HC Deb 08 June 1959 vol 606 cc667-701
Mr. Boyd-Carpenter

I beg to move, in page 2, line 17, to leave out from "then" to "and" in line 27 and to insert: if the employment was an employed contributor's employment and he either is under pensionable age or has not retired from regular employment—

  1. (i) he shall be liable to pay a graduated contribution based on that payment; and
  2. (ii) his employer in the employment shall be liable to pay such a contribution in respect of him ".
This Amendment is tabled to meet an undertaking which I gave in Standing Committee to look into a point which was raised there. Under the Bill as it stands, where a person earning above £9 a week is a pensioner he himself does not pay graduated contributions, but his employer is liable so to do. That, as the House knows, follows the provision already existing in the flat-rate National Insurance scheme and was inserted, I think, largely for that reason.

In Standing Committee and, indeed, on the Second Reading, the point was raised that these employer-only contributions would very greatly complicate the collection and administration by employers of graduated contributions. The point was raised, among others, by my hon. Friend the Member for Aylesbury (Sir S. Summers) who had tabled an Amendment in Standing Committee, and hon. Members who follow closely the drafting or Amendments will see that we have availed ourselves in this Amendment of precisely my hon. Friend's drafting.

The case is simply one as to whether we do not, if we leave the Bill as it stands, put an unnecessarily heavy burden on the administration of the scheme. I think that it is clear that to many particularly large employers who have mechanised accountancy and paying systems there will be a very great advantage if the amount of the employer's contribution in total can be the same as the employee's. In what I may call the ordinary case that is so, because the graduated contribution is on a 50-50 basis. But once we add to that these cases of employer-only contributions the simple calculation of taking the total of the employee's contributions deducted from pay and doubling it ceases to be possible.

We have heard a good deal, both in this Chamber and, as hon. Members will recall, in the Standing Committee, quite justifiably about the very heavy administrative burden on all concerned which a change-over to a system of graduated contributions inevitably involves. I am anxious, as I am sure hon. Members on both sides are anxious, to keep this down to the minimum and I have been impressed, on reflecting on the matter, by the considerable saving in administrative costs and in administrative trouble which would result if we abandoned the employer-only contribution. I have come to the conclusion that the point raised by my hon. Friend's Amendment which, upstairs, received at least supporting murmurs, I think, from both sides of the Committee, indicates the right solution.

I looked at various alternative methods of doing it without sacrificing the revenue, which will be a little over £1 million in the early stages of the scheme, but I came to the conclusion that none of these alternative methods would work. It seems to me, therefore, that the straightforward thing, so far as the graduated contribution in respect of a pensioner is concerned, is to abolish the employer's contribution and leave the position in general that, where an employer has collected contributions from his employees, he doubles them and hands the amount over to the Inland Revenue.

The only doubt expressed upstairs, a doubt which was in some of our minds, was whether this departure from what has been the principle of the National Insurance Act could possibly lead to any discrimination by employers against younger people in respect of whom they would have to pay contributions. When one remembers that one is here concerned only with people earning, ex hypothesi, at least £9 a week and one is concerned only with the contribution from the employer which at its maximum is 5s. 1d., it seems that those considerations, which were relevant and, for all I know, may still be relevant in respect of the larger amounts and, possibly, in respect of smaller earnings on the flat-rate scheme, really in this day and age do not carry very much weight.

I recommend to the House, therefore, that we simplify the administration of the collection of these contributions by eliminating these employer-only contributions.

Sir S. Summers

I do not want to take up the time of the House. I wish not so much to express my own appreciation of the attitude the Minister has shown in this matter but, what is more important, to assure him of the welcome which this decision of his will receive from those who have to administer the scheme. As he has explained, there is no doubt that it will greatly simplify the whole operation, and I am sure that the change he proposes will be of great advantage to those concerned.

Mr. Marquand

We on this side are, as I have said already, very conscious of the administrative complications of the scheme. In the light of the right hon. Gentleman's explanation, we have no objection to the Amendment he has moved.

Mr. Donald Wade (Huddersfield, West)

In case there is too much enthusiasm about the slight improvement that this Amendment makes, I wish to make it clear that, in my view, the administrative burden upon employers will still be very great indeed. There is a shock coming to them in 1961. The complexity of the calculations which they will have to make in regard to the amount payable by employees is very great. I intervene now only to ensure that no employer is left with the idea that his task will be very much simplified, although it will be somewhat simplified by the Amendment.

Amendment agreed to.

5.15 p.m.

Mr. R. H. S. Crossman (Coventry, East)

I beg to move, in page 2, line 30, to leave out "six" and to insert "sixteen".

This will have the effect of raising the ceiling in the new graduated pensions from £15 to £25. We put this forward partly in order to be able to discuss the whole principle and the problem of the ceiling and the floor introduced by the Government in their scheme. Upstairs, we had many discussions on this matter, and the more we heard from the Minister and the Parliamentary Secretaries the more puzzled we were or, I should say, the more confirmed we became in our view that it was the existence of this ceiling and floor which exposed the real purpose of the National Insurance Bill.

It is a very remarkable thing that the Government should be introducing such a vast administrative machine for such a very small pension effect. Here I should like to congratulate the Liberal Party on its return to our deliberations. If I remember aright, the Liberal Party was present at the first meeting of the Committee, it omitted twenty-four meetings of the Committee, and it is now back for the Report stage with its usual constructive, vacuous attitude. We are glad to see the Liberal Party here to provide that permanent, Liberal vacuum between the two great parties.

I support the one thing which the representative of the Liberal Party, the hon. Member for Huddersfield West (Mr. Wade) said, namely, that it would be a very complicated administrative matter to carry out the scheme. Upstairs, we learnt from the Minister that, if one is to have this floor and ceiling, if one is to have graduated contributions paid for separately from the flat-rate contributions, if the flat-rate contributions are to continue to be on the stamp, and if, as is proposed, the graduated contributions are to be on the P.A.Y.E. system in a separate column, this will mean an entirely new departure and a vast administrative task. It means that, in future, everybody who earns between £9 and £15 a week will have something recorded on his P.A.Y.E. record by the Inland Revenue. It may be 2½d. for people who earn a little above £9 or it may be just a little more than that, but never more than 6s. 5d., I think. So there will be millions of people who will have this record made in the new P.A.Y.E. column. Then, we understand, the record will be microfilmed and transported to Newcastle, where it will be re-recorded in one's life history.

The Minister and the Parliamentary Secretary are not very clear about how all this is to be done. They will be busy getting down to work after we pass the Bill in order to arrange it all. I gather that several hundred civil servants will have to be hired specially for this job alone, and a considerable number of new buildings will be constructed solely for the purpose. We on this side shall not oppose the introduction of the machinery because any adequate system of superannuation will require similar machinery. For although the machine is out of all proportion to the Government's miserable scheme, it may well be the kind of machinery which we shall be able to take over after the next election when we introduce an adequate superannuation Bill.

Today, I wish only to draw attention to the fact that the machinery bears no relation to the pitiable contributions and benefits, and that it is the existence of the floor and ceiling which complicates the machinery enormously If one had a complete graded pension scheme where all the contributions were graded from the smallest earnings up to £50 or £60 a week, then one would not have this particular problem of recording what fell just above or below the £9 level or what fell just above or below the £15 level. The peculiar administrative difficulties are entirely the result of the peculiar decision to levy the contribution only on the wage band between £9 and £15 a week and, therefore, to have wage-related pensions only as regards the element from £9 to £15 a week.

It is not because we are suspicious people but, knowing the character of the Minister, knowing his intelligence and knowing the intelligence of the civil servants behind him, we know that they would not produce such a ridiculous scheme as this without an excellent purpose. Nobody would produce a gigantic administrative machine of this kind with no adequate benefit for it unless it was to conceal something very big. This is the facade behind which the Government's real purpose is concealed. Though we could not get any concession out of those twenty-five meetings upstairs, at least we got this fact. We discovered in the course of them what the purpose of the Bill is and what the purpose of the records and the hundreds of civil servants is. The purpose is, of course, to conceal that this is not a pensions Bill but a Bill for transferring the liability for paying the existing pensions from the Exchequer to the contributor on a wage band between £9 and £15 a week. If a person earns £16 a week, he pays his contribution from between £9 and £15 but not beyond.

What we have discovered and what we have conclusively proved is that the purpose of the Bill is to transfer the sum of £400 million, which is at present an Exchequer liability, and to find a way of paying it from contributions, not from flat-rate contributions but through the new graded contributions combined with a somewhat slight increase of the Exchequer contribution.

We were able to prove conclusively that this was the Minister's purpose by studying the way in which the Exchequer contribution will steadily sink during the next period ahead while the graded contributions will increase. We were able to show, for instance, that the graded contributions which people will have levied upon them will bear virtually no relation to the benefits they receive.

