§ 3.37 p.m.
§ Mr. James Griffiths (Llanelly)
I think that the Committee will agree that it is appropriate that we should devote this day to a review of the work of the Ministry of Pensions and National Insurance, and that we should be holding it in this year of grace 1958 and on 7th July, for this year we are celebrating two anniversaries which mark two important landmarks in the development of the British system of social insurance and service.
Fifty years ago, the first national old age pensions Act came into operation. It was associated, and here I must be politically careful, in the minds of most people, if not actually in the procedure of this House, with the name of my famous compatriot David Lloyd George. Indeed, in the minds of most people, it was known and is still known, as the old Lloyd George Act.
When one reads the debates of 1910 in this House and in another place, and 36 realises the excitement, the anger, the fears, the wild anticipations that a pension at a maximum of 5s. and a minimum of 1s. a week would be granted to a man and woman at 70 years of age and over, the fear that the independence of the workers would be undermined, that the country would be ruined and the Empire go to the dogs—to read the debates of those days is to realise how far the climate of opinion has changed in this last half-century.
I read today a very interesting supplement to The Times which is devoted to the tenth anniversary of a service which we shall not discuss today on this Vote, but which we salute—the National Health Service. I notice that The Times, in its editorial commending this Service to the country, says that we all now accept the concept of a National Health Service. What a change in ten years. I hope that The Times will read its own editorials of ten years ago, and that hon. Members will read their own speeches of ten years ago. As one who has spent many years in the Labour Party, I can say that among the greatest triumphs of my party is the triumph of ideas.
Last Saturday, by the way, was also the tenth anniversary of the coming into operation of three important Acts, which it was my privilege to play some part in piloting through the House of Commons and bringing into operation. These were the National Insurance Act, the National Insurance (Industrial Injuries) Act and the National Assistance Act. There was a further Act of Parliament which falls within the administration of the Minister which was then on the Statute Book. When I. became Minister of National Insurance in July, 1945, all I had to do was to fill in a blank, and that was the date upon which the National Health Service Act would begin to operate. I ordered the earliest possible date, which was 2nd August, 1946.
The Minister will know what I recall as the Minister who made the provision, that for about 500,000 persons in this country the tenth anniversary has its own special importance. The people known as late entrants, having now completed ten years within the cover of the National Insurance scheme, are qualified for a retirement pension today. Here, I ought to declare my interest. I am one of the 37 late entrants myself, having been a contributor to the earlier scheme.
So I want to thank the Minister, and through him the courteous servants of the Ministry of National Insurance, for whom I have a deep regard. I have received with great pleasure their notification that I am now qualified for a retirement pension. They asked me two questions which I had to answer. The first was whether I contemplated retirement. I hope I have not disappointed them or my constituents by replying that I do not contemplate retirement at the moment.
The second question was about my earnings. I replied that since this nation is now slightly more generous to its devoted servants in the Commons than it used to be, Members' pay has at long last reached a stage where it disqualifies me from receiving a pension.
I propose this afternoon to take stock of these Acts of Parliament, to look back ten years, and to find out whether our hopes have been fulfilled or whether they have been disappointed. I want to find out whether the service we intended should be rendered by these statutes to our people has been as equal and adequate as we contemplated when we passed the legislation. I hope that the Committee will bear with me if I devote myself entirely to this aspect, although the Vote covers war pensions, also.
My right hon. Friend the Member for Middlesbrough, East (Mr. Marquand), who was himself a Minister of Pensions, will deal with that aspect as, no doubt, will other hon. Members. I am sure that the Committee will understand that I am not spending time on that subject not because I do not believe it is an important part of the Service and administration we are reviewing today. In the main, therefore, I shall deal with the National Insurance Act and the National Insurance (Industrial Injuries) Act and I shall venture to look into the future.
The National Insurance Act was noteworthy in many respects. One reason why it was noteworthy was that it was the first attempt in our country, and at that time as far as I know it was the first attempt ever made in any country—to seek to cover virtually the whole of the population within one social security scheme based on insurance by contribution.
38 There were a variety of schemes providing for adversities and old age in many other countries but here, following the recommendations of the Beveridge Report, was an attempt to seek to cover the whole population in one insurance scheme. Previous schemes had provided for only a part of the population, namely, persons who had been in employment, and only those of them who had an income of less than a maximum laid down at the time, £408 per annum.
The first test I apply is: where have we got? Have we proved in these last ten years that it is possible to bring virtually the whole population within the cover of an insurance scheme built on these lines, and if we have failed, why have we failed? The Government Actuary, in his seventh interim Report, published recently, has given us some figures to show the total number insured under the scheme in the three categories: the employed contributors, the self-employed and the not gainfully employed.
He states that at 31st March, 1957, there were 19½ million insured in the first category, employed contributors. Just over 1¼ million—1.39 million—self-employed, were also covered by the scheme, and half a million were covered as not gainfully employed. From this standpoint the employed contributors are in a sense an easy problem. The only difference made there was that there was no income limit. Anyone who is employed under a contract of service is covered in Class A. He pays a contribution, so does the employer, and so does the State.
Our new venture was to bring in the self-employed and the not gainfully employed. I hope that whoever replies to the debate will tell us where we stand in relation to these two last categories. Charging my memory—I think it is right, because I checked this point—the number of self-employed covered is substantially less than the number we estimated would be covered. I do not know the reason for the difference. I think we estimated that between 2 million and 3 million self-employed would be covered by the scheme, but there are only just over 1 million. In the case of the not gainfully employed it is difficult to make any estimate, but I also have the impression that the number of these people who are paying contributions under the scheme is much less that we anticipated.
