Social Insurance and Allied Services
Report by Sir William Beveridge
Presented to Parliament by Command of His Majesty
What follows is what would these days be called an executive summary of the report, together with the detailed section on Assumptions, Methods and Principles. The full report runs to 300 pages.
THREE GUIDING PRINCIPLES OF RECOMMENDATIONS
6. In proceeding from this first comprehensive survey of social insurance to the next task - of making recommendations - three guiding principles may be laid down at the outset.
7. The first principle is that any proposals for the future, while they should use to the full the experience gathered in the past, should not be restricted by consideration of sectional interests established in the obtaining of that experience. Now, when the war is abolishing landmarks of every kind, is the opportunity for using experience in a clear field. A revolutionary moment in the worlds history is a time for revolutions, not for patching.
8. The second principle is that organisation of social insurance should be treated as one part only of a comprehensive policy of social progress. Social insurance fully developed may provide income security; it is an attack upon Want. But Want is one only of five giants on the road of reconstruction and in some ways the easiest to attack. The others are Disease, Ignorance, Squalor and Idleness.
9. The third principle is that social security must be achieved by co-operation between the State and the individual. The State should offer security for service and contribution. The State in organising security should not stifle incentive, opportunity, responsibility ; in establishing a national minimum, it should leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and his family.
10. The Plan for Social Security set out in this Report is built upon these principles. It uses experience but is not tied by experience. It is put forward as a limited contribution to a wider social policy, though as something that could be achieved now without waiting for the whole of that policy. It is, first and foremost, a plan of insurance - of giving in return for contributions benefits up to subsistence level, as of right and without means test, so that individuals may build freely upon it.
THE WAY TO FREEDOM FROM WANT
11. The work of the Inter-departmental Committee began with a reviews of existing schemes of social insurance and allied services. The Plan for Social Security, with which that work ends, starts from a diagnosis of want - of the circumstances in which, in the years just preceding the present war families and individuals in Britain might lack the means of healthy subsistence. During those years impartial scientific authorities made social surveys of the conditions of life in a number of principal towns in Britain, including London, Liverpool, Sheffield, Plymouth, Southampton, York and Bristol. They determined the proportions of the people in each town whose means were below the standard assumed to be necessary for subsistence, and they analysed the extent and causes of that deficiency. From each of these social surveys the same broad result emerges. Of all the want shown by the surveys, from three-quarters to five-sixths, according to the precise standard chosen for want, was due to interruption or loss of earning power. Practically the whole of the remaining one-quarter to one-sixth was due to failure to relate income during earning to the size of the family. These surveys were made before the introduction of supplementary pensions had reduced the amount of poverty amongst old persons. But this does not affect the main conclusion to be drawn from these surveys: abolition of want requires a double re-distribution of income, through social insurance and by family needs.
12. Abolition of want requires, first, improvement of State insurance that is to say provision against interruption and loss of earning power All the principal causes of interruption or loss of earnings are now the subject of schemes of social insurance. If, in spite of these schemes, so many persons unemployed or sick or old or widowed are found to be without adequate income for subsistence according to the standards adopted in the social surveys, this means that the benefits amount to less than subsistence by those standards or do not last as long as the need, and that the assistance which supplements insurance is either insufficient in amount or available only on terms which make men unwilling to have recourse to it. None of the insurance benefits provided before the war were in fact designed with reference to the standards of the social surveys. Though unemployment benefit was not altogether out of relation to those standards, sickness and disablement benefit, old age pensions and widows pensions were far below them, while workmens compensation was below subsistence level for anyone who had family responsibilities or whose earnings in work were less than twice the amount needed for subsistence. To prevent interruption or destruction of earning power from leading to want, it is necessary to improve the present schemes of social insurance in three directions : by extension of scope to cover persons now excluded, by extension of purposes to cover risks now excluded, and by raising the rates of benefit.
13. Abolition of want requires, second, adjustment of incomes, in periods of earning as well as in interruption of earning, to family needs, that is to say, in one form or another it requires allowances for children. Without such allowances as part of benefit -or added to it, to make provision for large families, no social insurance against interruption of earnings can be adequate. But, if childrens allowances are given only when earnings are interrupted and are not given during earning also, two evils are unavoidable. First, a substantial measure of acute want will remain among the lower paid workers as the accompaniment of large families. Second, in all such cases, income will be greater during unemployment or other interruptions of work than during work.
14. By a double re-distribution of income through social insurance and childrens allowances, want, as defined in the social surveys, could have been abolished in Britain before the present war. As is shown in para. 445, the income available to the British people was ample for such a purpose. The Plan for Social Security set out in Part V of this Report takes abolition of want after this war as its aim. It includes as its main method compulsory social insurance, with national assistance and voluntary insurance as subsidiary, methods. It assumes allowances for dependent children, as part of its background. The plan assumes also establishment of comprehensive health and rehabilitation services and maintenance of employment, that is to say avoidance of mass unemployment, as necessary conditions of success in social insurance. These three measures - of childrens allowances, health and rehabilitation and maintenance of employment-are described as assumptions A,B and C of the plan ; they fall partly within and partly without the plan extending into other fields of social policy. They are discussed, not in the detailed exposition of the plan in Part V of the Report, but in Part VI, which is concerned with social security in relation to wider issues.
15. The plan is based on a diagnosis of want. It starts from facts, from the condition of the people as revealed by social surveys between the two wars. It takes account of two other facts about the British community, arising out of past movements of the birth rate and the death rate, which should dominate planning for its future; the main effects of these movements in determining the present and future of the British people are shown by Table XI in para. 234. The first of the two facts is the age constitution of the population, making it certain that persons past the age that is now regarded as the end of working life will be a much larger proportion of the whole community than at any time in the past. The second fact is the low reproduction rate of the British community today: unless this rate is raised very materially in the near future, a rapid and continuous decline of the population cannot be prevented. The first fact makes it necessary to seek ways of postponing the age of retirement from work rather than of hastening It. The second fact makes it imperative to give first place in social expenditure to the care of childhood and to the safeguarding of maternity.
