§ Mr. John McKay (Wallsend)
I beg to move, in page 3, line 17, to leave out "increased from £15 to £18" and to insert "abolished".
With this Amendment we can discuss the following Amendment:
In page 3, line 18, leave out from "accordingly" to end of subsection and insertthe words 'up to six pounds' shall be omitted from that sub-paragraph".
§ Mr. McKay
I think it necessary to explain shortly what this Amendment actually means. Reading Amendments on the Notice Paper and parts of the Bill to which they refer may not indicate to the ordinary man the actual position. This Amendment has been put down after being guided by skilled draftsmen. The 324 position before the Bill was introduced will remain as concerns the £6 payment of graded pension. If the Amendment were carried, lower paid men on £9 to £15 a week would still pay graded contribution at £6. The change is that after £15 all the incomes would have to pay 4¼ per cent. graded benefit contribution.
On the face of it this may seem a very large order, but it appears to be logical. We might not combine administrative ability and logic to get support for the ideas put forward. During the last few years the actions of the Government have definitely indicated that they are governed by class distinction. One might wonder how to connect that with this Bill. I have to go back a couple of years, to the time when it was decided to give £83 million in relief to the richest section of the people. That was pure class legislation. In this Bill and in the method adopted recently, which is now supported to a great extent, there is class legislation. 325 There is a desire on the part of the Government to get more finance into the insurance department. They have decided by a very skilful method when they introduced the graduated pension, that it had to be contributed to by a section of the people, those with £9 or £15 a week.
That was not purely a case of class legislation, because those on bigger incomes had to pay the same amount as those with £15 a week. That principle has been added to, but there is still a limit. The graded contributions are largely financing the Insurance Fund when we limit the contribution to a particular incomes section and give that amount of money towards apparently graded pensions, although it is admitted that the money is not gathered in a divided way. What is being applied now will apply for many years to come. The great amount of money contributed for graded pensions is going into the general fund of National Insurance and financing general benefits.
In this Bill the Government are departing front the generally accepted position which has obtained for generations. That position has been that for whatever the country thought advisable—whether the building of more schools or hospitals or spending money on munitions and destructive machines—the principle has always applied that for those national needs we cause the people to contribute on a basic principle of ability to pay. That is a principle to which we have adhered and are likely to adhere for the main purposes of the nation. We cannot finance the obtaining of the things we need unless we make the whole nation pay. That has been the position in the past, but now the Government are introducing almost the opposite principle into the National Insurance Scheme.
The lowest income groups in the Scheme are having to pay the greatest percentage of earnings. That cannot be denied. Take the case of the man on £7 a week. Under the Bill he will be paying 6 per cent. of his gross income. That seems absolutely ridiculous because, as everyone recognises, out of that low wage any amount of household and family liabilities have to be met. Under a sensible system of contribution to national aims and purposes that man would be practically absolved from taxation. That continues 326 throughout the whole National Insurance Scheme at the moment. Taking the graded scheme with the rest of the Insurance Scheme, we find that the man with £15 a week is paying towards his graded pension at the rate of 4.4 per cent. of his income.
On the same income he pays 10 per cent. in tax. We have a great National Insurance scheme which directly affects everyone. It is a great national scheme of importance to the people. The Government are now reversing the principle of contribution to it according to ability. Nobody can reasonably argue that this is a special part of the nation's activities which should be looked at differently from any other great national expense or object. For nearly every national purpose citizens are made to pay on the principle of ability. All a man's family circumstances are taken into consideration before he is taxed.
Under the National Insurance Scheme the reverse is the case. A man earning £18 a week pays 4.4 per cent. to the scheme and 16 per cent. in taxation. A man earning £50 a week pays 1.5 per cent. under the insurance scheme and 24 per cent. in taxation. There is no question but that this is class legislation. A tremendous amount of the money paid under the graduated scheme—I shall not be far out if I say nine-tenths of it, or perhaps nineteen-twentieths of it—goes into the ordinary fund of National Insurance and meets all the liabilities connected with that.
Instead of causing everybody to pay according to their means to this great national institution which looks after the most unfortunate section of the people, who need the greatest possible benefit that we can give them, the Government have reversed the system of taxation on the people and are making the people in the lowest income group pay the greatest percentage of income. This is a departure from the generally accepted position. With a national aim which causes great expense to the nation, the principle of Income Tax has generally been adopted. It is wholly wrong that in this great scheme for the benefit of the people, which is as costly as practically any other purpose we have. the method of payment should be changed so that the rich pay a much smaller percentage and the people in the lowest income group pay the greatest percentage.
327 The question is whether the system should be changed and, if so, what change should be made. If the Income Tax system were adopted, there would be a great increase in income. To the extent that the income was substantially increased the country would be in a better position to meet the liabilities. Greater benefits could be given under the scheme. The question is whether it would be wise in the circumstances to adopt this method.
A man earning £12 a week gets 67s. 6d. benefit; that is 28 per cent. of his wage. A woman earning £6 a week gets 67s. 6d. benefit, or 50 per cent. of her wage. This seems funny until one goes into the position more deeply. When considering how National Insurance should be financed one is bound to take note of these things. It is generally accepted that the wages of women are just about half the wages of men. When benefits are being given, women receive the same sum as men who receive about twice the wage. There is a big difference in relative benefits. It all works particularly to the benefit of single women.
If the 4¼ per cent. were applied to all income above £15 a week, the Government could pay almost £4 10s. benefit under the insurance scheme, according to the best figures I have been able to obtain. This would be so if the contributions were paid on the same basis as that on which Income Tax is calculated.
In recent years the whole spirit of the Government has been in reality not to meet liabilities by a reasonable and recognised principle of payment according to ability. The Government are now introducing into National Insurance a system of class legislation. The more they keep the contribution of the higher income group down the greater the extent to which the ordinary wage earner finances the National Insurance Scheme. It is about time we began to analyse this whole matter to see if the method of contributions to the National Insurance Scheme is justified as it is operated today. I believe that it is not. Hon. Members who represent working class interests must, therefore, insist on the Government placing a more equal liability on all sections of the working public, taking the higher and lower incomes into 328 consideration. I have explained why the present system does not operate fairly to the lower income groups and, for that reason, it is time we changed it.
§ Mr. N. Macpherson
I am sure the hon. Member for Wallsend (Mr. McKay) would agree that his main purpose in tabling the Amendment was not so much his hope that it would be accepted but to give him an opportunity of suggesting to the Committee another way by which the benefits could be paid for. I am sure he appreciates that the Amendment would hardly stand by itself. For example, it would mean that, with contracting out remaining as it is, everyone would be contracted out automatically if they earned more than £18 a week. Thus acceptance of his Amendment would not bring to the Fund the great profit which he expects and his suggestion cannot stand by itself.
Moreover, for contracting out the equivalent pension benefit is fixed at the maximum of the range. So the payments in lieu would be involved; because if an employee who has been contracted out leaves his contracted out employment, such a payment becomes due. If we were to accept the Amendment we would have to make many other changes as well, and I do not think that that would be possible in the time available.
I am not suggesting that it would be right to accept the Amendment because what the hon. Member is proposing is not in line with our conception of the scheme. The hon. Member is right when he referred to the position under a fiat-rate scheme with flat-rate contributions. Under such a scheme the flat-rate contributions in relation to the lower-paid workers must be proportionately much higher than they are in relation to the higher-paid. That goes without saying. What we tried to do in 1959 was to ease the burden on the lowest-paid contributors by fixing a lower flat-rate contribution; and then to graft on the graduated pensions scheme and to enable those who were contributing towards the scheme, or contracted out, to help the National Insurance Fund as a whole and so relieve the burden on the lowest-paid workers.
In addition, the change enabled us to concentrate the Exchequer contribution notionally, at any rate, on assisting the lowest-paid workers. If we were to extend the graduated scheme, as the hon.
329 Member suggests, beyond £18 we would not only be extending the contributions but also the benefits. We would be doing both; that would be inevitable. Thus the man earning £5,000 a year would pay more than £192 a year and in twenty years' time would have earned a pension of about £13 a week. Presumably in forty years he would have earned a pension of £26 a week. I do not know if the hon. Member had worked out those figures or had these results in mind. I am pointing out that whatever may be thought of the method he is suggesting of raising money for the National Insurance Fund, his Amendment would not be practical if taken by itself because it would involve many other changes; and therefore we must resist it.
§ 8.15 p.m.