I think it was my hon. Friend the Member for Wallsend (Mr. McKay), whom I am glad to see is in the Chamber, who pointed out that on his calculation anybody who pays a graded contribution, and whose employer pays it, will get back in benefit only 22 per cent. of his contribution. All the rest will be clawed up by the Chancellor of the Exchequer for paying the existing Exchequer liability. The real purpose of the Bill and of this elaborate machinery, therefore, is merely to put on to this wage band a liability which at present rests on the taxpayer at large.

I do not want to dilate on this at length because we have many important matters to discuss, but I want to concentrate on pointing out the object of the present ceiling of £15. In Committee we asked the Minister why the ceiling was fixed at £15. We asked him several times. We had, perhaps, half a dozen answers in the course of the twenty-five sittings of the Committee, and I will choose the nicest and most concise. The Minister said: On this side of the Committee, as in the House, we take the view that it is the proper function of a State scheme to provide something in the nature of a basic minimum. Farther down the column, the Minister said: I rest my argument on the view that it is really not the proper function of a State system to go beyond the moderate level. We may be right or wrong in putting that level at £15 a week—that is a matter of judgment and assessment. Fortunately, we do not at present have to argue about a reasonable figure as against a completely unlimited one. But from the point of view of our philosophy, I am quite certain that the right level is somewhere related to a basic minimum …[OFFICIAL REPORT, Standing Committee A, 17th February, 1959; c. 50–1.] That is spelt out even more clearly on page 7 of the Government's pension pamphlet in question and answer which I am sure the Minister himself drafted The question asks: Why does the graduated contribution not extend to earnings above £15 per week? The answer states: The object of the new scheme is, of course, to make better provision for old age in the light of our rising national prosperity. But it would not be right for a State scheme to make people contribute more for their old age than is reasonably necessary. For that would amount to dictating to a person how to spend his money during his working life. Such State dictation would be rightly resented and would undermine people's sense of responsibility for their own affairs. That is the answer given. No answer could be more disingenuous, for it gives the impression that what we are saying is that we should not compel people earning over £15 a week to contribute large sums to their own pensions. That is clearly what one would gather, but, in fact, of course, the graduated contributions are contributions taken and spent, for the large part, not on one's own pension but on someone else's.

What the Government are really saying is that if we have to pay the bill, as we must, for the liabilities incurred for the present pensions, it is fair to put the bill on to those earning under £15 a week and not over. We, on the other hand, hold the view, and we have always held it quite candidly, that since the bill has to be paid it should be fairly distributed among the whole community and that that is best done partly by a much larger Exchequer contribution and partly by graduated contributions going right up the scale to £50 or £60 a week. Therefore, on this issue, there is a sharp division.

We do not have much hope of this modest Amendment being accepted. When we moved it in Committee we raised the figure to £50 a week. We are more modest now and we are putting the figure in the realm of possibility for the Minister. I ask the right hon. Gentleman, why not £25 a week? Why place the burden on the £9 to £15 wage band? Why not place the burden of the present old-age pensions a little higher? I see a smile of support from experts below the Gangway opposite for the idea. One should spread it a little further up the scale than £15 a week.

When we consider the burden placed on the lower-paid wage earner by the flat-rate contribution in the last two years and add this further graduated contribution on top, I calculate that a major redistribution of expenditure is now occurring and is being placed on the lower-paid worker. On top of the increase in the flat-rate contribution is now added the new graduated contribution. It is a discriminatory tax designed to relieve the general taxpayer at the cost of the wage earner.

That is the case on which we base our opposition to the whole Bill. But the Bill would be a little better if this Amendment were accepted and if the ceiling were raised from £15 to £25 a week.

Mr. Reynolds

I beg to second the Amendment.

Whilst I agree with everything that my hon. Friend the Member for Coventry, East (Mr. Crossman) has said, I wish to draw attention to another and different aspect of this problem. The House will appreciate that as the Bill is at present drafted, with contributions being levied on £6 of income between £9 and £15 a week, anyone earning over £15 a week is, of course, making his contribution on earnings of £15 a week.

In the table and Appendix 2 of the Government White Paper prepared by the Government Actuary, we are told that in making all his calculations the Government Actuary has assumed that the rate of increase of earnings will be 2 per cent. per annum. In other words, we are being told by the Government, and it has already been quoted with great approval earlier this afternoon, that the rate of increase in earnings is going up 2 per cent. per annum on average for everyone in the country. If we now had a Bill drafted as this Bill is drafted, fixing no wage band at all as the basis on which contributions are going to be levied, sooner or later, of course, more and more people are going to be earning over £15 a week. The Amendment, of course, retains the wage band.

I would rather see the wage band disappear altogether and, instead, have some other calculation based on average earnings or a percentage of average earnings. But the most simple way of improving the Bill is to increase the wage on which contributions will be paid.

Let us take someone who enters the scheme at 20 years of age and earns a fraction over £9 a week and pays his contributions. He will be working and contributing to the scheme for forty-five years. On the basis of the Government Actuary's own assumption of the 2 per cent. average increase in wages per year, by the time that individual retires, assuming that he is doing exactly the same job as when he started at the age of 20, the normal 2 per cent. increase per annum will mean that instead of earning £9 a week he will, in forty-five years' time, be earning £21 10s. 2d. per week. Yet the pension to which he will be entitled under the Bill is £3 17s. a week. That is the ridiculous situation one gets into by trying to fix actual figures in legislation knowing that as the years go by earnings will go up and that the figures will become less and less realistic.

5.30 p.m.

Let us consider someone who is a little closer to retiring age, namely, a person of 50 years of age earning £9 a week. When he retires fifteen years later, on the basis of the 2 per cent. increase each year, his earnings will be £11 17s. 6d. The pension to which he will be entitled will be the maximum and wonderful sum of £2 13s. per week—a 3s. a week increase on the pension being paid today. The income of that individual would drop from £11 17s. 6d. to £2 13s. This Amendment would not greatly improve his position. It would, however, considerably improve the position of a younger person.

Let us go a little further up the wage scale and consider a person who is at present earning £15 a week. It does not matter what happens to earnings in future—they will go up 2 per cent, per year, according to the Government Actuary—his contribution for the whole of his working life will be based on £15 a week, as the Bill now stands. If he is 20 years of age when the scheme comes into operation and forty-five years later is due to draw his pension, the 2 per cent. increase will have taken his wage up from £15 a week to £35 16s. 11d. a week. On retirement he will be expected to scratch along on £4 10s. a week. According to the Government Actuary, he will not pay any contribution on that increase because he is earning £15 a week when the scheme starts. Therefore his benefits, whatever he is earning—and, as I say, he will probably be earning about £36 a week—will always be related to the £15 a week which he was receiving at the age of 20.

It would be ridiculous for the House to assent to such a ridiculous position. In fixing the present income level at £15 a week we are putting into permanent form by way of legislation something that will in due course mean that people in this country, as earnings keep going up, will pay a flat-rate contribution which at the moment is a proper contribution for someone earning £15 a week and who in due course will draw a flat-rate benefit.

Our Amendment would be a great improvement on the Bill and would insert a figure which could be a basis for the assessment of average adult earnings. The Amendment would go part of the way towards improving the position.

For the reasons which my hon. Friend the Member for Coventry, East has given and in view of the point which I have made, I hope that the Government will consider the Amendment more seriously than the other Amendments which we have put forward.

Mr. Wade

I have at last discovered a statement made by the hon. Member for Coventry, East (Mr. Crossman) with which I agree. I gathered that in his opinion the administrative structure which the Government propose to set up would be useful if ever the Labour Party had the opportunity of introducing its own proposals. I forecast that on Second Reading and I think that is true. I considered tabling an Amendment to alter the Title of the Bill to "The Labour Party Pensions Plan (Enabling) Bill", but in view of the fate that has befallen all other Amendments which I have tabled on Report it is probably not much use my attempting to table further Amendments.

Mr. J. T. Price

On a point of order. Is it not a reflection on the Chair that a Liberal Member should complain because the Amendments which he was too incompetent to draft in proper terms have been rejected by the Chair?

Mr. Deputy-Speaker (Sir Charles MacAndrew)

No. I thought that the hon. Member was congratulating the Chair.

Mr. Wade

I am delighted that you should regard it in that way, Mr. Deputy-Speaker. I should put the matter in a slightly different way. As I observed on Second Reading and in Committee, I regard the introduction of compulsory graded pensions as basically unsound and therefore the Bill, from my point of view, is difficult to amend. Furthermore, I think that it is a waste of breath to spend a great deal of time in discussing a Bill which I do not think can be satisfactorily amended. If there is to be a system of compulsory graded pensions—I emphasise the word "compulsory" because it means that the State will ensure that one retired pensioner shall receive more on retirement than another; it is a form of compulsory inequality—and if one proposes to introduce this compulsory inequality and to provide for its payment by contributions, I think that there is something to be said for a higher ceiling. I mentioned this in Committee as well as on Second Reading.