16. The provision to be made for old age represents the largest and most growing element in any social insurance scheme. The problem of age is discussed accordingly in Part III of the Report as one of three special problems; the measures proposed for dealing with this problem are summarised in paras. 254-257. Briefly, the proposal is to introduce for all citizens adequate pensions without means test by stages over a transition period of twenty years, while providing immediate assistance pensions for persons requiring them. In adopting a transition period for pensions as of right, while meeting immediate needs subject to consideration of means, the Plan for Social Security in Britain follows the precedent of New Zealand. The final rate of pensions in New Zealand is higher than that proposed in this Plan, but is reached only after a transition period of twenty-eight years as compared with twenty years suggested here; after twenty years, the New Zealand rate is not very materially different from the basic rate proposed for Britain. The New Zealand pensions are not conditional upon retirement from work ; for Britain it is proposed that they should be retirement pensions and that persons who continue at work and postpone retirement should be able to increase their pensions above the basic rate. The New Zealand scheme is less favourable than the plan for Britain in starting at a lower level ; it is more favourable some other respects. Broadly the two schemes for two communities of the British race are plans on the same lines to solve the same problem of passage from pensions based on need to pensions paid as of right to all citizens in virtue of contribution.
SUMMARY OF PLAN FOR SOCIAL SECURITY
17. The main feature of the Plan for Social Security is a scheme of social insurance against interruption and destruction of earning power and for special expenditure arising at birth, marriage or death. The scheme embodies six fundamental principles : flat rate of subsistence benefit ; flat rate of contribution ; unification of administrative responsibility; adequacy of benefit ; comprehensiveness ; and classification. These principles are explained in paras. 303-309. Based on them and in combination with national assistance and voluntary insurance as subsidiary methods, the aim of the Plan for Social Security is to make want under any circumstances unnecessary.
18. A plan which is designed to cover so many varieties of human circumstance must be long and detailed. It must contain proposals of differing orders of certainty and importance. In preparing the Report, the question arose naturally as to how far it was necessary at this stage to enter into details, and whether it might not be preferable to deal with principles only. For two reasons it has appeared desirable, in place of giving an outline only, to set the proposals out in as much detail as the time allowed. The first reason is that the principles underlying any practical reform can be judged only by seeing how they would work in practice. The second reason is that if a Plan for Social Security is to come into operation when the war ends or soon after, there is no time to lose in getting the plan prepared as fully as possible. The many details set forth in Part V are neither exhaustive nor final; they are put forward as a basis of discussion, but their formulation will, it is hoped, shorten subsequent discussion. Even among the major proposals of the Report there are differences of importance and of relevance to the scheme as a whole. There are some proposals which, though important and desirable in themselves, could be omitted without changing anything else in the scheme. Three in particular in the list of major changes in para. 30 have this character and are placed in square brackets to indicate it. This does not mean that everything not bracketed is essential and must be taken or left as a whole. The six principles named above and all that is implied in them are fundamental ; the rest of the scheme can be adjusted without changing its character: all rates of benefit and all details are by nature subject to amendment.
19. The main provisions of the plan may be summarised as follows:
(i) The plan covers all citizens without upper income limit, but. has regard
to their different ways of life ; it is a plan all-embracing in scope of persons and of needs, but is classified in application.
(ii) In relation to social security the population falls into four main classes of working age and two others below and above working age respectively, as follows:
- Employees, that is, persons whose normal occupation is employment under contract of service.
- Others gainfully occupied, including employers, traders and independent workers of all kinds.
- Housewives, that is married women of working age.
- Others of working age not gainfully occupied.
- Below working age.
- Retired above working age.
(iii) The sixth of these classes will receive retirement pensions and the fifth will be covered by childrens allowances, which will be paid from the National Exchequer in respect of all children when the responsible parent is in receipt of insurance benefit or pension, and in respect of all children except one in other cases. The four other classes will be insured for security appropriate to their circumstances. All classes will be covered for comprehensive medical treatment and rehabilitation and for funeral expenses.
(iv) Every person in Class I, II or IV will pay a single security contribution by a stamp on a single insurance document each week or combination of weeks. In Class I the employer also will contribute, affixing the insurance stamp and deducting the employees share from wages or salary. The contribution will differ from one class to another, according to the benefits provided, and will be higher for men than for women, so as to secure benefits for Class Ill.
(v) Subject to simple contribution conditions, every person in Class I will receive benefit for unemployment and disability, pension on retirement, medical treatment and funeral expenses. Persons in Class II will receive all these except unemployment benefit and disability benefit during the first 13 weeks of disability. Persons in Class IV will receive all these except unemployment and disability benefit. As a substitute for unemployment benefit, training benefit will be available to persons in all classes other than Class 1, to assist them to find new livelihoods if their present ones fail. Maternity grant, provision for widowhood and separation and qualification for retirement pensions will be secured to all persons in Class III by virtue of their husbands contributions ; in addition to maternity grant, housewives who take paid work will receive maternity benefit for thirteen weeks to enable them to give up working before and after childbirth.
(vi) Unemployment benefit, disability benefit, basic retirement pension after a transition period, and training benefit will be at the same rate, irrespective of previous earnings. This rate will provide by itself the income necessary for subsistence in all normal cases. There will be a joint rate for a man and wife who is not gainfully occupied. Where there is no wife or she is gainfully occupied, there will be a lower single rate ; where there is no wife but a dependant above the age for childrens allowance, there will be a dependant allowance. Maternity benefit for housewives who work also for gain will be at a higher rate than the single rate in unemployment or disability, while their unemployment and disability benefit will be at a lower rate ; there are special rates also for widowhood as described below. With these exceptions all rates of benefit will be the same for men and for women. Disability due to industrial accident or disease will be treated like all other disability for the first thirteen weeks ; if disability continues thereafter, disability benefit at a flat rate will be replaced by an industrial pension related to the earnings of the individual subject to a minimum and a maximum.
