§ Mr. Marquand
I beg to move, in page 7, line 1, to leave out "sixpence" and to insert "eightpence".
All workers in this country are at present required to pay a flat-rate contribution for a flat-rate retirement pension. Some more fortunate people have private occupational schemes on which they can rely to give them in their old age a benefit over and above this national flat-rate pension. They are a limited number and are more fortunate than the remainder.
We are told that in the Bill the State provides something similar for those who are earning more than £9 a week but who, at present, have no occupational scheme to give them an addition to their basic pension. Under the Bill all will receive a basic pension and will pay a flat-rate contribution for it. To judge the value of what is proposed in a national system of graduated pensions and contributions, therefore, the only fair and valid comparison, we on this side of the House believe, is a comparison with what private insurance can do for private schemes.
709 The conclusion which we have reached after examining very exhaustively in Committee this comparison between what the Government plan will provide as a graduated addition to basic pensions and what is provided by private schemes is that there is a discrepancy which is almost incredible when we seek to explain it to those who have not had the advantage of studying the Bill exhaustively in Committee.
The purpose of the debate is to report to the House. We feel obliged to return again and again to an aspect of the problem which has already been ventilated but which, when hon. Members who have not been in the Committee hear it, they can scarcely believe. I think that no one will deny that it was generally agreed in the sittings upstairs that the scheme means that, taking the flat-rate and the graduated benefits together, a man earning £10 4s. or £10 10s. a week would receive a better pension if he were contracted out of the national scheme.
The conclusion which we have reached from our study upstairs is that those who earn less than £10 4s., or shall we say £10 10s., a week would be well advised to remain in the national scheme, but that everybody above that level of earnings would be well advised to stay out. Above the figure of £10 10s. a week the advantage of being contracted out of the national scheme, if the man can persuade his employer to contract him out, rises very steeply.
A man earning £11 a week will pay, with his employer, 9½d. a week more in the national scheme than is actuarially required to meet the pension which he will be paid. A man earning £15 a week or more will be paying, with his employer, 4s. 8½d. a week more than is required to buy a similar pension privately. It was said when Mr. Lloyd George introduced the first National Insurance Act that he would give 9d. for 4d.
As I said in 1957, when the right hon. Gentleman introduced a National Insurance Bill, he then proposed to give 9d. for 10d. In this Bill, as far as we can work it out, he proposes to give 9d. for 1s. 7d. The discrepancy between the contribution payable and the benefit received is most surprising when it is compared with what could be obtained 710 privately. People who have not studied the matter can scarcely believe what we tell them.
This is done to relieve the Exchequer of the emerging cost of promises which were made long ago to pay pensions which have not yet fully become due. It is by this means that the Exchequer's total obligation on account of emerging and other costs, which would have been £508 million twenty years hence, is to be reduced to £170 million.
This method of meeting the emerging cost of pensions promised in the past but yet to be due is called concentrating the Exchequer supplement on the lower-paid worker. In fact, it is whittling away the Exchequer supplement as incomes rise above £9 a week until the Exchequer supplement to pensions disappears altogether at or about a level of £10 10s. a week. By far the greater part of the cost of meeting the emerging deficit which arises from pension promises made in the past is, therefore, being concentrated in the Bill upon the income band between £9 and £15 a week. Moreover, it is being concentrated on earnings between £9 and £15 a week among a selected group of individuals.
Those who succeed in being contracted out of the national scheme—and I have suggested that many will try to be contracted out—will be exempt from this contribution to the emerging costs. This heavy emerging cost, which we all undertook with our eyes wide open in 1946 and which we then thought would be met eventually by the general body of the public, is to be placed on those people who remain in the national scheme and whose earnings are between £9 and £15 a week.
It is a regressive form of taxation for meeting an emerging cost, as my hon. Friend the Member for Coventry, East (Mr. Crossman) has pointed out, because it requires a smaller proportionate contribution from everybody whose earnings exceed £15 a week than from those whose income is between £9 and £15 a week. It is also selective in that it lays the burden upon those who, for one reason or another, cannot be contracted out. It is a piece of taxation which is not merely regressive, but also selective.
If everybody contracted out the plan would have to be drastically revised, but 711 many people cannot contract out. Those working for small employers, possibly in farming or the building trade or the catering trade or the pottery trade or the textile trade, where the normal unit of production is comparatively small and where the industries are exposed to fierce competition, will find that their employers are unable or unwilling to contract them out. It is upon these workers, who are already among the lower paid of our industrial workers, that the burden is to fall.
The relationship between the graduated contribution and the graduated benefit is calculated in the Bill by means of the brick system. A sum of 6d. a week in pension will be bought for every £7 10s. of contribution made by a man and every £9 of contribution made by a woman.
We have, to the best of our ability with the resources available to us, calculated that £3 3s. 10d. would be enough to buy outside benefits of that amount The brick to be accumulated has to amount to £7 10s. My hon. Friend the Member for Motherwell (Mr. Lawson) pointed out on an earlier occasion that it might even be increased in amount later, if the Bill goes through. Even in the earlier period, it is envisaged that only 42 per cent. of the proposed contribution, according to our calculation, would be needed to buy the proposed graduated benefits.
Therefore, if we are to amend this proposal and suggest a greater degree of justice, we have various means of doing it. We recognise that the emerging cost must be met, and we believe that in a proper and satisfactory system of national superannuation it could and should be possible to put a substantial part of that emerging cost upon the contributors. We would certainly, if we had the power, ensure that the State's contribution was larger than is proposed in this scheme. We cannot for one moment agree, however, that, even if it is right and proper to require the contributors to meet some part of the emerging cost, it is right to select a particular group—a comparatively badly-off group—of contributors and to throw the whole burden of the emerging cost on them.
We have attempted during these discussions to meet this problem by ex- 712 tending the range over which contributions are to be required. My hon. Friend the Member for Coventry, East moved an Amendment not long ago to secure that contributions be levied on higher incomes than those of £15 per week. My hon. Friend the Member for Motherwell tried even more recently to do it in another way; but his solution has been rejected.
I now propose a third way, namely, to raise the amount of the pension given by each brick from 6d. to 8d. This does not go as far as to make the brick as valuable as it would need to be to pay the sort of pension which could be obtained from this contribution by outside insurance or as is required by justice. It is put forward in the hope that it might be accepted and that it is reasonable. This moderate suggestion of increasing the value of the pension payable by each brick by one-third might, even at this late hour, find favour in the eyes of the Minister.
