A Bright Future for Our Mutual Friends     home 
June 1999      


Future prospects for Friendly Societies
At a recent Third Way conference, Tony Blair said that “at times the Labour Party had forgotten its own roots in self-help, friendly societies and voluntary organisations and the insights of Robert Owen and William Morris”.  How true!  As far as co-operative and voluntary organisations are concerned, readers of Co-op News can justifiably claim that they have kept alive the values of mutualism and self-help even when they were regarded as old-fashioned and passe within the Labour Party itself. Most co-operators regret the demutualisation of Building Societies but when it comes to Friendly Societies, many think that they died years ago!!  This article is an attempt to redress that balance and to suggest that these co-operatively run organisations have a lot to offer contemporary Britain. 
Saving Schemes 
for Children
Before the coming of the Welfare State, there was little help for people when they were ill, out of work or old.  For this reason, people often joined together to help each other. In the Middle Ages craftsmen joined Guilds which as well as regulating trade looked after the welfare of their members.  Towards the end of the 18th century, Friendly Societies began to take over this role but unlike the Guilds they were open to everyone.  About this time co-operative societies and trade unions began to flourish as well.  Indeed it was quite common for working people to belong to all three.  By the end of the 19th century nearly 9 million people belonged to registered and unregistered societies.
The first steps towards the Welfare State came with the National Insurance Act 1911. Friendly Societies now administered the state sickness benefits scheme and by 1945 over 14 million people subscribed to them through a network of 18,000 branches and societies.  In 1946, the National Health Service and National Insurance Acts effectively nationalised welfare.  No role was envisaged for the old Friendly Societies.  This was opposed by Beveridge and by some Labour MPs representing industrial areas because they felt that the underlying values of mutuality and self-help were worth preserving.  Also Friendly Societies were more flexible in dealing with personal cases because they were able to make extra-contractual payments under the principle of “Good Fellowship” which to this day is enshrined in Friendly Society rules But the big problem with Friendly Societies paying out welfare was that the payments members received varied from society to society.  Worse still there was no provision for non- -members unless they were family members.  This left an awful lot of people out.


Bevan wisely decided that a root and branch reform of welfare was necessary and the whole previous structure was swept away.  However there was still an element of continuity as most of the staff of the Friendly Societies were recruited to run the enlarged Ministry of Health.  After all they were the only ones who had any practical experience of welfare administration. The National Health Service has been a spectacular success and transformed the lives of ordinary people immeasurably.  However one unintended consequence of the replacement of co-operative participation by state control was not immediately apparent.  The generation which had fought for the establishment of the Welfare State retained their belief in personal thrift, self reliance and mutual aid.  After 1948 the Societies went into decline.  Their number was sharply reduced and the membership plummeted.  However they continued to soldier on albeit in a much reduced form.  The emphasis was shifted to supplementing the provisions of the Welfare State.


The societies  became primarily mutual insurance and industrial assurance societies. Health and sickness insurance still remained an important part of their business and many continued to provide nursing and convalescent homes for their members.  Then came the Friendly Societies Act 1992.  This was the first new legislation for over a 100 years.  It lifted many of the Victorian restrictions which had made it difficult for the Societies to be competitive. The Societies were now allowed to run Personal Equity Plans (PEPs), Unit trusts, Investment Trusts and Open Ended Investment Companies (OEICs). They could now take deposits like a Bank. The largest Society, Liverpool Victoria acquired the Frizzel Group which included a bank and an insurance broker.  The Frizzel Group is probably best known to the public for its motor insurance business. Societies are now able to run hospitals and nursing homes, sheltered housing and old people homes.
At the moment, the Societies are regulated by the Friendly Societies Commission but under the new Financial Services and Markets Bill this responsibility will pass to the Financial Services Authority probably in June 2000.  Friendly Societies will only flourish if they provide services that their members need.  Like all membership-based organisations the future lies in their own hands.  But the government can help by creating a regulatory and legislative framework which will enable them to prosper. Government encouragement would help to spur on self-help and mutuality.  How else can the government help?  Raising the tax-exempt limit on savings from £270pa to £500pa would encourage small savers.
As people live longer, long-term care becomes a pressing issue.  Here Friendly Societies have a great deal to offer. From running  nursing and convalescent homes, it’s a very short step towards providing sheltered housing.A new £500 tax-exempt limit could be extended to policies which provide for unemployment, disability, long term sickness and domiciliary care for the elderly.  Stakeholder pensions and second pensions present other opportunities.  If the latter become compulsory, it would better for them to be provided by mutuals.  None of the pension contributions would then be siphoned off into the pockets of private shareholders. Friendly Societies could also be involved in the payment of other benefits by becoming Approved Welfare Providers.  Before that can happen, the Friendly Societies will need to change too.  Issues of governance and democratic control need to be re-examined and reforms made.

In order to appeal to the younger generation, the Societies must smarten up their image. Nowadays, they often seem dowdy and old-fashioned.Internet advertising and Direct Telephone Selling should be introduced.  Advertisements should be placed in the magazines that young people actually read, for example football fanzines.  But the basic principles of self-help and mutuality should remain.  Thus renewed the Friendly Society Movement would be equipped once again to play an increasingly important role in the welfare of our community.


This article was published in the Co-op News

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