§ Mr. McKay
The Minister is quite right when he says that the graduated pensioners are helping the general funds of the National Insurance Fund. The Government are, therefore, able to keep the contributions of the lower-paid workers lower than they would otherwise be. I also accept the Minister's argument about a man earning £5,000 a year. But it must be remembered that such a man is paying Income Tax and that, of course, is the general method of meeting our national liabilities. He is probably paying five or even ten times more Income Tax than a man earning a much lesser wage.
This would seem an argument for agreeing that it would not be a great obstacle for a £5,000 a year man to pay his National Insurance contributions in the way I have described. After all, because of his higher income, is he not paying a larger share towards the ordinary needs of the country than is the lower paid worker? I am merely arguing that the same principle should apply for National Insurance purposes. The lower-paid worker is paying 6 per cent. for one pension, as I have shown, while the higher-paid man can receive not one pension but two. All I have been asking is that the Minister should seriously consider a new method of financing the scheme so that it will be more equitable, socially and in every other way, than it is at present.
§ Mr. Lawson
It would be true to say that most of my hon. Friends are in favour of the idea in the Amendment. 330 The idea simply is that those who are the best off should make the largest contribution towards the National Insurance Scheme. I do not think that any of my hon. Friends would quarrel with that conception. The difficulty with my hon. Friend's Amendment is that he has apparently forgotten that the graduated pension scheme is designed to permit contracting out, not by the individual but by employers. As he knows, it is very much more to the advantage of the higher income group—and the higher their income the more the advantage—that they should be contracted out of the Scheme.
If we were to introduce the position whereby there was no ceiling, and at the same time leave the position whereby they could be contracted out, as at present, they would all escape. To achieve the purposes my hon. Friend has in mind there would have to be a means whereby we could deal with the general contracting out position. We know that it is designed to benefit the higher income groups. I will not go into all the details of this now, for we did that in Committee on the 1959 Measure. The point is that if the ceiling were abolished, it would simply mean that the escape route would be more widely used and although I would like to support my hon. Friend's idea I regret that, in this case, it would not work.
§ Amendment negatived.
§ The Temporary Chairman (Mr. Malcolm MacPherson)
I undetrstand that the hon. Member for Motherwell (Mr. Lawson) wishes to move the Amendment in page 3, line 19, and to discuss with it the other Amendment in tine 19, leave out "nine" and insert "eight".
§ Mr. Lawson
That suits the purpose quite well, Mr. MacPherson.
I beg to move, in page 3, line 19, at the end to insert:(2) The lower limit on the amount of weekly pay taken into account under section 1 (1) (b)331(iii) of the National Insurance Act 1959 (which fixes the graduated contributions payable by employees and employers) shall be increased from nine pounds to ten pounds.Most hon. Members will be aware that the graduated pension scheme is now confined to that band of income between £9 and £15 per week, and the Clause seeks to raise the ceiling to £18. The purpose of this Amendment is to raise the floor from £9 to £10 so that one has to reach that higher income level before beginning to contribute to a graduated pension scheme. It may seem to some people that in moving such an Amendment, we on this side are seeking to deprive of a benefit those whom we normally represent. That, in fact, was the argument used by the Minister on Second Reading—that it would deprive contributors of a benefit—but that would suggest that the graduated pension scheme is good for those in it and that the benefits accruing are well worth the contributions paid.
It is that conception I challenge. My experience is that many people would be very happy to be taken out of the scheme, and I contend that the nature of the scheme is such that the lower-paid worker in particular—whom I now consider to be the man earning no more than £10 a week—gets a very bad bargain, and if I were in a position to do so I would advise that lower-paid worker that if he could pay merely the flat-rate contribution—not the flat-rate contribution paid by those contracted out but that paid just now by those earning £9 or under—and if we could bring the floor up to £10 a week, a substantial benefit would accrue to him.
Let us look at the benefits that accrue from the contributions made. We know that the scheme is based on an idea of buying "bricks". The employee pays so much, his employer doubles the money, and that contribution goes to the purchase of a brick costing £15 for a male and £18 for a female. On the basis of the purchase price, in the case of a male of £15—£7 10s. each from employee and employer—and, in the case of a female, £18—£9 a side—there eventually accrues to the person retiring at retiral age or beyond—but not if he becomes chronically sick and can never earn anything at all, it is not paid then—a benefit of 6d. per week added to the 332 flat-rate pension is respect of each brick purchased.
A sum of £15 represents 600 sixpences, and one begins to get back one's contributions only when one retires. That means that it will take a male about 114 years from the time of his retirement to recover the money he and his employer have paid on his behalf. Therefore, at the best, he must be 76½ years of age before getting back the equivalent of the money paid in—and that takes no account of a fall in purchasing power or rise in prices. The female reaches retiral at 60, and can then begin to get her 6d. for each £18, but even there it will take her about 14 years to recover the money paid over during her working life.
That shows at once that the bargain is a very bad one indeed, but no such proof is required, because we all know, and the right hon. Gentleman admitted this only a few moments ago, that a very considerable part of the contribution paid to the graduated scheme is earmarked to pay for flat-rate benefits. We know that to be the principle way in which the Government solved the problem of the old-age pensions deficit, of which we have all heard, which was increasing in a way that would almost bankrupt the nation—
§ Mr. J. Griffiths
The problem of the deficit was based upon calculations of the increase in the expectation of life and the number of children. Is there not now room for reconsideration and could the Minister not tell us whether he is reconsidering the burden of the aged on the working population in the light of the recent figures of the growth of population?
§ 8.30 p.m.
§ Mr. Lawson
But the facts as printed and based on figures supplied by the Government Actuary is that before we introduced the 1959 graduated scheme we expected a deficit of £227 million in 1966–67. Because of the introduction of the graduated pension scheme, plus various other increases and plus the change in the present graduated scheme, that is the raising of the level from £15 to £18, instead of a deficit for the year 333 1966–67 a surplus of £3 million is expected.
The deficit which we have been hearing about for years and which Ministers of Pensions always raised when questions about pensions were put to them, did not emerge. It was taken care of by raising the flat-rate contributions to a level which was actuarially above what they were worth and by introducing a graduated pension scheme. The second point therefore indicates that the graduated scheme is not a good bargain for contributors. Its main purpose was not to provide a graduated pension but to get rid of a deficit.
There is no Exchequer supplementation in respect of the graduated scheme. The Exchequer works on a complex formula. I think that it is 25 per cent. of the flat-rate contributions of the non-contracted out contributors, 25 per cent. of the contributions of contracted-out contributors if they were paying at the same rate as those who had not contracted out, plus one-third of the contributions of the self-employed. This works out at about 16 per cent. of the cost of the scheme. The Exchequer therefore has devised by this means an excellent formula which enables it all the time to keep at a level which will be very little above 16 per cent. of the cost of running the scheme.
There is also another big feature about the graudated scheme. If any scheme should be based on insurance principles it ought to be the graduated scheme, because it is not providing a benefit in this or the next year. It is providing a benefit in the future many years ahead. It is a benefit which only gradually rises in total. Therefore, if any insurance scheme at all operated by the Government should operate on the basis of building up a fund to meet a rising obligation it should be the graduated pension scheme. There is no such fund. The total income of the graduated scheme is used to meet the flat-rate deficits. As the claim on the graduated side of the scheme increases in future, what will happen will be an increase in graduated contribution. The 6d. will cost more than £15, or £18 for women. Provision is already made for it in the Act. We shall, therefore, be paying more and more money in years ahead for less and less money in return.
334 Not many people understand the scheme, but it is clearly a bad bargain and it is designed not to give graduated pension contributors anything like a bargain for their money. In this connection I submit that it would be advantageous for us to argue that certain of the lower-paid workers—and a £10 a week man must be classified as a lower-paid worker—should be taken out of the scheme.
In justifying the raising of the ceiling from £15 to £18 the Minister made a point on the first introduction of the scheme in 1958. It took a long time to make it law, for this was a very strenuously-fought Measure. When the scheme was introduced, average earnings, according to the right hon. Gentleman himself, were between £12 and £13 a week. They are now about £16 a week. The right hon. Gentleman justifies the raising of the ceiling on the ground that there are now higher average earnings.
I submit that, if that argument is sound in respect of the higher earner, it is equally sound in respect of the lower earner. If a level of £9 was considered suitable in 1958 at which to begin to tax extra—that is what it amounts to—to meet this this charge, £9 cannot be considered as suitable or fair in 1963. I have spoken of £10. The Amendment speaks of £10. Probably, it should be nearer £11 or £12 to bring it to a comparable position. If the right hon. Gentleman wishes to be fair in this respect at least, he should consider the position of the lower-paid workers.
