NATIONAL INSURANCE BILL

HC Deb 28 January 1963 vol 670 cc594-708

Order for Second Reading read.

4.2 p.m.

The Minister of Pensions and National Insurance (Mr. Niall Macpherson)

I beg to move, That the Bill be now read a Second time.

The Bill is short and its purpose is clear. Nevertheless, it is a Bill of great importance to millions of people, and the House will not expect me to deal with it too briefly. Its main purpose is to raise the standard rate of retirement pension and of unemployment and sickness benefit by 10s. a week for a single insured person and 16s. 6d. a week for a married couple, with proportionate increases in other weekly benefits under the National Insurance and Industrial Injuries Acts.

This is the sixth increase in benefit rates made since the National Insurance Act started to come into full operation on 5th July, 1948. It is the fifth under this Administration, and benefit rates have been increased on each occasion by considerably more than the rise in the cost of living since the previous increase. As a result of this policy over the years, while the cost of living has risen by 71 per cent. since 1948, the standard rate of benefit for a single person has already risen by 121 per cent, and, with the increases in this Bill, the figure will be 160 per cent.

Of course, as prices rise in the periods between each increase in benefits, it is natural that people should notice the decline in the purchasing power of the benefits, and that they do not always recollect that they are still worth more than they were before the last increase. This is still true of the rates of benefit introduced in April, 1961. These rates continue to be worth more than the benefits in force before that date.

The increases now proposed carry the process a long step forward. In terms of the Retail Prices Index, an increase of 3s. 6d. in the single rate of benefit would restore the loss of value since 1961. We are proposing to put the rate up by 10s., nearly three times as much.

In recent years, we have promised that not only should benefits keep abreast of the cost of living, but that pensioners should share in rising standards.

Mr. Marcus Lipton (Brixton)

Except the 10s. widow.

Mr. Macpherson

One indication of rising standards is the excess of the increase in earnings over that in prices. The latest available figure of average earnings is for last October. During the two-year period from October, 1960, to October, 1962, average industrial earnings for men rose by 91 per cent. A similar increase in benefits would require an extra 5s. 3d. on the single rate, just about half the increase we are proposing in the Bill. Therefore, the increases we are making are, relatively, about three times the rise in the cost of living and about twice the rise in earnings.

Also, more retirement pensioners are having their pensions supplemented by increments which have been earned by continuing at work after minimum retirement age. Over one-third of pensions awarded in 1962 were supplemented in this way by an average amount of 8s. 9d., and in all ½ million people, including wives, are drawing increments. Further, as time goes on, incomes in retirement are more and more being augmented through occupational pension schemes and through graduated pensions.

But there may be many receiving benefits of one kind and another—for instance, the very old, in whom many of my hon. Friends have shown particular interest, the sick and the unemployed, both those who have just lost their jobs and those who have been out of work for a long time—who have had no means of adding to the standard rate in this way. They are, of course, very much better off today than they have ever been. The single rate of retirement pension paid in 1946 would be equivalent, on present-day values, to 47s. 11d., compared with the 67s. 6d. for which the Bill provides—an increase in purchasing power of almost £1, or 41 per cent.

Nevertheless, before deciding to maintain the present uniform basis of National Insurance benefits, the Government gave long and careful consideration to suggestions for preferential treatment in favour of one class of bene- ficiaries or another, for example, the very old, those who have been unemployed for a long time and those who have just lost their jobs.

We have previously recognised the special claims of widowed mothers by way of children's allowances, and we have continued to increase the preferential treatment for them in the Bill. I shall come back to that. But we do not think that, as yet, there exists any wide measure of agreement that it would be right to give to, say, all older retirement pensioners a preferential rate of benefit, which under a contributory insurance scheme, must inevitably be at the expense of other classes of beneficiaries. Rather than rob Peter to pay Paul in this way, the Government concluded that the only possible course at present was to propose as big an increase on a uniform basis as contributors in general could be expected to afford.

Many of my hon. Friends, and many people and organisations outside the House, advocate preferential treatment for the old. But opinions vary about the age at which, and the way in which, preference should be given—whether there should be a special rate of insurance benefit for them regardless of other resources, or whether the supplement should be related to individual need and subject to a test of means made in one way or another.

These are big social issues, controversial issues. They are being widely debated not only in this country, but elsewhere, but, so far, inconclusively. We shall certainly go on considering these problems, and I assure the House that we are always ready to listen to advice from all quarters, conflicting though it may be.

Not unnaturally, the House is particularly concerned at present with the welfare of the unemployed. The unemployment or sickness benefit of a single man will go up by 10s. to £3 7s. 6d. a week and bear a higher proportion to average industrial earnings than at any time since the 1946 Act came into full effect on 5th July, 1948. The position of an unemployed or sick man with a family is certainly no less important than that of a single man. A married man with two children— I think that the House will be interested in these figures—will receive £7 1s. plus 8s. family allowance. A married man with three children will receive £7 13s. plus 18s. family allowance, that is, £8 11s. in all. A married man with four children will receive £8 5s. plus 28s. family allowance, that is, £9 13s. in all. Even a married man without children previously earning £10 a week, and a married man with one child who had been earning £12 10s., will receive benefit equal to more than 50 per cent. of their earnings.

In assessing the effect on the finances of a household when an employee falls sick or out of work, one has to remember that their benefits, unlike their previous earnings, suffer no deduction of National Insurance contribution or P.A.Y.E. In the case of a man with a family of four who becomes sick or unemployed, the income which he will receive by way of State benefit and family allowances in relation to average net earnings of about £15 a week will amount to as much as 60 per cent. or so of previous income.

I do not suggest that these examples afford ground for complacency, but I do suggest that we need not be ashamed of this picture. Moreover, there has been an encouraging growth of provision for redundancy related to wages and for sick pay by industry itself, and my right hon. Friend the Minister of Labour is at present discussing with representatives of employers and trade unions in his National Joint Advisory Council means of encouraging it further. For my part, I welcome the willingness of the Trades Union Congress to consider the problem of wage-related benefits. The means of paying for them have, of course, also to be considered.

I would not think it necessary to say more on this subject in connection with the Bill were it not that the hon. Member for Sowerby (Mr. Houghton) appeared to suggest on Friday that the contributions which 'the Bill will establish will be a wonderful milch cow which, of its abundance, could provide for further significant improvements in National Insurance benefits. That is certainly not so. As the Government Actuary's estimates in the Appendix to his Report on the financial provisions of the Bill show, the contributions, flat-rate and graduated, will be insufficient to meet the benefit commitments from 1965–66 onwards without the help of the quinquennial increases for which the 1959 Act provides.

This brings me to what is perhaps the most complicated part of the Bill, that dealing with graduated contributions and contracting out. It might be convenient if I first explained Clause 3, and I ask the House to bear with me while I try to make its effect clear.

Mr. Lipton

Does the Minister propose to deal with Clause 2, or will he deal with that Clause after dealing with Clause 3?

Mr. Macpherson

I think that it will be convenient if I deal with this complicated part first before I weary the House too much.

This is the second occasion since Parliament provided for graduated pensions and contributions that the Government have put forward proposals for increasing the flat-rate benefits and contributions. On the last occasion, two years ago, the increases were timed to coincide with the start of the graduated scheme and of contracting out, and it was, of course, necessary not to interfere with the arrangements already in hand for that difficult pioneering operation.

This time, the circumstances are different. The graduated scheme has been successfully launched, a considerable operational achievement for which I feel tribute is due particularly to my predecessor, under whose inspiration and guidance as Minister it was carried out.

I remind the House of the important aims which the graduated pensions scheme was designed to serve and which it has already done much to advance. I have in mind in particular the aims stated in the White Paper of October, 1958, namely, to institute provision for employed persons who cannot be covered by an appropriate occupational scheme to obtain some measure of pension related to their earnings; and to preserve and encourage the best development of occupational pension schemes". The first of these aims is secured by the scheme of graduated contributions earning graduated additions to the standard pension. Contracting out was designed to serve the second of these objectives, and it is an indication of its success that about 4½ million people are now in contracted-out employment, many, of course, by virtue of occupational pension schemes which had previously existed, but many also by virtue of occupational schemes introduced for the purpose.

Moreover, it is a requirement that on change of employment the contracted-out employee must be fully reinstated in the State scheme if his pension rights are not preserved or transferred at least to the extent of the maximum benefit provided under the State scheme. These provisions have done something, I believe, to stimulate movement towards transfer of pension rights on change of employment.

Contracting out is now well established and the purposes of preserving and encouraging the best development of occupational pension schemes are being well served.

Mr. John Eden (Bournemouth, West)

Has my right hon. Friend made any assessment of the likely effect on one of the declared aims of the Government, namely, to encourage occupational schemes, of extending the range in such a way that it is a requirement that a man earning £9 a week will have to have secured for him in the occupational scheme equivalent pension benefit as though he were earning £18 a week? Are not we in danger of extending the range too far and thus going contrary to the aim of encouraging further occupational schemes, many of whose sponsors will be dissatisfied by the interference with the practice which was brought about only two years ago?

Mr. Macpherson

I was coming to that point. I hope that what I have to say will reassure my hon. Friend.

The time, we think, has now come to expand the provision for graduated contributions carrying a graduated addition to the State pension—that is, to extend the range of earnings subject to the graduated contribution of 4¼ per cent. a side. At present the range is £9 to £15. Average earnings in industry, which were between £12 and £13 a week when the scheme was introduced, are now nearly £16 a week.

As average earnings rise, it would not accord with the design of the scheme that the span of earnings to which graduated pension provision is related should remain unchanged. Nor would it serve the fundamental social purpose of developing the provision of pensions related to wages for those who, for one reason or another, are not covered by an occupational pension scheme and seem unlikely to be for some time to come. The Bill, therefore, proposes to extend the range of earnings subject to graduated contribution to a span of £9 to £18.

One of the main purposes of the graduated pension scheme was to provide additional pension for those who were not covered by any occupational pension scheme. In so far as we are increasing the span in line with earnings, we are doing only what would be expected by those people.

Sir Spencer Summers (Aylesbury)

While it is understood that there is a case for increasing the upper limit for the reasons which my right hon. Friend has given, when the limits were originally fixed it was thought proper to fix the lower limit at £9 to exclude some of the lower-paid workers. Is not the case equally strong for raising that at the same time as raising the upper limit?

Mr. Macpherson

If we were to do that we would, in some measure at any rate, be taking away from people the prospect of benefiting from the graduated pension scheme. In any case, we would be very greatly reducing the contribution to the general National Insurance Fund.

Mr. Eden

May I press my right hon. Friend on this point? Would he be good enough to reserve his position on this, for there are ways in which this can be done without affecting the fund? While this is clearly a matter for discussion in Committee, will my right hon. Friend please not commit himself too far now because we do not want to introduce into the Bill a trend completely adverse to what was established originally?

Mr. Macpherson

I note what my hon. Friend says. I have no doubt that in Committee he will have ample opportunity of developing the point. My present purpose, however, is to expound the Bill as it is.

Mr. George Lawson (Motherwell)

While the right hon. Gentleman is on the suggestion of raising the minimum as well as having raised the maximum, may I assure him from my experience that many people would be happy to escape from the obligation of having to make a contribution to the graduated pension scheme? Will the Minister bear in mind, for example, that many widows who occasionally—only very occasionally—receive over £9 a week have to make a contribution to the scheme? Will not he make an effort to raise the minimum to something like £12 instead of the existing £9?

Mr. Macpherson

That is a matter which we can certainly discuss in Committee, but I see no prospect of the Government being able to vary the lower limit. The lower limit was fixed in 1959 and I think that it should remain at that level.

The graduated pension earned by a given amount of graduated contribution will remain as provided in the 1959 Act, so that there will be no change in the amount which a person earning up to £15 a week will accumulate as graduated addition to his pension. In future, however, a person earning £18 or more will be building up a graduated element half as great again.

The increase in the span of the graduated element involves changes both in the level of the contracted-out contribution and also in the level of the occupational pension benefit which has to be assured as a condition of con-tracting-out—what is known as the equivalent pension benefit. This change can hardly be unexpected by employers, since they had to take into account the likelihood of earnings increasing when they were deciding, in consultation with their employees and insurance experts, whether to contract out.

None the less, many will have to increase the benefits provided by their occupational schemes or make other changes in them, and they will require time to do so. Some may wish to take fresh stock of the position. To my hon. Friend, I would say that it is quite impossible to forecast what decisions they will reach. For this purpose, we have provided in the Bill for an accommodation period for adjustments.

Our intention is that whereas the extension of the span to £18 a week and the consequential increases in the graduated and contracted out contributions will operate from 1st June, 1963, the higher equivalent pension benefit which will be required as a condition of contracting out, or of remaining contracted out, will not operate until on or after 6th January, 1964. Clause 3 (4) enables us to provide that. Employers and others concerned will thus have almost a year from now to take stock of their position and adjust their arrangements as necessary in relation to contracting out.

The House will note that to assist employers, the exact amount of equivalent pension benefit per year of employ-men is set out in the Bill, and that power is taken in Clause 3 (2) to make regulations giving tables of the amounts of equivalent pension benefit for any given period of service. This is to meet criticism which there has been of the difficulties of calculation.

There is one other point to which I should refer on Clause 3. Fear has been expressed in some circles that any necessary changes in the graduated pension arrangements might involve some kind of retrospective increase in the obligations of contracted out employers. Subsections (3) and (4) of Clause 3 make it clear that the Bill involves no such retrospection. When the new requirements come into force, they will apply only to employment after that time.

I now turn to flat-rate contributions. Right hon. and hon. Members will have noted that the minimum flat-rate contribution for men is to be increased by 1s. a side for National Insurance, plus an extra 1d. a side for industrial injuries. There are also appropriate increases in other flat-rate contributions.

I should, perhaps, say a word at this point to explain the basis on which the new contracted-out contribution has been calculated. Employed men contracted out of the graduated scheme at present pay a flat-rate contribution 1s. 7d. higher than the minimum flat-rate contribution applied to those not contracted out. Thus, those contracted out, like those paying graduated contributions, are making an appropriate payment towards the cost of flat-rate benefits and allowing the Exchequer support of the scheme to be concentrated on the benefit of the lower-paid worker, who is liable only for, at most, a small amount of graduated contribution in addition to the minimum contribution.

The span of earnings on which graduated contributions are paid is being extended by half. That extension is to be matched by a corresponding increase from 1s. 7d. to 2s. 5d. in the amount by which the contracted-out contribution exceeds the minimum flat-rate contribution. Since 1961, graduated contributions and minimum flat-rate contributions, both for men and for women, have been equally divided between employer and employee, except for those contracted out and for juveniles.

The Bill affords the first opportunity to bring these contributions into line, so that under our proposals the National Insurance element in the contribution of the employer is the same as that of the employee for the contracted-out contribution. The new National Insurance contribution rates are set out in the First Schedule to the Bill. The total contributions, including National Health Service and industrial injuries contributions, are given in the White Paper accompanying the Bill.

Perhaps it is worth while mentioning, if the House can bear a few more figures, that the employee's share of the National Insurance contribution for a man earning £10 a week and not contracted out of the graduated part of the scheme represents 4.6 per cent. of his earnings, while for a man earning £15 and £18 the figures are roughly 4½ and 4⅓ per cent., respectively, of earnings.

The higher flat-rate contributions will produce about £130 million in the first full year towards the extra income of the National Insurance Fund estimated at £206 million in that year. The extra flat-rate contribution income will attract an extra contribution from the Exchequer of £28 million. Extension of the graduated part of the scheme will bring in £48 million more in the first full year.

I should like to put those figures on record and offer my apologies to the House for not having given them quite accurately in reply to a question by the hon. Lady the Member for Lanarkshire, North (Miss Herbison) when I made my statement last Wednesday. The increased contributions will not become payable until after 'the increase in pensions; that is, from the first week in June.

I have already referred to the preferential treatment accorded to the widowed mother in higher child allowances paid to her than to other beneficiaries. I do not propose to say a great deal about this, because it was one of the subjects that we debated on Friday. It is proposed to increase that preference to 10s. A widow with three children will get £7 19s. 6d., including family allowances. Of this amount, 67s. 6d. is the widowed mother's personal allowance. It is, of course, the standard single rate.