39 I should like to know whether the number of self-employed who are insured under the scheme has been affected by the contributions. This is vastly important for the future of the scheme. We Members of Parliament are fortunate, as self-employed people, in that our contributions are collected for us by the kindness of the Vote Office, to whom we ought to pay a tribute. Other self-employed people have to make their own contributions. How many are not paying? Have we really found the way to bring the self-employed into a scheme of this kind? It is a wide class, from the barrow boy up to the man who practises his own profession, including barristers as well as Members of Parliament. I have a feeling that a substantial number of self-employed are not covered. Since we set out to make the scheme comprehensive, it is important to know about this.
Two other important points arise here. In the 1946 Act we found it necessary to insert a Section, which is still in operation, that we would exempt people whose income did not reach a certain figure. At first, it was £104 per annum and then it was raised to £156. It is interesting to find from the Report of the Government Actuary how many persons have claimed and have been granted exemption from paying contributions to the National Insurance scheme because their income was less than £3 a week in 1957–58.
Here are the figures. There were 50,000 men, 130,000 single women, 175,000 widows. So there were 355,000 men and women in Britain in that year who could not pay contributions to the National Insurance scheme because their income was less than £3 a week. What tragic human stories lie behind those figures of men, of single women, of widows. How much do we know about them? All the Ministry knows is that they have under £3 a week each, so they need not pay contributions. How do they live? What is the relation between this and the National Assistance Board? I will return to this point.
Here is a number of poor people, the size of an average city, who have not an income of £3 a week in 1958. One of the problems is that, good as our scheme is, in the change-over we have lost the personal manner which some of the best of the old boards of guardians had. By means of that type of personal service, 40 the tragedy of such people became better known than it does now. I hope that the Minister will tell us what is known about these people and how we can in future provide for them whereas, at the moment, our scheme does not cover them because their income is not sufficient to enable them to pay contributions.
There is also the case of young men and women students. At the time I found it hard to justify allowing young men and women students full credits without paying contributions, whereas young men and women who were not fortunate enough to be students but had to work in industry had to pay contributions. I was confronted with the problem that if I gave the students credits I should have to increase the contributions paid by the others.
§ Mr. Raymond Gower (Barry)
Does the right hon. Gentleman know to what extent the number of self-employed people may have been reduced by the growth of, say, larger economic units in the last ten or fifteen years? Also, has he any knowledge of how many of the people with very low earnings may be working a day or two a week?
§ Mr. Griffiths
That is what I am asking the Minister. All I know is that they have not £3 a week, and the Ministry has agreed that that is so. I hope that the Minister will give us the answer.
It must be remembered that when the students finish their student life and enter their chosen occupations they have to make good their contributions or lose their credits and some of their qualifications. I am sorry to bother the Committee with figures, but in this matter figures are of the essence. From the seventh interim Report of the Government Actuary I find that in 1956 there were 233,000 young men students and 190,000 young women students. How is the scheme working out? How many of them find it too difficult when they get into employment to pay back their contributions in a reasonable period and so put themselves in benefit? How many of them realise that if they do not do that their benefits will later be affected, in particular their pension benefits? May they not go through life without realising that? Cannot some means be devised, without putting the burden on the other contributors, for dealing with young 41 students under our social insurance scheme? This is one of the matters to which I hope attention will be given by the Minister.
The first basic principle of this scheme was comprehensiveness. As to the second, after due consideration we decided to build the scheme on the insurance principle. There is a general view still in favour of retention of the insurance principle. My T.U.C. friends attach enormous importance to it, rightly thinking that unless the insurance principle is maintained we shall not be able to ensure what they regard as the essence of a sound scheme, which is that benefits shall be paid as of right on the basis of contributions and without any means test. The only alternative is to make the provision from the national Exchequer. I strongly hold the view that it is better to base the scheme on the insurance principle.
However, we decided not only to base the scheme on the insurance principle, but to base it on the pattern of the insurance principle already embodied in existing Acts, which was—flat-rate contributions; flat-rate benefit. I can remember discussing in the House what was the maximum contribution that we could impose as a flat rate bearing in mind that the lowest paid worker would have to pay the same as the highest paid worker, that a business executive with a salary which sometimes makes that of the Prime Minister look small would pay the same as the day wage man in the pits. After a lot of discussion, we decided upon the sum of 5s.
If hon. Members take the contribution as a percentage of average earnings in 1948 and 1958 they will see what the difference is. Average earnings conceal enormous disparities. On the average these days there is a much bigger gap between earnings and wage rates than ever before. As an old trade union officer, I can say that one of the features today is the growing disparity between earnings and wage rates having regard to overtime factors and so on, but the situation will very quickly change. Today, we heard the Paymaster-General speak of the steps which the National Coal Board is taking to try to equate demand and production of coal. He referred to no Saturday work. Do hon. Members realise what that means to the earnings 42 of a miner? It may mean £1, £1 10s. or £2 a week less.
I beg hon. Members to realise how the increased contributions at these very high levels will affect people. I believe that we have reached the limit of flat-rate contributions—indeed, I thought so a long time ago—and that we shall have to change the system. All we have heard is rumours. I hope that the Government will tell us what is in mind. We follow with interest in the Press what is taking place. We are besieged with literature from the National Chamber of Commerce and the life assurance offices.
I have here an advertisement by a life assurance office in one of yesterday's Sunday newspapers. It refers to the pension problem. As an old trade unionist, I hope that these people pay for it out of their political fund, and I hope that, in accordance with their conviction, it is on a contracting-in basis. I hope that the Chancellor of the Exchequer is tough with them when they ask for expenses of this kind to be allowed for Income Tax purposes. If this is not political propaganda, what is? However, everyone is conscious that a change must come.