(vii) Unemployment benefit will continue at the same rate without means test so long as unemployment lasts, but will normally be subject to a condition of attendance at a work or training centre after a certain period. Disability benefit will continue at the same rate without means test, so long as disability lasts or till it is replaced by industrial pension, subject to acceptance of suitable medical treatment or vocational training.
- Pensions (other than industrial) will be paid only on retirement from work. They may be claimed at any time after the minimum age of retirement, that is 65 for men and 60 for women. The rate of pension will be increased above the basic rate if retirement is postponed. Contributory pensions as of right will be raised to the full basic rate gradually during a transition period of twenty years, in which adequate pensions according to needs will be paid to all persons requiring them. The position of existing pensioners will be safeguarded.
- While permanent pensions will no longer be granted to widows of working age without dependent children, there will be for all widows a temporary benefit at a higher rate than unemployment or disability benefit, followed by training benefit where necessary. For widows with the care of dependent children there will be guardian benefit, in addition. to the childrens allowances, adequate for subsistence without other means. The position of existing widows on pension will be safeguarded.
(x) For the limited number of cases of need not covered by social insurance, national assistance subject to a uniform means test will be available.
(xi) Medical treatment covering all requirements will be provided for all citizens by a national health service organised under the health departments and post-medical rehabilitation treatment will be provided for all persons capable of profiting by it.
(xii) A Ministry of Social Security will be established, responsible for social insurance, national assistance and encouragement and supervision of voluntary insurance and will take over, so far as necessary for these purposes, the present work of other Government Departments and of 1-ocal Authorities in these fields.
THE NATURE OF SOCIAL INSURANCE
20. Under the scheme of social insurance, which forms the main feature of this plan, every citizen of working age will contribute in his appropriate class according to the security that he needs, or as a married woman will have contributions made by the husband. Each will be covered for all his needs by a single weekly contribution on one insurance document. All the principal cash payments-for unemployment, disability and retirement win continue so long as the need lasts, without means test, and will be paid from a Social Insurance Fund built up by contributions from the insured persons, from their employers, if any, and from the State. This is in accord with two views as to the lines on which the problem of income maintenance should be approached.
21. The first view is that benefit in return for contributions, rather than free allowances from the State, is what the people of Britain desire. This desire is shown both by the established popularity of compulsory insurance, and by the phenomenal growth of voluntary insurance against sickness, against death and for endowment, and most recently for hospital treatment It is shown in another way by the strength of popular objection to any kind of means test. This objection springs not so much from a desire to get everything for nothing, as from resentment at a provision which appears to penalise what people have come to regard as the duty and pleasure of thrift, of putting pennies away for a rainy day. Management of ones income is an essential element of a citizens freedom. Payment of a substantial part of the cost of benefit as a contribution irrespective of the means of the contributor is the firm basis of a claim to benefit irrespective of means.
22. The second view is that whatever money is required for provision of insurance benefits, so long as they are needed, should come from a Fund to which the recipients have contributed and to which they may be required to make larger contributions if the Fund proves inadequate. The plan adopted since 1930 in regard to prolonged unemployment and sometimes suggested for prolonged disability, that the State should take this burden off insurance, in order to keep the contribution down, is wrong in principle. The insured persons should not feel that income for idleness, however caused, can come from a bottomless purse. The Government should not feel that by paying doles it can avoid the major responsibility of seeing that unemployment and disease are reduced to the minimum. The place for direct expenditure and organisation by the State is in maintaining employment of the labour and other productive resources of the country, and in preventing and combating disease, not in patching an incomplete scheme of insurance.
23. The State cannot be excluded altogether from giving direct assistance to individuals in need, after examination of their means. However comprehensive an insurance scheme, some, through physical infirmity, can never contribute at all and some will fall through the meshes of any insurance. The making of insurance benefit without means test unlimited in duration involves of itself that conditions must be imposed at some stage or another as to how men in receipt of benefit shall use their time, so as to fit themselves or to keep themselves fit for service ; imposition of any condition means that the condition may not be fulfilled and that a case of assistance may arise. Moreover for one of the main purposes of social insurance-provision for old age or retirement-the contributory principle implies contribution for a substantial number of years ; in the introduction of adequate contributory pensions there must be a period of transition during which those who have not qualified for pension by contribution but are in need have their needs met by assistance pensions. National assistance is an essential subsidiary method in the whole Plan for Social Security , and the work of the Assistance Board shows that assistance subject to means test can be administered with sympathetic justice and discretion taking full account of individual circumstances. But the scope of assistance will be narrowed from the beginning and will diminish throughout the transition period for pensions. The scheme of social insurance is designed of itself when in full operation to guarantee the income needed for subsistence in all normal cases.
24. The scheme is described as a scheme of insurance, because it preserves the contributory principle. It is described as social insurance to mark important distinctions from voluntary insurance. In the first place, while adjustment of premiums to risks is of the essence of voluntary insurance, since without this individuals would not of their own will insure, this adjustment is not essential in insurance which is made compulsory by the power of the State. In the second place, in providing for actuarial risks such as those of death, old age or sickness, it is necessary in voluntary insurance to fund contributions paid in early life in order to provide for the increasing risks of later life and to accumulate reserves against individual liabilities. The State with its power of compelling successive generations of citizens to become insured and its power of taxation is not under the necessity of accumulating reserves for actuarial risks and has not, in fact, adopted this method in the past. The second of these two distinctions is one of financial practice only ; the first raises important questions of policy and equity. Though the State, in conducting compulsory insurance, is not under the necessity of varying the premium according to the risk, it may decide as a matter of policy to do so.
