Liberalism and the Social Problem

by Winston Churchill

The expense of this system will no doubt be considerable. Its ordinary working will not need a sum less than about £170,000 per year, and during the period when the building is going on the expenditure will rise to about £200,000 per year.

We hope that the Labour Exchanges will become industrial centres in each town. We hope they will become the labour market. They may, where necessary, provide an office where the Trade Board, if there is one, will hold its meetings. We desire to co-operate with trade unions on cordial terms, while preserving strict impartiality between capital and labour in disputed matters. It may, for instance, be possible for trade unions to keep their vacant-book in some cases at the exchanges. The structure of those Exchanges may in some cases be such as to enable us to have rooms which can be let to trade unions at a rent, for benefit and other meetings, so as to avoid the necessity under which all but the strongest unions lie at the present time of conducting their meetings in licensed premises. The Exchanges may, as they develop, afford facilities for washing, clothes-mending, and for non-alcoholic refreshments to persons who are attending them. Separate provision will be made for men and for women, and for skilled and for unskilled labour. Boy labour will be dealt with in conjunction with the local Education Authorities; and travelling expenses may be advanced on loan, if the management of the Exchange think fit, to persons for whom situations have been found.

So much for the policy of Labour Exchanges. That is a policy complete in itself. It would be considerable if it stood alone; but it does not stand alone. As my right hon. friend the Chancellor of the Exchequer has announced in his Budget speech, the Government propose to associate with the policy of Labour Exchanges a system of Unemployment Insurance.

The House knows that the Minority Report advocates a system of compulsory labour exchanges, that no person shall engage any man for less than a month except through a Labour Exchange. That is not the proposal we are making. We are making a proposal of voluntary Labour Exchanges. I am quite ready to admit that no system of voluntary Labour Exchanges can deal adequately with the evils and difficulties of casual labour; but there is one conclusive reason against compulsory Labour Exchanges at the present time. To establish a system of compulsory Labour Exchanges in order to eliminate casual labour, and so to divide among a certain proportion of workers all available employment, would be absolutely and totally to cast out at the other end a surplus of unemployed: and to do this before preparations have been made for dealing with that surplus, would be to court an administrative breakdown which could not fail to be attended with the gravest possible disaster. Until poor law reform has made further progress, to establish a compulsory system of Labour Exchanges would only increase and not diminish the miseries with which we are seeking to cope.

We have, therefore, decided that our system of labour exchanges shall be voluntary in its character. For that very reason there is a great danger, to which I have never shut my eyes, that the highest ranks of labour, skilled workers, members of strong trade unions, would not think it necessary to use the Exchanges, but would use the very excellent apparatus which they have established themselves; that therefore this expensive system of Exchanges which we are calling into being would come to be used only by the poorest of the workers in the labour market, and, consequently, would gradually relapse and fall back into the purely distress machinery and non-economic machinery from which we are labouring to extricate and separate it. It is for that reason, quite apart from the merits of the scheme of unemployment insurance, that the Government are very anxious to associate with their system of Labour Exchanges a system of unemployed insurance. If Labour Exchanges depend for their effective initiation and establishment upon unemployment insurance being associated with them, it is equally true to say that no scheme of unemployment insurance can be worked except in conjunction with some apparatus for finding work and testing willingness to work, like Labour Exchanges. The two systems are complementary; they are man and wife; they mutually support and sustain each other.

So I come to Unemployment Insurance. It is not practicable at the present time to establish a universal system of unemployment insurance. We, therefore, have to choose at the very outset of this subject between insuring some workmen in all trades or all workmen in some. In the first case we should have a voluntary, and in the second a compulsory system. The risk of unemployment varies so much between one man and another owing to relative skill, character, demeanour, and other qualities, that any system of State-aided voluntary insurance is utilised mainly by those most liable to be unemployed, and, consequently, a preponderance of bad risks is established against the Insurance Office fatal to its financial stability. On the other hand, a compulsory system of insurance, which did not add to the contribution of the worker a substantial contribution from outside, would almost certainly break down, because of the refusal of the higher class of worker to assume, unsupported, a share of the burden of the weaker members of the community.

We have decided to adopt the second alternative, and our insurance system will, in consequence, be based upon four main principles. It will involve contributions from workmen and employers; it will receive a substantial subvention from the State; it will be organised by trades; it will be compulsory upon all—employers and employed, skilled and unskilled, unionists and non-unionists alike—within those trades. The hon. Member for Leicester[15] with great force showed that to confine a scheme of unemployment insurance merely to trade unionists would be trifling with the subject. It would only be aiding those who have, thank God, been most able to aid themselves, without at the same time assisting those who hitherto, under existing conditions, have not been able to make any effective provision.

To what trades ought we, as a beginning, to apply this system of compulsory contributory unemployment insurance? There is a group of trades specially marked out for the operation of such a policy. They are trades in which unemployment is not only high, but chronic, for even in the best of times it persists; in which it is not only high and chronic, but marked by seasonal and cyclical fluctuations, and in which, wherever and howsoever it occurs, it takes the form not of short time or of any of those devices for spreading wages and equalising or averaging risks, but of a total, absolute, periodical discharge of a certain proportion of the workers. The group of trades which we contemplate to be the subject of our scheme are these: house-building, and works of construction, engineering, machine-and tool-making, ship-building and boat-building, making of vehicles, and mill-sawing.

That is a very considerable group of industries. They comprise, probably at the present time, 2¼ millions of adult males. Two and a quarter millions of adult males are, roughly speaking, one-third of the population of these three kingdoms engaged in purely industrial work; that is to say, excluding commercial, professional, agricultural, and domestic occupations. Of the remaining two-thirds of the industrial population, nearly one-half are employed in the textile trades, in mining, on the railways, in the merchant marine, and in other trades, which either do not present the same features of unemployment which we see in these precarious trades, or which, by the adoption of short time or other arrangements, avoid the total discharge of a proportion of workmen from time to time. So that this group of trades to which we propose to apply the system of unemployment insurance, roughly speaking, covers very nearly half of the whole field of unemployment; and that half is, on the whole, perhaps the worse half.

The financial and actuarial basis of the scheme has been very carefully studied by the light of all available information. The report of the actuarial authorities whom I have consulted leaves me in no doubt that, even after all allowance has been made for the fact that unemployment may be more rife in the less organised and less highly skilled trades than in the trade unions who pay unemployment benefits—which is by no means certain—there is no doubt whatever that a financially sound scheme can be evolved which, in return for moderate contributions, will yield adequate benefits. I do not at this stage propose to offer any figures of contributions or benefits to the House. I confine myself to stating that we propose to aim at a scale of benefits which would be somewhat lower both in amount and in duration of payments, than that which the best-organised trade unions provide for their own members, but which, at the same time, should afford a substantial weekly payment extending over by far the greater part of the average period of unemployment of all unemployed persons in these trades.