There are very many such workers today. The hon. Member for Aylesbury (Sir S. Summers) may be ready to spring to his feet and scornfully ask which workers earn only £9 or £10 today. That is a habit of the hon. Gentleman. But I have looked at some figures. My hon. Friend the Member for Norfolk, South-West (Mr. Hilton) is here and he will substantiate or correct what I am about to say about agricultural workers. According to the Ministry of Labour Gazette, the average earnings for the year ending March, 1962, which is near enough for our purpose, of 38 per cent. of male whole-time workers in agriculture were less than £10 a week. That is a very substantial number.
Extending our consideration to females, we find that what was said by one of 335 my hon. Friends about their earnings being about half the earnings of males seems to be fairly accurate. I referred to some figures produced quite recently by the Ministry of Labour. On the basis of a sample of female full-time workers in clerical and administrative employment—they are not among the poorest paid—we find that the average for them was about £7 17s. a week. Very many people in this country earn substantially below £10 a week.
I return to the point that these earnings are very low and they ought not to be charged to pay more than the lower of the two basic flat-rate contributions. There is no justification for charging these people a surplus.
My final point is this. I plead for special categories of women to be recognised. A good deal has been said about widows today. I know of many widows whose normal weekly earnings are very substantially below £9 and, indeed, substantially below £7. I am thinking, for example, of women who work as school cleaners, whose normal weekly income is about £4 5s. or £4 10s. net. Occasionally, these women may earn more than £9 in a given week. This happens when the school is on holiday, at which time they get down to a really thorough cleaning and do a great deal of extra work. When they earn more than £9 a week, they pay the graduated contribution. It is a case not of whether her earnings average £9 over a year but of what she earns in a week.
§ Miss Herbison
Only over the weekend a councillor raised with me not only this question but the fact that over a period of eight weeks these women are doing something extra each week but are paid only on the eighth week for that extra work.
§ Mr. Lawson
That brings out the point that I am trying to make. Their earnings of over £9 in a given week have not been earned in that week. Their overtime has accrued over a number of weeks but they are paid in one week but in that one week when they are paid the £9 they have to pay a graduated contribution.
I have raised this matter with the Parliamentary Secretary and with others. I know that this is the law and that, as it stands, nothing can be done about it, but I wish to bring out the injustice of it.
§ Mr. A. V. Hilton (Norfolk, South-West)
This is a very important point, and the Minister knows that what my hon. Friend says is correct. If a person earns more than £9 a week, he pays into the graduated pension scheme. One of the methods that the Minister has used in helping to build up the fund is this. If a person is earning only just over £9 a week, obviously he can pay only 1s. or 2s. into the graduated pension fund. Suppose he has done that for one or two years. When he retires, he does not qualify for a pension, but he does not even get a refund of what he has paid in. This is snaffled by the Minister to bolster his fund.
§ Mr. Lawson
My hon. Friend is anticipating the point that I was about to make. However, I thank him for raising it because it shows that others of my hon. Friends apart from myself have been faced with this problem.
A woman such as the one I have described may have to make only one, two, three or four payments in a year. Let us suppose that she makes six payments, and that one the first £ they work out at about 10d. That means that in one year she pays about 5s. in graduated contribution. Suppose that she is a woman well advanced in years. She may be a widow, perhaps a 10s. widow, a "no-shilling widow" or she may receive the ordinary widow's pension. But suppose that five or six times a year she makes a contribution of 10d. a week, which means that in a year she contributes 5s. The cost of a sixpenny addition to her pension is £18—£9 by herself and £9 by her employer. If she pays 5s., her employer pays 5s., so that 10s. is paid towards her graduated pension. At this rate, she will have to work for about 36 years to build up the £18.
However, the scheme is not quite as bad as that. She would never work for 36 years, but—and this is exceptional—if after the "bricks" have been counted up at the end of her working life there is half left over, she is credited with the whole "brick". If there is less than half, it is wiped out. If she is able to build up on her own behalf payments to the tune of £4 10s. and if her employer pays £4 10s., she will have earned an addition of 6d. to her pension. But it will take her about 18 years to do this. How many of these women can hope to 337 build up even the price of half a brick? Very few indeed.
Virtually all of these women are making these extra payments with the knowledge that they will get nothing back from them. It may be a case only of coppers, perhaps 10d. a week, but coppers mean a lot to women who are counting their bus fares and every penny that they spend. By raising the floor from £9 to £10, we would help some of these women and help the worst of those low-paid workers. For these reasons, I move the Amendment to ease the position of the worst paid of our workers.
§ 8.45 p.m.
§ Sir Spencer Summers (Aylesbury)
I do not quite know what I have done to deserve the rebuke which the hon. Member for Motherwell (Mr. Lawson) conveyed a little earlier. It may surprise him to hear that I have considerable sympathy with the Amendment. The hon. Member alluded to the justification given by my right hon. Friend the Minister for the increase in the upper limit of the bans from £15 to £18, namely, that earnings had increased over the period by a somewhat similar amount.
The first point with which I should like my right hon. Friend to deal is this. The time which many people will take for comparing their earnings under the new system with their earnings under the old system is the beginning of the new system and the beginning of the old system, which is a period of two years and not four years as the figures usually quoted for earnings reflect.
The figures usually quoted are from £12 16s. 8d. in October, 1958, to £15 17s. 3d. in October, 1962, an increase of a fraction over £3 a week. The scheme did not come into force, however, until April, 1961, so that it is only reasonable to compare the figure then—£15 1s.—with, admittedly, not the figure at the present time, because there will, no doubt, be an increase by the time that the scheme comes into force, but to allow 5s., which is the approximate increase for each six months of the graph during the last three years, thus producing a figure of £16 2s. when the new scheme comes into force, compared with the figure of £15 1s. In other words, over a period of two years there has been an increase in average earnings of a trifle 338 over £1 a week. That shows a different picture from the more than £3 which is brought forward as justification for an increase in the ceiling of from £15 to £18.
We are dealing, however, with the lower limit of the band in which graduated contributions shall be paid. When the scheme was started, considerable emphasis was laid on the special assistance given to the under-£9 a week people by the excess contribution of the higher-paid people above what might have been otherwise expected, thus enabling the Treasury contribution to be concentrated on the lower paid people.
It was thought that £9 was the figure below which it was not reasonable to expect people to contribute to a graduated pension scheme. In passing, I should like to correct a false impression which the hon. Member for Motherwell, perhaps unwittingly, created and which is frequently given about somebody who for many years pays contribution at the £10-a-week level and calculation being made to show what a small sum follows from contributions paid over 30 years based on £10 a week.
The vast number of people do not remain for 30 years at £10 a week. They get promoted and have better jobs. The whole basis must be that people go up in the increment scale. Not everybody does, of course, but it is wrong to suppose that everybody remains permanently at the bottom of the scale.
§ Mr. Loughlin
I know that the hon. Member would not want to put something on record which is not true. It is not true that the majority of people move up from £9 a week to a higher figure through promotion, since the ratio of promotions to the total employable number is very small.
§ Sir S. Summers
The hon. Gentleman knows well that in addition to promotion there are increases awarded through collective bargaining which are far in excess of the increases in the cost of living. That also has a bearing on my argument.
§ Mr. Lawson rose——
§ Sir S. Summers
I hope the hon. Member will forgive me if I do not give way. I do not think that he can add anything to the case just now. I am on his side, as I said at the outset, and it 339 would be better if he did not interrupt me in my argument.
If it were thought that those on £9 and below ought not to be contributing to the graduated pension scheme, and that earnings and the value of money had changed in the intervening period sufficient to warrant an increase in the upper limit of as much as £3, despite the figures I have quoted, there would be a case for saying that the standard of the person at the bottom of the scale was higher than it was when the scheme was started. It is not my purpose to argue now as to whether £10 is the right figure. But many people outside will be surprised to hear that £9 was established for valid reasons in April, 1961, based on arguments of perhaps eighteen months earlier. I should have thought that there was a good case for saying that the person on that sum was not far removed from £10 a week at the present time.
I hope that my right hon. Friend will deal seriously with this Amendment. I do not know whether the cost will be very much. No doubt there will be many more people in the lower bracket than in the higher, and that might influence his thinking. But many people outside this House will listen with care to his justification for not losing some at any rate of the lower level of the band of graduated pensions payers.