25. When State insurance began in Britain, it was felt that compulsory insurance should be like voluntary insurance in adjusting premiums to risks. This was secured in health insurance by the system of Approved Societies. It was intended to be secured in unemployment insurance by variation of contribution rates between industries as soon as accurate valuation became possible, by encouragement of special schemes of insurance by industry, and by return of contributions to individuals who made no claims. In the still earlier institution of workmens compensation, adjustment of premiums to industrial risks was a necessary consequence of the form in which provision for industrial accidents was made, by placing liability on employers individually and leaving them to insure voluntarily against their liability. In the thirty years since 1912, there has been an unmistakable movement of public opinion away from these original ideas, that is to say, away from the principle of adjusting premiums to risks in compulsory insurance and in favour of pooling risks. This change has been most marked and most complete in regard to unemployment, where, in the general scheme, insurance by industry, in place of covering a large part of the field, has been reduced to historical exceptions; today the common argument is that the volume of unemployment in an industry is not to any effective extent within its control; that all industries depend upon one another, and that those which are fortunate in being regular should share the cost of unemployment in those which are less regular. The same tendency of opinion in favour of pooling of social risks has shown itself in the views expressed by the great majority of witnesses to the present Committee in regard to health insurance. In regard to workmens compensation, the same argument has been put by the Mineworkers Federation to the Royal Commission on Workmen s Compensation; as other industries cannot exist without coalmining, they have proposed that employers in all industries should bear equally the cost of industrial accidents and disease, in coalmining as elsewhere.
26. There is here an issue of principle and practice on which strong arguments can be advanced on each side by reasonable men. But the general tendency of public opinion seems clear. After trial of a different principle, it has been found to accord best with the sentiments of the British people that in insurance organised by the community by use of compulsory power, each individual should stand in on the same terms; none should claim to pay less because he is healthier or has more regular employment. In accord with that view, the proposals of the Report mark another step forward to the development of State insurance as a new type of human institution, differing both from the former methods of preventing or alleviating distress and from voluntary insurance. The term "social insurance" to describe this institution implies both that it is compulsory and that men stand together with their fellows. The term implies a pooling of risks except so far as separation of risks serves a social purpose. There may be reasons of social policy for adjusting premiums to risks, in order to give a stimulus for avoidance of danger, as in the case of industrial accident and disease. There is no longer an admitted claim of the individual citizen to share in national insurance and yet to stand outside it, keeping the advantage of his individual lower risk whether of unemployment or of disease or accident.
PROVISIONAL RATES OF BENEFIT AND CONTRIBUTION
27. Social insurance should aim at guaranteeing the minimum income needed for subsistence. What the actual rates of benefit and contribution should be in terms of money cannot be settled now, and that for two reasons. First, it is impossible today to forecast with assurance the level of prices after the war. Second, determination of what is required for reasonable human subsistence is to some extent a matter of judgment; estimates on this point change with time, and generally, in a progressive community, change upwards. The procedure adopted to deal with this problem has been: first, from consideration of subsistence needs, as given by impartial expert authorities, to determine the weekly incomes which would have been sufficient for subsistence in normal cases at prices ruling in 1938 ; second, to derive from these the rates appropriate to a cost of living about 25% above that of 1938. These rates of benefit, pension and grant are set out in para. 401 as provisional post-war rates; by reference to them it is possible to set forth simply what appears to be the most appropriate relation between different benefits and what would be the cost of each benefit and of all benefits together ; it is possible to show benefits in relation to contributions and taxation. But the provisional rates themselves are not essential. If the value of money when the scheme comes into operation differs materially from the assumptions on which the provisional rates are based, the rates could be changed without affecting the scheme in any important particular. If social policy should demand benefits on a higher scale than subsistence, the whole level of benefit and contribution rates could be raised without affecting the structure of the scheme. If social policy or financial stringency should dictate benefits on a lower scale, benefits and contributions could be lowered, though not perhaps so readily or without some adjustments within the scheme.
28. The most important of the provisional rates is the rate of 40/- a week for a man and wife in unemployment and disability and after the transition in addition to allowances for children at an average of 8/- per head per week. These amounts represent a large addition to existing benefits. They will mean that in unemployment and disability a man and wife if she is not working, with two children, will receive 56/- a week without means test so long as unemployment or disability lasts, as compared with the 33/- in unemployment and the 15/- or 7/6 in sickness, with additional benefit in some Approved Societies, which they were getting before the war. For married women gainfully occupied, there will be a maternity benefit at the rate of 36/- a week for 13 weeks, in addition to the maternity grant of £4 available for all married women.. Other rates, as for widowhood and for industrial disability, show similar increases, as set out in detail in paragraph. 284, in dealing with the Social Security Budget. There will be new benefits for funerals, marriage and other needs, as well as comprehensive medical treatment, both domiciliary and institutional, for all citizens and their dependants which, subject to further enquiry suggested in para. 437, will be without a charge on treatment at any point. At these provisional rates, the total Security Budget, including childrens allowances and free health and rehabilitation services, is estimated to amount to £697,000,000 in 1945 as the first year of the plan, and £858,000,000 twenty years after, in 1965. The extent to which these sums represent new expenditure which is not now being incurred and the division of the total cost between insured persons, their employers and the Exchequer are discussed in Part IV of the Report and provisional rates of contribution are suggested in para. 403. The most important of these is the contribution of 4/3 a week by an adult man in employment and 3/3 a week from his employer. At this rate, with corresponding rates for other classes, the contribution of insured employees in class I for cash benefits, when the plan, including contributory pensions, is in full operation, is estimated to amount to about 25 per cent. of the cost of their cash benefits exclusive of allowances for children ; the balance will be provided by the employers contributions and by taxation based on capacity to pay. At the outset, the contributions of insured persons will represent a larger proportion of the total cost ; the net addition to the burden on the National Exchequer in the first year, as compared with expenditure under the existing arrangements, will be about £86,000,000.
