APPENDIX A. 
345 
———AAG 
for, while the contribution applicable to the new expenditure would cease 
at the age of 65, the expenditure would continua during life, and pro- 
vision would have to be made for the accumulation in respect of each 
person reaching 65 of a capital sum representing a life annuity at that 
age of seven-ninths of 7s. or 8s. 9d. a year as the case might be. i 
On this basis, therefore, the apportionment of the weekly contribution 
into its component parts would he as follows: — 
Men. 
a. 
Benefit Fund (including the new expenditure) ..,. 7-95 
Reserve Values (interest and redemption) ... 80 
Contingencies Fund s 5 ie i 
0-0) 
Women. 
d. 
7:65 
"60 
~ 
The total amount of the reserve values on this basis would be about 
£41,000,000, being an increase of £6,000,000 on the sum of £35,000,000 
named in para. 26. 
As explained in para. 23, the above sums of 7s. and 8s. 9d. would respec- 
tively be chargeable with any capitation allowance for medical benefit in 
excess of 9s. 6d. per annum. Only the balances remaining after such 
expenditure had been provided for would be available for new purposes. 
31. Expenditure at the rate above indicated would amount in total to 
about £4,500,000 a year (inclusive of State grant), and in the course of a 
guinquennial period, after allowing for the set-off accruing from the reduec- 
tion of the contributions applied to the service of reserve values a total 
charge (with interest) of about £15,000,000 would fall to be met from the 
funds of the Approved Societies. For the greater part this sum would 
be met out of resources that, under existing conditions, would emerge 
as surplus at the quinquennial valuations. We are, however, constrained 
to point out that the imposition of the new burden would result in 
increased deficiencies where deficiencies now exist or in the creation of 
deficiency in certain cases where, on the present basis, surplus would have 
appeared. As the valuation reports have shown, the societies vary widely 
in their financial position, and only the margins which have emerged 
on the present basis have protected a number of them, with, in the 
aggregate, a substantial membership, from falling into a state of 
deficiency. The further expenditure contemplated by our terms of 
reference necessarily involves the reduction of these margins, and this is 
bound to have adverse results upon the solvency of the weaker units. It 
is impossible to form any definite opinion as to the membership of the 
societies which the new burdens would place in deficiency, one of the 
difficulties of the position being that the numbers would grow as the 
surpluses hitherto carried forward in sub-normal cases became exhausted 
and the full force of the new charges had to be met without the possibility 
of assistance from this source. We are led to expect, after making the 
best estimates of which the case admits, that the effect of the new burdens 
would he to create eventually a condition of deficiency in societies repre- 
senting about 10 per cent. of the whole insured population. This is a grave 
prospect, and although the machinery of the Central Fund is sufficient, 
we believe, to meet the situation we do not think we are going beyond 
our duty in inviting the Royal Commission to consider the effect upon 
the credit of the whole system of the adoption of changes such as might 
produce deficiency to the extent here indicated on the valuations of the 
societies—even though the means of subsequent adjustment existed and 
were ample for the purpose. We have taken note in this connection of the 
balances that are likely to accumulate in the Reserve Suspense Fund. 
Again we are precluded from forming dependable estimates by reason 
of the new conditions set up by the Contributory Pensions Act, the pro- 
visions of which may materially check the present rate of lapse from 
insurance. But, after giving full weight to the considerations which we 
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