§ Mr. N. Macpherson
The Committee will have remarked with great interest the command which the hon. Member for Motherwell (Mr. Lawson) and my hon. Friend the Member for Aylesbury (Sir S. Summers) have of the scheme. The hon. Member for Motherwell put forward quite a good case for raising the lower limit from £9 to £10, but there are one or two fatal objections to his proposal.
The hon. Member seemed rather to complain that the apparent deficit had been overcome. At any rate he was complaining of the way in which it was overcome. But he would surely agree that this was a deficit which had to be overcome. Great credit is due to my right hon. Friend the present Chief Secretary to the Treasury for having devised a scheme to overcome the deficit.
The right hon. Member for Llanelly (Mr. J. Griffiths) asked what the effect of the latest population trends was. As 340 he knows, the Government Actuary always takes the latest available figures in making his calculations, in which they are reflected. Undoubtedly, to some extent these trends have been beneficial in that they are likely to produce a greater proportion of active working people than was expected.
§ Mr. J. Griffiths
Will the right hon. Gentleman look at paragraph 8 of the Report of the Government Actuary on this Bill? This deals with the graduated method of wiping out the deficit. When the deficit was calculated in 1961, it was calculated on certain assumptions about population which are now being revised. The paragraph says,The bases used in the Second Quinquennial Review (H.C. 220 of 1959–60) and in my Report on the 1960 Bill have, for the purposes of the present report, been revised in certain respects. The population projection now used is the latest prepared for Great Britain by my Department in co-operation with the Registrar General; this takes account, among other things, of the continued increase in the annual number of births, which will be reflected in the size of the contributing population and the number of child dependants. During the period covered by the present estimates, the numbers of pensionable age are not expected to differ appreciably from those previously assumed.This is what the Committee is entitled to consider now.
Will the Minister please tell us, in the light of the revised estimate made for this Bill as compared with two years ago and as he is making the changes in the graduated scheme, what is now the picture of the deficit about which he is so concerned? Is not the deficit on the new trend in population so much less than he calculated, and will he not, therefore, make the present contributors to the graduated scheme pay not only for the deficit but also for a surplus, as the deficit will be rather less than expected?
§ Mr. Macpherson
The deficit may be rather less than it would have been. That is bound to be so if the relativities are changed favourably, but that does not indicate that it was not necessary nevertheless to overcome a very considerable deficit which would have greatly grown over the years. One of the effects has been, according to the Actuary's Report, that we can look forward to growing surpluses for a certain period. The right hon. Gentleman will see from paragraph 17 of the Actuary's Report how these surpluses develop.
341 There is one matter on which I must pick up the hon. Member for Motherwell. He suggested that the quinquennial contributions were to assist the graduated benefits. They are not. They are intended, and have always been said to be intended, to help to meet the flat-rate deficits.
§ Mr. Lawson
If the right hon. Gentleman looks closely into this matter, he will find that power was taken under the 1959 Act both to raise the flat-rate contribution, which is the 10d. of which he has been speaking, from 9d. to 10d., and to raise the percentage payment by 4¼ on each side, which is 8½ per cent. There were two separate powers one to raise the cost of the brick percentage-wise and one to raise the flat-rate contribution.
§ Mr. Macpherson
Quite so, but that does not contradict what I was saying. The purpose of the four quinquennial increases, which apply both to the graduated contributions and also to the flat-rate contributions, at 5d. a time, as well as to the self-employed and to the non-employed, is to meet the deficits which would otherwise arise on the flat-rate benefits.
§ Mr. Lawson rose——
§ Mr. Lawson
Will the right hon. Gentleman give way, for he has misrepresented or not understood the point? I am not disputing that the extra money will go towards the flat-rate benefit. That is what I was saying. The bulk of the contributions, whether flat-rate or graduated, went in that direction, but the brick costing £15, for which one eventually gets 6d. a week, will cost more and more as these quinquennial percentage increases occur.
§ Mr. Macpherson
That is so, provided that the quinquennial increases are imposed in full. There is power to modify the increases so that they are not imposed in full. If they are, what the hon. Member says is correct.
What the hon. Member has suggested is that those at the lower level, between £9 and £10, should be exempted from making their contribution towards the deficits. My hon. Friend the Member for Aylesbury (Sir S. Summers) suggested 342 that we should take account of the position in 1961, rather than that in 1958 when we first fixed the span on which the graduated contributions are chargeable. We fixed that in 1958, and we had in mind—it was always a possibility—that the value of money would change, and that earnings would rise in real terms. Both these things have happened.
I do not think that that is a good reason for raising the lower limit. People who start contributing at the lower limit pay 4¼ per cent. As the hon. Gentleman rightly said, this means 6d. a week for somebody earning £9 10s., and 11d. for somebody earning £10. I appreciate the hon. Gentleman's point about the casual contributors who come in and out and take a long time to build up an additional pension, but that would be so wherever we fixed the level. The same complaint could be made the next time with £10, and so on.
The crucial thing is that I am not certain my hon. Friend realises that it is not just the people who are earning between £9 and £10 who are affected, but everybody who earns more than £9. This means a terrific proportion of the total revenue that comes from graduated contributions. To raise the level from £9 to £10 would mean that we would have to raise £46 million in some other way. It would mean an addition of 4½d. a side to the flat-rate contribution if we raised it in that way, which would practically nullify the benefit for a man earning £9 10s.
Given the fact that one of the purposes of the scheme was to keep the minimum flat-rate contribution as low as possible, I should have thought that the sensible thing to do was to maintain the £9 minimum now so as not to have to increase the flat-rate contribution any further than is necessary. That is, I think, the really convincing argument against raising the level from £9 to £10, and I hope that the Committee will accept it and resist the Amendment.
§ Sir S. Summers
If the contributions do not have to be paid, likewise, some day, benefits will not have to be provided. Is the Minister taking account of both those factors in giving that figure?
§ Mr. Macpherson
Since, as my hon. Friend knows, we are on a "pay-as-you-go" basis, if we do not raise the £46 million in this way we shall have to raise it in some other way. Admittedly we shall be reducing the commitments for the future, but what I am suggesting to the Committee is that what we have to consider is how we are to raise the money to pay for the benefits at present.
§ Mr. J. Griffiths
I put this to the Minister again. When he came to estimate what the deficit would be under the old scheme and arrived at this method of making it up, he did so on the old assumptions about population. Suppose there had been no graduated scheme. Those assumptions would have to be changed, according to what the Actuary said.
Let us assume that there was no graduated scheme and that we were now reconsidering this in the light of the changes in the distribution of population. It would mean that on the present growth of population the proportion of pensioners to contributors would have to be Changed, and if the Actuary was now considering what the deficit would be he would say that it would be less in 1970, 1980, or 1990, than what he said it would be two years ago. As the Actuary has said that in making his estimates about this Bill he has revised the previous estimates, the Committee is entitled to know the effect of that revision.
Political capital is sometimes made out of this deficit. Let the Minister come clean with the Committee. Will he tell us now what the position is, having regard to the fact that the assumptions which the Government Actuary made about the distribution of population and the relationship between the number of pensioners and the number of contributors have proved to be incorrect? The graduated scheme in its present structure was devised in order to wipe out the deficit as estimated two years ago, and if that deficit is now less than was estimated, because of changes in population, the contributors under the graduated scheme are carrying a greater burden than they should be. The burden was estimated two years ago, and if the deficit is reduced the contributors are entitled to the benefit.
344 The right hon. Gentleman can produce the figures. He has them in his Department. Will he tell us what the effect of the Amendment would be? It is he who is changing the graduated pension scheme. I have had a quiet word with my hon. Friend the Member for Westhoughton (Mr. J. T. Price) who has greater experience of this matter than I have. He is ready to speak, and I hope that he will catch the eye of the Chair. He has assured me that I am raising a very good point.
§ Mr. N. Macpherson
The right hon. Gentleman has asked me whether I can produce the figures. I will do my best. But what the Actuary says is that the bases on which he makes his calculations have been revised. Whether he has made comparative calculations on the old basis and the new basis relating to the present situation I do not know. It would not be right to expect him to make a comparative hypothetical calculation in respect of these rather complicated matters. I am willing to look into the question, but I suggest that the manner in which the quinquennial increases are provided for ought to take account of this kind of matter. If the experience is more favourable than was originally estimated, it may not be necessary to make the full quinquennial increases. There is flexibility in that respect, and to the extent that the situation may prove to be more favourable than was originally estimated it may be possible to modify the increases.