All I hear is that the Government are in collusion with the insurance companies—that is only to be expected—and that one of these days they will produce a joint scheme devised not by the Ministry of Pensions and National Insurance, but by the Conservative Central Office and the life assurance offices association. I gather that the Government are in great doubt—I understand it—whether to produce a White Paper and fight a General Election on it, or produce a Bill and seek to pass it into law. Perhaps the Minister would tell us what he proposes to do.
The contributory conditions are rigid. How are they working? How many insured contributors fail to maintain the average number of contributions required for full benefit? How many are getting less than full benefit? This is especially important in the case of the self-employed; the contributions of the employed contributor are deducted at regular intervals. Has the Minister any figures of the number of persons who fail to get full benefit because the contributory conditions are so rigid that they are unable to maintain the required number of contributions and keep themselves 43 within benefit? This is a serious matter for sickness and unemployment benefit, but it is vitally important for pension benefit.
The next principle which was laid down was that benefits should be at subsistence level. To paraphrase what Beveridge said, it was decided that the National Insurance scheme should provide benefits at levels which for the normal case would suffice, leaving the Assistance Board as a residual service. In his scheme, Beveridge contemplated that the benefits to be provided would, by and large, provide for the needs of the sick and unemployed and others entitled to benefits under the scheme.
Let us admit at once that in this major problem we have failed, I shall not argue about who failed most. I do not want to discuss the subject on that level. We have all failed. The number of people on Assistance in December, 1948, was about 600,000. Ever since then, that number has increased. It may be down at the moment and the Minister may say that that is because new benefits have come into operation. However, the number will not stay down for long.
How are we to judge whether scales provide a subsistence level? We can argue what subsistence is. The Ministry has still not yet done anything about the Phillips Report, which said that there should be a special criterion for the people affected, bearing in mind the pattern of their expenditure. For the purpose of this examination, I shall take the subsistence level approved by Parliament in approving the Assistance Board's scales. If the Board's scales are subsistence, then the number of people who have to supplement their benefits under the National Insurance scheme by drawing assistance is the measure of our failure to provide subsistence for them.
§ Major H. Legge-Bourke (Isle of Ely)
The right hon. Gentleman will remember that he and I spent many days together in Committee discussing his 1946 Measure. Am I not right in saying that in his original plan Sir William Beveridge, as he then was, never visualised a subsistence level from the word "go", but thought that it could be built up to that level only over many years of contribution?
§ Mr. Griffiths
That is true for pensions, but not for other benefits. Beveridge proposed that the pension rate should not be raised immediately, but over a period. The benefits were 24s. and 40s., which I changed to 26s. and 42s. to take account of the increase in the cost of living.
The Digest of Statistics for May, 1958, shows that of the 1,630,000 National Assistance Board weekly allowances in March, 1958, nearly three-quarters, 1,107,000 were in supplementation of National Assistance benefit. The Assistance Board is only partly an assistance board. It is an adjunct of the Ministry of National Insurance. At that date, there were more than 1 million grants made to supplement National Insurance benefits, so that there were more than 1 million people whose insurance benefit was not for them subsistence, by the Board's test. That is the measure of our failure.
In Appendix III of the National Assistance Board's Report for 1957 are the figures of households receiving National Insurance benefits and the proportion of those households who were also in receipt of assistance. They were, for pensions, 24.6 per cent.; unemployment, 20.6 per cent.; sickness, 12.4 per cent.; widows' benefit, 14 per cent. One in four of all the pensioners drawing retirement pensions under the National Assistance Act were also receiving assistance, in spite of the fact that in recent years an increasing proportion have been receiving not only the basic rate, but an increased rate because of age increments. That is the measure of our failure.
It is, therefore, quite clear that on the principle which we embodied in Section 40 of the 1946 Act, the principle of a national minimum of subsistance as recommended by Beveridge, we have failed. We have to admit that at the end of ten years we are not providing a subsistence level of benefits.
I turn to some of the benefits, to make one or two comments and suggestions. I am disturbed to find that of those in receipt of sickness benefit, 113,000 have to receive assistance. I want to know something more about those 113,000. I believe that I know who they are. They are the people with large families and they include people for whom, I have always felt, we have 45 never provided adequately in our insurance scheme. This is one of the matters which must be considered. One of the things which I hope we shall do is to provide for the long-term sick a benefit other than the basic benefit provided under the National Insurance Scheme.
What I hope will be done, and what I hope a Minister of National Insurance will do in the next Government—the next Labour Government which will be the next Government—is to apply to the long-term sick two benefits which will not cost much, but which will render immense service—perhaps the right hon. Gentleman will tell us how much this would cost. We should make available to the long-term sick two benefits—on the same scale—which we provide for the long-term disabled under the Industrial Injuries scheme—the unemployability allowance and the constant attendance allowance.
I know what an enormous service such an arrangement, which began with war pensioners, has given to our longterm disabled under the Industrial Injuries scheme. How many of the 113,000 people who draw sickness benefit and received assistance are long-term sick? Does the right hon. Gentleman's experience tally with mine, and will he accept my view and agree to refer the matter to the National Advisory Committee to see whether we can adapt the industrial injuries arrangement to meet the needs of the long-term sick?
The same problem of subsistence arises with unemployment. Page 7 of the National Assistance Board's Report for 1957 shows that there were 95,000 registered unemployed who were receiving assistance at the end of 1957. Of those, 40,000 were receiving unemployment benefit, while 55,000 were not receiving unemployment benefit, although registered for work at employment exchanges.