29. The attempt to fix rates of insurance benefit and pension on a scientific basis with regard to subsistence needs has brought to notice a serious difficulty in doing so in the conditions of modern Britain. This is the problem of rent discussed in paras. 197-216. In this as in other respects, the framing of a satisfactory scheme of social security depends on the solution of other problems of economic and social organisation. But subject to unavoidable difficulties in giving a numerical value to the conception of a subsistence minimum, the scheme of social insurance outlined in this Report provides insurance benefit adequate to all normal needs, in duration and in amount. It is at the same time a scheme from which the anomalies and overlapping, the multiplicity of agencies and the needless administrative cost which mark the British Social Services today, have been removed and have been replaced by co-ordination, simplicity and economy.
UNIFIED SOCIAL SECURITY AND THE CHANGES INVOLVED
30. The advantages of unified social security are great and unquestionable. They can be obtained only at the cost of changes in the present administrative machinery whose necessity needs to be proved and can be proved case by case. The principal changes from present practice that are involved in the plan are set out below. The reasons for each of these changes are given in Part II in one or two cases they are set out there only briefly, in anticipation of fuller discussion.
1. Unification of social insurance in respect of contributions, that is to say, enabling each insured person to- obtain all benefits by a single weekly contribution on a single document (paras. 41-43).
2. Unification of social insurance and assistance in respect of administration in a Ministry of Social Security with local Security Offices within reach of all insured persons (paras. 44-47).
3. Supersession of the present system of Approved Societies giving unequal benefits for equal compulsory contributions [combined with retention of Friendly Societies and Trade Unions giving sickness benefit as responsible agents for the administration of State benefit as well as voluntary benefit for their members] (paras. 48-76).
4. Supersession of the present scheme of workmens compensation and inclusion of provision for industrial accident or disease within the unified social insurance scheme, subject to (a) a special method of meeting the cost of this provision, and (b) special pensions for prolonged disability and grants to dependants in cases of death due to such causes (paras. 77-105).
5. Separation of medical treatment from the administration of cash benefits and the setting up of a comprehensive medical service for every citizen, covering all treatment and every form of disability under the supervision of the Health Departments (para. 106).
6. Recognition of housewives as a distinct insurance class of occupied persons with benefits adjusted to their special needs, including (a) in all cases [marriage grant], maternity grant, widowhood and separation provisions and retirement pensions ; (b) if not gainfully occupied, benefit during husbands unemployment or disability; (c) if gainfully occupied, special maternity benefit in addition to grant, and lower unemployment and disability benefits, accompanied by abolition of the Anomalies Regulations for Married Women (paras. 107-117).
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 (paras. 118-121).
8. Provision of training benefit to facilitate change to new occupations of all persons who lose their former livelihood, whether paid or unpaid (para. 122).
9. Assimilation of benefit and pension rates for unemployment, disability. other than prolonged disability due to industrial accident or disease, and retirement (para. 123).
10. Assimilation of benefit conditions for unemployment and disability including disability due to industrial accident or disease, in respect of waiting time (paras. 124-126).
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 (paras. 127-128).
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 (paras. 129-132).
13. Making of disability benefit at full rate indefinite in duration, subject to imposition of special behaviour conditions (paras. 129-132).
14. Making of pensions, other than industrial, conditional on retirement from work and rising in value with each year of continued contribution after the minimum age of retirement, that is to say, after 65 for men and 60 for women (paras. 133-136).
15. Amalgamation of the special schemes of unemployment insurance, for agriculture, banking and finance and insurance, with the general scheme of social insurance (paras. 137-148).
16. Abolition of the exceptions from insurance
(a) of persons in particular occupations, such as the civil service, local government service, police, nursing, railways, and other pensionable employments, and, in respect of unemployment insurance, private indoor domestic service;
(b) of persons remunerated above £420 a year in non-manual occupations (paras. 149-152).
17. Replacement of unconditional inadequate widows pensions by provision suited to the varied needs of widows, including temporary widows benefit at a special rate in all cases, training benefit when required and guardian benefit so long as there are dependent children (paras.153-156).
18. Inclusion of universal funeral grant in compulsory insurance (paras. 157-160).
19. Transfer to the Ministry of Social Security of the remaining functions of Local Authorities in respect of public assistance, other than treatment and services of an institutional character (paras. 161-165).
20. Transfer to the Ministry of Social Security of responsibility for the maintenance of blind persons and the framing of a new scheme for maintenance and welfare by co-operation between the Ministry, Local Authorities and voluntary agencies (paras. 166-170).
21. Transfer to the Ministry of Social Security of the functions of the Assistance Board, of the work of the Customs and Excise Department in respect of non-contributory pensions, and probably of the employment service of the Ministry of Labour and National Service, in addition to unemployment insurance, and the work of other departments in connection with the administration of cash benefits of all kinds, including workmens compensation (paras. 171-175).
22. Substitution for the Unemployment Insurance Statutory Committee of a Social Insurance Statutory Committee with similar but extended powers (paras. 176-180).
[23. Conversion of the business of industrial assurance into a public service under an Industrial Assurance Board.] (paras. 181-192).
