Clause 2.—(HIGHER RATES, ETC., OF CON TRIBUTIONS AND BENEFIT UNDER NATIONAL INSURANCE ACT, 1946, AND ADDITIONAL CONTRIBUTIONS FROM EXCHEQUER.)

HC Deb 13 December 1954 vol 535 cc1425-77

Mr. Douglas Jay (Battersea, North)

I beg to move, in page 2, line 3, to leave out from "to" to the first the "in" line 4.

The Deputy-Chairman (Sir Rhys Hopkin Morris)

I think it would be convenient if, together with this Amendment, we considered the Amendment in page 2, line 6, after "in" insert "Part V of".

Mr. J. Griffiths

I agree.

Mr. Jay

In considering the previous Amendment we discussed a rise of 1d. in the contribution. In these Amendments we are proposing to delete the whole of the remaining increase in the contribution. We are discussing the sum of 11d. for employee contributors and the corresponding contribution from the employers. We are not proposing that these contributions should be wiped out, and the resulting deficit left to fall upon the Fund. Our intention is that the money lost from employees and employers should be made up by the Exchequer.

It is worth remarking that the Amendment, which is the main one affecting contributions, deals with an amount of about £80 million or £90 million a year. That is comparable to a major increase in taxation. Our proposals for compensating the Fund for the loss of this contribution are, as we explained on Second Reading, twofold. The first is that the Exchequer proportion of one-fifth should be restored, and, as we have another Amendment on that subject later on, I shall not say anything further about it now.

The second is that we propose that the Minister should abandon the suggestion of putting an extra 6d. on the employees' contribution over and above the actuarial figure. Taking these two changes together, the loss of 6d.—and there is no dispute about the figure—and the alteration of the proportion, they just about wipe out the 11d. which is the issue of these Amendments.

There are two points at which we have to look. First, the ability of the ordinary employee to pay this extra 11d., and, second, the justification for the action of the Minister in going beyond the figure which is actuarially necessary. It seems to us that 6s. 9d. is really an excessive figure for a wage earner to pay every week in relation to present level of wages.

It may be that as applied to average earnings, it is not so oppressive, but, as the hon. Member for Reigate (Mr. Vaughan-Morgan) quite rightly said on Second Reading, we are bound to look at the cases in which the level of wages is much lower than the average. I have in my constituency a number of railwaymen, some of whom are earning not more than £6 9s. a week. I think that if any of us in this House were asked to pay a contribution which bore the same proportion to our income as this 6s. 9d. does to £6 9s. a week, we should resent it as unquestionably excessive.

It is also said that the proportion which the contribution bears to average earnings is no higher than it was in 1946, but, of course, taxation has been reduced since 1946. The higher incomes are paying a lower proportion of the total amount of tax than they did at that time, and I do not accept the doctrine that these contributions should necessarily bear the same relation to earnings as they did eight years ago. I should be prepared to face some increase in contributions at this time if it were actuarily justified and really necessary to provide the benefits, but, on analysis, it is perfectly clear that that is not so.

The Minister of Health, during the Second Reading debate last week, produced yet another and wholly new explanation why the Government waited nine months before introducing these in- creases. He said they were not waiting for the Phillips Report, as we had previously been told, but for the Report of the Actuary. But when his right hon. Friend the Minister of Defence went to the West Derby by-election in November, he said that the country would be satisfied with the proposals when they got them.

He was referring to benefits which he knew already, and not to contributions, for which he had to wait for the Actuary's Report. This interesting disclosure of the Minister of Defence meant that he thought that the people would be satisfied with the benefits, but he did not know whether they would be satisfied with the contributions. I do not think that any of the electors of West Derby—

Mr. J. Griffiths

Will my right hon. Friend allow me? On 11th November, the Minister of Defence knew what the benefits would be. but did not know what the contributions would be. The benefits were fixed before the Actuary's Report was received.

Mr. Jay

That is perfectly clear. The benefits had been settled without relation to the contributions or to the quinquennial review. We are also expected to believe that, though the Minister had no knowledge what the contribution was going to be on 11th November, nevertheless, between the arrival of the Actuary's Report on 15th November, and 1st December, the whole of this complicated scheme was worked out. And now we have this final version of the story.

I should like to ask the Minister of Health, if that is the whole explanation of this course of events, why has he not based the contribution on the Actuary's Report at all, because, in point of fact, the contribution is far from being based on the principles of the Actuary's Report? It is not based on that at all—it has nothing whatever to do with it. What does the Report show?

It shows that, owing to a more favourable experience than the Actuary had expected, the contribution was already too high. So far from it being too low on actuarial principles, it was already too high, as the Minister of Health may see if he looks at Table 7 or paragraph 52 of the Report, which show that the employers' and employees' contributions together stood at 10.8d. above the actu- arial figure. That was before the benefits were increased. Is it not perfectly clear that there was nothing in the Actuary's Report of 15th November to justify any increase in contribution or to justify this ls. at all? If there is, perhaps the Minister of Health will tell us what it is.

Even after the calculation of the new increased benefits, the contribution is raised to a long way above the actuarial figure that would justify it. If hon. Members will look at page 5 of the Actuary's Report on the financial provisions of the Bill, they will see that the excess of 10.8d. in the total contributions over the actuarial figure has gone up to 17.8d., and that, of course, includes the 6d. which we are now discussing.

We now come to the conclusion of the story. Having waited all these months, as we were told, for the Report of the Government Actuary in order to decide the contributions, the Government finally ignored the Report altogether and decided the contributions on some totally different principles, of which we have not yet been informed. Therefore, I should like to ask the Minister of Health, when he replies, either to repudiate the story he told us last week about the importance of the Actuary's Report in relation to the contributions, or else, as we would much prefer, to accept his own logic and agree to this Amendment today.

The fact is that this extra 6d. which is loaded on to the employees' contribution over and above the actuarial figure, and over and above the 2d. in 1946, is really not insurance at all, but an additional tax. We can argue about the insurance principle, and varying views about it have been expressed, but if we are to stick to the insurance principle, we ought to stick to the actuarial figures which the Government Actuary put forward. If we go beyond that, we are really doing nothing else but imposing a tax on the contributors in order to pay, not for their own benefits, but for those of other people at a later date.

Mr. J. N. Browne (Glasgow, Govan)

I am trying to follow the right hon. Gentleman's argument, but I should like to ask him if it has not always been so, ever since the scheme started?

Mr. Jay

Only to the extent of the 2d. which came into force in 1951, and, of course, to add further to that is to introduce a wholly new principle of taxation into the scheme. In our view, it is not justified. If we are going to finance these benefits, not by insurance, but by taxation, then it seems perfectly clear that that taxation ought to be progressive, and not at a flat rate. Whatever we may think about the rest of the calculation, this 6d. is really in the nature of a poll tax.

5.30 p.m.

According to his Second Reading speech, the Minister of Health believes in the contributory principle. He said that people liked to feel that they had earned their benefit and that they took a pride in paying their contributions, and so forth. Does not the right hon. Gentleman think that it was perhaps a little unwise of him to introduce his rather curious argument about the age of 23, because it seemed to me to cast ridicule on the insurance element of the scheme or, at any rate, to undermine to some extent the confidence which people might have in it?

If we depart to this extent from the actuarial calculation in deciding the contribution which an employee has to pay, are we not bringing the insurance principle into disrepute? The employee is now to he asked to pay 8d. out of the 6s. 9d. over and above the figure which scientific calculations justify. Therefore, no good arguments can be put up for the increase.

I think that the Government have treated us in a most extraordinary way by basing the whole reason for their delay on the fact that they were waiting for this Report, and by then, in effect, treating the Report with very little respect, and, in fact, departing from it. I do not think it justifiable to finance the improved benefits by what amounts to a poll tax which departs both from the insurance principle, on the one hand, and from progressive taxation on the other. I hope, therefore, that the Committee will accept the Amendment.

Mr. Ralph Morley (Southampton, Itchen)

I hope that the Minister will accept this Amendment, because, by so doing, he will not only please a large number of people, but will also give some electoral advantage to the party which he represents. The proposed contributions represent a very heavy burden on people who only receive a low income.

Many millions of people in the country are only in receipt of £5 or £6 a week. A considerable proportion of them are single women, not all of whom are living at home and are paying to their parents less for board and lodgings than they would have to pay if they lived away from home, thereby getting their parents to subsidise the low wages paid by their employers. Many single women live in lodgings, for which they have to pay the current rate.

A single woman earning £5 a week not only has to pay a weekly contribution towards National Insurance, but is also assessable for Income Tax. Taking the 5s. 6d. a week contribution towards National Insurance, together with about £10 a year which a single woman has to pay in Income Tax, it means that her wage of £5 a week is reduced by at least 10s., leaving her with £4 10s. After paying for her board and lodgings and for her cosmetics and toilet necessities, she will probably be left with £1 10s. for such items as bus fares, amusement, cigarettes, and other amenities of life.

A contribution of 5s. 6d. a week is a very heavy burden to impose on a single woman who is only earning £5 a week. But perhaps the proposed contribution will weigh even more heavily on a married man, earning £6 a week, who has a wife and a child to keep, and who, because he has only one child, does not draw any family allowance. Out of his £6 a week, he will have to pay 6s. 9d. in contributions, leaving him with £5 13s.3d. on which to keep himself, a wife and a child, with the further prospect that in the coming months he may have to pay 4s., 5s. or even 6s. a week more for the rent of the house in which he lives.

The present rate of contributions is a serious burden on people in the lower income ranges. Is this to continue in the future? Are the contributions to be progressively increased as pensions are increased, because it may well be that the cost of living will go on rising? In fact, it is almost certain that if in the future we continue to have a Government like the present Government, who do not believe in price control, orderly marketing, or in all the other devices by which prices can be kept at a reasonable level, the cost of living will continue to rise.

That means that, in two or three years' time, we shall have another demand from the old-age pensioners for a further increase in their pensions in order to meet the increased cost of living. Are those increased pensions to be met by still further contributions, thus placing a still heavier burden upon the lowest-paid people?

It is pretty obvious that we cannot meet the cost of old-age pensions solely on the insurance principle, solely by contributions. The man who entered the pensions scheme when it first became contributory in 1925, and who is now drawing his pension, has not since 1925 paid by way of contributions a tithe of the cost of that pension. The same applies to his employer's contribution.

It seems to me that we cannot possibly finance these pensions unless a very substantial sum is added to the contributions by the Treasury from taxation. I do not wish to indulge in a lot of statistics, because we had a spate of them during the Second Reading of the Bill. I remember the old saying that there are three kinds of liars—liars, damned liars, and statisticians.

It was proved in the Second Reading debate that 90 per cent, of the cost of the increased benefits will come out of the contributions. There is a weekly journal which, I know, inspires and instructs hon. Members on the Government side of the Committee. I sometimes hear them quoting a week afterwards what has been said in that journal on the Friday before. The journal to which I refer is the "Economist." The "Economist" said, in its last issue, that if the Exchequer contribution had been increased from one-seventh to one-fifth it would only have been necessary to increase the contribution of employee and employer by 4d. per week each, in order to make the scheme actuarially sound. My chief point is that the cost of the increase in the pension has been thrown upon the unfortunate contributors.

It may be argued that if we increase the Exchequer contribution, and continue to increase it as it becomes necessary in future years to raise the pensions on account of the continually increasing cost of living, we shall throw a heavy burden upon the Exchequer, and will give rise to a level of taxation so high that it will be a crushing burden upon industry in general. We are told that, on the most conservative estimate, our rate of production will increase by 1½ per cent. per year. This year it has been increased by more than 1½ per cent. I believe that some hon. Gentlemen on the Government side claim that it has increased by 6 per cent.

