law is capable of improvement. I beg to move.