Change 7. Extension of insurance against prolonged disability to all persons gainfully occupied and of insurance for retirement pensions to all persons of working age, whether gainfully occupied or not.
118. Many independent workers—small shopkeepers, crofters, fishermen, hawkers, outworkers—are poorer than many of those employed under contract of service and are as much dependent on good health for their earnings. All persons, even if not gainfully occupied throughout their working years, should have certainty of a subsistence income when they are too old to work if their other income fails, and should secure that subsistence income by contributions made by or on behalf of them throughout their working life. Each of the two extensions proposed here raises different questions and needs separate examination.
119. As regards insurance against disability, this is proposed only for persons gainfully occupied and not for persons, who, since they have no earnings, do not lose income if sickness prevents them from earning. It is proposed also that the disability for which benefit should be provided in the case of persons gainfully occupied otherwise than under contract of service (Class II) should be limited to “prolonged disability.” The actual proposition is that to such persons benefit should be paid only if, and to the extent that, the disability lasts more than 13 weeks. The main ground for this limitation lies in the importance of avoiding the difficult administrative questions that will arise in regard to the control of benefit for short illnesses in the case of people working on their own account. The secondary reason for this limitation is that it makes a substantial difference to the contribution. Many of the independent workers are people who have limited means; the contribution required of them since they have no employer should be kept as low as possible. It is proposed in effect that persons in Class II should carry the risk of their minor illnesses, as far as cash benefit is concerned; like all others they will be entitled to treatment. Certain classes of persons not under contract of service, such as outworkers, share fishermen and small contractors for service, are now included under health insurance. Under the new scheme they should probably be placed in Class II, which would mean that they would no longer be insured compulsorily against the first 13 weeks of sickness. On the other hand, for prolonged disability, they will get altogether better provision than at present and they will continue to be qualified for pensions.
120. As regards pensions, the need to extend them to persons gainfully occupied as independent workers (Class II) is obvious, but it is not possible in a full security scheme to stop there. The persons of working age not gainfully occupied include a few who, through infirmity, are permanently incapable of work, and a few who, by possession of private means, may never need to work. They include many more who will work for gain at a later stage in their lives—students over sixteen—and many who may alternate between paid work and rendering unpaid service otherwise than as housewives —daughters looking after parents or sisters looking after brothers. Such persons do not need disability benefit, because disability should not affect their income, but they cannot count on continuance of their support throughout life and during the years of retirement. If they lose their unpaid livelihood through a change of family circumstances, while they are of working age, they will be able to obtain training benefit as a means of passage to other livelihoods. They need to be assured of pensions for their old age. Those who work in employment all their lives will pay contributions for retirement pensions throughout ; it is contrary to insurance principle that others who equally need pensions should contribute only in part of their lives, or should be able, as at present, to make factitious contracts of employment late in life with a view to securing pensions at minimum cost. The proposal here is in principle to require contributions for pensions from or on behalf of all citizens throughout their working years and to make receipt of full pension depend upon contribution (paras. 367-368). This raises problems of enforcement but none that should be insoluble.
121. There is no doubt as to the desirability of applying insurance for treatment, funerals and pensions to persons in Class IV, having regard to the fact that most of them will be in that class only temporarily. The main difficulty in making this extension of insurance lies in the fact that there may be no income under the control of the insured person to which liability to contribute can attach. Where such persons are in fact doing unpaid work for a relative, it will be reasonable to expect the relative to provide the contribution as part of the reward of their service. But having regard to the relatively high level of contributions required, it is necessary to make provision for exempting from liability to contribute on the ground of possessing less than a certain income. This provision for exemption is made applicable also to Class II. The practical implications are considered in para. 363.
Change 8. Provision of training benefit to facilitate change to new occupations of all persons who lose their former livelihood, whether paid or unpaid.