Under the scheme there seems to be an argument for a higher ceiling than is provided in the Bill. I have not heard an adequate or satisfactory argument for maintaining the present proposed ceiling. Therefore, coming as near as I can to discussion of the details of the scheme, I suggest that the Amendment improves a Bill which I fear is nevertheless fundamentally unsound.

Miss Pitt

The Amendment seeks to increase the upper limit on earnings on which graduated contributions would be paid from £15 to £25. It reopens the question of dimensions which we debated very fully during the long Committee stage. I think, however, that the proposal of the party opposite has suffered a change. At the end of the Committee stage, various figures for the ceiling were suggested, such as £47 and £50, and at times the hon. Member for Coventry, East (Mr. Crossman) spoke about the figure of £2,000 a year. I think that he was a little mixed with the two schemes. The party opposite has now proposed the more modest figure of £25. So far, I have not heard a reason from the benches opposite why the figure should be set at £25.

Mr. Crossman

We put that figure in to try to find a real reason why it should be £15 in the Bill.

Miss Pitt

It seems to me that it has been proposed to provide a vehicle for another exercise on the proportions of the Bill. In any event, it is not acceptable for the same reasons which my right hon. Friend and Members on this side advanced in Committee, because it is contrary to the Government's intentions.

We have given considerable thought to the proportions which should be introduced in a Bill to provide graduated pensions. We believe that the ceiling of £15 which we propose is reasonable because it will not damage existing private schemes or prevent developments in the private sector to which we attach importance. It will not interfere unduly with an individual's right to dispose of his own money as he chooses, and that is something which we as a party consider to be important. We do not believe that compulsory State insurance should be developed to such an extent that the individual is not able to spend his own money as he chooses. We believe that this modest ceiling will not discourage private provision for old age and will not be inflationary. Furthermore, we believe, perhaps most important of all, that it will provide a workable system of contracting out.

A ceiling of £15 a week or £780 a year, which is slightly above the average industrial earnings for men, compares very reasonably with schemes in other countries, for instance, those in America and Germany. Though modest, the scheme is not out of step with what is being done in other progressive industrial countries. I also advise hon. Members that if the Amendment were accepted it would mean that a man earning £25 a week or more would pay a graduated pension contribution of 13s. 7d. a week and his employer a similar amount, and that the total joint contribution would he 42s. 6d. a week, of which the employee's share would be 21s. 11d. The maximum graduated pension which that would earn would be £5 11s. 7d. a week, compared with 41s. 6d.

The hon. Member for Coventry, East said that he believed that the graded contribution should apply from the smallest amount of earnings up to £50 or £60. Why has he put £25 in the Amendment? He went on to add that the contributions would be used under the Government scheme to meet the deficiencies and to remove the taxpayers' liability. He rehashed all the arguments which we have had over and over again in Committee, and I hope that the House will forgive me if I do not take up time in replying to them once again.

He then added that we impose the burden on those earning between £9 and £15 a week, a point which he made twice. Lie understands, however, that those earning above £15 a week would in any event make their contribution within the band because they would be liable for graduated contributions. The hon. Member also said that there is a considerable burden on the lower-paid workers at the moment for the present flat-rate scheme. I will emphasise what I am sure he knows—that the provisions in the Bill will mean that the contributions of the lower-paid workers to the flat-rate scheme can be reduced, which is a not unimportant development of the graduated benefit scheme.

The hon. Member for Islington, North (Mr. Reynolds) said that everyone earning between £9 and £15 or more a week would make contributions on that part of their earnings but that they would make no other contributions. He has perhaps forgotten that they are bound to bear their share of the Exchequer liability which will be collected through Income Tax. His argument, if I understood him correctly, was that the higher paid were not making their full contribution towards the cost of this scheme, although he agrees that they would pay on that part of their earnings between £9 and £15. I remind him that the Exchequer contribution of not less than £170 million—and in the years ahead more than that—will have to come from the taxpayer.

He gave as one of his examples of the poor return which he alleges a man would get from graduated contributions that a man who entered the scheme at the age of 20 and contributed until he retired at the age of 65 would receive only the flat-rate pension plus the benefit of the graduated scheme of 41s. 6d. That assumes no change at all in the scheme or graduated benefits over a period of forty-five years, and no change in the flat-rate provisions of the present scheme. Furthermore, it assumes that the man he has in mind is unable to make any addition to the State pension by private provision out of the prosperity which he enjoys. I do not think that that is a very reasonable argument to advance in support of the Amendment.

5.45 p.m.

If the Amendment were accepted it would enlarge the size of the present scheme, which is contrary to what the Government have decided would be reasonable. It would have a considerable impact on private schemes and would mean a much higher bill for future generations to meet in the way of State provision. It would also necessitate a further amendment to Part II of the Bill, which deals with the contracting-out provisions. Neither the hon. Member for Coventry, East nor the hon. Member for Islington, North mentioned that. Without such an Amendment there would be no guarantee that equivalent benefits would apply at the limit of £25 suggested in the Amendment. I am not sure whether the proposers have it in mind to put the test of equivalency at £25 for those who are contracted out. If they have, it would make it much more difficult for companies operating private schemes to contemplate contract-out, because they would have to match a much higher level of benefits against the State scheme and guarantee those benefits, if a man left their service, in the form, for example, of a transfer payment.

Mr. Reynolds

I am worried by what the hon. Lady has said. A moment ago she was talking of the possibility of considerable alterations in the scheme in a period of forty-five years. At the same time, she refers to the test of equivalency at £15. If employers and employees are to look at this scheme and to work out equivalency on £15, and then to look back a few lines in the hon. Lady's speech and see that in a few years' time the equivalency will not be £15—for she was emphatic on that point—what are they to decide? They will be in a ridiculous position.

Miss Pitt

I asked, and I repeat, who is to say that in a period of forty-five years there will be no changes in either the graduated scheme or the flat-rate scheme? In view of our experience of the present flat-rate scheme, that is a very proper point to make.

I was trying to stress that if the Amendment were accepted it would mean reconsideration of the test of equivalency, because if there were no change it would mean less favoured treatment for the man who has contracted out, because he would be contracted out with a guaranteed pension based only on earnings of £15, whereas the individual in the State scheme with earnings above that figure would have a guaranteed pension based on earnings of up to £25. That adds to the difficulty.

The levels represented in the Bill have been arrived at after long consideration of what it is reasonable to impose in a State scheme of compulsory insurance for graduated benefits in old age. It rests on this moderate proposition, that we can say that we believe the scheme to be workable. The test is to be equivalency at £15 and the payment in lieu if a man leaves contracted-out employment is to be related to £15. It represents a reasonable figure above average earnings. I believe that it would be unworkable in maintaining contracting out, to which we attach importance, if the upper limit of contributions were increased by two-and-a-half times. For those reasons I am unable to accept the Amendment.

I would add a final word to the hon. Member for Huddersfield, West (Mr. Wade), because I should hate his intervention to be ignored. Nevertheless, it was a little contradictory, He regarded the introduction of graduated pensions as unsound, which means that he is out on a limb and agrees with neither party. He then said that the figure should be higher. I assume that that is not a very responsible contribution.

Question put, That "six" stand part of the Bill:—

The House divided: Ayes 229, Noes 181.

