§ Order for Second Reading read.
§ 3.59 p.m.
§ The Minister of Pensions and National Insurance (Mr. John Boyd-Carpenter)
I beg to move, That the Bill be now read a Second time.
This Bill, as I think the House knows, is designed to implement that part of the improvements in social benefits, which were announced in my statement of a week ago, which require legislation. In other words, it does not seek to deal with war pensions which, as hon. Members know, are dealt with by prerogative Instrument, nor with National Assistance in respect of which I have already laid regulations which will come before the House in due course on affirmative Resolution. The Bill is, therefore, confined to securing the changes in National Insurance and in Industrial Injury benefits and contributions and matters closely connected with them.
The Bill, as has already been noted, seeks to effect substantial improvements in the benefits payable under those two schemes while maintaining their main existing structure. It has been suggested in, among other places, The Times, that right hon. Gentlemen opposite will seek in the course of this debate to criticise these proposals on the grounds that instead of proceeding, as we are proposing to proceed, on the basis of effecting substantial improvements within the structure of the existing schemes, we should have approached the matter in a different way altogether and introduced a system involving graduated contributions and, perhaps, graduated benefits.
It may save a little of the time of the House if I say, at the outset, why it does not seem to us right, in this Bill, to take that course. Whatever may be the merits or demerits of such schemes as have been suggested and discussed over recent months, most of which, I think, are based on some form or other of graduation, it is clear that even when such schemes have been fully worked out and fully calculated a considerable time would elapse before they could have actual practical effect.
972 What we are seeking to do in this Bill is to deal with the present position of existing pensioners and of those shortly due to come on pension who, as I shall suggest to the House, can only be given a real improvement in their standards, as the Bill seeks to do, on the basis of the use of the existing system.
May I carry that argument further for a moment? Let us assume that the suggestion is still made that we should have proceeded by way of some graduated scheme or other. I think the House will realise that, in the first place, a change such as is involved in any of these schemes involves a profound change in the system of collection of contributions. The present stamp card system operates perfectly well in respect of flat rate contributions which are the same for broad categories of people. It certainly would not have worked for a system in which the contribution of the individual varied from week to week in accordance with his earnings, and varied, apart from those variations, through the whole spread of earnings in our society or certain levels of it today.
It is obvious that a wholly new system of collection of contributions—perhaps something on the lines of the P.A.Y.E. system, but profoundly different from that of the stamp card—would have to be evolved and put into operation; and anyone with experience of administration of these colossal schemes will know that these sort of changes which, when worked out, are perfectly feasible, are not very rapidly put into effect.
Similarly, if the new proposed alternative were a real insurance scheme—that is to say, a scheme in which additional benefits were earned by additional contributions—it is equally clear that it would be some years, at least, before appreciable improvements in benefits could be effected from the medium of such a scheme. That is why it seems to me that it is really not material or relevant to the present Measure. Ideally, it may well be possible to construct some other system, but the one thing that all such other systems have in common is that they cannot do, as this Bill can do, what I think both sides of the House desire to do, and that is to make it possible for there to be early, very early, improvement in the standards for the recipient of National Insurance and Industrial Injury benefits.
973 Before I leave this matter, there is one broader aspect of this problem which is worth the consideration of the House, and it is this. The present National Insurance scheme has been in operation for only nine years, and I think that before there could be any question of making a radical change in it, and so, of course, affecting the lives and arrangements of people who have made their plans on the basis of the existing scheme, it would be necessary to allow a substantial time to pass for discussion and with a view to obtaining, perhaps, the widest possible measure of general agreement.
It may help the House to recall how the National Insurance scheme itself came about. It did not spring, fully armed, from the head of the right hon. Member for Llanelly (Mr. J. Griffiths). It was the result of a much more prolonged period of gestation. It was, indeed, back in 1941 that Lord Beveridge and his committee were appointed and Lord Beveridge made his report in 1942. The Coalition Government's broad proposals were announced in September, 1944. The National Insurance Act passed through this House in 1946 and came into full operation in July, 1948.
Although I am not suggesting that a similar period of time, no doubt necessary under the trying conditions of that period, would be necessary if some such fundamental change were to come about again, I think that that process, with the prolonged public discussion and the genuine attempt to achieve a very high measure of general assent, are probably fairly good guides as to the attitude of mind that any of us should adopt if we were to contemplate similar radical changes in the future.
As has been said, and as is indicated in the Gracious Speech, and as was confirmed on the first day of the Session by my right hon. Friend the Prime Minister, we are continuing to study these subjects, but it seems to me that that study or, indeed, the preference of anybody for other schemes, really has no bearing on the practical problem before this House today, and that is the problem of how to make improvements in benefits for those who are at present on pension or who will shortly go on pension.
Though, for the reasons that I have given, this Bill does not change the major structure of the schemes it is none the 974 less a major Measure and one which will have a very considerable effect on the lives of our fellow citizens and upon the economy of our country. When account is taken as well of the increase in the number of pensioners which will take place next year, combined with the improvements in rates, retirement pensions will cost next year £622 million compared with £463 million in the current year, and National Insurance benefits generally will cost £897 million against £685 million.
When I made my statement a week ago, the main criticism which seemed to be made of it in its then necessarily concentrated form by the right hon. Members for Llanelly and for Middlesbrough, East (Mr. Marquand) was the odd one that it did not cost the Exchequer enough. That is a rather curious criticism, but it is one which, if the two right hon. Gentlemen are still disturbed by it, it is only too easy to allay.
The right hon. Gentlemen and the House as a whole will now have had an opportunity to study the Report by the Government Actuary which, in accordance with custom, I laid when the Bill was introduced. They will see from that Report that the capital value, on the present basis, of National Insurance benefits is the vast sum of £34,000 million, that this will be increased by the provisions of this Bill to £42,000 million, and that of that immense total under the arrangements now proposed, if they were to continue over the whole period, the capital liability falling on the taxpayer would be £17,500 million.
I hope that those figures will satisfy the appetite of even the most hungry protagonist of Government expenditure.
§ Mr. James Griffiths (Llanelly)
I hope that the right hon. Gentleman will give us certain comparative figures, quite apart from any absolute figure as to what Exchequer contributions are. This is most relevant. Will he tell us what proportion of the expenditure in this current year was contemplated in the 1946 Act as having to be met by contributions and what proportion has been paid by the Exchequer? Will he tell us what the difference is between those sums as contemplated for 1958–59 in the 1946 Act and the proportions he proposes in the new Bill?
§ Mr. Boyd-Carpenter
I will give the right hon. Gentleman, if he does not intervene, a great many facts and figures which, I think, will fully satisfy his legitimate desire for information on the subject, and will, I hope, satisfy his still unabated craving for increased Exchequer expenditure. May I deal with it as I have proposed? We are at the beginning of the debate. My hon. Friend the Joint Parliamentary Secretary, when she winds up, will be more than capable of explaining any point which I fail to cover.
Yesterday, the right hon. Gentleman the Leader of the Opposition returned to this point during the debate on the Address, and expressed very great indignation because, he said, the Treasury would make a profit out of this. I am sorry that the right hon. Gentleman is not here, because that attitude is very different from that which he adopted in 1951, when he himself was Chancellor of the Exchequer, and when, under the legislation of that year, the Exchequer was relieved of £86 million liability to the National Insurance Fund. It is a very different attitude now to complain, as he did yesterday, that the Exchequer—by which, of course, he meant the taxpayer—was making a profit out of this. Even if his indignation would come well from someone who had himself improved the position of the Exchequer at the expense of the Fund to that substantial degree, the right hon. Gentleman was not right on his facts.
The facts are that, in any event, owing largely to the increase in the number of pensioners—particularly, as the House will realise, because of the coming into payment of pensions to the late-age entrants, in the middle of next year, and a very welcome thing it is to many of them—the cost to the Exchequer of these services generally would rise by £44 million next year.
In addition, as the direct consequence of this Bill, the net result of the whole operation is to add to the expenditure on Votes a further £14 million next year—I will give the details if any hon. Gentleman wants them—and on top of that there is some additional further loss of revenue which I cannot give precisely, though I am advised that the increased revenue from the withdrawal of the tobacco concession, which will come in on the Customs side, will be more than offset 976 by the loss of Income Tax and Profits Tax on employers' National Insurance contributions at the new level and of Income Tax, though in smaller measure, on the employees' contributions.
We have, therefore, the position that, next year, as compared with this, the Exchequer liability for the services will be increased above the level of the current year by approximately £60 million. I am tempted to adopt the phraseology of my right hon. Friend the Member for Woodford (Sir W. Churchill) and say, "Some profit!" If that is the idea of profit entertained by the right hon. Gentleman the Leader of the Opposition, heaven protect the country from any further financial administration by him.
The story does not end there, of course. In the longer run, the burden will be even heavier, because, owing to the steady increase in the number of recipients of National Insurance benefits, the expenditure will go on rising, and, by the year 1964–65, the total Exchequer liability to the National Insurance Fund on the present basis will be £357 million, £45 million of which will be the direct result of the passing of the Bill.
I have said enough, I think, to indicate that, so far from the facile assumption of right hon. Gentlemen opposite being correct—some of them have had the audacity to use the word "swindle"—these Measures involve the assumption by the taxpayer of heavy and increasing liabilities. It is really not very helpful, in the course of our discussions, for any hon. Gentleman on either side of the House to suggest that the financial burden which this country has assumed, and is, by this Bill, to increase for the benefit of these older people, is a light one to bear. It is, on the contrary, a very heavy one, as the figures I have given illustrate. Though we think that it is right that the country should assume the burden, it is a profound mistake to under-rate the magnitude of the liabilities which the community as a whole, that is to say, the taxpayers, are assuming.
§ Mr. John Paton (Norwich, North)
I am grateful to the right hon. Gentleman for giving way. Is not the whole of his argument applicable not at all to this new Bill which he is now presenting, but to the whole scheme of National Insurance? These formidable increases were implicit in the old scheme from the very 977 beginning, and were understood to be there. We knew that, by 1970, the increases would be of the formidable kind that he has just mentioned. What has that to do with the present Bill?
§ Mr. Boyd-Carpenter
I am sorry if I have failed to impress upon the hon. Gentleman the point I was making, which, indeed, some, at any rate, of his right hon. Friends need to have impressed upon them, namely, that by this Measure we are adding very substantially to those pre-existing burdens which the community assumed and that it verges upon the irresponsible and frivolous to suggest that this is something out of which the Exchequer is doing well.
§ Mr. R. H. S. Crossman (Coventry, East)
I accept the right hon. Gentleman's figures, of course, but could he give us now the proportion of the increased burden borne by the Exchequer, by employers, and by employees? It would he very useful for the debate if we could have the figures broken down by percentages so that we knew how much of the increased cost went to the Exchequer, how much to the employers, and how much to the employees.
§ Mr. Boyd-Carpenter
The hon. Gentleman will be reassured at once, without figures, if I tell him that we are continuing to use the formula for Exchequer contribution which was introduced by his own right hon. Friends in 1951.
§ Mr. Boyd-Carpenter
It is the answer that the hon. Gentleman is going to get. No doubt it is an answer which he does not wish to receive.
§ Mr. Boyd-Carpenter
If the hon. Gentleman would be kind enough to listen, he might possibly apprehend that I am answering his question. At any rate, if he does not listen to it he will not be in a position to form a judgment either way.
We are using the formula for Exchequer contribution which was laid down by his right hon. Friends in 1951 but made more heavy on the Exchequer by the subsequent legislation of my right 978 hon. Friends, and applying that formula, weighted more against the Exchequer, to the higher levels of contribution which are to be imposed on employer and employee. That, rather than any calculations about percentages which vary from time to time, ought to reassure the House, if it does not reassure the hon. Gentleman the Member for Coventry, East (Mr. Crossman).
§ Mr. Boyd-Carpenter
I could hardly hope to satisfy the hon. Gentleman in his new-found interest in the subject. I hope that the House as a whole will be glad to know that, in this respect, we are adopting the same formula, so adapted, as was adopted by right hon. Gentlemen opposite in 1951. I will give the figures. They are certainly important. Indeed, part of the debate will undoubtedly turn, and rightly, on the question of the level of contributions for both employer and employee. Of course it will; that is a legitimate and proper subject for discussion.
The effect of the Bill will be to raise the total contribution income next year from employers and employed and others, to £708 million, of which the employers will find £348 million and their employees, the self-employed and the non-employed £360 million. That provides for an increase of £82 million by the employers and £85 million by the employees, self-employed and non-employed. The increased contributions and all the improvements which we are bringing forward deal not only with pensions, although emphasis has fallen on them, but also the other benefits under the scheme. Although it is right to some extent to look at that as effecting a transfer between those who are at work and those who have retired from work, that is an over-simplification, because those at work are getting an increased ultimate right to pension when they retire and immediate substantial improvements in sickness, unemployment, widows', industrial injury and other benefits as the necessity arises.
In addition, there is the important factor of the transfer of some wealth from those at work to those who—generally because of old age—are no longer at work. A very clear and apt way of 979 expressing that was adopted by Sir Alfred Roberts at the recent meeting of the T.U.C. Annual Congress. He said:We are demanding the acceptance of substantially greater obligations towards the old, and the only way in which those obligations can be met is by transferring a greater part of current consumption and productive power of the country to the old.That is certainly what the Bill sets out to do.
When I made my statement last week, the right hon. Member for Middlesbrough, East immediately raised the question of the level of contributions and, with complete accuracy, calculated—and I congratulate him on his speed in doing so—that they amounted to 7 per cent. of average industrial earnings. The House is aware that the figure for average industrial earnings relates to manufacturing industry generally and covers about hall the working population, but it is the best and widest in scope of figures for earnings as opposed to wages.
As I reminded the right hon. Gentleman then and would like again to remind the House, those figures have to be considered against the background of what has been our past practice. Let me make it clear that the 7 per cent. relates to the total contribution—the employee's plus his employer's—and that the employee's corresponding figure will be 3.8 per cent. It compares very modestly, as the House will appreciate, with the 7 per cent. a side for superannuation only which is being provided under the scheme in the Federal Republic of Western Germany, but a more important comparison is with the origin of the National Insurance Scheme itself.
When the Measure introducing that Scheme was taken through the House by the right hon. Member for Llanelly and the contributions were being fixed, the contributions embodied in that Measure amounted to 7.5 per cent. of average earnings at that time. When the Scheme had actually come into operation, in July, 1948, although owing to the rise in earnings the figure had fallen somewhat, it still amounted to 6.7 per cent. It is, clear therefore, that in its relationship to average earnings the new figure is somewhere between the figure originally contemplated when the Measure was taken through the House and the figure actually 980 operating when the Scheme came into effect two years later. As I said last week, it is therefore very closely in the line of precedent under the Scheme.
I was asked at the time—I did not then have the figure available—how the increased contributions looked in relation to agricultural earnings, since those, as the House knows, are not included in the figure for average earnings in manufacturing industry. The new contributions from both sides amount to 9.3 per cent. of average agricultural earnings compared with 9.8 per cent. in 1946 and 8.4 per cent. in 1948. It is therefore in the bracket between them. In mining, which is of interest to many hon. Members, it will be 5 per cent. compared with 6.1 per cent. in 1946 and 5.2 per cent. in 1948, so that for mining the percentage is even lower than that for 1948.
As the House knows, since 1951, wage rates and, still more, rates of earnings have risen appreciably more rapidly than the increase in retail prices; but it has not seemed to us, after very careful consideration, that these contributions are or should be excessive to any section of the community. They still amount to an absolutely first-class bargain. At the new rate of benefit, a married man aged 65 receiving a pension receives something of a capital value of £2,650. If he retires in 1968, at the absolute maximum without having received any credits at all, he will have paid £550 for something of a capital value of £2,650, and if he retires in 1978—even at as remote a time as that—he will have paid only £970 against the £2,650.
It is therefore clear that for many years to come these benefits will be a most valuable bargain for those concerned; and this provides an indication—which meets the point of the hon. Member for Coventry, East—of the extent to which the taxpayer is behind the system, thereby enabling pensions to be paid where the contributions of either side on an actuarial basis would have given a very much smaller pension.
Now I come to the topic on which there will, no doubt, be a good deal of discussion, the withdrawal of the tobacco concession, which was introduced by the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) in the Finance Act, 1947, and which was somewhat modified in the following year. 981 Clause 3 deals with this matter. I say at once that I accept the excellent intentions behind that proposal, but hon. Members who have had direct experience of it have been well satisfied that it has worked unfairly in practice and is of very doubtful merit in principle. When I was Financial Secretary to the Treasury—as the House knows, this concession is administered by Her Majesty's Customs and Excise—I was in continual correspondence with hon. Members on both sides of the House who pointed out to me the unfairness of this concession as between pensioner and pensioner.
It has been found administratively necessary, under all Governments, to tie this concession to the possession of either a retirement pension book or a book for payment of a non-contributory old-age pension. As a consequence, people who did not have such a book—for example, some retirement pensioners themselves when in hospital for long periods, war pensioners as such, war widows as such, industrial injury pensioners as such, Post Office and police pensioners—did not have the concession. There has been a good deal of very natural feeling that this is unfair as between pensioner and pensioner.
Even among those who were eligible to apply for it, as the years passed it became more and more evident that there was very little to be said for assisting the purchase of one particular amenity of life and not others, of giving help to habitual smokers and not to those who found the pleasures of life in other directions, tea, beer, or whatever it might be; so it was unfair even among those eligible for it—I appreciate that the original intention was to counterbalance the heavy increase in duty in the right hon. Gentleman's Budget, but, as the years passed, other prices adjusted themselves.
That view, as to the unfairness of the concession, is certainly not confined to this side of the House. The hon. Member for Erith and Crayford (Mr. Dodds), with his usual speed, put a Question on the Order Paper on the first day of this Session asking us what we intended to do about this matter. The hon. Member for lichen (Dr. King)—I do not know whether he is in his place or not—said last year:…if the Government choose to abolish the tobacco concession and give in lieu of it some concession in cash to all old-age pensioners, 982 I am quite sure that those who have enjoyed the tobacco concession would be delighted to think that non-smokers were also getting the benefit."—[OFFICIAL REPORT, 5th June, 1956; Vol. 553, c. 917.]Although I disagree with him on many matters, the hon. Member speaks with great sincerity and authority on that class of subject. The right hon. Member for Huyton (Mr. H. Wilson) also took the same point in a debate in March of this year.
Therefore, for some time we have held the view that this concession should be brought to an end, but it could in fact be fairly and sensibly brought to an end only at a time when substantial increases were being given in the rates of benefit, and that is the process we have followed. Among other factors we have taken into account in considering what should be the proper level of benefits is the fact that, so far as retirement pensioners are concerned, about half the total were losing vouchers which, if used to the full, were worth 2s. 4d. per week. We have taken that into account in deciding the level of benefits, and the House will have noticed that we have given increased benefits, not only to those who have not applied for this concession because they were not habitual smokers, but also to recipients of benefits which did not carry this right with them—widowhood, sickness, unemployment, industrial injury benefits and the like.
Therefore, I do commend to the House the suggestion that, whatever the original and excellent intentions of this concession, the time has come to end it; and the right way to end it—the way in which we are seeking to end it—is by taking it into account when making changes in the main National Insurance scheme.
§ Mr. Ellis Smith (Stoke-on-Trent, South)
Is the Minister saying that 2s. 4d. per week is the value of the vouchers?
§ Mr. Boyd-Carpenter
The full value of the voucher, if fully used, as I understand it, represents the difference between the duty on 40 cigarettes before the right hon. Member for Bishop Auckland raised it and afterwards. The right hon. Gentleman will no doubt correct me if I am wrong, but that is my impression of how it arises.
§ Dr. Horace King (Southampton, Itchen)
As the Minister has been kind 983 enough to refer to me, may I ask him if he will address himself to a point on which many of us feel very sincerely—that it would have been all right taking away the tobacco concession if a substantial concession had been made to the old-age pensioners? The people we are worried about are getting no substantial concession, and the very poor people are going to get an increased benefit of only 2s. 8d. out of this.
§ Mr. Boyd-Carpenter
I am coming to that argument, and I hope the hon. Gentleman will acquit me of any desire to avoid it. I shall deal with the level of benefits in a moment, and will deal with this aspect when I come to it.
The only category of person who cannot be taken into account in this way, who is losing the possible right to these vouchers, is the non-contributory old-age pensioner. The House will recall that that pension, based on the preservation of existing rights before the National Insurance Act was passed, was preserved by that Act for a limited time only. As I understand it, under the Act, these pensions could not be awarded to people who become 70 after 1961. This pension is administered by the National Assistance Board on a means test basis and is very often supplemented by National Assistance. It has been the policy of successive Governments to treat this as an obsolescent benefit and not to alter it.
In these circumstances, it seemed to us that the right thing to do, as we were going to take the withdrawal of the tobacco concession into account in an increase of National Insurance benefits, was to make a special payment of the precise value of the token—the figure I have given of 2s. 4d.—and pay it as an additional payment to all recipients of non-contributory old-age pensions, whether smokers or not. That is dealt with in Clause 3 (2), and I hope the House will think that it is a fair and reasonable method of dealing with the matter.
Now I come to the question of benefits. It is proposed by this Bill that these will be raised to a new high level in real terms. My noble Friend who is now Lord Ingleby, when he introduced the Measure which became law in 1954, told the House with truth that that Measure marked a new high level in the real value 984 of the benefits. This present Measure, the third to be introduced since 1951, takes that process further, and makes a substantial increase in the value of the National Insurance benefits in real terms. If the House would like the figures, using the Index of Retail Prices, for a single person it raises the value 7s. 6d. above the 1946 value, and, perhaps this is more significant, to approximately 12s. above the value to which right hon. Gentlemen opposite raised it in September, 1951, taking its real value at the time at which they raised it to that level. Whatever arguments may ensue as to the precise amount, it is clear beyond doubt that this constitutes a further advance in improving the benefits of those who are the recipients in this immense system.
In judging, under a contributory scheme, what is the correct level of benefits, there are a number of factors to be taken into account, and no doubt most of them will be taken into account during the course of the debate. Our view is that this is a substantial advance which it is right, though hard and difficult in present circumstances, to make, and it does represent all that can be done in present circumstances. I think it will be accepted that it does involve a real advance. Let me, on this subject, read some wise words:If the basic retirement pension were raised, similar provision should be made for the sick, the unemployed and the widowed mothers. The cost of corresponding increases in these benefits would be about £200 million a year. This would have to be found by still further increasing the contributions and adding to the burden from taxation. Such additional burden on our economy would undoubtedly lead to inflation which would leave the pensioners no better off than they are now and may cause great injury to the country.Those words come from the "Socialist Speakers' Handbook" for 1949–50, and I think they deserve full weight. Despite their origin, they are sound, wise and true.
§ Mr. Boyd-Carpenter
As the right hon. Gentleman says, there are other books to quote from, and I shall be quoting from some of them in the course of my remarks. I am grateful to him for the reminder.
We take a different view of our proposals for improving the benefits from 985 that taken by right hon. Gentlemen opposite in respect of the treatment of married pensioners. As I understand the proposals of right hon. Gentlemen opposite, they propose no greater increase for a married pensioner, as compared with a single person. On the contrary, we propose lo raise the rate for the single pensioner from 40s. to 50s. and for the married pensioners from 65s. to 80s.
The view has been expressed, and I think the hon. Member for Coventry, East expressed it, if I recall rightly, at the Labour Party Conference, that married pensioners were a minority. I do not think that they are as small a minority as the hon. Gentleman thinks. However, were they so small a minority, is that any reason for discriminating against them? Certainly, I do not share the view expressed by one member of the Socialist Party's Technical Sub-Committee on Superannuation, who was reported in the Grimsby Evening Telegraph of the 5th October as having decided all this by saying:Married couples are at present over-provided for.That is certainly not my view.
§ Mr. Boyd-Carpenter
I shall be delighted to let the hon. Gentleman have the extract, but in these circumstances I do not like to refer to the gentleman by name, because he is not a Member of this House. I merely refer to him as the source of this opinion; but this is a public statement, and I will give the cutting to the hon. Gentleman with pleasure.
