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The Pamphlet Collection of Sir Robert Stout: Volume 72

Combined Sickness and Old Age Insurance

Combined Sickness and Old Age Insurance.

The following were the main points:—
1.It did not apply to those who were over the age of 21 when the system came into operation. All above that age were left to be provided for by existing agencies.
2.It compelled every person, rich or poor, of high or low degree, to pay between the ages of 18 and 21, a sum of £10 into a National Sickness and Pension Fund.
3.In the case of those between 18 and 21, who were employed for wages, the employer was to be responsible for the collection of the amount, which he was authorised to deduct from the wages.
4.Every person so insured, was to be entitled to 8s. a week of sick pay when suffering from "loss of wages through sickness," and a pension of 4s. a week in any case, on attaining the age of seventy.
5.The sick pay would continue, however long the duration of the illness, and thus, in effect, was a provision for disablement as well as old age.
6.The premiums were to be paid to the Post Office, and handed over to the elected trustees of the National Sickness and Pension Fund.
7.The sick pay and pensions were to be paid through the machinery of the Post Office, under the supervision of local elective committees.page 8
8.This compulsory insurance was to apply to women equally with men.
9.The State was to give no subvention in aid of the fund, and no guarantee of its solvency; its sole duty was to compel persons between the age of eighteen and twenty-one to pay the sum of £10.

In recording the adverse opinion of the committee as respects the sickness part of the scheme, it is well to note that the committee expressed a more favourable view of the provision for old age. But they were "disposed to wait for the further development of public opinion" "before advising the adoption of a general obligatory system of superannuated pay." This reservation ought not to be forgotten.

The leading ideas of Canon Blackley's scheme, in so far as it relates to the case of sickness, are three in number: (1) The prepayment of the preminms, either in one sum or in instalments, before the age of twenty-one; (2) the universality of the obligation, imposed alike upon peer and peasant; and (3) the establishment of a single national fund for the United Kingdom, including England, Scotland, and Ireland, through the machinery of the Post Office. In all those particulars it is the exact opposite of the German system, with which, however, it agrees in requiring no State guarantee or subvention. Oddly enough, the committee agreed with the rev. gentleman on the question of prepayment. They observe that in Germany "payment to the fund are not made in an initial lump sum, but by weekly and lifelong deductions from wages. In this respect the committee thought the German system showed an inferiority to Canon Blackley's proposal, inasmuch as prepayment enables a much smaller total payment to suffice as insurance, and, once got over, the workman is free to dispose of his savings in whatever prudential investment he may select." This finding applies with much greater force to the old age pensions, and is somewhat neutralised by the recognition of the committee that the administrative difficulties of collecting the money render the scheme impracticable. It is, of course, most desirable that young people before they marry should lay aside a sum adequate to insure them against sickness, disablement, and old age; but the practical difficulties in the way proved fatal, in the judgment of the committee, to the whole scheme.

A more serious question arose as to whether £10 was sufficient. Mr. Sutton, the English Government actuary, expressed an opinion that, assuming 3 per cent, to be the rate of investment, £18 would be nearer the mark. The fact is, however, that there do not exist any data upon which an actuary could pronounce a confident opinion, either for or against the figures adopted by Canon Blackley—namely £10. Sick pay is an elastic quantity, depending very much on thee stringency and closeness of the supervision. The committee arrived at a clear opinion that, in view of the magnitude of the scheme, they could not accept an initial payment of £10 as a satisfactory basis. page 9 They, however, pointed out that "the financial objections to be urged against Canon Blackley's proposals for national insurance do not press with such force against the deferred annuity part as against the sick pay part of his scheme."