Division No. 117.] AYES [5.50 p.m.
Agnew, Sir Peter Gurden, Harold Molson, Rt. Hon. Hugh
Aitken, W. T. Hall, John (Wycombe) Morrison, John (Salisbury)
Allan, R. A. (Paddington, S.) Harris, Frederic (Croydon, N.W.) Nairn, D. L. S.
Alport, C. J. M. Harris, Reader (Heston) Neave, Airey
Amery, Julian (Preston, N.) Harrison, A. B. C. (Maldon) Nicholson, Sir Godfrey (Farnham)
Arbuthnot, John Harrison, Col. J. H. (Eye) Nicolson, N. (B'n'm'th, E. & Chr'ch)
Armstrong, C. W. Harvey, Sir Arthur Vere (Macclesf'd) Noble, Comdr. Rt. Hon. Allan
Ashton, H. Harvey, John (Walthamstow, E.) Noble, Michael (Argyll)
Atkins, H. E. Harvie-Watt, Sir George Nugent, Richard
Balniel, Lord Hay, John Oakshott, H. D.
Barlow, Sir John Heald, Rt. Hon. Sir Lionel O'Neill, Hn. Phelim (Co. Antrim, N.)
Barter, John Heath, Rt. Hon. E. R. G. Orr, Capt. L. P. S.
Batsford, Brian Henderson, John (Cathcart) Orr-Ewing, C. Ian (Hendon, N.)
Baxter, Sir Beverley Henderson-Stewart, Sir James Osborne, C.
Bell, Philip (Bolton, E.) Hesketh, R. F. Page, R. G.
Bell, Ronald (Bucks, S.) Hicks-Beach, Maj. W. W. Pannell, N. A. (Kirkdale)
Bennett, F. M. (Torquay) Hill, Rt. Hon. Charles (Luton) Partridge, E.
Bidgood, J. C. Hill, Mrs. E. (Wythemhawe) Peel, W. J.
Biggs-Davison, J. A. Hinchingbrooke, Viscount Peyton, J. W. W.
Bingham, R, M. Hirst, Geoffrey Pickthorn, Sir Kenneth
Birch, Rt. Hon. Nigel Holland-Martin, C. J. Pike, Miss Mervyn
Bishop, F. P. Hope, Lord John Pilkington, Capt. R. A.
Body, R. F. Hornby, R. P. Pitt, Miss E. M.
Boyd-Carpenter, Rt. Hon. J. A. Horobin, Sir Ian Powell, J. Enoch
Braithwaite, Sir Albert (Harrow, W.) Howard, Gerald (Cambridgeshire) Price, David (Eastleigh)
Brewis, John Howard, John (Test) Profumo, J. D.
Bromley-Davenport, Lt.-Col. W. H. Hughes-Young, M. H. C. Redmayne, M.
Brooman-White, R. C. Hutchison, Michael Clark(E'b'gh, S.) Rees-Davies, W. R.
Browne, J. Nixon (Craigton) Hyde, Montgomery Renton, D. L. M.
Bryan, P. Hylton-Foster, Rt. Hon. Sir Harry Rippon, A. G. F.
Bullus, Wing Commander E. E. Iremonger, T. L. Roberts, Sir Peter (Heeley)
Burden, F. F. A. Irvine, Bryant Godman (Rye) Robertson, Sir David
Butler, Rt. Hn. R. A.(Saffron Walden) Jenkins, Robert (Dulwich) Roper, Sir Harold
Campbell, Sir David Jennings, J. C. (Burton) Ropner, Col. Sir Leonard
Cary, Sir Robert Jennings, Sir Roland (Hallam) Russell, R. S.
Channon, H. P. G. Johnson, Dr. Donald (Carlisle) Sandys, Rt. Hon. D.
Chichester-Clark, R. Johnson, Eric (Blackley) Scott-Miller, Cmdr. R.
Cole, Norman Jones, Rt. Hon. Aubrey (Hall Green) Sharples, R. C.
Cooke, Robert Kerby, Capt. H. B. Simon, J. E. S. (Middlesbrough, W.)
Cooper, A. E. Kerr, Sir Hamilton Smyth, Brig. Sir John (Norwood)
Cooper-Key, E. M. Kimball, M. Spearman, Sir Alexander
Cordeaux, Lt.-Col. J. K. Kirk, P. M. Speir, R. M.
Corfield, F.V. Lambton, Viscount Stanley, Capt. Hon. Richard
Craddock, Beresford (Spelthorne) Lancaster, Col. C. G. Stoddart-Scott, Col. Sir Malcolm
Crosthwaite-Eyre, Col. O. E. Legge-Bourke, Maj. E. A. H. Storey, S.
Crowder, Sir John (Finchley) Legh, Hon. Peter (Petersfield) Stuart, Rt. Hon. James (Moray)
Crowder,Petre (Ruislip-Northwood) Lindsay, Hon. James (Devon, N.) Studholme, Sir Henry
Cunningham, Knox Lindsay, Martin (Solihull) Summers, Sir Spencer
Dance, J. C. G. Linstead, Sir H. N. Taylor, Sir Charles (Eastbourne)
D'Avigdor-Goldsmid, Sir Henry Lloyd, Maj. Sir Guy (Renfrew, E.) Teeling, W.
Deedes, W. F. Loveys, Walter H. Temple, John M.
de Ferranti, Basil Lucas, Sir Jocelyn (Portsmouth, S.) Thomas, Leslie (Canterbury)
Dodds-Parker, A. D. Lucas, P. B. (Brentford & Chiswick) Thomas, P. J. M. (Conway)
Donaldson, Cmdr. C. E. McA. Lucas-Tooth, Sir Hugh Thompson, Kenneth (Walton)
Doughty, C. J. A. McAdden, S. J. Thornton-Kemsley, Sir Colin
du Cann, E. D. L. Macdonald, Sir Peter Tiley, A. (Bradford. W.)
Emmet, Hon. Mrs. Evelyn McLaughlin, Mrs. P. Turner, H. F. L.
Errington, Sir Eric Maclay, Rt. Hon. John Vane, W. M. F.
Farey-Jones, F. W. Maclean, Sir Fitzroy (Lancaster) Vickers, Miss Joan
Fell, A. McLean, Neil (Inverness)
Fisher, Nigel Macleod, Rt. Hn. Iain (Enfield, W.) Vosper, Rt. Hon. D. F.
Fletcher-Cooke, C. McMaster, Stanley Wakefield, Edward (Derbyshire, W.)
Fraser, Hon. Hugh (Stone) Macmillan,Rt.Hn.Harold(Bromley) Wakefield, Sir Wavell (St. M'lebone)
Freeth, Denzil Macmillan, Maurice (Halifax) Wall, Patrick
Gammans, Lady Macpherson, Niall (Dumfries) Ward, Rt. Hon. G. R. (Worcester)
Garner-Evans, E. H. Maitland, Cdr. J. F. W. (Horncastle) Ward, Dame Irene (Tynemouth)
George, J. C. (Pollok) Maitland, Hon. Patrick (Lanark) Webbe, Sir H.
Gibson-Watt, D. Manningham-Buller, Rt. Hn. Sir R. Webster, David
Glover, D. Markham, Major Sir Frank Williams, Paul (Sunderland, S.)
Glyn, Col. Richard H. Marlowe, A. A. H. Williams, R. Dudley (Exeter)
Godber, J. B. Marples, Rt. Hon. A. E. Wills, Sir Gerald (Bridgwater)
Gough, C. F. H. Marshall, Douglas Wilson, Geoffrey (Truro)
Graham, Sir Fergus Mathew, R. Wolrige-Gordon, Patrick
Grant, Rt. Hon. W. (Woodside) Maudling, Rt. Hon. R. Woollam, John Victor
Grant-Ferris, Wg Cdr. R. (Nantwich) Mawby, R. L.
Gresham Cooke, R. Maydon, Lt.-Comdr. S. L. C. TELLERS FOR THE AYES:
Grimston, Hon. John (St. Albans) Medlicott, Sir Frank Mr. Finlay and Mr. Whitelaw.
Grimston, Sir Robert (Westbury) Milligan, Rt. Hon. W. R.
Ainsley, J. W. Herbison, Miss M. Pearson, A.
Albu, A. H. Hewitson, Capt. M. Peart, T. F.
Allaun, Frank (Salford, E.) Hobson, C. R. (Keighley) Plummer, Sir Leslie
Allen, Arthur (Bosworth) Holman, p. Popplewell, E.
Allen, Scholefield (Crewe) Holmes, Horace Price, J. T. (Westhoughton)
Bacon, Miss Alice Houghton, Douglas Probert, A. R.
Bellenger, Rt. Hon. F. J. Hoy, J. H. Pursey, Cmdr. H.
Bence, C. R. (Dunbartonshire, E.) Hughes, Cledwyn (Anglesey) Randall, H. E.
Benn, Hn. Wedgwood (Bristol, S.E.) Hughes, Emrys (S. Ayrshire) Rankin, John
Benson, Sir George Hughes, Hector (Aberdeen, N.) Redhead, E. C.
Beswick, Frank Hunter, A. E. Reeves, J.
Bevan, Rt. Hon. A. (Ebbw Vale) Hynd, H. (Accrington) Reid, William
Blackburn, F. Irvine, A. J. (Edge Hill) Reynolds, G. W.
Blenkinsop, A. Irving, Sydney (Dartford) Roberts, Albert (Normanton)
Blyton, W. R. Isaacs, Rt. Hon. G. A. Roberts, Goronwy (Caernarvon)
Boardman, H. Jay, Rt. Hon. D. P. T. Robinson, Kenneth (St. Pancras, N.)
Bowden, H. W. (Leicester, S.W.) Jeger, George (Goole) Rogers, George (Kensington, N.)
Boyd, T. C. Jenkins, Roy (Stetchford) Royle, C.
Braddock, Mrs. Elizabeth Johnson, James (Rugby) Shinwell, Rt. Hon. E.
Brockway, A. F. Jones, Rt. Hn. A. Creech (Wakefield) Silverman, Julius (Aston)
Brown, Thomas (Ince) Jones, David (The Hartlepools) Silverman, Sydney (Nelson)
Burton, Miss F. E. Jones, Elwyn (W. Ham, S.) Skeffington, A. M.
Butler, Herbert (Hackney, C.) Kenyon, C. Slater, Mrs. H. (Stoke, N.)
Butler, Mrs. Joyce (Wood Green) Key, Rt. Hon. C. W. Slater, J. (Sedgefield)
Callaghan, L. J. Lawson, G. M. Sorensen, R. W.
Carmichael, J. Lee, Frederick (Newton) Soskice, Rt. Hon. Sir Frank
Castle, Mrs. B. A. Lee, Miss Jennie (Cannock) Sparks, J. A.
Champion, A. J. Lever, Leslie (Ardwick) Spriggs, Leslie
Chapman, W. D. Lewis, Arthur Stewart, Michael (Futham)
Chetwynd, G. R. Lindgren, G. S. Stones, W. (Consett)
Coldrick, W. Lipton, Marcus Strauss, Rt. Hon. George (Vauxhall)
Collick, P. H. (Birkenhead) McAlister, Mrs. Mary
Corbet, Mrs. Freda McCann, J. Stross,Dr.Barnett(Stoke-on-Trent,C.)
Crossman, R. H. S. MacColl, J. E. Summerskill, Rt. Hon. E.
Cullen, Mrs. A. McKay, John (Wallsend) Sylvester, G. O.
Darling, George (Hillsborough) McLeavey, Frank Taylor, Bernard (Mansfield)
Daves, Ernest (Enfield, E.) MaePherson, Malcolm (Stirling) Taylor, John (West Lothian)
Davies, Harold (Leek) Mahon, Simon Thomson, George (Dundee, E.)
Diamond, John Mallalieu, E. L. (Brigg) Thornton, E.
Dodds, N. N. Mann, Mrs. Jean Tomney, F.
Donnelly, D. L. Marquand, Rt. Hon. H. A. Ungoed-Thomas, Sir Lynn
Ede, Rt. Hon. J. C. Mayhew, C. P. Viant, S. P.
Edwards, Robert (Bilston) Mellish, R. J. Warbey, W. N.
Edwards, W. J. (Stepney) Messer, Sir F. Watkins, T. E.
Evans, Albert (Islington, S.W.) Mikardo, Ian Weitzman, D.
Finch, H. J. (Bedwellty) Mitchison, G. R. Wells, Percy (Faversham)
Foot, D. M. Moody, A. S. Wells, William (Walsall, N.)
Fraser, Thomas (Hamilton) Morris, Percy (Swansea, W.) Wheeldon, W. E.
Gaitskell, Rt. Hon. H. T. N. Morrison, Rt.Hn. Herbert (Lewis'm,S.) White, Mrs. Eirene (E. Flint)
George, Lady Megan Lloyd(Car'then) Mort, D. L. Wilkins, W. A.
Gibson, C. W. Moss, R. Willey, Frederick
Grenfell, Rt. Hon. D. R. Neal, Harold (Bolsover) Williams, David (Neath)
Grey, C. F. Noel-Baker, Francis (Swindon) Williams, Rev. Llywelyn (Ab'tillery)
Griffiths, Rt. Hon. James (Llanelly) Noel-Baker, Rt. Hon. P. (Derby, S.) Williams, Rt. Hon.T. (Don Valley)
Griffiths, William (Exchange) Oswald, T. Williams, W. R. (Openshaw)
Hale, Leslie Owen, W. J. Woof, R. E.
Hall, Rt. Hn. Glenvil (Colne Valley) Padley, W. E. Yates, V. (Ladywood)
Hamilton, W. W. Palmer, A. M. F. Zilliacus, K.
Hannan, W. Pargiter, G. A.
Hastings, S. Parker, J. TELLERS FOR THE NOES:
Hayman, P. H. Parkin, B. T. Mr. Simmons and Mr. Deer
Henderson, Rt. Hn. A. (Rwly Regis) Paton, John