The contributors, who are chiefly the working people to whom this increased production is due, are entitled to some part of the benefit of their efforts, and they might be allowed to get it by our not increasing the contributions in the pensions scheme. It is generally estimated that there will be an increase of production of 1½ per cent. year by year. That is the very lowest estimated figure, and means that in 25 years' time, by 1979, when, I understand, the cost of pensions will reach its peak, the national income will be £6,000 million a year more than it is today. Instead of having a national income of £14,000 million, we shall then have an income of £20,000 million a year. Surely that income will be able to bear some additional contribution from the Treasury without increasing the level of taxation. A much higher production will give a greater yield of taxation, and will enable a much greater contribution to be paid from the Treasury.

My right hon. Friend the Member for Ebbw Vale (Mr. Bevan) made a speech during the Second Reading debate marked by his usual consummate mastery of the English language. It is rather humiliating to think that the greatest master of spoken English today is a Welshman. We can take some consolation from the fact that my right hon. Friend does not speak Welsh, and that English is his mother tongue. My right hon. Friend, in his eloquent and cogent speech, seemed to be advocating that the whole cost of old-age pensions should be thrown upon taxation and that there should be a special social security tax, graded to produce different yields according to the size of the income which was being taxed.

I know that the Socialist solution of this difficulty would be a tax of about 2½ per cent. upon all incomes, but it would raise very serious practical difficulties if we attempted to put it into operation. If we had a 2½ per cent. social security tax on a man with £6 a week and on a worker with £15 a week, the latter would say, "I want a higher pension because my 2½ per cent. is a good deal more than that of the man with £6 a week." We have to bear in mind also, that a large number of people are contributing to occupational pensions. If there were a social security tax on top of that, those people would demand two pensions. not only their occupational pension but the State pension in addition.

Mr. S. Silverman

Do they not get it now?

5.45 p.m.

Mr. Morley

New entrants will not be able to draw two pensions. [An HON. MEMBER: "Yes."] Oh, no. For example, in the teaching profession a new entrant will not be allowed to draw his occupational pension and the State pension. [HON. MEMBERS: "Why not?"] Because that is the arrangement made with my right hon. Friend the Member for Llanelly (Mr. G. Griffiths), when he was Minister of National Insurance. The arrangement was that new entrants would pay a little less. This point may be irrelevant to my argument, but as my hon. Friend the Member for Nelson and Colne (Mr. S. Silverman) interrupted me I am trying to enlighten him.

The Deputy-Chairman (Sir Rhys Hopkin Morris)

The hon. Gentleman himself said that the point was irrelevant to his argument; it is also irrelevant to the Amendment.

Mr. Morley

Quite right.

Mr. S. Silverman

On a point of order. Is this matter really out of order? My hon. Friend was arguing that if we had a non-contributory scheme—and part of the argument against this extra contribution is against contributions at all—it would result in unequal pensions instead of in a flat rate of pension. My right hon. Friend the Member for Ebbw Vale (Mr. Bevan) argued much the same thing, and it has been argued repeatedly throughout. It should be very difficult at this stage to say that the argument is not relevant.

The Deputy-Chairman

I did not say that that argument was not relevant. I referred to the argument about teachers' pensions.

Mr. Morley

You are absolutely correct, Sir Rhys. I only wanted to point out to my hon. Friend that a number of people will not be able in future to draw double pensions.

Mr. J. Griffiths

My hon. Friend the Member for Southampton, lichen (Mr. Morley) referred to some negotiations and discussions. You have ruled the point out of order, Sir Rhys, and I do not wish to pursue it, except to say that teachers have the same conditions as everybody else. I hardly recall any discussions with teachers or with anybody. If they had discussions it was not with me but with somebody else, who was responsible for the other pension.

Mr. Morley

The discussions did take place. I took part in them. Before the discussions I remember interviewing my right hon. Friend to ascertain his point of view.

I do not want to labour the point. A number of people will not be allowed to draw two pensions. If there were a social security tax, they would argue that they should have both. I did not say that my right hon. Friend the Member for Ebbw Vale said that people who paid a social security tax on a large income would have the right to a larger pension, but that they would claim and agitate for it.

I draw this somewhat disconnected discourse to a conclusion. Surely the best way of financing old-age pensions is to have a moderate contribution from the employee, and for the rest of the money necessary to finance the pensions to be met by a more generous contribution from the Exchequer. In this Bill the contribution from the Exchequer is by no means generous enough. Contributions from the employees are unreasonably large, and larger than they need be to make the scheme actuarially sound. For that reason, I hope that the Minister will consider this Amendment favourably.

Miss Ward

For a considerable time have taken a very great interest in the lower income groups. I was, therefore, very grateful to my right hon. Friend when, in his Second Reading speech last Wednesday, he said that the National Insurance Advisory Committee was reviewing the contribution liability of the smaller income groups. When he replies to the case for this Amendment, I hope that he will give us a great deal more information on the kind of proposals now under examination.

What I particularly want to know is whether the fact that the increased contributions are not to come into operation until next June is because, if the Advisory Committee makes certain recommendations, the Minister is then to review the liability of those income groups to pay the additional contributions at present standing in the Bill. Although my right hon. Friend dismissed this whole matter in a single sentence, I believe it to be one of the most important aspects of contribution liability. I am, therefore, anxiously seeking for a very great deal more information.

It would not be in order for me to go into the whole argument whether this should be a contributory pensions scheme or merely a State scheme. I myself am in favour of a contributory scheme, and I am grateful to my right hon. Friend for protecting the pension rights of those who will be due for their pensions in the years to come. We should fall far short of our duty if we did not think of the pensioners of the future.

I wish to make this point about the lower income groups and their liability. I noticed that several hon. Gentlemen opposite—I think it was mentioned from the Opposition Front Bench—started to raise the question of Income Tax reliefs for insurance contributions. They did not, of course, pursue that very far. They were the people who made those arrangements. There were one or two of them, however, who jumped up to say that it was just like the Conservative Party. I repeat, it was the Opposition which gave Income Tax reliefs in respect of Insurance contributions.

Mr. William Keenan (Liverpool, Kirkdale)

What is wrong with it?

Miss Ward

The effect is that those liable to Income Tax relief in respect of contributions are getting their social insurance benefits at less cost than those who are not liable to tax. That concerns me very greatly indeed.

I know that the general argument is that when benefits are subsequently drawn they are then taxable, and that what one loses on the swings one gains on the roundabouts. In fact, that is not true. Particularly in relation to old-age pensions, no one can say whether it is those who have had that Inland Revenue relief who will be taxable when they retire at 60 or 65 years of age. In my view, people who pay Income Tax are getting their insurance benefits more cheaply than are the lower income groups who do not pay Income Tax. Is my right hon. Friend intending to seek the advice of the Advisory Committee so that this matter can be readjusted?

Following the hon. Gentleman the Member for Southampton, Itchen (Mr. Morley), with whose views I was in some agreement, I shall instance a specific case. In my constituency there is a woman who is now, I think, 51 years of age. She had a very good and responsible job as manageress of a shop. When her mother, unfortunately, had a severe mental breakdown, this woman considered it her duty to give up her job and look after her mother, rather than have her sent to a mental institution. As she had had a good job and had a great sense of responsibility, she had saved, in the course of her employment, about £1,000. As a result of that, when she went home she could not draw National Assistance benefit but had to live on her savings.

6.0 p.m.

She had, of course, in the ordinary insurance process, been an insured person for a considerable number of years. As she wishes to maintain her position in insurance so that she can be eligible for pension on reaching the age of 60, she continues to pay her stamp liability out of her savings. Of course. she is not in a position to pay Income Tax. Far from it. So, in due time, when that very responsible woman, with a great sense of family responsibility, draws her National Insurance old-age pension at the age of 60 she will have paid more for it and out of her savings than other people will have paid who are paying Income Tax and get Inland Revenue relief year by year in respect of contributions.

Mr. Spencer Summers (Aylesbury)

Has my hon. Friend taken into account that the pension which this woman will get when she is 60 will be about seven times the pension which her contributions would justify?

Miss Ward

Before one can come to a decision on a question like that one must work out the full liability, the full payments and the final results.

I realise that we cannot differentiate between incomes over a wide field, but in the different insurance groups we have to take into account the time at which the contributions started, the amounts of Inland Revenue allowances received, and the final pensions payable, and what I am saying is that it would be much fairer to have a flat rate contribution with no reliefs. I understand that that is impracticable, to vary contributions by incomes, a very difficult thing to do, outside the three-group framework already in existence. I think it is most unfair that people should have Income Tax relief and get their National Insurance benefits—I repeat—at an annual cost to the Treasury of £34 million, which is a considerable sum, while people in the lower income groups who do not pay Income Tax have to pay the full contributions for the benefits which they receive.

Mr. Jay

If the hon. Lady would withdraw tax relief for National Insurance contributions, would she withdraw it for life insurance premiums, also?

Miss Ward

I am delighted that the right hon. Gentleman has put that question to me, for several times I have asked in the House for the setting up of a committee to examine the whole of this problem of providing for old age—

The Deputy-Chairman

I have listened to the hon. Lady with considerable interest, but she seems now to have raised a matter totally different from that in the Amendment.

Miss Ward

The hon. Gentleman opposite was talking about lower income groups, and he was allowed to go a very long way, if I may say so with great respect, Sir Rhys, and when the right hon. Gentleman the Member for Battersea, North (Mr. Jay) puts that question to me, although I do not want to develop the answer at length, because I realise that that would be out of order, I think I am entitled to give him an answer; otherwise, he will say that I funked it. [HON. MEMBERS: "Not the hon. Lady."] Hon. and right hon. Gentlemen opposite, and, indeed, my own party, may not always agree with me, but I am always ready to stand up to any knocking about I may have to put up with.

The Deputy-Chairman

I am quite sure of that, but I am not concerned with that, but only that the hon. Lady's argument should be in order.

Miss Ward

My main point is whether there should be a variation in the rate of contributions for the lower income groups. I had a Question down to my right hon. Friend today for Written Answer, and I want to tell the Committee the answer I have had, because it is germane to this argument. The Question I asked was: To what extent the proposed increased contributions from employees, self-employed, and non-employed could be reduced if £34 million being tax relief in respect of contributions was transferred from the Treasury to the National Insurance Fund and applied in reduction of contributions equally over all groups. That would give help to each group. The answer of my right hon. Friend was: If an extra £34 million a year were made available by the Exchequer for the Fund it would be possible to reduce the total contribution payable for each class of insured person by about 8d. I am suggesting that if the arrangements made by right hon. Gentlemen opposite when they introduced the National Insurance Act, which gave a great advantage to the higher income groups were to be readjusted on the advice of the Advisory Committee, and we got back to some equitable contributions in respect of the three income groups, we could then have a reduction in the increased contribution liability at any rate for the self-employed and the non-employed. Indeed, I think it would be only fair to include the other group as well, because there are many low-wage earners in the other group. they could have their increased contribution liability reduced by 8d. and we should then each be paying 4d.

I take it very badly indeed that there is this differentiation and I hope that when my right hon. Friend replies to the debate he will bear in mind that tremendous efforts are made by very many people to try to keep themselves within the scope of the National Insurance Fund and that many of them are paying stamp contributions when they would be able to claim exemption on the ground of low income. I think it is tremendously important. I regret that we have not examined this matter properly before. We ought to know exactly where we stand so that we may not overstrain the people in the lower income groups while taking for ourselves in the highest income groups a favourable position.

I was very glad that my right hon. Friend, on Second Reading, mentioned that he was to have advice from the Advisory Committee. I look forward with considerable interest to knowing what proposals are in his mind, and when he will take action when he receives advice from that very interesting Committee. I should also like him to say when he expects that it will report.

Dr. Horace King (Southampton, Test)

I am in agreement with much of what the hon. Lady the Member for Tyne-mouth (Miss Ward) has said—indeed, with most of what she said that was in order. I am only sorry that she should have marred her speech by a party thrust when she charged the Opposition with having been responsible for one of the blemishes in National Insurance as it now is—the fact that the rich man gets tax exemption on his National Insurance contributions.

Miss Ward

Not necessarily rich, but in the higher income groups.

Dr. King

If the Opposition are responsible for blemishes in the 1946 Act they are also responsible for the 1946 Act itself which, with all its magnificence, has become part of the pattern of the British way of life.