This problem brings in Section 62 of the Act. At what rate are the unemployed exhausting their standard benefit? Unemployment is growing. Earlier today we were discussing Lancashire, but in my constituency the unemployment rate is higher than it has been at any time since the 1930s. Are the Minister, his Advisory Committee and his officials paying attention to this problem, which especially affects the unemployed who fall 46 out of work through technological unemployment? In my constituency, for example, the tinplate industry has been completely revolutionised. The old hand mills have closed down, and new mills are being installed. This is a tremendous problem. I hope that the Ministry of Labour will take note of this, because it is also an important problem for that Ministry.
The man of 55 years of age, who has spent many years acquiring his skill; whose skill has been destroyed overnight by a technological revolution and who finds himself unable to find a job in this modern world, is a tragic figure. The hon. Member for Barry (Mr. Gower) will be familiar with this problem. Under the present system, after a period of unemployment pay there is no more for such a man, not even under Section 62. For him there is then only National Assistance. I ask the Minister to pay particular attention to this problem, and to tell us whether he has considered it.
I now want to say a few words about widows' benefits. Here, I must make a confession. This was the most difficult problem with which I had to deal. The first thing we had to decide in 1946 was whether we should make widowhood, as such, the only criterion for a widow's pension. That was the old criterion, under which we paid a widow 10s. a week. Lord Beveridge recommended—and the general climate of opinion was—that we should provide differential widows' pensions to meet the different needs of widows.
How has that system been working? Has there been a real examination of the situation? I have read reviews of a book which I have marked down as a "must", written by Mr. Peter Marris and called "Widows and their Families". It is a study of the position of widows in this country. We owe a lot to these young men, who are doing a great service in examining these problems. They are developing an enormous amount of knowledge on the subject. The only person who has not given us an adequate report is the Minister, under the quinquennial review. When the Minister's predecessor presented the quinquennial report for which I had provided under the 1946 Act we found that it was a little flimsy, instead of a real review of 47 the problems. What are we doing about it now?
I must confess that I am the author of the 10s. widow. [HON. MEMBERS: "Shame."] My hon. Friends say, "Shame". It shows how careful administrators must be. What I thought was a concession has become a grievance. In the context of what I wanted to do it was a concession. It provided a pension for widows, as such, and for varying the pension according to circumstances. In the case of the widows who had qualified merely by widowhood, under the old Act, I thought I had a duty to make the old pension available if they would not qualify for the new.
From the reviews of Mr. Marris's book—which I must read—it is quite plain that this is a human tragedy, about which we must do something. It may be that we shall have to recast the whole system of widows' pensions, and of children's allowances. I hope that the Minister will pay serious attention to this point and act very quickly. I would be inclined to abolish the earnings rule for widows. As for the war widow—she has paid a price, but she has the advantage over all the other sorts of widow that she is allowed full duplication, and I wonder whether we could not have a complete recasting of the whole system of widows' pensions immediately, bringing in duplication. Those are some of the things that I wanted to say in connection with the National Insurance Act.
I apologise for keeping the Committee for so long, but I must say a few words about the Industrial Injuries Act. This was the most revolutionary of all the Acts which have been passed since I entered Parliament. It made the biggest change, and converted what had been the responsibility of employers—who, more often than otherwise, farmed out their responsibilities to the insurance companies—into a social service. It changed the fundamental criterion from loss of earnings to loss of faculty. I remember the excitement aroused in connection with the hardship allowance, but it is only that hardship allowance which has saved the industrial injuries scheme from wreckage. I urge the Minister to recognise that fact. It is a safety valve, and if he does not keep it at a high level the whole scheme will collapse.
§ Mr. Sydney Silverman (Nelson and Colne)
. A short time ago my right hon. Friend was talking about a reconsideration of flat-rate benefits for pensions. I hope that he is applying that principle especially to the Industrial Injuries Act, where the introduction of the flat rate probably made the biggest change of all.
§ Mr. Griffiths
I am coming to that point in a moment. My hon. Friend will be interested to know that there is no demand among trade unions for a general recasting of the principles of the scheme. There are defects in it, and my hon. Friends will speak of them.
My general view is that the assessments made by the Board are generally on a lower level than I had thought. At the beginning, we had no experience in this matter. All our experience of the assessment of loss of faculty lay in the sphere of the war injured, and, in the main, war injuries are more easily capable of assessment, usually amounting to the loss of an arm or a leg, or a similar injury. But there is a wide variety of industrial injuries and industrial diseases, and I have the impression that the average assessments are too low. I beg the Minister to consider that point.
My second point concerns administration. When we established these new tribunals I hesitated whether we ought to abolish the final appeal to the House of Lords. In workmen's compensation cases the House of Lords sat as a judicial committee, and was very generous in its interpretation of the old Workmen's Compensation Act, particularly in regard to acceleration. It was sometimes claimed that an accident had accelerated a man's death, even though the cause of death was something other than could be directly attributable to the accident. There is a general feeling that the tribunals and the commissioners are less generous than was the House of Lords in interpreting the rule of acceleration, especially in regard to industrial diseases. I urge the Minister to remember that much feeling exists on this point, and that there is a growing demand to recast the judicial system. If that is not done many people will think that better justice was being provided under the old scheme.
Lastly, in connection with industrial injuries, I want to put in a plea for the 49 old cases. I wanted to bring them in originally, but I felt that I could not do so when it meant placing the burden upon contributors in respect of cases for which the old employers were responsible. Perhaps I may be forgiven if I admit to a little feeling in the matter. I asked myself why I should ask the miners and the State to pay extra money in respect of old cases which were really the responsibility of the former coal owners, who, had been paid compensation. I wish we had taken something out of the compensation we paid them and made it available for these old cases. In the result, I failed in my negotiations to find a way to include these cases, but there is no reason why anyone should be left outside now.
