HC Deb 28 April 1925 vol 183 cc71-83

We are now in a position to resume our march upon the two main objectives I mentioned to the House an hour ago--Security for the home of the wage-earner and Encouragement of enterprise by the relief of taxation upon income. But now we can move forward with our wagons and our field-parks replenished, if not with an ample, at any rate with an adequate supply of shot and shell. Security for the home of the wage-earner against exceptional misfortune—that is the first need. I do not blame the right hon. Gentleman opposite for his remissions on tea and sugar, but I differ from him in thinking that this was the best use which could have been made of the enormous power represented by £30,000,000 of Revenue in the hands of the State. The average British workman in good health, in full employment, at standard rates of wages, does not regard himself and his family as objects of compassion. It is when exceptional misfortune descends upon the cottage hors that the slender margin upon which it floated is, for the first time, revealed. A year of misfortune, a year of distress, a year of unemployment, above all the loss of the bread-winner, leaves this once happy family in the grip of the cruellest calamity. Their furniture and household effects, gathered together by thrift, through years of toil in the prime of life, are scattered and dispersed in a few months for a tithe of their value. Inconceivable waste, degenerating into havoc, takes place all over the country, and is taking place whenever a lamentable catastrophe of an exceptional character falls upon the otherwise happy, free, and prosperous workman's home. Most painful of all is the position of the widow with several young children, left absolutely upon her own resources with a few pounds, and a few belongings.

It is idle to say that the threat of adversity is a necessary factor in stimulating self-reliance. The threat of adversity has been active all these years, and, in the upshot, no effective provision has been made by the great mass of the labouring class, with all their efforts, for their wives and families in the event of their death. I am not reproaching them. The circumstances of their lives, the problems of existence, have not left them with the strength, or the means, or the foresight, or the habit of making such provision, and the fact remains, look at it how you will, that no such provision exists at the present time. That is the gravest evil and the gravest need at the present time.

To change to a military metaphor It is not to the sturdy marching troops that extra rewards and indulgences are needed at the present time. It is to the stragglers, to the exhausted, to the weak, to the wounded, to the veterans, to the widow and the orphans that the ambulances of the State and the aid of the State should, as far as possible, be directed. The oldlaissez faireorlaissez allerideas of mid-Victorian Radicalism have been superseded, and no one has done more to supersede them than the right hon. Member for Carnarvon Boroughs. I am proud to have been associated with him from the very beginning of those large insurance ideas. The old ideas have been superseded by modern conceptions of scientific State organisation. The conceptions of the party opposite, of course, we know, but they are conceptions which are held not less earnestly, and certainly more practically—[An HON. MEMBER "Quite recently ! "]--on this side of the House. I am sure they commend themselves to the right hon. Gentleman the father of British State Insurance, which at this very moment, although by no means complete, holds an honourable pre-eminence amongst the insurance systems of every country in the world.

Two years ago my right hon. Friend the Prime Minister appointed a Committee of experts to examine into the possibility of Old Age Pensions at an earlier age than 70 and of widows' pensions. Governments came and went; elections were won and lost, but the Committee continued to labour in the deepest recesses of Whitehall, and, in the end, all the actuarial and administrative possibilities were fully surveyed, and an immense mass of information and material was collected. The scheme of insurance we have now decided to inaugurate has been erected on that basis. Without that preliminary work, it would not have been practicable to deal with this matter this year, and perhaps not next year. As I have said, the action of my right hon. Friend the Prime Minister two years ago made possible this announcement. These conclusions were presented to the right hon. Gentleman opposite, in the summer of last year. I do not know what course he and his friends would have adopted with regard to it. Perhaps he will tell us for himself. But this mass of material was made available both to my right hon. Friend the Minister of Health, in whose Department this matter lies, and to the Chancellor of the Exchequer, and we have done our best to frame a scheme out of this material.