It has not been denied during this debate, and it was not denied in the later stages of our Committee proceedings, that this very heavy emerging cost is being put by the Bill upon a very small number of contributors, and those not the best off. This modest suggestion is put forward, taking account of the fact that there will undoubtedly be some redistribution of income even within the graduated scheme, and taking account of the difficulties that the right hon. Gentleman will face in meeting some reduction of the income which he expects to get.
We put forward now a solution less just than we would like to see it in the hope that it may be acceptable. It would go a little nearer to giving, to those who will be obliged to be in the national scheme with no hope of getting out of it, something like justice for their contribution. It will make them feel that they are not discriminated against in an unduly harsh manner. I am sure that they will still be discriminated against even if the Amendment be accepted, but at least we shall modify that discrimination and give something nearer to what should be given to these contributors.
The Joint Parliamentary Secretary, objecting to the proposal made by my hon. Friend the Member for Coventry, 713 East, said that his proposal would limit the number who might be able to contract out. My proposal goes less far than his and is not open to that objection. I hope that this evening we will find that it will meet with favour in the eyes of the right hon. Gentleman, or, at any rate, that he may be prepared, even at this late hour, to announce a concession to make the future less austere and bitter than it will be for the selected group of people who will be forced to bear the whole burden of the emerging cost, which the nation undertook in 1946 thinking that it would be spread over the whole population and not concentrated upon a particular group.
§ Mr. John McKay (Wallsend)
I beg to second the Amendment.
I shall do so on rather different lines from those pursued by other hon. Members on this subject. My right hon. Friend the Member for Middlesbrough, East (Mr. Marquand) has presented a very strong case for some amendment, whole other hon. Members, like my hon. Friend the Member for Motherwell (Mr. Lawson), have indicated that ordinary business circles can provide far better benefits than are now proposed. It is remarkable, if that be true—the suggestion has not yet been refuted—that the State scheme should be worse than schemes based upon private resources.
I propose to deal as far as I can with the finance of the Bill. There is need for a little preliminary explanation so that the House may understand what I am driving at. At present, we pay 9s. 11d. per week for general insurance. Information from Treasury officials and Ministers shows that it has been accepted that out of that 9s. 11d. approximately 4s. 11d. goes to pay the pension. There is an injury and health cost of 2s. 6½d., leaving 2s. 5½d. for sickness, unemployment and other benefits. The changed contribution for all those earning less than £9 per week will now be 8s. 4d. The injury, health and ordinary sickness benefit will have to be provided for out of that 8s. 4d. The cost of them is practically the same within the 8s. 4d as it was in the 9s. 11d.
If we take the 5s., which covers all those benefits apart from pensions, from the 8s. 4d. there is 3s. 4d. left for pensions, which will be paid at the level rate of 50s. for a single man. People 714 earning less than £9 a week will in future receive their pension of 50s. a week by paying 3s. 4d.
What will the graded contributors pay? Naturally, it will be far more than 3s. 4d. I will state the proportions so that the House may see what these people will pay. If a man earning less than £9 a week can receive a pension of 50s. for paying 3s. 4d., how much pension in proportion should the others receive for the extra amount of money which they pay? A man earning £12 a week will pay the ordinary 3s. 4d., but he will pay an additional 2s. 6d. Therefore, through the graded system, he will pay in reality 5s. 10d. towards his fiat-rate and graded pension. If the man earning £12 a week were to receive from his contribution of 5s. 10d. a proportionate benefit to that received by the £9 a week man, his benefit would be 87s. However, under the Bill he will receive, after paying for forty-seven years, a flat-rate pension of 50s. and a graduated pension of 20s., making a total of 70s. That is a difference of 17s. proportionately. The Amendment would give the man earning £12 a week 6s. 8d. extra, by increasing the 20s. graduated pension by one-third.
A man earning £15 a week will be paying 3s. 4d., like everyone else, plus 5s. 1d. If he received a pension proportionate to his contribution, he would receive 126s. 3d. Instead of that, he will receive 50s. flat-rate pension and 41s. graduated pension, making a total of 91s., which is 35s. 3d. less than the amount to which he would proportionately be entitled. Under the Amendment he would receive an additional 13s. 8d. Even with that, he would still be receiving much less than the amount of pension to which he would proportionately be entitled.
My hon. Friends and I press the Amendment because we think that the proposition contained in it is more just, taking all things into consideration, than the Bill as it stands.
What would the financial situation be if the Amendment were implemented? As far as I can understand the financial arrangements and contributions, the Actuary has very strongly indicated that there will be a sufficient balance in the financial arrangements to meet the increased liability which my hon. Friends 715 and I propose under the Amendment. The Actuary takes us to the year 2000, after forty years implementation of the Act. Taking the whole Bill as implemented and carrying it forward for forty years, that is when the pension scheme will be in a mature state. The vast majority of men reaching sixty-five will be getting well on to their maximum pension. The Government Actuary indicates that under the proposed Bill there will be a balance of £115 million at that stage.
Assuming that that is an accurate figure after the scheme is in a mature condition, is there anything to indicate from the Actuary's figures what the increased liability brought about by the Amendment will be? The Amendment would increase graded benefits by one-third. The Actuary tells us that in the year 2000 the total amount of graded pensions will be £223 million. The Amendment would increase that amount by £74 million. As I have already said, in the year 2000 there will be a balance of £115 million to meet the increased liability of £74 million.
The principle embodied in the Bill is that we should pay as we go. So far as I can judge in relation to incomes meeting liability, the position is satisfactory, assuming that I am interpreting the figures of the Government Actuary in a proper and systematic way.
The Actuary goes on to try to show clearly the financial position by taking the averages per year instead of giving simply the final results as a balance for one year. In another part of h4 diagnosis he indicates that the average balance for the last five years, when the scheme has reached a mature position in the year 2000, will be £98 million. My right hon. and hon. Friends and I are proposing an increased liability of £74 million.
We think that the Amendment should be supported, even by the Government. After all is said and done, the amount of pension to be received by people earning higher wages who pay extra contributions is not fair as compared with people earning £9 a week or under. I suggest that this will be seen when the figures are analysed in a little detail, but not in much detail, because the Actuary states the position definitely, which is remarkable for an Actuary.