Let me now take one or two points in these changes which are of particular interest. On Second Reading, I shall not take the House through all the details of the changes in the benefits. They are in a Schedule to the Bill, and they are in the White Paper. Many questions which may arise can arise naturally in Committee. There are, however, two points to which I would refer.
We are increasing the rate of guardian's allowance by some 50 per cent., from 18s. to 27s. 6d. We are doing that partly because we believe very strongly in the social value of the allowance, which enables orphaned children to be taken into private homes instead of living in institutions; and also because 986 this guardian's allowance did not share in the increase for the widowed mother's children which was effected in last year's Act. Therefore, we have made a bigger increase in this respect.
Another fact which is of some general interest is that we propose to bring together the rates of sickness and unemployment benefit for married women. That was the original Beveridge recommendation, but the rates have become separate, largely for historical reasons. Unemployment benefit for married women is at present 30s., and sickness benefit 25s. We propose to bring them both together at 34s., which is very close to the two-thirds of the basic single person's rate which Lord Beveridge recommended.
The House will recall—I do not want to detain it over this—that in view of the option which married women in employment have as to whether to come in or go out of National Insurance and the fact that this is an option against the Fund, it has always been held to justify paying benefit at a somewhat lower rate to them than to single women. I think it will be agreed that by bringing their rates of sickness and unemployment benefit together a great deal of confusion and misunderstanding will be avoided, and in both cases the increases constitute substantial improvements on the existing rates.
There is one Income Tax aspect of the proposed increase in pensions which I must mention. This concerns the tax allowance given to those who help to support elderly or infirm relatives. Under the present law, the maximum allowance of £60 is given only where the dependant's income is not more than £105 and is reduced by £1 for each £1 of any excess of the dependant's income over the £105. Thus, if nothing were done about it, the proposed increase in pension would have the effect of cutting down the tax relief given to those who help elderly relatives. That, of course, is not our intention, and we are anxious to prevent any anxiety on this score. In the special circumstances, therefore, the Chancellor of the Exchequer has authorised me to say that the next Finance Bill will include provision increasing the income limit for dependant relative allowance to £135.
987 The Bill, of course, deals with improvements in the rates of benefits and of contributions under the Industrial Injuries scheme. That scheme is nine years old, and its finances are on a totally different basis from those of the National Insurance scheme. The Fund has been maintained on an actuarial basis, and the proposals of this Bill will continue that process. We were advised, before making these improvements, that contributions were actuarially 1d. a side deficient, in view, among other things, of the changes we made last year. The effect of the Bill, therefore, is to raise the contribution by 3d. on the man's employer and 3d. on the employee to 9d. and 8d., respectively. That will increase the revenue of the Fund by £22 million in the first full year and maintain it, I am advised, on a sound actuarial basis.
The benefits, of course, have been very substantially increased. Injury benefit and 100 per cent. disablement pension go from 67s. 6d. to 85s. Unemployability supplement, about which the right hon. Gentleman asked me last week, goes—and I confirm the accuracy of the figures I then gave him—from 40s. to 50s. The special hardship allowance, in which, I know, the trade union movement takes a great interest, goes up from 27s. 6d. to 34s. Constant attendance allowance is increased from 30s. to 35s., and widows' pension is increased from 45s. to 56s.
There is in this connection a small provision in Clause 4 (2) relating to byssinosis. Byssinosis is a chronic chest complaint to which workers in certain types of cotton mill are liable. It closely resembles bronchitis, and for that reason it has always been treated as an industrial disease to qualify for benefit in respect of which one has had to show that one has been working in the process for a certain number of years. When the National Insurance (Industrial Injuries) Act was passed, the prescribed period of working in the cotton industry to obtain benefit for byssinosis was twenty years.
As a result of further research, the Industrial Injuries Advisory Council advised me that for payments for byssinosis under the Act the period could be safely reduced to ten years, and by the regulation I made last year that was effected. It is not, however, possible to 988 do the same by regulation in respect of the Byssinosis Benefit Scheme, which relates to those who contracted this disease before the Industrial Injuries Act came into operation. The figure is statutory.
I have, therefore, inserted in this Bill a provision which, I hope, the House will pass, which will enable me to reduce also the period for the benefit scheme to the ten years which it is already by regulation under the Industrial Injuries Act. That provision is rather apart from the main purpose of the Bill. It is, perhaps, a separate issue, but as it seemed to me a clear anomaly which required legislation, I hope that the House will agree that it is well now to put this right.
I should, no doubt, be out of order if I were to refer to what is being done in another direction which we shall discuss later on in respect of National Assistance, but I can, perhaps without being out of order, say that regulations which I have laid prescribe 27th January as the operative date for the increases in respect of National Assistance.
As the Prime Minister indicated, it is our intention, if the House is prepared to deal quickly with the present Bill, to bring the improvements in the long-term benefits due under it, the retirement pension and the widow's pension in particular, into payment on the same date as that proposed for the National Assistance increase; that is, 27th January. That should help to avoid the disappointment and friction which, I am afraid, resulted in 1955 from bringing the Assistance changes into effect two or three months before the increases in National Insurance benefits, thereby giving people the feeling that Assistance had been put up only to be reduced when the National Insurance benefits were increased.
To do this by 27th January will, of course, involve very rapid moving indeed. One or two newspapers have made the comment on my statement of last week that we were being slow in getting these benefits into payment. That is the very converse of the truth. Normally, the time taken—and I have been into this in some detail—between an announcement in this House and the operation of the announced changes has rarely been less than between five and six months. From 6th November to 27th January is under three months. That is an indication that 989 we are seeking to carry through this very large operation just as speedily as possible to give help as quickly as possible.
§ Mr. Tom Brown (Ince)
I think that the newspaper said something else. I do not think it is fair to take the statement out of its context. The newspaper said that the Government ought to have started sooner and arrived home much sooner.
§ Mr. Boyd-Carpenter
I do not know which newspaper entertains the hon. Gentleman's leisure hours. It may be that the one which I saw was a different one.
§ Mr. Boyd-Carpenter
However, the criticism has been made of dilatoriness in this respect, and as it has been made I am sure that I owe it to my own Department and to the House to point out that the period between the announcement and the operation will be very substantially shorter than it has ever been in respect of any previous change. This will impose very Heavy strain on my Department, which, as the House will appreciate, has already been exposed to a very heavy strain indeed on account of the payments of sickness benefit needed during the recent influenza epidemic.
It may interest the House to know that new claims for sickness benefit in the period from mid-September to the end of October were 3 million, which is about three times a normal average for that time of year. Seven million payments of sickness benefits have been made. New claims for the week ending 8th October numbered 566,000, which is a record since the National Insurance scheme came into being. I should like to pay tribute to the staffs of the local offices for maintaining the payment of benefits by great devotion to duty and hard work whilst themselves in many cases suffering from this complaint. These are qualities which will be demanded of them equally in our attempts to secure that the new benefits proposed by the Bill operate more quickly than they have ever done since the first operation of the scheme.
Changes in the Bill affect in some degree directly or indirectly virtually the whole population. They are not easy steps to take against the background of 990 the economic situation and the real necessity to combat inflation. We have had to consider with very great care whether we were justified in going so far in providing a new, higher level of benefits on so large a scale. But we believe that measures of this kind, although they involve as I said in the House last week, some sacrifice by many people, are right, not only because they give comfort and help where they are needed, but because it serves the true health of a community such as ours to make sacrifices in order to make proper provision for its elderly, its sick and its disabled.
§ 4.52 p.m.
§ Mr. H. A. Marquand (Middlesbrough, East)
My first reaction on hearing the Minister announcing his new intentions, which he has just expounded to us at greater length, was to call them "niggardly". The Economist newspaper, with a little more leisure to reflect upon the matter, said a few days later that the Bill was…a drearily bad one in flat-rate form….The right hon. Gentleman has given his reasons for introducing one more Bill in flat-rate form, and I accept them. He is quite right. If he had made up his mind that something must be done quickly, it would not have been possible to have introduced any more comprehensive or far-reaching scheme now. I do not quarrel with that at all.
Neither, incidentally, do I object, nor will any of my hon. Friends object for one moment, to the increase in the allowance made for the dependent wife of the pensioner. There has been no intention at any time on our part, and there has been no commitment by the Labour Party on that subject at any time, although a model scheme has been drawn up by experts on assumptions of the scheme as it exists at the moment and the commitments that we had made. We shall not object at all to what the right hon. Gentleman proposes in that respect.
Despite all the criticisms which we shall undoubtedly advance during the debate, we shall do nothing to retard the passage of the Bill into law. We do not intend to vote against the Second Reading today. We want as good an increase as we can get from the Government to come into force as quickly as we can get it for the benefit of the people concerned, 991 and we shall not impede or retard the passage of this Measure. We shall, of course, try to improve the Bill as much as we can during its passage through Committee.
In February, we did our best to persuade the Government that the time had come for substantial improvements in the pensions provided under the existing scheme. When no sign had come by August that the Government had any such intentions we repeated our plea. We are glad, indeed, that today the Minister admitted the need for "early action", I think that those were his words. We only wish he had admitted that need a little earlier. We are glad that, having admitted it, he has had the good sense to arrange that the increases, such as they are, in the National Assistance rates will come into force at the same time as those in the benefit rates.
In February last the right hon. Gentleman and his Parliamentary Secretary told us that there was no need to act. The hon. Lady told us in the debate in February:It is sometimes said that pensioners are going without the necessities and without essential food…. Where is the evidence? I have none within my own personal experience."—[OFFICIAL REPORT, 25th February, 1957; Vol. 565, c. 893.]She went on to give some evidence in support of her view. She told us that the pensioners' consumption of bacon, ham and meat was increasing, and that their consumption of fish, fruit, and so on was also increasing. She told us that the proportion of pensioners receiving National Assistance in September, 1956, was only 23.6 per cent. as compared with 27 per cent. in December, 1954. She added that that showed that the need to apply for National Assistance was less acute than it had been, and that the position in February had improved if anything over the previous position.
Later in the same debate, the Minister told us that 22 per cent. of men pensioners were drawing increments averaging 7s. 6d. each, that 50 per cent. of those men now retiring were drawing average increments of 9s. 8d., and that about one-third of the working population was covered by private schemes. He added that others had the right to resort to National Assistance for payment of their rent. He had been asked how people 992 could live on 40s. a week, and he replied that that question was quite irrelevant to this issue.
That was the attitude in February, which is not so very long ago. How has the position changed since then? We are told that private schemes are increasing. The increments earned by retiring pensioners who work a little beyond pension age are just the same as they were, and the proportion of pensioners on National Assistance is very much the same. The Index of Retail Prices stood at 104 in February, and it was 106 in September. The index figure for food only stood at 103.5 in February and was 104.8 in September. If it is irrelevant to say that these people could not live on 40s. in February, these changes in prices and general circumstances cannot possibly account for the change in the Government's attitude.
§ Mr. Boyd-Carpenter
I might save the right hon. Gentleman a little trouble if I say that I accept his argument that the real level of benefits today is still better than it was during the whole period of 1948–55, but we have come to the conclusion that the recipients of these benefits should have their standards further improved.
§ Mr. Marquand
The right hon. Gentleman knows perfectly well that he is trying to put words in my mouth which I did not say. It was not my argument. I said that it was his. I was quoting what the right hon. Gentleman had said. I shall not bore the House by repeating what I said. But what accounts for the difference in his view now? Why this change? What has happened between February and now? [HON. MEMBERS: "By-elections."] Yes, by-elections have taken place, but the significant event that occurred to change the whole situation happened in May, 1957, and that was the publication of the Labour Party's pamphlet on its future proposals. It is that which has changed, is it not? The Minister laughs. If it is not that, there is only one other possible explanation—that the Minister knows already the effects of the Rent Act which his Government have put on the Statute Book and is anticipating the effect of the 7 per cent. Bank Rate, in turn, upon municipal housing which will come about very soon. Those are the only two possible explanations of why the right hon. Gentleman 993 has so changed his tune. My word, it was a soft tune this afternoon compared with the tone we heard in February last.
Before I come to some major criticisms of the Bill, as I do not think I have annoyed the Minister very much so far, may I appeal to him to consider for a moment or two the rectification of some omissions from the Bill? I hope he will help us a little in this matter.
I can see no mention in the Bill of any increments for postponed retirement. We all know that the pensioner gets an increment in his eventual pension for every year he remains at work after retiring age. A 10s. increment on a 40s. pension is 25 per cent. of the basic pension, but a 10s. increment on a 50s. pension is only 20 per cent. It is still the same amount, but the inducement to postpone retirement and to continue at work is obviously reduced.
The same reasoning applies to a class of pensioner who is, I think, even more adversely affected if he is left out of the improvements that are made for others in this Bill. Those are pensioners who were drawing what we call modified pensions. They are persons who, before the war, were excluded from National Insurance because they were in excepted employment, later were allowed to join, were required to make heavier contributions than the average, and became contributors, but who are drawing less than the standard pension. I believe there are about 80,000 such beneficiaries. What happens to them? Are they catered for in the Bill? As far as we can see, they are not, and in Committee we shall seek to give them some of the benefit that the Bill confers on other more fortunate persons.
Then there are the disabled persons who are not entitled to Industrial Injury benefit; workers who, in the past, received compensation under the old workmen's compensation laws but who never qualified for the new benefits. They have had increases in their benefits on previous occasions such as this. What about them now? If increases on grounds of increases in prices are justified, and particularly increases in rents, which must be one of the main justifications for the Bill, what about them? These things affect them just as much as the others.
994 These are essentially Committee matters, and my reason for mentioning them at this stage of the Bill is that I am wondering—I hope I am wrong—whether under the Long Title it will be in order to move that the conditions of these people also shall be improved. I feel sure that the right hon. Gentleman would like an opportunity during the Committee stage to discuss the situation of these groups and to give reasons why he does not propose to increase their pensions, if he does not do so, or to make a concession.
Would the right hon. Gentleman please inquire now of the experts on these matters whether the condition of those pensioners can be brought into order when we reach the Committee stage? When the Parliamentary Secretary rises to reply to the debate, would she kindly advise us as to whether we will have the right? May I appeal to the right hon. Gentleman and to the hon. Lady to agree to use any method that may be open, by amendment of the Title of the Bill or whatever it may be, to bring these things within order if they should be out of order? This is a reasonable and fair request which, I hope, the right hon. Gentleman will grant.
Inevitably in all these debates we talk more about the retirement pensioner, or as he is always now colloquially called, the old-age pensioner, than we do about the other beneficiaries. Before I make any reference to the retirement pensioner, I shall say something about the other beneficiaries. In this matter we must not forget that, though children are not entitled in their own right to gain benefit from the National Insurance scheme, when their parents are adversely affected by unemployment, sickness, widowhood and so on, they have to be maintained out of the National Insurance Fund. It is the household with children, and especially the household with what we call a large number of children—four or more—which is always the first to resort to National Assistance. I mean the children of the unemployed, the sick and the widows, and even some children, though they are not numerous, of retirement pensioners.
Recently Parliament made improvements in the condition of widows' children and of widows themselves. Though, as 995 the right hon. Gentleman knows, we willingly took part in that legislation, we expressed doubts at the time, and they are still not removed, about the results. In 1955, 94,000 widows were obliged to draw National Assistance, and in June, 1957, there were still 64,000. The latter figure must include for the most part the widows with large families.
I have pleaded many times for these children, and I want to do so again. I do not think that the children of the unemployed, the sick and the widows ought to be made a pariah class in our community, and as the level of benefits now exists, I still think that they are not given their fair chance. Certainly they are not given anything like the chance to grow up healthy, to enjoy childhood, to get their education in the secondary school and the university, if they are fit, which the Prime Minister told us he wanted everybody to have in the Opportunity State.
The proposals in the Bill provide for an allowance for the dependent child for the person drawing benefit of 15s. a week and 20s. for a special allowance or for a widowed mother's child. The corresponding figures for National Assistance are higher once the child is over five years of age, and they reach 20s. for a child between 11 and 16 years of age. I welcome the increase that has been made, but I still feel that it does not go far enough. These allowances are still inadequate, especially when we realise that on the evidence of the Government's own publications the average weekly expenditure in this land per person on food alone is 28s. 4d.—and the mother is given 20s. to maintain her child. I still say that it is not good enough.
Now what about the retirement pensioners who smoke? The figure mentioned by the right hon. Gentleman this afternoon was 50 per cent., whereas the figure which he gave in answer to a Parliamentary Question a year ago was 53 per cent. I do not quarrel with that, but we must remember that between 50 and 53 per cent. of these pensioners will not get the full increase of 10s. a week in the purchasing power of their pension, because there has been removed from them the right to buy a certain quantity of tobacco at 2s. 4d. instead of at the higher price which the rest of us have to 996 pay. The real value to them of the pension increase in purchasing power, in view of the sort of goods they want to buy, will be 7s. 8d. because the tobacco concession is to be taken away. If they fall into that class of retirement pensioner, of whom there are nearly 1 million, who has to draw National Assistance benefit, then the increased benefit they get is only 2s. 8d.
As the right hon. Gentleman said, this concession has been available for ten years, since my right hon. Friend the Member for Bishop Auckland (Mr. Dalton), feeling sympathy for the old people at a time when he imposed a heavy increase in the Tobacco Duty in order to try to reduce our dollar expenditure in 1947, gave them this concession. Whatever our views—and the Minister devoted some time to this subject—about the merits of a concession to old people for a particular kind of purchase, I think the Minister himself must be convinced that his proposal to withdraw the concession has been received with the utmost disfavour throughout the country. I cannot believe that he would have devoted as much time as he did to the subject this afternoon if it had not been that he had heard on every hand what people were saying and had read in the newspapers, which in general do not agree with the politics of those on this side of the House, their agreement with our criticism of the withdrawal of this 2s. 4d. when the increase was to be only 10s.
The Minister said that the time might come when this special, peculiar concession might be withdrawn and that it should come when there was a substantial rise in pensions. We do not think that the rise of 10s. is substantial in view of rising prices and increased rents. If 10s. is a justified increase for other people, 7s. 8d. is not a justified increase for these people. This is not a substantial rise at all. In the case of those on National Assistance, the poorest of the poor, it is an increase of only 2s. 8d. a week.
These new rates will leave far too many of those entitled to benefits of all kinds in a position where they must have recourse to National Assistance. The Minister estimates the saving on National Assistance payments as £8 million a year. What will be the reduction in actual numbers of people? Some of this reduction 997 is surely bought about merely by a reduction in actual amounts paid to individuals which will not have the effect of taking them off National Assistance.
The significance of a pension paid as of right, which was the basic idea of the whole Beveridge plan, which we all accepted when it was first put before the country fourteen or fifteen years ago, is taken away if people have to resort to National Assistance and submit to the means test. It is not much compensation for people who have to go to the National Assistance Board and disclose all their resources to be told that some part of that is due to them as a matter of right if they still have to go to the National Assistance Board and be visited from time to time by National Assistance Board officers, kindhearted though those men are.
§ Mr. Boyd-Carpenter
The right hon. Gentleman will appreciate that the effect of this proposal is to widen the lead of the National Insurance benefit to the National Assistance scale. That was the very argument the right hon. Gentleman was using, and I should have thought that he would applaud it.
§ Mr. Marquand
It widens the lead, but I want to know by how much.
In December, 1956, there were 927,000 pensioners drawing National Assistance. Of that number, 852,000 were receiving from the National Assistance Board 5s. 6d. or more a week. Those are figures taken from the Annual Report of the National Assistance Board. If, then, these persons had been receiving from the National Assistance Board 5s. 6d. a week, they will still remain on National Assistance. Of course that is so under the new proposals. Therefore, if they are non-smokers, they will get an increase in their income of only 5s. a week. If they are smokers, they will get an increase of only 2s. 8d. a week, and, presumably, half of them will be smokers. There is no reason to suppose that the proportion of smokers among them is different from the proportion of smokers among retirement pensioners generally. Therefore, we draw the conclusion that 426,000 of these pensioners will get only 2s. 8d. a week increase in their benefit.
The full impact of the Rent Act has not yet been felt. It may be that, in the end. National Assistance Board payments 998 may turn out to be as high as ever. The full impact of increased rents has not yet been felt because numbers of people have put in forms which have caused landlords to postpone increasing their rents until repairs have been done. As we heard front my hon. and learned Friend the Member for Kettering (Mr. Mitchison), there is the prospect of further increases in rents as a result of the increased charge for capital, which will raise the cost of house-building.
Therefore, though there appears to be what the right hon. Gentleman called a bigger "lead", a bigger difference between the pension and the National Assistance Board rate, a difference of 5s. a week, I doubt very much whether there is going to be any very substantial reduction in the number of retirement pensioners obliged to apply for National Assistance. There may be some people who will very shortly find themselves just as badly off as they were before.
I hope I can be forgiven for not entirely grasping some of the figures which the right hon. Gentleman gave and for not commenting on them now. Some of these matters I must leave to my hon. Friends behind me who have had a little more time to consider them and particularly to my right hon. Friend the Member for Llanelly (Mr. J. Griffiths), who knows so very much more than anybody else on these benches about this whole matter.
The increases now proposed are designed to offset possible increases, actual increases, and forthcoming increases in prices and rents. A very large part of these increases in prices was deliberately caused by the Government abolishing subsidies on the kinds of food which, in very large measure, the poorest of the poor have to include in their diet—milk and bread, and foods of that kind. The proceeds of that operation have been handed over to the Income Tax and Surtax-payers in three successive Budgets since the present Government came to office. They have deliberately redistributed the income of the country in favour of the Income Tax and Surtax-payers and to the disadvantage of the rest of the community.
Are the Income Tax and Surtax-payers going to pay for the offsetting increases in benefit? To some extent they are, said the Minister today, because the 999 Exchequer will lose some of the tax which they would otherwise pay and which they will pay in their contributions. It does not really mean that they are going to lose anything. They will pay an increased amount in contributions and recoup it from the Exchequer. The Exchequer loses, but I cannot see that the Income Tax and Surtax-payers, to whom the whole advantage of the reduction of subsidies was given, will lose anything at all. They will not be paying for this.
In the last Budget, £35 million of relief was given to Surtax-payers, and immediately afterwards, with scarcely a pause for breath on the part of the House, the then Minister of Health imposed on the National Insurance contributors a further toll of £40 million by means of a new National Health Service contribution. The Surtax-payer received £35 million and the contributors to National Insurance had to pay for it, and a little over, by an increase of £40 million. In passing, may I say that I greatly regret the absence of the then Minister of Health from the House today? I hope that he is rapidly recovering his health.
The then Minister of Health said quite clearly on 1st May, 1957, that he wished to have a Billto double the contribution at present paid to the National Health Service and, at the same time, to relieve the taxpayer…of an equivalent amount."—[OFFICIAL REPORT, 1st May, 1957; Vol. 569, c. 237.]It was an exact quid pro quo.
We believe that a similar manoeuvre has been carried out in this Bill. The figures are complicated, but it seems to me that the essence is found in the figures given by the actuary for the year 1958–59. I readily admit that the figures change as the years go on, and I will say something about that later, but for 1958 an increase in the Exchequer supplement will be balanced by an equal reduction in the Exchequer grant. The increased expenditure on general National Insurance benefits will be balanced by an increase in contributions—exactly the same, £167 million.
The Minister said that the Industrial Injuries scheme had always been actuarial. That is true, but look how "actuarial" it will be this time. In the Industrial Injuries scheme the contribu- 1000 tion for next year will exceed the benefit by £12,900,000. Of that, the increase in the Exchequer supplement will be £4,600,000. On that scheme the Exchequer in round figures will be £8 million better off.
What of National Assistance? The Minister told us that he expects a net saving of £8 million. To offset that he has an increased payment to non-contributory pensions of £1¼ million. In other words, the Exchequer benefits by £6¾ million. On National Insurance proper the gain for the Exchequer in that year is £8 million; on National Assistance it is £7 million, in round figures; and there is, therefore, a total gain for the Exchequer of £15 million out of this operation.