Clause 2, provides, however, that her personal allowance cannot be reduced to less than 26s. on account of her earnings, whatever they may be. The House may wonder how we arrived at this figure of 26s. It seems to us fair that a widowed mother, as long as she has children to look after, should be allowed to keep the difference between the standard amount which a married woman gets by way of benefit on her husband's insurance while he is alive— namely, 41s. 6d.—and the amount she gets by way of her personal allowance, namely, 67s. 6d. It seems reasonable that she should keep this amount, however much she earns, as a contribution towards the cost of maintaining the home. The children's allowances, of course, are not subject to the earnings rule.

There is only one further point on the National Insurance part of the Bill which I should, perhaps, mention. Subsection (4) of Clause 2 ties the earnings test of dependency for wives to the amount of the dependant's allowance.

Lastly, industrial injuries. The Third Schedule to the Bill increases contributions by 1d., that is to say, it restores the contributions to what they were before April, 1961, and raises the rate of injury benefit and the basic weekly rate of disablement pension to the new high level of £5 15s. Special hardship allowance will go up from 39s. to 46s. and unemployment supplement will be increased by 10s. to 67s. 6d. The widow now getting 64s. will get 75s.

The allowance for constant attendance is increased by 10s. to 50s., while in cases of exceptionally severe disablement the increase is 20s., giving an allowance of £5. If one takes such a case as an example, where there are three children, the family income will amount to £19 6s. compared with the present income of £16 4s. 6d.

I turn now to the date on which the new benefit rates will start to be paid.

Miss Margaret Herbison (Lanarkshire, North)

Before the Minister leaves the industrial injuries part of the Bill, may I ask whether provision has been made for those men and women who are under the old compensation Acts, or for people such as those with pneumoconiosis who were left out under the previous increases? Many are wondering why they have been left out of this Bill, or have they?

Mr. Macpherson

The Bill does not deal with either. I do not want to detain the House too long. I hope that my hon. Friend will deal with the point when winding up the debate.

I was about to turn to the date on which the new benefit rates will start to be paid and the new contribution rates will begin. The Bill enables them to be fixed by Order as on previous occasions. In the normal way all the benefits are increased simultaneously. This time, in view of the unusually heavy unemployment, the Government are anxious for the unemployment and sickness benefits to be paid as soon as possible.

As the House knows, unemployment benefit is paid through the employment exchanges and sickness benefit is normally paid by postal draft through local offices of the Ministry. The time required to prepare the change in them is, of course, much less than it is for pensions.

The House will, naturally, wish to examine the Bill with its usual care, but all being well—(that is, provided nothing untoward arises either within Parliament in the course of the Bill, or outside it, for example, in the health of the country— I intend that the higher unemployment and sickness benefits will start to be payable for the benefit week beginning 7th March. Industrial injury benefit and unemployability supplement will be raised from 7th March, also.

If I may complete the picture within the rules of order, the increased rates of unemployability supplement and additional treatment allowances under the war pensions scheme will operate from 6th March. Increased maternity grant will start to be paid from the week beginning Monday, 11th March. All the other benefits, notably retirement pension, disablement pension and widows' benefits under the National Insurance, industrial injuries and war pensions schemes, will, I hope, be raised as from the week beginning 27th May.

The House will note that it is expected that the lapse of time from my announcement last Wednesday to the payment of the unemployment and sickness benefits will be six weeks and to the payment of pensions and related benefits just under 18 weeks, which is less than on every occasion when benefits have been increased, except one. To keep to this programme will require great efforts on the part of the staff of the Ministry, efforts which, I am confident, will be forthcoming.

Mrs. Barbara Castle (Blackburn)

While appreciating that some time must elapse before the administrative arrangements are made to bring the increased old-age pension into payment, may I ask whether the Minister has considered the point of view Which has been expressed to me by one old-age pensioner concerned in a letter only today, namely, that it is a long time to wait? Old-age pensioners are hard up. Therefore, when the administrative arrangements have been completed, cannot the pensions be paid retrospectively to the date of the announcement?

Mr. Macpherson

No. We have considered the dates very carefully indeed and I do not think that it would be proper to pay a pension of this kind retrospectively. Pensions are, after all, payable from week to week. I do not think that it would be proper to pay what would be a lump sum retrospectively in that way.

I was about to deal with National Assistance. The House will recall that increases in National Assistance scale rates were made as recently as last September. The Board has informed me that it will be making proposals for a further increase to come into effect at the same time as the increase in National Insurance pensions. But the House will, I know, not wish, any more than I would, that those unemployed and sick who are both drawing National Insurance benefit and receiving National Assistance supplement should get no advantage from the increases in benefit from 7th March.

Without some provision in the Bill they would get none, since under the National Assistance Act, 1948, the National Assistance Board would be bound to take into account the whole of the National Insurance unemployment or sickness benefit. Clause 5, therefore, make special provision to cover the interval between the time when the new unemployment and sickness benefits come into payment and the time when the new assistance scales will take effect.

Briefly, it will allow those receiving unemployment and sickness benefit as much advantage from the higher benefit rates as they would have got if the National Assistance rates had been increased at the same time as unemployment and sickness benefits.

As to Assistance rates, I am expecting to receive recommendations from the Board very soon, and I shall lay draft Regulations before the House providing for increases in National Assistance scales as soon as I have considered them. As the House knows, the Regulations are subject to the affirmative Resolution of both Houses. I hope that it will be possible, if both Houses approve the Regulations, for Clause 5 to come into effect on 7th March, although the Regulations themselves will not come into effect till 27th May.

Let me now sum up the effect of these changes on the finances of the National Insurance and Industrial Injuries Funds. The effect on the National Insurance Fund is clearly set out in the Report of the Government Actuary which hon. Members, no doubt, have seen. In 1963–64 there would have been a deficit in the National Insurance Fund even if we had not increased benefits. Deferring the rise in contributions till the beginning of June, after all benefits have been put up, will increase that deficit in 1963–64 by about £17 million, as well as costing an extra £3 million this year.

For 1964–65 it is expected that there will be a small deficit of about £7 million. From 1965–66 it is expected that there will be on average small surpluses which would grow bigger after 1975 if the scheme remained unchanged. This estimate assumes that the quinquennial increases will be charged in full, but there is power to reduce them if things go reasonably well.

Looking to the future, recent population trends have proved reassuring in one respect. Previously, statistics had suggested that there would be a growing number of pensioners to be supported by a more or less static number of active adults. The buoyant birth rate, however, has caused the statisticians to revise this gloomy forecast and it now seems as though the population of working age is likely to increase appreciably over the next twenty years. So that, after all, we are not an ageing and weary community.

It looks as though people of retirement age will constitute two in 12 members of the population in 1975 instead of two in 11, as at one time thought. If the present trend in the birth rate and the present balance between emigrating and immigration continue, the position will be better than two in 13 twenty years later, in 1995— quite a long way off when looking forward.

The additional cost to the Exchequer of the National Insurance benefit increases in the first full year will be £28 million, as I have said, bringing the total Exchequer contribution to £218 million in the first full year. The additional cost to the Exchequer of the industrial injuries increases will be about £2 million, bringing the total Exchequer contribution to over £13 million in the first full year. In addition, the Exchequer will pay £15 million extra for war pensions under the Royal Warrant.

In conclusion, perhaps I might suggest to the House that whenever one is thinking of taking out an insurance policy there are two questions that one has to answer: "How much can I afford to pay?" and, "What risks do I want to cover?" If, as individuals or collectively, we were prepared to pay more, we could obtain higher benefits either all round or for some particular eventualities—on reaching 75, for example, or on losing one's job. One could also relax or dispense with certain conditions, such as the qualifying periods, the maximum duration of unemployment benefit, the earnings rule, the waiting days, and so on.

Some say that the Exchequer should pay more. But the answer to that which my predecessor gave still remains valid— the greater the share of the Exchequer, the greater the threat to the fundamental right to receive insurance benefit by virtue of complying with the conditions of the scheme, especially as regards contributions. The 1959 Act established a firm and intelligible basis for the Exchequer contribution to the National Insurance Fund—one-quarter of the combined minimum contributions of employers and employees and one-third of those of the self-employed. I am sure that it is right to adhere to that settlement.

I am equally sure that an increase of the main benefits of 10s. single and 16s. 6d. married is well worth the extra contributions which will have to be paid. Contributors will not grudge the retirement pensioner the increase for which he no longer contributes, for they recognise that, while their contributions pay for the retirement pensions of others, the day will come when they, too, will have retired and the contributions of those who are still working will pay for their retirement pensions.

Mr. Arthur Holt (Bolton, West)

Would the right hon. Gentleman give the House even one or two reasons why he stated a moment ago that it was essential to retain the present method of paying for the benefits and the proportions which now exist as between an employer and an employee, because these bear no relation to current practice in most other countries, certainly in Europe?

Mr. Macpherson

Current practice in other countries varies tremendously from schemes in which the Exchequer makes no contributions whatsoever to schemes in which it pays practically the whole amount. I do not think that we can compare the practice in other countries with ours very easily. I have given the main reason why we think it is desirable to stick to the idea that a scheme of this kind should be financed mainly by contributions, that the fact of making contributions makes a contributor feel that he really has a right to the benefit which is ultimately to be obtained.

I am glad that in the Bill we are signally fulfilling our pledge to give pensioners a share in rising standards of living—

Mr. Lipton

Except the 10s. widow.

Mr. Macpherson

The hon. Gentleman has a refrain that I feel he will use persistently throughout the proceedings on the Bill, but I hope that he will consider that we dealt with his proposal on Friday.

Mr. Lipton

And rejected it.

Mr. Macpherson

We are signally fulfilling our pledge to give pensioners a share in rising standards of living—by providing an increase proportionately almost twice as large as the rise in average industrial earnings for men since the last increase. I commend the Bill with confidence to the House.

4.44 p.m.

Mr. Douglas Houghton (Sowerby)

I am sure that the whole House would wish to congratulate the Minister on his very pleasant duty this afternoon. It must be very agreeable to him, after only a few months in his new office, to be able to introduce a Bill with such comprehensive and substantial increases in National Insurance and kindred benefits. I suppose that there are two Ministers in the Government who have enviable tasks at times; one is the Chancellor of the Exchequer and the other is the Minister of Pensions and National Insurance.

We on this side of the House, in common with right hon. and hon. Gentlemen on the other side, welcome the benefits that the Bill will bring. But I think that I am entitled to ask the right hon. Gentleman why the Government have been hanging about so long and what explanation he has to offer for this strange behaviour not only of himself, but of Her Majesty's Government during the last few months.

Let me take the right hon. Gentleman back a very short time indeed, to 26th November when we had a debate in the House and I moved, on behalf of the Opposition, the Motion That this House calls for an early and substantial improvement in all social benefits and allowances payable to the sick; those disabled in war and industry; the unemployed; widows and widowed mothers; and old age pensioners. My opening sentence in that debate was: This Motion is all-embracing and in peremptory terms."—OFFICIAL REPORT, 26th November, 1962; Vol. 668, c. 44.] What happened? We had a whole day's debate, and the right hon. Gentleman, then comparatively new to his job, waffled all round the subject, indecisive, inconclusive, cautious, promising nothing, asking the House to trust Her Majesty's Government to keep the matter under close review. Why was the right hon. Gentleman so hesitant about offering some help, promising something, doing something, in November when he is able, as events turn out, to make dramatic proposals in January?

Sir John Vaughan-Morgan (Reigate)

Does the hon. Gentleman remember his own prognostication, when he said: What we need is a steady rise in the national income so that social needs can be met alongside rising standards generally, but the Government's economic policies of late have dealt a serious blow to hopes of being able to do this in the near future."?—[OFFICIAL REPORT, 26th November, 1962; Vol 668, c. 52–3.]

Mr. Houghton

There is no doubt at all that it is desirable, obviously, for rises in social benefits to flow from a rise in the national income. I will say a word in a moment about the possible motives underlying the Government's present proposals.

What I want to ask is: are they part of the Government's social policy, or are they part of the Government's economic policy, or are they part of the Government's electoral strategy. I think that I am entitled to ask those things at this moment. I have not the slightest doubt that the Government are so melancholy about their standing and repute in the country today that they must make every effort in this direction, as well as in other directions, to recover the ground which is so disastrously slipping from them.

But why is it that we never seem to be able to get proposals of this kind to see the poor people through the winter? So frequently the first hint of action is given in October, there is still hesitation in November, there is an announcement in December or January, and the increased benefits become effective from the spring. I think that we shall all agree that this year the old people, the sick and the unemployed have had probably one of the hardest winters they have endured for many years.

It is, of course, gratifying that in the Bill there is provision for an earlier effective date for unemployment and sickness benefit and other benefits which are not so encumbered by the machinery of administration as retirement benefits, widows' benefits, and so forth. There are few order books for unemployment and sickness benefits, and it is possible to get the machinery working more speedily. We accept that the interval between the announcement and the prospective effective date of 27th May is about as short as it has ever been. But it is still a very long time. Eighteen weeks is a very long time to wait for a little relief from the hardships of the weather that we have been having this last month.

My hon. Friend the Member for Blackburn (Mrs. Castle) asked whether some measure of retrospection was possible, but the right hon. Gentleman appears to rule that out. Pension increases and other payments in certain circumstances have had retrospective effect. He could have fixed a date, subject to the passing of the Bill, which would have allowed for a little retrospective payment. This was done under the Pensions (Increase) Act which we passed just before Christmas. The date of 1st January, 1963, was stipulated. The payments have not yet been made in many cases under that Act, but when they are they will be dated-back to 1st January. So there really is no reason why a measure of retrospection should not have been included in these proposals.

As my hon. Friend the Member for Brixton (Mr. Lipton) has been making interjections about the 10s. widow, undaunted I will refer, as I have done before, to three groups of people who are missed out of this Bill. First, there is the 10s. widow—and we devoted a good deal of last Friday to her grievance. Secondly, there is the non-contributory, over-70 pensioner, to which my right hon. Friend the Member for Llanelly (Mr. J. Griffiths) referred on Friday. My right hon. Friend increased the pension of the non-contributory, over-70 pensioner in 1946 and it has never been altered since, except to take account of the withdrawal of the tobacco token.

Thirdly, there is the small band of modified pensioners—only about 13,000 of them remain—who are victims of a reduction in pension owing to conditions which applied before 5th July, 1953. A number of persons receiving a modified pension have to their credit a longer period of contributions than many people receiving full benefit under the National Insurance Scheme. It is unfair to perpetuate cuts in benefit on account of conditions which have now been abandoned. Modified pensions under these terms were abolished five years after the new scheme came into operation, except for those who had already suffered a cut in their pensions. Why cannot the right hon. Gentleman now clean the slate?

Now I come to the main issue presented by the Bill—that of the general levels of benefits. The right hon. Gentleman said that this was the fifth increase under the present administration and that on each occasion the rise in benefits was higher than the rise in the cost of living and the rise in the average of adult earnings. He gave some figures.

I believe that, for the main task that is before us today, recent rises in wages and retail prices are almost irrelevant. On each occasion we have advanced the pension ahead of the rise in the cost of living and of the rise in adult earnings. But it seems to me that what we should be doing now is not to establish a minute or close relationship between graphs of wage increases and graphs of retail price increases, but to define anew the place of the pensioner, the unemployed, the sick and disabled in the scale of incomes. We must determine the place that these beneficiaries are to have in contemporary social conditions, and that is where we must make an appeal to public opinion.

What sort of income do we all think the retirement pensioner, the sick and the unemployed should have to live on? What sort of pension and social benefit do we think adequate in present circumstances? Such an objective judgment by the public would be a good guide to what our attitude should be. I admit at once that public response is essential, because the nation would have to pay. But the nation should also bear in mind that it is "our turn next". Social benefits we are providing now are to provide social security not only for those drawing benefits today, but for those who may draw them tomorrow, or next year, in the years to come.

we ask: is £3 7s. 6d. a week in present conditions enough for a single person? Is £5 9s. enough for a married couple? Is that what public opinion judges to be an adequate retirement pension, or an adequate payment during unemployment or sickness? I think that we are entitled to ask from this House today, "Would you, Mr. Citizen, be content with £3 7s. 6d. if you were single, £5 9s. if you were married, or £7 1s. if you were married with two children? Would you be content to live on that during sickness, or unemployment, or retirement?" That is the test we should now apply. I am coming back to this issue, because it really is the core of our approach to a Bill of this kind. We are rapidly approaching, I believe, the crossroads in our thinking on National Insurance when we have to decide whether we are to go boldly on or merely patch up the structure of the 1946 scheme. Before I deal with that, however, I want to refer to unemployment and sickness benefits because they are brought forward for earlier application than the main benefits for retirement pensioners and widows.