I am not making any promises. I merely point out that this was the kind of contingency that my right hon. Friend had in mind when he originally made the provisions for the quinquennial increases.
Mr. J. T. Price
I am embarrassed by my right hon. Friend's personal references to me, which are quite undeserved. However, I was a member of the Standing Committee which considered the old 1959 Bill, which was the foundation of the 1961 Act. I remember taking part in many debates in Committee, in those very protracted proceedings concerning the assumptions made by the Government Actuary. The basis of our claim is that the 1961 Act was a gross fraud perpetrated on the British electors. I have said that publicly. One of the purposes of the Bill was not to provide graduated pensions at their true value, 345 in actuarial terms, but to transfer from the national Exchequer and on to the shoulders of the taxpayers—by way of a poll tax and an increased contribution—the mounting liability of pensions already due to be paid and under payment.
I will not make much of that tonight because on this occasion I am not fortified by having the documents before me. But since I have been more or less "hijacked" into this debate, against my better instincts, I want to put another point to the Minister which he may care to consider while he is considering the substantial point which was raised by my right hon. Friend the Member for Llanelly (Mr. J. Griffiths).
I entirely agree that if the assumptions made by the Government Actuary when writing his report in 1959 have been invalidated by subsequent experience, the assumptions on which the Minister is presenting this Bill are invalid because an adjustment has not been allowed for. I did not hear all that the Minister said, and I apologise for that, but there is another substantial point which has been invalidated. It is a very substantial point, quite apart from the actuarial considerations mentioned by my right hon. Friend the Member for Llanelly. If I can rely on my memory—it is usually quite reliable—the Government Actuary, in drawing up the 1959 report upon which Government action was founded, assumed that the maximum number of people who would avail themselves of the opportunity to contract out, and not pay the graduated contributions because they were provided for elsewhere, would be about 2 million. When the right hon. Gentleman's predecessors got to work on the problem and began to receive requests for exemptions, as the right hon. Gentleman will be able to confirm, the number of people contracting out was almost double the number which had been anticipated by the Government Actuary. Instead of 2 million, in the event 4 million people contracted out. They are not making an appropriate contribution to the effort to salvage these debts on the old pensions.
This was, I maintain, a profound error for any Government to make. If it is maintained as a matter of principle, as a basic principle of this legislation, that graduated pensions must be levied in this way to salvage the old pension, every- 346 one in the State should make an appropriate contribution to the redemption of that debt. I have the greatest respect for our institutions. I am not a starry-eyed revolutionary, although I sit on this side of the Committee——
I thought I should get that from my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin) who sits below the Gangway.
Bernard Shaw—the old boy is no longer with us—who was a philosopher, once said that as men grew a little older and became a bit longer in the tooth they generally grew more conservative. That is wrong. They merely get impatient with conventional methods of reform. I quote that for the benefit of my hon. Friend the Member for Gloucestershire, West.
I intervened in this debate to indicate that a fundamental change has taken place because of the improved demographic figures—I think that that is the right word—the demographic prognostications. [HON. MEMBERS: "Hear, hear."] Unfortunately at one period in my life I lived and worked with actuaries and I learned something of the mysteries of acturial science. I say that for what it is worth.
There were these two basic assumptions. First there was the fallacy under the misapplication of the Malthusian principle, and the extremely pessimistic figure created to justify what was said by Malthus 150 years ago which has not been realised in the event. Human life on this earth has a way of adjusting its own errors. If there are too many old people, people marry younger and have more children. The whole process of nature tends to adjust shortcomings. I have a sort of blind faith that these forces are at work—without being too theological about it. [Laughter.] I hope that no one thinks I am being flippant about this serious subject.
I want to make a modest contribution to the debate. The Government Actuary was wrong and we are claiming that a suitable adjustment should be made to allow for the miscalculation. He was wrong in estimating the number of people who would contract out. In this 347 respect the biggest culprit in the transaction has been the Government. All civil servants have been contracted out of the scheme; the Government are not bearing their share of responsibility.
These are substantial matters. I cannot do them justice in a few off-the-cuff cursory remarks, although I am doing my best. If I cared to go into the Library and arm myself with all the matters of detail, I could speak on the subject for a very long time.
§ Mr. N. Macpherson
May I ask the hon. Member to make clear whether he is in favour of the Amendment or against it?
I apologise if I am not making myself crystal clear. I have very great respect for the proper use of the Queen's English and I try to practise it as well as I can in the circumstances. I certainly am supporting the Amendment. I thought that was perfectly clear. I am not talking both ways. I do not regard this Committee as a sort of higher form of Oxford Debating Society. This Committee is a place where serious matters should be discussed with sincerity, force and vigour and with proper information to support the arguments put forward. I am supporting the Amendment. If the Minister has any doubt, I am quite willing to speak at greater length on this subject when the opportunity occurs.
§ Miss Herbison
My hon. Friend the Member for Westhoughton (Mr. J. T. Price) and my right hon. Friend the Member for Llanelly (Mr. J. Griffiths) have taken up certain of the points which the Minister made. I want to take up one before the Committee divides. When he started to answer the points made by my hon. Friend the Member for Motherwell (Mr. Lawson) who so ably moved the Amendment the Minister said there were certain fatal objections to the Amendment.
I found only one, which I can understand is, from the Minister's point of view and the Government's point of view, a fatal objection to the Amendment. The right hon. Gentleman said that the previous Minister could take great credit for having found a way of overcoming the deficit. We do not give him any credit at all for the way in which he overcame the deficit because his graduated scheme 348 is shoddy, it is shabby and it bears heavily on people who cannot carry the burden. That is one of the main reasons why my hon. Friend moved the Amendment. He wanted to raise the floor from £9 to £10. The "fatal objection" which the Minister and the Government have to this proposal is that it would take from the Government £46 million.
§ Miss Herbison
It would take £46 million from the Fund. The only way of getting that £46 million, the Minister thought, was by raising considerably the flat-rate contribution, but of course there is another way and a much fairer way of getting that £46 million. If he has £9 or £10 a week, a married man with a family will be paying no Income Tax at all. If under this Amendment the Minister were to release him from paying the contribution to the graduated scheme, it would be a very great help to such a man. The way to find the extra money which the Minister thinks is a fatal objection to our Amendment is to take it from the Exchequer.
It has been proved tonight beyond any doubt that an examination of all the aspects of the insurance scheme shows that the Exchequer at present is carrying only 16 per cent. of the cost. It would be a much fairer and much more just way to take this from the Exchequer and relieve those people earning under £10 a week from paying into what I have always considered to be a shoddy, shabby scheme. It is for this reason that we have every intention of supporting my hon. Friend in the Lobby.
§ Mr. N. Macpherson
Will the hon. Lady bear in mind that it is not only those earning between £9 and £10 a week who would be relieved? All contributors would be relieved on their earnings between £9 and £10 if their income were over £9. Those earning between £9 and £10 a week pay 11d. a week at the most.
§ Miss Herbison
Yes, we understand that, because both my hon. Friend the Member for Motherwell and I were members of the Committee which considered the Bill which instituted graduated contributions. The Amendment proposes the only way of relieving 349 those who earn under £10 a week. It is for that reason that we intend to divide the Committee.