Both sides of the Committee want the Bill, and both sides want it quickly, but our speed must not allow the Government to imagine that they can get the Bill exactly as it stands in every detail. They really ought not to resist every Amendment. I plead with the Government earnestly to consider this Amendment, which contains one of the central arguments in the opposition to the Measure. I ask them, also, to consider certain other Amendments which we shall move, and to concede something to the Opposition, who are endeavouring to play an honourable part by needs of the pensioners on the one hand and by the Government's desire for speedy passing of the Bill on the other.

I want to deal briefly with one simple point—the fact that the heavy charges which are being imposed by the Bill on the contributors is being justified by saying that we must maintain the insurance principle. That principle, roughly, means that workers should be able to identify payments which they make with the benefits which they receive and that if we do that they will have the advantage of regarding their benefits as something given as of right. But, with all respect to Lord Beveridge, the insurance principle has long been whittled away. Before this new Bill was introduced, workers' contributions by no means paid directly for the benefits which they received. They were subvented by employers' and State contributions.

Therefore, the battle at the moment is joined not because the Government's proposition is standing firm by the principle of insurance and the Opposition's Amendment is destroying that principle. All that we have to decide, both in the Amendment and the Government's proposal, is what balance we shall strike between the insurance principle on the one hand and the State subventions on the other.

I believe that as years go on people are becoming more and more anxious about the case against direct contributions, against what has been called a poll tax. To say that "a bob a nob" is rough justice is not true. It has been said already in the debate that it is not even a "bob a nob," that the better off one is the less one is likely to pay, because of the tax relief that one receives. I have the worst case in mind—the simple fact that two kinds of people will pay the same amount in theory. The widow on the 10s. pension will have her contribution increased by the amount stated in the Bill and the millionaire will have his contributions increased by the same amount, and the only one for whom the Government will temper the new burden is the millionaire, because he receives tax relief on his increased contribution.

I regard this proposal, therefore, as a charge on the poorest people and as a heavy burden upon those whom we should have most in mind. The only difference between the part of the increased pension which has to be found by the worker's contribution and the part that has to be found by the British people generally is that the State part is graduated according to income. The Amendment does not abandon the insurance principle, but demands that the new charge carry a lower burden in direct contribution by the worker and a greater burden by the Welfare State.

This is not a question of charity. We do not regard the Welfare State contribution, National Assistance, or subvention by the State as an act of charity. We believe that we as a community should contribute each according to his ability to pay and that that should be distributed to each according to his need. We believe that the Amendment is much nearer that principle than the Government's proposal. Therefore, I urge the Government to accept the Amendment.

6.15 p.m.

Mr. Gower

I respectfully submit that, as it stands, the Amendment could not well be accepted by the Minister and by the Government. At present, the Exchequer is already accepting liability for the next five years well in excess of £300 million. Acceptance of the Amendment would throw another £77 million immediately on the Exchequer in the first year.

The hon. Member for Southampton, Itchen (Mr. Morley), with some of whose remarks many of us on this side of the Committee would agree, said that productivity would increase year by year and that that would enable us to take this Scheme in our stride. Many of us are hopeful and agree with him in his optimistic forecast of increased productivity, but our hopes of that increased productivity will bear some relation to the taxation burden which we assume. It is all very well to say, "Throw £77 million on the Exchequer in addition to £300 million and productivity will still go up by X per cent. per annum. We shall take it in our stride." That is the economics of folly which no responsible Minister could lightly undertake.

While we on this side of the Committee have great sympathy with what was said by the hon. Member for Southampton, Itchen and by my hon. Friend the Member for Tynemouth (Miss Ward) about the lower-income groups, the fact remains that that problem is now being investigated by a committee. I do not think that in a haphazard way we can lightly throw this additional burden on the Exchequer I would ask my right hon. Friend, however, to indicate more clearly the terms of reference of that committee. I wholly disagree with my hon. Friend the Member for Tynemouth in her remarks about private pension schemes. I should have thought that, as a Conservative, she would have wanted to support measures of private thrift.

Miss Ward

I did not say that I did not. Of course I support thrift. I said, in reply to a challenge from the benches opposite, that I was quite willing to have a committee examine the whole of the arrangements made with regard to thrift.

The Temporary Chairman (Mr. George Thomas)

Having allowed the hon. Lady to reply, I hope that the hon. Member for Barry (Mr. Gower) will now leave that subject.

Mr. Gower

Yes, Mr. Thomas. But when my hon. Friend the Member for Tynemouth was speaking, the right hon. Member for Battersea, North (Mr. Jay) made an interjection, with which I entirely agree, that any alteration of the basis of contribution to National Insurance—which is directly revelant to the argument about small-income earners—would also have to be applied to private pension schemes. I am in favour of all measures of private thrift but I also feel that if persons receive tax allowances on private schemes of that kind it is only right that people who contribute to State insurance should have similar benefits.

In their own interest, the Opposition should reconsider their attitude to the Amendment. There may be a very strong case for close study of the financial implications of repeated increases in contributions, but it would be most irresponsible to say tonight that we should throw this burden as it is on the Exchequer without further study.

Mr. Emrys Hughes (South Ayrshire)

The hon. Member for Barry (Mr. Gower) has argued that it is impossible for the Exchequer to find another £77 million in order that so much of the burden of this Scheme shall not fall upon the contributor. What is £77 million compared with the £1,500 million which is spent every year on armaments. on so-called defence and on obsolete weapons?

I have never heard the hon. Member for Barry say during debates on the Services Estimates that it is simply impossible for the Chancellor of the Exchequer to find another £77 million, but when we want £77 million for the purpose of improving the social standards of old-age pensioners and those on the lower incomes, along comes the hon. Member who is in favour of spending £1,500 million—

Mr. Gower

I did not say anything of the kind. The hon. Member is assuming that the two subjects are compatible. He is also assuming that the £77 million is the only expenditure on this social provision.

Mr. Hughes

I am saying that the Chancellor's problem will be the same. If the hon. Member finds no difficulty about the Chancellor finding £1,500 million for one thing, I fail to see how he can raise it as an insuperable problem for the Chancellor to find this money by direct contribution from the Exchequer.

The argument on the principle of contributory or non-contributory pensions has been going on since the first insurance Bill was introduced in 1910. I recall that at that time a small minority of Labour Members led by the then Mr. Philip Snowden, who had not become Chancellor of the Exchequer, argued very powerfully in favour of a non-contributory scheme. Mr. Snowden's argument was that social welfare benefits should come out of taxation, and I cannot see why that principle cannot be applied today.

Why was the Exchequer contribution reduced from one-fifth to one-seventh in 1951? It was because the Chancellor at that time argued that armaments were more important than insurance benefits. [An HON. MEMBER: "No, the burden on the Exchequer was too great."] It comes to the same thing. So, in this Amendment, we are asking for an increased amount on the Exchequer, and it would not be an insuperable burden, as has been argued, if we put the proper priorities first.

If we put the priorities in their proper order, then we as Socialists—and we should always look at these matters as Socialists—would place the benefits of such a scheme as this before armaments, and we would be prepared to support a Treasury contribution which would make a first priority the benefits to the old-age pensioners and to the industrially injured.

Mr. Michael Stewart (Fulham, East)

The hon. Member for Barry (Mr. Gower) suggested that if we impose further burdens on the Exchequer that would prevent savings and increased productivity reaching that degree for which we hope. But he is assuming, which is often assumed without proof, that a higher rate of taxation acts as a deterrent to the increase of wealth. In fact, most of the factual evidence we have does not point in that direction at all.

In the years immediately after the war high taxation was inevitable, particularly on large incomes. But it was during those years, as was very strikingly pointed out on one occasion by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), that production increased at a rate never before known in history, and at a rate even greater than today. Further, the relief given to taxation on large incomes three years ago has not resulted in increasing the rate at which productivity is rising. Indeed, if there is any result at all it has been in the reverse direction. It cannot be taken as proof that if there is a lighter burden of taxation, the rate of increase in the national income will become greater. The factual evidence which we possess shows that the trend goes in the opposite direction.

My hon. Friend the Member for Southampton, Test (Dr. King) pointed out, quite rightly, that this Scheme is not based exclusively on the contributory principle, and, indeed, cannot be. From the very beginning of the idea of any kind of insurance scheme, it has been financed in part by contributions and in part from the Exchequer. I think it would be more accurate to say that these schemes are financed by two different kinds of contribution. One kind of contribution is that a man pays by buying a stamp which he puts on his card, and the other is the contribution that he pays in his Income Tax, if he is an Income Tax payer, or in a large number of other ways when he is touched by indirect taxation.

The whole issue is: what proportions of the total finances of the scheme ought to be borne by what I will call the stamp contribution and what proportion by the tax contribution, because we have got to contribute one way or the other if there is to be any balance at all? We need not suggest that there is something immoral about reducing the proportion that is borne by the stamp contribution, because the people who do the country's work are the people who contribute to these schemes whatever the financial arrangements are.

The question that arises on this Bill is this: is there a case for increasing the contributions, particularly when that is related to increase of benefits? There is not, I think, a case on strictly actuarial grounds. The Actuary's Memorandum shows that the increased contribution is greater than actuarially will be required. That is due, as was pointed out in a leading article in "The Times," to the fact that all the time we are having to bear in mind the strain put on the Fund by pensions to comparatively late entrants into the Scheme, or to an increase of pensions for persons who are already drawing them, and, of course, in the nature of the case could not have paid an increased rate of contribution.

It seems to me that it cannot seriously be expected that the task of seeing, that our old people are properly provided for now, and the much bigger task that will face us in the future of seeing that the higher proportion of old people with whom we shall have to deal are properly provided for, can be fulfilled on the basis of the weekly contributions of particular contributors today. That is a problem which rests on the nation as a whole, and its real solution lies, not so much in financial arrangements, but in the raising of the productive power of the country. If we are not able to do that we shall not be able to provide a proper standard of living either for the young people or for the old.

It is not purely on actuarial grounds that one can justify this actual increase of contributions. We are forced to this conclusion that the effect of this Bill is to increase the amount of contribution and the financing of the Scheme which is done by stamp contributions as against that proportion of the finances of the Scheme which is met by tax contributions. Is that, in fact, a good thing to do? I doubt whether it is. Without entering into the whole argument of whether we ought to have a contributory scheme or not—and if I did I might be ruled out of order and, in any case I would unduly prolong what I have to say to the Committee, thereby preventing other hon. Members who may hope to address the Committee from doing so—the main question is: is it a good thing at this time to increase the contribution that is paid by the stamp contributor?

I should have thought not. I should have thought that the burden of proof is always on someone who wants to do that, because the stamp contribution itself, as has been stated already, is in the nature of a poll tax whereas the tax contribution, if the Chancellor of the Exchequer does his work properly, can be made a contribution according to people's capacity.

There is generally, therefore, a strong presumption, if any changes are to be made as the years go by, to suggest that it is desirable on the whole for the stamp contribution to become a smaller proportion of the whole and for the tax contribution to become a larger one. Without arguing for a completely non-contributory scheme, I believe that most hon. Members would accept that limited proposal.

That is not what we are doing here. For that reason, I hope that the Minister will be prepared to accept this Amendment. Let me look at it in the way it was put by my right hon. Friend the Member for Fulham, West (Dr. Summerskill), that really this Bill, with its increased benefits, is to meet an emergency situation which, in the opinion of many of us. might have been met a good deal earlier.

6.30 p.m.

Now, over and above that emergency situation there are the much more fundamental questions of National Insurance, of which this question—how much ought we to pay via our stamps and how much via our taxes—is one. The Bill, which we are all determined to hurry through, and which ought to be hurried through, is not, however, one in which we ought in any way to prejudge that question. Since, in the Bill, we cannot go into the whole question of what is the right proportion between those two forms of contribution, we ought to make, since we have to make a choice of some kind, the choice which is the better one generally, to increase the tax contribution rather than the stamp contribution until we have had time to look more thoroughly at the entire question of the financing of the National Insurance Scheme.