716 The Government Actuary shows that in the year 2000, the amount of contributions paid by the graduated pensioners alone will be more than the benefit collectively received by them under the Bill. In other words, though their contributions will meet the full cost of their benefits, as a result of this change the employers' contributions will amount to practically the same amount as that of the employees' contributions, so that the whole of the employers' contributions under the graduated scheme will not help the graded pensioner's pension by one iota. The whole of the employers' contributions in relation to the graduated part of the scheme goes back into the general pool, so that the contribution paid by men earning less than £9 a week can be reduced.
While we agree, in principle, that the better off should try to help the underdog, we think that the Bill has gone too far. By the time we include the £15-a-week men we have covered 90 per cent. of the workpeople, and we think that the sacrifice enforced on insured contributors earning £10 to £15 a week is more than is justified. That is our main reason for tabling the Amendment, and I hope that the Government will accept it.
§ Mr. Boyd-Carpenter
I must confess that I did not wholly follow some of the figures deployed by the hon. Member for Wallsend (Mr. McKay) in support of his argument, so if I do not deal with them now I certainly promise to read them in HANSARD in the morning, and seek, perhaps, some other occasion to deal with them.
One point that I did fully appreciate was his argument that the cost of the proposals in the Amendment could, as he put it, be carried without difficulty by the National Insurance Fund. The position is, as the Government Actuary's Report makes clear, that for the first three quinquennia the scheme will, taking the quinquennia as a whole, be slightly in deficit. That is because the cost rises with a steady curve, whereas the quinquennial increases, in so far as they are made, operate sharply on each five-year period.
Therefore, though the cost in the earlier years is limited, being in the first three quinquennia, to single figures, the effect of the Amendment would be to 717 increase the deficit over the first three quinquennia, taken as such. At the end of the century, the total cost of some £60 million would not, by itself, wipe out the estimated surplus at that period—though the House will view figures as far ahead as that with very considerable caution——
§ Mr. Boyd-Carpenter
I am glad to carry the hon. Member for Westhoughton (Mr. J. T. Price) with me in that, though, regrettably, I may not do so in other things.
As I understood it, the main theme of the argument presented by the right hon. Member for Middlesbrough (Mr. Marquand) was the comparison of what, under the Bill, the State scheme will do, with what would be obtainable under private schemes. It is no part of my argument that, taking the graduated part separately, a State graduated scheme taken separately can compete in yield with a commercially-operated scheme. There are obvious and fundamental differences between a State scheme, run on a pay-as-you-go basis and without any interest element in it, and a private scheme, where balances are accumulated and in which there are interest factors. The House will appreciate the difference to be so fundamental as to make such comparisons not particularly helpful in our consideration of the State scheme.
The other factor that vitiates such comparison, taking the graduated scheme separately, is the treatment of the subsidy. Under this scheme, as the right hon. Gentleman quite rightly said, the subsidy is concentrated on the lower-paid workers. That is done, as I think the House will recall, by putting in the subsidy on contributions relating to earnings of £9 a week, and gradually and progressively withdrawing it from earnings of up to about £15. When that fact is allowed for, it is obvious that a comparison of the graduated scheme, taking it by itself, with an outside scheme must be in favour of the outside scheme, which does not have in it this element of withdrawal of subsidy.
With respect to the right hon. Gentleman, however, all the comparisons of the graduated scheme, taken by itself, with private schemes, are really not valid 718 criticisms of the Bill's proposals. I have said in Standing Committee on a number of occasions—perhaps to the weariness of hon. Members, but, in the light of what the right hon. Gentleman said, I must repeat it—that when we are dealing with a pensions scheme the contributions and benefits must be looked at as a whole.
After all, from the point of view of the contributor he, if he is an employed person, feels that contribution as a whole—and as a hole, perhaps, in his wage packet, from which it is deducted. He gets his pension as a whole from the post office. Therefore, when we are making these comparisons, what I suggest should be looked at—and the only point that is very relevant is that whether this is a reasonable proposition from the State point of view—is the totality of contribution and benefit.
We start with the very formidable reinforcement of the argument in favour of the scheme which derives from the fact that, taking the flat-rate element by itself, it will be many years indeed, as the White Paper has made clear, before any recipient of the flat-rate benefits has paid anything like value for money for his pension. That, of course, derives from the acceptance by the State of successive increases of the back-service liability, which is one of the main reasons for the emerging deficit to which the right hon. Gentleman referred——
§ Sir S. Summers
Could my right hon. Friend clarify that point by saying how many years it would be before the recipient had paid half of what it would cost to provide that benefit?
§ Mr. Boyd-Carpenter
I hate making calculations on my feet, but I can certainly have the figure worked out and given to my hon. Friend. It is the fact that, broadly speaking, it will be very near the end of the century before the recipient of a flat-rate pension will have paid full actuarial value for it. However, as I say, I would prefer, if my hon. Friend will forgive me, not to attempt to calculate the half figure. Were I to try, it would almost certainly involve me in making a statement at the end of Questions——
§ Mr. Lawson
Will the right hon. Gentleman tell the House by how much a youngster—coming into the scheme at 719 the age of 18 and paying on the full £15 a week—pays in excess of the actuarial value?
§ Mr. Boyd-Carpenter
I am coming to that part of the matter in the light of the table with which, I am glad to see, the hon. Gentleman has furnished himself, but I would prefer, if I might, to deploy my argument in reply to that of the right hon. Gentleman the Member for Middlesbrough, East, more or less in the order that the right hon. Gentleman used in addressing himself to this subject.
In dealing with the emerging deficit, I thought that the right hon. Gentleman inadvertently contradicted himself. At one time, he was apparently suggesting that the party opposite had not accepted the idea that the whole of the emerging deficit should be borne by the taxpayer, but then I was glad to hear him say that he appreciated that some part of that burden should be borne by the contributors, but that what he objected to was the concentration of the burden on a smaller number of contributors among the less well off.
There I thought the right hon. Gentleman had fallen into error, because in so far as the cost of meeting the deficit is contributed towards by those who contribute to graduated pensions, it will, it is true, begin to fall upon them on the tranche of earnings above £9 a week but will, in fact, on earnings between £9 and £15 a week be borne by all those above that range as well as those within it. While I cannot give the figures offhand, the number of people in this country earning more than £9 a week is very substantial indeed.