122. Routine unemployment benefit, that is to say, payment to persons capable of work on the simple test of offering themselves as available for work at an employment exchange, must for practical reasons be limited to people who, by contributions in Class I, prove that they are, in fact, dependent upon employment. Only in employment are earnings related closely to particular days of work. The income of a farmer, a shopkeeper or a business manager may come at any time; how busy or how active he is on a particular day is largely within his own control. It is not practicable to have a general system of maintaining earnings of persons gainfully occupied otherwise than by way of employment, by benefits conditional upon not working or appearing to work on a particular day. But some general provision must be made, not only for persons gainfully occupied whose livelihood may fail, but also for persons whose unpaid livelihood may fail, as it may for housewives in Class III, or for daughters and sisters and others who have kept house for their relatives in Class IV, and find a change in their household circumstances. The general provision for this is training benefit—a payment for a limited period at unemployment benefit rates, given in accord with Regulation without means test, but subject to conditions of training.
Change 9. Assimilation of benefit and pension rates for unemployment, disability, other than prolonged disability due to industrial accident or disease, and retirement.
123. There is no difference between the subsistence needs of those affected by different forms of interruption of earnings which is large enough and clear enough to justify a differentiation of benefits. Uniformity has the advantage of giving no motive to the insured person to claim one form of benefit rather than another (say unemployment rather than disability) because it is higher and not because it really fits his case. The following notes deal with particular comparisons.
(i) Unemployment and disability. The sick man needs as a rule more income than the fit unemployed man, for special food or for attention; the unemployed man also has more chances of small subsidiary earnings. If there were to be any difference between the two benefits, disability ought to be higher than unemployment benefit, not lower as at present. On the other hand, voluntary provision to supplement State benefit is both easier to make and much more widely made, for sickness than for unemployment. Equality of benefit is the safest line.
(ii) Short and long disability. As is pointed out in relation to Changes 12 and 13 below, it can be argued that benefit should increase rather than decrease as disability becomes prolonged. It may be argued, on the other hand, that after being disabled for some time the insured person should have been able to adjust his expenditure and lower his standards. But in general it is clear that in a long illness the sick man needs at least as much as at the beginning of illness. There is no real argument for the present practice of making disablement benefit less than sickness benefit, except the argument of expense.
(iii) Unemployment or disability and retirement. As is shown in para. 224, the needs of a retired person are in some ways less and in other ways more than those of an unemployed or disabled person of working age. On balance, the strict subsistence needs of the retired person are probably slightly less. But the difference is not great and “the advantage of avoiding any stepping down from unemployment or disability benefit to retirement pension is considerable. Uniformity of rates for long and short disability and for retirement avoids the awkward problem of the point at which a reduction could be made if they were not uniform. Serious difficulties arise whatever the point chosen for reduction; whether it be proposed after disability has lasted six months or two years or ten years, or to apply when a disabled man reaches his sixty-fifth birthday. The full rate of contributory pensions is put accordingly at the same amount as the rate of working age benefits (para. 251). But this full rate under the transition arrangements proposed in paras. 241-243 will be reached only in 20 years. During the transition, stepping down from disability benefit to contributory pension will be inevitable.
(iv) Men and Women. As is shown in paras. 217-222 the subsistence needs of men and women do not differ except in food, where the needs of the latter may be put at about 1/- a week less. On the whole it appears not worth while to distinguish the rates of benefits for single women from those for men, on account of 1/- difference in food. Different rates are proposed for married women gainfully occupied for the reasons given in Change 6.
Change 10. Assimilation of benefit conditions for unemployment and disability, including disability due to industrial accident or disease, in respect of waiting time.
124. In all three schemes of provision for interruption of earnings, by unemployment, by industrial accident or disease, and by sickness or other accident, as they stand at present, payment is withheld for the first three days of interruption which are usually described as “waiting time”. But while some form of waiting time is found in all three schemes, the form is now different in each of the cases. In workmen’s compensation for industrial accident or disease, the waiting time is provisional, in the sense that if the interruption of earnings lasts for as much as four weeks altogether, payment is made retrospectively for the three first days, for which it had been withheld till then. In health insurance and in unemployment insurance the waiting time is absolute, that is to say no payment is made for the first three days of a continuous period of sickness or of unemployment however long it lasts; but the rules defining a continuous period of sickness and of unemployment respectively, are different. It may be added that payment for the waiting time can be given as an additional benefit under health insurance, though this power has not been widely used; in 1939 it covered about 4 per cent, of the total insured membership.