To sum up, since this is really only an emergency Measure, we do not want to give here any final answer based on contributions as between stamps and taxes. We have to give a makeshift answer and, if we have to do that, it is much better to give one which makes the stamp contribution a lesser proportion than one which makes it a greater proportion. It is for this reason that I hope the Minister will accept the Amendment.

Mr. Summers

I want to make one or two observations on the remarks to which we have just listened. I was glad that the hon. Member for Fulham, East (Mr. M. Stewart) drew attention to the question of balance between the stamp contribution and the tax contribution, but he seemed entirely to overlook the fact that from the Report of the Actuary it is evident that the proportion borne by the tax contribution will go up severely in the years ahead, and that the stamp contribution will fall relatively. If, therefore, a small adjustment is suggested now, it will be infinitesimal compared with the major change which will come in the future.

The hon. Member for Fulham, East misunderstood my hon. Friend the Member for Barry (Mr. Gower), who spoke of the risk of overdoing the burden placed on the taxpayer. As I understood my hon. Friend, he did not allude to any link between taxation and productivity. What he alluded to was the grave risk, if taxation is excessive in the name of social insurance, of a recurrence of inflation. Ever since the war there has been considerable evidence to show that the period of highest taxation has been the time of greatest inflation. It is inflation which has done more than anything else to reduce the buying capacity of the benefits of social insurance. For that reason, my hon. Friend issued a warning against increasing beyond what is prudent that share of the burden falling upon what he called the tax contribution.

Mr. M. Stewart

What the hon. Gentleman has just said may well be what the hon. Member for Barry (Mr. Gower) would have liked to say if he had thought of it, but I submit that it is not what that hon. Gentleman said.

Mr. Summers

If the hon. Gentleman prefers to attribute to me the thoughts I have just expressed, I am ready to accept them because they are ones I have expressed already in an earlier comment on this topic.

Mr. Morley rose—

Mr. Summers

I want to be brief and it is not worth the hon. Member interrupting me here.

My only other observation is this. If I were a pensioner or, perhaps, a prospective pensioner is better—[HON. MEMBERS: "You are."] Very well then, if I were a prospective pensioner, depending only on my pension, and I were listening to this discussion of the relative merits of the burden of the tax and stamp contributions, I should be rather concerned about those who speak disparagingly of profit, because it is from profit that taxes largely come.

If the pension, on which I should be solely dependent, is to be paid almost exclusively out of taxation, and hon. Members come to my constituency and pour scorn and contempt on the increased profits made by industry, I should fear that the members of such a party would probably not in the long run allow sufficient profits to be available from which to extract taxes to pay my pension. Hon. Gentlemen opposite cannot, in one breath, ask that the resources for pensions shall increasingly be laid upon the taxpayer and, at the same time, disparage those profits from which the taxes in question are drawn.

Mr. H. Hynd (Accrington) rose—

Mr. Summers

I am about to sit down and it would be better if the hon. Gentleman would allow me to continue, so that he can have a chance of making his own speech in a moment. I felt that I should make these brief observations on the speech we have just heard, as it ought not to go unanswered.

Mr. Thomas Fraser (Hamilton)

The steel workers of this country will be interested to read the remarks of the hon. Member for Aylesbury (Mr. Summers), who has just asserted that all taxation in this country comes from profits.

Mr. Summers

I did not say that.

Mr. Fraser

Now the hon. Gentleman says he did not say that, but he will read the OFFICIAL REPORT tomorrow and he will find that he did say it

In any case, the logic of what he had to say was that the old-age pensioners look to the taxpayers of this country to yield them the pension they are drawing or will draw in the future—

Mr. Summers

"Almost exclusively" was what I said.

Mr. Fraser

Well then, almost exclusively—that the very poorest people of this country have their incomes supplemented to a figure which is paid almost exclusively by the taxpayers of this country. That is the tragedy. The benefits have been increased, but not to a subsistence level, and they are being increased by imposing a burden upon many people in this country who are scarcely able to carry it.

It goes without saying that the increase in contribution imposed upon the worker earning £5 or £6 a week is a much greater one than that borne by the worker earning £20 or £30 a week, and it is a much greater burden than would have to be borne by the taxpayer if he were to find the money that is to be provided by this increased contribution. None of these things can be refuted.

I listened to the Minister of Health the other night when he described two categories of people upon whom it might be said that this increased contribution was a burden. He spoke of the lower-income group. I think of the wage earners in Scotland who will have to pay a higher contribution, the 100,000 agricultural workers who save a wage of £5 16s. a week. We have been endeavouring to get those workers housed decently for the first time in their lives, and they are paying rents of about 17s. a week. They are to be asked now to make an insurance contribution of 6s. 9d. a week out of that £5 16s. The trouble about all this is that the old-age pensioners will very soon find that their greatest enemies are really their best friends, the people of the lowest-income groups. We must avoid that sort of thing.

I think also of a great many of the miners, who are often described as being among the higher wage earners. Miners who work at the surface or are on minimum wages in the pit take home less than £7 a week, and many of them are paying rents of 25s. for new houses in the developing areas. If they have to pay the increased contribution they will also become enemies of decent pensions for the old people. I see the hon. Member for Aylesbury shaking his head, indicating that the miners will not become enemies of pensions for the old people. Of course they will not, because they will do their utmost to ensure that there shall be decent old-age pensions; but apparently the hon. Member believes that the taxpayers would not be so willing.

Mr. Summers

I do not think that the miner will grudge the extra contribution if he knows that the bulk of it will go towards an increased pension.

Mr. Fraser

But the miner knows that the bulk of it is not needed for an increased pension. He has been told that in the Actuary's Report. That in itself will upset him, and, in any case, if he is having great difficulty in making ends meet from week to week, he will not welcome having to make an increased contribution which is not required for the increased pension which will be given.

There are other categories. I have had many representations from 10s. widows, who will get nothing under the Bill. Many are employed in the school meals service, earning £2 a week, out of which they will be asked to make an increased contribution. They are excluded from some of the benefits of the seasonal workers' Regulations, and in the summer months, when the children are on holiday, they are paid off, and then they have no unemployment benefit anti have nothing to live on but the 10s.

The Minister must appreciate that the increased contribution will be a difficult burden for millions of workers. If he insists upon retaining the provision, it will be very difficult for any of us to be convinced that this is an interim Measure or for us to convince any body of persons outside the House that that is so. If this is an interim Measure, let him give the increased benefits and take all the credit he likes for doing so, but let him do it without prejudicing next year's discussions by increasing contributions at this stage.

When we examine the structure of the Scheme next year, we shall have to consider whether there should be a poll tax or flat rate contributions, or whether there should be some form of graded contribution or social security tax. The discussions will be prejudiced if the Minister insists on increasing the contributions now to meet, not the immediate requirements of the Scheme, but the requirements at some time in the distant future.

The right hon. Gentleman must know that his hon. Friends are not unanimously in support of him. He heard the speech of his hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) the other week, and he has heard the speech of his hon. Friend the Member for Tynemouth (Miss Ward).

Miss Ward

Call me "friend"

Mr. Fraser

Do I understand that I am getting into some trouble with the hon. Member for having referred to her as my friend? I do not think I did so. If I did so, I apologise, because I am not her friend.

Miss Ward

The hon. Gentleman misunderstands me. What I said was "Call me friend.'"

6.45 p.m.

Mr. Fraser

This is not a party political point. We are discussing, not an abstract matter, but something of very great importance to millions of workers. Let the Minister have second thoughts and earn the gratitude of millions of lower-paid workers by accepting the Amendment. That is the least we expect him to do.

Listening to some of the speeches which have been made, and, in particular, to an intervention by the hon. Member for Aylesbury, I got the impression that the Committee is not sufficiently appreciative of the inadequacy of the wages of millions of workers. We tend to think that, because they can make their contribution to the country's wealth while drawing wages which are inadequate, they should, therefore, he willing to live on a hopelessly inadequate pension in their old age.

Mr. J. Enoch Powell (Wolverhampton, South-West)

With all due respect to the hon. Member for Hamilton (Mr. T. Fraser), it was the hon. Member for Fulham, East (Mr. M. Stewart) who helped the Committee most by the manner in which he formulated the question which is before us.

The hon. Member for Fulham, East said that we had to decide what was to be the balance between the two forms of taxation by which, year by year, the social security benefits are financed. His recommendation was that no change should be made at present in the balance. He has got his wish; no change is being made in the balance at present. It is true, of course, that, in so far as the contributions now proposed contain an element towards the emergent cost of retirement pensions, if it happens that the emergent cost becomes a reality, then, as a result of the present increase in contributions, there will progressively year by year be a shift as compared with the present level of contributions and benefits. But until the emergent cost emerges, the proportion between general taxation finance and stamp finance will, after the Bill is passed, be exactly the same as it was left by the Labour Party.

Mr. M. Stewart

The hon. Member is not representing me correctly. I argued that there was always a general presumption in favour of increasing the tax contribution as against the stamp contribution. My contention as applied to the Bill was that where we have to provide a makeshift answer and have not time to go into all aspects of the matter, we ought not to make one which involves an increase in contributions.

Mr. Powell

—or rather "which involves an increase in the contribution element for the financing of the security benefits." That is the logic of the hon. Gentleman's contention.

During the next two or three years there will be no emergent cost falling upon general taxation, so that no shift will, in reality, occur. Hon. Members can satisfy themselves of this if they look at the right hand column in paragraph 15 of the Actuary's Report. They will there see figures of deficit ranging from £1 million to £121 million per annum in the next four years but they will remember that those figures are based upon an assumption about future unemployment rates—to mention no other assumptions—which the Actuary had to be given but which may not, we all hope it will not, become a fact. Therefore, during the next two or three years the balance between stamp-borne finance and general tax-borne finance will remain exactly what it has been during the past two or three years.

We may test this another way. We may ask whether the proportion of the national output falling to the worker in the form of his wages which goes, through the contribution, to support the social security benefits is being increased by the Bill or not. We know that, in fact, it is not being increased. We know that the proportion which these contributions bear to the general level of earnings is less than the proportion which the contributions fixed in 1946 bore to earnings at that time. The burden of proof rests upon those who call in aid the lowest paid workers to show that the proportion for them is more unfavourable than it was in 1946, and I challenge any hon. Member to do that.

Mr. S. Silverman

Anyone listening to the hon. Member for Wolverhampton, South-West (Mr. Powell) and admiring, as I am sure we all do every time he speaks, the lucidity of his exposition and the orderliness of his thinking might be deceived into thinking that the hon. Member was in support of the Government on this Measure. But that would he to do him a great injustice. There are many of us who heard the speech he made in the old-age pensions debate which preceded the introduction of the Bill and I hope he will not think me offensive or discourteous if I say that as between the speech today and the speech on that occasion we should appeal from "Philip drunk to Philip sober."

I have an Amendment on the Order Paper to the same effect as this Amendment. I think it was defective, because had that Amendment been carried it would have cut away the increased Exchequer contribution as well as the increased contributions from other people. I think that the position would have been saved by a subsequent subsection and I thought that that risk might be taken for the sake of simplicity. But, in principle and in total effect, my right hon. Friend's Amendment has the same result without even seeming to interfere with the Exchequer contribution and is probably a better Amendment for that reason.

The simple question with which the Committee is faced is who is to bear the burden of the cost of the increased benefits which the Bill proposes? It is quite true that that simple issue has been considerably bedevilled by a variety of other issues which are no doubt related to it. Those other issues are interesting issues in themselves. I would like to take just two or three minutes, I hope no more, in referring to them.

It is a mistake to confuse what is called the insurance principle with what is called the contributory principle. The two figures are not at all the same. One could have a contributory scheme which is by no stretch of the imagination an insurance scheme. It is perfectly clear that no old-age pensions scheme either in operation in this country, or, so far as I know, in any country, has ever been an insurance scheme.