Then the right hon. Gentleman, as I understood it, accepts that part of the emerging deficit should be borne by the contributors to the scheme and part by an increased contribution from the Exchequer. That is, of course, precisely what this Bill seeks to do. One of the provisions is to increase the fixed Exchequer contribution now running at £123 million, to a minimum of £170 million above which it will rise as the percentage formula operates. Therefore, I do not think there is so much difference between the right hon. Gentleman and those of us on this side of the House as appeared at one time.
720 Then the right hon. Gentleman referred to those contracting out of graduated contributions and the effect on the emerging deficit. I should point out that the 18s. 2d. contribution which will remain contains some element towards this, and it is an element in this calculation which will depend upon the exact amount of their earnings. We had a discussion on that in Standing Committee. But to say that they are completely cleared of a contribution is not the fact.
Then we come to what is really the gravamen of this Amendment, and that is whether we should at this stage increase the benefits. We have been warned by very authoritative outside voices in recent weeks of the dangers of falling into the temptation in dealing with pension schemes of making improvements which will cost us very little in the near future but which will impose a heavy burden on our descendants. In various authoritative publications and statements those responsible for the scheme of right hon. and hon. Gentlemen opposite and Her Majesty's Government have received warnings of the ease and wrongness of falling into that temptation. I suggest that this Amendment is a very good example of the value of such a warning. As I said, the cost of this in the earlier years would be quite limited. It would obviously be a popular and attractive thing to do, but it would be doing just what I would suggest that in the handling of pension schemes we should not do—namely, fall into that temptation of making at present excessive promises for the future. The hon. Member for Westhoughton agreed when I said that we should look at figures forty years ahead with a certain degree of caution, and I think that the more practical experience we have the more caution we apply in that respect.
Mr. J. T. Price
The right hon. Gentleman might also, while he is giving this little homily to the House, which is not without merit, have a word with his right hon. Friend the Home Secretary and Leader of the House who, not long ago, informed us that in twenty-five years' time the standard of living in this country would be doubled as a result of the policy of this Government. The right hon. Gentleman might also bear in mind that he himself is being a little careless in throwing rash statements about.
§ Mr. Boyd-Carpenter
In twenty-five years' time, when I hope both the hon. Member for Westhoughton and I will be Members of this House, I shall hope to have great pleasure in reminding the hon. Member of this intervention of his, and in listening to the apologies which I am sure, with his customary grace, he will make.
As I have said, this proposal seems to me an example of adding to the benefits at an early stage of this scheme which I suggest it would be irresponsible for us to do.
Then there is the small technical point, but quite an important one, that when the time came to increase the benefits this would he a very bad way to do it. It would produce pensions ending in rather odd numbers of pennies. If and when the time came to make an improvement, far better than increasing the amount of pension bought by a brick would be to adjust the price of the brick and maintain the position that the pensions would be paid ending in sixpences. This is one of the technical difficulties into which one is liable to be drawn.
The hon. Member for Motherwell (Mr. Lawson) asked whether a man of 18 would get value for money. I saw that he had in his hand a document which, at the request of his hon. Friends, I made available to the Standing Committee. I made it clear in Standing Committee—indeed, the hon. Member for Coventry, East (Mr. Crossman) took me to task for doing so—that in the consideration of a pay-as-you-go scheme actuarial calculations of this kind were largely irrelevant, and that is why they were not immediately available, but that it was the wish of the Government not to deprive the Committee of any information which the Committee wanted if it could be obtained without unreasonable difficulty. Therefore, although, in my view, the value of this in consideration of the scheme is small, as others took a different view my duty was to make it available.
The short answer is this. This scheme, even on the actuarial calculations and assumptions of hon. Members opposite, gives good value to everybody at the £9 a week level; for all except the very youngest on the £12 a week level; and all over 30 at the £15 a week level. All those assumptions 722 which show that the scheme is weighted in favour of the lower paid and of the older are themselves dependent, if anybody is to get less than value for money, on the assumption which my hon. Friend the Joint Parliamentary Secretary referred to earlier, that there will be no change in the flat rate over the next forty years. Therefore, with respect to hon. Members opposite, I do not intend to spend any more time on this aspect of the matter which I think is not of major importance; I have simply dealt with it because I was asked a question, and I think hon. Members will agree that I generally try to answer these questions.
Let us return to the main point of the Amendment. I do not think that at this stage of the scheme we ought to fall into the temptation of increasing the proposed benefits. It may be that when we have some experience of the scheme, if the assumptions on which the contributions are calculated turn out to be cautious, we could look at them again. But this is a scheme, on those assumptions, which is very narrowly balanced in its finances for, at any rate, the first twenty years, and I am sure that the responsible way to deal with the matter is to leave the benefits at the level at which they at present stand in the Bill and to put the Bill into operation on that basis. I hope, therefore, that the House will reject the Amendment.
§ 8.0 p.m.
§ Mr. Lawson
The Minister laid some emphasis on our concern with future generations and said that we ought not to place a heavy burden on them. He reminded us that we had recently received a statement from those very responsible bodies, the actuaries of Scotland and of England and Wales, which had stressed the burden that the pensions placed upon present and future generations, and uttered dire warnings about the dangers of adopting the Labour Party scheme and even the right hon. Gentleman's scheme, though clearly, in the opinion of the actuaries, the right hon. Gentleman's scheme is very much better than the scheme pro-pounded by the Labour Party.
The point made by the actuaries is that the State scheme is building up a burden in respect of pensions which future generations will have to meet. The right hon. Gentleman makes the 723 same point, and he warns the House that we must be careful and give thought to the position of future generations. Neither the actuaries nor the right hon. Gentleman mention the fact that there are building up vast debts in the future in the form of private superannuation schemes. Huge sums will be paid out on the basis of those private superannuation schemes which must be paid for by future generations, just as the State scheme must be paid for by future generations.
Although they tell us that they are non-political, the actuaries conveniently ignore the fact that there is building up this huge debt in the future. I would say that, if there is a debt in the State scheme, there is certainly a debt in the private superannuation schemes. Let us take both into account when we think in terms of the burden that we are placing on future generations.