Any scheme to be of any use must be contributory. [HON. MEMBERS "Oh ! "] I will give a word of caution to hon. Members at the outset. Before they deride this scheme, or commit themselves to an attitude of derision, let them make quite sure what it is. Let them make quite cure how great are the masses it affects in a favourable sense. Any scheme, I say, must be contributory, must be compulsory, and, above all, must cover, virtually, the whole area of the wage-earning population. This area is broadly represented by the 15,000,000 people who are at present insured under the Health Insurance Scheme of the right hon. Member for Carnarvon Boroughs. Those 15,000,000 contributors, with their dependants, represent over 30,050,000, or 70 per cent. of the entire population. The first question we have to ask ourselves is this What burden of additional contribution, in existing circumstances, can be borne and shared equally between employers and employed? We believe that 4d. for men and 2d. for women can be assumed by both parties, employers and employed, in the circumstances of our national life at the present time.


In addition to what they pay at the present time?


Yes, that is what we believe.


Is it 4d. and 2d. each from the workers and employers.


Yes, 4d. from the workman and 4d. from the workman's employer, and 2d. from the workwoman and 2d. from the workwoman's employer. We bear in mind, in the case of the workman and workwoman, the very large remissions of taxation which were made by the late Chancellor of the Exchequer last year. He made these great remissions on tea and sugar, and the relief granted by him provides the fund out of which the contributions of the workers can be paid. That is the right hon. Gentleman's share in the general architecture of the scheme, if he cares to claim it, but only if he cares to claim it. If he does not wish to claim it, there is no reason why he should.

The case of the employers is more difficult, because we know how heavy are the burdens upon our productive industries at the present time. [HON. MEMBERS "Oh! "] I am sure my hon. Friends opposite, however they may feel about these matters—we will have weeks to debate them—would not wish to show anything like an air of levity in dealing with questions which, after all, affect not millions but tens of millions. We may differ—[Interruption.].


I must ask hon. Members to allow the right hon. Gentleman to continue.


We may differ. The case of the employers is more difficult, because while unemployment is at its present height the burden is especially heavy on employers and also on the employed in the area of unemployment insurance. While the deficiency period lasts 10d. is required per week from the employer and 9d. from the man. That is an enormous burden. We believe this period is temporary. That is our basis. It will be a very great falsification of our view if it should turn out to be not temporary. Once unemployment has fallen from its present level to the neighbourhood of 800,000 then the deficiency period rapidly passes away, and the contributions of employers and of workmen in the unemployment area fall from 10d. to 6d. and from 9d. to 6d., respectively. It is a temporary period, but it is one which, I frankly admit, has caused my colleagues and myself a great deal of anxiety in connection with these present proposals. Before I sit down I shall hope to provide the employer, with certain resources which will enable him to meet, and to more than meet, this extra burden, which will be a proper counterpoise in direct taxation to the immense remissions of indirect taxation which the right hon. Gentleman opposite, the late Chancellor of the Exchequer, made this time last year.

What are the benefits which can be paid by contributions on this scale. If everybody in the ambit of Health Insurance had from the age of 16 years onwards contributed 4d. a week, and had had 4d. a week contributed by the employer—the women at half rates—a self-supporting scheme would now be in operation and would have afforded 10s. per week to widows, with an allowance for children and for orphans, and, secondly, l0s. a week to all insured persons and their wives from 65 years. Such a State scheme, on such a scale, would be self-supporting if everybody had contributed.from the age of 16 onwards. Such a scheme is not in existence. No one has contributed from the age of 16 onwards. Large numbers of people have never had the opportunity of contributing at all. The vast majority can never contribute on any scale sufficient to pay for benefits of this scope. The contributions of the employers and of the employed are 4d. Certain incidental savings on health and unemployment insurance will give relief to the extent of a penny each, which two pennies can be transferred to the new scheme. Such a basis could never have enabled us to overtake the immense liabilities for which no back payments have been made. Left to its own resources the scheme could not be brought into full operation for many years. A whole generation of men and women might toil their lives out before the distribution of benefits would be wide enough sensibly to raise the general level of comfort amongst the mass of the people. Here, then, is where the State—the capitalist State—with its long record of stable finance, with its carefully maintained credit, can march in to fill the immense gap. The contribution of the State will enable the whole scheme to be brought rapidly into operation, and we intend to bring it into operation in successive stages beginning from 4th January, 1926.

The present capital value of the additional liability to be undertaken by the State under the scheme—the scope of which I have yet to explain—has beet computed at nearly £750.000,000.before the Committee can be asked to bind upon themselves and upon future Parliaments this formidable load, we must look not only to the next few years, but we must let our minds roam forward into the remote periods of the future, which we shall not ourselves see, but for which we have a solemn responsibility.