Surveying the achievements of the past ten years, I think that we have a right to be proud of what we have done. It has been of enormous benefit to the people. I consider it a great privilege to have had the opportunity and the honour of taking some part in framing the legislation and in building the Ministry. Now we must look to the future. We have said what we want to do about pensions and we shall say what we want to do about the whole scheme. Flat-rate contributions and flat-rate benefits are not in tune with the age in which we live. Beveridge, in 1942, and I, in 1946, immediately after the Second World War, considered the matter in terms applicable in the 1930s, when the cry was, For heaven's sake let us have a minimum below which no benefit may fall."
Now I hope that we are entering an age of full employment and an expanding economy which will require the provision of sickness and unemployment benefits, and particularly, benefits for old age, which bear an adequate relationship to the income received by people in work. One week people are in work and receive an income of £X, and the next week they are retired and have to live upon a pension. Subsistence levels, even though we had achieved them—and we have not—are out of tune with this modern age, and the whole scheme must be recast.
I have not said much this afternoon about the cost. The Minister's estimates provide that next year there will be an increase of £38 million in the grant from 50 the State for National Insurance. The total grant of £138 million appears a lot, but I wonder whether the country realises that the National Insurance scheme is not the only scheme which is assisted by the Government. I wonder whether people realise that four years ago, in 1954, the Phillips Committee estimated that the subventions, or tax concessions, made to private pension schemes cost the Exchequer £100 million. So, this year, we shall be providing for the National Insurance scheme only £38 million more than is provided for private schemes, including the "top hat" scheme.
§ Sir Keith Joseph (Leeds, North-East)
I am sure that the right hon. Gentleman will bear in mind that the Treasury does not hand out concessions in this case, but merely defers the collecting of tax, admittedly at a lower rate, when the pension is actually paid.
§ Mr. Griffiths
But it means that through this concession, or whatever one cares to call it, the Treasury loses £100 million; because contributions can be set against Income Tax. Therefore, the Chancellor gives up £100 million.
The Welfare State is not a luxury. It is an essential part of the life of a civilised community and the cost must be borne by the community. We need an economic and financial policy which will enable us to make full and wise use of our resources. I believe that a Britain determined to expand and build up her economy can provide such a Welfare State. I am proud that I was permitted to play some part in creating it, and I look forward to its future with confidence.
§ 4.25 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Miss Edith Pitt)
I wish, first, to thank the right hon. Member for Llanelly (Mr. J. Griffiths) for his tribute to my Department and to the work which has gone into the operation of the first ten years of full insurance and industrial injuries benefits; not least to the fact that he was properly notified of his own entitlement.
The work of the first ten years presented an enormous task in which the right hon. Gentleman played an important part in 51 guiding both the relevant Acts of Parliament through this House in 1946. Though comprehensive insurance came into full operation in 1948, it was not wholly new. Perhaps it is unnecessary to remind the Committee that the foundations of social security had been laid many years earlier and the existing schemes of pensions, sickness benefit, and unemployment insurance, were all absorbed into this new, comprehensive National Insurance scheme.
What I think is worth reminding ourselves about is that even during the days when the outcome of the war was in the balance the thoughts of many people were turning to the need for improved and wider measures of social security for the years after the war. I wish briefly to remind the Committee of the history behind the present National Insurance scheme. The Beveridge Report was commissioned in June, 1941, and the Report itself was submitted in November, 1942. A White Paper on Social Insurance was issued in September, 1944, and the Ministry of National Insurance was set up in November, 1944, both under the then Coalition Government presided over by my right hon. Friend the Member for Woodford (Sir W. Churchill).
I have always had in mind some words of my right hon. Friend which he used in a broadcast on 21st March, 1943, when he said:I personally am very keen that a scheme for the amalgamation and extension of our present incomparable insurance system should have a leading place in our Four Years Plan. … Here is a real opportunity for what I once called 'bringing the magic of averages to the rescue of the millions.' Therefore you must rank me and my colleagues as strong partisans of national compulsory insurance for all classes for all purposes from the cradle to the grave.Therefore, the right hon. Member for Llanelly is not the "father" of this infant whose tenth anniversary we are celebrating, but rather the "male nurse" in attendance.
§ Mr. J. Griffiths
I hope that the hon. Lady will not forget the work of my distinguished compatriot.
§ Miss Pitt
No. Indeed, I will join with the right hon. Gentleman in his tribute. I should like to come back to the point later.
The principle of universality was established with the National Insurance 52 scheme and I think it is appropriate when we review the scheme to have in mind that today is the first pension payday for the late age entrants and their wives, as we were reminded by the right hon. Gentleman. These late age entrants are people who were within ten years of the minimum pension age when insurance became compulsory in July, 1948. They were not covered previously for a variety of reasons.
For the most part, those reasons were that their own exempted employment provided at least as good a pension as the State scheme, or their salaries were over the income limit, or they were employed on their own account. But from now on virtually everyone reaching retiring age will qualify for a National Insurance pension. Today, therefore, marks the triumph of the Beveridge principle of universality, and pensions paid as of right without regard to means. We can truly say that this universal scheme now embraces, if I may borrow a phrase, everyone from the field marshal to the private.
I am glad, because I think that the pensions now to be enjoyed by the late age entrants, as we call them, will help many whose occupational pensions or personal thrift in the years gone by were sufficient, as they thought, to maintain a standard of living, but because of changed money values are not now buying the security which they hoped for when they were working and saving for it. I am glad that this legislation will be a help to them.