The Minister hopes to bring in the new benefits for sickness and unemployment on 7th March. Could it not have been earlier even than that? A suggestion has been made that he could have introduced a short Bill to deal with this question alone and have got it through the House speedily so that he could have brought the benefits for the sick and unemployed into operation at least a month earlier. This could have preceded the main Bill and, with the co-operation of all hon. Members, no delay would have occurred in the passage of that Bill. But the Minister is doing his best within the framework of this one new Bill to bring in the additional benefits for the unemployed and sick as early as possible.

I am glad that the right hon. Gentleman has felt able to depart from the principle, so firmly defended by his predecessor, the present Chief Secretary to the Treasury, of not having benefits in advance of the movement of contributions. His predecessor had quite a lot to say about this in the debate on the National Insurance Act, 1960, on 15th November, 1960. I refer to col. 234 of the OFFICIAL REPORT for 15th November, 1960. I will not delay the House on the subject, but I am glad that we have at last broken away from that in regard to unemployment and sickness.

It is true, of course, that the previous Minister said that he felt unable, unless there were some impelling reason, to do this. I assume, therefore, that the impelling reason for doing this now is the desire to get these higher benefits to the unemployed and the sick at the earliest moment. I do not think that the Minister need have any financial worries about doing what he proposes. He knows full well that on account of the unduly heavy weighting for unemployment in the contributions in past years he has a lot of money tucked away.

The Minister was profiteering on unemployment in the years gone by. The contribution was based on an assumption of 4 per cent. unemployment which, happily, was never reached, and the profit on that went into the National Insurance Fund. The right hon. Gentleman has millions of pounds tucked away upon which he can draw in circumstances of this kind.

Mr. Arthur Tiley (Bradford, West)

Is not most of it tucked away in "Daltons"?

Mr. Houghton

I do not know where it is, but the right hon. Gentleman can lay his hands on it. I understand that some is invested in electricity and in other nationalised industries. It was a very good investment. It might have gone "down the drain" had it been invested in some other equities. I do not think that the right hon. Gentleman has any financial worries, but I do not know whether he has any "Daltons".

This hidden reserve is rarely mentioned and hardly ever touched, and now it looks as though we may be drawing on it very modestly to finance payments to the unemployed and the sick this year. That brings me to the question of the flat-rate benefits, especially for unemployment and sickness.

There is now a strong case for abandoning the flat-rate principle for unemployment and sickness. There is gathering opinion that the flat-rate concept for these benefits is out of date. We have intro- duced a graduated scale for retirement pensions, although we still have many retirement pensioners on flat-rate pension to whom the graduated scheme cannot apply. However, for the unemployed and the sick it is becoming imperative that benefits should be in closer relationship to their earnings.

The unemployed and sick are, by definition, the younger people. They are not over pension age. They are often family men with family responsibilities. They have not retired, and they do not have the savings of a lifetime. They do not have a firm's pension. They are in the fullness of life. They are a going concern and they hope to return to full health and strength and full work after as short a period as possible. They have hire-purchase commitments, mortgage commitments, and so on, and they need benefits which are equivalent to a high proportion of their recent earnings.

That is the social case, the personal case for wage-related benefits, but there is now an economic case, especially for the unemployed. Where the workless are heavily concentrated in certain areas economic consequences are likely to flow from the reduction in the general purchasing power in certain localities where there may be 4, 5, 6, 7, 8, 9, or even 10 per cent. unemployment and where the effect is bound to fall on local trade in all sorts of ways. Not only do those who are unemployed have their purchasing power reduced, but many others who are in fear of unemployment reduce their spending on that account.

Higher benefits for the unemployed would offset the fall in local trade and would help to stop the blight which might otherwise descend on certain areas on account of the chain reaction which flows from a high proportion of local unemployment. There may be a point sooner or later concerning the length of time during which a person is entitled to unemployment benefit. I am not sure that we have yet reached it, but 180 days or 30 weeks is now the maximum period for unemployment benefit except where a person has been insured for more than five years, when it may be considerably extended, to 492 days. We hope that persons now unemployed will not exhaust their title to benefit, but this is something of which we must take note, and perhaps we may consider it in Committee.

One of the incidental problems of advancing some benefits before others, arises in connection with a man, or woman, who may be receiving sickness benefit or unemployment benefit on 7th March, but who becomes a retirement pensioner before 27th May. He will have his benefit increased on account of being sick or unemployed, but when that benefit is converted into a retirement pension, will the amount be reduced? One correspondent has been quick off the mark to ask me that question, and "off the cuff", thinking that "fair do's" was in the mind of the Minister, I said that there would be transitional arrangements to deal with with. I hope that I was right.

Now I come to the finances of the scheme. I do not know whether hon. Members appreciate that of the increased revenue to pay for the higher benefit only 14 per cent. comes from an increased Exchequer grant and 27 per cent. from extending the range of earnings for graduated contributions from £15 to £18. When I referred on Friday to the graduated scheme being a gold mine, what I meant was that the Minister was able to draw on graduated contributions to finance benefits under the flat-rate scheme, and here we see it clearly enough with nearly one-third of the total cost of the higher benefits being covered by money transferred from the graduated contributions to the flat-rate scheme.

Another point to bear in mind is that by limiting the increases in flat-rate contributions, the Minister limits the Exchequer contribution as well. The Exchequer contribution is only one-quarter of the flat-rate contributions, and if they are kept down, the Exchequer contribution is kept down. The Minister may have a double reason for wanting to keep them down. Let us note in passing that the one quarter of flat-rate contributions in the case of those who are contracted out and who themselves pay a higher flat-rate contribution does not apply to the amount which they actually pay, but to the amount which they would pay if they were not contracted out.

The Minister is as mean as that with the Exchequer contribution. As he has explained, the person who is contracted out is to pay 2s. 5d. a week more in flat-rate contributions for the same benefit as the person who has not contracted out—for women it is 1s. 8d. a week more. Although he calls upon those contracted out to pay more in flat-rate contribution, the Minister will not cover it by a corresponding increase in the Exchequer contribution.

The details of the financing of this scheme are now so intricate and so obscure that we ought to appoint a kind of financial ombudsman to watch over this bewildering array of trickery and magic which is entwined in the finances of the National Insurance Scheme. The result of using £48 million of graduated contributions to help to pay for higher flat-rate benefit is that the Exchequer share of the total additional cost is reduced to one-seventh, or 14 per cent.

The Minister said that it would be a bad thing to enlarge the share which the Exchequer was finding lest it should weaken the right of a beneficiary to his entitlement under the scheme. This is where the Exchequer contribution has now got to. I assure the right hon. Gentleman that nobody will feel that his right to benefit is imperilled by an Exchequer contribution as small as this. It would have to go much higher before any beneficiary began to feel that he was losing his self-respect and independence and his claim as of right to the benefits of the scheme.

We went over all this at the time of the 1959 Bill, and we have seen exactly the way in which the finances of the National Insurance Scheme have been solved to the satisfaction of the Government by creating a graduated scheme, the funds of which could be milked, unabashed and without reserve, to finance the flat-rate benefits.

I come now to what is called "cost". It seems to me that in this context cost is a term of art. When a Minister gets up in the House and announces improved social security benefits, how the widows are to benefit, that the retired pensioners are to have a better time and the sick and unemployed are better off, and so on, and then refers to the cost, what, of course, he is doing is announcing the issue of a new policy to the whole of the nation in return for which he is to charge premiums.

We have to look at cost in that regard. The National Insurance Scheme now is as to 6/7ths of its expenditure self-supporting. It seems to me that what the Government have to decide is not how much they will spend, because they are not spending it, but what premiums they feel they can impose for what benefits. In that sense the right hon. Gentleman is a National Insurance agent. He is to sell something to the nation. He not only has the power of persuasion, but also the power of compulsion, so he has to be rather more careful than the ordinary insurance agent who is relying entirely on the voluntary assent of the assured person.

In theory, and, I think, in practice, the Government can now raise benefits to any level they consider expedient, politically or otherwise, or necessary, socially or economically, provided that the consequent higher contributions can be imposed fairly and without hardship and adverse economic side effects. For how much shall the people be compulsorily insured for sickness, unemployment, old age, and the rest? That is the question. Therefore, since it is a matter of relating benefits to contributions, with the Exchequer now a very junior partner, it becomes a matter of political and economic judgment as to the level of benefits under the National Insurance Scheme.

I think that the Minister, the Government and all of us should be putting this question time and again to the general public: what level of benefits are they ready to pay for, not only for others but for themselves? What is social security worth today in money terms? Are they concerned for their own future welfare, and for the present welfare of the old, the sick and the unemployed, deeply and strongly enough to bear the sacrifice which they are asked to make for it?

In short, this is a tremendous social issue, and if the public can be persuaded to set new and higher targets for social security and to be willing on a fair basis to pay for them, then there is no restraint on reasonable advance in our social provisions. I have repeatedly said from this Box that the British people acclaimed the Beveridge doctrine that social security was worth its money price, and I do not believe that the public generally has since faltered in that conviction.

The good spirit, willingness and confidence with which millions of people, many of them on low rates of pay, give up their stamp money is a tribute to the qualities of thrift and prudence so deeply ingrained in working-class tradition. I think we all agree with that. It is remarkable how much can be paid out by people for social benefits whereas in any other form there would be a reaction against it. We should bear in mind that this is not an imposition graduated according to assumed ability to pay. It is imposed on all, high paid and low paid alike. I think that this spirit is something to be respected and to be encouraged along the path of social advance, but not to be exploited, not to be the subject of the sleight of hand of the Minister of Pensions and National Insurance who wants to transfer Exchequer liabilities to the shoulders of the contributor.

Every young person joining the scheme now pays contributions substantially higher than the amount required on an actuarial basis to pay for the benefits which he is likely to receive. Similarly, a person, young or old, paying the graduated scheme contribution pays a much higher premium than his policy justifies, and this tribute is exacted from both lots of contributions in order to keep the scheme solvent and in order to reduce the liabilities which would otherwise have rested upon the Exchequer at some time in the years to come.

The original idea was that the Exchequer should bear those liabilities and that they should not be thrust upon the contributor who has to bear the burden of bringing millions into the scheme on full benefit as well as pay for his own share in it.

Mr. John McKay (Wallsend)

I am sorry to interrupt my hon. Friend, but could I put this point to him? He is dealing with a point of which I am particularly taking note. Is my hon. Friend aware that the lowest-paid workers in the country are paying 5 per cent. towards insurance benefit and that as incomes rise we get to the bigger incomes where the people concerned are paying only 1 per cent. instead of 5 per cent.?

Mr. Houghton

I am obliged to my hon. Friend. I know that he works very diligently on these figures and is always ready to quote them, sometimes to the discomfiture of those addressing the House. I am aware of these things.

What I am stressing and have stressed again and again is that the Exchequer has rid itself of a very heavy liability which all Ministers in the past contemplated it would have to bear at some time in the future. It has now placed its future liability fairly and squarely on the shoulders of the contributors. If anyone likes to see a vivid illustration of this he has only to look up Command Paper 629 of 1959 to find out that the estimated deficit on the National Insurance Fund in the year 1981–82 was going to be £424 million, and if he will now look at the White Paper now before us, Table 2, he will see that in 1981–82 there will be a surplus of £122 million.

When the right hon. Gentleman the Chief Secretary leaves office and is open to offers for directorships he will be offered some very lucrative opportunities of going into the City. Any man who can convert an anticipated deficit of £424 million into a surplus of £122 million is a man that the whole City of London is looking for. The fees paid to the chairman of Plessey's will not be in it. That is the accomplishment of the right hon. Gentleman's predecessor, and the right hon. Gentleman inherits all the financial advantages of that terrific financial operation.

I now want to ask the Minister a few questions about the level of benefits. I understand that a few days before he made his announcement in the House he saw the Social Assurance Committee of the Trades Union Congress. According to reports of that interview which I have read, the committee made certain proposals to him. It said that the pension for a single person should be increased from £2 17s. 6d. to £3 19s. 6d., with corresponding increases elsewhere. It also asked him to consider a system of graduated benefits—wage-related benefits—for sickness and unemployment.

Mr. N. Macpherson

It asked me to increase the benefits, and it said that if we did increase the benefits as it suggested it was willing to consider with us the wage-related benefits to which the hon. Member has referred.

Mr. Houghton

I thank the right hon. Gentleman. That is what I understood to be the position. The Trades Union Congress was asking for a benefit for a single person of £4 a week, and on that basis the benefit for a married couple would be £6 a week. That happens to be the same scale of benefits that the Labour Party conference at Brighton supported by resolution in October.

If the T.U.C. did ask for benefits to be raised to this level, it presumably did so in full knowledge of the financial consequences. Was that its assessment of what the contributors could stand in respect of higher benefits? I know that the right hon. Gentleman has always frightened people from asking for higher benefits by warning them what it would mean in higher contributions, but he has shown that when he increases benefits he does not always increase the flat-rate contribution to match. He has discovered an alternative to financing the increases, as to one-third, as I have explained. This seems to be the sort of level which we should now be considering.

Substantial as the increases are, if we are honest with ourselves we must admit that the benefits are inadequate. As I have already explained, the right hon. Gentleman has to exercise his judgment of the sort of increase which contributors —both employers and employed—can afford and will be willing to pay. In certain circumstances he might have to consider changing the basis of contribution— enlarging the amount of the Exchequer contribution. None of us would dissent from the view that the flat-rate contributory system has about reached the end of its tether. It is clear enough now that we shall never get an adequate minimum pension so long as we rely on the flat-rate contribution. We shall have to change over to contributions proportionate to earnings.

Mr. N. Macpherson

Does the hon. Member mean that benefits would not be proportionate to earnings? If the contributions are to finance the minimum the benefits could not be proportionate to the contributions.

Mr. Houghton

In a measure, yes, but under any such system it would be necessary to provide a minimum, and it would be a pretty high minimum. The graduated element in respect of benefits would be above the minimum. But the contribution to the scheme would be based on wages, and therefore would not impose on the lower-paid workers a burden, which, under present circumstances, would be somewhat unreasonable. We can see from the figures quoted by the Minister that the proportion of earnings paid in contributions under the flat-rate scheme can vary between 3 per cent. and 8 per cent., which clearly shows that the lower-paid worker is carrying a disproportionately heavy burden of contributions in relation to his income than are the people in the higher wage scales.

But hon. Members on this side of the House realise that this is in the nature of a crash programme to improve all benefits substantially and as speedily as possible. As an interim Measure it has much in it that we welcome. But it begs all the big questions to which answers must be found very soon. The public must realise that the Bill takes the existing scheme about as far as it will go on existing lines, and radical changes will be necessary both in the financing and the benefits of the scheme if it is to meet contemporary requirements.

To break through the 1946 concept— noble achievement though it was at the time—we therefore need higher targets, and financing on a bolder, fairer and sounder footing, so that we can extend the scope of the whole scheme. Other countries have done it, and there is no reason why we should lag behind. The great discouragement which hon. and right hon. Members opposite have in embarking on this tremendously exciting task is that they suffer from a congenital distaste for more State action, in a field in which they think that private provision, combined with National Assistance, would make the ideal Conservative Welfare State.

5.27 p.m.

Lord Balniel (Hertford)

Hon. Members on both sides recognise that the hon. Member for Sowerby (Mr. Houghton) speaks with an authority which is almost unequalled in the House. We invariably listen to his speeches with interest and respect. I was particularly amused to hear him chiding my right hon. Friend for, two months ago, having made a speech which he described as being hesitant and cautious—a speech in which my right hon. Friend had been reluctant to prognosticate the future. But the hon. Member will be the first to admit that, however cautious that speech was, at least since then we have moved forward. Within two months a Bill has been introduced. This is very different from the action of the hon. Member. Within those two months not only has he not moved forward, or even marked time; he has begun to go backwards.

