§ 3.10 p.m.
§ Order of the Day for the Second Reading read.
My Lords, this is a small Bill to enable the friendly societies to enlarge their scope and, at the same time, to put right certain anomalies in the existing law. The friendly societies were a product largely of the Victorian era: men came together to secure protection by mutual aid against calamities which might happen to them through sickness, death or other disaster. The societies had an element of good fellowship about them; in fact, many of the early ones used to meet in public-houses, and there was a strong local feeling, because originally they were all local. They had fanciful, rather romantic-sounding names, such as Odd Fellows, Shepherds, Foresters, Druids and so on. Their charter is The Friendly Societies Act, 1896, and the friendly societies proper were registered under Section 8 (1) of that Act. When the 1911 National Health Scheme came into operation the friendly societies were harnessed as paying agents for benefits on behalf of the Government; in fact, they were married to the State. But when the 1946 National Health Scheme came into operation no place was found for the societies and there was, in effect, a divorce.
In 1947 they reached their peak membership of 8½, million. In 1954 they had dwindled to 6½ million, and it can be seen that their dwindling function has resulted in a somewhat dwindling membership. However, they still have an appeal, because people still want to secure themselves some benefit greater than the State will provide and the element of benefit-cum-saving which is characteristic of so many of these societies is a most attractive one. In 1948, after holding an unofficial inquiry, Lord Beveridge produced a book called Voluntary Aid, which I can commend to your Lordships as being interesting and good reading. That book examined the position of the friendly societies with great care. The noble Lord recognised that their main functions had largely been taken over by the State, but he suggested that people should be encouraged to supplement the State benefits through the societies and also that the societies should be encour- 284 aged and enabled to break new ground. He had in mind particularly, among other things, homes for old people, clubs and holiday camps. In June. 1949, there was a debate in your Lordships' House on the subject, and since then the matter has been examined carefully in the Departments concerned. Successive Governments, however, have not found time for legislation, but in December last year, the Member for Holland-with-Boston, Sir Herbert Butcher, introduced a Private Member's Bill. That Bill had some assistance from the Government, but was a casualty of the Dissolution; so now we have found time to produce a Government Bill for the same purpose.
The objects of the friendly societies are defined in subsection (1) of Section 8 of the Act of 1896, and they are comparatively narrow. They are confined, in the main, to insurance for benefits of birth, sickness, death or endowment for limited sums. To this, in this new Bill, we now propose to add marriage and unemployment. This is as far as we go in adding to the direct scope of the societies, but we propose some important indirect additions to the possibility of their activities. Under the Act of 1896, there are other classes of societies which can be registered, though not, of course, as friendly societies; working men's clubs, and benevolent societies of various kinds. We now propose to add a further class, that of old people's homes societies. We also propose that societies registered in one class should be allowed to lend their surplus funds to societies registered in other classes, which cover working men's clubs, old people's homes societies, and other similar activities.
In addition, we propose that friendly societies should be able to invest their surplus funds in shares and loan capital of housing associations—which, of course, are not registered under this Act at all. All this is secured by Clauses 1, 2. 3 and 4. Clause 6 should also be a help to the friendly societies. It makes it possible for them to get exemption from the restrictions of the Industrial Assurance Acts in respect of a rather wider field of sickness-cum-death insurance than applies at present.
The remaining clauses clear up some anomalies of the existing law and should be welcomed by the-societies. Parliament has always had a soft spot in its heart 285 for the friendly societies—and rightly so. For instance, they are exempt from taxes, provided that they set a limit of £500 on assurance and f104 a year on annuities. They have in the past done great work to encourage thrift and to mitigate the calamities of their members, and we should be sorry to see them dwindle further. We hope that, with the extra scope provided in this Bill, they may start a new period of advance. We do not pretend that this Bill can create the vast new personal savings which would transform our economy, but we can claim that it is a tiny step towards thrift in a world of profligacy. I beg to move.
§ Moved, That the Bill be now read 2a. —(Lord Hawke.)
§ 3.18 p.m.