§ Question put, That those words be there inserted:—
§ The Committee divided: Ayes 172, Noes 213.351
|Division No. 41.]||AYES||[9.22 p.m.|
|Abse, Leo||George, Lady Megan Lloyd (Crmrthn)||Oram, A. E.|
|Ainsley, William||Ginsburg, David||Oswald, Thomas|
|Albu, Austen||Gourlay, Harry||Pargiter, G. A.|
|Allaun, Frank (Salford, E.)||Greenwood, Anthony||Parker, John|
|Allen, Scholefield (Crewe)||Grey, Charles||Parkin, B. T.|
|Awbery, Stan (Bristol, Central)||Griffiths, David (Rother Valley)||Pearson, Arthur (Pontypridd)|
|Bacon, Miss Alice||Griffiths, Rt. Hon. James (Llanelly)||Peart, Frederick|
|Baird, John||Hale, Leslie (Oldham, W.)||Pentland, Norman|
|Barnett, Guy||Hamilton, William (West Fife)||Popplewell, Ernest|
|Beaney, Alan||Hannan, William||Prentice, R. E.|
|Bellenger, Rt. Hon. F. J.||Harper, Joseph||Price, J. T. (Westhoughton)|
|Bence, Cyril||Hart, Mrs. Judith||Probert, Arthur|
|Bennett, J. (Glasgow, Bridgaton)||Hayman, F. H.||Pursey Cmdr. Harry|
|Benson, Sir George||Herbison, Miss Margaret||Rankin, John|
|Blackburn, F.||Hill, J. (Midlothian)||Redhead, E. C.|
|Blyton, William||Hilton, A. V.||Reid, William|
|Boardman, H.||Holman, Percy||Reynolds, G. W.|
|Bottomley, Rt. Hon. A. G.||Holt, Arthur||Rhodes, H.|
|Bowden, Rt. Hn. H. W.(Leics. S. W.)||Houghton, Douglas||Roberts, Albert (Normanton)|
|Bowen, Roderic (Cardigan)||Howell, Charles A. (Perry Barr)||Roberts, Goronwy (Caernarvon)|
|Bowles, Frank||Hoy, James H.||Robertson, John (Paisley)|
|Braddock, Mrs. E. M.||Hughes, Cledwyn (Anglesey)||Robinson, Kenneth (st. Pancras, N.)|
|Bradley, Tom||Hughes, Hector (Aberdeen, N.)||Rodgere, W. T. (Stockton)|
|Bray, Dr. Jeremy||Hunter, A. E.||Ross, William|
|Brockway, A. Fenner||Hynd, H. (Accrington)||Short, Edward|
|Broughton, Dr. A. D. D.||Janner, Sir Barnett||Silverman, Sydney (Nelson)|
|Brown, Rt. Hon. George (Belper)||Jones, Rt. Hn. A. Creech(Wakefield)||Skeffington, Arthur|
|Brown, Thomas (Ince)||Jones, Dan (Burnley)||Slater, Mrs. Harriet (Stoke, N.)|
|Callaghan, James||Jones, Elwyn (West Ham, S.)||Slater, Joseph (Sedgefield)|
|Carmichael, Neil||Jones, J. Idwal (Wrexham)||Small, William|
|Castle, Mrs. Barbara||Jones, T. W. (Merioneth)||Smith, Ellis (Stoke, S.)|
|Chapman, Donald||Kelley, Richard||Soskice, Rt. Hon. Sir Frank|
|Cliffe, Michael||Kenyon, Clifford||Spriggs, Leslie|
|Collick, Percy||King, Dr. Horace||Steele, Thomas|
|Craddock, George (Bradford, S.)||Lawson, George||stones, William|
|Crosland, Anthony||Ledger, Ron||Swain, Thomas|
|Cullen, Mrs. Alice|
|Dalyell, Tam||Lee, Frederick (Newton)||Taylor, Bernard (Mansfield)|
|Davies, G. Elfed (Rhondda, E.)||Lee, Miss Jennie (Cannock)||Thomas, Iorwerth (Rhondda, W.)|
|Davies, Harold (Leek)||Lever, L. M. (Ardwick)||Thompson, Dr. Alan (Dunfermline)|
|Davies, Ifor (Gower)||Lewis, Arthur (West Ham, N.)||Thornton, Ernest|
|Davies, S. O. (Merthyr)||Loughlin, Charles||Wade, Donald|
|Deer, George||Lubbock, Eric||Wainwright, Edwin|
|Dempsey, James||Mabon, Dr. J. Dickson||Warbey, William|
|Diamond, John||MacColl, James||Weitzman, David|
|Dodds, Norman||McInnss, James||Wells, William (Walsall, N.)|
|Driberg, Tom||McKay, John (Wallsend)||Whitlock, William|
|Dugdale, Rt. Hon. John||Mackie, John (Enfield, East)||Wilkins, W. A.|
|Ede, Rt. Hon. C.||McLeavy, Frank||Willey, Frederick|
|Edelman, Maurice||MacMillan, Malcolm (Western Isles)||Williams, LI. (Abertillery)|
|Edwards, Rt. Hon. Ness (Caerphilly)||Mallalieu, E. L. (Brigg)||Williams, W. R. (Openshaw)|
|Edwards, Robert (Bilston)||Manuel, Archie||Williams, W. T. (Warrington)|
|Ferynhough, E.||Mapp, Charles||Willis, E. G. (Edinburgh, E.)|
|Finch, Harold||Mason, Roy||Woodburn, Rt. Hon. A.|
|Fitch, Alan||Mendelson, J. J.||Woof, Robert|
|Fletcher, Eric||Milne, Edward||Yates, Victor (Ladywood)|
|Foot, Michael (Ebbw Vale)||Mitchison, G. R.|
|Forman, J. C.||Morris, John||TELLERS FOR THE AYES:|
|Fraser, Thomas (Hamilton)||Neal, Harold||Mr. Sydney Irving and|
|Aitken, W. T.||Bidgood, John C.||Burden, F. A.|
|Allan, Robert (Paddington, S.)||Bingham, R. M.||Campbell, Sir David (Belfast, S.)|
|Allason, James||Bishop, F. P.||Campbell, Gordon (Moray & Nairn)|
|Arbuthnot, John||Bossom, Hon. Clive||Carr, Compton (Barons Court)|
|Ashton, Sir Hubert||Bourne-Arton, A.||Carr, Robert (Mitcham)|
|Atkins, Humphrey||Box, Donald||Chataway, Christopher|
|Awdry, Daniel (Chippenham)||Boyd-Carpenter, Rt. Hon. John||Chichester-Clark, R.|
|Barber, Anthony||Boyle, Rt. Hon. Sir Edward||Clarke, Brig. Terence (Portsmth, W.)|
|Barlow, Sir John||Braine, Bernard||Cleaver, Leonard|
|Barter, John||Brewis, John||Corfield, F. V.|
|Batsford, Brian||Bromley-Davenport, Lt.-Col. Sir Walter||Craddock, Sir Beresford (Spelthorne)|
|Beamish, Col. Sir Tufton||Bryan, Paul||Crosthwaite-Eyre, Col. Sir Oliver|
|Bennett, Dr. Reginald (Gos & Fhm)||Buck, Antony||Crowder, F. P.|
|Berkeley, Humphry||Bullard, Denys||Curran, Charles|
|Dalkeith, Earl of||Irvine, Bryant Godman (Rye)||Prior, J. M. L.|
|Dance, James||James, David||Proudfoot, Wilfred|
|d'Avigdor-Goldsmid, sir Henry||Johnson, Dr. Donald (Carlisle)||Pym, Francis|
|Deedes, Rt. Hon. W. F.||Johnson, Eric (Blackley)||Ramsden, James|
|Donaldson, Cmdr. C. E. M.||Kerans, Cdr. J. S.||Rawlinson, Sir Peter|
|Doughty, Charles||Kerr, Sir Hamilton||Redmayne, Rt. Hon. Martin|
|Drayson, G. B.||Kimball, Marcus||Renton, Rt. Hon. David|
|du Cann, Edward||Lancaster, Col. C. G.||Ridley, Hon. Nicholas|
|Eden, John||Leavey, J. A.||Ridsdale, Julian|
|Elliot, Capt. Walter (Carshalton)||Leburn, Gilmour||Roberts, Sir Peter (Heeley)|
|Elliott, R. W. (Nwcastle-upon-Tyne, N.)||Lewis, Kenneth (Rutland)||Robinson, Rt. Hn. Sir R. (B'pool, S.)|
|Emery, Peter||Lindsay, Sir Martin||Ropner, Col. Sir Leonard|
|Errington, Sir Eric||Linstead, Sir Hugh||Russell, Ronald|
|Farr, John||Litchfield, Capt. John||St. Clair, M.|
|Finlay, Graeme||Loveys, Walter H.||Shaw, M.|
|Fisher, Nigel||Lucas-Tooth, Sir Hugh||Smith, Dudley (Br'ntf'd & Chiswick)|
|Fletcher-Cooke, Charles||MacArthur, Ian||Spearman, Sir Alexander|
|Fraser, Ian (Plymouth, Sutton)||McLaren, Martin||Speir, Rupert|
|Gammans, Lady||McLean, Neil (Inverness)||Stanley, Hon. Richard|
|Gardner, Edward||Macleod, Rt. Hn. Iain (Enfield, W.)||Stodart, J. A.|
|Gibson-Watt, David||McMaster, Stanley R.||Stoddart-Scott, Col. Sir Malcolm|
|Glimour, Ian (Norfolk Central)||Macmillan, Maurice (Halifax)||Storey, Sir Samuel|
|Glimour, Sir John (East Fife)||Macpherson, Rt. Hn. Niall(Dumfries)||Studholme, Sir Henry|
|Glyn, Dr. Alan (Clapham)||Maltland, Sir John||Summers, Sir Spencer|
|Glyn, Sir Richard (Dorset, N.)||Marshall, Douglas||Tapsell, Peter|
|Goodhart, Philip||Marten, Neil||Taylor, Sir Charles (Eastbourne)|
|Goodhew, Victor||Matthews, Gordon (Meriden)||Taylor, Edwin (Bolton, E.)|
|Gough, Frederick||Mawby, Ray||Taylor, Frank (M'ch'st'r, Moss Side>|
|Gower, Raymond||Maxwell-Hyslop, R. J.||Taylor, Sir William (Bradford, N.)|
|Grant-Ferris, R.||Maydon, Lt.-Cmdr. S. L. C.||Teeling, Sir William|
|Green, Alan||Mills, Stratton||Temple, John M.|
|Gresham Cooke, R.||Miscampbell, Norman||Thatcher, Mrs. Margaret|
|Grosvenor, Lt.-Col. R. G.||Montgomery, Fergus||Thomas, Sir Leslie (Canterbury)|
|Gurden, Harold||More, Jasper (Ludlow)||Thomas, Peter (Conway)|
|Hamilton, Michael (Wellingborough)||Morrison, John||Touche, Rt. Hon. Sir Gordon|
|Harris, Reader (Heston)||Mott-Radclyffe, Sir Charles||Turner, Colin|
|Harvey, Sir Arthur Vere (Macclesf'd)||Nabarro, Sir Gerald||Turton, Rt. Hon. R. H.|
|Harvey, John (Walthamstow, E.)||Nicholson, Sir Godfrey||Tweedsmuir, Lady|
|Harvie Anderson, Miss||Noble, Rt. Hon. Michael||van Straubenzee, W. R.|
|Hastings, Stephen||Nugent, Rt. Hon. Sir Richard||Vane, w. M. F.|