It is true that the Minister told us that there will be some compensating loss of tax to the Revenue, and the total gain to the Revenue may therefore not be quite as large as the £15 million which I have indicated. There can, however, be no doubt that the total effect of the operation for this year is to leave the Exchequer in substantially the same position as, indeed a slightly better position than, before and to put off for some time the time when the Exchequer will have to subvent these various funds.
This is the very opposite to the situation which we claim should exist. We believe that after all the deliberate increases in prices laid so heavily upon the shoulders of the poorest of the poor, the taxpayer should help the poorest of the poor. As a result of the Government's proposals it is not the taxpayer but the contributor who is asked to help the poorest of the poor; it is upon his shoulders that the burden is being laid.
§ Mr. George Thomas (Cardiff, West)
Millions of people do not pay Income Tax because they are too poor.
§ Mr. Marquand
We all pay tax; we pay it in prices as a result of tax levied on imports, and we pay it in other ways. We all pay it, but we do not all pay Surtax, and it was the Surtax-payer who received the relief when the subsidies were withdrawn. It is there that we say the burden should be laid. From that source the payment should be taken.
1001 This is the biggest increase in contributions which we have ever had—2s. each for every insured worker, irrespective of his income, and 1s. 11d. for his employer. I aroused some passion on the Conservative benches last week when I asked whether the Trades Union Congress had been consulted about these proposals. Hon. Members opposite shouted, "Why?" Do they not realise that trade unions and their leaders are bound to be interested when the incomes of their members are to be reduced by 2s. a week? Of course they are bound to be concerned.
Cannot hon. Members guess the reaction of the younger workers, particularly in the trade unions, to these proposals? Although the younger workers in trade unions may not always be very close students of documents like the report of the Government Actuary on the financial provisions of the Bill, even they will know before very long the excess of the proposed contribution over the actuarial contribution which the young worker needs to pay for his own pension. The younger worker will know the excess he will pay over the contribution which would be sufficient to earn him the pension now proposed at the end of his working life. That excess for the insured person will be 14.8d., or 1s. 3d. a week, for a man and 1s. 0½d. for a woman. They are to be required to pay these weekly amounts in excess of what is necessary to buy their pensions. Will they show a lack of interest in that or will they be apathetic about it?
Of course the Trades Union Congress ought to have been consulted before such proposals were made, and of course the Trades Union Congress will make representations about them now that the opportunity has arisen. They are bound to do so. It is their duty to do so. As the Minister knows very well, they have made representations in the past on changes of this kind which have increased the actuarial contribution paid by new entrants and younger people in the scheme. They have made representations in the past that the size of the Exchequer supplement is now too small and that the Exchequer supplement, which used to be one-fifth and then was reduced to one-seventh, ought to be put back to one-fifth. I wonder what they will say this time?
§ Mr. Marquand
It was, of course, my right hon. Friend the Leader of the Opposition. This is the old business of trying to reintroduce the red herring, "What did you do in 1951?" I tried previously at some length to explain all the reasons for that, and I will not go all over that situation again. We were at war in 1951. In any event, that does not in the slightest degree alter the situation which the Minister has to face now and it in no way helps him to justify his increases in the contributions of the younger workers today.
The Minister may find that he has gone too far. Certainly he has reached the end of the road. No one after him, Tory Minister or Labour Minister, can go any further along this road. There can be no doubt at all that this Bill must be, for this reason alone, an interim Bill. I was glad to judge, from the remarks which the right hon. Gentleman made in his speech, that he realises that this is the last time we must rely for an improvement in conditions of retirement for the mass of our people on this sort of scheme.
The right hon. Gentleman indicated fairly clearly that he had it in mind to move forward to a different type of scheme. We have long thought so. We thought before these increases were made that the burden was already too heavy on the lower-paid worker and that an increase sufficient to provide a satisfactory pension in retirement could no longer be made except by means of an increase in contribution so heavy that the lower-paid worker could not bear it. Now the contribution is to be 9s. 5d. a week and, whatever proportion it may be of average wages, it is nearly 7 per cent. of the wages of the lowest-paid workers in this country.
It has reached a point beyond which I feel it is quite impossible to go any further. The only solution is to embark, before long—and I hope that it will not be long—on a system of graduated contributions. Graduated contributions will require graduated benefits. How is it 1003 to be done? We have put forward our plan, as everyone knows, and it is available to everyone to examine and discuss. It has been discussed at the Labour Party Conference. Some of it was referred back for examination and discussion and further publication will take place in good time.
What do the Government intend to do? I think that we had a hint today that they have it in mind to do something. I think that we had a hint from the Prime Minister's opening speech on the Address in reply to the Gracious Speech. But we had a hint before that, because the Life Offices' Association and the Associated Scottish Life Offices published in March of this year a pamphlet on this subject. Their major conclusion, after examining the possibilities of a better system of pensions—they were, of course, in favour of a system of pensions proportionate to earnings—expressed in the form of a question, was thatthe basic issue was whether it is in the best interests of the country that the State pension scheme should be extended beyond the level of basic needs.When the Prime Minister addressed the House a few days ago, he said:We all agree that in a modern society the State must secure that provision is made for basic needs, but I think it is a different question, and a difficult one, how far it is the right or duty of the State to compel people to go beyond this."—[OFFICIAL REPORT, 5th November, 1957; Vol. 577, c. 31.]It was an echo of his master's voice. It was an echo of what the life offices had already said.
All I want, in conclusion, is to tell the Minister that if he is thinking of a different kind of scheme based on graduated contributions and giving graduated benefits, he must abandon the conception that the only duty of the State is to provide for basic needs. Anything that does not provide a superannuation for the whole of our population—anything that does not take care of the requirements of farm workers, building workers and many others who work for small employers and who have no real prospect of getting a supplementary pension—will not do.
It is no good bringing before Parliament and the country a proposal for some basic national pension and erecting upon that merely a system of voluntary pensions 1004 provided for those who are in sufficiently good employment to be able to afford them through the insurance companies. What is required is a national scheme of a different character giving better and graduated pensions and more satisfaction than the one we now have.
§ 5.35 p.m.
§ Mr. Anthony Kershaw (Stroud)
I could not follow the right hon. Gentleman the Member for Middlesbrough, East (Mr. Marquand) in his explanation of the figures whereby he sought to prove that the Exchequer contribution will be reduced in the pension in the future. Perhaps I should leave that to my hon. Friend who is to reply to the debate. I understood quite clearly the Minister to say—and I believe that the figures show—that the obligation on the Treasury will be about £60 million more in consequence of the proposals.
I was very interested to hear that the reason the Labour Government, in 1951, reduced the Exchequer contribution was because we were at war. I must confess that I have never before heard that responsibility put upon the Korean war. I should have thought that a country like ours might possibly have been able to maintain a brigade group in contact with the enemy without having to alter the whole pensions structure at home, especially at a time when expenditure on defence was very much less than it is now.
Lastly, the criticism which the right hon. Gentleman directed to this side of the House, that the trade unions should have been consulted beforehand, does not fit very well the newspaper which, I see, is still lying on the Table, about which the Opposition took a Minister to task this afternoon on the ground that he had told someone else before he told this House about the alteration of telephone charges.
§ Mr. Marquand
No one took him to task for consulting even the newspapers. He was taken to task for consulting the chairman of a party political organisation.
§ Mr. Kershaw
I think that we are on a different point. Perhaps the right hon. Gentleman was not present.
The Postmaster-General was taken to task because there was a headline in the Star containing news that he should have revealed first to the House. I think 1005 that there would have been criticism if the pension proposals had been put before the public before they were put before the House. While, no doubt, he would wish to consult as much as possible the Trades Union Congress now that the proposals are public, certainly this is the place where they ought first to be made.
Like a number of hon. Members opposite and, no doubt, others on this side who will speak, I welcome the proposals that the Government have made. I welcome the fact that old-age pensioners and others are now to receive the highest benefits they have ever had, the highest in real terms, and so are to share to some extent in the general increase of prosperity in the country. I welcome the fact that it has been possible, in this Administration, to do more for old-age pensioners than the Socialists were able to do during their time in office, and that the real benefits of the pensions now will be 12s. higher than right hon. Gentlemen opposite were able to arrange for retirement pensions when they left office.
I welcome, also, the administrative expertise which has made possible the payment so early of the extra benefit—in three and a half months—which is very much quicker than it was possible to do it before.
§ Mr. Walter Monslow (Barrow-in-Furness)
Is the hon. Member aware that I have a case which completely wipes away his argument? Last week I met a pensioner, a constituent, who was paying a rent of 10s. 3d., but is now paying £1 5s. 6d.
§ Mr. Kershaw
If it is a case which wipes away my argument, doubtless the hon. Gentleman will have an opportunity to explain it to the House later.
The question of the extra contribution is, of course, a serious matter. These are the highest contributions that have ever been paid and the highest increase in contributions ever to have been paid, as the right hon. Member for Middlesbrough, East said. He might, in fairness, have added that it is also the highest increase that has ever been made in pensions. [HON. MEMBERS: "No."] The people who are in employment and whose wages have, by and large, kept abreast and have, in the average industrial case, gone slightly ahead of prices will not 1006 begrudge this extra payment to the old and retired pensioners.
I hope that the extra 2s. contribution will not be regarded as a reason for a demand for extra wages. I must add, in fairness, that I very much hope that the extra contributions that the employers will have to pay will not be made an excuse for a rise in prices, which would have an equally harmful effect for the old people.
There is no doubt that the burden of these contributions will be considerable. The extra contributions which are demanded will, of course, balance the extra benefits only in the first year. Thereafter, the taxpayer will continue to find the extra money which is required to the tune of, in twenty years' time, £475 million a year, even if the benefits and the contributions continue the same.
The argument has been put forward that the extra payments should be met by taxation rather than contributions.
§ Mr. Kershaw
Or by the Surtax payers. That is a perfectly maintainable argument. I can only follow my right hon. Friend in saying that the contribution is now 7 per cent. of the average industrial wage and that when this House passed the proposals to start the scheme, in 1946, it was envisaged that the contribution should be 7½ per cent; so that we are on the right side of that figure.
Furthermore, one must consider that the extra cost of the pensions will he £167 million a year and, thereafter, will rise sharply. An extra tax of £167 million this year and rising sharply in that way is bound to be inflationary in its effect. Nobody would disagree with the proposition that high taxation has an inflationary effect upon the economy. After all, not for forty-nine years after 1948 will the contributor have paid an actuarial value for his pension. Not until 1997, when, I hope, most hon. Members will still be here, although some may not be, will it be possible for a man to say that his contributions have paid for his pension. Until that time, the taxpayer has to step in and help him. As my right hon. Friend said, the taxpayer will have to step in to the tune of £17,500 million during that time. Therefore, if we are placing an even greater burden on the 1007 taxpayer in respect of pension schemes, we must at least think seriously about it.
The right hon. Member for Middlesbrough, East suggested that the limit had been reached. I would not dissent from that view, but if we are to put the burden not on contributions but on taxes it might be that the taxpayer will come to think of pensions, not as something that he is saving for himself for his old age, but as something for which he pays a tax in order to keep other people who have not paid the full contribution. The working population may in due course get fed up with this. They may jib and demand alterations. In the last resort, they may refuse to pay the taxes by emigrating and going elsewhere, thus removing our productive labour, which is the only means by which the old-age pension can be paid. There is a danger, which the House should consider, that the taxpayer may go on strike against the contribution that is necessary from him. This is a factor which should be borne in mind.
Nevertheless, we must wonder whether the flat-rate pension has reached the limit of its usefulness. When the flat-rate pension was low and when taxes were low, it was surely possible to pay to everybody a flat-rate pension whether people needed it or not. That flat-rate pension, however, is no longer the demand of the ordinary pensioner. He does not want merely a little something to keep him out of the direst poverty. The demand—and it is a natural and reasonable one—is that he should have a decent pension upon which he can live respectably. Is it possible for a flat-rate pension to be provided to everybody, irrespective of need, to fulfil that legitimate demand?
§ Mr. Crossman indicated dissent.
§ Mr. Kershaw
I agree with the hon. Member, who signifies that it is not possible.
Any flat-rate pension is basically unfair to the poorest people, because those who do not need it are also getting it and, therefore, the poorest person cannot have the higher rate of pension which he ought to have. Therefore, I should say, in passing, that a flat-rate pension of £3 a week to those who need it is more unfair from that point of view than a basic pension of something less
1008 I welcome the statement in the Queen's Speech that the problem of the long-term solution to this question, to which the right hon. Member for Middlesbrough, East referred, is being studied. I hope that in discussing the complicated scheme which alone will be satisfactory—and we must discuss it at some length—we do not fall into the same errors as the Socialist scheme published in May. I think I can say without being accused of any party political bias that that scheme is a piece of political window-dressing and that the scheme as a whole will take so long to come into operation that it is basically a flat-rate pension scheme. "Half-pay in the next century" is not a cry that is likely greatly to enthuse the people, nor does it alter the type of pension scheme from a basic flat-rate pension, which, as I have tried to indicate, has very great defects.
The Socialist pension scheme has many other objectives than merely providing a pension. It is loaded very much against the better-off contributor. As I understand, the £12 a week man will get a pension of £6, whereas the £24 a week man will get only £9—that is, a 50 per cent. rise in pension for a 100 per cent. rise in contributions.
§ Mr. Kershaw
The £24 a week man would get a pension of about £15 a week for the contributions which he now makes if he did it through an insurance company. The consequence will be that all the higher-paid people will wish to opt out of the scheme put forward by the hon. Member for Coventry, East (Mr. Crossman). But if these people opt out, the scheme clearly will not work, because there will not be enough money. Therefore, the provision which is included that the permission to opt out would have to be considered later would obviously have to be brought into operation and the option out terminated. That element of compulsion is a disagreeable feature.
§ Mr. Crossman
I do not think that the hon. Member would wish to misinterpret the scheme. At no point do we say that the right of free choice shall be limited later. We have made it perfectly clear that there shall be a genuine freedom of choice. We believe that the Government are wrong in their calculations; and that, 1009 the more they look at the scheme, the people will prefer ours. The basic freedom of choice will remain in our scheme. I am sure that the hon. Member would not like to misinterpret that.
§ Mr. Kershaw
I do not wish to misinterpret it. The hon. Member may agree, however, that some of the details of the scheme are not as clear as they might have been and that—
§ Mr. Kershaw
If I have been mistaken, perhaps I may be excused. At all events, it is clear that if all the richer members of the scheme opt out, the scheme will not work and, therefore, it would have to be modified drastically or the richer members prevented from opting out. This element of compulsion is a very disagreeable aspect of the scheme.
The Socialist scheme has a further drawback. The Socialist calculations, I understand, were that there should be more than £3,000 million surplus contributions in the first ten years. I understand that that calculation was not accurate and that the correct figure would be less than £1,000 million. Nevertheless, £1,000 million is a lot of money. The destination of those funds and how they are to be used, whether in subvention of the nationalised industries or for productive enterprises such as making two groundnuts grow where none grew before and none will ever grow again, must give cause for considerable anxiety.
One of the very important features of our economy—and it is a capitalist economy whether the Socialist Party likes it or not—is that we must have a fairly large degree of National Savings. If those National Savings are to be taken away by the collapse of private insurance schemes—as I believe will happen—and by the mismanagement of the funds which will flow into the National Insurance scheme in different ways, it will create a very serious problem in the future.
Such supports are unnecessary. It is quite possible to devise a graded scheme which will not have them. In the first place, I hope that any such scheme will be funded, so that it will be safe from the depredations of any future Chancellor of the Exchequer. Secondly, it is obvious that the contributions will have to be graded to some extent, and I hope also to 1010 see the transferability of pensions—[HON. MEMBERS: "Hear, hear."] I am glad to see that I am getting agreement from hon. Members opposite—to assist in the mobility of labour.
It is absolutely unnecessary and, for the reasons I have given, harmful, for the State to take over and float its own scheme, subsidised by the taxpayer, because that means that the scheme will never be funded, and will always be at the mercy of Chancellors of the Exchequer. But the State, which has an interest in this matter, should encourage each industry, which knows its own problems best, to work out its own scheme. That would get rid of some of the difficulties which will loom up in the future, such as the question of the retiring age, and whether men and women should have pensions at the same age.
In different industries different conditions apply, and schemes could be worked out better industry by industry than upon a State basis. It is desirable that trade unions should run their own pension schemes, as many already do. This is a very suitable activity, as opposed to the purely political activity in which some but not all leaders of trade unions indulge at present. It is not impossible to imagine that the State machinery for pensions could be lent, provided that it did not result in a subvention from the State, to ensure that these graded pensions worked. All the schemes should be vetted to see that they come up to certain standards.
In that way it would be possible to preserve the liberty of the subject and to build up savings to allow the future investment which alone will permit us to pay the pensions which we demand. I agree that as such schemes develop we shall he able to leave behind us the basic pension, with which we are principally concerned this afternoon, because it will cease to be relevant. In the technical age into which we are entering, to a greater degree every day, we should not need the basic pension to ward off poverty, because we will not have poverty, but only varying degrees of wealth.
§ 5.53 p.m.
§ Mr. R. H. S. Crossman (Coventry, East)
I was not going to refer to the Labour Party's national superannuation scheme, except indirectly, until I heard the speech of the hon. Member for Stroud (Mr. Kershaw). I should like to make 1011 two comments upon it. When we began to think about the matter many of us also thought that it would be nice to operate the scheme industry by industry. Indeed, our plan makes it clear that any industry which chooses to organise a scheme of its own—provided that it passes the three tests which the hon. Member laid down; I am glad that he mentioned the transferability test and the necessity for it to be fully funded—should be encouraged to do so.
The hon. Member should realise that nobody who has studied this question believes that much more than 50 per cent. of the employed workers are ever likely to be included in a private occupational scheme. Even if they gave every encouragement during the next ten years it would be surprising if the Government could get more than 10 million workers into those schemes. The hon. Member will therefore appreciate why we started by saying that our aim was, through the State, to provide National Superannuation for every worker who had not available to him an adequate and sound occupational scheme.
The Labour Party scheme, when passed into law, will compel every worker who is not in a sound occupational scheme, or who does not choose to remain in one, to be a member of the State scheme. It fills in the gaps in the occupational schemes and completes them, so as to ensure that every person will receive superannuation benefit. That is the plan that we have laid down, and I am afraid that any Government facing this question will very soon find that without a State scheme we shall have all the people who need it most permanently excluded.
Looking forward to the Britain of the next ten or twenty years—it will not be a completely capitalist Britain or a wholly Socialist one; it will be a Britain with a mixed economy—we believe that the scheme that we have worked out will provide a framework for collaboration between the private and public sector which will set a precedent for genuine freedom of choice. We have allowed people genuinely to choose which they want, and I think that that is all to the good, because it will mean that all the private schemes will have to be as good as the State scheme, and vice versa, in order to attract people. I should have thought 1012 that hon. Members opposite would appreciate the virtues of that kind of competition.
I now want to turn to the Minister's speech. I accept his rebuke—his statement that I had a new-found enthusiasm for this matter. It is only two years since I have been studying it. I would add that it is also just two years since he began studying it.
§ Mr. Boyd-Carpenter rose—
§ Mr. Crossman
I am willing to give way when I have finished my sentence. We are both novices in this subject; there are Members on both sides of the House with years of experience in this matter. But I will try to be a little less cocky in my attitude to the House than the right hon. Gentleman was, because I am very much aware that this is a job in which experience tells a great deal. Those who have the privilege of having my kind of luck and being thrown into the job of thinking out new ideas on this subject, should realise that they are inexperienced. During the last year I was chairman of a working party of the Labour Party Executive, and our job, taking account of all the research and resources available, was to try to work out a plan for abolishing poverty in old age.
The Minister has also had two years, with all the resources of the Ministry at his disposal besides the advice of the central statistical staff, and he has had every chance of bringing out a scheme. But what did he say this afternoon? He said, "It will be years before we can do anything, because we have to start thinking." I would ask him what he has been doing for the last two years, because for two years it has been known that the Labour Party was preparing a superannuation scheme. If he thinks that it is so important—and he must realise that this is the last Bill of this sort that can be passed, because it is the reductio ad absurdum and the total destruction of National Insurance as we know it—why has not he been getting on with the job of formulating a basically new policy? I will answer that question at the end of my speech.
§ Mr. Boyd-Carpenter
I wish to intervene only to say that if my casual aside to two simultaneous interruptions 1013 seemed to be offensive to the hon. Member I very much regret it. Secondly, I am not going into competition with him. His right hon. Friend will remember that I did quite a lot of work with him in a very friendly way as long ago as the Industrial Injuries Bill, in Standing Committee, twelve years ago.
§ Mr. Crossman
We now understand that the right hon. Gentleman has a great deal more experience than I. He should therefore have done a better job.
I have never heard a more laboured excuse for total inactivity on long-term policy than the right hon. Gentleman gave at the beginning of his speech. As far as I can see, his only activity in the way of long-term thought has been to try to denigrate the efforts of the Labour Party. He was a little sensitive and he seemed to resent the use of the word "swindle", when used in connection with his Bill. I would refer him to the words that he used about the Labour Party policy. He said that it was:the biggest imposition on public credulity since the South Sea bubble. The truth is that there is not a Labour Party pension scheme and the claim that there is one is simply a phoney prospectus.A man who accuses his opponents of being swindlers should not be quite so sensitive to the charge when it is put hack to him.
One of the differences here is that the right hon. Gentleman was quite well aware that there was no bogus prospectus on our side at all. He was well aware that we were seeking to put forward a workable scheme and then to add to it a model to show how the scheme might work; knowing it to be full of deficiencies, and trying to make it work as best we could. That was no "phoney" prospectus. But I say, with respect to the Minister, that this Bill is a swindle and I am going to tell him why it is a swindle. I am also going to tell him why the right hon. Gentleman made those violent speeches attacking the Labour Party scheme. It was because he knew—and I did not—what a swindle he was going to put forward in the shape of this Bill. During the war I used to be in Psychological Warfare and there I learned that when you are in a thoroughly weak position and proposing to do something a bit dirty, the regulation routine is to charge the other fellow with doing something even dirtier in order to cover up the dirt 1014 you are doing. I shall not say any more about the swindle except to say to the Minister "Be careful," now that we all know what he is actually putting forward. I have in my considered verdict come to the conclusion that this Bill is a swindle on the contributors and on the old-age pensioners and I will tell him why I think that.
Of course, we must be fair. This is not the right hon. Gentleman's Bill, it is the Prime Minister's Bill. The Prime Minister made clear his decision. The Minister of Pensions and National Insurance could have done what the right hon. Member for Carshalton (Mr. Head) did when he was asked to carry out a job which, in his view, destroyed utterly our British defences. He resigned rather than do it. The Minister of Pensions and National Insurance has been told to carry out a pension reform which destroys National Insurance, which restores the purchasing power of the pension to the 1946 level, but at the cost of weighting down the contributor as never before. The Prime Minister said to the right hon. Gentleman, "My boy, you will please produce a Bill which restores the purchasing power of the pension, but reduces to a minimum the liability on the Chancellor of the Exchequer".
That is what the right hon. Gentleman was told to do and it was clear to him that it could not be done without making nonsense of National Insurance. The really serious thing is that National Insurance is being shattered by this Bill. People were very sceptical about it before, but after this Bill it makes nonsense to talk about insurance principles. Instead, we have a form of regressive taxation, and I take it for granted that some hon. Gentlemen opposite genuinely do not realise that. It is regressive in the sense that it bears far more heavily on the lower-paid worker than on the higher-paid worker. In fact, National Insurance is being destroyed, and the Minister proposes to substitute for it a highly reactionary and inflationary form of regressive taxation.
I wish to start by discussing the benefits. I hope that the Minister will pay attention to what I am now saying because I wish to ask him a question. Would he agree with my calculation when I say that he has succeeded in 1015 restoring the standard of living of the old-age pensioner to almost exactly what it was in 1946 when the pension was first introduced? I think The Times was right in its leader when it stated that if we calculate in the various increases for the cost of living and rent, we find that the old-age pensioner is, roughly, 8d. better off, if he is a smoker, on the 50s. pension than he was on the 26s. pension in 1946.