§ LORD MILNER OF LEEDS
My Lords, I am sure the House is obliged to the noble Lord, Lord Hawke, for his lucid explanation of this small, but not altogether unimportant, Bill. As he has told us, and as your Lordships know, friendly societies have a long and creditable, and in some instances romantic, history. Like so many other organisations, they began as voluntary and mutual help societies, and notwithstanding the Acts of 1911 and 1946, which took away some of their functions, they have not only survived but are playing and will continue to play a considerable part in the future social history of our country. I imagine that all parts of the House can approve the present Bill. Perhaps before 1 offer a few observations on some of the clauses, I ought to declare an interest as a trustee of a friendly society and as a member of a legal firm which from time to time acts as legal adviser to friendly societies. So in those capacities I have some little experience and knowledge of the good friendly societies do, not only in the death or sickness and disability benefits they disburse but in the opportunities they offer for saving and, not less important, the personal and truly fraternal and friendly services which many of them render to their members. As your Lordships know, many of these societies have their own courts and lodges where the members, unlike the members of ordinary insurance companies or societies, are known to one another; they are enabled to meet together and get advice and sympathy and, frequently, practical help. I should like 286 to see that aspect of their work extended and developed. It may, of course, be that some of the provisions of this Bill will help to that end.
As the noble Lord, Lord Hawke, has told us, there are some 6 million members of friendly societies in this country, a remarkable number. If the noble Lord will forgive my saying so, I felt he gave the impression that the numbers were still going down. I happen to know that in one society, in connection with which I attended a function only two or three weeks ago, the numbers are actually increasing. That society has also a great many—I think 80,000—overseas members, who I think represent a valuable asset to the society and to the country. Of course, friendly societies have no political, denominational or racial associations. Obviously, they play a considerable part in our affairs and are quite an influential factor. Therefore, any Bills affecting their members deserve the attention of both the Government and Parliament. The present Bill is rather "a thing of shreds and patches," but it contains some useful provisions. I should like to offer one or two observations and then ask a question or two on those provisions.
Clause I. gives power to societies to make advances to other societies in circumstances explained by the noble Lord, Lord Hawke. That power is apparently to make advances only, whereas under Clause 2 friendly societies can actually make investments—I suppose by the purchase of shares or otherwise—in housing associations. I wonder if the noble Lord can tell us whether the powers given by Clause i are limited to advances or loans only or whether, under those powers, some actual interest by way of shareholding or investment of some kind may be taken in other societies or organisations? Two other matters arise out of that question. As the noble Lord has explained, and as your Lordships know, in certain conditions friendly societies are entitled to exemption from income tax. If a friendly society invests its funds, whether surplus or otherwise, in trustee securities, then it enjoys tax exemption; but, apparently, if a society establishes another society or body to run, for example, the old people's homes mentioned in the Bill, or for some other social purpose, that subsidiary society, if I may call it such, will not be exempt from income tax. This would appear to he 287 somewhat illogical. Perhaps the noble Lord will be good enough to indicate where the line of demarcation will be drawn.
A second question concerns the powers of investment of a friendly society. Most of us who have anything to do with friendly societies, or indeed anything to do with trusts, know the difficulty nowadays, in the absence of express authority, in investing funds in remunerative investments, having regard to the limited field allowed by law. None of the additional powers which this Bill gives to friendly societies appears to improve that position at all. Gilt-edged securities lose their value, as do deposits in savings banks, and it would appear that in these days only the power to invest in real property is valuable to trustees, and indeed to friendly societies. Real property is probably the best form of investment at present. I wondered whether the Government had given any consideration to that position, and with what result.
Clause 3 is useful in that it extends the range of friendly society benefits to a form of unemployment benefit and to a benefit on marriage. Those are, clearly, a great advantage. Clause 5—I was going to say "unfortunately"—will deprive lawyers of some work which they at present have to do, in that the powers of nomination given to members of friendly societies are increased by that clause.