Nobody has ever attempted to finance old-age pensions by an insurance scheme. One cannot have an insurance scheme without a fund and there has never been a fund. That is the difference between this Amendment and the Amendment we discussed on Clause 1, because the Industrial Injuries Scheme is definitely an insurance scheme with an invested fund and some actuarial basis. But this is not and it is quite a mistake to try and examine either the question as a whole, or this particular Amendment, from that point of view.

Into what fantastic situations people get themselves when they try to deal with this as though it were an insurance scheme, was very well illustrated by the right hon. Gentleman the Minister of Health when he wound up the Second Reading debate on Thursday night. He had been dealing with how to make the Insurance Scheme balance, and he worked out a number of figures and a number of ages. Let me read the really remarkable discovery that he made. I quote it from col. 1235 of HANSARD: In other words—and it is a wonderful thought— It occurred to him, even in parenthesis, as he was uttering it— if we were all 23 and all stayed 23 the Scheme would be perfectly balanced forever"— I interrupted to say: And we should not need the old-age pension."—[OFFICIAL REPORT, 9th December, 1954; Vol. 535, c. 1235.] A sudden light broke over the right hon. Gentleman and I could not help thinking of Keats's sonnet about the Spanish discoverers who first found themselves gazing upon the Pacific: Look'd at each other with a wild surmise—Silent, upon a peak… Whether ebullient or not, no one will ever know.

Of course the thing is fantastic and it is well to leave out the so-called insurance argument because it only—if I may be forgiven another pun—"Macleod's the issue."

I do not know why my hon. Friend the Member for Southampton, Itchen (Mr. Morley) was so afraid of the non-contributory scheme that one could have without introducing an insurance principle. He knows very well that this party was for a long time committed to non-contributory pensions. It was not only Mr. Philip Snowden. Perhaps one might without offence remind the Committee that Philip Snowden, in the days about which my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) was talking, was in a smaller minority than my hon. Friend himself. He only had four, whereas we had six.

It was not only Philip Snowden, but the whole Labour Party for many years, right up to 1937, that was committed to the non-contributory scheme.

Mr. Peake

They have moved forward.

Mr. Silverman

I have known for a long time that the right hon. Gentleman's geographical position was different from mine so that what seems to him to be going forward seems to me to be going back and what seems to him to be going back seems to me to be going forward. That is why we sit on opposite sides of the House and there is no need to grumble about that. But it does remain a fact that we were for a long time committed to the non-contributory scheme.

People say, "Oh, if you have a noncontributory scheme, you will have to have a social security tax and that would be variable and if you have a variable contribution would you not have to have variable benefit?" But why not? Why hon. Members, who seemed to be in favour of inequality right through their life from birth to the grave, should think there was something sancrosanct about the flat rate principle when people are sick, or unemployed, or ill, I cannot understand.

7.0 p.m.

My hon. Friend the Member for Southampton, Itchen said that, after all, they may want to have two pensions, and he seemed to be very surprised at the notion. He told us—and I was sorry to hear it, but as he told us I accept it from him—that in his own profession they had agreed to a superannuation scheme, an occupational pension, budgeted and paid for according to a set insurance principle; and that they had agreed to take into account the State pension and to reduce the amount accordingly. If my hon. Friend says so, I must accept it, but I am sorry that they did so and I must point out that no one else in the country has done it. Town clerks do not do it—

Mr. Morley

We had to do it.

Mr. Silverman

If my hon. Friend says "We had to do it" I have no quarrel with him. But I would point out that no other superannuation scheme in the country accepts such a condition. Every other superannuation scheme, or at any rate most of them, do not even include a retirement condition. When the proper age comes and the contributions have been paid, and the pension has by contract become due, a man draws his pension. If he wishes to earn any amount of money in any other occupation, he can do so without his contractual rights and his superannuation scheme being affected at all. If that be good for town clerks and civil servants, I cannot see why it is not good for anyone else.

Mr. Douglas Houghton (Sowerby)

May I point out that a civil servant must retire before he can draw his pension?

Mr. Silverman

No doubt. But when he retires from the Civil Service and draws his pension he can, and often does, obtain employment elsewhere at a salary that is not inferior to his retiring salary as a civil servant, and he still continues to draw his Civil Service pension. And why not? It is money he has paid for and earned, and if he goes on contributing to the national wealth he is entitled to his wages for so doing.

However, these are all matters extraneous to the one which we are discussing. One deals with them only because virtually every other speaker in the Second Reading debate—in which I did not take part—and in Committee, has dealt with it as if it were, on the one side, a defence of this extra 11d., and, on the other side. an attack upon it—when it is completely irrelevant.

All old-age pensions are paid out of current production. There is nothing else from which they could be paid. For that reason alone the insurance argument is quite irrelevant to the discussion. If, under this Bill, old-age pensioners are to eat a little more, it can only be if other people eat a little less, and the question is, who shall make the sacrifice? That is the only question.

The Minister of Health (Mr. Iain Macleod)

Certainly not; there may be more to eat.

Mr. Silverman

The right hon. Gentleman is quite right, but I think he will agree that between now and the date upon which the Royal Assent is given to this Bill there is little to be added to the food stocks or food production of this country.

Mr. Jay

And it would happen irrespective of this Bill.

Mr. Silverman

If there is to be an improvement, it would happen irrespective of this Bill.

For the purposes of the present argument, I submit that it is fair to say that if the old-age pensioners are to consume more under the terms of this Bill, it must be only because other people consume less, and that the question we are asked to decide is, who shall make the necessary sacrifice? That is all.

Why should any sacrifice be made? What are the Government attempting to do by the increase of benefit for which they require this extra 11d. for food—or so they claim, but not correctly? They made their position perfectly clear. They said, "We are not proposing to do anything more in the Bill than raise the old-age pension to such a figure as will enable old-age pensioners to consume as much as they could have consumed in the then conditions with the 1946 pension." That is the object of the Government, and they do not claim to do anything more.

How have the facts changed since 1946 to the detriment of the old-age pensioner? They have changed to his detriment because the cost of living has risen. But there are a great many items that go to

the constitution of the index figure which have little or no relation to the consumption of old-age pensioners. Those old-age pensioners with little or no other means spend the larger part of their pension on food. They may pay rent and buy some clothes, and have an occasional luxury, if they can afford it, but the great bulk of the money goes on food.

The price of food has risen against the old-age pensioner by 20 per cent. in three years. Why? Not because the world price of food has risen; that has gone down. The reason his food is costing the pensioner more is, in the main, because that portion of the price of his food which was paid by the State in 1946 is no longer so paid.

The Chairman

The hon. Gentleman is going beyond the Amendment before the Committee.

Mr. Silverman

I hope I may be allowed to continue, Sir Charles, and then the object of my comparison will become clear. I am saying that the need to be covered by this increased contribution arises because of the rise in the cost of food. That rise has, not entirely, but very largely and almost entirely, been caused by the withdrawal of the food subsidies. In the same year that the Government saved money on the food subsidies they made Income Tax concessions. I refer to this in order to deal with the inequity of the claim that this increased cost should be born by the insurable population at large and not by the taxpayer. I am saying that the taxpayer has benefited, qua taxpayer, out of the higher cost which has made the increase in pensions necessary. That is my point, and I hope that its relevance is clear, whether or not its accuracy is accepted.

The food subsidies were withdrawn. That sent up food prices—obviously so. But money saved by the withdrawal of the food subsidies was distributed in Income Tax reliefs which went to the Surtax payer at the full standard rate and to the Income Tax payer at a lower than standard rate, but which did not benefit those large classes of people who do not, in fact, pay Income Tax at all.

Mr. J. N. Browne

What about family allowances?

Mr. Silverman

I doubt very much whether a discussion upon family allowances would be accepted by the Chair as being relevant to the present argument, but if it were I should be glad to deal with the point. If the hon. Member thinks the matter out he will see that, whatever the point he wants to make about family allowances, it has no effect upon the point which I am now advancing. There may be something to be said about it, but it has no direct bearing upon my present argument. Family allowances, obviously, have nothing to do with Income Tax. It may well be that some part of the money saved by the reduction in food subsidies went in family allowances, but it must have been a very small part of the money so saved. The bulk went in Income Tax reliefs, as the hon. Member knows perfectly well.

All I am saying is that if it is the taxpayer qua taxpayer who has benefited by the saving of money which has caused the cost of food to rise against the pensioner, it is equitable that, if we decide to restore to the pensioner—and not to the rest of the population—what he lost by the removal of the food subsidies, it is also equitable that those who received the benefit of that removal should bear the burden of this Scheme. That is the simple point which I am making, and if there is an answer to it, it will no doubt be forthcoming later in the debate.

If it is said, "Ah, but everybody pays. It is not only the worker who pays the 11d. but also the employer," my reply is that that is true in the letter but completely untrue in the spirit. Most of the people who work do not pay Income Tax; most employers do. I think it will be found that those statements are correct. Therefore, since the increased contribution, like the rest of the contribution, is an allowable deduction for Income Tax purposes, the increased contribution paid by the employer will, in any case, largely be paid by the Chancellor of the Exchequer, because it will be deducted from the employer's profits, and he will not pay Income Tax upon the whole of it. The lower his income, the greater the proportion he will pay. The higher his income, and the higher his rate of Income Tax or Surtax, the more the Chancellor of the Exchequer will pay for him.

This way of financing these increased benefits provides the clearest possible instance of the principle of hon. Members opposite that whosoever hath, to him shall be given … but whosoever hath not, from him shall be taken away even that he hath. It is wrong in itself. There is no actuarial justification for it and there is no justification in equity. It is merely another instance—as was the resistance to the last Amendment—of the fact that hon. Members opposite fight a stubborn, hard, rearguard action, every inch of the way, against every social betterment that they are compelled by public opinion to grant. What they give with the one hand they take back with the other, and they would take it back twice if they could.

Mr. Iain Macleod

We have had a very good debate upon what is perhaps the most important subject to come before us in the two days that we have allotted to this debate. I want to reply to as many points as I can, even if it makes my speech a little disjointed. The debate was opened by the right hon. Member for Battersea, North (Mr. Jay), who gave a rather colourful version of some of the things that I said in the Second Reading debate. He posed two questions which are fair, and which, indeed, are the main ones we have to face.

There is another matter for debate lying behind and fringing upon this one. That matter, which has been avoided by most people, concerns the question of the one-fifth and the one-seventh which, I understand, the Opposition wish to keep till later. The right hon. Member's two questions were, first, is it reasonable to pay this amount and, secondly, what is the justification for going beyond the actuarial figures necessary for these benefits?

7.15 p.m.

First, it is very relevant to look at what the relationship will be—assuming that the Bill becomes an Act—between contributions and average earnings in 1954 and in 1946. I appreciate the right hon. Gentleman's point but it must be of the first importance to see just where we stand. The figures which I have obtained show that in 1946 the contribution was 3.9 per cent. of average earnings, and, if the Bill becomes an Act, it will be 3.2 per cent. That seems to be a very significant point, which is a little difficult to argue against, and it takes a little gilt off the allegation that these contributions are monstrously unfair whereas, by implication, they were reasonably fair in 1946.

A point was also made with regard to those people with the lowest earnings. Statistics are also available for that group. In 1946, 4.9 per cent. of the earnings of the lowest-paid workers went in contributions, and if the Bill becomes an Act, without amendment in this respect, the percentage will be 4.2. Therefore, it is very clear that in the case of all workers, including the lowest-paid workers, the percentage of contribution to earnings is very much more favourable under the Bill than it was in 1946.

Mr. H. Hynd

What does the Minister call the lowest earnings.

Dr. King

The right hon. Gentleman's argument has been perfectly logical, but in the event of a rise in the average wage the greatest injustice of the new charges would fall upon those whose wages do not increase by the average amount or, in some cases, whose incomes do not increase at all.

Mr. Macleod

We are all familiar with the difficulties that arise when we talk in averages, but we know perfectly well that when we are arguing national matters we have to do so. There were averages in 1946, and the same problems and anomalies arose then. I am making a direct comparison, which I think is of value.