31.This considerable list of changes does not mean that, in the proposals of the Report, either the experience or the achievements of the past are forgotten. What is proposed today for unified social security springs out of what has been accomplished in building up security piece by piece. It retains the contributory principle of sharing the cost of security between three parties -the insured person himself, his employer, if he has an employer, and the State. It retains and extends the principle that compulsory insurance should provide a flat rate of benefit, irrespective of earnings, in return for a flat contribution from all. It retains as the best method of contribution the system of insurance documents and insurance stamps. It builds upon the experience gained in the administration of unemployment insurance and later of unemployment assistance, of a national administration which is not centralised at Whitehall but is carried out through responsible regional and local officers, acting at all points in close co-operation with representatives of the communities which they serve. It provides for retaining on a new basis the association of Friendly Societies with national health insurance. It provides for retaining within the general framework of a unified scheme some of the special features of workmens compensation and for converting the associations for mutual indemnity in the industries chiefly concerned into new organs of industrial co-operation and self-government. While completing the transfer from local to national government of assistance by cash payments, it retains a vital place for Local Authorities in the provision of institutions and in the organisation and maintenance of services connected with social welfare. The scheme proposed here is in some ways a revolution, but in more important ways it is a natural development from the past. It is a British revolution.
32. The Plan for Social Security is put forward as something that could be in operation in the immediate aftermath of the war. In the Memorandum by the Government Actuary on the financial aspects of the plan, which is printed as Appendix A to the Report, it is assumed, for the purpose of relating the estimates of expenditure to the numbers of the population, that the plan will begin to operate on 1st July, 1944, so that the first full year of benefit will be the calendar year 1945. But in view of the legislative and administrative work involved in bringing the plan into force, so early a date as this will be possible only if a decision of principle on the plan is taken in the near future by the Government and by Parliament.
PLAN FOR SOCIAL SECURITY
ASSUMPTIONS, METHODS AND PRINCIPLES300. Scope of Social Security : The term " social security " is used here to denote the securing of an income to take the place of earnings when they are interrupted by unemployment, sickness or accident, to provide for retirement through age, to provide against loss of support by the death of another person, and to meet exceptional expenditures, such as those connected with birth, death and marriage. Primarily social security means security. of income up to a minimum, but the provision of an income should be associated with treatment designed to bring the interruption of earnings to an end as soon as possible.
301. Three Assumptions : No satisfactory scheme of social security can be devised except on the following assumptions
(A) Childrens allowances for children up to the age of 15 or if in full-time education up to the age of 16
(B) Comprehensive health and rehabilitation services for prevention and cure of disease and restoration of capacity for work, available to all members of the community;
(C) Maintenance of employment, that is to say avoidance of mass unemployment.
The grounds for making these three assumptions, the methods of satisfying them and their relation to the social security scheme are discussed in Part VI. Childrens allowances will be added to all the insurance benefits and Pensions described below in paras. 320-349.
302. Three Methods of Security :On these three assumptions, a Plan for Social Security is outlined below, combining three distinct methods: social insurance for basic needs ; national assistance for special cases; voluntary insurance for additions to the basic provision. Social insurance means the providing of cash payments conditional upon compulsory contributions previously made by, or on behalf of, the insured persons-, irrespective of the resources of the individual at the time of the claim. Social insurance is much the most important of the three methods and is proposed here in a form as comprehensive as possible. But while social insurance can, and should, be the main instrument for guaranteeing income security, it cannot be the only one. It needs to be supplemented both by national assistance and by voluntary insurance. National assistance means the giving of cash payments conditional upon proved need at the time of the claim, irrespective of previous contributions but adjusted by consideration of individual circumstances and paid from the national exchequer. Assistance is an indispensable supplement to social insurance, however the scope of the latter may be widened. In addition to both of these there is place for voluntary insurance. Social insurance and national assistance organised by the State are designed to guarantee, on condition of service, a basic income for subsistence. The actual incomes and by consequence the normal standards of expenditure of different sections of the population differ greatly Making provision for these higher standards is primarily the function of the individual that is to say, it is a matter for free choice and voluntary insurance. But the State should make sure that its measures leave room and encouragement. for such voluntary insurance. The social insurance scheme is the greater part of the Plan for Social Security and its description occupies most of this Part of the Report. But the plan includes national assistance and voluntary insurance as well.
303. Six Principles of Social Insurance :The social insurance scheme set out below as the chief method of social security embodies six fundamental principles
Flat rate of subsistence benefit
Flat rate of contribution
Unification of administrative responsibility
Adequacy of benefit
304. Flat Rate of Subsistence Benefit : The first fundamental principle of the social insurance scheme is provision of a flat rate of insurance benefit, irrespective of the amount of the earnings which have been interrupted by unemployment or disability or ended by retirement ; exception is made only where prolonged disability has resulted from an industrial accident or disease. This principle follows from the recognition of the, place and importance of voluntary insurance in social security and distinguishes the scheme proposed. for Britain from the security schemes of Germany, the Soviet Union, the United States and most other countries with the exception of New Zealand. The flat rate is the same for all the principal forms of cessation of earning unemployment, disability, retirement; for maternity and for widowhood there is a temporary benefit at a higher rate.
305. Flat Rate of Contribution :The second fundamental principle of the scheme is that the compulsory contribution required o f each insured person or his employer is at a flat rate, irrespective of his means. All insured persons, rich or poor pay the same contributions for the same security ; those with larger means will pay more only to the extent that as tax-payers they pay more to the national Exchequer and so to the State share of the Social Insurance Fund. This feature distinguishes the scheme proposed for Britain from the scheme recently established in New Zealand under which the contributions are graduated by income, and are in effect an income-tax assigned to a particular service. Subject moreover to one exception, the contribution will be the same irrespective of the assumed degree of risk affecting particular individuals or forms of employment. The exception is the raising of a proportion of the special cost of benefits and pensions for industrial disability in occupations of high risk by a levy on employers proportionate to risk and payroll (paras 86-90 and 360).