125. The question of the waiting time for unemployment insurance was considered recently by the Unemployment Insurance Statutory Committee on a reference from the Minister of Labour and National Service and the Report made by the Statutory Committee has been sent to the present Committee. In preparing this Report the Statutory Committee made a study of the practice of Trade Unions in regard to the waiting time in their schemes of out-of-work benefit. They found a considerable variety of practice, some Trade Unions having an absolute waiting time, others a provisional waiting time, and others no waiting time at all. The second of these groups, with provisional waiting time, was the largest both in total of members and in volume of benefit and the Statutory Committee concluded that if there were no question of saving money for more urgent needs, a provisional waiting time was the plan with most general advantage. They expressed the opinion accordingly “that as and when occasion offers steps should be taken to make the waiting time for unemployment insurance provisional as that for workmen’s compensation is provisional.” They added that “though some differences between the different insurances may be necessary and be justified by differences in the risks insured against, unnecessary differences are an obvious cause of injustice and discontent. If it proves possible to introduce for all forms of lost earnings in common the principle of provisional waiting time, a very desirable simplification of our social insurance will have been effected.” The proposal now made is in accord with this recommendation of the Unemployment Insurance Statutory Committee. It adopts, for unemployment and for disability alike, both the principle of the workmen’s compensation scheme and the period of four weeks, as that for which interruption of earnings should last before payment is made for the first three days.
126. There remains the further question of defining what is meant by a continuous period of unemployment or disability. This is a highly technical matter in regard to which it may be necessary to adopt different procedure for unemployment and disability respectively.
Change 11. Assimilation of contribution conditions for unemployment and disability benefit, except where disability is due to industrial accident or disease, and revision of contribution conditions for pension.
127. Some contribution conditions for receipt of the benefits, pensions,and grants of the social insurance scheme are essential in order :
(a) To maintain the insurance principle that people should pay for their security, though not in full;
(b) To determine the social security class in which each person falls;
(c) To facilitate enforcement of contributions by making it to the interest of individuals to contribute regularly.
The need for simplifying and co-ordinating the present conditions is as obvious as the need for having some conditions at all. In regard to the working .age benefits—for unemployment and disability—the simplest method would be to make the question whether a person was in full benefit or not during a benefit year (say 12 months beginning 1st October) depend upon contributions made by him in the preceding contribution year (12 months ending in the preceding July). The administrative practicability of this particular method needs further examination, having regard to the probable numbers of persons to be dealt with at any one time. But that, either in this way, or in some other way, great simplification of contribution conditions can be achieved under a unified system of insurance, is clear. Contribution conditions will not apply-to claims for disability benefit arising out of industrial accident or disease.
128. In regard to pensions, the position is changed by extension of the scope of insurance from those employed under contract of service to the whole population of working age. With the limitation of scope hitherto, it was felt necessary to allow persons to qualify for pensions by a relatively short period of contribution of five years as employees; this gave temptation to the making of factitious contracts of employment with relatives for the last five years of working age. Extension in the scope of insurance makes it possible and desirable to insist on contributions covering the whole of working life as a condition of pensions.
Change 12. Making of unemployment benefit at full rate indefinite in duration, subject to requirement of attendance at a work or training centre after a limited period of unemployment.
Change 13. Making of disability benefit at full rate indefinite in duration, subject to imposition of special behaviour conditions.
129. Prolongation of interruption of earnings, whether through unemployment or through disability, has normally two consequences:—
(i) The income needs tend to increase rather than to decrease; the other means at the disposal of the insured person become exhausted; expenditures on clothing and equipment which he may have been able to postpone become unavoidable, since they cannot be postponed indefinitely.