To call that a substantial improvement; to say that we can afford to take away the tobacco token, because the pensioner now has such a princely income, when, in fact, what he has is just about what he had in 1946—I am sorry, that disgusts me. That pretence really disgusts me. If the right hon. Gentleman or I were asked to live at the standard of living we had in 1946, we would say that it was rather a poor standard. We hear a great deal from the Tories about the scarcities of 1946 and the shortages. Well, remember that the right hon. Gentleman is giving back to the pensioners just the standard of living of the pensioner of 1946 and saying, "Look what I have done. I have given the pensioner a 'substantial improvement' in giving him a sum equivalent to the 26s. he had at that time."
When we gave the 26s., it was the first year after the war, and then it was a large slice of the very small national cake. Certainly, to put up the pension 16s. more than it was before represented an enormous increase, yet, it was a great sacrifice then because there was a tiny national cake. We hear about the great increases of income under the Tories. We hear that the national income has expanded hugely. Yet the pensioners' slice of the national cake is to be just what it was in the austerity days of 1946. Moreover, it is to be like that only for the moment. It has only been fixed in pounds, shillings and pence; and when the cost of living rises, as it will do during the course of the next year or so, the pension will he pared away month by month as it has been since 1955. Since the gratuity of the last increase, 3s. 9d. or 4s. has been pared off the pension, which means that month by month through the period the pensioner has been cheated even of that small part he was given. The provisions of this Bill simply mean that for a few months there will be a restoration to the 1016 1946 living standard and after that the pensioners of this country are to sink back below that living standard until another lobby has another drive to get another Bill through Parliament.
We on this side of the House think it shameful to treat the old people in that way, to leave them to be at the mercy of inflation and to have a Bill every time to try to give them back a little of what we promised two or three years ago. We are determined to take them out of that situation, to create a pension system which automatically allocates to the pensioner something which no political party can "welsh" over because the pension will be tied up so tightly. Our desire to take the matter out of politics is something which I believe no decent person should object to.
There is no suggestion in the Bill that we shall give the pensioner any guarantee against inflation. If the Minister had said today, "I give a pledge on the part of the Government that every six months there will be an automatic review and adjustment," there would have been no opposition from this side of the House. We would have supported the right hon. Gentleman overwhelmingly, if only he had promised not to cheat, but to ensure that, automatically, the cost of living of the pensioners was studied at six-monthly periods and the pension adjusted upwards.
§ Mr. Crossman
I think the hon. and gallant Gentleman means after 1946, and I would say this. Unlike the Conservative Party, we in the Labour Party learn. We are not at all ashamed of what we did in 1946, but we hope to do better in 1959. We have learned that we can improve on the scheme of 1946 and one of the essential improvements is to ensure that the pensioner is guaranteed against inflation.
The argument is advanced that this guarantee itself is inflationary. It is there in one of the beautiful little pamphlets—the Government's "bible"—issued by the life insurance companies. But is there anything more inflationary than armaments? Yet we do not say that we shall have no armaments because they are inflationary. We on this side of the House say that there are some things which are so important that, even if they 1017 are inflationary, we have to take the risk of having them. One of the things which is very important is not to cheat the old people who are the last persons who can be said to be responsible for inflation. It is right that those people who push up wages and profits should pay for inflation, but the one group who should be protected against inflation are the pensioners who are not the cause of it, whose expenditure is in no way inflationary.
Nothing could be less inflationary than the expenditure of the pensioners. They do not buy motor cars which could otherwise be sold in America. They just buy a little food and coal and have to pay for public transport. It would be a very mean Minister who would say that we cannot guarantee the pensioners against inflation.
Moreover, we have to face the fact that during the period of this Bill the gap between the privileged and unprivileged pensioner will continue to widen; the gap between those on superannuation, whether it be at the top level of the "top hat scheme" or at the bottom level of superannuation at 10s. a week—the lucky one-third who have superannuation and the two-thirds who, through no fault of their own, do not happen to be in superannuation schemes. We on this side of the House cannot tolerate it when the Minister says that we have to spend another two years thinking about the long-term policy. We cannot accept it as inevitable that meanwhile we have to have another makeshift Bill, with all these evils going on and becoming worse than ever under the provisions of this Bill.
Now, what about the contributions? I hope that I shall have my figures right. My skiffle-group of professors has worked out all four sets of figures for me. [Interruption.] When we have at our disposal the plenitude of staff which the Minister has, by Jove, we will do a good job. I would put four questions to the Minister, to see whether I have the facts right. Would he (1) agree that the pension increase from 26s. to 50s. is an increase of 92 per cent.; (2) that the share of contribution payable by the employee is increased from 19s. 6d. to 53s. 1d. and is an increase of 94 per cent.; (3) that the total contribution of the employee will have risen from 55s. 4d. to 105s., an increase of 172 per cent.; and (4) that 1018 the Exchequer contribution has risen from 24s. 8d. to 29s., or only 17 per cent.?
§ Mr. Boyd-Carpenter indicated assent.
§ Mr. Crossman
The Minister agrees. Here, then, is the proof of regressive taxation. The Exchequer contribution is only rising by 17 per cent. while the employed man pays, towards his own pension, a contribution which has increased by 171 per cent. There has been a steady and deliberate policy of shifting from the Exchequer to the contributor the weight of paying for the old-age pension. I want to be fair to the Minister and say that we believe that the contribution ought to be much higher, but we shall not tolerate a flat-rate contribution, which is simply a poll-tax on the lowest-paid worker, producing unbearable hardship.
These increases are most inflationary. Imagine an agricultural worker suddenly told to pay 6 per cent. of his wage as his contribution. He is almost bound to put in a wage claim. We therefore have the fantastic situation that this Government who talk against inflation are imposing inflationary increases which must put an enormous burden on the lowest-paid workers.
Let me point out to the Minister some thing else that he is doing. Has he worked out the effect of the new contributions on the low-paid part-time workers? What employer will be able to afford to pay for nine hours work by a domestic cleaner, in addition to the wage a contribution of 14s. 2d. per woman and 17s. 6d. for a man? Does not the Minister think that he is making it almost impossible for elderly persons to get part-time work because of the size of the contribution which has to be paid? The contribution of the employer will either be deducted from wages, which will come even more miserably down, or the employer will not employ the part-time worker. The same is true for women in domestic service or office work; they simply will not get employment. One of the by-products of this scheme will therefore be to take away one source of minor earnings from elderly people who are already suffering under the scheme. Instead of bringing the contribution down for these people the present proposals will shift the burden regressively on to the lowest-paid workers.
It will also destroy the actuarial basis of National Insurance. National Insurance used to be a tripartite scheme; it 1019 will now be a bipartite scheme, because it is now to be paid for mainly by employers and employees. The employer will be able to pass his contribution on. It is therefore inflationary. The Government, who are so keen about preventing inflation, are here giving employers an excuse for raising prices all over again because the Government are putting nearly two bob on their contribution. It will be passed on in increased prices. So the burden falls on the employee contributor and most heavily on the poorest contributor.
Let us observe something else. Young people will have to pay more under this scheme than will be necessary to get their pension—and it is not a splendid pension at that. Government actuaries tell me that the employee will pay one shilling and threepence per week more than he actuarially needs to do, to graduate for his pension, and that the employer will pay one shilling and twopence more. That means two shillings and fivepence per week more being paid than is necessary. Under the Labour Party's plan those who pay more get more while under the Conservative scheme we all pay more and get no higher benefit. That is called "a noble and substantial improvement."
The result will be that the insurance principle will have no meaning whatever. It would have been far more sensible under this Bill to give a full pension as well to the non-contributory pensioners. For what is the difference now between somebody who has contributed and somebody who has not? Some have to contribute too much and some too little and there is no relationship between their contributions and the pension that they get. Then why not bring them all into a single non-contributory pension scheme? We all know why the Minister will not do that; because it has to be paid for by the Exchequer. A non-contributory pension would be an equal pension putting a crushing burden of taxation equally on the whole community. The proposals in this Bill, however, are an ingenious device to make the working class pay more than it has ever had to pay, and for an inadequate benefit.
I know the Minister believes that the right thing to do is to settle things in the short run for the existing pensioners and then to sit down and do some thinking about the long-term policy. Let me be 1020 honest with the Minister: we started that way ourselves. We thought we could split these two problems, first getting National Insurance right for the existing pensioners and then putting on top of that a new scheme for the young people. The fact is—I will tell the Minister this free—it cannot be done. The only workable scheme is one which deals (1) with the existing pensioner, (2) with the middle-aged pensioner, and (3) with the long-term pensioner all together. If one deals with (1) by itself, one's scheme will be permanently bankrupt and there will be a permanent political temptation to lobby for higher pensions rates. It does not help solvency to have a safe, non-bankrupt scheme for people of eighteen linked with a bankrupt scheme for people over fifty. We must have an over-all scheme for all the people all the time.
One respect in which we look at the Bill with pleasure is that it proves conclusively that point. The Bill is the end of the dead-end. It is the end of the blind alley. We are knocking our heads on the end of it. We cannot raise contributions any further under the existing scheme. That is why the next Pensions Bill must be a National Superannuation Bill. There is no alternative and we must always be grateful to the Tories when they prove the necessity of Socialism by their blind, stupid continuation of schemes until they become positively unworkable. In so far as this scheme is workable, it is only against the interests of the poorest people.
I would now refer to a point mentioned by my right hon. Friend the Member for Middlesbrough, East (Mr. Marquand). It is interesting to speculate why the master ordered the Minister of Pensions to introduce this scheme. Let me quote from the speech made by the Prime Minister on Tuesday of last week. He said:We have been and are giving, as the Gracious Speech shows, very close attention to these problems. Meanwhile, we are very grateful for some of the preliminary suggestions which have added to the pool of general information on these matters. We have watched with interest quite a lot of political garments lying strewn about on the river banks.He had already said:We all agree that in a modern society the State must secure that provision is made for basic needs, but I think it is a different question, and a difficult one, how far it is the right or duty of the State to compel people to go beyond this."—[OFFICIAL REPORT, 5th November, 1957; Vol. 577, c. 31.]1021 When I read this I understood all that had happened. The Prime Minister is a shrewd politician. He looked at our scheme, and as it made good sense he wanted to have one like it. Somebody came along and said, "Of course, it is good for the people, but what about the Pearl and the Pru'. Do a bit more thinking. Don't make any decision. Show yourself theoretically in favour, but not in a practical way which is any danger to private insurance schemes." That is a guess, only a guess, but I would say this to the insurance companies. Every time the State has advanced into the world of insurance the insurance companies have been scared lest their business should fade away. They were scared of the 1946 Act, but the result of the 1946 Act was actually an increase in the amount of work they had to do.
I say in all sincerity that if we could get this country pension-minded, if every worker had superannuation and recognised that his contributions are deferred pay saved up for him in a fund controlled by an adequately independent trustee, I believe he would not be content with that first part provided by the State. Through his trade union he would negotiate other schemes with his employer. So we would build in national superannuation a foundation for the workers who, by their trade union or individual activity as they became more prosperous, would be able to build on that foundation. Therefore, I think the insurance companies are being a little short-sighted in not recognising that it would be a terrible thing if, for the sake of their private commercial interests, they denied to half the people of the country the superannuation which they admit to be a good thing.
All the insurance companies say that superannuation is right. But they want to do it all themselves, and I say they cannot do it all. No one will believe that the building industry will have a superannuation scheme in the next 50 years, or agriculture either. The insurance companies will not be able to cover all the workers. That is why the next Labour Government will introduce their scheme which, for the first time, will provide superannuation for every worker in the country, either through a private or a public scheme. That in the long run will abolish poverty in old age and 1022 produce a higher standard of living, as the Minister rightly said, at the cost of each of us being prepared to cut consumption today for the take of provision for our old age tomorrow.
That is the philosophy in which we believe. That is what we have put into our pamphlet which the Minister says is ridiculous nonsense and not a pension scheme at all. We are glad that this Bill has been brought in. It gives a very miserable pittance and we cannot oppose it, but what it has done is to make certain that the people of the country, including a lot of Tories, will understand the need for national superannuation. I predict that what the Minister called a scheme by "a skiffle-group of professors," will be the law of this country within the next three years.
§ 6.23 p.m.
§ Mr. A. E. Cooper (Ilford, South)
The hon. Member for Coventry, East (Mr. Crossman) is always very amusing, but we are never quite sure, when he starts his speech, how he will end it. There were quite a number of points in it with which I hope to deal as I go along. Tonight, he has at least been consistent. He accused us of cheating old-age pensioners of their share of the national product. He said exactly the same to his right hon. Friend the Member for Llanelly (Mr. J. Griffiths) when the right hon. Member was Minister of Pensions and National Insurance, so the hon. Member has dispensed his bouquets rather liberally all round.
If I may say so to the hon. Member, he addressed the House tonight and the Labour Party Conference at Brighton with some impertinence. He has told the House that he is a novice on the subject of pensions, but he has come to this subject like Moses descending from the mountain and told us how we should behave. I am not so much criticising the hon. Member for that, because I am the first to admit that it is an exceedingly difficult problem for any political party, particularly a political party in opposition, to formulate a scheme of such magnitude that it will be foolproof. Heaven knows, in private industry, where we have to formulate our own pensions proposals, we have just as many problems to face. I would have hoped that the hon. Member and his working party would try to learn from some of the experience which 1023 private industry has had, not only in the last two or three years but over half a century or more.
We have had many setbacks, not so much from the employers' side as from the employees' side. We find that in many industries employees are not willing to make necessary contributions towards a superannuation fund. That is found where employment has been regular and consistent, particularly in my industry the chemical industry. That is a state of mind among many working people that we have to overcome. Unfortunately, a large number of people live for today and let tomorrow take care of itself. There is still a great deal of education to be done before we get all people into the frame of mind to agree that a national superannuation scheme is a wholly desirable thing. If the hon. Member is honest, I think he will be the first to admit that the Labour Party's scheme as at present put to the country has already been riddled with holes by the Minister beyond the possibility of redemption.
§ Mr. Crossman
I could not admit that. Will the hon. Member allow me to put this to him? The Minister made one very serious criticism of our scheme. He said that we had miscalculated the amount we would have in contributions. He said that at the end of ten years we would have only £1 billion. I have been working out what we would have at the end of ten years under the Government's scheme. I find that he would have squandered £1,400 million. That is the difference. The criticism of us is that we would have only £1 billion surplus in our fund, whereas, if we do not have the Labour Party scheme, the right hon. Gentleman admits that £1,400 million will be squandered. Therefore, let us improve the fund.
§ Mr. Cooper
That was an extraordinary intervention by the hon. Member. Here we have a scheme, formulated after two years' work by a novice chairman and a working party—
§ Mr. Cooper
The hon. Member for Coventry, East brings forward the scheme with certain financial explanations and the Minister completely destroys the case. 1024 Then the hon. Member says, "Well, maybe we made a mistake of a couple of thousand million, but, nevertheless, let us have another think about it."
§ Mr. Cooper
I say that the Labour Party scheme is thoroughly ill-thought-out and half-baked. When hon. Members opposite put their scheme to the people in the country, as so many have been doing recently—as the Labour candidate in my constituency has done—and say that it means half-pay on retirement, what is meant is half-pay on retirement in forty years' time. That is a thoroughly dishonest prospectus and the sort of thing which will destroy the Labour Party's scheme in the eyes of the electorate.
I should like to see my right hon. Friend come forward now with a scheme for long-term superannuation. I believe that before this Parliament is out such a scheme will be brought forward. When it is brought forward it has got to be right, because we are not dealing with a couple of hundred employees, but with more than 20 million people. I should like hon. Members to realise some of the implications of this pension problem over which we skate so freely.
The population is ageing, and in a few years' time there will be far more old-age pensioners in relation to the working population than there are today. At the other end of the scale, more children are remaining at school until they are older, and in the near future it may be that the compulsory school leaving age will be raised to 16 for everybody. As a result, productivity must increase very substantially because a smaller section of the community will have to sustain a greater proportion than at present. Let us remember that.
To support this almost Frankenstein monster, there must be a far greater incentive to the working population than there is at present, whether it is through greater superannuation benefits at the end of their working lives or through greater taxation reliefs now. All these things must form the general pattern which we as a nation must follow over the next few years, and it is idle for right hon. and hon. Gentlemen opposite to tell the country that this pensions increase is niggardly and that they would have done more when they know in their hearts that 1025 if they had been the Government of the country at present they would have done no more.
This is nothing more or less than political vote catching, but, make no mistake about it, it will rebound against the Labour Party in a big way. The people are not so stupid. [HON. MEMBERS: "Then have an Election."] The reason we do not have an Election now is that we are busy as a Government and have a lot to do.
I was rather sorry for the right hon. Member for Middlesbrough, East (Mr. Marquand) who spoke very much with his tongue in his cheek. Why is it that right hon. and hon. Gentlemen opposite look so miserable when the Government are doing something good? When the announcement was made about telephone charges this afternoon, I thought I had never seen such a collection of miserable faces in all my life as I saw on the Labour benches. In this Bill we are increasing pensions to a level which they have never reached before and giving them a purchasing power which they have never before enjoyed, but hon. Members opposite look very miserable. They must learn to cheer up when good news is given to the country.
The hon. Member for Coventry. East got himself in quite a muddle over contributions. He said, first, that the employer would simply pass on the extra 1s. 11d. which he had to pay. As an afterthought, he said that the Chancellor pays 65 per cent. of it and there is, therefore, not very much to pass on anyway. He said that the only person who suffers is the contributor, who pays an extra 2s., but if he is paying tax—and many contributors are—then 65 per cent. of the increase is paid by the Chancellor of the Exchequer. Let us not forget that.
When the hon. Member talks about the poor working class it does not cut any ice with me or with many hon. Members. Sitting in front of him is his hon. Friend the Member for West Ham, North (Mr. Lewis). I drive through West Ham every day; I drive through it as quickly as possible, but, nevertheless, I drive through it. I pass through street after street of working-class houses—people working in the docks or in factories of one sort or another—and I see motor car after motor car and television aerial after television 1026 aerial. That is all right. I am very happy about it. But hon. Members cannot say that these people are hard up if they have these things. If hon. Members want to know who are the new poor in this country—
§ Mr. Cooper
Correct. The new poor are the fixed income, lower middle-class people. They have gained very little or nothing from the country's prosperity over the past few years. Last year, wages increased by £900 million, but there was no proportionate increase in the salaries of the lower middle class.
§ Mr. Lewis
The hon. Member has mentioned my constituency. If he drives through it, he knows that it contains quite a large number of railway workers. The majority of them earn £8 or £9 a week. Does he not understand that many are being charged a rent increase of 25s. a week? They deeply resent that when they know that hon. Members opposite are receiving as much as £14 a week extra in Surtax rebates from the Government. That is what they resent.
§ Mr. Cooper
I can assure the hon. Member that in my very best ward, a very strong Tory ward, a great majority of the people would love to be earning the wages which are being earned in Becontree at present. They would love to have the facilities to do so. Hon. Members cannot find all the material evidence of prosperity in my Cranbrook ward that can he found in Becontree.
§ Mr. Cooper
But it is just as prosperous. If the hon. Member wants to make money quickly he could do worse than open a shop in West Ham—much worse.
§ Mr. Cooper
Which, of course, the hon. Member has.
I want to make one or two comments about Civil Service pensions to which I hope my right hon. Friend will give attention. I presume that I am not alone in having been approached by Civil Service pensioners who are distressed that their pensions remain at the old 1027 figure and that they have had no compensating increases to cover inflation. I wonder whether it is possible to do something about that.
The second point is one on which I know the entire House is agreed. When we were in opposition we pressed it upon the Government and they were unable to accept it at the time for financial reasons. Probably the same reasons apply today. It concerns non-established service. It has been agreed by the House that it is absolutely proper that this question should be dealt with, and I hope that something can be done about it in the very near future.
§ Mr. W. R. Williams (Manchester, Openshaw)
Obviously, that does not come within the scope of this debate but I am very pleased that the hon. Member is sympathetically disposed on that issue. Has he noticed a Motion on the Order Paper which will enable him to try to bring pressure where it is most useful in that connection?
[That this House takes note of the recent Report of the Royal Commission on the Civil Service (Command Paper No. 9613) and the observations of the Commission in Chapter XV, paragraph 743, on the subject of the reckoning of unestablished service for superannuation purposes in the Civil Service, to the effect that there is no question of merit or principle outstanding, that it is in fact now common ground that it is right that unestablished service should reckon in full, that Parliament conceded that as regards service after July, 1949, by the Superannuation Act, 1949, that the Royal Commission were of opinion that the Superannuation Act, 1949, afforded a precedent for retrospection and supported the argument that if a certain treatment is right at one point in time it is also right at others, and that in the view of the Royal Commission the sole consideration was that of cost; and this House is of opinion that all unestablished service prior to July, 1949, of civil servants subsequently appointed to established posts should be reckonable in full for superannuation purposes (instead of one-half only) on the grounds put forward by the Right honourable Gentleman, the Member for Monmouth, in his speech to Standing Committee B on the 1028 Superannuation Bill, 1949 (HANSARD, 10th May, 1949, Cols. 155–158), and calls upon Her Majesty's Government to take the necessary action.]
§ Mr. Cooper
I thought it was a good idea to try to bring pressure on the Minister during the Second Reading debate. The matter might then be discussed in Committee. We will see what can be done.
The final comment I want to make is about the earnings rule. There is some room for controversy about this, and I know that certain trade union leaders are opposed to any relaxation of the earnings rule. Earlier in my speech, however, I emphasised that for many years we need a greater level of productivity. We must have as many people working as possible. The advantages of medical science and the general standard of living of the people suggests that many people at the age of 65 are fully capable of continuing to work for many more years and want to work for many more years. They could make a positive contribution to the country's economy. I know the disadvantages that can be cited against doing away with the earnings rule altogether. Nevertheless, we have to consider this question in relation to the nation's need for greater productivity. With the burden of pensions growing with the years, we cannot ignore the labour of perhaps as many as half a million people.
I would suggest that this whole vast field of pensions and pension reform is something we should try to take out of the cockpit of party politics. We can have our individual knockabouts, but that is a little profitless. It may be that the time has arrived when a Royal Commission, or another Beveridge Committee, should consider this whole problem, which is probably one of the greatest domestic problems that the nation has to face.
§ 6.41 p.m.
§ Miss Margaret Herbison (Lanarkshire, North)
The hon. Member for Ilford. South (Mr. Cooper) has dealt with almost nothing of what is in the Bill, and has given us the present-day Tory patter that we have "never had it so good". After listening to his speech, one wonders what must be the reaction of the old and the sick to his attitude.
1029 The provisions of the Bill have been very long awaited, and now that they are before us I am quite certain that the majority of our people will consider them miserably inadequate. In his speech today, the Minister spoke time again of the substantial improvements that the Bill would give to many people. Knowing the provisions of this Measure, I feel that there has never been a more farcical use of our language than his describing them as substantial improvements.
The Minister is not alone in that. Winding up the very long debate that we had yesterday, the Leader of the House said:In this Session we are going to take great strides forward in carrying forward our philosophy of championing individual rights.Again, if one puts the Bill's provisions against that statement, the only conclusion one can come to is that the statement is just sheer humbug as far as it affects the liberty of the old, the sick and the disabled. I have always believed that one of the most important aspects of liberty is a freedom from poverty and from grinding want. The old and the sick are certainly suffering from both at present, and for many thousands of them the Bill will do little to take away that poverty.
In his last few words in moving the Second Reading, the Minister said that the Bill would bring comfort and help where they were needed. I do not accept that, and I am quite certain that millions of our people will not accept it, either. The right hon. Gentleman announced last week, and the Bill provides, an increase of 10s. in various benefits. I was interested in what my hon. Friend the Member for Coventry, East (Mr. Crossman) gave as what he supposed would be the conversation with the Prime Minister on the question of a superannuation scheme. I am certain that when the Government were pushed to make increases they decided to make them as low as possible and, at the same time, they had long discussions to discover, in what devious ways they could protect the Treasury and the Surtax payers from carrying a part of any burden that might ensue from the increase.
