Friendly societies may be set for comeback: New welfare schemes recommended

FRIENDLY societies could return to their pre-Victorian roots as providers of private welfare schemes if the Government listens to the recommendations of a report published yesterday.

'It would be disappointing if, in reforming the welfare system, policy-makers did not recognise the opportunity that friendly societies present to promote once again the values of mutuality and self-help throughout society,' says the report by George Yarrow, director of the Regulatory Policy Institute and Fellow of Hertford College, Oxford.

Mr Yarrow was commissioned to write the report by the National Conference of Friendly Societies.

The societies are mutual organisations that trace their origins back to the craft guilds of the Middle Ages. They multiplied rapidly in the 19th century as people used them to insure against a range of misfortunes such as loss of income through sickness or unemployment. This century their role has gradually diminished with the development of the welfare state.

They now specialise in tax-exempt investment schemes and have about pounds 5.5bn of funds under management. The societies won a range of new powers through the Friendly Societies Act 1992, including the marketing of personal equity plans and unit trusts, offering loans and running homes for the elderly.

Mr Yarrow suggests they have an even wider role to play. 'The principles and values which friendly societies embrace should be fundamental components of any reform of the social security system,' he says.

However, the Government first needs to review taxation of savings to encourage private provision without creating fiscal distortions, he warns. Policy-makers will also need to develop an effective regulatory system for private provision.

'Unregulated private provision can be expected to be characterised by substantial inefficiencies and inequities,' Mr Yarrow says.

Peter Gray, president of the National Conference of Friendly Societies, said yesterday that friendly societies could not put forward concrete proposals on the types of private benefit schemes they might offer until the Government made clear its plans for the future of welfare provision.

'We are trying to get a debate going with the Government to see how much we can do,' he said.