[AS AMENDED BY STANDING COMMITTEE C.]

FINANCIAL MEMORANDUM.

Under the provisions of Section four of the principal National Health Insurance Act the funds required for defraying the cost of benefits conferred by the Act and the expenses of administration of those benefits are derived, in the case of men as to six-sevenths and in the case of women as to four-fifths thereof, from contributions made by or in respect of the contributors by themselves or their employers, and as to the balance thereof from moneys provided by Parliament. The Exchequer contribution to insurance funds out of which benefits and expenses of administration under the Act are provided is, therefore, made as and when the expenditure is incurred.

Under Clauses 11 and 20 of the Bill, provision is made for the application in future towards the cost of benefits and expenses of administration of certain moneys consisting of contributions, as to which the existing Act either makes no provision for their being so applied or provides for their application in such manner as does not involve a pari passu payment out of moneys provided by Parliament. In these cases accordingly a liability is imposed on the Exchequer beyond that already involved by Section four of the principal Act.

Under Clause 19 it is proposed to bring two additional classes of workers under compulsory insurance. The contributions collected in respect of these new classes, when expended on the payment of benefits and expenses of administration, will involve a pari passu payment of moneys provided by Parliament. A fresh liability will thereby be imposed on the Exchequer under Section four of the principal Act.

The other proposals of the Bill in so far as they affect the Exchequer, while they involve some anticipation of the date at which expenditure would otherwise have been incurred, do not increase the ultimate liability. Under the proposals in Clause 13 (4) there will be a small saving, estimated at £3,000, for the first year and increasing slightly in subsequent years.

Insurance.

Clause 11.

Under Clause 11 of the Bill it is proposed that deposit contributors who by reason of the state of their health cannot obtain admission to approved societies shall be included in a special section and insured for the normal benefits of the Act. Following the recommendation of the Royal Commission, the clause makes available for the purpose of meeting the cost of benefits under the Act and the expenses of administration thereof certain sums forming part of the Deposit Contributors Fund, and the interest on the balances in the Fund which at present are not available for that purpose.

The sums in question, other than interest, consist of one-half of the balances that may be standing to the credit of deposit contributors at any time hereafter when they become permanently resident outside of the United Kingdom. Under the existing provisions one-half of such balance is paid to the individual deposit contributor on his becoming permanently resident outside the United Kingdom, without any addition from moneys provided by Parliament. Under the proposal of the Bill (paragraph (d) (iii) of clause 11) those amounts (unless required to be transferred to a foreign or colonial society if the insured person becomes a member of such a society) will be in future paid into the account of the Deposit Contributors Insurance Section.

The Clause further provides (paragraph (d) (iv)) that any interest credited to the Deposit Contributors Fund in the accounts of the Fund for any period subsequent to 31st December 1927, shall be credited to the Insurance Section. Under the Insurance Scheme, interest earned on the funds of approved societies is available for the payment of benefits, but the temporary scheme for deposit contributors under the original Insurance Act made no provision for the disposal of interest on deposit contributors' balances.

The sums to be credited to the Insurance Section under the two foregoing provisions are estimated to amount together to not more than £45,000 a year. They will be available to be applied towards the cost of benefits and expenses of administration of the section, and if they are fully applied each year the increased

Insurance.

annual Exchequer liability may be estimated at £9,000 a year.

Under Clause 11, provision is also made for the disposal of interest credited to the Deposit Contributors Fund up to 31st December 1927. The interest accumulated since the inception of the Act to 31st December 1927 amounted to about £780,000. It is proposed that this interest shall be credited to the Reserve Suspense Fund, the main purpose of which is to provide credits of capital sums in respect of new entrants into insurance, including deposit contributors who enter approved societies or the Insurance Section. The actual expenditure of the money on benefits and expenses of administration will not take place immediately but will be spread over a considerable period in the future. The present capital, value of the ultimate total Exchequer liability is about £156,000.

Clause 19.

Under Clause 19 of the Bill it is proposed to add two paragraphs to Part I of the First Schedule of the principal Act which specifies employments within the meaning of the Act, viz.:

(1) Employment by way of manual labour under a contract for the performance of such labour for the purposes of any trade or business.

(2) Employment on any fishing or other vessel when the person employed is remunerated by a share in the profits or gross earnings of the vessel.

The addition of these two employments will it is estimated have the effect of bringing ultimately about 25,000 additional persons into compulsory insurance. The additional Exchequer liability thereby involved is estimated at £7,000 a year, after the expiry of the usual waiting periods.

Clause 20.

Clause 20 of the Bill provides for the extension of the purposes to which unclaimed health insurance contributions may be applied. Under the existing law ninetenths of the unclaimed contributions are in the first

Insurance.

place applied in making grants to approved societies to prevent their members from being suspended from benefits by reason of arrears, and, so far as the money available is not required for this purpose, it is to be applied as may be necessary in payment to the Exchequer of the cost incurred by government departments in the provision of stamps and cards and the sale of stamps. Any ultimate balance is transferred to the Central Fund.

Under Clause 1 (5) of the Bill power is taken to enable societies to excuse all arrears of their members which arise from genuine unemployment, so as to prevent them from suffering either reduction of or suspension of benefits by reason of genuine unemployment, and it is proposed that the available moneys from unclaimed contributions shall first be used in making grants to approved societies, under an appropriate scheme, towards the cost incurred by them for this purpose. These proposals would enable moneys, which would otherwise be available for payment to the Exchequer of the cost incurred by government departments in connection with stamps and cards, to be applied in the payment of benefits to insured persons, and would entail a charge on the Exchequer of the statutory proportion of the benefits. The maximum additional sum which could be so applied in the payment of benefits is estimated at £200,000 a year, and the maximum additional cost to the Exchequer is approximately £40,000 a year.