They solved what was for them this serious problem in two ways, and both are despicable. According to the figures given by the Minister, 1,683,000 National Assistance grants are paid weekly to old 1030 couples, and to families where the breadwinner is unemployed, or sick, or industrially disabled. The grants may, indeed, cover well over 2 million people. The old-age pensioners have been given a 10s. increase by this Bill, but, of them, over 1 million are receiving National Assistance. Those people immediately lose 5s. of this increase. I do not know the exact number of those old-age pensioners who receive tobacco coupons worth 2s. 4d., but I imagine that with the disappearance of this concession there will be about a million of them, who will get the princely increase of 2s. 8d. on the present amount. How dare the Minister say that that is a substantial increase for anybody?
Yesterday, again, the Leader of the House said:…our ideals must expand in the same proportion as our scientific advance…"—[OFFICIAL REPORT, 12th November, 1957; Vol. 577, c. 906–7.]We have become very used to the platitudes of the Leader of the House, but when one examines that particular platitude it would seem, from the Bill's treatment of our old people, either that our scientific advance is going at a snail's pace, or that the ideals of the Tories are very poor and makeshift things. I am sure that everyone knows that our old people's troubles are due to the lack of any ideals or decent philosophy on the part of the present Government.
The Government's second solution to the problem was the raising of the contributions—again, in particular, to relieve the Surtax payers. In giving his financial explanation today, the Minister obviously showed what my hon. Friend the Member for Coventry, East proved so clearly in his excellent speech: that if we try to continue with the present fixed-rate contribution and fixed-rate pension there will be no hope in the future for the old people having any decent standard of living at all. If the Minister examines his own speech he will find that that is the only conclusion to which he can come. I am convinced that either this Government—if they last long enough—or certainly a Labour Government, will get away from the flat-rate contribution and introduce a graded contribution with a graded pension.
The hon. Member for Ilford, South does not seem to know how many of our people work and live. He does not seem 1031 to have any knowledge of agricultural workers. He does not seem to know that those doing the ordinary labouring, the low-paid wages earners with families, will find this extra 2s. a quite intolerable extra burden on them. And for the young in that category it is, as has been pointed out earlier from this side, an extra contribution in order to give to our present old-age pensioners a completely inadequate pension—and also a completely inadequate pension for these young people in the future—although the Government's own actuaries have shown very clearly indeed that the young people in our community, even the lowest-paid wage earners among them, will pay more than actuarially they should for their own pensions in, say, forty years' time.
I want to touch on what is not in the Bill. A very long fight was put up by hon. Friends on this side of the House to try to bring those men and women who receive benefits under the old compensation Acts up to the same rate as those in receipt of Industrial Injuries benefit. I myself introduced a Private Member's Bill to cover both the partially and the totally disabled under the old compensation Acts. Friday after Friday it was turned down by a Tory Member at the instigation of the Minister. Last year, however, the Minister finally brought in a Bill that took care of the totally disabled and, by giving them an increase of 17s. 6d., brought them up to the same rate as those in receipt of benefit under the Industrial Injuries Act.
Surely, when the Government decided at that time that it was only justice to give to those people that increase, the Government ought to have had in this Bill provision for raising those old compensation cases to the new level. If the Minister does not bring in the old compensation cases when the Bill is in Committee, the men and women in those old cases will be 25s. a week worse off than those who are receiving Industrial Injuries benefit.
I ask the Minister to consider this matter between now and Committee, and, if he decides that it is just to bring them in, that he will so phrase his legislation that if there is an increase in Industrial Injuries benefit, those who receive benefit under the old compensation Acts will be able to get such increases. If 1032 he does not, we on this side will put down an Amendment.
Then there are those who get pneumoconiosis benefits—all time-barred cases. They are getting even less than many who are receiving benefit under the old compensation Acts. They benefited under the 1956 Act, but under this Bill there is no benefit for them. I beg the Minister to include in the Bill a provision that will cover these people.
My last point relates to the non-contributory pension. This was raised to 26s. in 1946, but there has not been a single penny increase since. Many of these people are very badly off indeed. If 26s. was considered the correct amount in 1946, according to the Minister's own figures, given in an Answer on Monday, the figure would now be about 42s. 4d. Surely the Minister cannot believe that to give them the 2s. 4d., which is what they will lose from the tobacco token, will be sufficient. This is a poor Bill. It is completely inadequate and a great disappointment to our old people.
§ 6.54 p.m.
§ Mr. Harold Gurden (Birmingham, Selly Oak)
If there should be any recently admitted visitors to the Public Gallery listening to some of the speeches from the benches opposite, they might well think that the proposal of my right hon. Friend is to reduce rather than to increase pensions by 10s. a week. It is very surprising that no one has yet seen fit to compliment the Minister on what he is doing in the Bill.
I would mention, in passing, the statement by the hon. Lady the Member for Lanarkshire, North (Miss Herbison) that this increase is niggardly. She compared it with the contributions increase which she said is very serious. It is 2s. a week, which is less than 1 per cent. of most of the lowest-paid workers' wages. I want to add my congratulations to the Minister for this Bill and for dealing with the matter immediately, although inflation is with us and there are serious financial difficulties. He has done a very brave thing at this stage of our difficulties, and this proposed increase in the pension rates is very large in face of our financial position.
Of course, the increase in contributions has had to be loaded to a very high figure, although 2s. is not such a great figure proportionately speaking, but—let us 1033 admit it—it could well add to our serious financial difficulties and increase inflation. I hope that both those who have to fix commodity prices, and wage earners, will observe restraint and will not add to the country's financial difficulties which would make conditions far more difficult for the old-age pensioner, by increasing prices and adding to the inflationary spiral.
§ Mr. Marquand
Do I follow the hon. Gentleman's argument aright, that the increase in pensions is inflationary? How can this be so if the contributors are to pay £167 million and the beneficiaries are to receive £167 million? Is it not just a balance?
§ Mr. Gurden
What I am saying is that the increase in contributions could be an inflationary act if the wage earners and the people who fix the prices of goods and not observe restraint.
I should like to refer to my experiences in my own and in other constituencies during the recent Recess. I visited a fair number of meetings of old-age pensioners. I was told that I was going into the lion's den. In fact, I found that the old-age pensioners themselves were not so very anxious, but that they would like an increase and they felt, very rightly, that they ought to be compensated against inflation—a point with which I agree, and my right hon. Friend has obviously agreed with it since he proposes to increase the pension.
There are, however, the pressure groups and some of the officers of the old-age pensioners associations who have been whipping up the enthusiasm of these people to a rather disgraceful state.
§ Mr. Gurden
Some of these people themselves were not old-age pensioners. I am sorry to say that, in one case, that person was someone describing himself as a clergyman. I do not know what was his denomination, but he was not, I believe, a member of the Roman Catholic Church or of the Church of England.
§ Mr. G. Thomas
The hon. Gentleman is not, I think, being his usual fair self. He has been very unkind to other 1034 denominations. Would he not agree that it is natural for one who wears the cloth to be concerned about the living standards of old people?
§ Mr. Gurden
I agree that it would be wise for anyone who wears the cloth to be concerned about the living standards of old people, but I should like to go on to explain why I take exception to the way in which these people have been whipping up the enthusiasm of old-age pensioners, often against the wish of old-age pensioners. This type of person has not, may I say, been helping the case of the old-age pensioner. The particular one I have in mind certainly did nor convince me that it was the right way to go about it, and I do not think that he was doing the old-age pensioners' case one bit of good. I saw him working people into a frenzy by the singing of songs with a swaying motion, behaviour which might well have come from heathen parts rather than those he was supposed to represent.
I say these things tonight so that it may go on record that no good is done by trying to persuade pensioners that the sort of person I am referring to is the one really getting the increases for old-age pensioners, leading them to expect certainly not a penny less than £3 a week, and causing them ultimately, unfortunately, to be very disappointed when they find out that it simply cannot be done at this stage and at that rate.
§ Mr. R. E. Winterbottom (Sheffield, Brightside)
Would the hon. Gentleman tell us what is wrong in having enthusiasm for something in which one believes or in having enthusiasm for a cause devoted to the correction of injustice? Would he say why the type of person to whom he refers is undesirable, compared with the bellringer at the Conservative Conference? Probably some enthusiasm was needed there.
§ Mr. Gurden
The reason why that type of person doing things like that should not be approved in this democracy of ours is that he is using the same method as was used by the Nazis and other similar national leaders to work people into a state of frenzy quite improperly. As I say, it does not do the old-age pensioners' case any good either. I am quite sure that, if the hon. Member for Sheffield, Brightside (Mr. Winterbottom), 1035 had been with me, he would have agreed that that was bad propaganda to use.
I now turn to the long-term policy which the hon. Member for Coventry, East (Mr. Crossman) touched upon. Of course, we know that he has become the salesman to sell a policy which he hopes to be able to put over from the Front Bench opposite. In my view, we must in the future have more regard to the greater ages people are attaining today. If we do not recognise that people are living longer, we shall undermine any scheme, even that of the party opposite. We are told that, by 1978, at the present rate of old-age pensions, the cost will be £1,000 million a year. I suggest that we cannot go on much longer, probably not more than a year or two at the most, paying out the present pensions at the present minimum ages of 60 and 65.
I am strongly in favour of paying a higher rate of pension, and I hope that we shall before long be able to pay to the really aged of 70 or 75 a higher rate of pension.
I will give as an instance the case of a constituent of mine. He came to me in tears, saying that his problem was that he had to retire from his job. He was considered to be an old man at 65. He certainly did not look old; he looked fit for another five or ten years' work, and he hated the idea of retiring. His situation was depressing him tremendously, and he wanted to know what could be done. Because he was entitled to an old-age pension at 65, he was forced to retire from his job. I am strongly of opinion that the age limit of 65 must be raised, perhaps by three or six months at the beginning, and progressively thereafter, to keep pace with the longer life of the average person today.
We cannot really call people old at 60. Are old-age pensioners aged people who have to come, as they say, for charity, who must leave their jobs and retire? Certainly not. They are not old at 60 at all. Perhaps they were some forty or fifty years ago, when it might have been a reasonable age to take. Perhaps it was even in 1946 a reasonable age to start with; but today it is out of date and people are not, or should not be, old-age pensioners at 60 years of age.
§ Mr. Richard Fort (Clitheroe)
May I ask my hon. Friend a question on some- 1036 thing which undoubtedly affects the problem? If he is advocating this change, why should it be that almost every other pension scheme in the world adheres to 65 as the retirement age, just as we do at present?
§ Mr. Gurden
I am not quite clear what is the point my hon. Friend is trying to put to me. If we enter a voluntary scheme, we may choose to take the pension at 65; and that is all right. To impose it as a statutory age limit is, I think, wrong.
§ Mr. Gurden
I am advocating that the savings which will be made by raising the age limit should be passed on to those of 70 and 75 years of age. This would go a long way towards solving the problem of ensuring that people of greater age, who are less able to look after themselves than those of 60, receive the increased money.
I hope that my right hon. Friend will tackle this matter very closely, and I hope that he will see it through. It would be a sad day for this country if my right hon. Friend had to leave his present Ministry for another, and I hope that he will stay long enough to complete this work which he has set out to do. He is really quite brilliant at it.
§ 7.8 p.m.
§ Mr. Tom Brown (Ince)
I understood the hon. Gentleman the Member for Selly Oak (Mr. Gurden) to complain about the enthusiasm which was being worked up in the ranks of old-age pensioners by some irresponsible person. At least, I gathered that that was what he said.
§ Mr. Gurden indicated assent.
§ Mr. Brown
My experience does not lead me to that view at all. Old-age pensioners have been very enthusiastic for a number of years in trying to secure redress for the injustice meted out to them. I visit old-age pensioners' clubs in my constituency and elsewhere, and the enthusiasm, if I sum it up aright, is born from the fact that they are suffering grave injustice brought about by the increased cost of living which makes it difficult for the basic pension of £2 to meet their needs. I do not think that the hon. Gentleman meant what he said in the way he put it.
1037 There are many people who are throwing their weight in with old-age pensioners who are not old-age pensioners—members of the Churches, the Co-operative societies, the trade union movement. My experience teaches me that many of the leaders of the old-age pensioners' movement have been members of trade unions in the past. They know very well that if they are to get any redress for the injustice from which they are suffering, they will have to organise themselves, draw up petitions, and so on. I hope that the hon. Member will take it from me that the enthusiasm of the old-age pensioners is born from real hardship.
I listened with rapt attention, as I always do, to the Minister when he put forward the case on behalf of the Government. I listened to him when he said that he had an intuition that we on this side of the House would advance a very strong argument about graduated contributions. How he got that impression, I do not know, but it would be foolish of us to advance that argument under the present pensions structure. In the days that lie ahead, we shall certainly come forward with a Measure that will have within it graduated contributions. That is as sure as night follows day, because that is the only sensible thing to do.
When there is such a variation of wage rates and standards in the various industries, we cannot have a fair flat-rate contribution. Therefore, we have to make up our minds, when we face this problem in the future, that there will have to be a graduated contribution.
The next thing of importance that the Minister said was that the Bill did not alter in principle the structure of the present scheme. Neither would it be wise for the Bill to alter it. We have to make the best of the scheme. However many shortcomings this Bill may have—and it has plenty, which we shall be in duty bound to criticise, if not on Second Reading, in Committee—I think that it would be foolish for us to try to upset the structure which was established many years ago. We have got to improve upon it. I entirely agree with my hon. Friend the Member for Coventry, East (Mr. Crossman) that in the days which lie ahead this problem will have to be faced in a totally different way from that which has been faced in the past. I am not blaming the Government or my own party 1038 for the scheme which was inaugurated in 1946. I am blaming the statesmen of the past, who have failed to realise the problem of the ageing population. We should have started a lot sooner. A lot of water has gone under the bridge since then.
The Minister gave us some staggering figures, which almost made me fear and tremble for the future. We have had staggering figures from time to time of what it would cost to grant the pensions that the old-age pensioner demands. We have had staggering figures for destruction, too, of £1,460,000 million a year spent in the preparation for war and in payment for past wars. If we can afford to spend that money in preparation for war and destroying life, then I say without fear of contradiction that we ought to be in a position to find the money for the maintenanec of life.
I am not so silly as to suggest that we must not prepare for our defence. We have got to defend this country, and defend it we will with our money and with our physical resources, but, at the same time, we cannot allow the people who have weathered the storm of life to remain in a state of poverty.
I agree, also, with my hon. Friend the Member for Coventry, East that this will be our last debate on the present scheme. I made that prophecy some time ago and I repeat it. I may be wrong, but as I read the signs of the times—and I think I read them aright—that prophecy will eventually prove to be true, because there is a different approach in many spheres of society regarding the old-age pensioner and the problem of the aged of the country.
I was glad to see in the Queen's Speech that the Government proposed to do something concerning the wider aspects of old age. When we have finished with the Bill, we shall have to tackle the wider field, because, after all, we can give the old-age pensioner his £2 10s. or the married couple their £4, but one thing that the money will not do is to relieve loneliness. That problem has got to be tackled, and I hope that the Government will tackle it with determination in the near future.
In the concluding part of the Minister's speech, he spoke of bringing comfort and solace to the old, the sick and the infirm. We agree with him. I assure the Minister 1039 that we on this side of the House will not do anything to retard or hinder the progress of this Bill, with all its faults, with all its failings, and with all its shortcomings. We shall assist in every conceivable way to get it on the Statute Book as quickly as possible, so that the old folk may have the benefit of the increase. We realise that the improvements do not go far enough. They ought to go a lot further.
We should have had these increases long ago, but we are told by the Minister that the old folks will have to wait until after Christmas. It would have been a good thing if the increase contained within the Bill could have been given to the old-age pensioners on the payment day before Christmas. It would have been welcome to them. The Department knew full well that there was this agitation throughout the country. On 20th February this year, there was presented a Petition, signed by 133,000 people over the age of 21, calling the attention of the Government to the dire need for some improvement in the basic pension rates. We had a debate on 25th February, when the Government, through the Joint Parliamentary-Secretary, admitted—I pay tribute to her honesty—that £2 a week was an inadequate pension on which to live. On 1st August, we had a debate and many points were put forcibly and logically. Those three events were sufficient to convince the House and the Department that something would have to be done in this new Session for the old folk.
It would have been a good thing if it could have been done before Christmas. I have had some experience of administration for over twenty-five years, and I am not unmindful of the administrative difficulties that confronted the Department. At the same time, if the Department had realised the problem that was facing it, preparations could have been made in the early part of this year to meet the situation in the new Session.
This great family of pensioners is growing, but I am convinced that if the Department had shown the good will which it ought to have manifested towards the old people during the Recess it would have formulated proposals to make it possible for the old folk to have an increase in their pensions before Christmas. Alas, such is not the case, and 1040 the old folk are bitterly disappointed at the Government's failure to do that for them, because they are suffering real hardship.
The old folk have had the most disgraceful treatment given to any section of the community. There is not one of us here, whatever our political philosophy may be, and no matter on which side of the House he sits, who can deny that. They have been left at the back end of the queue. They have been struggling for years to meet the higher prices caused by inflation. They have no trade union, and, therefore, somebody has to take up the cudgels on their behalf. I say with the greatest respect that no other section of the community has had the treatment that our old folks have had. Rising prices have depressed their conditions more and more, and as one views the future one cannot see any hope of an end to rising prices for food, coal, light, clothing, etc.
The increased benefits foreshadowed in the Bill, such as they are, will be swallowed up by rising prices, may be by 27th January, 1958, when the increases take place. I hope that that does not happen. I hope to have an opportunity of criticising the contents of the Bill at a later date. During the Committee stage, we shall put forward certain Amendments, and I hope the Minister and the Department will give serious consideration to them. The Government are tackling this problem early in their current programme of legislation, and one thing that I admire is the fact that this is the first Bill in the programme of the new Session.
The Bill offers increases which, if they do not meet all the demands of the pensioners, will certainly do something to ease the strain now being borne by the old folk on their meagre resources. Of course, the proposed increases will have to be paid for, and we all realise that. I have said that before, and I do not go back on my word. The insured workers will have to pay. There is no question about it. We cannot think of a pension scheme unless the workers are prepared to pay towards it, but I say that the payment ought to be on an equitable basis—equitable in every sense of the word.
Therefore, I say that the Exchequer is not paying its full share of this scheme. It is true that the Minister made some reference to increased contributions from 1041 the Exchequer, but I think that if he will turn back the files he will discover that in 1952, 1953 and 1954 the Exchequer grant to this fund went down sharply. I am glad to know that it is now increasing.
I want to give some figures concerning this family of pensioners, a family for which we must care. In the quarter which ended in June of this year the number of retirement pensioners rose to 4,716,000; that is, the figure of non-contributory pensioners, which had gone down. This is a diminishing figure, and, as the years go by, it will disappear altogether, so that in a few years' time they will all be contributory pensioners. But we still have to meet the liability of paying pensions to 4,959,000. During the first two quarters of this year—I do not know about the third—there has been an increase of over 25,000 pensioners.
Furthermore, one has to examine the increase in the number of people going to the National Assistance Board, and that is the acid test whether our people are becoming better or worse off. These figures speak for themselves. In July of this year, the number of people in receipt of National Assistance was 1,660,000, and in August it had gone up to 1,663,000. I am informed on good authority—though how far my informant is correct I do not know—that the figure will be considerably greater in October.
It is not my intention to say very much about the repeal of the tobacco token, which, to me, is the last straw. I am the first to admit that this tobacco token, when it was put upon the Statute Book in 1947, manifested a keen desire to help the old folk. I know that it is illogical, but I think that taking it off now is inopportune in this sense. In one, two or three years' time, we shall have to consider a comprehensive pensions scheme. Whether it comes from that side of the House or this, we shall he forced into that situation, and in my judgment it would have been much better if we had allowed the tobacco tokens to remain for that period and to have removed them when the comprehensive scheme was put before the House.
I happen to occupy an honorary position in connection with the old folk, and, naturally, I get hundreds of letters. I do not want to weary the House with them, but I think we ought to be able to get a consensus of opinion on this 1042 question of tobacco tokens from two sample letters which I propose to read, one from England and one from Scotland. This one came yesterday, along with many others:Dear Mr. Brown.It was announced in Parliament last Wednesday, 6th November, that pensioners were to receive 10s. a week increase and also that the tobacco tokens were to cease. If that is the case, how do the pensioners get 10s. a week? According to my reckoning, it is only 7s. 8d. On the 6 o'clock news, it said that the tobacco tokens were to be replaced by money. According to the newspapers, that is not so. Can you please tell me which is the correct version? If the National Assistance do the same as they have done before, and take National Assistance off them as well, can you please explain how the pensioners are going to be any better off than they are now? I am only one pensioner out of thousands, and it affects them all in the same way—give with one hand, and take away with the other.That is the policy of the Government. It is causing a great deal of bitterness among the ranks of the old folks.
I will now quote from a letter which I received from the Scottish Old Age Pensions Association. It was written on behalf of the Executive Council of that Association. It says that the Minister of Pensions and National Insurance has received a letter of protest on the question of the proposed discontinuance of the tobacco coupons and adds:We feel that it is most unfair, especially as it is proposed to give a cash allowance to non-contributors in lieu of the coupons. I have written the Minister, and am giving you the information as it may be possible to raise the question at a later stage of the debate on the Bill.That is signed by the General Secretary of the Association.
All these things are reacting against what the Government, yesterday and the day before, and last week, tried to persuade us all to do—to co-operate with the Government to get through the economic crisis which we are facing. If this policy is to be pursued by the Government I say that the workers will not co-operate, but will look askance at the proposals the Government are now submitting to us.
I beg the Minister—I have pleaded before and I plead again with the Government—to have another look at the anomalies of this Bill and the injustices it perpetuates. If the right hon. Gentleman will do that he will have the eternal gratitude of the old-age pensioners of this country. I beg of him to do so.
§ 7.32 p.m.
§ Mr. Denzil Freeth (Basingstoke)
My right hon. Friend's Bill has been criticised from the benches opposite for a number of reasons; first of all, that it does not seek to enact some such prototype pensions scheme of a graded nature as may be found in the second part of the Labour Party's pamphlet on pensions and superannuation, that this Bill is not a "Crossman Plan" or a "Titmuss Flier." It has been criticised also because of the level of benefits and contributions. The first criticism which the right hon. Member for Middlesbrough, East (Mr. Marquand) made of this Bill was that it had been born too late. He asked my right hon. Friend why the Government had not brought this Bill in at an earlier date.
I shall come to the possibilities of other schemes later, but in considering whether or not under the present scheme to alter the level of National Insurance benefits the Government have two things to consider. First, the Government have to consider the relationship between the present purchasing power of the benefits and the level either at the time of the 1946 Act or the level which was actually paid in 1948. Secondly, the Government have to consider whether the national product has so expanded, without further demands being made upon it in other directions, that it is possible to raise the proportion of the national income which is paid to the retirement pensioners and those drawing other benefits under the National Insurance Acts.
Of course, in making that last calculation one of the most important things the Government have to consider is the number of people actually drawing benefit, and, in particular, the number of people who may at any one time be drawing National Insurance retirement pensions, because that figure is increasing very substantially next year. Indeed, since the first National Insurance Act was passed in 1946 reviews have taken place, on the average, every three years. Hon. and right hon. Gentlemen opposite reviewed the scheme in the early autumn of 1951. We reviewed it in the spring of 1952, again at the end of 1954 and the beginning of 1955, and again now at the end of 1957 to take effect early in 1958.
When one is considering the level at which National Insurance retirement benefit should be placed it is essential that 1044 one should get away from the idea that it is meant to be the full subsistence level. It never has been the full subsistence level, and I do not believe that it was ever designed to be. It has been meant to be a pension, secured as of right through contributions and Government grants, which can make all the difference to a retired person between having just enough on which to live and being able to live at a slightly higher standard than that.