Here I have to make a very unexpected and a very disagreeable digression. The liabilities of the new pension scheme—I am putting all the facts before the Committee, and before a people who have gone through the Great War, and who, in view of all these events cannot be afraid to look at the facts and realities as they are—the cost of the new pension scheme is not the only great impending charge which we have to meet. Quite apart from the new pension scheme, the actuaries who have examined the matter have discovered and predicted an enormous growth in the cost of the existing non-contributory scheme of old age pensions. This additional cost is not due to the recent improvements or relaxations made by the late Administration. It is due to the fact that we are now entering upon a period 70 years away from the very great expansions of the population which took place in Victorian times. Moreover, we are living in a period when the span of human life has been sensibly prolonged. I will give one impressive example. The Census of 1891 showed 5.600,000 persons between the ages of 40 and 60. The survivors of these persons are the old Census of 1921 showed, not 5,600,000, but 9,700,000 persons between the ages of 40 and 60. These persons—that is the survivors of them—will be the old age pensioners of 20, 30 and 40 years hence. This tendency to a larger proportion of old people is steadily increasing. The actuaries assure me that the existing cost of old age pensions on the present basis in 50 years' time will be more than double what it now is. At present it is £27,000,000.In 10 years it will be £36,000,000. In 20 years it will be £46,000,000. In 30 years it will be £54,000,000. In 50 years it will be £60,000,000, without any addition being made of any sort or kind by any Government. This island in 30 years will have more than double its present number of old and feeble people, and it will have to support them with an active population little larger than it is to-day—a population robbed—we must never forget—of much of its natural increase by the slaughter of the Great War. None of this was fore seen. Perhaps none of it could be foreseen at the time the non-contributory scheme of old age pensions was started in 1908. I think that the facts and figures which I have brought before the Committee are such as to raise disturbing and anxious reflections in the mind of every serious person.

I have to take these figures into account in framing the finance of the new scheme. I am bound to secure for the Parliaments of the future the opportunity of control ling the growing burdens of the State. I will not put the Parliaments of the future in the position of being fettered by quasi-contractual obligations towards contributor seven though their contributions are compulsory. I will not be responsible for financial arrangements which in 90, 30, or 40 years will lead mathematically to an overburdened Treasury, fettered Parliaments, and a de pendent people. Therefore, it is provided in the finance of our scheme that the contributions, both of employer and employed, should be raised one penny each per man, and a half-penny each per woman, after the tenth, twentieth, and thirtieth year of the scheme to a maxi mum, in 1956, of 7d. on each side. I can not think that is an unfair condition for us to impose. I cannot think that is an excessive burden for us to contemplate in relation to posterity, for, after all, It is less than we are paying now while the present high rates of unemployment contributions are in force during the deficiency period. I am not seeking to fetter Parliaments. I am only seeking to make sure that what ever Parliaments there are, whatever parties- they may be ruled by, they shall be free to keep the finance in this matter under control, with out what would otherwise look like a breach of faith to those humble people who all their lives will have been paying contributions. On this basis, however, the cost to the State of the new scheme will still be heavy. The capital value is what I have already stated, but it will be definite. It will be controllable by Parliament without any breach of faith. By the tenth year the cost to the State will be £15,000,000.By the fifteenth year it willbe£20,000,000. By the twentieth year it will be £24,000,000.Bythe thirty fifth year the burden will have declinedto£21,000,000and,thereafter we slowly pass into periods too speculative for us to follow with out the labours of the statistician But that is not all. If the Parliaments of the future adhere to the, three decennial increases suggested, and the conditions prevail which I have already explained, the whole system of old age pensions, not only the new scheme but the existing non-contributory scheme, will gradually come on to a self supporting basis. That is to say, the new entrants at 16 years of age, after the year 1956, wild with the help of the employers' contribution, pay not only for all their own benefits under the new scheme but for their own old age pensions after 70 as well. In 80 years, therefore, when the great majority of the contributors have contributedfrom16onwards,the complete scheme, the new and the existing old age pensions schemes—willbeon a wholly self supporting basis, so far as the great mass of the population is concerned The State will still be called upon to pay nearly £90,000,000 a year in perpetuity But that will not be on account of the cost of running the scheme; it will represent the interest on the cost of bringing these schemes into immediate operation without waiting for a whole generation until an adequate capital fund has been accumulated. That is the great division of burden which we make between the contributors and the State, and it is our guiding principle. According to this principle, the contributors will pay for benefits and the State will pay for making those benefits immediately avail able in our own time instead of after we have all passed from this sphere. This principle after 195(5 will apply fully not only to the new scheme, but to the existing Old Age Pensions scheme as well. I apologise to the Committee for the length of my speech. I really have tried to economise every word so as to give a fair idea of the scheme and yet not waste the time of the Committee.