Early in 1891, a conference was held at the House of Commons, between the followers of Canon Blackley and a few members of Parliament. Mr. Chamberlain taking the chair. So much interest was manifested in the making of better provision for the old age of workmen, that fresh meetings were held, until at last between eighty and ninety members of Parliament formed themselves into a committee for the discussion of the subject. In the result a general agreement was arrived at on two important points—(1) that, for the present, at all events, compulsory insurance against old age was impracticable, but (2) that it was expedient that the State should encourage such provisions by contributing partly to old age pensions. It was accordingly resolved that the preparation of a scheme, upon the lines laid down by the committee, should be entrusted to a committee consisting of gentlemen who had drawn up schemes. It was an instruction to this sub-committee that they should devise a scheme that would not conflict with the work of friendly societies, and that they should meet leading representatives of these societies in friendly conference. In accordance with this remit, the sub-committee, with actuarial aid, prepared a scheme, which has been submitted to leading representatives of friendly societies.

The draft scheme provides an alternative means of insurance for old age. A person may under the plan provide for old age through the Post Office or a friendly society or trades union, or by any other association. If the scheme should be adopted, its principal chance of success lies in its being taken up by friendly societies. The provisions under this branch vary according as a person is under or over 25 years of age at the time when the plan comes into operation. Take the case of a person under 25 by way of illustration. If one subscribes either by instalments or in a lump sum £2 10s. in the Post Office before he has reached 25 years of age, and if he subsequently secures a pension of not less than 2s. 6d. a week at the age of 65, from a friendly society or otherwise, he will then be entitled to an additional benefit of 2s. 6d. a week from the State. The Oddfellows' Society has published a scale of old-age pensions of 5s. a week at 65. Every person who gets such a pension will be entitled to an additional 2s. 6d. a week; and thus a small pension of 5s. a week is converted into the more satisfactory sum of 7s. 6d. a week. These are the figures in the draft scheme, but the essential principle is a moderate addition to the pension obtained through a friendly society, and it is hoped that this additional inducement may assist the friendly societies in winning adherents to these admirable provisions for old age. For those who are over the age of 25, a higher scale of pension is necessary.

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On perusing this scheme the reader will perceive that the State is not brought into any relation with the friendly societies, has no responsibility for them, and no claim to control arising out of the aids to pensions. A man who has made his deposit in a Post Office, on reaching 65, will simply present his certificate and evidence of having secured a pension elsewhere than in the Post Office. With the society of which he has been a member the Government will have no concern. It matters not where he gets his pension, it is only with the fact that he has secured a pension of not less than 2s. 6d. a week that the State has to deal, and the additional State pension becomes due. It would be impossible for human ingenuity to extract from such an arrangement the slightest reason for any further interference with friendly societies. Non-interference with these institutions is the principle of the draft scheme.

Those who are not members of friendly societies or trades unions providing old-age pensions, may insure in the Post Office. They have a choice of making their premiums returnable or non-returnable. If they select the latter, they will earn a pension of 5s. a week practically by a payment of 10s. a year from the age of 20 to 65. But the subscriber has an option—he may so insure that in the event of his death before 65 he will secure a moderate provision for his wife and family. This costs 20s. a year over a period of 45 years. The benefits to the widow and children are considerable. For the first six months after the subscriber's death his widow will receive 5s. a week, and 2s. per week for each child, but so that the whole shall not exceed 12s. a week. At the end of six months the maximum payable to one family will be 8s. per week, and will continue at the rate of 2s. per week per child until the youngest child has reached 12 years of age. Such a plan would provide a much-to-be-desired life insurance for the working classes. A workman would have the satisfaction of knowing that if he died in early life his children would be lifted well above the dreary level of pauperism; and, if he lived to bring up his family so that such provision was unnecessary, he would have a provision for his old age.

Such, in bare outline, are the chief features of the draft scheme Probably the feeling which one will experience after a perusal of the scheme is one of disappointment. Is this all, it may be asked, that can be done for old age? The answer to this question is simple. It is all that can be done for the money. If Parliament is prepared for a larger expenditure on old-age pensions than is contemplated by the committee, and if this is responded to by larger contributions from the workmen, undoubtedly larger pensions can be provided. It is all a question of money.

It is probable that the friendly societies may be tempted to compete with the Post Office in providing temporary annuities for widows and orphan children. If so, they would deserve the same page 11 assistance from the State as any other system, whether it be a voluntary or a compulsory one.

By far and away the most instructive experiment is that to be found in the