We all remember that in his speech on that occasion he said that it was Labour Party policy to introduce graduated pensions which would be harmonised automatically with rises in the cost of living and in average earnings. This has disappeared from his speech. We also remember that he announced that it was Labour Party policy to demolish the means test in connection with supplementary pensions. This also has disappeared from his speech Perhaps he should not be too rash in chiding my hon. Friend for displaying caution when speaking on this subject.

Before turning directly to the Bill I wish to express the regret which I feel hon. Members on both sides of the House feel at the fact that my hon. Friend the Member for Torrington (Mr. P. Browne), who has invariably taken part in debates on this subject during the last few years, has unfortunately had to go to hospital today. For the first time for a long period he is not able to contribute constructively to the debate.

I welcome the general tenor of the Bill, with certain reservations about the methods of my right hon. Friend. In common with other hon. Members, I welcome the fact that once again we are able to give to the old people, the unemployed and the sick benefits which far outstrip the rise in the cost of living and average earnings since the last increase. I particularly welcome the speed with which my right hon. Friend has found it possible to act on this occasion, and the whole House will be indebted to the staff of his Department for the efforts which will have to be made to secure implementation of this speedy action.

One part of the Bill commands my wholehearted support and that is the emphasis which my right hon. Friend is placing upon the care of the widowed mothers. Everyone realises that this section of the community is faced with particular difficulties and I cannot do much more than emphasise the words used by my hon. Friend the Member for East Grinstead (Mrs. Emmet) in the debate last week. Everyone knows of the great emotional human problems which a widowed mother has to face when bringing up her children without the guidance of a husband.

Widowed mothers, especially the more elderly, encounter difficulties when it is necessary for them to find remunerative work at a time when they are endeavouring to bring up a family. So I welcome wholeheartedly the increase in the widowed mothers allowance by 10s. to 67s. 6d. I give a very warm welcome to the fact that, in respect of widowed mothers, my right hon. Friend is increasing the child allowance by 5s., which is exactly double the increase he is able to give in the allowance for other parents, and I welcome the alteration in the earnings rule whereby a widowed mother, as of right, will keep a minimum allowance of 26s. I also welcome, although it is not in the Bill, the proposal to increase the earnings limit from £5 to £6.

I welcome these improvements, but also I agree with those who urge that we should have a thorough examination of all the financial problems connected with widowhood and widowed motherhood. That is something which would take us right outside the scope of a National Insurance Advisory Committee. In this sphere there exist a great number of anomalies, all of which have good, historic origins and may be defended in isolation. Indeed, my right hon. Friend defended them in isolation most ably in the debate last week. But, put together, they tend to create a picture which is almost Byzantine in its rigidity and obscurity. All these anomalies make the matter so complex that it is completely inexplicable to ordinary members of the community. I venture to suggest that the majority of hon. Members find it almost impossible to answer the letters which they receive on this subject and invariably pass on their correspondence to my hon. Friend the Parliamentary Secretary who answers it with immense care. Even so, I doubt whether many of us understand the reasons for the anomalies. The total result is that there are many widows and widowed mothers who, because they do not understand the reasons for the law, labour under a strong sense of injustice and grievance.

Some of these anomalies are very cruel. They are, of course, well known to the House. There is the case of a widow, whose husband died when she was aged 49, who receives benefit for 13 weeks and nothing more, but must continue to buy her insurance stamps until she retires at the age of 60. Had she been aged 50 when her husband died, straight away she would have received a widow's pension. We all know that the pensions of widows of war pensioners and the so-called "industrial injury" widows are not subject to the earnings rule. Widows' pensions and widowed mothers' allowances are subject to the earnings rule.

All this was fully debated last week and my right hon. Friend said that he understood the feeling that it was time to have an overall review of the needs of widows. I hope that he will find it possible to initiate such a review. I am sure that he would command the support of the whole House in so doing, and I should like to see it associated with something far bigger. On the whole question of social insurance there seems to me to be a growing demand that we should chart new policies and not continue—here I paraphrase the words used by Disraeli, one of the greatest of the Conservative statesmen, in his novel,"Coningsby"—as mere children of routine.

This Bill is administratively sound and simple and it is certainly most welcome because it puts up benefits generously and substantially. But it is a mere child of routine. It could have been introduced 20 years ago, or 10 years ago, and would have been acceptable. Now, its introduction is based on a structure of flat-rate benefits which might have been accepted without question 10 years ago, but is certainly not so accepted by many people today.

I believe that three things are necessary in the sphere of social service. First, we must look at the problem of the care of the elderly people. The responsibility for elderly people rests upon themselves, on their families and on a whole multitude of voluntary organisations. It rests on many local government organisations and on a variety of Ministers. A major responsibility for their financial well-being rests on the shoulders of my right hon. Friend.

One of the results of this diversity of responsibility is an extraordinary lack of information about the needs of old people. We had the Beveridge Report in 1942, 20 years ago, and since then, in 1954, we had the Phillips Report on the economic and financial problems of the provisions for old age. That was two years after food rationing ended and the Committee considered totally different economic circumstances. The Report was based on information provided by the Royal Commission on Population which, as was pointed out only today by my right hon. Friend, was most misleading as was shown by subsequent events.

We have also had a variety of reports, which have been most useful, on specific subjects by a variety of university research workers, all of which are much appreciated. But, as those research workers have pointed out time and time again, general information on a national level is very seriously lacking. That was pointed out very firmly in the Cole and Utting Report. It was repeated only recently in the book, "The Last Refuge" written by Mr. Peter Townshend. He pointed out that very little initiative to provide national information is given by the central Government.

He gave a few random examples illustrating that there has been no official study of the use made by old people of home helps, health visiting or district nursing services, residential convalescent and nursing homes, chronic sick hospitals, or of meals or chiropody services, day clinics and centres. No study had been made of the 1½ million old people on National Assistance, no study of the practices of the National Assistance Board in awarding discretionary allowances. He ended by expressing the view, which is widely shared by research workers that: on the official level the pre-conditions of effective policy-making scarcely exist. I find myself echoing those words. If my right hon. Friend finds it possible to undertake a thorough examination of the problems of widowhood and widowed motherhood, I should like a comparable inter-departmental study of the problems generally associated with National Insurance.

The second thing which we ought to do is to stick very firmly to the principle that we want to encourage people to take part in private pension schemes. We want to encourage firms to provide occupational pension schemes better than can be provided by the State—con- tracted-out pension schemes. In the ideal State, because of high wages and full employment and the general sense of thrift, people ought to take out for themselves and to provide for their old age, personal pension schemes and gradually the State scheme would wither away. Obviously because of unemployment in the 1930s and low wages and because of inflation since the war we are a long way indeed from that Utopia.

None the less, today 10 million people take part in occupational pension schemes. Of these 10 million, 4½ million have already been contracted out of the State scheme because they will receive pensions better than can be provided by the State. All, or most, of those ½ million who have contracted out within the last few years have got to have their pension schemes reviewed as a result of the legislation we are passing. I agree with the interruption which was made by my hon. Friend the Member for Bournemouth, West (Mr. Eden). It is at the moment administratively very difficult to contract out.

If we are to call upon those contracted-out firms to review their own schemes every two years, or even at shorter intervals, we shall be making contracting-out very difficult indeed. I understand most clearly the arguments my right hon. Friend advanced about the difficulties of this matter, but I think we should try to find a way of ensuring that the different schemes do not have to be reviewed every time we put up State pensions.

Lastly, we ought to channel the resources of the State to those in greatest need. The State scheme is immensely expensive. Ten years ago it cost £275 million. Today it costs £787 million. My right hon. Friend, in this legislation, is adding £144 million. In 10 years' time, even without this legislation, pensions will cost over £1,000 million. In spite of this tremendous expenditure on State pensions, in spite of the tremendous burden which, as the hon. Member for Sowerby mentioned, is being borne by the lowest-paid contributor, there is hardly any attempt in the existing structure to concentrate help where it is most needed.

As a result the resources are thinly spread so that those in no need at all receive exactly the same help as those who are in desperate need. I find myself agreeing with the Economistthis week, which headed its description of this Bill as "Flat-Rate Folly." If we have to spread our resources so thinly, if we make no attempt to channel resources to where they are 'most needed, no wonder we have to witness this deplorable situation whereby 30 per cent. of those aged 80 and over are living permanently on National Assistance.

We can channel resources to help people in the greatest of need in three ways. The most delicate, the most effective and the most personal way is to do it by means of the National Assistance Board, but the National Assistance Board is designed to relieve individual hardship. It would be very tragic if one saw as part of our social security a large section of our old people living permanently on National Assistance. This might be a way of solving the problem flexibly and directing the resources efficiently to where the need is greatest, but it would not be acceptable to me as part of our social insurance policy.

An alternative way would be by tying the pension to the income of a retired person. This is a view which, I believe I am right in saying, is shared by some hon. Members on this side of the House. There is a disadvantage in this in that it reduces the incentive to thrift and destroys the admittedly rather weak link between contribution and benefit. The only other way I can see in which we can attempt to channel resources to where the need is greatest is arbitrarily to select one or two well-defined groups among our people who quite clearly are in the greatest of need. I quite accept that this is rough, that this is arbitrary, but rough justice will not be unacceptable to the country in this matter.

I can only repeat what has been echoed time and again from these back benches. Rough justice would be obtained if additional resources were channelled to those over 70 years of age so many of whom are living on National Assistance, or if additional resources were channelled to elderly people who are chronically sick. While I welcome the Bill because it undoubtedly brings greater financial help to those who are elderly, to those who are unemployed and those who are sick, I am saddened by the fact that it does not point to a finer and more noble social insurance scheme for the future.

5.49 p.m.

Mr. Arthur Holt (Bolton, West)

I am glad to follow the noble Lord the Member for Hertford (Lord Balniel) who, after initially commenting in detail on the Bill, spent some time giving us his views on how social security schemes should be developed in this country. I should very much like to follow him in that part of his speech, and I will take up one or two of the points which he made as I come to them.

He said that the cost of State pensions was rising to £1,000 million a year, but I would point out to him that the cost of these pensions has to be paid willy-nilly. The only matter for examination and suggestion is whether we should use one means or another. We must recognise that we have to agree to the allocation of a part of the resources of the nation each year to supplying the needs of all those who, for one reason or another out of their own control—old age, sickness, injury or unemployment —are for the time being unable to contribute to increasing those resources. We must make an allocation of the resources to ensure, I think, that the level of their income is not subject to the same kind of steep fall as took place in the past.

Hon. Members will have observed that it is 1963 and that the Beveridge Report has come of age. It is also the centenary of that other great statesman, Lloyd George, who made his initial and great contribution to our social security. Surely it is, therefore, an appropriate year for another great advance in our system of social security. But I agree with the noble Lord, in that we must not slavishly follow precedents which may have been set by either of those two gentlemen. The Beveridge Report laid down two lines of advance which have been followed. The immediate task was that of trying to put an end to destitution, while at the same time there was the task of seeing that people were encouraged to provide extra benefits for themselves through their own initiative or through collective bargaining.

I do not think that either of the two parties which have been in the Government since the war would assert that they have carried out the first part of the Beveridge Plan in full. It remains a first priority to fix the basic level of pensions and other social security benefits high enough for people to live on it without National Assistance. The noble Lord the Member for Hertford spoke about rough justice and taking out a certain group of old people and giving them higher benefits. This suggestion seemed to imply that the group of old people below them were not, in fact, receiving a basic pension which was adequate, and I do not think that the present pension can be considered adequate as a basic pension. At least we should be aiming at a basic pension for a married couple of not less than £6 a week.

In the meantime, the rest of the social security movement responded to Beveridge's urging that as much as possible should be done by individual and voluntary means. It must be said that the interest of the trade union movement in negotiating private pension schemes and other fringe benefits has been disappointing. I was sorry to hear the hon. Member for Sowerby (Mr Houghton), in his closing remarks, a little lukewarm, to say the least, about the desirability of private schemes. This is slightly out of line with what I understood was the current trade union view on this matter, because at the last Trades Union Congress last summer there seemed to be a movement to urge trade unionists to negotiate more strongly for many kinds of fringe benefits, such as improved private pension schemes, redundancy payments and sickness benefits.

I think that whatever the State does, if only because of the economic problems which arise if the whole provision is made centrally, it is still most important that we should encourage private individuals and firms to make as much provision as possible for sickness, injury, old age and redundancy through their own private schemes. This should be done while the State takes care of the minimum requirements.

As the noble Lord said, much progress has been made. There are between 10 million and 11 million people in private pension schemes. He gave the figure as 10 million and I have a figure of 11 million. I understand that this includes half the adult men in the working force. Other benefits have grown similarly. As early as 1957 nearly half the manual workers in London were having their pay made up by their employers, in whole or in part, in time of sickness or injury. This is of interest to those hon. Members from the North who are trying to offer suggestions to deal with the problem of the drift to the South. In staff grades the proportion was a great deal higher—75 to 90 per cent Redundancy benefits have been spreading and now cover several million people, although they are still nowhere near sufficient or widespread enough.

In all these ways there has been an improvement not only in the number of people covered but in the level of benefits aimed at. Although many pensioners must still manage with only the basic State pension and National Assistance, we are becoming accustomed to the idea that those who are now earning pension rights should look forward to pensions at half pay or even more on retirement. We have raised our sights. Under some redundancy schemes an unemployed worker's income is raised to at least two-thirds of his former earnings. In sickness, for instance, we are reaching a position in which it is expected that a good employer will ensure to all workers, or at any rate to those with a reasonable length of service, at least a period of sick pay at nearly 100 per cent.

There is a lesson for the future in all this, and in the way in which this revolution in the range and standards of provisions has come about. It is not entirely a matter of State action—and this is a point which I think the hon. Member for Sowerby and others have not fully appreciated. Nearly the whole of this movement for an improvement in social security standards has come from individuals and groups of people. We must allow this to go on. Firms and individuals have been free to try out new ideas and back them with their own resources. When an experiment has worked, others have imitated it and followed. It has caught on and spread. However, it must be admitted that many others have not followed and there the State has had to come in and insist on minimum standards.

As with so many other services in the past, it becomes the State's business to follow and consolidate the ground gained, but in doing so it must not close the door to any new pioneering. There is always room for improvement, and in consolidating the gains of the past the State must not bury opportunity for free initiative under a blanket of monopoly. Social security must remain decentralised, with many independent agencies and many openings for initiative and progress.

In these conditions, the right policy for social security on one or two main points is as follows. As to the standards of provision, the purpose of social security today is not simply, as it was initially, to avoid poverty. It should be to enable people to maintain steadily and without sharp breaks or steep falls in times of sicknes, unemployment or old age, the standard of living earned by their work. It is a question of how near to that standard of living we can reasonably get. For this purpose provision must be made which is, first, comprehensive covering all the contingencies which may cause a sharp break or steep fall in the standard of living; secondly, available with certainty to all, and at all times; and, thirdly, closely related to earnings.

It is useful to think in terms of two standards of provision. One is the minimum which is the least the State should enforce. The other is the normal level which ought usually to be obtained and on which good private schemes will improve. On this basis the standards for some major types of social security provision should be as follow. New entrants into pension schemes should be able to look forward to a minimum pension in the year after they retire of 50 per cent. of their earnings on the average of, say, their three best earnings years. The normal target that we should aim at is a higher one, perhaps 65 per cent. and more.

For sickness, industrial injury, unemployment and retraining the minimum should be two-thirds of earnings while in work. The normal standard should be a great deal higher, perhaps 100 per cent. in a number of cases, and in particular during the first weeks of sickness or injury and during periods of industrial retraining. In other cases it should be 75 per cent. to 80 per cent.

If we start to tackle it along these lines, we shall not only achieve a more effective social security but also help to deal effectively and economically often with some of the problems which arise in areas of sudden unemployment. Some of the towns about which Questions were asked this afternoon have an unemployment figure of over 6 per cent. This means a sudden drop in the income of those communities, which in turn raises its own problems. There is a very good economic case for endeavouring to keep the level of income as near as possible to ordinary wages.