6.0 p.m.

Mr. Lawson

I beg to move, in page 2, line 37, to leave out paragraph (a).

Mr. Deputy-Speaker

I think the hon. Member's next Amendment, in page 3, line 9, leave out "to a quarter" goes with this one.

Mr. Lawson

Yes, the second is contingent upon the first.

The reason for the Amendment will be made much clearer if it is understood what this paragraph does. It gives the Minister the power in each quinquennial period to raise the graduated contribution which is paid in respect of the graduated benefit; it gives him power to raise it from 4¼ per cent. of the amount between £9 and £15, by ¼ per cent. each five years, to 5¼ per cent. It should be understood that this means that the Minister is given power to raise the contribution by as much as 23 per cent.

It should also be understood that the contribution of 4¼ per cent. is payable by the employee and is covered by a like 4¼ per cent. payable by his employer. Therefore, the total contribution is one of 8½ per cent., which will be raised to 10½ per cent. over the four quinquennial periods. This means a quite substantial increase in the amount to be paid. When the Bill becomes law, the maximum payment to begin with, by the £15 a week man, will be 5s. 1d., in addition to his basic contribution, and his employer will also pay 5s. 1d. Therefore, the contribution in respect of graduated benefits to begin with will be 10s. 2d.

The Minister is given the power under this paragraph to raise the contribution in those four periods to about 12s. 8d. from 10s. 2d., though I may be wrong to a penny in my calculations. Both Amendments would deprive the Minister of that power and would leave a position in which the contribution would be 4¼ per cent. precisely, or 8½ per cent. taking employer and employee jointly. In other words, the fixed maximum contribution would be 10s. 2d.

It may be that the Minister or the Parliamentary Secretary will tell us why power is also taken under the Bill to raise the flat-rate contribution. I agree that at this stage we are not challenging that point. We have shown in Committee what we feel about it. We are concerned here solely with the treatment to be given to the graduated contribution.

In the first place, the graduated contribution differs very materially from the basic contribution. It differs, for example, in the fact that there will be no Treasury contribution or supplement in respect of the graduated contribution, and that means, of course, no Treasury supplement in respect of the graduated benefit. The two types of contribution differ also in that the graduated contribution will not be payable by all. Thirdly, the graduated contribution of 4¼ per cent. is already more than enough to pay for the benefit which will be paid out eventually.

Let us consider these three points separately. The first is that the Exchequer will make no supplement towards the graduated contribution or graduated benefit. This may be of interest to the hon. Member for Aylesbury (Sir S. Summers) who earlier in the debate seemed to be challenging this. I would refer him to Clause 1 (3, a) which states: (i) the Exchequer supplements for contributions as an employed person and for employer's contributions shall be of an amount equal to one quarter of the contributions, but"— and I underline what follows— but so that no Exchequer supplements shall be payable for graduated contributions … In other words, there is here not merely an omission of provision to pay supplements towards graduated contributions and benefits but a deliberate prohibition of any such supplement being paid. It means that if we ever intended or felt it desirable to make an Exchequer supplementation, a new Bill would have to be passed to repeal this provision. This definite prohibition makes the graduated part of the Bill very different from the flat-rate part.

Everyone is included in the flat-rate part but that is not the case here. There is also the point that graduated contributions are not payable by everyone. In the first place, they are payable only by employed persons. Self-employed people are not brought into this part of the scheme. They are payable only by those employees whose income is about £9 and up to £15. Therefore, only that band of earners pay the graduated contributions, and it means that probably 9 million employees whose income is £9 or under will be excluded from this provision in the Bill.

The provision, again, does not apply to those who earn over £15 a week. Therefore, another substantial number of people is excluded. Nor will the graduated contributions be payable by those who are contracted out. When it is remembered that at present about 8 million people are in private industrial schemes, it will be realised that a very large number of these are likely to be contracted out, and the selective nature of these provisions in respect of graduated contributions will be seen. Here, therefore, is a section which is being treated differently from the working population.

The third point was to the effect that even at 4¼ per cent. on each side, that is, the employer paying 4¼ per cent. and the employee 4¼ per cent., the graduated contributions are already excessive. If we look at the benefit that will be derived from those contributions we can see how excessive they are. For example, let us take how much will be paid for each six pennies a week in terms of graduated retirement benefit. Six pennies will cost £15 in contributions at the initial rate; that is, £7 10s. will be paid by the employer and £7 10s. by the employee, so a unit is one of £15.

Mr. Marquand

It will be £18 for a woman.

Mr. Lawson

At the moment I am talking about men. For the total of £15 there will be paid eventually sixpence a week by way of pension. As my right hon. Friend has just pointed out, it will be more expensive for women. A woman will have to pay £9, and her employer will also have to pay £9, in order to earn the same six pennies at the beginning of the scheme, before any addition has been made. I calculate that at this rate, before a man can recover the amount of contribution paid either by himself or on his behalf at the initial rate, the cheapest rate, it will take him 11½ years. If he retires at the age of 65, it will be 76½ years before he has recovered the money paid on his behalf. This is not taking into account inflation or any interest on the contribution he has made.

So if the Minister is enabled by this paragraph in the Bill to raise the cost of the unit by these percentages each five-year period, the unit will cost, after the completion of these rises, not £15 but £18 13s. The price of the unit rises but the benefit to be derived from it remains the same. In other words, although so much more money will be paid—£18 13s. instead of £15—the contributor will receive when he retires not a penny more than the six pennies for the unit. On this basis it will take a man fourteen years—far more than his expectation of life—merely to recover the amount of the contribution which either he has made or his employer has made on his behalf.