Of these 400,000 new pensioners, 300,000 are contributors themselves and 100,000 are the wives. Thus the figure of 400,000 represents as many new pensioners in one day as we would normally take in one year. They bring the total number of pensioners to 5¼ million, and the extra cost of the late age entrants' pension will be £50 million a year. It has been a very considerable administrative operation to bring these pensions into payment, and I am happy to say it has been carried through without any serious hitch.
I think that it is a happy coincidence, too, that in this anniversary year the 13th General Meeting of the International Social Security Association was held in Great Britain. Hon. Members on both sides of the Committee attended many of the sessions and functions arranged in 53 connection with that meeting, which took place in May, when we were the host country to representatives from more than forty-eight other countries and were able to discuss many problems and exchange information on this important subject of social security.
To return to the review of ten years' work, over the period there has been a tremendous gain in experience, both among the staff of the Ministry in administering the service and the public in the understanding of their rights and making use of the service. Of course, one still meets with some misunderstanding, and I am sure that hon. Members on both sides of the Committee share this experience with me. For instance, there are still people who do not understand the difference between the retirement condition and the earnings rule. There are two totally different sets of conditions. One is that it has to be accepted that a man has retired from full-time employment. When this has been accepted, other conditions come into operation, and he comes up against the earnings rule. It is sometimes here, I find, that the beneficiaries are not quite clear on the two different sets of conditions.
I find, too, that it is not clearly understood that the earnings rule of 50s. for the retirement pension and the 60s. rule for the widowed mother are not limits on earnings. Sometimes people say to me, "I am not allowed to earn more than 50s." Of course, as we understand, there is no limit on their earnings, but if they are, in the respective cases, earning above 50s. or 60s. then the earnings rule itself bites. I wish that were fully understood.
One other thing misunderstood is that the earnings taken into account are net earnings, and disregard any fares which the individual concerned may have to pay getting to and from work, and disregard any payment which the widowed mother may have to make for the care of her children while working. The earnings rule does not operate until the deduction of these and similar expenses has been made from the gross earnings.
One of the other things still misunderstood is the need for making claims prompts in order to secure benefit. I need not remind the Committee that we in the Ministry do all that we can to 54 make this known and the staff is always willing to help. I think, too, that the readiness of the public to seek to help is borne out by the fact that about 20 million personal inquiries a year are now being made at our local offices.
During the past ten years the work of the Department has steadily increased. For instance there are now nearly 1½ million additional retirement pensioners, 600,000 more family allowances for an additional 900,000 children, 1 million more contributors to National Insurance. Also, the Department now issues documents for welfare foods to about ¾ million expectant mothers each year and for a total of 3½ million children under school age. This is work which we took over on an agency basis in 1952.
The central office of the Department at Newcastle now records contributions each year from no fewer than 24 million people. I think that hon. Members will be amused to learn that of that 24 million there are 525,000 people with the name of Smith. At the same time, there has been a constant search for economy in administration. Between 1948 and mid-1953, the staff has been reduced from the peak figure of about 39,500 to 32,000, a saving of 7,500. In September, 1953, the Ministries of National Insurance and Pensions were merged. In consequence, the number of staff rose to 37,800 but by 1st June this year it had been reduced to 36,000, a saving of 1,800.
The number of National Insurance offices has also been steadily reduced from a peak figure of 981 to 857, but where there is need established in the locality we have maintained an inquiry office open either whole or part-time for the benefit of the public. These changes have resulted in economies, but the public is still well served.
The number of war pension offices has been reduced from 32 to 22 since 1953, but in every case a local pensions office has been retained for war pensioners' inquiries, medical boarding and welfare services. In fact, the merger of the Ministries of Pensions and National Insurance provides, through the much wider local office network available, greatly increased facilities for personal inquiries by war pensioners. Last year's total was 48,000.
Staff reductions have been made possible, in part by constant review by the 55 organisation and methods teams seeking to simplify and improve procedures and in part by mechanisation and mechanical aids of many kinds introduced to save time and labour. An order is now being placed for an electronic computer to be installed in 1960 in the central office of the Department at Newcastle which will do pay-rolling for about two-thirds of the Ministries' staff and process statistical data on the insurance schemes. This will save about 100 staff and soon pay for itself. I would add that the displaced staff will be absorbed into other vacancies caused by normal wastage.
There have been improvements in accommodation, too, because originally we had to take what we could get. I say "we", but hon. Members opposite were responsible at the time. I know that buildings were difficult to acquire and old churches, old houses and empty factory buildings were used. We have been able to improve the position over the years. Since 1952, 173 National Insurance offices have been rehoused in new or specially adapted buildings. Improvements have been made in 256 others and we have further improvements planned for the future.
Staff training has gone on steadily over the years and much attention has been paid to training in management and relations with the public. I think that this has contributed to the smoothness, efficiency and good relations which we have established.
On the benefits side, perhaps the clearest comparison that I can give is on the total expenditure. I should like to give the figures. On National Insurance benefits the actual cost for the year 1949–50 totalled £390 million. The current expenditure on National Insurance benefits for the year 1958–59 is estimated at £897 million. I know perfectly well that when I make that comparison hon. Members will ask me what that means in terms of 1948 values. I have broken down the figures, and if we translate the £897 million current year's expenditure to 1948 values we get £578 million as compared with the first year's working of £390 million. Similar figures for Industrial Injuries are: in the first year the actual cost was £14 million and the current expenditure for the year 1958–59 is £53 million. At 1948 values 56 that represents £34 million. As the Industrial Injuries scheme was then new, the cost was expected to build up gradually over the years, and I think that the figures show that this has happened.