Under the Bill a single man will receive unemployment benefit of 67s. 6d., which is a terrific drop from his ordinary wages. It is probably only about 22 per cent. if he is an average industrial wage earner. The benefit for a married couple will be only 35 per cent. of their earnings, whereas a married couple with two children will receive only 45 per cent. of their earnings. In the Bill we could not get further away from the principles that I have suggested we should follow in our social security system. The new benefits are still substantially below the level of earnings. We seem to be widely out of line with what is going on on the Continent.

The single man in relation to his earnings is now rather worse off than he was in 1924. His unemployment benefit was then 18s., which represented 32 per cent. of his average weekly earnings. The average German wage earner can expect a benefit of £6 5s. a week. The notional percentage of earnings is 55 per cent. In Holland it is even higher, ranging from 80 per cent. of previous wages for a married man down to 70 per cent. for a single man. Only Italy and Belgium retain the flat-rate benefits which are still favoured by this Government.

The other noticeable thing about the Continental system is that employers pay a far higher proportion of the contribution. The British employer pays a much smaller direct contribution than employers in any of the Common Market countries. In Italy employers made a social security contribution in 1960 of 37 per cent. of the gross wage. In France employers made a similar contribution. For Belgium, Germany, the Netherlands, and Britain, the figures are 17 per cent. 15 per cent, 14 per cent., and 2.8 per cent. respectively.

There is a very good economic argument for having it their way and not ours. It has been urged by Sir Robert Shone of "Neddy" and others that, if the employer's contribution is high, this ensures the fullest use of the labour he has and does not encourage the hoarding of labour. Although this may seem an odd proposition to advance at this moment, I am sure that nobody would think that the way to get out of our present economic troubles is to encourage employers to hoard labour. They should instead be encouraged to make the most economic and efficient use of the skilled labour they have.

I was disappointed with the Minister when he appeared to be fixed in his ideas about how our social security system should be paid for. This is one thing about which he should not be rigid. We should carefully consider the methods adopted in other countries and the suggestions made in the debate today with a view to keeping an open mind on the subject. We should try to achieve both economy and the right kind of incentives for industry and, at the same time, fairness.

I welcome the Bill as a stop-gap Measure. I regret that it is nothing more, and I urge the Government to get on with a serious study of the whole matter coupled with the quick production of plans for the proper development of our social security system in 1963. It should have as its main aim, by a combination of State and private schemes, the avoidance of severe and sharp drops in incomes whether because of industrial injury, sickness, unemployment or old age, over which the people concerned have no control. If the Government produce such a comprehensive plan I am sure that it will be warmly welcomed by all hon. Members.

6.12 p.m.

Sir John Vaughan-Morgan (Reigate)

I agreed with much of the speech of the hon. Member for Bolton, West (Mr. Holt), but I was a little doubtful about how far he really wished to rely on the State, and, rather like a good Victorian Liberal, he wanted to leave it more and more to private enterprise. I will not comment further on that aspect of his speech until I have been able to study it in closer detail.

The hon. Member for Bolton, West thought that the pension for a married couple should be £6 a week, but, apart from some remarks at the end of his speech, he gave no idea as to how the money to do that would be financed. He then suggested that the employers' contribution should be larger, and in many ways I agree with him. One of the advantages—I hardly like to use this sentence—of going into the Common Market will be the harmonisation of the social services. But, whether or not we join Europe, that is the direction in which we should move; we should see that we keep up and fill up the gaps in our social security system, as the Europeans have done; and they will have much to gain from us because they lag behind in certain directions.

The Minister and the Parliamentary Secretary must be somewhat relieved after last Friday to know that there is no great danger of a revolt on these benches, but I would remind him that there are still considerable criticisms from some hon. Members who would have preferred a degree of selectivity. My noble Friend the Member for Hertford (Lord Balniel), in an admirable and well spoken speech, voiced many of the ideas which I am seeking to express. However, in a curious way, this point was put more lucidly—certainly more lucidly than in any inadequate words of mine— by the Chief Secretary in the debate on 26th November, 1962. I am sorry that in what must be almost the first debate on pensions for ten years the Chief Secretary is today not taking part. On that occasion he said: The House must face these massive figures and the fact that a further series of all-round increases as suggested in the Motion would impose a very considerable additional charge on the present working generation. An additional difficulty is that while, in so doing, it would give—and I do not dispute it—advantage and help to many people who could well do with it, it would also give, at a heavy cost to the working generation, advantage to those who are not in particular need."—[OFFICIAL REPORT, 26th November, 1962; Vol. 668, c. 146.] That is exactly what these proposals do. After listening to the debate in November one might have thought that we would have had today from the Minister more concrete proposals for a measure of differentiation in the step forward which is being taken by the Bill. We might have deduced from the Chief Secretary's remarks that he was averse to such indiscriminate increases, but the best thing about these proposals is that for the first time, in a minor way, there is a measure of discrimination in that priority of payment is to be given to unemployment and sickness benefits.

Those who know something of the machinery of the Department must want to congratulate it on the way in which it has progressively improved the gap between legislation and administration; in other words, the way in which the gap in payment has been increasingly shortened. Bearing that in mind, it is about the wider aspects of selectivity I wish to speak. There are arguments for discriminating further in favour of the unemployed—if necessary in the direction of the proposals which have been made today—in benefits being related to earnings as a further supplementary scheme to the National Insurance Scheme.

There are others—including the hon. Member for Bolton, West, with whom I agree—who consider that short-time sickness benefit should now be taken out of the scheme altogether and made the concern of the employer. I am not anxious to define too closely exactly what I mean by "short-term sickness benefit", but I would have thought that we could have called it any illness up to, say, two or three months in duration. There would have to be separate provision for the self-employed whose earnings would not continue.

If we took short-term sickness benefit out of the scheme we could then concentrate the benefits on the chronic sick, particularly the chronic elderly sick. However, the strongest case of all for selectivity is surely that of supplemental benefit to the very old. It is true that if one had this it would be alleged that one might be helping those who are not necessarily in need. But the blanket proposals we are considering today do exactly that, as my quotation from the Chief Secretary's speech last November showed only too well.

I realise, too, that that argument is not acceptable to many hon. Members any longer. There surely are grounds for selectivity, although we now need a political decision to practise some form of discrimination in the National Insurance Scheme. We already accept that there is reason for special consideration for widowed mothers and we are now asking that there should be special consideration for the other classes who have been mentioned.

I do not want to discuss the earnings rule again. I made my views on that fairly clear in the November debate when, to my surprise, the hon. Member for Coventry, East (Mr. Crossman) referred to some of my criticisms of the Minister as being kindly, Christian, cautious and something else; a quadruple compliment from which I have not yet recovered. However, let me remind the House, as I did then, that the earnings rule does not apply at 70 for men and 65 for women. As we all know, at those ages the retirement pension ceases to be such and becomes an old-age pension. It is then really an old-age pension and not a retirement pension, because no retirement condition attaches to it.

Is it not, therefore, reasonable to treat people at a particular age as being entitled to a different benefit, as is the case in any ordinary insurance scheme? In private insurance we have different benefits for different circumstances and I am sure that here we can reasonably differentiate again. The very old—and I would tentatively suggest 75 for men and 70 for women as the appropriate age—should receive a higher benefit.

If my suggestions are vague, it is for the usual reason. It is difficult for us on the back benches to put forward concrete proposals. We are at a disadvantage; either we weigh in, as the Labour Party did once, with a scheme based on faulty statistics, or we are liable to be shot down by the man from the Ministry with the expert at his elbow. Nevertheless, we must try to convey to my right hon. Friend and to the Government that we who are concerned with these matters feel a degree of disappointment that does not yet appear to have reached the Government Front Bench. It may do so today. We feel that this elaborate machinery of social security was designed to fit an age that was gone, and that those in authority are not devoting themselves to thinking about what should be taking its place.

I repeat the plea I made in my previous speech for an inquiry—a plea made also by my hon. Friend the Member for Tynemouth (Dame Irene Ward) in her very remarkable speech last Friday, and a plea made also by my noble Friend. The hon. Member for Sowerby (Mr. Houghton) referred last Friday to the Phillips Committee, which has been mentioned again today. That reference prompted me to reread at least the Committee's summary and conclusions, but it is only fair to recall that the Phillips Committee's terms of reference were limited to provision for old age, and that is not enough.

My hon. Friend the Member for Tyne-mouth asked for an inquiry into all aspects of the problems of widowhood. That is a good idea—it could be made the subject of a separate inquiry, and I would support it—but that, too, would have limited terms of reference. What we really need now is not, as my noble Friend suggested, an inter-Departmental inquiry, but an inquiry once again by a Royal Commission, or whatever might be set up, that would examine the whole basis of the scheme and be able to call for the statistics and information which we on these benches cannot have. I hope that it would be with the agreement of both sides of the House. Only then would we be able to make a very real further advance in social security.

6.24 p.m

Mr. Harold Finch (Bedwellty)

We have had quite a number of debates on pensions and National Insurance in recent years, and on each occasion we on this side have stressed the fact that prevailing rates of benefit do not give anything like adequate security to those affected by our social legislation. Over the years, inquiries aimed at measuring the poverty in our society have been undertaken by social philanthropists and others. Perhaps the most notable inquiry was that which resulted in the Beveridge Report, whose recommendations, in a large measure, the Government of the day carried out.

Poverty, of course, is a relative matter. In relation to the standard of living and to wages, poverty today is quite different from the poverty existing when Rowntree first made his survey in York, and in considering any measure of social security we must have regard to industrial and social changes, to the present standard of living and to the wages now being paid.

It is bad enough to be poor, but to be poor and yet to live in a community where the mass of people are far better off than oneself, and able to enjoy many amenities denied to oneself, makes matters far worse. The outlook is even grimmer when a man is poor through no fault of his own—poor because of sickness, accident, war wounds received in defending his country, unemployment, due to some extent to lack of Government policy and lack of expansion in industry—or poor because of age itself. The man is poor through no fault of his own yet is living in a society with a high standard of living. This problem must, therefore, be related to the present standard of living.

The new rate of unemployment benefit is to be £3 7s. 6d. for a single person and £5 9s. for a married couple. The average wage in the mining industry ranges between £14 and £15 a week. I welcome the increased rates, which will to some extent alleviate the present position, but it will be seen that the redundant miner will find a heavy drop in his income. Today, £5 9s. is the poverty line.

After all these years, after all our inquiries and reports, and after the Beveridge Report, the position still is that the amounts now proposed represent less than subsistence. We have not yet been able to achieve a level of benefit which provides subsistence, let alone a reasonable degree of comfort or a fair relationship to wages, and this will still be true under this Measure.

We do not yet know what the National Assistance Board's new figures will be but, at present, taking into account the amount paid by the Board for rent, a single person is still at least 22s. a week below subsistence standards. The position of unemployed men—and their numbers now approach 1 million—receiving £3 7s. 6d. a week will be very grim in the months to come.

Another feature of the unemployment benefit is that it will not be continuous. It will cease after a certain period and benefit will be paid according to contributions. After the period expires, and it may be twelve months or less, the maximum being 492 days, the benefit ceases. We are hoping against hope that men will not be unemployed for as long a period as that, but the position today is grim and we must take care of what the situation should be in the future.

If these men are unemployed for any length of time they will all have to go on National Assistance. I would remind the Minister that this question of the discontinuation of unemployment benefit gave rise to mass demonstrations in South Wales, and it will give rise to mass demonstrations again there on 13th February. The men there remember the dark days when unemployment benefit ceased and they were brought up before tribunals to be questioned under a means test.

I know that it is not the Minister's intention to introduce a means test in that sense, but the fact remains that after the end of a certain period these men will be forced on to National Assistance. We are here dealing with young men, possibly married, young engineers in the North-East, in Scotland, and in South Wales, who have been enjoying a high standard of living. What will their wives say if the men remain idle for six months and have to apply for National Assistance? I remind the House that, as my right hon. Friend the Member for Llanelly (Mr. J. Griffiths) has said, we are here handling dynamite.

If anything will give rise to serious discontent it is this abolition of Section 62 of the National Insurance Act and I ask the Minister to put into the Bill a provision to allow a man to continue to draw unemployment benefit as long as the Ministry is not in a position to find him suitable work. I say that the onus must be on the Ministry and that when it says that it is not in a position to find a man suitable employment it should enable him to continue to draw benefit.

In time of sickness there is no question that as long as a man proves that he is incapable of working he continues to receive sickness benefit. Therefore, as long as a man is available and is prepared to take a job but the Ministry cannot find him one he is surely entitled to continue to receive unemployment benefit. A complete change of thought on the part of the Government is required in this matter of unemployment benefit. They have been in power for ten or eleven years. Much has been made of what the Labour Government did when they were in power, but we feel, as some hon. Members opposite have mentioned, that by now the Government should have reviewed this whole matter.

The Minister and hon. Members opposite must know that this unemployment problem is not due to one but to several factors which are unrelated. Men can be laid off, for example, because their firm is in economic difficulties or because the whole industry, like coal, cotton or the railways is contracting. Alternatively, they can be laid off because the economy as a whole is running below capacity as a result of the Government's economic policy. They can become victims of what is termed technological unemployment. These facts must be faced in years to come.

In the light of these facts unemployment benefits take on added importance. Technological changes are in their infancy in this country, but considerable difficulties are being experienced now in America as a result of these great changes. We must recognise the scope of automation for both manual and non-manual occupations. It is so far-reaching that a large number of occupations will be affected once it gets under way. We must, therefore, look closely at this whole problem of unemployment benefit.

The Guardiantouched this very point recently when it said: Even with the latest increases the level of benefits will fall short of an adequate subsistence standard, as the Government have recognised by agreeing to a simultaneous increase in National Assistance scales. The day may come when most retired people enjoy the advantages of private superannuation, but comparatively few old people now have any substantial means apart from old-age pensions and the new rates can scarcely be said to be over-generous to the sick and unemployed. For a married man with children it amounts to about one-third of the national average earnings of employed men. Even the man with two children will still get less than half of what he would normally have expected to earn. Although what is provided in the Bill will be received with a certain amount of gratitude by many people, it does not remove poverty from the homes of most of these people.

I would also draw attention to those men who are partially disabled who have not received any increase in industrial injury benefit since 1943. The majority of them are in the mining industry. They have declined in numbers from 24,000 to 16,000 and they have not received a penny piece of extra benefit in that time. Surely these men are not to be allowed to continue to be outside the provisions of the Industrial Injuries Act. They are the men who come under the workmen's compensation system. Some time ago these men who received a two-thirds maximum received an increase, but there is nothing sacrosanct about the two-thirds. Why cannot the Minister consider raising the ceiling to seven-eighths as some recognition of the fact that costs are rising and that we are living in a society where the standard of life has so risen that these disabled men are entitled to an increase?

Again, there has not been an increase for years in death benefit under the Industrial Injuries Act to the parents and other relatives of these men. Why are they left out of the Bill? I am pleased that the Government have increased the hardship allowance. Most of the men concerned are partially disabled. The increase in the hardship allowance will, of course, give them some satisfaction. To the man whose earnings have been £20 to £22 a week, but who is now earning £10 to £12 and is restricted by the hardship allowance, it is satisfactory that the allowance is to be increased, but far too many restrictions are still attached to the allowance. The Parliamentary Secretary has heard me dealing with this hardship allowance on many occasions, but I ask the Minister to look again at these restrictions imposed on the industrially disabled and to consider whether some of these anomalies can be rectified.

I welcome the fact that the Bill gives some increases in benefits. I agree with what some of my hon. Friends, and, indeed, some hon. Members opposite, have already said. The whole of this insurance scheme needs to be reviewed. I would have had sympathy with the Minister if he had said today, "This is a temporary Measure. I am increasing unemployment benefits so that they are somewhere near the level of wages. I realise that this will cost something, and I am, therefore, calling upon the contributors, both employers and employees, to pay more. I am also going to increase the contribution from the Exchequer".

As my hon. Friend the Member for Sowerby (Mr. Houghton) has said, the Exchequer is the junior partner in this concern. The Exchequer should certainly make a bigger contribution. I believe that employers and the State should make a larger contribution. They have done very well out of it in recent years.

The right hon. Gentleman could very well have brought in a temporary Measure which would have further increased the benefits and given added security to our people. He could have said, "This is only temporary. We intend to review the whole National Insurance Scheme", for it requires a complete review. However, we are getting nothing from the right hon. Gentleman on that aspect of the matter.