306. Unification of Administrative Responsibility: The third fundamental principle is Unification of administrative responsibility in the interests of efficiency and economy. For each insured person there will be a single weekly contribution, in respect of all his benefits. There will be in each locality a Security Office able to deal with claims of every kind and all sides of security. The methods of paying different kinds of cash benefit will be different and will take account of the circumstances of insured persons, providing for payment at the home or elsewhere, as is necessary. All contributions will be paid into a single Social Insurance Fund and all benefits and other insurance payments will be paid from the fund.
307. Adequacy of Benefit: the fourth fundamental principle is adequacy of benefit in amount and in time. The flat rate of benefit proposed is intended in itself to be sufficient without further resources to provide the minimum income needed for subsistence in all normal cases. It gives room and a basis for additional voluntary provision, but does not assume that in any case. The benefits are adequate also in time, that is to say except for contingencies of a temporary nature , they will continue indefinitely without means test, so long as the need continues, though subject to any change of conditions and treatment required by prolongation of the interruption in earning and occupation.
308. Comprehensiveness: The fifth fundamental principle is that social insurance should be comprehensive, in respect both of the persons covered and of their needs. It should not leave either to national assistance or to voluntary insurance any risk so general or so uniform that social insurance can be justified. For national assistance involves a means test which may discourage voluntary insurance or personal saving. And voluntary insurance can never be sure of covering the ground. For any need moreover which, like direct funeral expenses, is so general and so uniform as to be a fit subject for insurance by compulsion, social insurance is much cheaper to administer than voluntary insurance.
309. Classification: The sixth fundamental principle is that social insurance, while unified and comprehensive, must take account of the different ways of life of different sections of the community; of those dependent on earnings by employment under contract of service, of those earning in other ways, of those rendering vital unpaid service as housewives, of those not yet of age to earn, and of those past earning. The term "classification" is used here to denote adjustment of insurance to the differing circumstances of each of these classes and to many varieties of need and circumstance within each insurance class. But the insurance classes are not economic or social classes
310. Six Population Classes: the Plan for Social Security starts with consideration of the people and of their needs. From the point of view of social security the people of Britain fall into six main classes described briefly as I-Employees; II-Others gainfully employed; III-Housewives; IV-Others of working age; V-Below working age; VI-Retired above working age. The precise definitions of each of these classes, the boundaries between them and the provision for passage from one to another are discussed in detail in paragraphs 314-319. The approximate numbers in each class and their relation to security needs, as listed in the following paragraph are given in table XVI. Some needs, for medical treatment and for burial are common to all classes. In addition to this, those in Class V (below working age) need childrens allowances, and those in class VI (Retired above working age) need pensions; neither of these classes can be called on to contribute for social insurance. The other four classes all have different needs for which they will be insured by contributions made by or in respect of them. Class I (Employees), in addition to medical treatment, funeral expenses and pension, need security against interruption of earnings by unemployment and disability, however caused. Class II, i.e., persons gainfully occupied otherwise than as employees, cannot be insured against loss of employment, but in addition to medical treatment, funeral expenses and pension they need provision for loss of earnings through disability and they need some provision for loss of livelihood. Class III (Housewives) not being gainfully occupied do not need compensation for loss of earnings through disability or otherwise, but, in addition to the common needs of treatment, funeral expenses and pension, they have a variety of special needs arising out of marriage. Class IV (Others of working age) is a heterogeneous class in which relatively few people remain for any large part of their lives : they all need provision for medical treatment, funeral expenses and retirement, and also for the risk of having to find a new means of livelihood.
311 Eight Primary Causes of Need: The primary needs for social security are of eight kinds, reckoning the composite needs of a married woman as one and including also the needs of childhood (Assumption A) and the need for universal comprehensive medical treatment and rehabilitation (Assumption B). These needs are set out below ; to each there is attached in the security scheme a distinct insurance benefit or benefits. Assistance may enter to deal with any kind of need, where insurance benefit for any reason is inadequate or absent.
Unemployment : that is to say, inability to obtain employment by a person dependent on it and physically fit for it, met by unemployment benefit with removal and lodging grants.
Disability : that is to say, inability of a person of working age, through illness or accident, to pursue a gainful occupation, met by disability benefit and industrial pension.
Loss of Livelihood by person not dependent on paid employment, met by training benefit.
Retirement from occupation, paid or unpaid, through age, met by retirement pension.
Marriage needs of a woman, met by Housewives Policy including provision for
(1) Marriage, met by marriage grant.
(2) Maternity, met by maternity grant in all cases, and, in the case of a married woman in gainful occupation, also by maternity benefit for a period before and after confinement.
(3) Interruption or cessation of husbands earnings by his unemployment, disability or retirement, met by share of benefit or pension with husband.
(4) Widowhood, met by provision varying according to circumstances Including temporary widows benefit for readjustment, guardian benefit while caring for children and training benefit if and when there are no children in need of care.
(5) Separation, i.e. end of husbands maintenance by legal separation, or established desertion, met by adaptation of widowhood provisions, including separation benefit, guardian benefit and training benefit.
(6) Incapacity for household duties, met by provision of paid help in illness as part of treatment.
Funeral Expenses of self or any person for whom responsible, met by funeral grant.
Childhood, provided for by childrens allowances if in full-time education, till sixteen.
Physical Disease or Incapacity, met by medical treatment, domiciliary and institutional, for self and dependants in comprehensive health service and by post-medical rehabilitation.
312. Other Needs : The needs listed in para. 311 are the only ones so general and so uniform as to be clearly fit subjects for compulsory insurance. There is, partly for historical reasons, a problem as to the provision to be made for fatal accidents and diseases arising out of employment, by means of an industrial grant. There are many other needs and risks which are sufficiently common to be suited for voluntary insurance, and to a varying extent are already covered by that method. They include a great variety of contingencies for which provision is made by life and endowment insurance; there are risks of fire, theft, or accident ; there are exceptional expenditures such as those on holidays and education.