As regards payment, the right hon. Gentleman suggests that everybody is getting a bargain out of the proposed scheme. He mentioned that I had in my hand a statement which he himself, after very great pressure from my right hon. and hon. Friends, issued to the Committee. We said, when we were discussing this matter in Committee, that we had no actuarial statement at all and that we were talking in the air. We pressed very strongly for an actuarial table to be prepared which would give us some idea of what the costs were in relation to the benefits which were to be paid. Out of this statement some very interesting facts have emerged.
For example, we have the reason for the minimum payment which is to be made under the Bill in respect of those in the scheme where the income is £9 a week or less, that is to say, excluding the Health Service contribution and other extraneous parts and dealing only with the pension contribution. It amounts in this case to a total contribution of 5s. 9½d. a side—5s. 9½d. for employer and 5s. 9½d. for employee—making a contribution of 11s. 7d. Actually, the actuarial cost of the pension to be derived from this for a man of 18 years of age entering the scheme initially—and this is the basis on which all these things have been calculated in the past—is 13s. 6d. That is the Government's own figure.
724 Thus, we have 11s. 7d. as the minimum contribution to be paid, plus 1s. 7d., which, in effect, represents one-seventh, which is the old basis of calculation of the Treasury or Exchequer grant. We have the actuarial cost of the present pension, which is 13s. 6d., that is, 11s. 7d. to be paid by the employer and employee, plus one-seventh coming from the Government.
With the table which the Minister was so good as to provide, after a very great deal of pressure, we are able to calculate the cost of the graduated part of the pension as well as many other things. I will confine myself to the cost of the basic pension for a young man of 18 years of age, plus the cost for that young man of the full graduated pension, that is to say, assuming that this young man starts out at the age of 18 earning from that time £15 a week.
§ Sir S. Summers
If the hon. Gentleman is able to trace this mythical person, will he kindly give us the benefit of knowing what is the occupation where one can earn £15 a week at 18?
§ Mr. Lawson
I am granting certain things to the Government. Will the hon. Gentleman grant me that this young man might conceivably come to earn more than £15 a week? We are assuming that he is paying on the full sum——
§ Mr. Lawson
—of £15. He will still be paying proportionately, according to his earnings, the excess about which I am speaking. If the hon. Member for Aylesbury (Sir S. Summers) wants me to take £12 as his earnings, I can still show the excess he is paying, but, on the basis of the £15, which is recognised by all as the figure on which these calculations were made, we arrive at the conclusion that his basic pension in terms of the Government's own actuarial calculations for a man of 18 is worth 13s. 6d., and the actuarial cost of his graduated pension will be worth 4s. 4d. This figure has been mentioned already by my hon. Friend the Member for Islington, North (Mr. Reynolds). It is derived from the Government's own tables.
Thus, on top of 13s. 6d., if we add the full 4s. 4d., we have the actual figure 725 which would be paid actuarially to cover a pension for that young man entering the scheme at 18. He pays 5s. 10d. in excess of the actuarial cost of his basic pension plus his graduated pension. I know it may be that a young man would not be earning £15 a week but if, for example, he is earning £12 a week, he would start out by paying, on the basis of the Government's own calculations, 2s. 10d. more per week than he ought to be paying actuarially.
We must remember that this is only the beginning of the scheme. In each quinquennial period, the costs will rise. If we take it that he is paying for his graduated pension not on the basis of 4¼ per cent. but on the basis of 5 per cent. —and he will be paying more than this—he will be paying 7s. 8d. at £15 a week in excess of the actuarial cost of his basic and graduated pension. The hon. Lady the Joint Parliamentary Secretary talked about not making people pay more today than they ought to be paying. Here is an example of how the youngster will he burdened from the start of his working life.
We have heard a great deal about the emerging cost of pensions. The cost and the emerging deficit on pensions has been emerging ever since the Government took office, but the deficit has, I think, scarcely emerged clearly yet.
§ Only in 1958, I think, was there a deficit. The Government have been taking care to see that the deficit did not emerge by increasing the contribution all the time in excess of the increase in benefits. As we know, while the benefit has gone up by two-thirds during the life of this Government, the contribution has gone up by 95 per cent. We have here a still greater addition in the contribution, which is to fall grievously heavily on the youngster starting out in his working life. He is being made to carry the burden, a burden which we as taxpayers have accepted in the past.
§ The Government are getting out of the obligation by very heavily and disproportionately passing it on particularly to the shoulders of the youngsters. They think that he should be paying much more at this stage than his pension is worth. It is clearly a fraudulent swindle. I have given up hoping that the Minister will make any concession whatever to this side of the House, but I certainly hope that the people of the country will appreciate what is being handed to them as a so-called superannuation scheme.