6.15 p.m.

It was shown clearly in Committee that the benefits to be derived from the contributions were not as much as half that would be payable on any commercial terms. An interesting percentage was worked out in Committee to the effect that a man earning £15 a week and commencing at the age of 20 to contri- bute at the 4¼ per cent. rate—that is to say, 5s. 1d. himself and 5s. 1d. by his employer, or 10s. 2d. a week—towards graduated benefits to any of the existing insurance companies would receive a retirement pension which would be more than double that being paid under the Bill. In fact, the estimate was that if this sum of money were put aside and allowed to accumulate at only 3 per cent. compound interest—many companies pay substantially better interest rates than that—it would provide a pension of £5 6s. 5d. a week as compared with the maximum under the State scheme payable to a man entering at the age of 18 and paying the maximum for forty-seven years, under which the additional pension would be only £2 1s. That is £5 6s. 5d. against £2 1s., and it is without any increases being made in contributions.

This is supposed to be a scheme in substitution of the existing private ones. This is the Government's reply to the fact that there is a growing number of people who are being taken care of in private industry schemes, many giving handsome benefits and some without the payment of contributions. This is the Government's solution for those who cannot be enrolled in such private schemes. But there will be no choice for such people. If a man's income is over £9, he will have to pay on this basis, whether he likes it or not, if his employer has not contracted him out and put him into a private scheme. So there is no question of choice.

If, for example, a person thought it would suit him much better to take the money and put it into a private scheme, he will not be permitted to do so unless he is doing it in addition to what the State is demanding he should do. So we have not a second-rate superannuation scheme but one which can only be described as a fraud. We have this scheme, which exists not for the purpose of providing a genuine substitute for the private industry schemes that are growing up. If that were the purpose it would provide benefits at least as good as those which are being provided by the insurance companies. The insistence upon raising contributions for the graduated benefit is clearly for the purpose of transferring the cost of the deficit on the flat-rate benefit that is emerging on to the shoulders of those who are paying the graduated contribution in return for this benefit which is less than half the benefit they would be entitled to under any commercial scheme.

This is so blatantly a fraud that I ask the Minister, if he is to be honest with the people of this country, to tell us that he will at least agree not to add to the burden of those who are compulsorily enrolled in the graduated aspect of this scheme.

Mr. Reynolds

I beg to second the Amendment.

I have not yet heard any occupants of the Government Front Bench state definitely that they really believe in the Ministry of Pensions and National Insurance providing wage-related pensions for people who cannot get them from any other source through their employers. In that respect I congratulate them upon not trying to make out that the Bill is something which it is not. On Second Reading, my right hon. Friend the Member for Middlesbrough, East (Mr. Marquand) spoke of the real effect of the Bill and said that it ought to have been a Finance Bill.

Looking at the graduated contribution, one finds that a man earning £15 a week will have to pay a graduated contribution, with his employer, of 10s. 2d. per week—5s. 1d. each—but the cost of providing the graduated benefit is only 4s. 4d. In other words, the man is having to pay 135 per cent. more than is necessary to cover the cost of providing the benefit which he will eventually receive.

To look at it another way, each £1 worth of benefit which the contributor will eventually get will cost him £2 7s. That is the scheme as it starts off according to the Bill. Yet we are told in this subsection that, despite the fact that the contributor is being swindled in this way at the start, the Minister must have the right every five years to get a little more money from him, to increase the contribution by another ¼ per cent. if he thinks it necessary.

I cannot understand this on the basis of the arguments which we have heard from the Government side Looking at the graduated pension scheme, one finds that in its first year the income will be £196 million and the expenditure nil. Five years later when the first increase in the contribution will be levied as proposed in the subsection, the total income will be 248 million and the total expenditure £3 million. Five years later a further increase in the graduated contribution is provided for. Then the total income will be £295 million and, on the Government's own figures, the total expenditure will be £16 million.

When the figures already provide for an annual surplus of £279 million in 1971, is it necessary to have yet another increase five years later so that the annual income will go up to £342 million, whereas by that time the benefits will still be costing the Government only £35 million and there will be a surplus of £307 million a year on the graduated pension scheme? I suggest that the surplus of about £200 million which we have in the earlier years is sufficient without deliberately providing for extra money each quinquennium, as the money is not required to meet the cost of providing the graduated benefit.

We can see what the money is actually required for and what is the main purpose of the Bill. The purpose of the Bill is not to provide graduated benefit. The purpose is to increase the contributions and in return, as a slight sweetener, to promise a little extra money at some time in the future to the people who pay the increased contributions. However, once the money has been collected by means of increased contributions it will be used to meet the deficit which at present exists under the National Insurance Scheme, a deficit which will amount to £144 million in the opening year of the scheme. Therefore, we shall have a surplus of £196 million on the graduated benefit part of the scheme which will be used in its entirety to meet the existing deficit of £144 million on the present National Insurance Scheme. Five years later the deficit on the present National Insurance Scheme will increase to £227 million.

That is the reason for the proposal to increase the graduated contribution. The object is that the surplus of £245 million which will then arise will be sufficient to meet the deficit on the flat-rate National Insurance Scheme of £227 million. The intention is that each five years, as the deficit on the present flat-rate National Insurance Scheme increases, there shall be an increase in the percentage contribution being paid for the new graduated scheme, not for the purpose of providing decent graduated benefits but solely to meet the deficit on the flat-rate National Insurance Scheme, a deficit which over the years both parties in the House have accepted should be met from general taxation.

I object to a change in that policy now. The community, which has accepted this emerging deficit ever since 1925 and before, should be prepared to continue to accept it. I hope that the Amendment will be carried so that the graduated contributor will have to bear only the burden which is being forced upon him at the beginning of the scheme and will not have a prospect of an increase in his contribution every five years thereafter.

Mr. Vane

The hon. Member for Motherwell (Mr. Lawson) and the hon. Member for Islington, North (Mr. Reynolds) went a little wide of the comparatively narrow effect of the Amendment. The hon. Member for Islington, North, I thought too, went a little far in saying that all parties in the House accepted that the emerging cost of retirement pensions consequent on changes in the population—

Mr. Reynolds

If that was not the intention behind the Government's Pensions Act, 1953, where did they expect to get the money to meet the deficit? The Government's Measures of 1953 and 1957, on the basis of the Government Actuary's Report, assume that a deficit has to be met. Everyone has assumed that it was the intention of the Government that it should be met from general taxation. This Bill is the first indication that any of us have had that the deficit is to be met by contributions from the contributors.

Mr. Vane

It is one thing to indicate that a deficit will arise. It is another thing to accept the principle which the hon. Gentleman wrongly attributes to us. The principle of a change in the contribution rates, such as the quinquennial increases proposed in the Bill, is certainly no novelty, as someone might have supposed when listening to the speeches of hon. Gentlemen opposite. Something of the same kind has previously been considered and implemented.

The Amendment proposes to exempt the graduated contribution from the impact of any quinquennial increase which may—not "will"—be made. It is suggested that by providing for the graduated contribution to bear some fractional increase it was being treated selectively and unfairly. I should have thought that it was the other way round, that to leave the graduated contribution exactly where it is at times when other contributions under the scheme will be bearing a small increase would be unfair and selective.

Mr. Lawson

The person paying the graduated contribution also pays the flat-rate contribution. So he pays an increase as well as the others.

Mr. Vane

At the lowest rate. This would certainly interfere with the proportions on which things have been worked out, and I hope I shall be able to make that clear. The position was indeed made clear from the very beginning. The White Paper made it clear that there might have to be this series of ¼ per cent, increases. I can remember answering questions on this point during the Committee stage.

We have decided not to ask contributors for funds in advance of the time when they will be needed to meet the increasing cost of retirement pensions which will emerge. Although national earnings will, we hope, continue to be bouyant and increase over the years, I do not think that anybody can honestly suggest that they can be expected to meet the increasing cost of retirement pensions which we all know will be presented to us a few years ahead.

The increases which we propose are broadly in proportion over the whole field. If the graduated contributors are to be exempted, I submit that it will create unfairness and we shall then find that a larger share of the emerging cost will be borne by those with the smallest incomes. I am sure that hon. Gentlemen opposite do not want that to be the effect of the Amendment.

6.30 p.m.

The self-employed, too, and those contracted out will be larger share bearers, because they will pay an increase of 9d. maximum while a member of the State scheme paying graduated contributions will pay, under the Amendment, no more than 5d., even though his earnings may be more than a man paying 9d. There will also be a very considerable loss to the fund—£15 million in 1965 has been estimated, a figure which could rise to over £80 million per annum.

That loss would make a quinquennial increase at the full rate absolutely certain. At present it is a maximum, not a certain increase, and it could be less. If we forgo the increases due from this ¼ per cent. calculated on the graduated contributions, there is little doubt that the quinquennial increases would have to be at a maximum, and even then they might not met the full cost required and a succeeding Government would have to think further as to how they were to meet the cost.