On the question of when the benefits should be paid, I would remind the House that we had a debate on this topic in November last. Before then we have had a long Recess. The Government must have had something in their mind about this Measure then. Why did not the right hon. Gentleman say in November, "Here is the Bill"? If he had done so there would have been ample time to put these benefits into operation. But now we have got to wait until March and April.

It has been a long and bitter winter for the aged, many of whom have been living in poverty. We talk about our Welfare State and all the rest of it, but widows and others have been living in poverty. The least the Government could do would be to treat the matter as one of extreme urgency and put these benefits into operation immediately. I regret that the right hon. Gentleman has not done so.

There are many features of the Bill that we can debate in Committee. Whilst I welcome the Bill, I am disappointed that the Government have not introduced benefits which would have given added security, and have not, at the same time, promised to review the position having regard to the changes that are taking place so quickly in our industrial and social life.

6.43 p.m.

Mr. Philip Holland (Acton)

The hon. Member for Bedwellty (Mr. Finch) said that poverty is relative, contrasting poverty today with poverty some years ago between the wars. I should like to underline this fact. As some hon. Members may be aware, my memories include a vivid recollection of the struggle of my widowed mother to provide for her three young children. In those days, not only was there no Welfare State but employment prospects were so remote as to be almost non-existent.

It is hardly surprising, therefore, that, like my noble Friend the hon. Member for Hertford (Lord Balniel) in this respect, I should particularly welcome that part of the Bill which singles out for special treatment the widowed mother with young children; a widowed mother, with perhaps more responsibilities and less facility for supplementing her income than many other National Insurance beneficiaries.

The example of a widowed mother with three children which was used by my right hon. Friend is for me particularly apposite, and I should like to expand a little on the point that he made about the conditions as they apply to these particular beneficiaries. I assume that the existing disregards for a widowed mother doing part-time work will continue to apply. I refer to fares to and from work, deductions from the weekly pay packet and the cost of supervision of the children while the mother is at work.

Mr. N. Macpherson indicated assent.

Mr. Holland

I note the nod of assent from my right hon. Friend, and on that assumption it seems to me that, with the combination of the approval of the National Insurance Advisory Committee to the draft Regulation laid before it in December and the provisions of this Bill, a widowed mother with three young children will be able to add gross weekly earnings of something over £7 to her total weekly benefit of £7 19s. 6d. before the operation of the earnings rule. In other words, her total gross income will approximate to the average full-time industrial earnings for the country as a whole before the earnings rule makes any encroachment into her National Insurance benefit.

At the same time, for the widow with three children, who is fortunate enough to be able to take up full-time employment or who can return to a professional career, £5 18s. of her National Insurance benefits—provided the N.I.A.C. agrees to the proposals before it—will not be subject to any earnings rule no matter what she earns.

It has been suggested on numerous occasions that the earnings rule ought to be abolished. The hon. Member for Sowerby (Mr. Houghton) said on Friday in another debate that this was now a part of the policy of the party opposite. I am not clear whether it is part of the policy to abolish the earnings rule partially or as a whole.

Mr. Houghton

The pledge has been given with regard to widows only.

Mr. Holland

I am obliged to the hon. Gentleman. I am not sure what the reaction of the trade unions will be to this. I had the impression that in the past they had tended to oppose the abolition of the earnings rule for pensioners on the ground that this might create a pool of cheap labour. I have no idea what their reaction will be to the abolition of the rule for widows. I should like to state my own feelings about the earnings rule and to explain why I am relieved that there is no mention in this Bill that it should be abolished. The foundation stone of the Beveridge Social Security Plan, which was accepted by all parties in the Coalition Government during the war, was that benefits should provide against the interruption and loss of earning power. My right hon. Friend the Member for Reigate (Sir J. Vaughan-Morgan) made this point too.

The advantage of incorporating an element of selectivity into an insurance scheme is that benefits can be larger for any given size of contribution than they would otherwise be. Knowing as we all do that some National Insurance beneficiaries are in far greater need than others, this is an element which appeals very strongly to me. Of course, we do not entirely adhere to the Beveridge principle because the earnings rule does not apply to all earnings. This modification of fixing a level of part-time earnings at which the earnings rule begins to apply was incorporated in the scheme when it was introduced by the post-war Labour Government, and has been endorsed and considerably improved by successive Conservative Governments ever since.

As regards the improvements, it is right and proper that the level at which the earning rule begins to operate should be periodically adjusted upwards to take account of the rising level of part-time rates of pay. That should be the criterion, rather than any dogmatic approach. I am glad to note that, certainly in the case of widowed mothers and to a slightly lesser extent in the case of other National Insurance beneficiaries, my right hon. Friend and I are in agreement on this.

A point has been made by the hon. Member for Sowerby (Mr. Houghton) about the 10s. widow. I gained the impression from what he said that the 10s. widow was worse off than the National Insurance widow. Yet my understanding of the position is that the 10s. widow is receiving 10s. more than the National Insurance widow in comparable terms. As I understand it, the National Insurance widow's benefit stops after 13 weeks. [Interruption.] She gets nothing. I am not talking about the over-50s, or the long-term sick, but about what I might call the standard widow. Some, I understand, are just coming into receipt of this benefit. They have not all been in receipt of it since prior to 1948. Therefore, in these circumstances, the 10s. widow is 10s. a week better off than the National Insurance standard widow. In 1948, the 10s. widow who was in the long-term sick category went on to the National Insurance scale rather than the 10s. scale. The Labour Government did that for the 10s. widows at that time. Therefore, in comparison with what I might call the standard class of widow, the majority of the existing 10s. widows are 10s. a week better off than they would be under the National Health Scheme.

Dr. Horace King (Southampton, Itchen)

Only if what the hon. Member calls the National Insurance widow is under 50.

Mr. Holland

I agree. I tried to make the point that I was referring to the standard type of National Insurance widow and not the exceptions to the rule, those over 50 or those with young children.

What I have said in this and in other respects should not be taken to mean that I am opposed to radical change in the National Insurance Scheme. On the contrary, I, too, should like to see a two-tier flat-rate benefit with the higher level concentrated on the categories of beneficiary who are most in need. I shall not, however, expand upon this, as my right hon. Friend the Member for Reigate has already done so, as has at least one hon. Member opposite. I understand the point made by my right hon. Friend the Minister on this subject and am reassured to learn that he is keeping an open mind about it for the future.

I should also like my right hon. Friend the Minister to investigate the possibility of a future development that would, in my view, take pensions right out of the arena of politics and, therefore, obviate the need for this type of Bill to come before the House periodically. It may be that my right hon. Friend could consider a scheme based upon a combination of percentage payroll and earnings tax linked in fixed ratio to a percentage of income for insurance benefits.

If the ratio initially fixed between contributions and benefits were right, although, I imagine, it would be a difficult one to fix, such a scheme could then be self-adjusting to meet changes in the economy. It may be that my right hon. Friend has investigated this kind of possibility. I am not trying to be dogmatic about one scheme but am suggesting one of many possible ideas for future development. I am trying, in other words, to be constructive for the future rather than critical of the past or present.

I recognise, albeit with a slight twinge of regret, that the urgency of the need to raise unemployment benefit and to inject more purchasing power into the economy, whilst improving the lot of the least fortunate members of the community, precludes the possibility of incorporating in the Bill any radical change in the basis of the scheme.

Having said that, however, let me go one stage further and congratulate my right hon. Friend the Minister on taking the opportunity offered by the situation to introduce substantial increases in the flat-rate benefit part of the National Insurance, Scheme, together with an improvement in the scope of the graduated scheme, which I, unlike some of my hon. Friends, warmly welcome because I believe this to be a move in the right direction.

The Bill is another example of Tory humanitarianism in practice, and as such I support it and hope that its passage through the House will not be long delayed.

6.55 p.m.

Mr. A. E. Hunter (Feltham)

We are discussing an important aspect of the Welfare State, for social benefits to help our countrymen who are unemployed, sick or in retirement are one of the foundation stones of the Welfare State.

Hon. Members opposite have criticised the financing of National Insurance. I want them to cast their minds back to 1912, when old-age pensions were introduced. Then, there was no contribution. The pension was paid direct by the Treasury; it was a national charge upon national taxation. The pensions carried, however, a severe means test. A person was not allowed to have an income of more than 10s. a week to qualify for the 5s. pension. Friendly societies, trade unions, and, I imagine, some insurance companies who had pension schemes were against that form of financial provision for old-age pensions.

It was the party opposite who, in 1929, made the change, no doubt with the idea of transferring the charge upon taxation and the Treasury to the employee and the employer. We then had the Act of 1929, which gave a pension of 10s. a week and reduced the qualifying age from 70 to 65. There is nothing fundamentally wrong in the financing of the National Insurance Scheme except that, like many other hon. Members, I consider that both the benefits and the Exchequer grant have not been high enough.

My hon. Friend the Member for Sowerby (Mr. Houghton) has pointed out that in the years ahead there will be a surplus of well over £100 million. As to financing, therefore, I do not consider that there is anything fundamentally wrong with the scheme, except that the Exchequer grant needs to be considerably increased.

I welcome the Second Reading of the Bill. It increases unemployment and sickness benefit and retirement pensions and it provides other increases for children and widows, as explained in the White Paper of 1934. I should imagine that the Minister had pleasure in introducing the Bill. It is the first Measure of this kind that he has brought in and it must be pleasing to introduce a Bill that will assist a number of our fellow countrymen.

We have for some time urged the Government to increase National Insurance benefits. The Trades Union Congress has been urging the Government to increase these benefits, not only to help the unemployed, the sick, the widows and the retirement pensioner, but also to help the economy of the country by putting more purchasing power into the hands of the people.

The new rates are a step forward. There is a 10s. a week increase for a single person and 16s. 6d. for a married couple and there are increases for children, for widowed mothers and for those receiving industrial injuries benefits. Even though this is a step forward, I still do not consider the amounts high enough to maintain a proper standard of living.

As other hon. Members have pointed out, we have been falling behind other European countries. We have certainly fallen behind other Commonwealth countries in our social benefits. I want Britain to lead. I want her to be, not at the bottom of the table, but at the top. This Bill, as I say, is certainly a step forward.

Hon. Members opposite have said they would like to see more money go to the poorest people. There are 1¼ million pensioners on National Assistance. The Minister has said that he is to bring in new regulations. There is nothing to prevent the Minister or the House from being as generous as possible by means of those National Assistance regulations. If the Minister and the House want to help the poorest of people, then I hope very much that the regulations which are to come to us in the near future will enable the National Assistance allowances to be generously increased.

After all, it has been, and still is, a very hard winter. I can imagine the situation of some of those old-age pensioners in the last few weeks, people with 57s. 6d. plus National Assistance. I can imagine their bills for heating, their bills for electricity or gas. I know that a good many pensioners have gone to bed to keep warm. Surely we do not want that in our Welfare State. The retired or the sick person cannot go out in severe, cold weather, and on the average his costs for heating are higher than those of an ordinary person who is not confined to his home day after day. In some suburban districts I am certain that those old or sick people need heating not only in the living room, but in the bedroom at night. Therefore, while welcoming these increases one regrets they did not come earlier.

Then, apart from the sick and the retired people, there is the unemployed person. He feels depressed because he has been out of work, and he wants nourishing food just as a sick person does and he wants warm clothing, too. On the past amounts granted to the unemployed, sick and old age pensioner they certainly could get those requirements.

The increases are a step forward and the Minister has promised extra allowances for those on National Assistance. We move along slowly with the social services. I have seen a number of increases which I have always welcomed during my time in the House, but this one, I think, is one of the best, and, therefore, on both sides of the House we welcome the Bill, but I hope very much that the Minister will consider— for I am sure that he is a kindly man— bringing forward the date for payments of the old-age pensions. He says that the time between his announcement and making the increased payments is a shorter time than that which elapsed on previous occasions between the making of an announcement and the paying of the increases.

On most of those previous occasions the interval has always been a fairly long period. But though the Minister says this is the shortest interval, the old-age pensioner has to wait till May. I cannot believe that, with an efficient Civil Service, and with all the administration that it can demand, it has to take nearly 18 weeks to get the alterations made. One has only to look at the pools people, how in one week a firm like Littlewoods, or other football pools promoters, can deal with millions of football coupons and millions of postal orders and dividends. I never do the pools; I do not quite understand them. Matters like treble chances look complicated; but those people can do all that in a week, and yet the Civil Service has got to take 18 weeks to alter the old-age pensioners' books.

Mr. N. Macpherson

But with the pools not such a high proportion of payments comes out.

Mr. Hunter

That may be, but they must be very efficient to handle these things not in 18 weeks, but every week. Therefore, I hope that the Minister will look at this point again and see whether he cannot make the date 1st April, or earlier.

I am pleased that the unemployed and the sick are to have their benefits in March. Let the Minister do the big, generous act, and make the payment to the old-age pensioners at least—as was suggested by my hon. Friend, and as I suggested in a previous debate on the subject—and back date it to March, because most old-age pensioners could do with a lump sum which would give them a chance of renewing some of the necessities of life, clothing, blankets, etc.

While I welcome the Bill as a step forward, I hope very much that we shall go on improving and expanding the social services so that we can put Britain at the top of the league in the social services and among welfare States.

7.5 p.m.

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

I should like to start by apologising to the House and to the Minister, in particular, that because of a predicament I was unable to hear the Minister's speech. The predicament I found myself in was that because I had to help lead a deputation from my constituency I had to miss the Minister's speech and the speech of my hon. Friend the Member for Sowerby (Mr. Houghton), and I apologise for speaking despite the fact of not hearing them. However, I have learned so far as I can what was said, and I gather that from the Minister there were no welcome surprises and that he made the same kind of speech that we have had before.

One of the difficulties in this debate is that of not repeating oneself, because the Government repeat themselves. There is only one thing, perhaps, a little novel in the Government's attitude, and that is their intention to bring the payments in with speed.

I will tell the Minister something. One of the things most odious is the view that we should use the social services for pump-priming purposes: this view that "The economy is in difficulty so let us shuffle out some purchasing power, for it is convenient now that the old-age pensioners should have a little more because the economy needs it." There are many ways of pump priming, and we ought not to measure the right of the sick and the widow and the old by whether the economy requires to be primed but by whether social justice demands that they should have increased benefits. We should always assess the need for pensions simply and solely in terms of whether we have done justice to those people, because they have a need to share in the prosperity, and their needs are as great in a period of prosperity as in a period of slump.

So this reason which the Minister has now suggested for this Bill, that now we have a lot of unemployed suddenly the time has come to raise unemployment benefits, is not a just one. Were the people who were unemployed before less deserving of benefit? Were their needs any less because they were unemployed before, or because there were fewer of them? It is a striking philosophy, to say that we disregard social justice in principle and that we are moved by economic or political or even electoral convenience.

Having said that, I want to congratulate the Minister on something else. He has resisted a very insidious campaign and a very powerful argument which says, "Look, this is the time to meet the needs of the unemployed because the public is feeling for them—even lots of Conservatives are feeling for them. So let us make a big public gesture to them because they are fresh in the public eye, and let us do it at the cost of the old stagers. Let us leave the old-age pensioners where they are, and let us leave the sick where they are, for they are largely forgotten, and we have this new class of the needy, the unemployed, and we shall get more votes and some popularity and get some kudos if we give more purchasing power pumped to the unemployed in certain areas by a special discriminatory increase to the unemployed". I congratulate the Minister on refusing the suggestion that he should give to the unemployed a special increase which would not also go to the sick and the widow, and of course those with industrial injuries, and other categories of short-term victims and casualties of the Welfare State.

Why do I say that? I was struck by a quite staggering article in the Economist the other day. I always thought the Economistwas a scientific paper—until I knew something of the facts on which it built that article. For what did the article say? It said that one need not worry about the sick because now half of the sick were in employers' schemes for the paying of wages up to the last £1.

I went into it. We did not learn anything from the Ministry. One of the Ministry's biggest deficiencies has been its refusal to discover the facts. Year after year it has been pressed to investigate the real position of the sick, to discover how many sick people get assistance from their employers. I gather that the Ministry is in the middle of an inquiry. I am told that there are no facts available yet. If there are any facts available, perhaps we can winkle out of the Parliamentary Secretary a temporary, interim report about what she has learnt so far about sickness schemes. This would be interesting, but I shall understand it if she thinks it wiser to wait.