Mr. Jay

Is the right hon. Gentleman not going to deal with my point, that since our production has risen by 50 per cent. or more since 1946, when the immediate post-war difficulties were prevailing, one would have expected the lower-paid workers to have received some of the benefits, and would not, therefore, have expected the proportion to have remained so high.

Mr. Macleod

There is a substantial benefit to the lower-paid workers. The increase in production is also reflected in the substantial increase in average earnings. I concede straight away that no scientific judgment is involved in deciding upon the 6d. It is a fair point, and I want to answer it absolutely honestly. There is no scientific basis for the 6d., just as there was not for the 4d. in 1946. In both cases—and in this matter sauce must be for the goose and the gander alike—it was thought right to have an amount against the emerging weight of these claims.

It has been argued by many people—and especially by the hon. Member for Ebbw Vale (Mr. Bevan)—that our dictionary is out of date, and that we should not use the word "insurance" any longer in relation to this subject. With great respect, I think that, literally, is perfectly correct. But I think it shows something of a confusion between State insurance and personal insurance, which is a very different thing indeed. The main difference between the two is that the State compels everyone to insure, whether the individual is a "good" life or a "bad" life.

The classic example is in the field of industrial insurance, in which many millions of people in this country are paying contributions for industrial insurance, and keeping the contributions low, when it would be almost inconceivable that they could have such an industrial injury unless they impaled themselves on their fountain pens or something like that. That sort of principle runs all through State insurance, and I do not accept the view that, because there are obvious contradictions in the terms used in State insurance and personal insurance, we are necessarily wrong to go on using these words.

Surely, the main point is this. There is nothing whatever new in the idea of a margin for the emerging weight of the cost of industrial injuries and the emerging cost of retirement pensions in these schemes. There was nothing new in the 1911 Act; there was nothing new in the 1925 Act; there was nothing new in 1946 or in 1951; and there is nothing new now. So we cannot accept that, as the right hon. Gentleman says, this is a new question of principle, because that is the one thing that it cannot be. If we like, we can argue that this is unfair weighting, but we cannot argue that this is a new principle when, for more than 40 years, as far as I know, without exception, every Minister has, in greater or lesser degree, adopted that principle.

When the right hon. Member for Llanelly (Mr. J. Griffiths), in 1946, made some provision for a margin to be introduced, there was no supplement to that. There was the supplement of the one-fifth in his scheme, but there was no supplement to the supplement, and in this particular case there is a contribution—and this is a very fair point, although it only amounts to 2½d.—from the Exchequer towards the emerging cost of this scheme.

I want to make another point which is linked to what I said on Second Reading, which gave rise to a pleasantry or two about the conception of the actuarial year of age 23. I think it is of great importance and has a bearing on this matter, for this reason. If we know that it costs one-third more at 25, twice as much at 35, three times as much at 45 and seven times as much at 55, it is of great importance to realise that everybody at 23 is in fact paying less, even with an Exchequer supplement of one-fifth, than the actuarial benefits he is to receive.

I think that my hon. Friends the Members for Aylesbury (Mr. Summers) and Barry (Mr. Gower) were quite right in what they said about the cost of this Scheme. We are dealing with enormous sums, but, as I said on Second Reading, and I repeat it now, the future does not frighten me, though we must be very careful about the burdens which we are to lay upon the Exchequer and on the people of this country, and must look very carefully at the cost of this Scheme. It is not just a question of £75 million, about which the hon. Member for South Ayrshire (Mr. Emrys Hughes) was speaking, or even of £75 million a year.

The extra supplement which the Opposition are proposing would cost £184 million, and, in addition, they would put up the deficiency on the Scheme from £326 million to £588 million, or an increase of £262 million, and a net burden for the next five years of £446 million. We have a responsibility to the people of this country, when we make such a proposal, to say what we will do about it, and how we propose to carry it out. In regard to armaments, we heard a one-word answer, but I doubt if that is the whole answer.

There is one other matter which I think we ought to discuss, and I am really thinking aloud to a certain extent here. As I listened to some of the speeches, I was not sure that we were right in assuming automatically that employed persons would be so well off if we tried to raise this money entirely from taxation.

It is perfectly true on the face of it that taxation falls more heavily on the rich than on the poor, but there are a great many more people employed than there are employers, and if, in the light of this Bill, even taking into account the point about Income Tax relief which has just been made, we imagine a case in which a man has 19 employees, those 20 people would have to find roughly the same amount of money as is found from them at the moment in contributions.

I should have to hear some more convincing arguments to satisfy me that the employer will not be better off if we laid the whole of the sum for his 19 employees on the Budget. We should have to have a pretty steep method of taxation before we could make it effective in that field, if we put the whole sum on to direct taxation, and, if it was on indirect taxation, it would obviously be paid by everyone in the same way.

Mr. Mitchison

Would not the right hon. Gentleman bear in mind that no doubt the employer pays it in the first instance, but that a great deal of it is passed on in at least three ways? First, by way of Income Tax, which the right hon. Gentleman has mentioned; second, because it comes out of profits which the employer would otherwise have; and, third, in many other cases, by being put on the price of goods and thereby becoming a form of indirect taxation?

Mr. Macleod

I admit all these things. I merely say that this is a very big proposal which we all ought to look at, but I am not absolutely certain by any means that it would have the result which hon. Members opposite seem to think.

Before I come to the speech of the hon. Member for Fulham, East (Mr. M. Stewart)—and I quite agree with my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) that it brought us up very sharply against the real issue here—I should like to say a word or two in response to the speech of my hon. Friend the Member for Tynemouth (Miss Ward). On Second Reading, the Minister announced, as appears in column 963 of the OFFICIAL REPORT of 8th December, 1954, that he had referred the question of contribution arrangements for people of low income to the National Insurance Advisory Committee, and my hon. Friend the Member for Tynemouth called out "Hear, hear," which is recorded in HANSARD. She asked me to enlarge a little on that question.

I am very sorry that I cannot do so, for the obvious reason that I have no idea, nor has the Minister, what this Committee will recommend, but the matter is before it and it still has to report upon it. Although I have made inquiries, I am afraid that I cannot give a date when we may expect that report, although I am certain that there will be no undue delay.

The speech of the hon. Member for Fulham, East really brought us up against the big issue here, which, after all, is whether we are being unfair. We can argue this in all the ways we like, but I have shown, I hope with at least some conviction, that it is difficult to sustain the argument in regard to wages and say that in any way we are being unfair. I have tried to show that in this case it is impossible to sustain the argument that there is here a new principle, or that there is something particularly satanic in having a margin to meet emerging costs. There is not.

7.30 p.m.

The hon. Member for Fulham, East asked what proportion should be borne by the Exchequer and what proportion by the contributor. He was brilliantly answered on this point by my hon. Friend the Member for Wolverhampton, South-West in a speech which, if they did not hear it, I think hon. Members would like to read, because it seemed to me to meet the point at once.

There is also another way of looking at the matter. If we take into account both the rates of benefits and the rates of contributions—and quite clearly we must do that—then the percentage of value of benefit not covered either by contributions from the employee or from the employer, represented 49 in 1946 and will amount to 47 after the Bill becomes an Act. I agree that there is a difference, but it is a fairly marginal difference.

I believe that these amounts are reasonable in relation to wages and earnings, and overwhelmingly reasonable in relation to the benefits that will accrue. On the question of whether we are right to take something more than the age 16 contribution, I have no doubt at all. I am sure that we are right, just I am sure that the right hon. Member for Llanelly was right in 1946, and as all the Ministers who preceded him were right. I think it wholly right that some small measure of the burden should be borne by those who come in at the beginning of the Scheme, remembering that we can only object to it if we contemplate that benefits are not going to change for 49 years. I do not think that the Opposition have made out a ease, other than a political case, on these points, and I ask the Committee to reject the Amendment.

Mr. Jay

Is the right hon. Gentleman not going to reply to my question why, if the Government waited for the Actuary's Report in order to decide, the contribution now proposed is not based on anything in the Actuary's Report at all?

Mr. Macleod

It certainly is. The point that I was arguing was the point at which one goes beyond that. The right hon. Gentleman is quite right. We have gone beyond the contribution proposed by the Actuary to the extent of 6d. I have said quite frankly that there is no scientific basis for it, but that it is a matter of judgment, and that it was so in 1947.

Mr. J. Griffiths

The debate today illustrates the fact that the Government have compelled both the House of Commons and the nation to do two things at the same time which we ought not to be asked to do. Here is an interim Measure, and we are treating it as such. In order to get the Bill on to the Statute Book and enable the Government to keep to their timetable for the payment of benefits, we have agreed to let the Committee stage, the Report stage and Third Reading go through in two days.

We have done something quite out of the ordinary on a Measure of this kind. It will limit us severely on the ground that this is an interim Measure and that we ought to have further opportunities of considering the quinquennial review, the Phillips Report, and the other reports that will come along, before making up our minds about the future of the scheme.

The purpose of this Amendment and of others which we shall be moving later, particularly the one which has relevance to the Exchequer contribution, is that we should not disturb the financial structure laid down in 1946 until we have had a full opportunity of considering these problems. There is a large number of questions to be considered. There is the fundamental question which, as I indicated on Second Reading, I had been thinking about in 1946. It is that we ought to consider, first, whether there should be a major change in the structure of the Scheme.

Accepting that, in the end, we are going to have a contributory scheme, we ought to consider whether a flat rate contribution is the best. It is quite true that from the figures quoted by the Minister of Health, taking average earnings, the proportion of the new contribution to average earnings is slightly less than it was in 1946. It has gone down from 3.9 to 3.2 and for the lowest earnings group from 4.9 to 4.2. The Minister of Health will note, as I noted in 1946, that on a flat rate contribution the proportion of the contribution to the earnings of the lower paid man is higher than the proportion to the earnings of the higher paid man. That was so in 1946, and it is now.

There have been some very considerable changes in the wage structure and in the incidences of Income Tax to wages since 1946. As a matter of fact, in prewar days it was only a very small proportion of wage earners who paid Income Tax at all. Since the end of the war, the proportion has become very much bigger. Therefore, I put it to the Minister—and I am sure that he will be seized of the point—that these changes do not represent a full and fair picture, because the percentage taken is that of the flat rate contributions to gross earnings. As a matter of fact, a very large percentage of the higher income group will be able to offset their contributions against Income Tax, whereas the people in the lower income group will not. Therefore, the net burden carried by the lower-paid workers is now higher, at least in my view, than it was in 1946.

The T.U.C. said quite frankly in its evidence that the contributions could he raised because at the moment they represented actually a lower proportion than did the old contributions. At the same time, it said that to speak of average wages conceals wide variations. For that reason, we thought that we ought to leave the structure where it was in 1946 until we had had an opportunity of considering these problems.

One of my complaints is that all these problems should have been carefully examined by the Minister and reported upon to the House under the provisions of section 40 of the 1946 Act so that the House might come to a final conclusion about them. We ought to treat this Bill as an interim Measure and not prejudge any of these matters.

The Minister of Health admits that the proportion of the emerging costs placed on the contributor under the Bill is more than it was in 1946. Is that permanent? Is it proposed that this increased weighting—I agree with the right hon. Gentleman that there is no change in principle—as regards the emerging costs is to be placed permanently on the contributor? Supposing that in two, three or five years' time, we have to make other increases in benefits. When we make them, we shall have to handle this same problem. Is this Committee now being asked to commit itself permanently to this weighting? Perhaps the Minister will answer that question now?

Mr. Peake

Nothing that Parliament does is permanent, and particularly is that so in this Scheme, where there has in any case to be a review every five years.

Mr. Griffiths

I know that there has to be a review; but let me put the matter in a different way.

Is the Minister assuming that this weighting is to remain as it is for five years, even though during those five years there will have to be a further increase in contributions? We ought not to be asked to accept any new principle or new weighting, but in this interim Measure we are being asked to accept a new weighting which will prejudice the whole consideration of these problems in the future.