313. Explanation of Terms: Before defining more closely the classes into which the people must be divided for purposes of social security, it is necessary to explain three terms. " Exception " means that certain types of persons are not within a particular class, though apart from the exception they would be ; exception is general, not individual, altering the definition of a class. Exemption " means that a person though within a particular class is exempted individually from paying the contributions of that class; his employer, if he has one, remains liable for contributions, but these contributions are not counted in judging of the insured persons claim to benefit. " Excusal " means that contributions for which an insured person and his employer, if he has one, would otherwise be liable, are not required, but for the purpose of satisfying contribution conditions for benefit are deemed to have been paid; excusal is normally conditional on the insured person proving that he is unemployed or incapable of work. Exemption and excusal are dealt with more fully in paras. 3
314. Employees (Class I): These are, in general, persons depending for their maintenance upon remuneration received under a contract of service, including apprenticeship. The exact boundaries of this class will be adjusted by certain exceptions and inclusions. There will also be provision for exemption, that is to say, for allowing persons who take work falling within Class I to escape payment of their contributions while still requiring contributions by the employer. Insured persons in this class will hold an employment book which they will present to the employer for stamping.
The principal exception suggested is for family employment, that is to say, employment of one member of a family by another forming part of the same household. This is a development of the existing exception of fathers, sons, daughters, etc., under Agricultural Unemployment Insurance, and is designed to prevent fictitious claims for benefit. Persons excluded from Class I by this exception will fall into Class II.
Persons in Class II or IV taking work temporarily under a contract of service will be allowed to claim exemption from their own contributions, and persons in Class Ill undertaking such work will be allowed to obtain exemption so long as they desire it. Exempt persons will present to the employer a special card to be stamped. by him with the employer contribution.
On the other hand, certain exceptions and exemptions under the present scheme will no longer apply.- In particular.-
- There will be no exception of employees on the ground of the regularity of their employment or that it entitles them to pension. The basis of the security scheme is that all should contribute compulsorily irrespective of their personal risk. For men in the Armed Forces special arrangements for contribution will secure their rights to the benefits of the scheme when they return to civil life. For men in the merchant service there will be special arrangements for contribution adjusted to the conditions of their employment.
- There will be no exception of any employees by a remuneration limit.
- The right of persons above normal working age to claim exemption will cease on the introduction of the principle that pension is payable only on retirement from work and that men and women reaching the ages of 65 and 60 respectively, will have the option either of continuing to work and contribute or of retiring on pension at any time thereafter.
The possibility of either including in Class I and so insuring against unemployment certain classes of persons who are not technically under a contract of service but work in effect for employers (e.g. manual labour contractors, out-workers and private nurses) or of insuring such classes by special schemes, taking account of their special circumstances, needs further exploration. In one of these classes for instance, namely nurses, in addition to the fact that nurses work sometimes under contract of service and sometimes not, there are special needs arising out of their exposure to infection and out of the urgency of their duties, rendering necessary the possibility of intervals for rest and recuperation. The problem of giving some income security under a special scheme to share fishermen should also be explored. As stated above, apprentices generally will be included in Class I, but special arrangements may be made in regard to their rate of contribution (see para. 408).
315. Others Gainfully Occupied (Class II): These are, in general, all persons working for gain who are not in Class I. Most of these will be persons working on their own account as employers or by themselves, including shopkeepers and hawkers, farmers, small holders and crofters, share fishermen, entertainers and renderers of professional and personal service and out-workers. They will include also persons who, though technically under contract of service, are excepted from Class I on the ground of family employment. Apart from the possibilities whose exploration is proposed above, persons gainfully occupied otherwise than under contract of service will not be insured against unemployment. Persons in Class II will pay contributions upon an occupation card. If a person in Class II gives up his independent occupation and takes insurable employment he will pass into Class I and will in due course acquire a claim to unemployment benefit in addition to the other benefits of Class II. If he takes insurable employment temporarily he will be allowed to work as an exempt person, i.e. only the employers contribution will be paid and he will neither contribute for unemployment nor acquire a right to unemployment benefit. Conversely, a person whose main occupation is employment under a contract of service but who also works regularly or occasionally at some other gainful occupation, will be able to obtain exemption from Class II contributions. Persons in Class II will be able to apply for exemption on the ground that their income is below a certain minimum, say £75 a year (para. 363).
316. Housewives (Class III): These are married women of working age living with their husbands. An housewife who undertakes paid work as well, either under a contract of service or otherwise, will have the choice either of contributing in the ordinary way in Class 1 or Class II as the case may be, or of working as an exempt person, paying no contributions of her own
317. Others of Working Age (Class IV). These are in the main students above 16, unmarried women engaged in domestic duties not for pay, persons of private means, and persons incapacitated by blindness or other physical infirmity without being qualified for benefits under the social insurance scheme. The last of these groups will be a diminishing one. Blindness and other physical infirmities will occur in most cases after people have had a chance of contributing under the scheme and qualifying for disability benefit. At the outset there will be a number of people who became incapacitated before the scheme began. After the scheme has been established, persons in receipt of any benefit or pension in respect of contributions in other classes will be treated as still belonging to those classes and not as in Class IV. Those incapacitated or in institutions will be subject to the special arrangements appropriate in each case. All the others in Class IV will be required to hold security cards and to pay contributions thereon unless and until they pass into another class. This security card must be produced to obtain an employment book or occupation card. Persons in Class IV will be able to apply for exemption from contributions on the ground that their total income is below a certain minimum, say £75 a year (para. 363).
318. Below Working Age (Class V):This class will include all persons below 16 who are in full-time education, whether compulsorily or voluntarily.
319. Retired Above Working Age (Class VI): The minimum pensionable age for retirement on social insurance pension will be 65 for men and 60 for women, but persons who continue to work after these ages will pay contributions in the ordinary way and will be treated as belonging to Class 1 or Class II.
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Paul Halsall, January 1999