We are told that about one-third of the people now retiring have pensions from private pensions schemes. A growing number of people are delaying their retirement and are, therefore, being able to draw higher retirement pensions with the 3s. per annum increment attached thereto, but I fully agree with the hon. Member for Coventry, East (Mr. Crossman) that we are never going to reach the stage, in the normal evolution of events, at which more than about a half of the retired persons of this country have pensions accruing from their jobs or, alternatively, from private schemes which they themselves have arranged with insurance companies. Those other people will have to fall back on the current scheme and upon National Assistance.
We should face quite squarely that, in fact, that is what the National Insurance scheme ever since 1946 has decided that they ought to do. We have, in fact, said, "If you have no means of your own when you retire, you will have to fall back upon the National Assistance Board." I do not think one need be ashamed of the fact that one pensioner in five, or one in four, or one in three, has to have recourse to the National Assistance Board. It means that most of those people have not been lucky enough to be able to save during their working lives. Therefore, when they retire they have little or nothing to provide them with comfort in their old age.
I am not at all sure that from now on we ought not to consider far more the level of National Assistance than the level of retirement pension, and ask ourselves whether the level of National Assistance really is the level which we think is fit and proper to be the lowest level of subsistence in our community today. Although this Bill does not deal with National Assistance, if we can spare the money, if the Exchequer can pass on money from the rest of the community 1045 through taxation to help the aged, I would hope that it might give a higher level of National Assistance benefit rather than greater Exchequer aid to the National Insurance Fund to pay out higher insurance benefits.
Surely, it is common ground between us that the taxpayers' money should first go to help those who most need help, and those who most need help are those who have nothing but their retirement pension. Those are people who will not be in receipt also of £300 or £400 or £500 a year from a private pensions scheme. I hope, therefore, that we may in future devote our taxation subsidy to the National Insurance Fund to raising the level of National Assistance rather than quarrel about the level of the National Insurance retirement pension.
It was announced during Question Time today that the cost of living has risen by about 24½ per cent. since 1951. It is worth while reminding the House and people in the country that, with the benefits included in the Bill, the pension for a single person will be increased not by 25 per cent. but by 66⅔ per cent. Although I do not wish my speech to be very controversial, it is also worth while recording that when the Conservatives came to power in 1951, there were people still on a 26s. a week retirement pension, and these people have had an increase of 92 per cent. under Tory Governments.
I also believe it is worth while drawing the attention of hon. Members to a reply made by my right hon. Friend the Minister of Pensions and National Insurance to my hon. and gallant Friend the Member for Poole (Captain Pilkington). My right hon. Friend pointed out that, taking the equivalent purchasing value as at September, 1957, it would be found that when the National Insurance scheme was enacted in 1946, the purchasing power of the present single person's retirement pension was 42s. 4d. and that it fell steadily until October, 1950, to 36s. 9d. It has never been below that level under a Conservative Government, but it fell until the pension was increased to 30s. for certain pensioners in the summer of 1951. In October, 1955, the value of the retirement pension was 42s. 11d. and in October, 1956, it was 41s. 4d. In fact, we are today raising its purchasing value to 50s.
1046 These are figures which show that there are some pretty substantial increases in train. According to my calculations, the general increase in the cost of living since early 1955, when the last increase in retirement pension was made, is about 11 per cent. Yet my right hon. Friend is proposing to the House that practically every National Insurance benefit is to go up by 25 per cent. I do not think that sufficient recognition has been given to the very wide nature of the increases to be made. Hon. Members have drawn attention to omissions from the increases and I shall agree in a moment with the right hon. Member for Middlesbrough. East about one omission, but this is a comprehensive Measure covering unemployment benefit, widows' pensions, sickness benefit, maternity grants and death grants. Indeed, it covers the whole length of our lives.
I am pleased to see that my right hon. Friend is now proposing to remove the anomaly of paying different rates for married women's unemployment benefit and married women's sickness benefit, which was something nobody could understand and was continually the cause of friction and discontent. The omission to which the right hon. Member for Middlesbrough, East drew attention concerns the fact that when we are putting up, as we have been doing over the years, the level of retirement pensions, it seems anomalous to leave the increment which delayed retirement can bring at the rate of 3s. extra per week for every extra year's work.
I should have thought that in these days we want people to stay at work after the age of 60 for women and 65 for men. It would be an excellent thing. Many cannot do so because of sickness or because of the nature of their job, but when they can do so, it is good for the country and for themselves. When they are deciding whether or not to do so, they must think about how much it is worth to have the extra when they retire. An extra 3s. a week is not a very great deal today. They think about the level of the basic retirement pension and, in particular, about the contributions which they must pay during the extra years that they work. A man may say, "A contribution of 9s. 5d. a week is not a very good exchange for receiving back 3s. a week when I retire." I suggest to my right hon. Friend that the time is 1047 coming when, whatever we do with the generality of the National Insurance pension scheme, we ought to increase that increment.
§ Mr. Marquand
I welcome the hon. Member's support on this, but I should have thought from his previous remarks that he would also have agreed with me that those who receive less than the standard pension, and there are 80,000 of them, should be included in the Bill.
§ Mr. Freeth
I thought that I would confine my remarks to that aspect of the subject mentioned by the right hon. Member which I had studied at some length. I did not mean to say that when I have studied that particular point which he has brought to the attention of the House I would necessarily disagree with him. On the other hand, I may disagree.
It is worth noting that some benefits will be increased under the Bill by more than 25 per cent. The payment for the first thirteen weeks of widowhood will be increased by 27 per cent. The first or only child dependant's allowance will be increased by 30 per cent., and the guardian's allowance by no less than 54 per cent. I believe that everybody will welcome these increases. Retirement pensions are up by 25 per cent., but of the 10s. increase—and that 10s. is the biggest increase since 1948–2s. 4d. is accounted for by the tobacco coupon. I fully agree that the tobacco concession has proved unfortunate in practice. Most people, therefore, will be having a rise of only 7s. 8d. a week, but that is a rise of 19 per cent. over the 1955 figure against a rise of 11 per cent. in the cost of living. Whether we consider the adjective "substantial" to be accurate or not, these are certainly very reasonable increases indeed.
This brings me to the problem of how these increases are to be paid for, because all increases have to be paid for. It is worth remembering, and the hon. Member for Ince (Mr. T. Brown) drew attention to it in the closing passage of his speech, that this Bill is being introduced at a time when the Government are making a major attack upon inflation and upon all inflationary spending.
§ Mr. Freeth
We cannot spend the same money twice, and we cannot give a bigger slice of the same cake to one section of the community unless another section of the community is willing to give up some of its slice. If we give more of the community's wealth to the aged, then those of us who are young and able to work must have that little bit less. It is for that reason that I think the case for increased contributions was unanswerable. This is a national insurance scheme. It is a scheme in which the State has its big part to play. The State's contribution is fixed by law, but, in addition, the employer and the employee have each their part to play. This means that it should be a self-supporting scheme, a national insurance scheme.
§ Mr. G. Thomas
Would not the hon. Gentleman agree, however, that it is a strange insurance scheme when one of the partners out of three is able to change the amount it must pay to suit its own convenience? That is what the State has done.
§ Mr. Freeth
The State is still paying the amount laid down in the 1951 Act, and the major decision to change the amount that the State must contribute to this scheme was taken by hon. Gentlemen opposite when they altered the fractional contribution which the State makes. When we say "the State," do not let us forget that the State is merely another word for ourselves. Primarily, it is the people who are working and producing in this country, because the Government, alas, cannot create wealth.
I suggest that because this is a National Insurance scheme, the case for increased contributions is unanswerable. An extra £35 million will go into the National Insurance Fund next year as a complement to the increased contributions which employer and employee are at present being called upon to pay. Is this contribution too high? The hon. Member for Coventry, East said he regarded it as merely a form of regressive taxation. It is relatively high, but it is lower, a ½ per cent. lower, than the 1946 calculation, although it is slightly higher than the 1948 calculation.
If we are to have a flat rate pension then the case for a flat rate contribution seems to me almost unanswerable. I am not at all sure that we should think of 1049 an insurance scheme in the sense of it being a form of taxation. It should be regarded rather as a form of saving, a form of deferred earnings. It is not a penal form of tax imposed by the Government from above: it is a form of deferred earnings, of savings, which we in this House agree to accept on behalf of the people.
§ Mr. Arthur Moyle (Oldbury and Halesowen)
Except, of course, that if the insured person dies there is no return of contributions, so it is not wholly a case of deferred earnings.
§ Mr. Freeth
That is true, but when we look at the aid which the State will have to give to the fund over the years, when, in particular, we consider the amount which retirement pensioners are at present drawing out of the fund compared with the amount they had to pay into the fund during the last years of their working lives, it is hard to say, in weighing up the pros and cons, that the pensioner is not getting a very good bargain indeed. There is no scheme which does not have some disadvantages, but I would have thought that the present one is, as my right hon. Friend said, a very good bargain indeed today.
I understand that the Labour Party proposes to meet this point, of the inability of Governments to raise the contribution above a certain level because of its comparison with the lower wages, by graduating contributions and matching them by graduated pensions, or at any rate by moderately graduated pensions, because some people will be getting in the ultimate stages 75 per cent. of their average earnings over their lives and others will only be getting about 24 per cent.
What the Labour Party pension scheme is proposing to do is to use the increased contributions in the earlier years to pay the annual deficit which will arise on the existing scheme, and which will arise even more when, and if, the basic rate is put up to £3 a week. I think that must be regarded as not very good finance. I do not believe that it provides a safe pension fund, and it certainly prevents any talk of a funded pension fund. In fact, the document almost goes out of its way to talk about assessment rather than funding.
The point at issue, when we come to consider whether or not this Bill ought to 1050 be a graded pension Bill instead of the type of Bill it is, is that we have got on the present National Insurance Fund a growing liability, to which I will come later. In National Insurance we cannot talk about funding or saving in the sense that an ordinary person saves. What we can do is to say to the nation, "If you will agree during your working lives to pay out in taxation enough according to your means—whether by graded contribution or by higher direct taxation—to pay the pensions of the people who have already retired, and possibly also save a hit extra for the nationalised industries' capital programmes and the like, then you can hope, or even expect, that your children and your children's children equally agree to be taxed to such an extent as to pay you the sort of pension which you have paid to your fathers."
That is the proposition which any graded National Insurance Fund must produce in the end. To talk about a graded fund, indeed to talk about a fund at all, is economic nonsense. The only thing we can ever talk about is a transfer of wealth from one section of the community to another. If over the years the workers of this country—using the word to cover those who are of working age and working ability—are willing to transfer overall to the retired a sufficiency to give them the half pay pensions, of whatever they may be, well and good. The unfortunate thing is that we have no way of asking the people of this country that question in isolation.
If we can persuade everybody that it is a good and generous thing, then I am all for it. But by the time I get to draw my old-age pension, there will be an enormous number of old people and there will not be as many people working as there are now. Therefore, I want to think a little carefully before deciding to enter into this very expensive type of "I pay, and I hope to heaven someone else will pay me." I want to be certain that the figures are such that the country can support the scheme. That seems to me to be the basic point about any graded insurance scheme. If we can meet it, to my mind it does not matter two hoots whether we do it by contributions, and grade them, or do it all on the Income Tax. We may find one method or the other preferable or politically easier, and we must make our decision at the time.
1051 At the moment, we have not gone into that. We have a National Insurance Fund and we have to look to the future of that fund. I suggest that it is greatly to the credit of my right hon. Friend and his colleagues that they have managed to produce a scheme of increased benefits without making the fund any less solvent than it was, over the short term. I believe that when we have a fund which will run more and more into deficit, as this is, the prudent thing to do every time there is some rearrangement of it is to try to decrease the debit which will be incurred after the next year or two in other words, to keep the fund as much out of the red as possible over the next one, two, three or four years; and that in fact my right hon. Friend has done.
In 1958–59 the deficit on the National Insurance Fund would have been £44 million; now it is to be £14 million and I think that an achievement. In 1960–61—this is a figure which hon. Members opposite ought to regard with particular attention, if they are hoping to win the General Election—the deficit will be reduced from £226 million to £126 million, a noteable difference. In 1979–80, even so, it will be £475 million. I think we should remember that the deficit in the year 1960–61 is in fact going to be something not far off 1s. in the £ on Income Tax.
Of course these calculations are very tentative. They assume that unemployment will run at the rate of 4 per cent. after 1962. If it runs at the present rate, my right hon. Friend tells us that by 1970–80 we may be let off with a deficit of some £65 million less than that in the Government Actuary's paper. I think it unfortunate—I do not consider it irrelevant to mention the matter here—that this figure, used by the Government Actuary in Cmd. 294, has been used by the Daily Herald in a piece of political propaganda which seems to me quite disgraceful. Either the article from which I am about to read was written by someone who knows nothing about National Insurance and should never be allowed near a fountain pen, or alternatively, it was written with the deliberate intention of deceiving.
Hon. Members who have read the Command Paper will recall that on page 5 it states that the Government Actuary has 1052 decided to return to the actuarial basis previously used in calculations including the long-term unemployment rate of 4 per cent.…in regard to which I have consulted the Treasury and other Departments.Let us see how this particular phrase by the Government Actuary is turned by the Daily Herald. On the front page, on Thursday, 7th November, there was a headline in capital letters:500,000 more work less by 1962.I think that is a pretty obvious scare headline.Unemployment will be trebled during the next four years, according to a Government expert.That remark is, to put it politely, grossly inaccurate.Sir George Maddox, the Government Actuary, makes this disturbing announcement In his report on the plans to increase pensions.Of course, he does not do any such thing.He reveals that after consulting the Treasury and other Departments he concluded that unemployment, now standing at 1½ per cent., would rise to at least 4 per cent. by 1962.I think that the two words, "at least" are gratuitously horrible.The present figure of unemployment is about 275,000, so Sir George estimates that 1962 there will be more than half a million more people without jobs.I felt it right to draw the attention of the House and the country to that disgraceful exhibition of dishonest reporting by the Daily Herald last week.
In 1980, at the time when the National Insurance Fund will be running into fairly substantial deficits every year of the order of £400 million to £500 million, I shall be 56. I shall be looking at the next ten years with apprehension, because in 1989 I shall be able to draw whatever retirement pension then happens to be going, as I shall be 65. Therefore, when hon. Members opposite refer to the views of the young workers confronted with contributions, I think that possibly I am in as good a position as any to count myself as in that particular lot of people.
I would say, as a young worker—at any rate moderately young—that the one thing which I demand is that when I reach pensionable age I have the certainty that there will be a pension paid to me every year; in other words, that the fund which is to pay that pension is moderately 1053 solvent. I use the words, "moderately solvent," since no fund of this type run by the Government is ever completely solvent. I am perfectly willing to pay more into that fund at the present time in order to make certain that the fund is not "bust" when I want to draw out of it. The most important thing seems to me to be that the fund shall be solvent at the time we want to use it.
It is perfectly true that the younger members of the population are paying into the fund more than is actuarially needed to pay their pensions when they retire. Of course they are, because any pension scheme, particularly one which grants pensions to people who have not contributed—as this National Insurance Scheme does to the late entrants—must inevitably mean that people are not saving for their future retirement pension. What they are really doing half the time is paying the pensions of people who have retired now. I assume that pensions have to be paid for by workers and retired taxpayers and that is why I believe that, because retired people also pay taxes, it is a good thing in a retirement pension scheme to keep the contribution paid by taxation over and above the statutory contribution of the Exchequer down to as little as possible. Next year, 1958–59, we shall he spending £125 million out of general taxation on the Exchequer contribution, and a further £14 million on the deficit. That is in fact £125 million, or nearly the value of 1s. on the Income Tax and I regard that as a sizeable sum.
I read recently that in a Gallup Poll 92 per cent. of the people of this country wanted pensions to go up in October. I wonder how many realised that that could not be done without the transfer of wealth from the producing and working members of the community to the aged and retired.
§ Mr. Freeth
The hon. Member seems to have an obsession about Surtax payers. I would remind him that it was only the Surtax payers who do work who were given the incentive of a tax reduction in my right hon. Friend's Budget in the spring. The point to remember about my right hon. Friend's Budget, as about arty Government, is that it did not create wealth. A Government can print money, but money without real 1054 wealth behind it merely loses its value. A Government can distribute only the wealth created by others and, by and large, they can distribute that wealth only if the people of the country agree that the redistribution is right and proper.
I believe that the workers of this country are prepared to pay an extra contribution because it would go to help the old. It is no use saying that we believe in giving the old a better deal if we are not prepared to make some slight sacrifice in order to do so. Heaven knows, there is a lot in the treatment of old-age—the hon. Member for Ince referred to loneliness—where the Government finds it hard to intervene, and so much must be left to voluntary bodies. But here we have an example of what the Government can do, and I believe that this Bill is a praiseworthy step.
§ 8.10 p.m.
The Rev. Llywelyn Williams (Abertillery)
The hon. Member for Basingstoke (Mr. Denzil Freeth) made some thoughtful points, although the length of his speech was inordinate. Sonic of us thought that he was making up for the speeches which seem likely not to be delivered now by some of his colleagues.
I did not agree with some of the hon. Member's points. In the early part of his speech, he referred to pensions not being regarded as subsistence pensions. Unless I mistake the feeling in my own party, we are coming more and more to the conclusion that the retirement pension should be regarded as a subsistence pension. Certainly Lord Beveridge had that conception in mind when he set to work on his great social document.
The hon. Member also referred, and I did not like the reference, to the larger part which the National Assistance Board could play in social welfare. He thought that alleviation should be directed more to that quarter than to any other quarter. There are profound psychological implications in this question of the National Assistance Board. I do not think the hon. Member can know very much about the feelings of sonic of the finest people who have been unfortunate, through no fault of their own. The hon. Member cannot possibly know the poignancy of their feelings when they are driven, by the exigencies of economic suffering, to the National Assistance Board.
§ Mr. Freeth
I agree with all that the hon. Member says about people's feelings, their pride and so on. Would he not agree that although such pride is praiseworthy it is extremely misguided? Since 1946 we have tried to embody National Assistance as part of our social services.
The Rev. Ll. Williams
I appreciate that, but the thinking of our party is on the lines that we hope for the disappearance of the National Assistance Board when our social ideals have been realised.
I was not too happy about another of the hon. Member's references. He said that the cost of living had been increased by 11 per cent. since April, 1955, when the last increases were made to retirement pensions, and that the proposals of the Bill would increase them by 25 per cent. He went on, I thought rather synthetically, to refer to the generosity of the Government It is generosity at other people's expense. Contributions are increased by one-third while benefits are increased only by one-quarter. It does not seem very convincing when we are told that that is a wonderful act of generosity.
I was not convinced by the Minister when, in opening the debate, he sought to excuse the tardiness of the Bill. I believe that the Bill could have been introduced last February. My hon. Friends would have offered every facility to the Government at that time. As it is, the actual payment over the counter will not take place until the end of January next year. It may well be that before that time rigorous tests will be demanded of us all by a very inhospitable winter. It is the old people who will suffer most during the next few weeks while they are waiting for the increases in pensions and other social benefits.
There are formidable factors in the economic budgeting of old people. Bus fares have increased, and the prices of many commodities, such as fuel, have risen.
The Rev. Ll. Williams
That is a glaring instance against the Government. Such factors make it impossible for old people to face the coming winter.
§ Mr. Lewis
Could my hon. Friend develop a little further the point about 1056 rents? Is it not a fact that the great majority of old-age pensioners have already lost the increase because they have had to pay as much as 7s. 6d. per week increase in rent? They are to lose the tobacco token. Will they not be about 2d. a week worse off than they were before?
The Rev. Ll. Williams
My hon. Friend has made the point for me. My hon. Friend the Member for Coventry, East (Mr. Crossman) made the very important point that there should be a six-monthly or annual review of the pensions situation. If that had happened, this Government would have been compelled to introduce a Measure of this kind many months ago. I was far from convinced by the Minister's attempt to exculpate himself from the charge levelled against him from this side of the House that the Bill is tardy and dilatory.
I would like to make a reference to the withholding of the tobacco token. I share the misgivings of my hon. Friend the Member for Ince (Mr. T. Brown) and the reservations expressed by other hon. Members about payments in kind, which create as many problems as they solve. I understand the circumstances, of course, in which this token was introduced. It creates resentment between pensioners; there is no doubt about that. Nevertheless, I am opposed to the withholding of the token because once we have instituted payment in kind a tremendous amount of resentment is created at a proposal to withdraw it at a later stage. People are very strange, psychologically, about a benefit in kind. They would be more opposed to the withholding of the tobacco token than to the withholding of some financial benefit.
§ Mr. E. Partridge (Battersea, South)
I am sure that the hon. Member wants to be fair, and that he has noticed, when attending his "surgery," as I am sure he does very frequently, that it is the people who are not entitled to the token and who do not smoke who show most resentment.
The Rev. Ll. Williams
I will throw out a suggestion. Like the great French statesman, Mendès-France, I am a great believer in the nutritive value of milk. I wonder whether something could be done to ensure that the equivalent value of the withheld tobacco token 1057 could be given to old-age pensioners in the form of a milk token. I am sure that suggestion is not so fatuous as it may seem to some hon. Members.
I wish to refer to a section of people hitherto unmentioned in all the speeches in this debate. They number 130,000. I refer to widows on the basic pension of 10s. a week. Not one reference has been made to them. I have had some bitter and resentful letters from those people, understandably bitter and resentful letters. Not only is there no increase whatever in this Bill on their basic pension for those widows, but from that 10s. they are expected to provide for themselves a National Insurance stamp. In a case I am thinking of a widow is left with 2s. 4d. a week. Remembering that the number involved is only 130,000 and that 95 per cent. are in the age group of 45 to 60, which is a very difficult period physiologically for women, I believe an enlightened and imaginative Government could do more than has been done for this section of the community.
I wish to say a word about contributions. The hon. Member for Basingstoke said that workers would be glad to pay the 2s. increase in contributions in order that retirement pensions and other social benefits could be increased. I have never thought that the British worker is parsimonious, niggardly or self-centred, but he must not be imposed upon. We feel there is a flagrant imposition here on the low wage workers. In our economic set-up there are widely separated differentials even among the workers. I always thought that Wales was a poorer country than England and Scotland. I was flabbergasted to learn from an economic social study the other day that wage rates in Wales are higher than in England or Scotland. That would be because pro rata we have a larger number of steel workers and miners than there are in the other two countries. We all know how steel workers' earnings compare with those of bus conductors or agricultural labourers.
The Rev. Ll. Williams
My hon. Friend can speak for the teachers. I am speaking of industrial workers and pointing out that there is a great differential between the high-earning steel worker and the piece-rate miner and the low 1058 wage worker. The 2s. increase for the steel worker or the type of miner to whom I have referred would not be an imposition, whereas it would be a serious imposition for low-wage people. We believe it is completely indefensible, and we hope that in Committee we shall be able to persuade the Government to our point of view.
§ Mr. Freeth
Would not the hon. Member agree that it is still less as a percentage, even on the earnings of low-paid workers such as agricultural labourers, than the 1946 calculations?
The Rev. Ll. Williams
This continual reference to 1946 is made in the debate almost to the point of nausea. Every speech we have heard from hon. Members opposite has contained references to what we did or did not do between 1945 and 1951. Cannot hon. Members opposite realise that with all our failings—we are not a perfect political party—history will indicate that we are an essentially empirical and pragmatic party? We learn from the past; our ideas move as times change. We must not be continually badgered about what happened in 1946 or 1947. If in a debate of this character we were to start talking about what happened in the 'thirties and before the 'thirties, there would be monotonous reference to the poor record of the Tory Party when it was in power.
I wish to refer to another section which, strangely enough, has not been referred to in this debate, the self-employed. The increase in contribution for them is 2s. 3d., which will make a total contribution of 11 s. 6d. Numerically, of course, they cannot compare with those employed by employers, but among the self-employed many are having a very difficult time.