On the war pensions side, the actual cost in 1949–50 was £88 million, and the current cost in 1958–59 is £100 million. That, at 1948 values, is £64 million. I should explain here that the reduction is due, as hon. Members will know, to the fact that the total number of war pensions beneficiaries has declined. If hon. Members would like the figures, the reduction has been from 1,080,000 in March, 1949, to just over 800,000 at the end of 1957. The final figures in the work of our Department—family allowances—are, actual cost, 1949–50, £61 million; current expenditure for 1958–59, £125 million, which, at 1948 values, is £81 million.
In July, 1948, the main benefits—that is, retirement pension, sickness benefit and unemployment benefit—were operative at the rate of 26s., single, and 42s., married couple. Since that date there have been four increases in retirement pension; one which bridged over the months of September and October, 1951, one in October, 1952, another in April, 1955, and another in January, 1958.
Over the same period there have been three increases in unemployment and sickness benefit—in the months of July, 1952, May, 1955, and February, 1958. These rates are now 50s., single, and 80s., married couple, which represents a substantial increase in purchasing power. It is, in fact, higher than ever before, even when allowing for the withdrawal of the Tobacco Duty relief for some pensioners, because, measured by the Index of Retail Prices, the present equivalent of the 26s. and the 42s. that operated in 1948 would, today, be 40s. 4d. and 65s. 2d. As I have reminded the Committee, the actual figures are 50s. and 80s.
There have been improvements also in widows' pensions on three occasions, and the widowed mothers' allowance has been increased five times over this ten-year period; and there have been additions to guardians' allowances, maternity allowances, and other benefits. Experience showed that the position of families with children required special consideration, and successive improvements have increased the benefits for such families 57 more than in proportion to the improvements in standard rates. In 1956, the widowed mother was given priority over other families with dependent children, with a lead of 5s. for each of her children. That lead she still maintains.
An example of these improvements for families, both in benefits and in family allowances is that, in 1948, the sick or unemployed man with a wife and three children would have received 59s. 6d. In 1958, he receives 127s., which, allowing for price changes, represents an improvement of 38 per cent. In 1948, the widowed mother with three children would have received 43s. 6d. In 1958, she receives 112s. and, allowing for price changes, that represents an improvement of 66 per cent. That, I hope, goes some way towards answering the right hon. Gentleman's point that more should be done for the widowed mother.
I turn to the Industrial Injuries scheme, which, of course, was something entirely different—the biggest change made, I think, in the pattern of insurance—when the new basis of compensation for loss of faculty was substituted for the former basis of compensation for loss of earnings. If I may say so, I think that the new basis was not so readily understood by workmen—I was earning my living in a factory at the time—but I know that they did appreciate this enormous changeover when they realised that this new basis took the partisan atmosphere out of workmen's compensation.
There have been three increases since the Industrial Injuries scheme first became operative, as a result of which the original 45s. of 1948 has become 85s. at present. Allowances for dependants are, of course, the same as in the main scheme, and have been increased in the same way. New claims for Industrial Injuries benefit have been steady at about 800,000 a year. The average period of injury benefit for men is four weeks, and, for women, five weeks, and only one in 60 receives injury benefit for the full six months.
Injury benefit is, of course, followed by disablement benefit where loss of faculty exists. Originally, this disablement benefit was not payable unless the disability was either permanent or substantial or, in certain circumstances, both. From August, 1953, it has been payable for any assessment of at least 1 per cent. This change was the main reason for the increase in 58 the number of claims from about 69,000 in 1948 to 162,000 last year.
In 1948, there were 35 prescribed industrial diseases, in addition to pneumoconiosis and byssinosis. These diseases, of course, are kept under constant review, and that has resulted in the addition of five new diseases, and an extension of cover for pneumoconiosis and byssinosis. The minimum degree of qualifying disablement for the last two has also been reduced to 1 per cent. About 40,000 claims for injury benefit for prescribed diseases are allowed each year, roughly half of these for industrial dermatitis.
The right hon. Gentleman said that he did not propose to deal with war pensions, but I think that a review of what we do at the Ministry would not be complete without mention of them. As he said, they play a very important part in our work, and are included in the Estimates now under consideration. Again, in the period under review, the past ten years, war pensions have been increased three times—in May. 1952, February, 1955, and January, 1958, and the 1958 increases were the biggest ever to be made in war pensions.
An age allowance for disablement pensioners was introduced in February, 1957, and, at the same time, improvements were made in the conditions for the award of the comforts allowance for the most seriously disabled of all ages. Welfare services have continued. There is no need to stress the excellent job they do, as all right hon. and hon. Gentlemen must be aware of them. Particular attention has been paid to the elderly war widows, to keep in touch with them to make sure that they are in touch with voluntary organisations, and so on.
Family allowances, again, are not strictly within our purview today, because they were already on the Statute Book. They have now been payable for twelve years, commencing on 1st August, 1956, following the Act of 1945 passed by the "Caretaker" Government. The rate of 5s. originally given was increased to 8s. in 1952, and further beneficial changes were made in 1956, the two most important being the introduction of higher age limits, and increases in the rates for larger families. From 1st August, 1956, children at school, and apprentices, count for family allowance until their eighteenth birthday, instead of, at the latest, to 31st July following their sixteenth birthday.
59 At the same time, family allowances for physically or mentally handicapped children were extended to their sixteenth birthday, from which time, of course, they may qualify for National Assistance in their own right. This closed a gap whereby handicapped children were unable to attract any payment for their family between their fifteenth and sixteenth birthdays. Nearly 90,000 families have benefited from these changes in the age limits.
Since October 1956, the larger families have also benefited by the increase to 10s. for the third child and subsequent children. About 1,200,000 families have benefited in this way: One other change, though not so far-reaching, allows children committed to the care of a local authority who are returned temporarily to their own homes while the committal order still applies to attract family allowances while they are in their own homes.