Because we think there should be no weighting of that kind, we have been discussing this Amendment, which is related to another Amendment. We say, "Keep the 1946 proportion, and put the Exchequer contribution back where it was." If that is done, the amount of contribution increase required will be only 1d. or a fraction of 1d. In those circumstances, there is no case for increasing contributions now, as we are treating this as an interim Measure.

Now I come to the important point which was put by my hon. Friend the Member for Fulham, East (Mr. M. Stewart), about the future of the Scheme. Are we to accept the present distribution of the burden among the State, the employers and the workers? That question ought to be examined, and I see no reason why we should not examine also the distribution of the burden between employer and worker. Beyond that, are we to continue the flat rate? If so, what is to be its effect? My own view now, as it was in 1946, is that the time has come when we ought to re-examine the position and consider some method of financing other than the flat-rate contribution.

Another change has been made, and I want to ask questions about it because it has come out rather inadvertently. I understand that the Government has made a change affecting only one class of insured person, in the way in which the burden is distributed between the contributor and the Exchequer. In this case, as I understand the matter, the Exchequer is to pay a bigger proportion of the contribution in regard to the self-employed person. This is a new principle. I asked the Parliamentary Secretary to tell me the cost to the State each year of increasing the State's proportion of the total contribution of the self-employed person. By increasing the Exchequer contribution we are reducing the size of the increase to be paid by the self-employed under the Bill. The Minister told me that the figure was £3½ million.

Nothing much has been said about this point. Is this a Government decision? Has it been recommended to them by any committee? In this class of self-employed person is a very wide variation, from the barrow boy to some of the very richest people in the country, who are self-employed. One question I had to decide when I was Minister of National Insurance was in which class to put Members of Parliament. They could not be in Class I, as employed contributors, because they had no contract of employment with the State. They were put into the second class of self-employed, which contains a wide variety of people, and a larger proportion of the amount required for the new benefits for them will be paid by the State. The Exchequer has been generous enough to provide extra money to reduce the size of the increase not only payable by the barrow boy but by Members of Parliament and others.

7.45 p.m.

Two new principles are, therefore, being introduced, one in regard to the new weighting, which I think is unfair, and the principle which I have just mentioned.

Does that not show that the right thing to do is that which is suggested in the Amendment, to preserve the financial structure of the 1946 Act and the way in which the burdens are distributed, until Parliament has had an opportunity of considering the whole problem of financing and distributing of the burden among the State, the workers and the employers?

We should consider the part that would be played by a contribution made from general taxation by a graduated system of taxation, and the part played by this flat-rate contribution in which the lower-paid worker bears a bigger proportion of burden than anybody else. We should retain the 1946 Act substantially as it is, and the new benefits might be met by an increase in the Exchequer rate. In that way we should not prejudice future consideration of the way to finance the Scheme, a matter which deserves fuller consideration than it has had. For all these reasons we shall, when the time comes, divide on the Amendment.

Mr. Keenan

I shall not speak for long, but I have spent three hours trying to get a word in, and have listened to quite a lot of matters. A great deal of confusion has been introduced into the debate by discussing the basis upon which the Insurance Acts rest, the contributions from workers, employers, and the State. Is that the right and proper way? It does not seem to me that we can talk about scrapping the contributory system, unless there is a safeguard. That safeguard should be that there is no means test attaching to any pension, even if the State foots the bill for the lot.

I think that the hon. Member for Tyne-mouth (Miss Ward) asked how long the Bill was likely to remain in operation, with all its faults, failings, and weaknesses. The Minister of National Insurance is responsible for this Measure, and I suggest that there will be no further Measure for the next two or three years. The apprehensions of the hon. Member for Tynemouth will certainly not be dealt with by a Government for a considerable period.

I am worried about the way in which the contributions are raised. Nearly half the 23 million workers do not pay Income Tax. About 7 million or 8 million were not assisted when a reduction was made in Income Tax some two years ago, because they did not pay Income Tax. As a consequence of that, nearly half the workers will pay the full contribution of 6s. 9d. although hon. Members here, and other people, will get a rebate when their insurance contributions are taken into consideration for Income Tax purposes. In most cases it means that those paying Income Tax will pay one-third, or two-thirds, or whatever it may be, less than is paid by the man who does not pay Income Tax at all. Something must be done about that.

It is suggested that the Exchequer pays about £70 million; that, except for the one-seventh Exchequer contribution, the contributions of employee and the employer should meet the cost of the increases. Is it not true that there is already an accumulated surplus of about £1,300 million in the National Insurance Fund? That being so, I cannot understand why not only this but the previous Government were, and are, concerned about building up the Fund? For what purpose is it being built up? Even while we talked about the ability or inability to pay, there was a surplus in the Fund of over £1,000 million. During the last few years we could, had we wished, have increased pensions by the use of that surplus.

To insist, as the Bill does, on 1s. extra from each contributor will relieve the Exchequer more than is neecssary. The Minister of Pensions and National Insurance and the Minister of Health say that the £350 million paid over five years is quite generous. It is not generous at all. At 6s. 9d. a week, the amount of the contribution is rising to a fantastic level. I am satisfied that the majority of workers, both men and women, will be concerned about it, and will resist—and justifiably—this increased payment. There is no need for the increase. Taxation is the fairer way of meeting the increased pensions.

Question put, That the words proposed to be left out stand part of the Clause:—

The Committee divided: Ayes 274, Noes 255.

Division No. 5.]	AYES	[7.54 p.m.
Aitken, W. T.	Galbraith, T. G. D. (Hillhead)	Maitland, Comdr. J. F. W. (Horncastle)
Allan, R. A. (Paddington, S.)	Gammans, L. D.	Maitland, Patrick (Lanark)
Alport, C. J. M.	Garner-Evans, E. H.	Manningham-Buller, Rt. Hn. Sir Reginald
Amery, Julian (Preston, N.)	Glover, D.	Markham, Major Sir Frank
Amory, Rt. Hon. Heathcoat (Tiverton)	Godber, J. B.	Marlowe, A. A. H.
Arbuthnot, John	Gomme-Duncan, Col. A.	Marples, A. E.
Armstrong, C. W.	Gough, C. F. H.	Marshall, Douglas (Bodmin)
Ashton, H. (Chelmsford)	Gower, H. R.	Maude, Angus
Assheton, Rt. Hon. R. (Blackburn, W.)	Graham, Sir Fergus	Maudling, R.
Astor, Hon. J. J.	Gridley, Sir Arnold	Maydon, Lt.-Comdr. S. L. C.
Baldock, Lt.-Cmdr. J. M.	Grimond, J.	Medlicott, Brig. F.
Banks, Col. C.	Grimston, Hon. John (St. Albans)	Mellor, Sir John
Barber, Anthony	Grimston, Sir Robert (Westbury)	Molson, A. H. E.
Barlow, Sir John	Hall, John (Wycombe)	Monckton, Rt. Hon. Sir Waller
Baxter, Sir Beverley	Harris, Reader (Heston)	Moore, Sir Thomas
Beach, Maj. Hicks	Harrison, Col. J. H. (Eye)	Morrison, John (Salisbury)
Bell, Philip (Bolton, E.)	Harvey, Air Cdre A. V. (Macclesfield)	Nabarro, G. D. N.
Bell, Ronald (Bucks, S.)	Harvey, Ian (Harrow, E.)	Neave, Airey
Bennett, Dr. Reginald (Gosport)	Harvie-Watt, Sir George	Nicholls, Harmar
Bennett, William (Woodside)	Hay, John	Nicolson, Nigel (Bournemouth, E.)
Bevins, J. R. (Toxteth)	Head, Rt. Hon. A. H.	Nield, Basil (Chester)
Birch, Nigel	Heald, Rt. Hon. Sir Lionel	Noble, Comdr. A. H. P.
Bishop, F. P.	Heath, Edward	Odey, G. W.
Black, C. W.	Henderson, John (Cathcart)	O'Neill, Hon. Phelim (Co. Antrim, N.)
Bossom, Sir A. C.	Higgs, J. M. C.	Ormsby-Gore, Hon. W. D.
Bowen, E. R.	Hill, Dr. Charles (Luton)	Orr, Capt. L. P. S.
Boyle, Sir Edward	Hill, Mrs. E. (Wythenshawe)	Orr-Ewing, Charles Ian (Hendon, N.)
Braine, B. R.	Hinchingbrooke, Viscount	Osborne, C.
Braithwaite, Sir Albert (Harrow, W.)	Hirst, Geoffrey	Page, R. G.
Braithwaite, Sir Gurney	Holland-Martin, C. J.	Partridge, E.
Bromley-Davenport, Lt.-Col. W. H.	Hollis, M. C.	Peake, Rt. Hon. O.
Brooke, Henry (Hampstead)	Holt, A. F.	Perkins, Sir Robert
Brooman-White, R. C.	Hope, Lord John	Pete, Brig. C. H. M.
Browne, Jack (Govan)	Hopkinson, Rt. Hon. Henry	Peyton J. W. W.
Buchan-Hepburn, Rt. Hon. P. G. T.	Howard, Gerald (Cambridgeshire)	Pilkington, Capt. R. A.
Bullard, D. G.	Howard, Hon. Greville (St. Ives)	Pitman, I. J.
Bullus, Wing Commander E. E.	Hudson, Sir Austin (Lewisham, N.)	Pitt, Miss E. M.
Burden, F. F. A.	Hudson, W. R. A. (Hull, N.)
Butcher, Sir Herbert	Hughes Hallett, Vice-Admiral J.	Powell, J. Enoch
Campbell, Sir David	Hulbert, Wing Cmdr. N. J.	Price, Henry (Lewisnam, W.)
Carr, Robert	Hurd, A. R.	Prior-Palmer, Brig. O. L.
Cary, Sir Robert	Hutchison, Sir Ian Clark (E'b'rgh, W.)	Profumo, J. D.
Channon, H.	Hutchison, James (Scotstoun)	Raikes, Sir Victor
Clarke, Col. Ralph (East Grinstead)	Hyde, Lt.-Col. H. M.	Ramsden, J. E.
Clarke, Brig. Terence (Portsmouth, W.)	Hylton-Foster, Sir H. B. H.	Rayner, Brig. R.
Clyde, Rt. Hon. J. L.	Iremonger, T. L.	Remnant, Hon. P.
Cole, Norman	Jennings, Sir Roland	Renton, D. L. M.
Colegate, W. A.	Johnson, Eric (Blackley)	Ridsdale, J. E.
Conant, Maj. Sir Roger	Johnson, Howard (Kemptown)	Roberts, Peter (Heeley)
Cooper, Son. Ldr. Albert	Jones, A. (Hall Green)	Robertson, Sir David
Craddock, Beresford (Spelthorne)	Joynson-Hicks, Hon. L. W.	Robson-Brown, W.
Crookshank, Capt. Rt. Hon. H. F. C.	Kaberry, D.	Rodgers, John (Sevenoaks)
Crosthwaite-Eyre, Col. O. E.	Kerby, Capt. H. B.	Roper, Sir Harold
Crouch, R. F.	Kerr, H. W.	Ropner, Col. Sir Leonard
Crowder, Sir John (Finchley)	Lambert, Hon. G.	Russell, R. S.
Crowder, Petre (Ruislip—Northwood)	Lambton, Viscount	Ryder, Capt. R. E. D.
Darling, Sir William (Edinburgh, S.)	Lancaster, Col. C. G.	Sandys, Rt. Hon. D.
Davidson, Viscountess	Langford-Holt, J. A.	Savory, Prof. Sir Douglas
Deedes, W. F.	Leather, E. H. C.	Schofield, Lt.-Col. W.
Digby, S. Wingfield	Legge-Bourke, Maj. E. A. H.	Scott, R. Donald
Donaldson, Cmdr. C. E. MoA.	Legh, Hon. Peter (Petersfield)	Scott-Miller, Cmdr. R.
Donner, Sir P. W.	Lennox-Boyd, Rt. Hon. A. T.	Sharples, Maj. R. C.
Doughty, C. J. A.	Llewellyn, D. T.	Shepherd, William
Drayson, G. B.	Lloyd-George, Maj. Rt. Hon. G.	Simon, J. E. S. (Middlesbrough, W.)
Drewe, Sir C.	Lloyd, Rt. Hon. Selwyn (Wirral)	Smithers, Peter (Winchester)
Dugdale, Rt. Hon. Sir T. (Richmond)	Lockwood, Lt.-Col. J. C.	Smyth, Brig. J. G. (Norwood)
Duncan, Capt. J. A. L.	Longden, Gilbert	Snadden, W. McN.
Duthie, W. S.	Low, Rt. Hon. A. R. W.	Soames, Capt. C.
Eden, J. B. (Bournemouth, West)	Lucas, Sir Jocelyn (Portsmouth, S.)	Spearman, A. C. M.
Elliot, Rt. Hon. W. E.	Lucas, P. B. (Brentford)	Spens, Rt. Hon. Sir P. (Kensington, S.)
Errington, Sir Eric	Lucas-Tooth, Sir Hugh	Stanley, Capt. Hon. Richard
Erroll, F. J.	McAdden, S. J.	Stevens, Geoffrey
Fell, A.	McCorquodale, Rt. Hon. M. S.	Steward, W. A. (Woolwich, W.)
Finlay, Graeme	Mackeson, Brig. Sir Harry	Stewart, Henderson (Fife, E.)
Fisher, Nigel	McKibbin, A. J.	Stoddart-Scott, Col. M.
Fletcher-Cooke, C.	Mackle, J. H. (Galloway)	Storey, S.
Ford, Mrs. Patricia	Maclay, Rt. Hon. John	Strauss, Henry (Norwich, S.)
Fort, R.	Maclean, Fitzroy	Summers, G. S.
Foster, John	Macleod, Rt. Hon. lain (Enfield, W.)	Sutcliffe, Sir Harold
Fraser, Hon. Hugh (Stone)	MacLeod, John (Ross and Cromarty)	Taylor, Sir Charles (Eastbourne)
Galbraith, Rt. Hon. T. D. (Pollok)	Macmillan, Rt. Hon. Harold (Bromley)	Taylor, William (Bradford, N.)