I may be allowed to refer to a section about whose problems and difficulties I know something—ministers of religion. When the 1946 Act was brought before the House it was decided that ministers of religion could not be recognised as employed persons but must be regarded as self-employed. I took the trouble this morning to look up a church calendar in the reference room, and a rough calculation led me to the conclusion that there are about 30,000 ministers of religion—Catholic priests, Anglican priests and Nonconformist ministers of all sects.
1059 The larger part of those 30,000 must be thought of as being in the low income group. Nonconformist ministers are finding the situation desperately difficult. I know from personal experience, and I speak with passion on this, because I know of the hidden tragedies in the homes of some ministers. Thousands of them are earning less than £8 a week and a National Insurance contribution of 11s. 6d. a week will be something which is intolerable. I ask the Minister to make a special examination of their situation.
I will say a brief word about benefits. I am surprised that on all non-contributory pensions about 250,000 will be having no increase except for the value of the tobacco token of 2s. 4d. being added to their pension. No one on either side of the House would be unaware of the difficulties of implementing our ideals in social insurance. As my hon. Friend the Member for Ince said, the Minister threw out some staggering figures about future commitments and future liabilities. We are not minimising those. At the end of 1956 the total expenditure on National Insurance retirement pensions was of the order of £450 million. That is a very large sum, but it is not so frighteningly large when viewed vis-à-vis defence expenditure.
I find that defence expenditure is 25.9 per cent. of the total Government expenditure. The total expenditure on National Insurance pensions is only 8 per cent. of the total Government expenditure and only 2.1 per cent. of our national income. The figures seem frightening, awe-inspiring and overwhelming, but to point out that they amount to 2.1 per cent. of our national income brings these frightening figures into more reasonable focus, and I am sure that no one who has a social conscience about these matters can feel that we are spending too much on pensions in this country.
To the degree that these increased benefits will raise the standard of living of the pensioners, I naturally welcome them. It would be churlish and hypocritical to pretend otherwise. But a succinct summing up of the Bill and its proposals would be, "Too little, too late". I am proud to think that we in the Labour Party, as so convincingly adduced by my 1060 hon. Friend the Member for Coventry, East, have got down to this problem. I am as proud of the constructive thought and the far-sighted vision which is included in our national superannuation scheme as I have been proud during the years of our National Health Service. It is something of which we can be proud. If the Conservative Government cam compete with us, all power to them. The fact remains that in a short time we shall have the power and shall have the privilege and the joy of carrying out our own great scheme.
§ 8.32 p.m.
§ Mr. Philip Bell (Bolton, East)
We are very nearly at the end of a considerable debate on this subject and I am bound to say that I have heard many novel and interesting points brought forward and seen one or two old donkeys driven round the circus. May I say, straight away, that I support the Second Reading on three grounds: first, that it is a good first-aid Measure, although I do not put it much higher than that; secondly, that I think it is cunningly contrived to avoid what we must avoid now, any heavy inflationary pressure on the economy; and, thirdly, without quibbling about adjectives, that it gives some assistance to deserving old-age pensioners.
When we debate the subject I wonder whether, except for some of the younger Members, we ought not to declare our interest. I am reaching the stage when I do not mind how much anybody contributes as long as he provides me with a pension, but perhaps I must resist that temptation, because I am near pensionable age. It seems to me that, however we look at it, there is bound to be some suspicion of an electoral advantage if we offer people today large pensions for which somebody else must find the money in forty years' time.
The temptation now is: how much we can squeeze out of our children? That is true, because many of our pensions will be paid for by the future generation. There is, moreover, no theoretical limit to the amount we can spend on social welfare and pensions. There is no theoretical limit to what we shall pay for pensions—£5, £7 or £10. The limit comes in another way. It comes in haw much the people will, in fact, pay. It was interesting to read that the Labour Party pamphlet recognises that there is a limit 1061 to what we can raise. They made the point that there isa very real limit to the amount which the taxpayer is prepared to pay in taxes.Whether it be done by Income Tax, or by Surtax, or by contributions, there is some limit—we do not know where it lies exactly—to the amount of money we can raise in the form of taxation.
There is, however, a second limit, and that is inflation—trying to raise more by taxes than we can afford if we are to be competitive in a world market. I shall not trespass on the time of the House by continuing further with that, but, nevertheless, it is not a matter of simply saying, "Give them more", because that would not be honest unless we can see where we are to get the money from.
It is quite clear, although it was not made clear by the right hon. Gentleman the Member for Middlesbrough, East (Mr. Marquand), where the trouble arose. The trouble is an old one. When Lord Beveridge—and, indeed, Lord Keynes—recommended their system of security, they made the proviso that late entrants would not get full pension but would have to be supplemented by National Assistance; that only those who paid over a specified time, actuarially calculated, would get the full pension.
That was the scheme, and when the right hon. Gentleman claimed that Lord Beveridge said that the pension should be paid of right, by that was meant a pension that had been bought and paid for actuarially. In those cases, such problems as staying in employment and having a pension are quite irrelevant. But both Governments—and I think that both sides have a responsibility in this—ignoring the advice of Lord Keynes, produced a pension payable in full to everyone from the time it was brought forward. I quite agree with the attack made by the hon. Member for Coventry, East (Mr. Crossman) but, if I may say so, that attack comes a bit late.
The pension scheme would obviously come up with a jerk some time. I was only a question of time, and it is really rather bad luck for this side that it has reached the turning point during our Administration. That it would reach that turning point was clear not only to our Administration, but to the previous one, but all of us, in a sort of cuckoo-land, ignored that problem, and it is still pretty well ignored at the moment.
1062 This is a problem, not only of the old-age pensioners, but of the whole economy. Of course, it is easy to use exaggerated language about the poor old-age pensioners and say that we must do something in the way of scaling the contributions to the cost of living, but there is a bigger enemy, and that is galloping inflation. It is no good our pretending that there is a bottomless well out of which pensions that are reasonable and proper can be paid. Where I differ at this stage—although, on this Bill, the difference is, perhaps, not necessary—from this idea of linking pensions with cost of living is that it seems to me to be defeatist, for it recognises a powerlessness in checking the cost of living and may destroy the whole scheme by leapfrogging one step after another.
I noticed that one hon. Member opposite made the point that the new contribution would cause people to ask for more wages. Some hon. Members opposite said that that would be inflationary, but that did not seem to surprise anyone. Hon. Members opposite have been talking about the British workman being prepared to help his lower-paid brother and the down-and-out by paying a little more subscription. Now, apparently, he will ask for more wages to offset that increased contribution and thereby add to inflation. What sort of help is that?
The figures are there for everybody to see. Before the increased contribution, over 4½ million people of pensionable age cost us £465 million per annum, of which the taxpayer paid £90 million. If nothing happened at all, and we just floated on, in 1960 there would be over 5 million pensioners and we would be running into a deficit of about £160 million, rising in 1970 to £300 million. For this deficit to be met there would have to be a serious increase in taxation.
There are other ways of looking at the question. If the liability were funded, about £15,000 million, which is almost impossible for us to fund, would be required. We have only about £1,500 million in the fund. We would have to add £300 million a year to taxation if we put this £15,000 million on the National Debt and paid interest on it; and if we put it in the Sinking Fund the figure would be well over £550 million.
1063 That is the sort of problem which this country faces both before and after this Bill. The hon. Member for Coventry, East said that we must direct our minds to it, although whether his scheme would not get us into worse trouble and meet with a good deal of resistance is a matter to be debated on another occasion.
There is only one really safe way to deal with pensions, and we are a long way from it. That is to have a pensions fund—not to eat up the contributions as they come in, but to invest them and live upon the interest from those funds. There is a difficulty, however, except in commercial firms, where 8 million people are covered by pensions, which figure is expected to rise to 10 million, because there is a variation in the pension according to the age and contribution which varies in different circumstances, and our difficulty is that we cannot fund it. It is difficult for the Government to make it as fluid or flexible as a private scheme.
I understand that the argument which was only tentatively put forward from the benches opposite is that the deficit which arises should not be raised, all or substantially all, by taxation. I thought it was generally agreed, for the reasons which were powerfully advocated in the pamphlet to which reference has been made, that this should not be done. If this burden is put on general taxation, some Government will find something which has priority over it. It is too much of a temptation to the politician. Therefore, to put too much into the general revenue puts us too much into the hands of the general financial position, whereas we want to make it exclusive. I thought that was agreed. If that is agreed, then this scheme must now and in the future generally be financed by contributions.
What, then, is our disagreement about that? The disagreement—not only in the short term, but in the long term as well—is on whether we should have graded contributions and graded benefits. That is the suggestion which has been made. People seemed to believe that this plan was so obvious that there was no objection to it at all. In fact, behind it all—the hon. Member for Coventry, East, put his finger on it—lies a difference in appreciation of the position. Do 1064 we believe that we should tax people to relieve poverty, distress and sickness, or are we going to tax people to lift them above what Rowntree in his survey called the primary and secondary stages of poverty?
Are we to tax people not merely to give them subsistence above the poverty line, but to give them better conditions than that? It is attractive to do the latter. We would be very odd people indeed if we did not wish our own families to be above the subsistence level. We want our wives to have something more than mere subsistence.
The question is: what are we going to pay for that? How far are human beings, the better-paid workmen or the Income Tax and Surtax payers, willing to hand out their money not for essential needs but for a general egalitarian theory, however admirable it may be? I have grave doubts whether people will, in fact, stand that form of taxation.
The hon. Member for Coventry, East said, for the great consolation of some of the more frightened Conservatives, that for the next few years, until the day of Nemesis arrives, private enterprise and State will jolly along together, and that he and his hon. Friends would allow the pensions schemes of private firms, which could not do more than cover 10 million people, to trot along in happy harness with the rest.
But what will happen if those schemes are so much better, as I believe they will be? What will the more highly-paid worker say? He will say, "I am having all this money taken from me. I do not mind paying for grandfather or grandmother, or even for myself, but when it comes to deploying my extra money, I, as a steelworker, doing very valuable service, would rather put my money into a scheme which brings me a much better return."
No doubt many hon. Gentlemen have seen the publication, "Pensions in a Free Society", published by the Institute of Economic Affairs. Very good examples are given there of the difference which comes in. I will not weary the House with details, but I will take one example at £12 a week. There, with contributions on the basis proposed according to the figures in the Socialist pamphlet, as a result of that increased contribution, the differential is £3 on the scheme laid 1065 before the Socialist Party Conference; whereas the corresponding weekly return from an insurance company is £4 16s. It goes on even higher. In other words, the worker earning more money, when he goes beyond providing basic needs, will say that he wants to be free to put out his resources as he likes.
§ Mr. Bell
Will the State then find all its better contributors contributing to private schemes and itself be carrying the lame ducks of the National Insurance scheme? The advantage of a national scheme is in evening out one's risks, taking the good lives and the bad lives, the good earners and the small earners together. It would be fatal to the scheme to allow private schemes for the better-paid people, leaving the State to deal with what I call the bad bargains. That is one of the big difficulties which would arise in the alternative scheme.
It is not, perhaps, very helpful to anybody merely to point out objections to schemes when we are dealing with what is, I think, now a measure of first-aid relief. To avoid the recurrence of the situation which we are now in, which will come in 1970 if this Bill is not followed by a comprehensive Measure to take care of that consequence, there are certain things which should be done, and I have one or two points to put before my right hon. Friend which either he or his hon. Friend the Joint Parliamentary Secretary might be prepared to deal with.
Until 1970, we shall not be so badly off, but when 1970 comes, on our present Bill, we shall be back where we started. We shall then be running a higher deficit than we are running at the moment. We hope that it will be possible for all of us to make some provision so that we do not have to take another emergency step.
The suggestion which I should like, with diffidence, to put to the House and to my hon. Friend, to be considered, at any rate, as an interim measure, is the recommendation of the Phillips Committee, which suggested lifting the qualifying age for men from 65 to 68 and for women from 60 to 63. That is not a matter which, in our present circumstances, when we are thinking of doing the best for the economy and for old people, should be scoffed at. Curiously enough, in Canada, Ireland and Norway the retiring age is 1066 70. What about having the same age of retirement for men and women? That is the practice in West Germany, the United States and Holland. The circumstances might be investigated in which both men and women have the common retiring age of 65.
I wonder whether it is possible to vary the ages of retirement. It is interesting that, for instance, in Australia and in Poland the age for retirement and for drawing the State pension is 60 for anyone who has been in the mining industry, where the work is extremely arduous. Indeed, in the Soviet Union the comparable age is 50. I did not know that the job of a railwayman was as arduous, but it is interesting to notice that in Canada and in Switzerland the retiring age for railwaymen is beneath the average and is down to 60.
In dealing with pensions generally, there arises the difficulty that private pensions are not transferable. Is it possible to consider a tax arrangement by which, before firms can obtain concessions for their pension contributions, they must make arrangements so that they can either put the pension rights into cold storage or make them transferable? It is in the interests of all of us that pension schemes, however they are operated, should he brought into existence.
I do not know whether it is possible to fund part of the contributions. Most of the contributions of the young people now coming in to insurance are going to provide their own pensions, but we know that some of their contributions are not going towards their own pensions. I wonder whether it is possible, even at this late stage, to carry out a funding operation and at least to introduce the funding element.
Finally, there is the question of the distribution of the burden, and between Income Tax and the contribution. Must we exclude for all time the suggestion that the payers of Income Tax may carry some special liability for the social services that they enjoy? A similar point has often been put forward concerning housing and council tenants, that in submitting their Income Tax returns a figure should be included to represent the benefit of the property that they occupy. It does not appear that we can exclude all these things.
1067 The Bill, as has been rightly said, is a temporary Measure. As a temporary Measure and with that qualification, I commend it to the House. I am gratified to have had an opportunity to speak in this debate, because, although both parties may quarrel about our respective schemes, a long-term scheme is, it is clear, necessary; and this debate has certainly proved that point.
§ 8.53 p.m.
§ Mr. George Thomas (Cardiff, West)
The hon. and learned Member for Bolton, East (Mr. Philip Bell) has made a speech which, whilst it is impossible to agree with all his points, has been a useful one. I am grateful to the hon. and learned Member for outlining the gap that exists between the two sides of the House on the approach to the question of the redistribution of wealth. The very basis of the Welfare State was that if people were not willing to contribute to help the weaker members of the community, through the Chancellor of the Exchequer, we compelled them to contribute to maintain those weaker members of the community. In any civilised community, there is bound to be an element of compulsion in forcing the wealthy to make their fair contribution to those who are not so wealthy.
The hon. and learned Member, who fears that a Socialist State scheme would be left with the not so good bargains, overlooks the supreme merit of the Labour Party scheme, that it guarantees, as no private superannuation scheme is able to guarantee, that the value of the pension will never fall. There is a guarantee against inflation written into the superannuation scheme of the Labour Party, which the hon. and learned Gentleman must read again.
§ Mr. Philip Bell
I know that it is written in, but what I question is whether what is written in is the same as carrying it out.
§ Mr. Thomas
The hon. and learned Gentleman's faith is not as great as mine, and I am not surprised. It is not the first time that his faith has been placed in the wrong quarter.
The hon. and learned Gentleman also joined his hon. Friend the Member for Selly Oak (Mr. Gurden) in suggesting that we ought to consider raising the retire- 1068 ment age of our workers. It is a strange commentary on our times that, as we move into the nuclear age, we are thinking of a longer working life instead of a shorter one for our people. Even before the war, we used to speak of a shorter working life, in order that people might have some years in which to enjoy their leisure with their partners away from the harshness of industry and commerce. I earnestly hope that we will not buy our way out of our difficulties simply by increasing the length of the working life of people engaged in industry and commerce.
Now, I wish to turn to my own contribution to this debate. It is significant that, although the Bill itself covers a very wide field of benefits, most hon. Members have concentrated their contributions on the plight of the old people. This debate tonight is the culmination of a long campaign by the pensioners in Britain for a square deal. The House has witnessed Petition after Petition being addressed to the Minister and the House, and the right hon. Gentleman himself has been good enough to receive deputations from the National Federation of Old-age Pensions Associations. I know that for a long time those who are responsible for the leadership of the old-age pensioners have been deeply disturbed by the harsh poverty of their members.
This Bill is necessary only because of the failure of the Government's policy. It is necessary only because the Government have failed to mend the hole in the purse. They realise that the pensioner, unfortunately, has to be the last in the queue for increases in income. The pensioner is tied to the tail of the community, and I believe that this imposes an even greater responsibility on us to see that, when a Measure is introduced, it shall be adequate not only to meet current needs, but shall ensure that the pensioner will be cushioned in the future against the harsh, runaway inflation which we have experienced during the past two or three years.
I suggest to the House that, as we are opposed to this flat-rate contribution, the time has come when we want to think of graduated benefits. Out of all the list of people mentioned in the Bill, in the case of the industrially injured, the sick and the unemployed, their plight is usually a temporary plight; but there is nothing temporary about old age. Once people 1069 move into the category of retirement pensioners, there is no hope of improvement in their lot, and I verily believe that there is a case for a different benefit for the old-age pensioner while we are waiting for the superannuation scheme to be introduced. The retirement pension is not regarded by our people as a temporary bad patch or a reduction in income for a while. It comes at a time which brings its own crisis into the homes of the working people who have been unable to save enough to cushion themselves against the falling value of money.
We ought to face the fact that this is not the last increase we shall have to give to the old-age pensioners. Whether they will have to wait until the superannuation scheme comes in is anybody's guess, but even if we were to have what we all long for, and that is a General Election, even within the next 12 months, I doubt whether, while we were waiting for our superannuation scheme to go through, there would not be an emergency measure to protect the old folk.
However, I believe that this is the last time it would be done this way. I am not afraid of financing our old-age pensioners—and here I disagree with my hon. Friend—from the Exchequer.
§ Mr. Thomas
My hon. Friend who made that sparkling speech tonight, the highlight of the debate, my hon. Friend the Member for Coventry, East (Mr. Crossman).
What is wrong in paying family allowances out of the Exchequer? If we pay family allowances out of the Exchequer, why should we not pay old-age pensions out of the Exchequer? The taxpayer pays for family allowances. Of course he does. We all have to contribute to them. Through our taxation, those who are able to pay are the ones who pay and we do not ask the lower-wage earner to contribute. There is a case, while we are waiting for the superannuation scheme to be introduced, for relieving the lower-paid wage earners of this present burden. In our taxation we recognise graded ability to contribute, and that, after all, is the fairest means of obtaining from people their contribution to the upkeep of the Welfare State.
1070 I know some people say that once we drop the insurance principle we endanger the pension, but that is not an argument which holds much water, because the pension and other benefits under the same scheme have been interfered with by the Government on past occasions. Governments have a way in emergencies of interfering with any legislation or any scheme they want. So I ask the Minister not to be too hidebound in his attitude towards this suggestion as an emergency measure whilst he is waiting for us to introduce our scheme.
§ Mr. Thomas
The right hon. Gentleman's calculation may be out.
It is quite wrong to try to mesmerise the House with all those figures the Minister gave us today and overlook the fact that the Exchequer's contribution to this is by now—no doubt, the right hon. Gentleman will correct me if I am wrong—nearly £500 million short of what it ought to be.
§ Mr. Thomas
I should think my estimate is about right. I know it was my right hon. Friend the Leader of the Labour Party who was Chancellor of the Exchequer at the time when this balance was altered, but the fact remains that the Exchequer all through these intervening years has not been making the contribution it ought to this scheme. If now, in view of the changed circumstances, it went back to the old formula it would not be necessary to increase the contributions by the working people in the way in which it has been done.
I turn from contributions to look to benefits, and I note that once again those whose poverty is proved to be the greatest are to receive the least. I read a headline in the newspapers, on the morning following the Minister's announcement in the House, to the effect that there was to be a 10s. increase for old-age pensioners and 15s. for the old couple, but it is dishonest not to take notice of the fact that people in receipt of National Assistance will have 5s. taken away at once from the 10s. Poverty is the normal lot of these people. The Prime Minister can talk as much as he likes about our never having had it so good, but the Government have 1071 never had to answer so many Questions about allowances from the National Assistance Board as they are having to do at present.
I do not speak without knowledge of this subject. I too am in close touch with my constituents and I hold my weekly "surgery". I feel humiliated when decent people have to come to me and say that they want an extra grant to enable them to buy a pair of trousers or to enable a woman to buy a dress. There is something morally wrong when a Member of Parliament has to write to the National Assistance Board to find out whether he cannot have a little extra clothing for decent, honest people. The tragedy is that, after this miserable Measure is passed, we shall still have to send letters to the effect that the plight of these people is not being relieved. The poverty will be there just as much in February next as it is at present.
The National Assistance Board exists only to keep people alive. It is not there to see that they have any comforts. Indeed, if people want a suit of clothes it is the custom of the Board today to suggest to them that they should have it on hire-purchase and pay so much a week for it. We know that this is happening. I would be willing to go with the Minister to the National Assistance Board's office in Cardiff and bring with me people who have been told that kind of thing. We are toying with a human problem. There are old folk who, after the Bill has been passed, will be cold and hungry this winter. I am not exaggerating. It is a disgrace to our sense of values that we are not giving a more adequate increase than the one now proposed.
Where is the money to come from? This is a favourite question in the House, and as a rule we have then paraded before us the pensioners of twenty-five years' time. By the grace of God, I shall be parading with them, but I think that it is monstrous to deny justice today because of a problem that will face the House in twenty-five years' time. I do not believe that the Government are justified in doing that. I can tell the Government where they could save money. There is the field of defence, always attractive to me. We have been assured in a White Paper that we have a wonderful defence scheme which does not give us defence. We can save something 1072 there since we have not got defence. Surely the Minister knows that there are fields open to him for raising this money. As my hon. Friend the Member for Abertillery (The Rev. Ll. Williams) has rightly pointed out, this whole business represents only just over 2 per cent. of our national income.
Since they are tackling this problem, I wish the Government had been generous in their thinking, wise enough to realise that the British people are aware that the Welfare State has been undermined, and that this little Measure is no answer to our current needs.
§ 9.10 p.m.
§ Mr. James Griffiths (Llanelly)
In this interesting debate, by no means the first on National Insurance in which I have taken part, there have been two noteworthy features. The first is that every speaker on every side of the House regards this Measure as a stopgap, which we are all anxious to get through quickly, and no one regards it as an answer to the problem now confronting us. The Minister will note the significance of the fact that the last speaker on his side of the House described the Bill as a first-aid Measure. Indeed, there have been varying views as to the amount of first-aid which it will bring to the aged people in particular, and to others.
The other feature of this debate which is encouraging to hon. and right hon. Friends of mine—especially to my hon. Friend the Member for Coventry, East (Mr. Crossman) who presided over the committee, and whose speech gave so much pleasure to me and also to those who were privileged to co-operate with him on the working party—is that the Labour Party's plan for superannuation is being read by hon. Gentlemen opposite, The Minister will discover, if he reads HANSARD tomorrow and measures it by a measuring stick, that there have been more references to the Labour Party's plan than to his Bill. That is only right since it is a more modern, more up-to-date and more real answer to the problem.
I will limit my speech in accordance with what was the obvious desire of the House in the course of the week, and so I will merely give the Minister notice that during the Committee stage, if I catch the Chairman's eye, I hope to raise two or three problems. First, I shall return to the problem raised by my hon. Friend 1073 the Member for Coventry, East, the changes in the proportion of the burden of National Insurance now being borne by the contributors and by the Treasury as compared with what was envisged and prepared and provided for in the 1946 Act.
There has been a substantial change which, in many ways, has been a departure from the fundamental principles on which that Act was based. It was a tripartite scheme to which the workers and employers would contribute on a flat-rate basis, to which the Exchequer would make two contributions, a supplement to the weekly contribution and another which was designed to meet what actuaries call—I hope they are not skiffle actuaries—the emerging cost. The cost this House fully realised because, as Minister, I was at pains to point out that we were admitting people into the insurance scheme who had not contributed the full actuarial value of their benefits. Indeed, one aspect of it comes into operation next year because we permitted some people to pay for ten years and then become entitled to draw a pension at the age of 65. In July next year 500,000 of those people will be entitled to do so, and I must declare my interest here because I am one of the 500,000, so I shall benefit under my own scheme.