§ Question put, That "sixpence" stand part of the Bill:—
§ The House divided: Ayes 208, Noes 173.729
|Division No. 119.]||AYES||[8.10 p.m.|
|Agnew, Sir Peter||Burden, F. F. A.||Cough, C. F. H.|
|Aitken, W. T.||Campbell, Sir David||Graham, Sir Fergus|
|Allan, R. A. (Paddington, S.)||Chichester-Clark, R.||Grant, Rt. Hon. W. (Woodside)|
|Amery, Julian (Preston, N.)||Cole, Norman||Grant-Ferris, Wg. Cdr. R(Nantwich)|
|Amory, Rt. Hn. Heathcoat (Tiverton)||Cooke, Robert||Gresham Cooke, R.|
|Arbuthnot, John||Cooper-Key, E. M.||Grimond, J.|
|Armstrong, C. W.||Cordeaux, Lt.-Col. J. K.||Grimston, Hon. John (St. Albans)|
|Ashton, H.||Corfield, F. V.||Grimston, Sir Robert (Westbury)|
|Atkins. H. E.||Craddock, Beresford (Spelthorne)||Gurden, Harold|
|Balniel, Lord||Crosthwaite-Eyre, Col. O. E.||Hall, John (Wycombe)|
|Barber, Anthony||Crowder, Sir John (Finchley)||Harris, Reader (Heston)|
|Barlow, Sir John||Cunningham, Knox||Harrison, Col. J. H. (Eye)|
|Barter, John||Currie, G. B. H.||Harvey, Sir Arthur Vere (Macclesf'd)|
|Batsford, Brian||Dance, J. C. G.||Harvey, John (Walthamstow, E.)|
|Baxter, Sir Beverley||Deedes, W. F.||Hay, John|
|Bell, Philip (Bolton, E.)||de Ferranti, Basil||Heald, Rt. Hon. Sir Lionel|
|Bell, Ronald (Bucks, S.)||Dodds-Parker, A. D.||Heath, Rt. Hon. E. R. G.|
|Bennett, F. M. (Torquay)||Donaldson, Cmdr, C. E. McA.||Henderson-Stewart, Sir James|
|Bidgood, J. C.||Doughty, C. J. A.||Hesketh, R. F.|
|Biggs-Davison, J. A.||du Cann, E. D. L,||Hicks-Beach, Maj. W. W.|
|Bingham, R. M.||Emmet, Hon. Mrs. Evelyn||Hill, Rt. Hon. Charles (tutor.)|
|Bishop, F. P.||Errington, Sir Eric||Hill, Mrs. E. (Wythenshawe)|
|Body, Ft. F.||Farey-Jones, F. W.||Hinchingbrooke, Viscount|
|Bossom, Sir Alfred||Fell, A.||Hirst, Geoffrey|
|Bowen, E. R. (Cardigan)||Fisher, Nigel||Holland-Martin, c. J.|
|Boyd-Carpenter, Rt. Hon. J. A.||Fletcher-Cooke, C.||Hope, Lord John|
|Brewis, John||Freeth, Denzil||Hornby, R. P.|
|Bromley-Davenport, Lt.-Col. W. H.||Gammans, Lady||Hornsby-Smith, Miss M. P.|
|Brooman-White, R. C.||Garner-Evans, E. H.||Horobin, Sir Ian|
|Browne, J. Nixon (Craigton)||George, J. C. (Pollock)||Howard, John (Test)|
|Bryan, P.||Gibson-Watt, D.||Hughes-Young, M. H. C.|
|Bullus, Wing Commander E. E.||Glover, D.||Hutchison Michael Clark (E'b'gh, S.)|
|Hylton-Foster, Rt. Hon. Sir Harry||Marples, Rt. Hon. A. E.||Shepherd, William|
|Iremonger, T. L.||Marshall, Douglas||Simon, J. E. S. (Middlesbrough, W.)|
|Irvine, Bryant Godman (Rye)||Mathew, R.||Smithers, Peter (Winchester)|
|Jenkins, Robert (Dulwich)||Maudling, Rt. Hon. R.||Smyth, Brig. Sir John (Norwood)|
|Jennings, J. C. (Burton)||Mawby, R. L.||Speir, R. M.|
|Jennings, Sir Roland (Hallam)||Maydon, Lt.-Comdr. S. L. C.||Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)|
|Johnson, Dr. Donald (Carlisle)||Milligan, Rt. Hon. W. R.||Stanley, Capt. Hon. Richard|
|Johnson, Eric (Blackley)||Molson, Rt. Hon. Hugh||Steward, Harold (Stockport, S.)|
|Kerby, Capt. H. B.||Morrison, John (Salisbury)||Stoddart-Scott, Col. Sir Malcolm|
|Kerr, Sir Hamilton||Nairn, D. L. S.||Storey, S.|
|Kimball, M.||Neave, Airey||Studholme, Sir Henry|
|Kirk, P. M.||Nicholson, Sir Godfrey (Farnham)||Summers, Sir Spencer|
|Lambton, Viscount||Nicolson, N. (B'n'm'th, E. & Chr'ch)||Taylor, Sir Charles (Eastbourne)|
|Lancaster, Col. C. G.||Noble, Michael (Argyll)||Teeling, W.|
|Leavey, J. A.||Oakshott, H. D.||Thomas, Leslie (Canterbury)|
|Leburn, W. G.||O'Neill, Hn. Phelim(Co. Antrim, N.)||Thomas, P. J. M. (Conway)|
|Legge-Bourke, Maj. E. A. H.||Osborne, C.||Thompson, Kenneth (Walton)|
|Legh, Hon. Peter (Petersfield)||Page, R. G.||Thornton-Kemsley, Sir Colin|
|Lindsay, Hon. James (Devon, N.)||Pannell, N. A. (Kirkdale)||Tiley, A. (Bradford, W.)|
|Lindsay, Martin (Solihull)||Partridge, E.||Turton, Rt. Hon. R. H.|
|Linstead, Sir H. N.||Pike, Miss Mervyn||Vane, W. M. F.|
|Lloyd, Maj. Sir Guy (Renfrew, E.)||Pilkington, Capt. R. A.||Vickers, Miss Joan|
|Loveys, Walter H.||Pitt, Miss E. M.||Vosper, Rt. Hon. D. F.|
|Lucas, Sir Jocelyn (Portsmouth, S.)||Powell, J. Enoch||Wade, D. W.|
|Lucas, P. B. (Brentford & Chiswick)||Price, David (Eastleigh)||Wakefield, Edward (Derbyshire, W.)|
|Lucas-Tooth, Sir Hugh||Price, Henry (Lewisham, W.)||Wakefield, Sir Waved (St. M'lebone)|
|McAdden, S. J.||Profumo, J. D.||Wall, Patrick|
|Macdonald, Sir Peter||Rawlinson, Peter||Ward, Rt. Hon. G. R. (Worcester)|
|Maclean, Sir Fitzroy (Lancaster)||Redmayne, M.||Ward, Dame Irene (Tynemouth)|
|McLean, Neil (Inverness)||Rees-Davies, W. R.||Webbe, Sir H.|
|Macleod, Rt. Hn. Iain (Enfield, W.)||Renton, D. L. M.||Webster, David|
|McMaster, Stanley||Ridsdale, J. E.||Williams, Paul (Sunderland, S.)|
|Macpherson, Niall (Dumfries)||Rippon, A. G. F.||Williams, R. Dudley (Exeter)|
|Maitland, Cdr. J. F. W. (Horncastle)||Robertson, Sir David||Wills, Sir Gerald (Bridgwater)|
