Page 3, 16th December 1949

16th December 1949
Page 3
Page 3, 16th December 1949 — MUTUALISATION Foreshadow A Change Of Labour Policy? Does It

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MUTUALISATION Foreshadow A Change Of Labour Policy? Does It


THE WRITER Paul Derrick, a son of Thomas Derrick, the artist and cartoonist, and brother of Michael Derrick, Assistant-Editor of the Tablet, has made a special study of economic questions in the light of Christian teaching.

AFTER going to a great deal of trouble and making a constitutional adjustment in order to ensure that steel should be nationalised before the election, the Labour Government recently decided to delay the operation of

steel nationalisation atleast until January, 1951. All the bother about reducing the power of the House of Lords was so much waste of Parlia

mentary time. It is probable that the decision to delay steel nationalisation was to some extent due to pressure from the Lords and from the Labour Party's desire for greater freedom in fixing the election date: but it was probably also to some extent due to the bad impression which the policy of pressing on with the nationalisation of steel before the election in spite of the achievements of the industry was having upon the electorate.

Now the Labour Party has decided to abandon the policy of nationalising insurance, put forward in Labour Believes in Britain last spring in favour of the " mutualisation " of insurance. It proposes that the insurance companies, at least as far as industrial assurance is concerned, should be organised on a " mutual " basis as many insurance societies are already. This change of policy is no doubt partly due to the attitude of the Co-operative Movement; it was made clear both at the Co-operative Congress last May and at the Labour Party Conference last June that the Co-operative Movement was strongly opposed to the nationalisation of insurance and, in particular, to the nationalisation of the Co-operative Insurance Society.

But the change of policy was also due to the fact that the nationalisation of insurance would undoubtedly have had a serious effect upon our balance of payments position, and to the fact that insurance workers are not all convinced that it is a good thing to nationalise as many industries as possible and might well have persuaded many of their clients that it was against their interests to vote Labour.

Vagueness of Announcement

The Labour Party's statement is very vague about how the insurance companies are to be "mutualised." The Financial Times declares that " there can be no quarrel with the mutual principle which is operated by many successful life offices, both industrial and ordinary," but it suspects that the Labour Party intends to do more than require the companies to organise themselves on a " mutual" basis, and to impose almost as much State control as would occur under nationalisation. The Times also deplores the vagueness of the Labour Party's announcement.

The essential difference between the " mutual " and other insurance companies is that the former are run in the interests of the policy holders whereas the others are run for the profit of shareholders. and very high profits they have often been. It would be difficult, as the Labour Party recognised in Labour Believes in Britain, to separate the industrial business of the insurance companies from their other business.

The Times points out, however. that if the companies were converted to collecting societies, so subjecting their investments to all the restrictions of the Trustee Act, the consequent loss of earnings from invested funds would more than offset the saving on dividends and tax. Virtually no advantage would be gained, it adds, that could not be got with far less trouble by a statutory limitation of industrial assurance dividends, compulsion of the companies to return the bulk of their surpluses to policyholders and more stringent control of the present rather arbitary methods whereby those profits are calculated. In fact the essential characteristic of a " mutual " society is that the return on capital is limited and the enterprise is run in the interests of the policyholders instead of in the interests of shareholders. The Labour Party's proposal to " mutualise" the insurance corn: panics is, basically, a proposal to limit the dividends of the companies so that they are no longer run for the profit of the shareholders.

Why Stop at Insurance ?

The Labour Party statement declared that "mutualisation" will mean that the whole field of industrial assurance will be transformed into a public service freed from the profit motive, and on a basis of mutual ownership. Hitherto Labour Party spokesmen have tended to assume that only a publicly-owned enterprise can be a " public service." In fact, of course. every enterprise is a public service; the more successful it is in serving the public the better it will be for the promoters of the enterprise. Now they say that industrial insurance will be a public service though based upon mutual owner

ship. But why should mutualisation stop at insurance ? If mutualisation is such a good way of eliminating the profit motive. why not extend the principle to other

industries ? Why not, for instance, mutualise steel and sugar and cement ?

The steel industry is already " mutualised " in virtue of clause 17 of the legislation which has just been passed. The reports of Stewart & Lloyds, John Summers and other steel companies last year made it quite clear that the return on capital in the steel industries was effectively limited. The directors explained that they were unable to pay higher dividends than they did or they would become personally liable under the Steel Bill.

Why should not 4rel nationalisation be abandoned like the national

isation of insurance and replaced by the " mutualisation" of steel?

With the return on capital limited by law there would he no chance of the steel masters profiteering at the expense of the community; surpluses resulting from increased efficiency might go in part to the steelworkers in bonuses in recognition of their tremendous efforts or might be passed on to the public in lower steel prices; but they would not go to the shareholders who would receive merely a reasonable return. Again in the case of sugar would not mutualisation be sufficient ? Or must we have Mr. Strachey in charge of the sugar industry to ensure not only that the shareholders shall not make excessive profits out of sugar but that the nation shall suffer a loss?

Another Method

Last summer Mr. Shinwell declared that the nationalisation of industries was not Labour's final objective or " Socialism," but only a means of reaching it. " lf," he said. " it can be demonstrated that other methods can be equally effective there can be no advantage in pursu

ing nationalisation." The Labour Party has now found another method in " rnutualisation." It has learned that nationalisation does nothing to increase productivity and that there is, indeed little advantage in going on with it. Perhaps the postponement of the nationalisation of steel and the abandonment of the nationalisation of insurance will be followed by a realisation that mutualisation is a far better way of achieving " socialism." Mutualisatiun has, after all, much more in common with what Robert Owen and the Christian Socialists meant by socialism than the collectivist theories of Hyndman and Sidney Webb.

Moreover many Trade Unionist•i are becoming disillusioned with nationalisation whereas they arc actively demanding something very

like " mutualisation." When the TALC. asked for the abandonment of current wage claims on November 23 and called for the more effective stabilisation of wages and prices. it also demanded a more rigorous limitation of dividends. Resolutions in favour of the more effective limitation of dividends were passed by overwhelming majorities both at the Labour Party Conference and at the Trade Union Congress in 1948, and similar demands were made in 1949. Sir Stafford Cripps declared in April and July, 1948, and in January and September, 1949, that he might have to introduce some

kind of legislation on profits. He may well be forced to do so before long in order to stabilise wages and Prices in spite of the increase of the cost of living which has followed devaluation. Otherwise many Unions may continue to press or may renew wage claims in spite of the T.U.C. and make it impossible to stabilise prices, maintain export markets and pay for essential imports of food and raw materials.

The T.U.C. have also been calling for incentives; and the limitation of the return on capital and distribution of the surplus revenues of industry as a dividend on wages and salarizs would certainly do much to make the profit incentive fully operative for the v. orking population.

Catholics and Dividend Limitation The idea of dividend limitation. which is the basis of the mutual insurance societies and of co-opeiative societies, is also advocated by Fr. Andrew Gordon in the C.S.G. year hook " Property in the Christian Tradition " and by the late Samuel Courtauld in his book Ideals and Industry which was published a few weeks ago. It is many years now since legislation was passed requiring Building Societies to limit their return on capital and thereby organise themselves on a mutual basis. Why should not the Labour Party propose that steel and sugar and cement companies should be required to organise themselves in the same way ? At any rate it should make it clear that " mutualisation " does not involve any more State control than is now exercised over the mutual societies or the change of policy will do little to help maintain British insurance earnings from abroad. If people in other countries imagine that mutualisation is just another name for nationalisation and will involve almost as much State control it is likely to have a serious effect upon our balance of payments nosition. It may also have an adverse effect on Labour's prospects at the election.

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