Let us now see what are the charges upon the State both for the new scheme and for Old Age Pensions. At present we are paying £27,000,000 a year for Old Age Pensions. In the tenth year the new scheme will cost £15,000,000 and Old Age Pensions, £36,000,000, total, £51,000,000. In the twentieth year the new scheme will cost £24,000,000, and Old Age Pensions, £46,000,000, total, £70,000,000. In the thirty-fifth year the new scheme will cost £21,000,000 and Old Age Pensions, £56,000,000, total, £77,000,000. The next question I have to ask is, are we justified in laying these charges upon posterity? Here I would remind the Committee of the descending scale of war pensions charges, to which I designedly referred what seems a very long time ago at the begining of my remarks. We are paying £67,000,000 for war pensions this year. In 10 years they will have fallen to £43,000,000, a saving of £24,000,000 a year. In 20 years they will have fallen by £35,000,000, in 30 years by £45,000,000, and they will be virtually extinguished in 50 years. And so, when we compare the ever-rising expense of the new scheme and of old age pensions on the one hand with the ever-falling cost of war pensions, we find that the fall of war pensions in every year and at every stage largely exceeds the rise in the new pension scheme, and that at every stage it balances, or nearly 11,1ances, the cost of the new pension scheme arid the old age pension scheme taken together. At the worst, therefore, we have no need on these matters to expect greater burdens than those we are supporting at the present time. By the time that the growing relief from the decline of the war pensions has come to an end we shall have paid off our American debt, and a relief of £35,000,000 to £40,000,000 a year will inure to the benefit of our successors. Therefore, it seems to me, in nothing that we are now doing are we acting in an improper sense towards posterity. We are bearing great burdens every year, and we are putting upon them nothing of which it may be said we have in any way endeavoured to shirk our share.

I turn, now, to the first decennial period of the new pension scheme, which is, after all, the one which concerns us in the most practical manner. The new pension scheme will cost the Exchequer nothing in the first year. Surpluses will accrue in the next two years and will be carried to the credit of the scheme. It is only from the third full year that a charge begins to operate. It begins at about £4,000,000 a year and it rises in the tenth year to £15,000,000. But I feel very strongly, and it is the view of the Government, that this Parliament should not be generous at the expense of other Parliaments, that we should not have the advantage or the honour of introducing a great new scheme and departure of this kind and leave the bulk of the burden to be borne by the next Parliament, or the next after that. Therefore, we have decided to spread the payments evenly over the whole of the first decennial period, and I shall defray the charges of this scheme by 10 annual and approximately equal instalments. I will not now go into the reasons why they are not exactly equal; these will all appear in the documents which will in due course be brought to the attention of Parliament. They will be 10 approximately equal instalments of about £5,750,000 a year, beginning from the year 1926. That is the new charge, and to meet it is one of the reasons that I have fortified the revenue.

I purposely refrain from giving details of the Bill. It will be presented to the House by my right hon. Friend the Minister for Health. The Bill is ready, it will be printed, and we await only the first convenient opportunity, the first convenient break in the Budget discussions, to place it before the House. It will be sufficient to-night if I sum up the benefits in general terms, not in strict legal phraseology, for this I leave to the Bill and to. the documents to be presented.

First, the widows of all men who are insured under the new scheme and who die after 4th January, 1926, will receive 10s. a week for life, and the eldest child will receive 5s. and the other children 3s. until they reach the age of 14. Every wife of an insured man and every child, over an area of 70 per cent of the population, will have that security behind them from 4th January next.