Clause 4 is also useful, in that it enables friendly societies with their surplus funds, in conjunction with local authorities, where that is possible, to provide or assist in the provision of old people's homes, not only for the society's own members but for others. Your Lordships know that the provision of these homes seems to become more and more necessary as time goes on. A great deal is being done in our large cities in that direction. I happen to know that in my own city, in one home alone provided comparatively recently by the corporation, the accommodation is full and there are certainly over a hundred applicants who will have to wait until one of the present fortunate tenants dies before one of them can take over that accommodation. Therefore, I hope that friendly societies and local authorities will do all they can to further the provision of old people's homes by means of their funds and, in particular, 288 the surplus funds of friendly societies. Quite clearly, that object, and some of the other objects I have dealt with, are eminently desirable. In general. I feel sure the House will agree that the Bill is useful. I hope that it will soon be passed into law and that friendly societies and their members, as well as local authorities, will take full advantage of its provisions.
§ 3.28 p.m.
My Lords, I remember well the last time that your Lordships discussed friendly societies. On that occasion I recall that all the noble Lords who sat on my side of the House, with the humble exception of myself, held a quite definite view of the matter after several speeches had been made. The noble and learned Earl who now leads the Opposition then rose and made a ten-minute speech which changed the whole complexion of the debate and moved the whole House unanimously to his opinion on the matter. I have always remembered that, because it seems to me significant in these days when people are too apt to say that your Lordships' House is a "rubber stamp" for the Conservative Party. I hope that the noble and learned Earl will always remember that occasion as well as I do.
There is little left for me to say about this Bill, for the noble Lord, Lord Milner of Leeds, has said practically all that I wished to say about it. It is natural and proper to discuss these things where there exist useful organisations which have a great social value but which, owing to legislation, find that a great many of their functions are withdrawn from them. It is always sound. I think, to enlarge and expand the functions of such organisations, and this Bill is intended by all Parties in the State to set the friendly societies free and to give them new and important functions to carry out. Like Lord Milner of Leeds, I am glad to see that they can support boys' clubs and housing schemes, and also the housing of old people. a matter which is becoming of much greater importance than it was in the time of our ancestors.
There is only one question that I should like to ask the noble Lord in charge of this Bill. It may not be an important question, but it is: when any contract of insurance is entered into between a person and a company, as your Lordships 289 know, the most scrupulous accuracy in all the statements made by the proposer has to be adhered to; if not, it vitiates the contract. The people who propose themselves to friendly societies are, in the main, poor and uneducated people. I have never had to propose myself to a friendly society, so I am ignorant on the subject. What I should like to know is whether the fact that an inaccuracy in the answers to any of the questions on the form may lead to the vitiation of the contract is clearly stated on the form which has to be answered. I think it is important that it should be, even though there may be no great necessity for it. With those few words, I welcome this Bill.
§ 3.32 p.m.
My Lords, I am glad to know that the Bill has had such a warm welcome from both sides of the House. Lord Milner of Leeds asked me one or two questions with which I should like to deal—first of all, in regard to the power in Clause 1 to lend surplus funds. I understand that that power applies only to making loans, not to taking up any form of share. Then the noble Lord asked a question about tax exemption. These societies are free from tax, and they will remain free from tax on any income which they may derive from this lending of their surplus funds. On the other hand. the people to whom they lend their surplus funds will be in precisely the same position as they are in at the moment—some of them may he tax exempt and some may not; it depends entirely on the Act under which they are incorporated and so on. So one can say that the lending of their funds does not carry with it tax exemption to another body.
The noble Lord raised a very wide point in regard to the question of extending the securities in which they can invest their funds. Of course, they already have a wider scope than many bodies because they can invest in land or in mortgages on security on land. But, apart from land, I can see nothing in which they can invest which would appreciate with any fall in the value of money. However, I believe that the issue is a far wider one than this, and it would be impossible, on a small Bill such as this, to deal with the whole position of trustees. We all get our troubles in this matter and we are all 290 deeply sympathetic; but so far trustees have not been allowed any wider scope, and it certainly cannot be done on this Bill.
My noble friend Lord Saltoun has asked me a specific question about the exact contents of the proposal forms of these societies. I must confess that I have not armed myself with the proposal forms and I do not know the answer to his question. I understand, however, that the question has never arisen of the vitiation of a policy through a misstatement by a policy-holder who was without full knowledge of the terms and conditions of the contract. I think the best thing I can do is to make some inquiry about the practice of the societies and to write my noble friend a letter on the subject. I hope that I have answered the points raised, and I thank the House for the reception they have given to the Bill.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.