Mr. J. T. Price

How can the hon. Gentleman sustain this argument when, in practice, the purpose of this Clause would be to give the Government the right to impose an additional ¼ per cent. but, in fact, whatever the right percentage on wages may be in the future it must be related to the product of the capital which is available for paying pensions? In other words, the contribution is to buy so many bricks and if the contribution is to be increased the size of the brick will increase, or the number of bricks available will increase in the proportion of 1s. a week for each £15.

I am not clear how the Joint Parliamentary Secretary is applying this argument, because it appears to me that the result he envisages will not take place if the pension liability is increased proportionately, because the pension will relate to the capital standing to the fund.

Mr. Vane

I do not follow the hon. Gentleman entirely, because the Amendment suggests that at a quinquennial increase the graduated contribution should not be included with the other contributions and should be exempted entirely. In fact, as we have argued before—I remember doing so in Committee—that this small fractional addition to the graduated contribution will coincide with a surcharge on the amount of the brick.

Mr. Lawson

It is not a small fractional increase. It is ¼ per cent. added to 4¼ per cent. which, over the period, amounts to about 23 per cent. on the initial contribution, which is quite a substantial increase.

Mr. Vane

We are anticipating an increase of ¼ per cent. When we get down basically to this the difference between the two sides of the House seems to be that hon. Gentlemen opposite think that it is meritorious to ask contributors to pay a great deal more money than is needed in the early days of the scheme. That is a feature of the scheme that they published.

We consider that it is not our duty to ask contributors to pay, through stamps or other methods of collection, substantially more than is needed in the earlier stages and that, as the cost of retirement pensions over the years becomes higher, we should increase the contributions to meet that cost. I cannot see why hon. Gentlemen opposite should consider this demanding of additional contributions from the outset to be something that is meritorious and that to ask no more than is needed for a pay as you go scheme is something that merits their opposition.

Mr. Crossman

I wonder whether the hon. Gentleman is deliberately not understanding the point that we are making. It is about the idea of contribution and units. He has launched this wage-related scheme of contributions on the idea that we can earn so much by paying so much. He says that by paying so many £s we get 1s. on the pension. It says in the pamphlet that if one contributes so many pounds one gets so many shillings pension. We then discover that the value of the brick declines every five years. We object to this. We say that with a straight contribution one can raise it by ½ per cent. to pay for the pension, but if one launches a new scheme and talks about bricks and units and says, "You can earn so much with so many bricks" and then one is found to be cheating because every five years the value of the brick is reduced, that is an outrage. It would have been better to have had a simple percentage scheme.

The Conservative pamphlet says: Under the new scheme.… Each £1 of graduated contribution paid … will amount to a 'unit of contribution'. That is in the first period, but after five years the Government quietly introduce another increase which decreases the value of the unit. if the Government do this, they should rewrite the scheme and tell people that it is no longer true that £1 would always earn that amount, and that it will earn less than that amount every five years.

Mr. Vane

There is nothing in what we have so far argued in the course of Committee or today which is not clear from the White Paper in its original form. Hon. Members opposite, from time to time, have pretended that they could not understand the very straightforward and simple paragraphs which set this out in great detail because we wanted people to be able to understand it.

Because we are not proposing to ask contributors to pay more in the first few years than is actually needed to meet the

charges on the fund, hon. Members opposite accuse us of strange calculations with ulterior motives. It is nothing of the kind. It is their calculations which are so strange, because they are asking from the public more money than they need in the early stages.

If, at the time of a quinquennial increase, it were decided that one type of contribution should be exempted from its proportionate share, the whole scheme would be thrown out of balance and it would be necessary to search for further income by other means. I am sure that the House will agree that the Bill as drafted is very much fairer than the proposal of hon. Gentlemen opposite.

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

The House divided: Ayes 229, Noes 179.