Secondly, all existing widows of men who were insured under the National Health Insurance scheme who are now mothers of young children will be pensioned. The widows of those who have contributed have the pension for life as widows, but the widows of those who have not contributed, and in the nature of things never can contribute, are only pensioned when they are widowed mothers, that is, when they have children under 14. All existing widows of men who were within the ambit of National Health Insurance, and who are now mothers, and on behalf of whom no contribution has ever been made or ever can be made, will receive as a free gift from the State the same pension and the same allowance in respect of children as the new insured classes will get after 4th January. These pensions will begin from 4th January, 1926, and will continue not for life, but till the youngest child reaches the age of 14 and for six months thereafter. This provision affects 200,000 widowed mothers and 350,000 children as from 4th January next. Existing and future orphan children will receive allowances of 7s. 6d. a week for the eldest and 6s. for the second orphan in the family. Of such children 30,000 will be affected from 4th January.

Thirdly, from 6th January, 1928, two years later, all contributors, male and female, who have been contributors to health insurance for five years, and who will have paid under the new scheme two years' contributions—that is, less than £1 a year in the case of men, and 10s. in the case of women—who are over 65 years of age, or who subsequently reach 65, will receive 10s. a week without any means test or other disabling conditions. The same benefits will be given at 65 to the wives of contributors who have entered upon their pensions, i.e., if a man has entered upon a pension and his wife reaches 65, she will receive a pension of 10s. a week in consequence of his pensionable rights.

Fourthly, the introduction of pensions at 65 has decided us to sweep away altogether the restrictions, inquisitions and means tests upon persons now over 70 who have been insured under the Health Insurance Scheme until reaching that age. There are about 100,000 persons affected by this provision. They will receive as a free gift from the State the rights in respect of old age pensions from which they are now debarred. I am informed that there are 75,000 men over 70 qualified in every other way for old age pensions, but who, because they are earning wages, are not allowed to receive pensions. That will all be swept away. After this Act is in operation it will be nobody's business what means they have, if they are in the insurable class, and it will be nobody's business how they employ their time. 1st July, 1926, is the date appointed for this reform, but my right hon. Friend informs me that it will be only with the utmost strain of effort by his Department that all the necessary administrative work can be carried through by that time.

Great as are the demands which I am making on the patience of the Committee I cannot pass from this subject on the first occasion of presenting it to Parliament without attempting an example of the scale of pensions which this new scheme affords. Talk of 9d. for 4d.—Interruption.] —That was a boast which was fully made good. There is no need for overstatement. The facts and figures which are supplied me by the Government Actuaries' Department are frankly incredible, but I am assured they are correct. A man of 20 will obtain under this scheme for 4d a week benefits which are actuarially worth 1s. 00. a week. The same benefits would cost a man of 30, 1s.8½d., a man of 40, 2s.8½d., a man of 50, 4s. 11d., and a man of 60, 16s. 8d. Now all will receive it equally for the payment of 4d. An employed woman will pay half contributions, but in the nature of things the major part of the benefits of the scheme will accrue to women. I take as a supreme example the case of a man of 35 who dies after the 4th January next, in insurance, leaving a widow and three children all under five years of age. The benefits which this widow and children will receive, allowing for the fact that the pension ceases on remarriage, are worth in capital value £600, that is to say, as much as the maximum sum awarded under the Workmen's Compensation Act to the widow of a man who is killed in a terrible accident. Such are the miracles, I can call them nothing less, of nationwide insurance.

I have only one thing more to say on this subject, and thatisI hope the Committee understand what it is we are doing with this declining charge for war pensions. We could quite easily, and high authorities could have been marshalled behind us, have spread it over the lifetime of the pensioners and secured a substantial reduction of expenditure in the interval, which could have been devoted to the relief of the direct taxpayers who, after all, pay two-thirds of the whole cost. We have deliberately decided not to do that, but to use this diminishing charge as a great instrument and lever to bring this new scheme into existence and thus turn it to another and I think an even better purpose. If I may stray for a moment from the dusty highroad of facts and figures on which we have been marching, and have still to march and turn aside into the path of fancy, I would say that I like the association of this new scheme of widows' pensions, and pensions at 65 with the dying out of the cost of the war pensions. I like to think that the sorrow and sacrifice and the suffering have been the seed from which a strong tree will grow, under which perhaps many generations of British people may find shelter against some of the storms of life. It is by far the finest war memorial you can set up to those who gave their lives, their limbs, their blood, and who lost their health or dear ones in their country's cause.