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Upon the data available when the act was being framed, it was assumed that over a period or cycle of good, bad, and average years of trade the rate of unem ployment among workers in the trades to be insured would be 4%. The act of 192o contained, as explained later, provisions enabling industries to contract out of the general scheme. It was estimated that after allowing for the withdrawal of those industries that might be expected to contract out, the industries that remained in the general scheme would have an unemployment experience of 5.32% over a cycle. It was upon this basis that the finance of the scheme was founded. There has been (194o) no real opportunity to test the soundness of these assumptions because of the much greater severity of unemployment (192o-39) than the actuaries had anticipated. Material alterations in the contributions and benefits have changed the act so much that the original calcula tions are not applicable. The conditions and disqualifications for benefit were almost identical in 192o with those under the act of 1911 and need not, therefore, be repeated. The machinery of ad judication upon claims, viz., the insurance officer, court of referees, and the umpire, was maintained.
The act of 1920 contained two provisions for enabling persons who would not otherwise have been qualified to draw benefit under the scheme. The first was that men discharged from the Forces should be given a free credit of contributions to enable them to re ceive up to the maximum period payable during twelve months; this was at first 15 weeks, and later 26 weeks in a year. The other special qualifying condition was temporary. It was, that during the first twelve months of the scheme benefit might be paid up to a maximum of eight weeks as soon as an insured person had paid four contributions. This was to provide for new entrants who had had no opportunity to satisfy the statutory condition of the pay ment of twelve contributions. Even this relaxation of the normal condition did not prove adequate to meet the situation which arose. The act of 192o began to operate just when the severe industrial depression began. To meet this situation an act was passed en abling eight weeks of benefit to be paid to persons who had been engaged in insurable employment during ten weeks since Dec. 1919 or during four weeks since July 192o. Even this proved in sufficient, as will be shown.
The right of employers to receive a refund of a part of the contributions paid in respect of workmen in their regular employ ment was not continued, but the practice of refunding to work men their share of the contributions paid in respect of them less any benefit they had received, was retained. This right of the workmen was, however, abolished in 1924.
An important new feature was included in the extended scheme of 192o. Power was given to an industiy to set up a special scheme of unemployment insurance for itself and so contract out of the general scheme. Such a scheme when approved had statu tory force and effect and was binding on all employers and workers in the industry. The chief conditions which applied to a special scheme were that it must cover all persons employed in the industry, the benefits must be, on the whole, not less favourable than those provided under the general scheme ; the State con tribution would be on a reduced scale; and the scheme would be administered, not by a Government department, but by a joint body of employers and employed in the industry.
It was expected that several industries with low rates of em ployment would contract out of the general scheme and a number prepared to do so, but because of the severe trade depression which began in the autumn of 1920 only two industries formed special schemes, viz., the insurance and banking industries. The power of contracting out was suspended as from July 1921 and was abolished by the act of 1927.
After the principal act of 1920, no less than 20 acts of Parliament were passed down to June 193o, dealing with unemployment insurance, while contributions under the scheme were dealt with in two other measures. The need for this mass of legislation was in the wholly exceptional mass unemployment which began in the autumn of 192o, just when the scheme commenced, and has continued ever since (1939). These several acts have had one main purpose, viz., to enable benefit to be paid to those persons normally employed in the in sured trades who were unable to satisfy the usual requirement of the prior payment of contributions. The general trend was toward more generosity in dealing with the needs of the unemployed. The Act of 193o marked the extreme relaxation of the benefit rules. It opened the door to claimants who had no moral right to benefits, especially married women and seasonal and casual workers, who merely "signed on" at the labour exchanges because there was a chance for benefits. The legislation which followed the principal act brought into existence a system of additional benefit which was first called "uncovenanted" and later "extended" benefit. The most important and serious effect of these extensions of rights of benefits to persons who had not earned them through previous contributions was that British workers came to regard the employment exchanges as banks where they always had a bal ance upon which, subject to the rules, they always had a legal right to draw without query into their need for the benefits. This sense of rights became a very part of British social life.