Division No. 118.] AYES [6.37 p.m.
Agnew, Sir Peter Cunningham, Knox Hirst, Geoffrey
Aitken, W. T. Currie, G. B. H. Holland-Martin, C. J.
Allan, R. A. (Paddington, S.) Dance, J. C. G. Hope, Lord John
Alport, C. J. M. Davies,Rt.Hn.Clement(Montgomery) Hornby, R. P.
Amery, Julian (Preston, N.) D'Avigdor-Goldsmid, Sir Henry Horobin, Sir Ian
Arbuthnot, John Deedes, W. F. Howard, Gerald (Cambridgeshire)
Armstrong, C. W. Dodds-Parker, A. D. Howard, John (Test)
Ashton, H. Donaldson, Cmdr. C. E, McA. Hutchison, Michael Clark(E'b'gh, S.)
Atkins, H. E. Doughty, C. J. A. Hyde, Montgomery
Balniel, Lord du Cann, E. D. L. Hylton-Foster, Rt. Hon. Sir Harry
Barlow, Sir John Emmet, Hon. Mrs. Evelyn Iremonger, T. L.
Barter, John Errington, Sir Eric Irvine, Bryant Godman (Rye)
Batsford, Brian Farey-Jones, F. W. Jenkins, Robert (Dulwich)
Baxter, Sir Beverley Fell, A. Jennings, J. C. (Burton)
Bell, Philip (Bolton, E.) Finlay, Graeme Jennings, Sir Roland (Hallam)
Bell, Ronald (Bucks, S.) Fisher, Nigel Johnson, Dr. Donald (Carlisle)
Bennett, F. M. (Torquay) Fletcher-Cooke, C. Johnson, Eric (Blackley)
Bidgood, J. C. Fraser, Hon. Hugh (Stone) Jones, Rt. Hon. Aubrey (Hall Green)
Biggs-Davison, J. A. Freeth, Dentil Kerby, Capt. H. B.
Bingham, R. M. Gammans, Lady Kerr, Sir Hamilton
Birch, Rt. Hon. Nigel Garner-Evans, E. H. Kimball, M.
Bishop, F. P. George, J. C. (Pollok) Kirk, P. M.
Body, R. F. Glover, D. Lancaster, Col, C. G.
Bonham Carter, Mark Glyn, Col. Richard H. Legge-Bourke, Maj. E. A. H.
Bowen, E. R. (Cardigan) Godber, J. B. Legh, Hon. Peter (Petersfield)
Boyd-Carpenter, Rt. Hon. J. A. Gough, C. F. H. Lennox-Boyd, Rt. Hon. A. T.
Braithwaite, Sir Albert (Harrow, W.) Graham, Sir Fergus Lindsay, Hon. James (Devon, N.)
Brewis, John Grant, Rt. Hon. W. (Woodside) Lindsay, Martin (Solihull)
Bromley-Davenport, Lt.-Col. W. H. Grant-Ferris, Wg Cdr. R. (Nantwich) Linstead, Sir H. N.
Brooman-White, R. C. Gresham Cooke, R. Lloyd, Maj. Sir Guy (Renfrew, E.)
Browne, J. Nixon (Craigton) Grimond, J. Loveys, Walter H.
Bryan, P. Grimston, Hon. John (St. Albans) Lucas, Sir Jocelyn (Portsmouth, S.)
Bullus, wing Commander E. E. Grimston, Hon. John (St. Albans) Lucas, P. B. (Brentford & Chiswick)
Burden, F. F. A. Grimston, sir Robert (Westbury) Lucas-Tooth, Sir Hugh
Butler, Rt. Hn.R.A.(Saffron Walden) Gurden, Harold McAdden, S. J.
Campbell, Sir David Hall, John (Wycombe) Macdonald, Sir Peter
Cary, Sir Robert Harris, Frederic (Croydon, N.W.) McLaughlin, Mrs. P.
Channon, H. P. G. Harris, Reader (Heston) Maclay, Rt. Hon. John
Chichester-Clark, R. Harrison, A. B. C. (Maldon) Maclean, Sir Fitzroy (Lancaster)
Cole, Norman Harrison, Col. J. H. (Eye) Macleod, Rt. Hn. Iain (Enfield, W.)
Conant, Maj. Sir Roger Harvey, Sir Arthur Vere (Macclesf'd) McMaster, Stanley
Cooke, Robert Harvey, John (Walthamstow, E.) Macmillan,Rt.Hn.Harold(Bromley)
Cooper, A. E. Harvie-Watt, Sir George Macpherson, Niall (Dumfries)
Cooper-Key, E. M. Heath, Rt. Hon. E. R. G. Maitland, Cdr. J. F. W.(Horncastle)
Cordeaux, Lt.-Col. J. K. Henderson-Stewart, Sir James Maitland, Hon. Patrick (Lanark)
Corfield, F. V. Hesketh, R. F. Manningham-Buller, Rt. Hn. Sir R.
Craddock, Beresford (Spelthorne) Hicks-Beach, Maj. W. W. Markham, Major Sir Frank
Crosthwaite-Eyre, Col. O. E. Hill, Rt. Hon. Charles (Luton) Marlowe, A. A. H.
Crowder, Sir John (Finchley) Hill, Mrs. E. (Wythenshawe) Marples, Rt. Hon. A. E.
Crowder, Petre(Ruislip-Northwood) Hinchingbrooke, Viscount Marshall, Douglas
Mathew, R. Price, Henry (Lewisham, W.) Teeling, W.
Maudling, Rt. Hon. R. Profumo, J. D. Thomas, Leslie (Canterbury)
Mawby, R. L. Rawlinson, Peter Thomas, P. J. M. (Conway)
Maydon, Lt.-Comdr, S. L. C. Redmayne, M. Thornton-Kemsley, Sir Colin
Medlicott, Sir Frank Rees-Davies, W. R. Tiley, A. (Bradford, W.)
Milligan, Rt. Hon. W. R. Renton, D. L. M. Tilney, John (Wavertree)
Molson, Rt. Hon. Hugh Ridsdale, J. E. Turner, H. F. L.
Morrison, John (Salisbury) Rippon, A. G. F. Vane, W. M. F.
Nairn, D. L. S. Roberts, Sir Peter (Heeley) Vickers, Miss Joan
Neave, Airey Robertson, Sir David Vosper, Rt. Hon. D. F.
Nicholson, Sir Godfrey (Farnham) Roper, Sir Harold Wade, D. W.
Nicolson, N. (B'n'm'th, E. & Chr'ch) Ropner, Col. Sir Leonard Wakefield, Edward (Derbyshire, W.)
Noble, Comdr. Rt. Hon. Allan Russell, R. S. Wakefield, Sir Wavell (St. M'lebone)
Noble, Michael (Argyll) Scott-Miller, Cmdr. R. Wall, Patrick
Nugent, Richard Sharples, R. C. Ward, Rt. Hon. G. R. (Worcester)
Oakshott, H. D. Shepherd, William Ward, Dame Irene (Tynemouth)
O'nell, Hn. Phelim (Co. Antrim, N.) Simon, J. E. S. (Middlesbrough, W.) Webbe, Sir H.
Orr-Ewing, C. Ian (Hendon, N.) Smyth, Brig. Sir John (Norwood) Webster, David
Osborne, C. Spearman, Sir Alexander Whitelaw, W. S. I.
Page, R. G. Speir, R. M. Williams, Paul (Sunderland, S.)
Pannell, N. A. (Kirkdale) Spens, Rt. Hn. Sir P. (Kens'gt'n.S.) Williams, R. Dudley (Exeter)
Partridge, E. Stanley, Capt. Hon. Richard Wills, Sr Gerald (Bridgwater)
Pickthorn, Sir Kenneth Steward, Harold (Stockport, S.) Wilson, Geoffrey (Truro)
Pike, Miss Mervyn Stoddart-Scott, Col. Sir Malcolm Woollam, John Victor
Pilkington, Capt. R. A. Storey, S.
Pitt, Miss E. M. Studholme, Sir Harry TELLERS FOR THE AYES:
Powell, J. Enoch Summers, Sir Spencer Mr. Hughes-Young and
Price, David (Eastleigh) Taylor, Sir Charles (Eastbourne) Mr. Gibson-Watt.
Ainsley, J. W. Gibson, C. W. Mitchison, G. R.
Albu, A. H. Grenfell, Rt. Hon. D. R. Moody, A. S.
Allaun, Frank (Salford, E.) Grey, C. F. Morris, Percy (Swansea, W.)
Allen, Arthur (Bosworth) Griffiths, Rt. Hon. James (Llanelly) Morrison, Rt.Hn.Herbert(Lewis'm,S.)
Allen, Schofield (Crewe) Griffiths, William (Exchange) Mort, D. L.
Awbery, S. S. Hale, Leslie Moss, R.
Bacon, Miss Alice Hall, Rt. Hn.Clenvil (Colne Valley) Moyle, A.
Bellenger, Rt. Hon. F. J. Hamilton, W. W. Neal, Harold (Bolsover)
Bence, C. R. (Dunbartonshire, E.) Hannan, W. Noel-Baker, Francis (Swindon)
Benn, Hn, Wedgwood (Bristol, S.E.) Hastings, S. Oram, A. E.
Beswick, Frank Hayman, F. H. Oswald, T.
Bevan, Rt. Hon. A. (Ebbw Vale) Herbison, Miss M. Owen, W. J.
Blackburn, F. Hewitson, Capt. M. Padley, W. E.
Blenkinsop, A. Hobson, C. R. (Keighley) Palmer, A. M. F.
Blyton, W. R. Holman, P. Parker, J.
Boardman, H. Holmes, Horace Parkin, B. T.
Bowden, H. W. (Leicester, S.W.) Houghton, Douglas Paton, John
Boyd, T. C. Hoy, J. H. Pearson, A.
Braddock, Mrs. Elizabeth Hughes, Cledwyn (Anglesey) Plummer, Sir Leslie
Brockway, A. F. Hughes, Emrys (S. Ayrshire) Popplewell, E.
Brown, Rt. Hon. George (Belper) Hughes, Hector (Aberdeen, N.) Price, J. T. (Westhoughton)
Brown, Thomas (Ince) Hynd, H. (Accrington) Probert, A. R.
Burton, Miss F. E. Irvine, A. J. (Edge Hill) Pursey, Cmdr. H.
Butler, Herbert (Hackney, C.) Irving, Sydney (Dartford) Randall, H. E.
Butler, Mrs. Joyce (Wood Green) Isaacs, Rt. Hon. G. A. Rankin, John
Callaghan, L. J. Jay, Rt. Hon. D. P. T. Reeves, J.
Carmichael, J. Jeger, George (Goole) Reid, William
Castle, Mrs. B. A. Jenkins, Roy (Stechford) Reynolds, G. W.
Champion, A. J. Johnson, James (Rugby) Roberts, Albert (Normanton)
Chapman, W. D. Jones, Rt. Hn. A. Creech (Wakefield) Roberts, Goronwy (Caernarvon)
Chetwynd, G. R. Jones, David (The Hartlepools) Robinson, Kenneth (St. Pancras, N.)
Coldrick, W. Kenyon, C. Rogers, George (Kensington, N.)
Collick, P. H. (Birkenhead) Key, Rt. Hon. C. W. Royle, C.
Corbet, Mrs. Freda Lawson, G. M. Shinwell, Rt. Hon. E.
Crossman, R, H. S. Lee, Frederick (Newton) Silverman, Julius (Aston)
Cullen, Mrs. A. Lee Miss Jennie (Cannock) Silverman, Sydney (Nelson)
Darling, George (Hillsborough) Lever, Leslie (Ardwick) Skeffington, A. M.
Davies, Ernest (Enfield, E.) Lindgren, G. S. Slater, Mrs. H. (Stoke, N.)
Davies, Harold (Leek) Lipton, Marcus Slater, J. (Sedgefield)
Davies, Stephen (Merthyr) Logan, D. G. Smith, Ellis (Stoke, S.)
Diamond, John McAlister, Mrs. Mary Sorensen, R. W.
Dodds, N. N. McCann, J. Soskice, Rt. Hon. Sir Frank
Donnelly, D. L. MacColl, J. E. Sparks, J. A.
Ede, Rt. Hon. J. C. McKay, John (Wallsend) Spriggs, Leslie
Edwards, Rt. Hon. Ness (Caerphilly) McLeavy, Frank Stewart, Michael (Fulham)
Edwards, W. J. (Stepney) MacPherson, Malcolm (Stirling) Stones, W. (Consett)
Evans, Albert (Islington, S.W.) Mahon, Simon Stross,Dr.Barnett(Stoke-on-Trent,C.)
Finch, H. J. (Bedwellty) Mallalieu, E. L. (Brigg) Summerskill, Rt. Hon. E.
Fitch, A. E. (Wigan) Mann, Mrs. Jean Sylvester, G. O.
Fletcher, Eric Marquand, Rt. Hon, H. A. Taylor, Bernard (Mansfield)
Foot, D. M. Mayhew, C. P. Taylor, John (West Lothian)
Fraser, Thomas (Hamilton) Mellish, R. J. Thomson, George (Dundee, E.)
Gaitskell, Rt. Hon. H. T. N. Messer, Sir F. Thornton, E.
George, Lady Megan Lloyd(Car'then) Mikardo, Ian Tomney, F.
Viant, S. P. Wilkins, W. A. Woof, R. E.
Warbey, W. N. Willey, Frederick Yates, V. (Ladywood)
Watkins, T. E. Williams, David (Neath) Zilliacus, K.
Wells, Percy (Faversham) Williams, Rev. Llywelyn (Ab'tillery)
Wells, William (Walsall, N.) Williams, Rt. Hon. T. (Don Valley) TELLERS FOR THE NOES:
Wheeldon, W. E. Williams, W. R. (Openshaw) Mr. Deer and Mr. Simmons.
White, Mrs. Eirene (E. Flint) Willis, Eustace (Edinburgh, E.)