By far the biggest responsibility of the Ministry is that of retirement pensions, and this also accounts for the heaviest item of expenditure. I scarcely need to remind the Committee of the facts. No one can possibly have paid the full actuarial contributions for present benefits, and although the contributions have been increased, the deficit falls to be met by the taxpayer in the form of a steadily growing figure from this year onwards.
We do need to remind ourselves that the proportion of old people in the population is now about one in seven. By 1979, this figure will be about one in 54 of the population. If we consider the numbers of old people in relation to the workers whose efforts will support them, the changes are even more striking. For every person of pensionable age in 1949 there were just five workers. There are now less than 4½, and by 1979 there will be less than 3½.
The numbers of old people and of retirement pensioners now and expected in the future are as follows: In the present year there are 5,200,000 retirement pensioners, including the late age entrants about whom we have already spoken; all old people over minimum pension age number 7,300,000. By 1979, the numbers will be: retirement pensioners 7,600,000; all old people over minimum 60 pension age 9,700,000. This rising proportion of old people, coupled with the fact that responsibility was accepted for payment of pensions at full rates to existing pensioners, and because of the increases given, means that the total cost of pensions is estimated to be £826 million by 1969–70 and £978 million by 1979–80. At these figures the deficit to be met by the taxpayer is expected to rise to £322 million by 1969–70 and £475 million by 1979–80 in addition to the Exchequer supplement.
§ Miss Pitt
Yes; I said so.
One other point that I should mention in this list of developments, although I shall have to miss many of the minor ones, is the growth in reciprocal agreements with other countries.
Before 1948, there were reciprocal agreements between schemes of sickness insurance in Great Britain, Northern Ireland, the Isle of Man and the Irish Republic, but none with schemes of social security in Commonwealth or foreign countries. With good will and determination, reciprocal agreements have been concluded with four Commonwealth countries—Australia, New Zealand, Malta and Cyprus, and with 15 other countries. Agreements are under discussion with three more countries.
My right hon. Friend gave a full list of the countries to the right hon. Member for Llanelly in answer to a Question in March, and I will not take up the time of the Committee by mentioning the list again. However, the right hon. Gentleman may like to know that since that reply, the Belgian agreement has been ratified and is in operation, and the Yugoslavian agreement has been signed. General speaking, these agreements aim at enabling the national of one country to take his social security rights with him where he goes to live in another country, and although the agreements differ form, they represent a very valuable step forward in social security.
There are a few points that I should like to take up from the right hon. Gentleman's speech. He asked why the number of self-employed people was less than estimated, and the same question was asked about those not gainfully employed. 61 The answer is contained in the first interim Report of the Government Actuary for 5th July, 1948, to 31st March, 1950, which says specifically that the number of persons working for an employer is considerably larger than was assumed in the Estimates for the Bill, and conversely the number of self-employed persons is much less.
I understand that the reason for this is that the Estimates were taken on a 1931 census and therefore they have been proved incorrect. Where it was estimated that there would be 2,200,000 self-employed when the Bill was passed, the figure for 1950 was 1,460,000, and in 1956 1,390,000.
§ Mr. J. Griffiths
Could the hon. Lady say how the figures now equate with what we learned from the last census? This is important not only from the standpoint of the scheme but as showing the pattern of our economic life.
§ Miss Pitt
I will make inquiries and will inform the right hon. Gentleman.
The right hon. Gentleman asked me about the people who may be precluded because their income is less than £156 a year. He asked how they would be brought into benefit. I would make clear that their income can be rather above £156, because it can be £156 plus the contribution that they would pay towards National Insurance. That brings the income limit somewhere nearer to £3 10s. a week. If these people apply for exception they have no benefit rights, and in the long run they would, I imagine, resort to National Assistance.
The right hon. Gentleman asked me about students and made the point that they have to pay back in the years when they begin work following their undergraduate days. He thinks that perhaps these young men and women do not realise that their benefits may be affected. I would like to assure him that we do all we can on our part to make that clear to them. There are some excellent leaflets, and it is made clear to them also, I believe, in their interviews at universities and with our local offices. I want to stress that they have six years now— 62 originally, it was four years—after they have started work in which to catch up with the contributions if they wish. There is no compulsion, but if they wish to pay, the period has from 1956, been extended to six years, so that they have a fairly long time in which to make good their record of contributions.
When the right hon. Gentleman asked me if there is no way in which we can help them, I think that, on reflection, he will feel we have given them a considerable amount of help. These young people who are taking further education are relieved of any necessity to pay contributions up to the age of 18. It would be wrong to the general body of contributors if we were to give those who have the opportunity of higher education even more concessions at the expense of those who have to pay through a longer working life.
The right hon. Gentleman also asked me about the number of pensioners receiving National Assistance. In fact, he quoted the figure as being 24.6 per cent. That was correct in December, but I think that he and other hon. Members who propose to take part in the debate may like to know that it was 22.3 per cent. in March of this year, and similarly there have been reductions in the number of sickness and unemployment claimants who resort to National Assistance.
On the long-term sickness benefit, the right hon. Gentleman made the point that he thought we should consider trying to provide something either equivalent to unemployability supplement or constant attendance allowance, on Industrial Injuries lines. In reply to that, about which I know he feels deeply—he has raised it before—I would say that National Insurance is on an insurance basis.
There are uniform rates for the main contingencies which mean the interruption or cessation of earnings, and to do what the right hon. Gentleman suggests would mean far more generous treatment for the long-term sick than, for instance, for the widow or the retirement pensioner.