Teeling, W.	Tweedsmuir, Lady	Wellwood, W.
Thomas, Rt. Hon. J. P. L. (Hereford)	Vane, W. M. F.	Williams, Rt. Hon. Charles (Torquay)
Thomas, Leslie (Canterbury)	Vaughan-Morgan, J. K.	Williams, Paul (Sunderland, S.)
Thomas, P. J. M. (Conway)	Vosper, D. F.	Williams, R. Dudley (Exeter)
Thompson, Kenneth (Walton)	Wade, D. W.	Wills, G.
Thompson, Lt.-Cdr. R. (Croydon, W.)	Wakefield, Edward (Derbyshire, W.)	Wilson, Geoffrey (Truro)
Thorneycroft, Rt. Hn. Peter (Monmouth)	Wakefield, Sir Wavell (St. Marylebone)	Wood, Hon. R.
Thornton-Kemsley, Col. C. N.	Wall, Major Patrick	Woollam, John Victor
Tilney, John	Ward, Miss I. (Tynemouth)
Touche, Sir Gordon	Waterhouse, Capt. Rt. Hon. C.	TELLERS FOR THE AYES:
Turner, H. F. L.	Watkinson, H. A.	Mr. Oakshott and Mr. Redmayn.
Turton, R. H.	Webbe, Sir H. (London & Westminster)

NOES
Acland, Sir Richard	Fraser, Thomas (Hamilton)	Mallalieu, J. P. W. (Huddersfield, E.)
Adams, Richard	Freeman, John (Watford)	Mann, Mrs. Jean
Albu, A. H.	Freeman, Peter (Newport)	Manuel, A. C.
Allen, Arthur (Bosworth)	Gaitskell, Rt. Hon. H. T. N.	Marquand, Rt. Hon. H. A.
Allen, Scholefield (Crewe)	Gibson, C. W.	Mason, Roy
Anderson, Frank (Whitehaven)	Gooch, E. G.	Mayhew, C. P.
Awbery, S. S.	Gordon Walker, Rt. Hon. P. C.	Mellish, R. J.
Bacon, Miss Alice	Greenwood, Anthony	Mikardo, Ian
Barnes, Rt. Hon. A. J.	Grenfell, Rt. Hon. D. R.	Mitchison, G. R.
Bartley, P.	Grey, C. F.	Monslow, W.
Bellenger, Rt. Hon. F. J.	Griffiths, David (Rother Valley)	Moody, A. S.
Bence, C. R.	Griffiths, Rt. Hon. James (Llanelly)	Morgan, Dr. H. B. W.
Benn, Hon. Wedgwood	Griffiths, William (Exchange)	Morley, R.
Benson, G.	Hall, Rt. Hon. Glenvil (Colne Valley)	Morris, Percy (Swansea, W.)
Beswick, F.	Hall, John T. (Gateshead, W.)	Mort, D. L.
Bevan, Rt. Hon. A. (Ebbw Vale)	Hamilton, W. W.	Moyle, A.
Bing, G. H. C.	Hannan, W.	Mully, F. W.
Blenkinsop, A.	Hardy, E. A.	Murray, J. D.
Blyton, W. R.	Hargreaves, A.	Nally, W.
Boardman, H.	Harrison, J. (Nottingham, E.)	Neal, Harold (Bolsover)
Bottomley, Rt. Hon. A. G.	Hastings, S.	Noel-Baker, Rt. Hon. P. J.
Bowden, H. W.	Hayman, F. H.	O'Brien, T.
Braddock, Mrs. Elizabeth	Herbison, Miss M.	Oldfield, W. H.
Brockway, A. F.	Hewitson, Capt. M.
Brook, Dryden (Halifax)	Hobson, C. R.	Oliver, G. H.
Broughton, Dr. A. D. D.	Holman, P.	Orbach, M.
Brown, Rt. Hon. George (Belper)	Houghton, Douglas	Oswald, T.
Brown, Thomas (Ince)	Hoy, J. H.	Owen, W. J.
Burke, W. A.	Hubbard, T. F.	Padley, W. E.
Burton, Miss F. E.	Hudson, James (Ealing, N.)	Paget, R. T.
Butler, Herbert (Hackney S.)	Hughes, Cledwyn (Anglesey)	Paling, Rt. Hon. W. (Dearne Valley)
Callaghan, L. J.	Hughes, Emrys (S. Ayrshire)	Paling, Will T. (Dewsbury)
Carmichael, J.	Hughes, Hector (Aberdeen, N.)	Palmer, A. M. F.
Castle, Mrs. B. A.	Hynd, H. (Accrington)	Pannell, Charles
Champion, A. J.	Hynd, J. B. (Attercliffe)	Pargiter, G. A.
Chapman, W. D.	Irvine, A. J. (Edge Hill)	Parker, J.
Chetwynd, G. R.	Irving, W. J. (Wood Green)	Parkin, B. T.
Clunle, J.	Isaacs, Rt. Hon. G. A.	Paton, J.
Coldrick, W.	Jay, Rt. Hon. D. P. T.	Pearson, A.
Collick, P. H.	Jeger, George (Goole)	Peart, T. F.
Collins, V. J.	Jeger, Mrs. Lena	Plummer, Sir Leslie
Corbet, Mrs. Freda	Jenkins, R. H. (Stechford)	Popplewell, E.
Cove, W. G.	Johnson, James (Rugby)	Price, Philips (Gloucestershire, W.)
Craddock, George (Bradford. S.)	Jones, Rt. Hon. A. Creech	Probert, A. R.
Cullen, Mrs. A.	Jones, David (Hartlepool)	Proctor, W. T.
Dalnes, P.	Jones, Fredrick Elwyn (West Ham, S.)	Pryde, D. J.
Darling, George (Hillsborough)	Jones, Jack (Rotherham)	Rankin, John
Davies, Harold (Leek)	Jones, T. W. (Merioneth)	Reeves, J.
Davies, Stephen (Merthyr)	Keenan, W.	Reid, Thomas (Swindon)
de Freitas, Geoffrey	Kenyan, C.	Reid, William (Camlachie)
Deer, G.	Key, Rt.Hon. C. W.
Delargy, H. J.	King, Dr. H. M.	Rhodes, H.
Dodds, N. N.	Kinley, J.	Richards, R.
Donnelly, D. L.	Lawson, G. M.	Robens, Rt. Hon. A.
Driberg, T. E. N.	Lee, Frederick (Newton)	Roberts, Albert (Normanton)
Dugdale, Rt. Hon. John (W. Bromwich)	Lever, Harold (Cheetham)	Roberts, Goronwy (Caernarvon)
Ede, Rt. Hon. J. C.	Lewis, Arthur	Robinson, Kenneth (St. Pancras, N.)
Edelman, M.	Lindgren, G. S.	Rogers, George (Kensington, N.)
Edwards, Rt. Hon. Ness (Caerphilly)	Lipton, Lt.-Col. M.	Ross, William
Edwards, W. J. (Stepney)	Logan, D. G.	Royle, C.
Evans, Albert (Islington, S.W.)	MacColl, J. E.	Shackleton, E. A. A.
Evans, Edward (Lowestoft)	McGovern, J.	Shawcross, Rt. Hon. Sir Hartley
Evans, Stanley (Wednesbury)	Mclnnes, J.	Shinwell, Rt. Hon. E.
Fernyhough, E.	McKay, John (Wallsend)	Short, E. W.
Finch, H. J.	McLeavy, F.	Shurmer, P. L. E.
Fletcher, Eric (Islington, E.)	MacMillan, M. K. (Western Isles)	Silverman, Julius (Erdington)
Follick, M.	McNeil, Rt. Hon. H.	Silverman, Sydney (Nelson)
Foot, M. M.	MacPherson, Malcolm (Stirling)	Simmons, C. J. (Brierley Hill)
Forman, J. C.	Mallalieu, E. L. (Brigg)	Skeffington, A. M.

Slater, Mrs. H. (Stoke-on-Trent)	Thornton, E.	Wigg, George
Slater, J. (Durham, Sedgefield)	Timmons, J.	Wilcock, Group Capt. C. A. B.
Smith, Ellis (Stoke, S.)	Turner Samuels, M.	Wilkins, W. A.
Smith, Norman (Nottingham, S.)	Ungoed-Thomas, Sir Lynn	Willey, F. T.
Snow, J. W.	Usborne, H. C.	Williams, David (Neath)
Sparks, J. A.	Viant, S. P.	Williams, Rev. Llywelyn (Abertillery)
Steele, T.	Wallace, H. W.	Williams, Ronald (Wigan)
Stewart, Michael (Fulham, E.)	Warbey, W. N.	Williams, Rt. Hon. Thomas (Don V'H'y)
Strachey, Rt. Hon. J.	Watkins, T. E.	Williams, W. R. (Droylsden)
Stross, Dr. Barnett	Webb, Rt. Hon. M. (Bradford, C.)	Wilson, Rt. Hon. Harold (Huyton)
Summerskill, Rt. Hon. E.	Weitzman, D.	Winterbottom, Ian (Nottingham, C.)
Swingler, S. T.	Wells, Percy (Faversham)	Winterbottom, Richard (Brightside)
Sylvester, G. O.	Wells, William (Walsall)	Wyatt, W. L.
Taylor, Bernard (Mansfield)	West, D. G.	Yates, V. F.
Taylor, John (West Lothian)	Wheeldon, W. E.
Thomas, Iorwerth (Rhondda, W.)	White, Mrs. Eirene (E. Flint)	TELLERS FOR THE NOES:
Thomas, Ivor Owen (Wrekin)	White, Henry (Derbyshire, N.E.)	Mr. Holmes and Mr. J. T. Price.
Thomson, George (Dundee, E.)	Whiteley, Rt. Hon. W.

Clause ordered to stand part of the Bill.

Clause 3 ordered to stand part of the Bill.