|Maitland, Hon. Patrick (Lanark)||Roper, Sir Harold||Wilson, Geoffrey (Truro)|
|Manningham-Buller, Rt. Hn. Sir R.||Russell, R. S.||Woollam, John Victor|
|Markham, Major Sir Frank||Scott-Miller, Cmdr. R.|
|Marlowe, A. A. H.||Sharples, R. C.||TELLERS FOR THE AYES:|
|Mr. Finlay and Mr. Whitelaw|
|Ainsley, J. W.||Fraser, Thomas (Hamilton)||McCann, J.|
|Allaun, Frank (Salford, E.)||George, Lady Megan Lloyd(Car'then)||MacColl, J. E.|
|Allen. Arthur (Bosworth)||Gibson, C. W.||McKay, John (Wallsend)|
|Awbery, S. S.||Greenwood, Anthony||McLeavy, Frank|
|Bacon, Miss Alice||Grenfell, Rt. Hon. D. R.||MacPherson, Malcolm (Stirling)|
|Bence, C. R. (Dunbartonshire, E.)||Grey, C. F.||Mahon, Simon|
|Benn, Hn. Wedgwood (Bristol, S.E.)||Griffiths, David (Rother Valley)||Mann, Mrs. Jean|
|Blackburn, F.||Griffiths, Rt. Hon. James (Llanelly)||Marquand, Rt. Hon. H. A.|
|Blenkinsop, A.||Griffiths, William (Exchange)||Mayhew, C. P.|
|Blyton, W. R.||Hale, Leslie||Messer, Sir F.|
|Boardman, H.||Hamilton, W. W.||Mikardo, Ian|
|Bowden, H. W. (Leicester, S. W.)||Hannan, W.||Mitchison, G. R.|
|Bowles, F. G.||Hastings, S.||Moody, A. S.|
|Boyd, T. C.||Hayman, F. H.||Morris, Percy (Swansea, W.)|
|Braddock, Mrs. Elizabeth||Henderson, Rt. Hn. A. (Rwly Regis)||Morrison, Rt. Hn. Herbert (Lewis'm, S.)|
|Brockway, A. F.||Herbison, Miss M.||Mort, D. L.|
|Brown, Thomas (Ince)||Hewitson, Capt. M.||Moss, R.|
|Butler, Herbert (Hackney, C.)||Hobson, C. R. (Keighley)||Moyle, A.|
|Butler, Mrs. Joyce (Wood Green)||Holman, P.||Neal, Harold (Bolsover)|
|Callaghan, L. J.||Houghton, Douglas||Noel-Baker, Francis (Swindon)|
|Carmichael, J.||Howell, Denis (All Saints)||Noel-Baker, Rt. Hon. P. (Derby, S.)|
|Castle, Mrs. B. A.||Hoy, J. H.||Oram, A. E.|
|Champion, A. J.||Hughes, Cledwyn (Anglesey)||Oswald, T.|
|Chapman, W. D.||Hughes, Emrys (S. Ayrshire)||Owen, W. J.|
|Coldrick, W.||Hughes, Hector (Aberdeen, N.)||Padley, W. E.|
|Collick, P. H. (Birkenhead)||Hunter, A. E.||Paget, R. T.|
|Corbet, Mrs. Freda||Irvine, A. J. (Edge Hill)||Palmer, A. M. F.|
|Crossman, R. H. S.||Irving, Sydney (Dartford)||Pargiter, G. A.|
|Cullen, Mrs. A.||Isaacs, Rt. Hon. G. A.||Parker, J.|
|Darling, George (Hillsborough)||Jay, Rt. Hon. D. P. T.||Parkin, B. T.|
|Davies, Harold (Leek)||Jenkins, Roy (Stechford)||Paton, John|
|Davies, Stephen (Merthyr)||Johnson, James (Rugby)||Pearson, A.|
|Deer, G.||Jones, Elwyn (W. Ham. S.)||Plummer, Sir Leslie|
|Diamond, John||Kenyon c.||Popplewell, E.|
|Dodds, N. N.||Key, Rt. Hon. C. W.||Price, Philips (Gloucestershire, W.)|
|Ede, Rt. Hon. J. C.||King, Dr. H. M.||Probert, A. R.|
|Edelman, M.||Lawson, G. M.||Pursey, Cmdr. H.|
|Edwards, Rt. Hon. Ness (Caerphilly)||Lee, Frederick (Newton)||Randall, H. E.|
|Edwards, Robert (Bilston)||Lee, Miss Jennie (Cannock)||Rankin, John|
|Evans, Albert (Islington, S.W.)||Lever, Harold (Cheetham)||Redhead, E. C.|
|Finch, H. J. (Bedwellty)||Lever, Leslie (Ardwick)||Reeves, J.|
|Filch, A. E. (Wigan)||Lindgren, G. S.||Reid, William|
|Fletcher, Eric||Logan, D. G.||Roberts, Albert (Normanton)|
|Foot, D. M.||McAilster, Mrs. Mary||Roberts, Goronwy (Caernarvon)|
|Robinson, Kenneth (St. Pancras, N.)||Strachey, Rt. Hon. J.||White, Mrs. Eirene (E. Flint)|
|Rogers, George (Kensington, N.)||Summerskill, Rt. Hon. E.||Wilkins, W. A.|
|Royle, C.||Swingler, S. T.||Willey, Frederick|
|Silverman, Julius (Aston)||Sylvester, G. O.||Williams, David (Neath)|
|8ilverman, Sydney (Nelson)||Taylor, Bernard (Mansfield)||Williams, Rev. Llywelyn (Ab'tillery)|
|Slater, Mrs. H. (Stoke, N.)||Taylor, John (West Lothian)||Williams, Rt. Hon. T. (Don Valley)|
|Sinter, J. (Sedgefield)||Thomson, George (Dundee, E.)||Williams, W. R. (Openshaw)|
|Smith, Ellis (Stoke, S.)||Thornton, E.||Willis, Eustace (Edinburgh, E.)|
|Snow, J. W.||Tomney, F.||Woof, R. E.|
|Sorensen, R. W.||Viant, S. P.||Yates, V. (Ladywood)|
|Soskice, Rt. Hon. Sir Frank||Warbey, W. N.||Zilliacus, K.|
|Sparks, J. A.||Watkins, T. E.|
|Spriggs, Leslie||Weitzman, D.||TELLERS FOR THE NOES:|
|Stewart, Michael (Fulham)||Wells, Percy (Faversham)||Mr. J. T. Price and Mr. Simmons.|
|Stones, W, (Consett)||Wheeldon, W. E.|
§ Miss Margaret Herbison (Lanarkshire, North)
On a point of order. Should it not be the Amendment in page 7, line 6, to leave out from "rate" to the second "and" in line 9 and to insert:specified in paragraph (b) (iii) of subsection (1) of section one of this Act, the units shall he such amounts (being the same for women as for men and not exceeding the amount of seven pounds ten shillings) as may be specified by order of the Minister
§ Miss Herbison
Why not, Mr. Deputy-Speaker? Is there not a possibility of our being given the reason? It is the only Amendment we have down affecting women who are covered by the Bill.