|Hay, John||Orr, Capt. L. P. S.||Vaughan-Morgan, Rt. Hon. Sir John|
|Henderson, John (Cathcart)||Osborn, John (Hallam)||Vickers, Miss Joan|
|Hendry, Forbes||Osborne, Sir Cyril (Louth)||Ward, Dame Irene|
|Hill, Dr. Rt. Hon. Charles (Luton)||Page, Graham (Crosby)||Webster, David|
|Hill, Mrs. Eveline (Wythenshawe)||Page, John (Harrow, West)||Wells, John (Maidstone)|
|Hill, J. E. B. (S. Norfolk)||Partridge, E.||whitelaw, William|
|Hirst, Geoffrey||Pearson, Frank (Clitheroe)||Wills, Sir Gerald (Bridgwater)|
|Hocking, Philip N.||Percival, Ian||Wilson, Geoffrey (Truro)|
|Holland, Philip||Peyton, John||Wise, A. R.|
|Hollingworth, John||Pickthorn, sir Kenneth||Wolrige-Gordon, Patrick|
|Hornby, R. P.||Pike, Miss Mervyn||Woodhouse, C. M.|
|Hornsby-Smith, Rt. Hon. Dame P.||Pilkington, Sir Richard||Woodnutt, Mark|
|Howard, John (Southampton, Test)||Pitman, Sir James||Woollam, John|
|Hughes Hallett, Vice-Admiral John||Pitt, Dame Edith||Worsley, Marcus|
|Hughes-Young, Michael||Pott, Percivall||Yates, William (The Wrekin)|
|Hulbert, Sir Norman||Powell, Rt. Hon. J. Enoch|
|Hutchison, Michael Clark||Price, David (Eastleigh)||TELLERS FOR THE NOES:|
|Iremonger, T. L.||Price, H. A. (Lewisham, W.)||Mr. Peel and Mr. Rees.|
§ Question proposed, That the Clause stand part of the Bill.
§ 9.30 p.m.
§ Mr. Eden
The debates on this Clause have covered a good deal of ground, and the Clause itself refers to virtually every aspect of the graduated scheme introduced by the 1959 Act. I want to touch on one or two aspects of the requirements of the Clause, and on their likely effects in the sphere of occupational pensions. First of all, I owe a duty to the Committee to declare, as I have done on previous occasions, my interest in insurance and pensions, since I am engaged by and work for a firm of brokers who deal in occupational pensions schemes.
352 The main effect of this Clause is to extend the range of the original graduated pensions scheme, which came into operation in April, 1961. The 1959 Act established the principle of graduation, and at that time limited the range to incomes between £9 and £15. The Act required that the employee members of contracted-out occupational schemes should have preserved for them pension benefits equivalent to the maximum obtainable under the State scheme. Those equivalent-pension benefits, as they were known, were fixed by the Act at £2 6s. 2d. By this Clause, extending as it does the upper limit from £15 to £18 and placing the £9-a-week man on the higher maximum figure, the equivalent-pension benefits are increased 353 from £2 6s. 2d. to £3 9s. 7d. That means that the contracted-out occupational schemes which do not meet the new requirements when this Measure is enacted will have to be revised if they wish to keep their certificate of non-participation.
In an earlier debate, reference was made to the lower-paid workers in the graduated scheme, but I think it fair to say that the majority of the contracted-out occupational schemes provide better terms and higher benefits than does the State scheme. Whilst, in theory, it is now necessary only to provide benefits to equal the £2 6s. 2d., in practice, of course, the schemes mainly provide benefits of at least £3. I believe that there is a real possibility that the extension of the range and the requirement to preserve the pension benefits of the £9-a-week employee at the top level as though he were earning at a rate of £18, coming as they do at a time when industry is faced with many other impositions, could well force industry as a whole to be much less generous than it now is.
Let the Committee consider the fact that the extra cost to industry of these provisions is likely to be about £13½ million for the total of 4½ million contracted-out employees. They might even go further than that. They might take the lower-paid employees out of their occupational schemes altogether. I would regard that as a retrograde step. It would not only be to their disadvantage if that were to happen but over recent years there has been a general move towards setting up occupational schemes of all kinds and I think that the Committee would agree that most spectacular developments have taken place in the establishment of works schemes. We should do our best to keep this momentum going.
There are other possibilities which we should do well to consider. I do not want to be too gloomy and it is not my intention to overstate the case, but it is right that we should examine the likely consequences of extending the range while the provisions in Clause 3 are still comparatively limited. There is a chance that if the employer always has to preserve at the top rate he may tend to limit his own occupational scheme. It would be a curious paradox if occupational schemes were to develop on a flat-rate basis of contribution and benefits as a 354 result of these requirements. We should be comparing that with what is happening in the State scheme which is in the hands of a Government intent upon introducing an element of graduation and wage relation.
But the greatest danger of the Clause is that if industry believed that what is proposed in the Bill is to set the pattern for future extension of the graduated pension scheme, it could well lead to widespread abandonment of the principle of contracting out and with it end the development of occupational schemes, the fostering of which the Government in 1959 declared to be one of the principal reasons for introducing the Act.
This is not an idle threat, even though I speak to the Committee from my very limited experience in this type of work outside the House of Commons. Already in these last few days a number of employers have communicated their doubts about the wisdom of continuing with their contracting-out provisions at all. This might lead them to change the whole nature of their schemes and alter the range of employees which they were designed to cover.
§ Mr. Ellis Smith
The hon. Member is well versed in this subject, and I know that men like him have access to a great deal of advice tendered to them by trained accountants and actuaries. Can the hon. Member give us some information about the figures on which he is basing his contribution to the debate, and can he also say with what he would replace contracting out?
§ Mr. Eden
I am not attempting to replace contracting out. It is one of the provisions which I welcomed in the original 1959 Act. I am not trying to take any step which would destroy it. All I was trying to point out—against a certain amount of background noise during the earlier part of my speech—was that the extension of the range, albeit in a limited manner, together with the requirement that, in order to contract out a £9-a-week man, he must have preserved for him in the works scheme a pension benefit equivalent to that which he would have earned had he participated in the graduated scheme and earned at the rate of £18, might tend to force industrialists who are 355 setting up these schemes to leave the lower-paid workers out of their works schemes.
I should regard this as a very retrograde step. I say that it might happen—I hope to heaven that it does not—because, with this requirement of the £9-a-week man being preserved at £18, which is a fairly big range, as I think all will recognise, there is a considerable addition to the cost not only of the equivalent pension benefit but also to the payment-in-lieu.
§ Mr. Houghton
There is no need to leave the lower-paid workers out of the works scheme. What the employer could do is not contract them out.