One of the dangers about an interim report on sickness schemes is that one may be able to obtain information from employers who have organised good schemes but it may be difficult to get evidence from places where schemes do not exist. Thus, the early statistics may be unusually favourable in showing the number of workers covered. Let us suppose that it is true that a large number of employers are decent and that a large number of workers are covered by sickness schemes. The Economistwas moderate in its claim and referred to "rather more than half". That means that 500,000 persons a week are not covered by any sickness scheme.

I suggest that the plight of a sick person who is taken out of industry is just as grave as that of an unemployed person. There is no way of discriminating and saying that the unemployed person is worse off. I have heard people say that if one is physically healthy it is worse to be out of work. But the cost of being sick, as I learnt last year, is sometimes higher than that of being unemployed. So it seems that 500,000 people a week get no assistance from their employers when they fall sick, and I see no conceivable reason in terms of social justice for saying that they are any less in need of an increase than the 80,000 unemployed. To say the contrary seems to be flying in the face of every fact.

A new publication, New Society,tried to do a very small-scale investigation of actual conditions. It took for this purpose Bethnal Green, where remarkable social survey work has been done. I will not quote the figures resulting from its survey, because it was conducted before the last increase but one. A very small survey was carried out, covering about 80 married men, mostly aged 50 or over, but what it showed was interesting. It showed that some 30 per cent. of these men were being fully paid by their employers while they were sick, and there was no considerable suffering among them. Here one ought to look into the point previously made in Government reports that if a man is receiving full wages from his employer and also receiving sickness benefit he may be better off as a sick person than as an employed person. There is an anomaly here. The main fact shown by the survey was the appalling conditions of certain people in Bethnal Green, constituting nearly half of those surveyed, who were receiving no kind of assistance. I want to show how in the case of sickness it is not true to suggest that one has to wait a long time before it hits one hard.

The survey quotes a Mr. Spears, who said he was finding it more and more difficult to go on managing. He was a skilled man of about 30, and was the only employee in his firm. He received no money during sickness other than his National Insurance allowance for himself, his wife, and his two young sons. After paying rent of £3 10s., this family of four was left with £2 17s. 6d., including 8s. family allowance, to meet all its weekly household expenses. For Mr. Spears, "managing" had meant using up his savings, leaving hire-purchase payments, cutting down on food and fuel, and borrowing from his mother. This is not a unique case; it is a normal case of a man working for a small employer. I am not blaming the employer for not voluntarily helping the man—many employers would not do so unless it were made compulsory—but this is the kind of problem which ought not to exist, and one should certainly not say that special benefit should be given to the unemployed but not to those people.

The second case is that of a Mr. Morris, and it is an interesting one. It relates to the National Assistance Board and shows what happens when one is sick. Mr. Morris lives with his wife and three children in a council flat and pays a rent of £2 a week. Two of the children are at school; the third child is two and a half years old and the wife stays at home to look after it. Mr. Morris normally earns £13 a week, and has no savings. Anything laid by goes on the children's shoes, and so on.

Mr. Morris fell ill just before Christmas. The House should listen to this carefully, because it is a characteristic story. Mr. Morris worked on until Friday, 22nd December, in order to be able to draw his full wages. He hoped to rest over Christmas and avoid being off work. However, feeling no better, he went to the doctor on Wednesday, 27th December. On Friday, 29th December, he had no wages to come, and no sickness benefit either, because he had sent off his certificate only the day previously, and he went to the National Assistance Board and was given £5 5s., which, with the 16s. family allowances, gave an income of £6 Is., less than half Mr. Morris's normal income.

In the second week his National Insurance benefit came through, but the £5 5s. lent by the National Assistance Board had been deducted, so that only £1 4s. was payable. On the Friday he went again to the National Assistance Board and received £2 10s. Thus, the family's total income, taking into account the family allowances, came to £4 10s. in the second week.

On Tuesday of the third week Mr. Morris was interviewed for the purposes of the survey. He was hoping that with the help of the 16s. family allowances, due that day, he would be able to manage until the Thursday, when his National Insurance benefit would come through, without returning to the National Assistance Board. He expected that the previous week's loan would be deducted from his National Insurance benefit. The total income for the family in the third week was £4 15s. It is not surprising that the family was two weeks in arrears with the rent and three weeks in arrears with the hire purchase payments; and at the time of the interview Mr. Morris was looking round the house for something to sell.

This is not an extravagant or extreme case. It is a perfectly characteristic case of what happens to a young man, with not excessive obligations but living in a perfectly ordinary way in Bethnal Green, when sickness hits him just before Christmas. In the struggle to get money in order to keep his family, he overworks at the critical moment, and that makes it worse. I do not know what the end of the story is. The National Assistance Board is said always to be generous. The information I have is about the paying back of the loans. Surely in such a case the loans should have been outright grants to the man.

I congratulate the right hon. Gentleman on resisting the temptation to say that the sick were not in need of assistance at this time as much as the unemployed. In fact, all people on State benefit were needing assistance. He was right, therefore, not to make any special differentiation for any single group. But I must say that this Bill—this has been said, in effect, by every single speaker from both sides of the House—shows the total bankruptcy of the Government's scheme. I should like to go into some detail about contracting out. I have asked myself what employers will do with regard to their obligations to the State. Let us look at the scheme.

Little has been said in this debate about the flat-rate increase of contribution. I know why. It comes on 1st July, after the election. But a flat-rate increase of 1s. for a lower-paid worker is a very heavy imposition indeed. It is already putting the flat rate up to £1. I can tell the Minister that his present flat rate is so high that when the Labour Party introduces its single-graded contribution I think we shall be able to promise the worker earning below the average wage a reduction. So heavy is the burden put on the worker now by saying that all workers must pay the same that everyone earning under £15-£16 a week is being mulcted of far more than the share due from him for the rest of the social services. This, of course, is the old evil of the poll tax on the poor. Each time the Government put one shilling on that tax they make the burden more intolerable. It thus becomes so high that when one is sick or unemployed there are no savings to fall back on. That is part of the burden.

One of the biggest triumphs of the Government has been the transfer to flat-rate contributions of a burden which was previously carried by the income tax payers. In the last ten years they have been priding themselves on being able to say this. I congratulate the Minister of Pensions and National Insurance on being a good assistant to the Chancellor of the Exchequer. The job of any Tory Minister of Pensions and National Insurance is to serve the need of the Chancellor of the Exchequer to tax the poor in order to give reliefs to the rich. That has been the sole object of the Government over the last ten years. They pride themselves on it. They think they are wonderful in doing so and being able to reduce Surtax, Profits Tax and Super Tax in so doing.

Then they say, "Look how we have managed to increase National Insurance benefits again." But they do so by increasing the new graduated contributions of men earning between £11 and £15 a week. When the Government introduced the scheme for graded contributions, during the Committee stage we warned them that such a scheme would mean absolute chaos for employers if the Government chopped and changed the rates. People have contracted out on certain conditions. Millions have done so on the understanding that the scheme gave benefits of a certain kind and that private schemes would have equally good benefits.

Every employer who has contracted out has to recalculate the pensions he must give in order to stay contracted out. In terms of bureaucratic anomaly we are getting the most intolerable burden. This might be justifiable if the end benefits were of any value, but we know that they are far below the National Assistance level. Therefore, the whole point of the scheme is to get money out of the contributors.

These publicans in Newcastle—I use the name in the Biblical sense—constitute the largest and most futile group of civil servants. They are the most expensive bureaucracy in the country. However, we shall be able to use them under the Labour Government, for we shall have a lot to do in bringing forward a social security system worth having. I should like to know the figures showing how much these civil servants cost, together with such activities as the micro-film department, and how big the building is in which they work. It would be interesting to see how much this costs in income tax.

Now another huge staff will have to be employed to make all the recalculations which are now being made necessary. What is it all for? It is a trick to enable the Chancellor of the Exchequer to transfer more of the burden to the average wage earner. That means the man earning £18 a week and under. Anybody earning more than £18 a week gets off scot-free. He pays a proportion but does not pay proportionately. Of course, the scheme is bankrupt when seen in terms of the poll tax and of the graded contribution.

Now I wish to deal with benefits. We all agree that although we dislike the scheme we cannot oppose this Bill. Thank God, we are getting something for the unemployed, the sick, the old and the widow. But we all know perfectly well that this flat-rate increase in benefits is hopelessly unsatisfactory. It is inadequate for those who really need it most, and for a certain number of people it is not the most urgent priority. We know what the problem is.

First, there is the case of the old-age pensioner. Let us be quite clear about this. We understand that the National Assistance scales are also to go up. So they should, for they are so low. But the fact remains that under these provisions the number of pensioners on National Assistance will still be a scandal and a disgrace to the country. This Bill will not raise the pension above National Assistance level. The National Assistance scales will be put up again. Thus, the pension will not be a subsistence pension even by the Government's definition.

Why is this? It is because National Assistance is the Government's main instrument for paying pensions. It saves them money. It forces employers to spend more money on private pension schemes. It helps the insurance companies. The Government have deliberately created a vicious and mean pension scheme in order to force people into private pension schemes. That was the whole object of their operation. That is why they congratulate themselves on the number of people who have contracted out. They are always saying how they welcome the growth of private schemes.

The Government's scheme is so vicious and such a financial swindle that even the civil servants who sit in the box near the Ministerial benches have got themselves out of it. They invented it, so they know what a swindle it is. Every single Civil Service Union has contracted out. Why? Because such a vast amount of the money is used to pay the Exchequer's debts that only one-fifth goes back in benefits. It see that someone is now going up to the box, presumably to ask the civil servants there all about it. He will not get the answer.

What are we to do? Really, it is little use telling this Government. Such advice is no good for a bankrupt Government. But we have a chance to outline what the Government will do. On this issue they are sold out to the insurance companies. They got the biggest contributions from these companies at the last election by claiming that the Labour Party, with its own superannuation scheme, would take over their business. It certainly will. It will take over all future superannuation business.

I do not know how much money the Government got from the insurance companies. I believe that it ran into tens of thousands of pounds. The Government are in the debt of these companies and are therefore compelled always to run State pensions at. a level where private pensions are superior. As long as that situation continues, the State pension will remain low.

The Government will not put up contributions before the next election. They will try to diddle the elector again by seeking to persuade him that they intend to do something about better pensions. But they may find that the elector has become "canny". There is no hope of the sinner—the Government—having a death-bed repentance. He cannot. He is a prisoner of his past.

What will a Labour Government do? First, they will have a scheme with a single graded contribution which will not stop at the £18 a week wage but will go to the top so that there will be fair shares. There will, of course, have to be a ceiling but it will be a great deal higher than £18 a week. There are much higher levels in other countries, including Germany and Sweden. Naturally there must be an upper level but the only sane method is to have a percentage of earnings levied each week. A contributor then always knows what his contribution will be over the years. That is clear, intelligible and fair, and it gives enough money to pay for the amounts of pensions and social security benefits needed. There is no other way except by taxation.

It must also be a tripartite system. How should it be divided? I do not think we should go as far as Germany, where 10 per cent. of the earnings each week are paid by the employer and the employee. This is something which I do not think the British would do. I think that employers must pay more, and J would not be surprised if this proved to be about 8 per cent., with three to four per cent contributed by employees. This, I think, would entail an increase big enough to give the funds required, taking into account the other contribution in the tripartite system. With those three elements one could calculate how large would be the funds which one would have at one's disposal and which would enable one to provide social security benefits on a scale which was requisite, or which the people found satisfactory.

The idea of a wage-related contribution inevitably brings with it that of wage-related benefits. We have already explained that we propose to have half-pay retirement in the long run, which is a form of wage-related benefit, and we will have to make similar provision for the unemployed and sick. I believe in wage-related benefits in all those cases because I believe that the job of social security is to cushion the shock of misfortune. The shock of misfortune cannot be cushioned unless the benefit is related to the standard of living which the man had achieved before the misfortune fell upon him. What is needed to cushion that shock for a married man with £20 a week is different from what is needed for a married man with £10 a week.

It is clear that, although we may have to have a ceiling, we must have a very high national minimum. All these things are very complicated and we shall have to work them out, but as Socialists we must be very careful to see that the national minimum is very high, because one of our objects is to raise the whole national minimum above the National Assistance scale. We will have to have a ceiling beyond which the benefits would not be related to wages, but up to that there would be a relation between wages and the kind of pension or unemployment relief or sickness benefit which a man drew provided that he had certain obligations. They could not be related to luxury limits at the top nor to penury at the bottom, but between the two limits benefits should be able to bridge the gap for the active person who is unemployed, or sick, or for the older person who has retired, so that he can have roughly the same kind of social life which he had while still at work and at the height of his work. I know that half-pay on retirement does not do that, but it goes a long way to help and one would not be excluded from private insurance if one chose.

I want now to deal with sickness and unemployment benefits and to take up something which was said by the right hon. Member for Reigate (Sir J. Vaughan-Morgan). He suggested that the whole sickness benefits scheme should be scrapped and that we should hand over to employers the sole obligation for covering their workers during sickness. Some years ago we put forward the view— and I still hold it—that employers should be given some obligation. But to give employers the sole obligation would mean only one thing—nobody with a bad health record would be employed.

If the obligation were put entirely on the employer, he would not hire such a person. We had better face the fact that employers are what are called business men, and that if they know that they are in danger of hiring a bad risk for which they will have to pay for the rest of a man's life they will not hire him. There would then be a group of people who would be difficult cases and who would be unemployable.

It is, therefore, obvious that the State, even in the short run, will have to bear a portion of the responsibility for sickness benefits, although it should be divided between the State and the employer. In Germany the employer has to make up the sickness benefit to the level of a man's wages. First there is sickness benefit, which is provided by the State and which is wage-related, and then the employer is obligated to make up the employee's wage for the first so many week's illness.

That is a sensible combination of the two—the State pays so much and the employer pays so much. However, one must be careful with a scheme of this kind. I am prepared for the employers to share in the responsibility, but we should not be led astray by those who think that we can save money by harshly imposing on employers a responsibility which they would not carry out except to healthy young people, only heaven helping anybody over 50.

I am glad that the earnings rule in respect of widows is going. The widows' case is the most difficult of all. A young widow mainly needs a lump sum to see her through her difficulties.

Mrs. Harriet Slater (Stoke-on-Trent, North)

The earnings rule is not going.

Mr. Crossman

I was thinking about our Government, not the Government of right hon. Gentlemen opposite. I meant when we were in power. What I meant was that I was glad that finally we had decided that the earnings rule should go. It will be done under our Government, not the Government of right hon. Gentlemen opposite. My mind had put itself forward in history to the point when we were doing the job.

We have to be much more drastic in our approach to this matter. I shall not go into it in detail, but it must be appreciated that there are different stages of a widow's life at which her financial requirements are different. At one point she may require a lump sum, or a combination of a lump sum and a pension. I appreciate all the difficulties about some people "blueing" a lump sum and we will have to work it out, but we have to relate what she is given to her needs, to whether she is just a widow, or a widow with children, and so on. While we do that, we have to make sure that we do not introduce other anomalies.

This is a very tricky job, but there is no reason why that benefit, too, should not be integrated into the kind of living-standard-related scheme which I have tried to outline.

One of the biggest things we have to tackle is the problem of those outside the scheme, a problem which is getting more and more difficult. For some bureaucratic reason, there are half a million people who are not covered. This is a number which is dwindling all the time, but I am often tempted to plead for the abolition of insurance stamps and for payment to everybody in certain categories. That would be an enormous advantage and I am not sure whether the time has not arrived for having a flat-rate benefit for every widow and pensioner and so on, although at first with different grades of flat rate. Not only would millions of £s' worth of bureaucratic administration be saved, but it would remove a sense of grievance among these unfortunate people about which all hon. Members know because we receive so many letters about it. If we could end that grievance, there would come a time when the group was so small and still dwindling that we could say that in order to be humane and not bureaucratic we would knock out the stamps altogether and allow everyone to have the benefits.