My hon. Friend the Member for Lanarkshire, North (Miss Herbison) raised another important point, that there is a provision dealing with industrial injuries in the Bill, and in Committee we shall raise several problems on that aspect. For instance, on the Committee stage I want to raise the question of the old cases, in particular those disabled by pneumoconiosis. One of the perhaps unexpected developments in the experience of the National Insurance Industrial Injuries Scheme has been the very much larger part played in it by the provision known as the hardship allowance. I am not making a party point when I say that the Minister will know that his hon. Friends tried to prevent that getting into the Bill.
I am sure the Minister will share my view that had it not been for the provision of the hardship allowance, the Scheme would have broken down. That allowance was what saved it. Another and perhaps disappointing consequence 1074 of the Industrial Injuries Scheme is what I regard as the very low general standard of assessment. We get few opportunities to discuss the Scheme in this House and because of that and because it is related to the question of hardship I give notice that I shall take the opportunity to discuss it.
One of the reasons why the allowance plays such an important part of the question of industrial injuries is because of this low standard of assessment to which I have referred. We have had experience of assessing disability in this way only in connection with war injuries, and the range of injuries and disablement in the industrial sphere is much wider. Most of the provisions in respect of war pensions could be catered for by a specific list of awards—so much for a finger, so much for a hand, and so on. That is among the problems which I hope we shall have an opportunity to discuss during the Committee stage of the Bill because they are of great importance.
Realising that this is a temporary Measure, a number of speakers have expressed the hope that this will be the last of such Measures and that the next legislation will be comprehensive. References have been made to reports. I want to refer to three which I consider of vital importance and which have deeply impressed me. To my mind they reveal the problem as it now exists, and as it will present itself in the future, in a way to which I hope hon. Members and the public will pay full attention.
The first report is a complete survey, although on a limited scale, of the plight of the elderly citizens of Salford. It was made by James Roberts, the Director of Civil Welfare. I hope that hon. Members have read it. Because of my long interest in the matter I read the reports of the National Assistance Board and one thing which I have noticed year by year is very significant. The reports give the percentage in age groups of old people who apply for assistance. The first age group is that of women of 60 and men of 65 to 70. In round figures 12 per cent. of the pensioners in that group, which includes those at the beginning of their pensionable life, apply for assistance and receive it. In the age group of 70 to 80, the percentage receiving assistance is double. 24 per cent. Of those of over 80 years the percentage receiving assistance goes up to one-third.
1075 Those figures reveal that when old people first begin to live on their pensions, they eke them out with a little life savings. And as their pensionable life extends, more of them exhaust their savings and have to draw assistance. The story of pensioners in this country is one of deepening poverty and until they reach grim destitution in the last years of their life. That is brought out in the Salford Report.
§ Mr. Griffiths
Yes, from the Central Welfare Office at Salford. I wish to quote from the report, and I make no apology for doing so.To those in doubt of the Plight of Elderly in 1957,…I ask, 'Take a walk with me on the daily round' and see in cold reality homes where replacement or repair of footwear is ' luxury '; a hot mid-day meal for six days a week almost a miracle; warm, winter clothes (so necessary in this part of Lancashire to old people) a mere fancy; see cinders sifted minutely from old fireplaces until they are reduced to fine ash (1 cwt. of coal at approximately eight shillings for each week taking 20 per cent. of the individual's retirement pension); the ability to buy sufficient coal alone, I feel, might be the relevant inducement for them to remain in their own homes with at least the comfort of warmth.He adds:One of the most depressing features of the survey was to find so many elderly couples endeavouring to maintain appearances by living practically on bread, margarine, tea, potatoes, and more bread.I leave that with the House. There is the problem and there it will remain while we are seeking to meet it with National Assistance.
I, myself, and my party, have come to the conclusion, which we have put in our Manifesto, that there must be a major recasting of the National Insurance scheme and that the National Assistance Board, as an organisation, must go. It ought to be integrated into one Ministry of Social Welfare.
We faced the problem of the old people who will not go for assistance. As long as we have the National Assistance office it keeps them away. It is essential to deal with this problem, which is indeed vital.
In the Bill we shall make a net profit by switching around National Assistance 1076 and Insurance. We shall pass the Bill, but none of us on this side of the House will do so with any pride, when we remember the problems to which I have just referred.
The second report was published before the Labour Party Conference. It was written by a group of workers in working class London. Everybody who takes an interest in this matter will want to read this Plan for Industrial Pensions put forward by a group of trade unionists who are members of a branch of the Transport and General Workers' Union. I compliment them on an extraordinarily valuable document.
What is indicated here is really basic reasoning about our superannuation plan. I ask hon. Members to think about it. The House is realising that there is a problem. There is, and has been for some time, a movement away from the conception of assistance. It was my privilege to seek to put the Beveridge Report into legislative and administrative form. We all live and learn. Our conception of social security in and immediately after the war years was conditions by our experience in the 1930's. It was the problem of preventing destitution and mass unemployment and all the rest of it. All the time we asked ourselves, "What can we do to put a footing beyond which people will not fall?"
Beveridge, therefore, conceived a way, which was to have a social security system established, based on the subsistence principle and to establish a national minimum. We can call it a national minimum of subsistence. Now we have had years of full employment. One of the changes I welcome is the tremendous psychological changes that have been brought about by full employment. My working and trade union life was spent in the old atmosphere of decay and unemployment, in which we had one man out of work for every man in a job. The whole idea was, "For God's sake put a bottom to it below which we cannot fall."
With full employment there are now opportunities for expansive thinking.
One problem that confronts us and inspires so much of new trade union thought is that now we are thinking of the status of the worker and his place in industry, where he is becoming a partner. Those who wrote this pamphlet had talked about the problem in plain terms. 1077 This is the thinking of the working class, of the trade unionist, the man in a branch who is rendering a real social service. Hon. Members do not realise the debt they owe to trade unionsists in many industries. The pamphlet says:Some means must be found to provide adequate incomes for the aged. The standard of living they require must not be calculated on a 'survival' basis. It is not enough to measure how many pounds of coal will keep out the cold; how many ounces of bread and pints of milk will keep the body in health. None of us wants to look forward to an old age spent in scavenging the markets and weighing our food. The only test by which a pension can be judged is by its relation to the wage packet earned at work.Hon. Members should listen to this last sentence:This is the way the boss looks at his pension and that is the way we should look at ours.Someone asked if public opinion was ready for this. The hon. Member for Basingstoke (Mr. Denzil Freeth) is a generation behind. Yesterday on the train I saw an advertisement of vacancies in railway work, and among the attractions offered were a pension and sick pay. We are entering a new age in social insurance. We came to the conclusion, and I believe that if the Government look honestly at the problem they will come to the same conclusion, that this is a national problem. I hope they will not be enticed away by private insurance companies. One in three of all existing employees can look forward to an old age with National Insurance pension and superannuation. I am very proud that in the ranks of coal miners one in three could look forward to that after nationalisation. Coal miners never had the slightest chance of superannuation during the private ownership of the mines. In five years' time the number will not be one in three; it will grow.
We welcome the growth of these schemes and want to encourage them. We believe it essential for the country as well as for the people concerned that not only should these schemes grow but that they should become interchangeable and transferable. Otherwise, there will he a big problem for our economy. We can reach a stage in the next five years in which half the people can look forward to an old age with a pension and superannuation; how can we deny the other half that advantage? We cannot have two classes of old-age pensioners. 1078 Therefore, when confronted with this problem, we came to the conclusion that the best way of meeting it was the way we have described in this plan.
There are three ways which we discussed very fully. I shall return to the question of contributions and the flat-rate contribution when we discuss the matter later in detail. I enter that caveat now. I wish to remind the Minister of what I said on the Third Reading of the National Insurance Bill. I said I felt that in five years' time we would probably have to have some method of financing it by which contributions would be equated to capacity to pay. I shall return to that. I hope we shall discuss all three ways of meeting the problem.
One way was referred to by my hon. Friend the Member for Cardiff, West (Mr. G. Thomas). He held the view, as many hold the view, perhaps including some hon. Members opposite, that we ought to take the pensions provision entirely out of the insurance scheme and make it a provision provided by the State, financed out of the Exchequer, out of taxation, and paid entirely as a national contribution in the way that in the main we run the National Health Service.
We examined that and rejected it, and I will tell my hon. Friend why. It was because the vast majority of people in this country, and all the trade unions we consulted, regard the insurance principle as essential. They think it essential to maintain it, because they regard the principle of benefit as of right as inseparable from the insurance principle. They therefore rejected the method suggested by my hon. Friend, and we rejected it. I know that there are arguments for it, and we can argue the question again.
The second method was that by which we had graduated contributions, related to income, and flat-rate benefits—a social security tax in which everyone would pay for the provision for old age in accordance with their capacity to pay and all would receive benefits at a uniform level. That stage may well be reached as the social conscience develops, but the general conclusion which we reached was that at this stage we did not think that method would be acceptable either.
The only alternative, therefore, and the alternative which we adopted and which we have elaborated in our plan, was that 1079 we should move towards graduated contributions and for a transitional period, which is bound to be of some length, in which we would marry together the flat rate basic pension and the differential pension related to earnings.
We could start a superannuation scheme afresh now, and the benefit would not become payable until people had paid their full contributions, but we cannot start there. Next year we shall be celebrating the fiftieth anniversary of the first Pensions Act, providing a pension which in my country they still very proudly call "Lloyd George's pension." Curiously enough, there is a little of it in this Bill. We shall return to that, too.
We started as long ago as that and we have proceeded with these pensions schemes ever since. We have not yet found the complete answer. Our new plan says that there must be a basic pension and a differential pension for this transitional period. We say that the basic pension should be £3 and we indicate how the two pensions will march and develop side by side until eventually they are married into one scheme. That is what we suggest, since we cannot start from the beginning but must begin with the history from 1908 in our minds. It is essential to marry the new conception and the old scheme. That is what we have sought to do.
This is the proposal which we put before the Labour Party Conference. We had a very interesting and valuable discussion. We are now considering the full implications of this scheme as they apply to all the other benefits, the whole of National Insurance and the whole of National Assistance. We believe that in these mid-1950's, almost on the eve of the 1960's, these documents represent as important a contribution to our social thinking as did the Beveridge Report in 1942. We believe that from this plan we can march on to a new system of social security which will pay due regard to the developments which have taken place and to the desire of our people for status, security and opportunity.
We shall concur in the Second Reading of the Bill and we shall return to some of its details in Committee, and we look forward to the day when we shall be in office and when a plan of the 1080 kind I have described will be our next contribution to the social progress of our country.
§ 9.34 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Miss Edith Pitt)
This has been a rather curious debate for the Second Reading of a Bill. We have had congratulations, we have had criticisms, and we have had some very useful and thoughtful speeches, particularly, if I may say so, from my hon. Friends the Members for Ilford, South (Mr. Cooper), Stroud (Mr. Kershaw) and Basingstoke (Mr. Freeth). We are, in fact, discussing a Bill, the proposals in which are designed to give improved benefits to all National Insurance and Industrial Injuries beneficiaries.
The proposals mean that the benefits will be fixed at the highest level ever. They also mean that contributions will be increased to the highest level yet. But the reaction of the present workers, as far as I can judge—and here I agree with my hon. Friend the Member for Basingstoke who said that he thought they would be willing to pay these contributions—is that they do not mind paying more now in order to improve the position of the pensioners, and secure for themselves better benefits later.
Today's debate has tended to centre, as the hon. Member for Cardiff, West (Mr. G. Thomas) has reminded us, on retirement pensions, but the increased benefits will apply to present workers who may need to fall back at some time on sickness or unemployment benefit, or need industrial injury benefit as a result of accidents at work. Certainly, the present worker, so far as he plans ahead, realises that he is building up for himself rights to a retirement pension.
As our debate has tended to concentrate so largely on pensions, perhaps I may, in reply, very briefly try to set out the position. The standard rates of pensions are being increased, for single persons from 40s. to 50s. a week, and for married couples from 65s. to 80s. a week. The previous increase, as hon. Members well know, came into effect in 1955. Since then, prices have risen by 11 per cent. Incidentally, so have food prices, and I make that point because it is always stressed, and rightly so, that food is very important to the pensioner.
1081 To restore the pension to the purchasing power of 1955—when, as I say, we gave the last increase—would need an increase, at present, of 4s. 4d. for the single rate and 7s. 1d. for the married rate. In this Bill we propose increases of 10s. and 15s., respectively, which will more than compensate for the rise in the cost of living—[HON. MEMBERS: "2s. 8d."] I have not forgotten the withdrawal of the tobacco tokens, which are worth 2s. 4d. a week, but even when that is deducted the increase represents a real improvement to all pensioners.
We in this House should not forget that by no means all pensioners apply for the tobacco tokens. The figures show that about 54 per cent. do, so nearly half of the pensioners will get the full benefit of the increase which is now proposed, and I would suggest that all pensioners would much prefer to have the cash in hand to spend as they choose—[Interruption.] My right hon. Friend dealt with the tobacco tokens and I do not want to take up the time of the House in stressing the difficulties which ail of us have experienced; the unfairness as between one pensioner and another, and the unfairness as between the non-smoker and the smoker.
Hon. Members must be aware of this source of irritation and dissatisfaction from the letters they receive from their constituents—which, in turn, sometimes come on to me—and must be aware from their contacts in their constituencies that, obviously, the token could be removed only at a time when a substantial increase of pensions was possible. This we have decided to do, and I am a little surprised, I must confess, that there has been criticism of it today.
The hon. Member for Ince (Mr. T. Brown) said that the tobacco token was illogical—he was with us there—but that to take it away now was inopportune.
§ Miss Pitt
The right hon. Gentleman the Member for Middlesbrough, East (Mr. Marquand) said that this proposal to withdraw the token had been received with the utmost disfavour. I do not think that that is true. My right hon. Friend, in his comments, gave two quotations from hon. Members opposite which. I should have thought, committed them to our view, but perhaps I may add one more on behalf of the pensioners them- 1082 selves. I noticed in the Birmingham Mail that the chairman of a Leamington old men's club said, on this announcement being made:No doubt, there will be a lot of grumbles about the abolition of tobacco tokens—but as a smoker I find it difficult to justify a concession which gave smokers an advantage over non-smokers. A 10s. increase for all pensioners is far better than cheap tobacco for some.We have heard a good deal about alternative superannuation schemes, and the right hon. Member for Llanelly (Mr. J. Griffiths) said that the best way of dealing with retirement pensions was by this plan. I do not deny the merits or the attraction of a graded scheme more nearly related to earnings during working life. The Government have already given much thought and study to this subject, as my right hon. Friend reminded us earlier this afternoon. But the Socialist proposals, as they said in the preamble, were a blueprint submitted to the British people for public examination and review, and they fell into two parts. The first one related to the principles and the second to the working model. It is the second part which has already been shown to be unworkable.
I can sympathise with the party opposite because the scheme which they produced with such triumph and calculated appeal has not been able to stand up to the tests. They are now committed to far-reaching changes in principle without adequate examination of the facts and the questions involved. If the principles were carried out, they would require a total levy on earnings for pensions of something like 13 per cent., instead of the 10 per cent. provided in the working model, and a further 7 per cent., making 20 per cent. in all, if similar provision is to be made for unemployment benefit and sickness benefit. Such proposals are highly inflationary in themselves. In particular, hon. Members in submitting this plan have failed to solve the problem of integration or exclusion of present occupational pension schemes.
§ Mr. Crossman rose—
§ Miss Pitt
I propose to come to the hon. Gentleman's points later; given time, and I will certainly give way to him.
1083 The rapid and encouraging growth of occupational pension schemes—it is estimated that 8¾ million employed people now have rights in various schemes—tends to emphasise the value of this type of provision for retirement years, and the rights of those who already belong to such schemes are improving as some of the benefits have improved in recent years. It is a fact that four years ago more than 25 per cent. of men retiring had some kind of superannuation rights, and the proportion now may well be nearer one-third.
I have no wish to be unduly critical. No doubt, ideas in this field on proper provision for old age and our growing number of older people are well worth examining. But there are other schemes in the field, too, which are also worthy of examination. America and Germany both have graded pension schemes already, although in neither case is the ceiling anything like so high as in the Socialist proposals. We have, of course, given considerable study to these schemes and have accumulated a considerable amount of information. Perhaps I might add that I have myself had the opportunity of visiting Germany and America this year and studying their schemes.
§ Miss Pitt
If we are to change the complete structure of social security, and it is not a matter of retirement pensions alone, we must give the fullest consideration to the long-term plan with all its implications for the individual and the economy. In this connection, I would remind the House, and answer an interjection on the point, that the Phillips Committee recommended the collection of information about occupational pension schemes. The Government actuary is now in the final stages of analysing a pilot survey, and this information, when it is ready, must surely play a very important part in our deliberations. No one has the right to complain that the Government are proceeding with deliberation in considering whether any form of alternative provision for retirement is practicable.
Naturally, we are all concerned at the growing financial burden on the National Insurance scheme, a burden which is increased by the responsibility which we have accepted for payments for back 1084 service, by the additions we have made to benefits, and by the rising proportion of pensioners in the population. The hon. Member for Kirkcaldy Burghs (Mr. Hubbard) in his speech in the debate on the Address last week, which I read, made the point, and made it very well, that he did not think of old people as a burden and he did not wish others to think of them as a burden. I certainly share his view, as I am sure we all do, but the fact remains that we have assumed a considerable financial burden in helping to provide for their old age. Naturally also, we are all encouraged by the developments in private supplementary schemes and would wish to see more and more people brought within the scope of such schemes; but this is not the answer to the problem of present pensioners who have already retired.
Those who need help need it now, and the Government are taking action now. We intend to provide improvements for present beneficiaries which will bring the rate of pension now to a level which, for pensioners as a whole, married as well as single, compares very favourably with the £3 rate for those insured in their own right which the Socialists promised for 1960—if they are ever to come to power again.
Coming back to the real discussion tonight, or the discussion as it should be, on the financial side my right hon. Friend dealt with the figures in detail. It is still asserted, however, that the taxpayer is not paying enough or that we are making a profit out of it. That assertion is made by the right hon. Member for Middlesbrough, East and by the hon. Member for Coventry, East (Mr. Crossman). It is just not true. The taxpayer is not being relieved of a penny by these proposals. In fact, he is being committed considerably farther, especially in the years ahead.
It is true that increases in contributions on the National Insurance side will meet the increased expenditure on benefits next year, but the increase in contributions involves an increase in the Exchequer supplement, and the amount so required is £30 million extra. Again, it is correct that this £30 million extra will, next year, reduce the deficit which also had to be met by the taxpayer. This was estimated to be £44 million for next year, so that it is reduced by the £30 million to which I referred to £14 million. But in total—and 1085 this is the point—the taxpayer's liability is unchanged. This is for next year only. In fact, the taxpayer's extra liability will next year be the £30 million Exchequer supplement, plus war pensions increases of £16½ million, plus the increase in non-contributory pensions of £1 million, plus the Exchequer supplement to the Industrial Injuries Fund of £4½ million.
§ Mr. J. Griffiths
The hon. Lady must know that we are discussing the burden on the National Insurance scheme. War pensioners are not associated with the National Insurance scheme.
§ Miss Pitt
But this is one operation. We are discussing improvements together. In particular, we are at the moment discussing what contribution the taxpayer is to make to the improvements. [Interruption.] My right hon. Friend behind me interjects, "Was the right hon. Gentleman not prepared to do anything about war pensions?" If so, they must be paid for.
I had got as far as a total of £52 million. From this can be deducted the estimated net saving on National Assistance of about £8 million. That brings us to £44 million. To this, we must add the £14 million deficiency payment already mentioned. There is also the imprecise figure, as my right hon. Friend said, of the loss in revenue to the Exchequer arising from the increased contributions from employers and insured persons which is likely more than to offset any increase in revenue from the abolition of the tobacco scheme. So now we come back to the figure with which my right hon. Friend opened this afternoon of, in all, about £60 million.
§ Mr. Marquand
Has the hon. Lady not forgotten that the Actuary himself said that the extra supplements will amount to £30 million but that this will be offset by a reduction in the grant required to meet the deficiency?
§ Miss Pitt
That is exactly what I have just said. That intervention has taken up some of my valuable time. I quite clearly stated that there will be a reduction of £30 million in the expected deficit, but it is made up in the increased Exchequer contribution.
What is even more important than this complicated arithmetic is the mounting liability of the Exchequer to the Fund. The annual liability of the Exchequer for supplement and deficit is estimated to 1086 rise to £357 million by 1964–65 and to almost £600 million by 1979–80, the latter being an increase of £84 million over the previously estimated liability and caused solely by the increases proposed under this Bill.
I want to try to answer some of the other points which I have not been able to deal with en route, but my reply must of necessity be brief. The right hon. Member for Middlesbrough, East asked me about modified pensions. I am glad to be able to reassure him by telling him that we are introducing regulations to bring up modified pensions in the same proportion as the main rates.
I really must correct the figures given by the right hon. Gentleman. He added to the credit of the taxpayers the increase in the Industrial Injuries Fund. Surely, he knows as well as I do that this is a quite separate fund and one which cannot he used for any other purpose.
Then, he also asked me about widowed mothers. At least he raised the point, which I know is one on which he feels very deeply, because he has discussed it in the House so often, and it is one on which I find myself in sympathy with him. I want to remind him, however, that improvements were given to the widowed mother last year, as he will remember, when 5s. was granted for each of the children, and that lead has been maintained. We have given her benefits which will still give her a lead over other beneficiaries. Whereas in November, 1955, before the action which he took, 28 per cent. of widowed mothers were on National Assistance, that figure is now down to 24 per cent., which is about the same as that for retirement pensioners.
My hon. Friend the Member for Ilford. South asked about Civil Service pensions for non-established service. That is not the responsibility of my Ministry and he must pursue it elsewhere. My hon. Friend has the Financial Secretary to the Treasury on the Front Bench.
He also asked me about the earnings rule, which was changed in 1956. I do not think that circumstances have changed a great deal since then. In any event, perhaps I may remind him that legislation is not necessary to change the earnings rule again, because we took power in the last Bill in 1956 to do this by regulation.
1087 Now I come to the hon. Member for Coventry, East. He made a statement, first of all, that this is no better than the 1946 figures. The hon. Gentleman is really not very good at figures. The 26s. for a single person in 1946 would be worth at today's prices 42s. 4d.; or, if we take 1948, when the other benefits came into operation, 39s. 2d., but I will stick to the higher figure of 42s. 4d. Married couples in 1946 received 42s., which is worth today 68s. 5d., at today's prices. We are proposing in this Bill to raise these two figures, respectively, to 50s. and 80s. The hon. Gentleman's criticism is really most unjustified.
The hon. Gentleman also mentioned part-time workers paying the full contribution. The National Insurance Advisory Committee recently recommended that part-time workers who worked for eight hours in any occupation should not pay the stamp, and the regulations are going through.
The hon. Gentleman admits that the figures in his own plan are inaccurate and that the party takes no responsibility. In fact he said so in a letter to The Times. Referring to my right hon. Friend's criticism, he said:They relate not to a policy statement prepared by the National Executive and endorsed at the Party Conference a fortnight ago, but to the model scheme for which"—Professors so-and-so—I will not mention their names—are responsible.The hon. Gentleman disowned the other half of the programme, but for all that, this booklet is published without a disclaimer under the title of "Labour Party's policy for security in old age."
Furthermore, the hon. Gentleman overestimated the income by including the employers' National Insurance contributions, income in kind, earnings of people in Ireland but no payments, excluding expenditure on widow's benefits for widows under pension age amounting to about £60 million in the first year of the scheme, and he forgot the administrative costs. If that is the best that the hon. Gentleman can do, I think it is really intolerable that he should come here today to suggest that we should have a new 1088 scheme when his own is proved unworkable.
§ Question put and agreed to.
§ Bill read a Second time.
§ Bill committed to a Committee of the whole House.—[Colonel J. H. Harrison.]
§ Committee Tomorrow.