§ Mr. Eden
That is so, but I have said that I wish to maintain the contracting-out provision because I think that it does help—this goes back to one's basic philosophy about these things—to encourage people to provide more adequately against their own retirement. This is not the proper occasion to enter into those more general arguments, but I am sure that the hon. Gentleman knows what my views on this subject are.
§ Mr. Thomas Swain (Derbyshire, North-East)
The hon. Gentleman has referred to the employer and his lower-paid employees. At what level of wages would the hon. Gentleman regard a worker as being in the lower-paid category—£12, £l1, £10 or £9?
§ Mr. Eden
That is purely academic for the purposes of my argument. Had the hon. Gentleman taken part in the debate on the Amendments to the Clause, he would know that we were discussing then £9 and £10 a week as being the earnings of the lower-paid worker; and I should not dispute that.
No doubt, the Minister has received a number of proposals as to how he should operate this part of the scheme, and I regret that the provisions of the Clause prevent him from doing one of two things. He could, for example, have related the equivalent pension benefits to average earnings in each fiscal year, leaving the £2 6s. 2d. as the basic minimum for all on £15 and below. This would then have produced a simple table with a separate equivalent pension benefit at each earnings level between £15 and the maximum.
356 The usual P.A.Y.E. cards could have been used for this purpose and would have provided the Minister with all the information his Department would require.
I recognise at once that it could be argued that in some cases average earnings might provide a benefit less than that which would have been earned in the graduated pension scheme itself, Therefore, I have always favoured an alternative proposal, which, very briefly, is to relate the equivalent pension benefits to notional contributions. This sounds rather complicated but it is, in fact, extremely simple. The employer would use the first column on the P.A.Y.E. card and would enter the wage-related contribution for every employee in his firm. This would be the actual contribution for those participating-in and would be the notional contribution for those contracted-out as though they had been participating-in.
§ 9.45 p.m.
§ Mr. Loughlin
On a point of order. Is it not right that on the Question, "That the Clause stand part of the Bill" one can deal only with what is in the Clause?
§ The Chairman
I think that the hon. Gentleman is entitled to make his point of order. I hope that the hon. Member for Bournemouth, West (Mr. Eden) will take note.
§ Mr. Eden
I am entirely in your hands, Sir William, but it is slightly difficult to limit one's arguments on this subject, as hon. Members who have taken part in the discussions and who have not come in simply to make a nuisance of themselves know. I am coming to my final point.
The equivalent pension benefits would thereby be related to equivalent graduated contributions. The advantage of this proposal is that it would give complete fairness and absolute security at relatively little cost and would produce parity with the graduated pension scheme.
§ Mr. E. G. Willis (Edinburgh, East)
Further to the point of order raised by my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin). Is it in order for the hon. Member for Bournemouth, West (Mr. Eden) to continue to discuss this matter after having been ruled out of order?
§ The Chairman
No, but it is customary in Committee to allow hon. Members a certain amount of latitude. I have no doubt that the hon. Member for Bournemouth, West will heed the Ruling of the Chair.
§ Mr. Eden
I apologise, Sir William. I do not wish to trespass on the courtesy of the Committee. As I pointed out, before you resumed the occupancy of the Chair, Sir William, we had an extremely wide-ranging discussion earlier. But I recognise that that is not relevant to the discussion on the Question, "That the Clause stand part of the Bill".
I will pass from that point and move to the conclusion of my remarks. Whatever basis the Minister may conceive for future extensions of the graduated pension scheme, I hope that what is done in this Clause will not lay down a firm pattern for subsequent action. Industry, I think I am right in saying, is not opposed to extensions of the range in principle, but if it has to go back to the beginning, as it were, and alter its contracted-out schemes each time the range is extended, that will produce an unhealthy degree of uncertainty, to say the least. I attach a great deal of importance to the ending of this uncertainty.
I considered tabling a number of Amendments, and, thanks to the interruptions of the hon. Members for Gloucestershire, West (Mr. Loughlin) and Edinburgh, East (Mr. Willis), I wish that I had gone ahead and done so. They would have taken up a good deal more time than I have taken up. I did not table them because I knew that the Minister and hon. Members were anxious to get the Bill through as quickly as possible and because the extension of the range which is proposed in Clause 3 is not a particularly substantial operation.
I ask my right hon. Friend to bear in mind that he has a great deal of responsibility for private occupational schemes as well as for the State scheme, for private schemes are closely linked with anything that he does in the State scheme which can have an effect on their structure. I therefore hope that he will keep an open mind on this matter and that for the purposes of this debate, in replying to my speech, and that of any of my hon. Friends who may take part in it, will give a firm assurance tonight that he is aware of the implications of this 358 Clause, and that what is being done will not determine the course to be adopted for future extensions. I trust that he will consult industry and its advisers as to how best in future to provide security for contracted-out employees without, each time the range is extended, causing widespread dislocation among those already doing their best to help them through their pensions provisions.
§ Mr. Gough
My hon. Friend the Member for Bournemouth, West (Mr. Eden) and I are engaged in the same business. We are both pension consultants. I came to listen to what he had to say and would not have continued the discussion on this point had it not been for the interruptions of hon. Members opposite. For the benefit of hon. Members opposite, may I say that what my hon. Friend proposes would be of very great value, particularly to the lower-paid workers. [HON. MEMBERS: "Order."] I am not out of order. I am merely pointing out that what my hon. Friend proposes concerning the graduated pension scheme would benefit the lower-paid workers.
Having said that, I want to add one or two points slightly different from what my hon. Friend has said. I, too, served in the Committee on the original Bill. I have never been able to understand, if one wished to contract out of the graduated scheme, why it was necessary for the lowest-paid, or £9 a week, worker to have to come in at the top grade, which was £15 and is now £18, as a result of which he has to pay a contribution based upon the top grade. It is beneficial to him—I will not go out of order by saying how beneficial it is—but it surely is not necessarily right and it is not fair to those who are not contracted out and who are on the £9 basis in the graduated scheme. This is not the time or place to put other suggestions to my right hon. Friend, but I should like to ask him to have a talk with my hon. Friend the Member for Bournemouth, West and myself. We could put to him suggestions which he might be able to incorporate at a later stage of the Bill.
§ Mr. N. Macpherson
I shall always be glad to see my two hon. Friends and to discuss these matters with them, because I know that they have a great deal to contribute in the way of thought to these matters.
359 It is just as well to bear in mind what the Government tried to do originally: that was, to provide an earnings-related element to the pension for those who were not in occupational schemes, to make certain that everybody in that position earning over £9 a week had an addition to his pension over and above what he would get by way of the flat-rate pension.
At the same time, however, the Government were anxious to encourage firms who were already providing occupational schemes—to encourage them to the greatest extent, so that they would have the best occupational schemes possible for their employees. That was why it was made a condition of contracting out of the graduated scheme that an equivalent pension benefit should be provided at the maximum of the range. That is to say, to receive a certificate of being contracted out an employer must guarantee to his employees in the contracted-out scheme a pension equivalent to what they would have obtained had they been in the graduated scheme and earning the maximum.
My hon. Friend the Member for Bournemouth, West (Mr. Eden) says, quite rightly, that if the maximum is raised, a greater proportionate obligation is placed upon the employer in regard to his lower-paid employees, in that for those employees also he has to provide an equivalent pension at the new and higher level. I do not regard this as unreasonable when one considers the movement of wages as a whole.
My hon. Friend the Member for Aylesbury (Sir S. Summers) has referred to this matter, but the fact is that average earnings have risen by roughly £3 since we first fixed the span. When the span was first thought of, average earnings were a little above the middle of the span. It might not have been unreasonable for us to have kept average earnings in the middle of the span, and that would have meant a much greater increase in the equivalent pension benefit and in the span than has actually been made.
We were very conscious of the difficulties that might arise if we were to do that As it is, we estimate that about 8,000 schemes covering about 1¼ million employees will have to be modified in order to provide an equivalent pension benefit at £18. I do not 360 think that this is an overwhelming obligation to place on employers.
I agree with my hon. Friend that this point will always need watching. What is in the Bill does not mean that every time we have a Bill of this nature we shall do things in exactly the same way as far as the conditions of the graduated pensions scheme are concerned. I can assure him that we shall be thinking of this before any question arises of increasing again the rates of National Insurance, and that we shall take carefully into account everything that he and my hon. Friend the Member for Horsham (Mr. Gough) have said.
§ Question put and agreed to.
§ Clause ordered to stand part of the Bill.