(ii) Measures other than the provision of income become increasingly necessary, to prevent deterioration of morale and to encourage recovery.
In view of these considerations, the existing provisions for dealing with prolonged interruption of earnings are unsatisfactory. For disability the cash benefit is drastically reduced, though the needs have almost certainly increased ; for unemployment the insured person is referred from benefit to assistance, which may give him higher, or lower, or equal income, but will give it subject to a means test, and normally will do nothing but give an income. The needs of persons suffering from prolonged unemployment or disability are, on the one hand, for as much income at least as before, without any means test discouraging voluntary provision, and, on the other hand, for the taking of steps to prevent deterioration and encourage recovery. It is proposed, accordingly, that the rates both for unemployment and for disability should continue without diminution so long as unemployment or disability lasts; this abolishes the present distinction between sickness and disablement benefits under health insurance.
130. To reduce the income of an unemployed or disabled person, either directly or by application of a means test, because the unemployment or disability has lasted for a certain period, is wrong in principle. But it is equally wrong to ignore the fact that to make unemployment or disability benefit, which is adequate for subsistence, also indefinite in duration involves a danger against which practical precautions must be taken. Most men who have once gained the habit of work would rather work—in ways to which they are used—than be idle, and all men would rather be well than ill. But getting work or getting well may involve a change of habits, doing something that is unfamiliar or leaving one’s friends or making a painful effort of some other kind. The danger of providing benefits, which are both adequate in amount and indefinite in duration, is that men, as creatures who adapt themselves to circumstances, may settle down to them. In the proposals of the present Report, not only are insurance benefits being made for the first time adequate for subsistence without other means, but the possibility of drawing them is being extended to new classes not hitherto accustomed to industrial discipline. The correlative of the State’s undertaking to ensure adequate benefit for unavoidable interruption of earnings, however long, is enforcement of the citizen’s obligation to seek and accept all reasonable opportunities of work, to co-operate in measures designed to save him from habituation to idleness, and to take all proper measures to be well. The higher the benefits provided out of a common fund for unmerited misfortune, the higher must be the citizen’s sense of obligation not to draw upon that fund unnecessarily.
131. This general principle leads to the following practical conclusions:
(i) Men and women in receipt of unemployment benefit cannot be allowed to hold out indefinitely for work of the type to which they are used or in their present places of residence, if there is work which they could do available at the standard wage for that work.
(ii) Men and women who have been unemployed for a certain period should be required as a condition of continued benefit to attend a work or training centre, such attendance being designed both as a means of preventing habituation to idleness and as a means of improving capacity for earning. Incidentally, though this is an altogether minor reason for the proposal, such a condition is the most effective way of unmasking the relatively few persons who may be suspected of malingering, who have perhaps some concealed means of earning which they are combining with an appearance of unemployment. The period after which attendance should be required need not be the same at all times or for all persons. It might be extended in times of high unemployment and reduced in times of good employment; six months for adults would perhaps be a reasonable average period of benefit without conditions. But for young persons who have not yet the habit of continuous work the period should be shorter; for boys and girls there should ideally be no unconditional benefit at all; their enforced abstention from work should be made an occasion of further training.
(iii) The measures for control of claims to disability benefit—both by certification and by sick visiting—will need to be strengthened, in view of the large increases proposed in the scale of compulsory insurance benefit and the possibility of adding to this substantially by voluntary insurance through Friendly Societies.
(iv) Special attention should be paid to the prevention of chronic disability, by intensified treatment, advice and supervision of cases in which it is threatened and by research into its causes.
(v) Conditions imposed on benefit must be enforced where necessary by suitable penalties.
132. The practicability of adopting the principle of special treatment for prolonged disability depends on adequate development of the medical service (Assumption B) in paras. 426-437. Practicability of the same thing in regard to unemployment depends on the satisfaction of Assumption C (paras. 440—443), that is to say, on maintenance of employment to keep within reasonable numbers the men who are likely to exhaust unconditional benefit.