§ Mr. Lawson
I must confess that I was rather surprised at being called now, Mr. Deputy-Speaker.
I beg to move, in page 7, line 29, to leave out "half" and to insert "quarter".
The subsection as it stands means that when a person reaches retiring age and has been paying graduated contributions those graduated contributions will be assessed into the number of units which he will have paid by that time. Remember, a unit means a unit of £15; £7 10s. a side from the employer and the employee. There will be an assessment as to the number of units which his total graduated contributions add up to. Where there are odd parts, fractions, those fractions may be added together to make a single unit. If there is something left over, the question whether it will be treated as a unit will depend on its 730 amount. If it amounts to half a unit or more than a half it will be treated as a single unit, and there will be paid in respect of that unit when that person has retired a sum of 6d. a week.
The Amendment proposes to delete the word "half" and to insert "quarter", so that when the units are calculated and it is found that a fraction is left over amounting to one-quarter or more it will be treated as a complete unit, and 6d. a week pension will be paid on it. There are excellent reasons for proposing this. As the Bill stands, if the odd amount comes to anything less than £7 10s., that is, assuming a unit to be £15, that is lost to the contributor, and the contributor is already paying an excessive amount. It seems to us, therefore, that the margin should be half of £7 10s. and that the unit should be treated accordingly. When the unit comes to cost not £15 but rather more than £18 10s., as it will in time, half of that will be £9 5s. but as the Bill stands the contributor might have paid £9 2s. 6d. and that would be lost to him.
It seems to us, therefore, that the least that can be done in respect of this part of the Bill is to give the contributor the benefit where there is an odd sum over reaching as much as one-quarter of the total value of the unit, and give him 6d. pension in respect of it, as a result of its being treated as a complete unit.
When, in the administration of the scheme, we come to the odd fractions of bricks which will arise, according to the calculations which were explained to us quite correctly a moment ago from the benches opposite, we are faced with finding a way to deal with these fractions. To most of us two alternatives present themselves. The 731 first is that the odd small amounts should be refunded. The second is that some form of rounding-up should be adopted. On reflection, I am sure that most hon. Members will agree that rounding-up is usually the better way of dealing with these small fractions rather than an accurate calculation and a refund after a period of perhaps some months after the man has ceased active employment.
Then there arises the question of the scale on which the rounding-up should be worked. The commonsense way would surely seem to be by half, because so many times in this world one treats more than half as a whole, and forgets about the small fraction that is less than half. When one thinks of the unit in which it is convenient to pay a pension, 6d. seems as small a convenient sum as one could probably consider in this connection.
The hard-case picture is not justified, nor is it the whole story, because the pension as a whole is a good bargain. There is an average example in the White Paper and it was a surprise to many people, both inside and outside the House, to see what a very large fraction of that retirement pension was not covered by the contributions of the man and wife concerned. It is of the essence of a scheme like this that at the end of the day different people may have paid slightly more or less for their retirement pensions. It occurs in the main scheme the whole time. Therefore, there is nothing unusual in the fact that there is this small fractional difference that occurs in rounding-up.
We must also look at the other side of the coin. Whereas there will be some who will have a fraction less there will be an equal number who will have a fraction more. On reflection, I think that the hon. Member for Motherwell (Mr. Lawson) will agree that to take the basis of the rounding-up at the half instead of at the quarter is the better way. The quarter would seem to me an unfair place to draw the line. Everybody can see the reasonableness of the halfway house, and it would seem appropriate in this case as it is so often in everyday life.
§ Amendment negatived.732
§ Mr. Lawson
There is a further Amendment, in page 7, line 29, at the end to insert:Where the fraction is less than sufficient to be treated as a whole unit the amount represented by the fraction shall be returned to the retired person in the form of a single payment within six weeks of his receiving his first graduated benefit.
§ Mr. Lawson
I must not question Mr. Speaker's Ruling, but I confess that it baffles me why the one was selected and this one was not selected.
§ 8.30 p.m.
§ Mr. Boyd-Carpenter
I beg to move, in page 8, line 20, at the end to insert:(8) Notwithstanding that the provisions of the principal Act reducing the weekly rate of benefit in respect of the beneficiary's earnings are applied by this Act to graduated retirement benefit, the power of the Minister under section two of the National Insurance Act. 1956, to make regulations amending those provisions shall include power to provide that they shall not reduce the amounts payable as graduated retirement benefit, but that those amounts shall be payable as if it were a separate benefit not subject to the said provisions.The Amendment is tabled to carry out an undertaking which I gave in Committee. On an Amendment moved by an hon. Member opposite, which was fully discussed and attracted a good deal of sympathy, we discussed the application of the earnings rule to the graduated pensions payable under the Bill. On that Amendment I pointed out that to exclude the graduated pension from the earnings rule would result, in the early stages of the scheme, in a very small proportionate part of the total combined pension being exempted from the rule while all the rest was subject to it.
That would be plainly unsatisfactory, and I suggested to the Committee that the best way of dealing with the matter was to give the Minister of the day power by Statutory Instrument to exclude the graduated pension in whole or in part from the operation of the earnings rule. I pointed out, too, that this would have the further advantage of being analogous to the powers we have already under the 1956 Act to do the same with the earnings rule regarding the flat-rate pension, and that if both these matters could be dealt 733 with by Statutory Instrument it might he convenient to be able to deal with them at some future date at the same time, and having a combined effect on the pension.
It is proposed that the procedure should be by Statutory Instrument, subject to the affirmative Resolution procedure. Upstairs, that solution was approved on both sides of the Committee, and in implementation of the undertaking I have tabled this Amendment.
§ Amendment agreed to.