I know that the Parliamentary Secretary will refer to the cost of such a scheme, and clearly any scheme which we set up must be a combination of a flat-rate scheme, carrying on the tradition of the old system, and a graduated element. We could not at once substitute the one for the other and they would first have to be integrated, with the flat-rate element becoming less and less important as the years went on. The aim would be a transition from wholly flat rate to wholly graduated, and there might be a period of, say, 15 years during which the system would contain elements of both schemes. It would be for the Minister to find a just way of operating the transition, but we are convinced that in that transition the biggest single responsibility would be to ensure that the existing old-age pensioner felt that he was being fairly treated and that we were not legislating only for the future.

The single most important problem when working out a new deal in social security for all people is to see that those who, through no fault of their own, became pensioners too early are not left behind. That is why we are convinced of the need to relate pensions not only to the cost of living but also to the national average wage, so that the pension always bears a certain fixed proportion of the average wage. In that way we would get the matter out of politics.

We have also to face the problem of the two nations, of the one million pensioners at the very least who are quite well off and who, although entitled to the flat-rate increase, are not entitled Do all that we can give them, and the one million or two million pensioners at the other end of the scale who are desperately poor and must be given more than we can give them on the flat rate—but not through National Assistance.

That is the problem. It is the problem of the guarantee, the problem of the supplement, a problem which any Government with a heart and mind and will power could solve. The Minister is clever enough to do all those things, but he is not a free agent. He is working for the insurance companies and that is why he cannot do these things. The difference between the two sides of the House is that we shall not be indebted to the insurance companies for anything in the next election. We shall be completely free to introduce a genuine National Insurance Scheme, to make National Insurance a reality, to make subsistence a reality and to give all those words a meaning which they have never yet known. We know that we can do it.

Looking at the Bill itself, we have a frustrated feeling, knowing that we have to have six weeks in the Committee stage dealing with all the trivialities of a Bill which will be out of date before it is passed. We have to have it in order that we can make this small increase— a hopelessly unsatisfactory increase. It is necessary for us to go through all this nonsense, When what we want is not a new Bill but a new Government.

7.40 p.m.

Mr. Charles Curran (Uxbridge)

I am sure that I speak for all hon. Members when I congratulate the hon. Member for Coventry, Ea9t (Mr. Crossman) on his preview of his next Election speech. Clearly, this is the stuff that he is going to give them when the "balloon" goes up. But I want to start by talking about the Bill.

Mrs. Slater

This is the next election.

Mr. Curran

Not now. One thing at a time.

I want the Parliamentary Secretary to clear up one point that is bothering me. It is apparently assumed by hon. Members on both sides of the House that it is administratively impossible to grant the increase to retirement pensioners without a lapse of 18 weeks. I want to know why. On every occasion when previous Ministers of Pensions have announced increases they have wrung their hands in departmental agony and have said that it was impossible to grant the increase until after X weeks ahead. I hope that my hon. Friend the Parliamentary Secretary will make history and break the sound barrier by telling us not only that it is impossible, but why it is impossible.

I fancy that I am not the only person who thinks that, on the face of it, it should be quite straightforward for the Ministry of Pensions to give instructions to post offices, telling them that when a persons comes to draw his pension of, say, 57s. 6d., he shall automatically be given a further 10s. There may be administrative reasons why this cannot be done. If so, I hope that my hon. Friend will make them clear, because many people are genuinely puzzled to know why this cannot be done quickly.

The hon. Member for Sowerby (Mr. Houghton), in a speech to which I listened with much interest, said something with which I entirely agree, namely, that the Bill is an interim measure, a crash programme for dealing with an immediate and urgent collection of difficulties. He then said that the Bill was about the last that we could do in the way of patching up the 1946 National Insurance Scheme, and that the time was coming when we ought to break through the 1946 concept. Again, I entirely agree. We have been trying to run the Welfare State for the last sixteen or seventeen years on a series of assumptions which are no longer valid. We have kept on patching it up and adding bits, and we have come very nearly to the end of the patchwork process.

If we reread the Report of the founding father, Lord Beveridge, we find that nearly all the assumptions on which he worked have turned out to be completely wrong. That is certainly true of his financial assumptions. I want to refer to what I suppose is the most remarkable piece of unfulfilled prediction ever issued by the Stationery Office. On page 199 of the Beveridge Report the Government Actuary estimates what the Welfare State will cost. The Government Actuary of that date was rash enough to work out the arithmetic for three years—1945, 1955 and 1965.

If we compare the figures that he gave for 1955 and 1965 with the actual amounts that we are spending, we can see that the Government Actuary of that date, whatever his other merits, would never have been able to earn a living as a racing tipster. Let us take one figure only. On this celebrated page 199 the Government Actuary, using his statistical telescope, managed to work out that the cost of the National Health Service in 1955 and also in 1965 would be £170 million. As we all know the cost of the Service increases every year by almost the sum then estimated to be the total cost of running it.

The assumptions on which we have been working have all turned out wrong. First, all the calculations made about the original cost of the Welfare State and the amount of benefits that we could provide have been nullified by inflation. We are not able to do as the founding fathers in the Labour Party expected in 1946, namely, to provide benefits whose purchasing power comes anywhere near the expectations of the post-war years. That is why, every few months, we must keep injecting a new dose of money into the system. We must try to keep the assumptions more or less in line with contemporary facts by voting more and more money at intervals.

I suggest that this process of patchwork has continued long enough. I hope that this will be the last time that we shall be asked to agree all-round, across-the-board increases. The assumptions on which we started welfare legislation in the post-war years have been nullified by inflation, and also, to a great extent, by post-war social changes. I want to deal in particular with the way in which post-war changes have altered our assumptions about pensions.

If I understood the speech of the hon. Member for Coventry, East correctly, his idea of the good society is one in which the State accepts an all-round, universal obligation to provide people with pensions when they are too old to work, and to pay for those pensions by a universal levy. I suggest that the way in which our society has developed since the war makes that quite unnecessary. We have seen how, since the war, more and more people look for support not so much to the State as to their jobs when they are too old to work. The emphasis is continually shifting away from the State to the job.

This process has continued on both sides of the Atlantic. The great difference between organised labour in this country and that on the other side of the Atlantic is that organised labour in America has welcomed, accentuated and cashed in on the process. More and more, the organised worker in North America uses his trade union power to extract welfare benefits from his employer. More and more trade unions of North America seek to increase pensions by means of collective bargaining rather than by voting.

Our trade unions have not done that so far. Nor have they followed the good example set to them on the other side of the Atlantic and used their collective bargaining power to obtain insulation against redundancy. In this country, they have hardly bothered to exploit the advantages of the sellers' market after the war, in order to compel employers to pay them for redundancy. They should have done so. The American trade unions have done so. But, unfortunately, for the sixteen or seventeen yearns when our trade unions could have used this bargaining power they failed to use it.

We are now being confronted by the accelerating process of industrial change, and the unions are looking to the Government and Parliament to do something about it.

Mr. Crossman

I entirely agree that the unions ought to do this, and that employers should be encouraged to undertake such schemes for pensions, sickness and unemployment. But I am sure that the hon. Member will agree that where an employer does not do this there is a comprehensive State obligation to fill the gap. That is just what I was saying.

Mr. Curran

I do not dispute that if pensions are not provided by employers, the State has to step in and act. But I am saying that the failure of employers to provide pension schemes on the scale obtaining in North America is largely a criticism of the trade unions which could have achieved this had they chosen to do so. They had the power to do it. They had the "sellers' market" in labour which should have been used to give them leverage, and they did not use it. They ought to have done so.

I agree with the hon. Member that where employers do not provide pensions, obviously the State has to come in. I suggest that this ought increasingly to be the rô1e of the State. It should not take over the whole business of providing for people from the cradle to the grave. The State should take action basically to supplement rather than to replace.

I fancy that my opinions about this were expressed persuasively by the hon. Member for Bolton, West (Mr. Holt), with whose point of view I find myself in very considerable sympathy. The hon. Gentleman recognises, as I do, that in our increasingly prosperous society there is, in fact, no need to provide universal benefits. More and more we can leave people to use the advantages which affluence gives them in order to obtain these benefits for themselves, either by individual or collective efforts, or by a mixture of both.

When we look at the plight to which we have been reduced by our insistence on maintaining these post-war schemes —even though the value of money has fallen and the schemes do not any longer provide the benefits which they are supposed to provide—I cannot for the life of me see why anyone in the Labour Party should imagine that we shall get out of the mess simply by repeating the dose of 1946 once more—

Mr. Crossman

Certainly not.

Mr. Curran

Look at the position of pensions. We have nearly 6 million people who are too old to work. Suppose it is true that about one-fifth of them are poor and that they have to get supplementary help through National Assistance. Let it be granted, if hon. Members wish, that another one-fifth are also poor and could get National Assistance, but do not do so because they think of it as charity.

Let it be granted that two pensioners in every five are in urgent need of extra help. I am quite prepared to believe that. As things are now, the only way in which we can help the two who need help is to give help to the three who do not. We have to spread the money which we have available for pensions over people who do not need it as well as those people who do.

Mr. Cyril Bence (Dunbartonshire, East)

We can get it back in taxation.

Mr. Curran

I am glad the hon. Gentleman makes the point that we can get it back in taxation. But instead of getting it back in taxation and giving aid to the Treasury, why not give the money to the pensioners who need it? Why use increases in pensions for the purpose of endowing the Treasury? Why is the hon. Gentleman so eager to pour money into the pockets of the Treasury and so reluctant to pour money into the pockets of (hose who are hard up?

Mr. Crossman

I did not make myself clear. I thought that the final point in my speech about the supplementation of the pensions of these 2 million indicated that this supplementation was not available for those who did not need it.

Mr. Curran

In my last remarks I was dealing not with the hon. Member for Coventry, East, but with the hon. Member for Dumbartonshire, East (Mr. Bence). Apparently the hon. Gentlemen do not see eye to eye in all respects. The interruption of the hon. Member for Dunbartonshire, East was directed not at the arguments which the hon. Member for Coventry, East had been using, 'but at the arguments which I had been using; and I thought I ought to reply to his interruption, since he was talking at that moment, rather than to the hon. Member for Coventry, who was not talking at that moment.

I wish to put to the hon. Member—I am now addressing myself to, among others, the hon. Member for Coventry, East and to the hon. Member for Dunbartonshire, East—the reductio ad absurdum of universal benefits and pensions. If we wish to help—I am sure that we all wish to do so—the people at the bottom of the social heap, the unfortunate men and women who have to obtain National Assistance—and they are the Cinderellas of our society—how can we do so? As things are, the only way is by increasing the National Assistance scale. It is idle to imagine that we can help them by making a universal increase in the size of pensions because in the scheme as it is operated at present it would be completely impossible to raise pensions sufficiently to lift the recipients of National Assistance above the assistance level.

An interesting and remarkable piece of arithmetic has been worked out about this and I wish to quote it. I am quoting from a pamphlet entitled "National Assistance: Service or Charity?", published by the Fabian Society last September. I quote from the foreword to the pamphlet: This pamphlet was written by Howard Glennerster, a member of the research staff of Transport House, with the assistance of a study group of people engaged in social work and social research… Mr. Glennerster asks whether it would be practicable to get people off National Assistance by a fiat-rate increase in the pension. This is what he says: … a brief look at the cost involved makes it clear that it is just not practical politics. To take the vast majority of recipients off National Assistance would involve raising the flat-rate pension to over £5 for a single person and £8 for a married couple. The cost of such an increase would be well over a thousand million pounds, that is to say, one thousand million pounds extra per year. Assuming that it was financed as the present system is, this would mean about twelve shillings a week on the weekly insurance stamp plus the 3s. 3d. contribution per week from the State. It would involve spending 10 per cent. of the national income on social security alone. So says Mr. Glennerster. He adds one sentence which I wish also to quote: If National Assistance were the only social service this might be conceivable, but when education expenditure needs to be increased by £700 million in ten years and national health service expenditure is rising by over £100 million a year, it would be utterly naive to suppose that any government could raise the flat rate pension to such a level. The truth is that we are now the captives of 1946. Here are these people on National Assistance and we cannot get them off National Assistance by raising pensions because the cost of that would be astronomical. We help them by making certain increases in their pensions, but when we do that we spread the benefits over people who do not need the money, and only a comparatively small amount of it goes to those people who do need it.

These deficiencies have emerged in the 1946 legislation. There are a good many others. It means that the time has come for us to make a fresh attack on the problem of poverty. In our society we have certainly 1 million, perhaps 2 million, people in urgent need of help. All the money we can spare for helping them ought to be concentrated on the people who need it. We should concentrate on helping the people who need help and not, as happens at present, spread the help both over those who need it and those who do not.

Until we reconstruct the 1946 Act, until we rearrange, revalue, reorientate, the assumptions on which we have been working since the war, we cannot do that. What we are doing by this Bill is something which we have done many times before. We are giving some money to the people who need it, and a lot more to people who do not. We are helping the poor, but to a large extent we are helping those who are well off. It is a policy of fair shares for the rich. I suggest that this has gone on for about as long as the British people are prepared to stand it.

I ask my right hon. Friend the Minister whether he is now prepared to accept the suggestions which have been pressed upon him from both sides of the House. They were pressed upon him in respect of widows last week. The time has come for a new Beveridge Committee. We need to ask ourselves on what basis we should run our social services in our increasingly prosperous society. I suggest that, so far from extending the principle of universality, the time has come to withdraw from universality and work towards selectivity. Unless we do that, I do not see how we can hope to bring help to the people in our society who need it without, at the same time, showering money on people who do not need it.

8.1 p.m.

Mrs. Harriet Slater (Stoke-on-Trent, North)

The hon. Member for Uxbridge (Mr. Curran) has continually referred to the speech made by my hon. Friend the Member for Coventry, East (Mr. Cross-man), but if I understood both speeches correctly, there is a fundamental difference between the approach of the two hon. Members to this question.

The hon. Member for Uxbridge based his whole argument on the fact, to use a phrase which he used and which I thought very unfortunate, that somehow we have to find how to help those at "the bottom of the heap". His argument is that we must help only those who are desperately in need. My hon. Friend the Member for Coventry, East is anxious to establish a pensions scheme which will give to all people something more related to their earnings and which would not introduce the idea of a means test, which to me seemed to be the fundamental argument of the hon. Member for Uxbridge.

Mr. Curran

I appreciate the courtesy of the hon. Lady in giving way. I am sure that she does not wish to misrepresent me. I want urgently to help the people who need help. I do not mind how widely we define them. Maybe we should define more widely the people who need help. I urge that whatever money we can afford to give for the relief of people who are hard up we should concentrate, every penny, on those who need it instead of disbursing it among those who do not.

Mrs. Slater

That reinforces my argument that the basic approach of the hon. Member is a means test philosophy, that we should have a means test on the benefits which we give to these people.

I am sure all of us welcome these increases, but we have been told that the factor which has urged these new increases in benefits is the terrific increase in the rate of unemployment. We are told that that is the reason why the Government have introduced this Bill now. Yet, as recently as just before Christmas, members of the Trades Union Congress interviewed the Chancellor of the Exchequer with a view to securing higher rates of unemployment pay. They were told by the Chancellor that he was unable to suggest an early solution along those lines. Yet now, because over the last month the situation has worsened terrifically—not entirely because of the weather but greatly due to the policy of the Tory Government—we have this Bill.

We welcome the fact that, while increases will be made to the unemployed, other basic rates are to be increased. The Joint Parliamentary Secretary said in the debate on this problem—I think it was in November—that the Government were unable to give increases in the basic benefit. I have not got the report of that debate with me, but she used a phrase to the effect that they were "reluctant to be milked".

The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Mrs. Margaret Thatcher)

I did not speak in that debate.

Mrs. Slater

It was in the last but one debate. She used the phrase that the Government would not be milked by the kind of people we represent.

Mrs. Thatcher

indicated dissent.

Mrs. Slater

I shall get the Report afterwards and show it to the hon. Lady.

My hon. Friend the Member for Bedwellty (Mr. Finch) said that the unemployed are in a very difficult situation. They get unemployment benefit only for the period covered by their stamps. Their stamps may cover the period if it is short-term unemployment, but when a man is 45—certainly when he is 50—he finds it increasingly difficult to obtain employment.

Mr. Bence

Is my hon. Friend aware that many men in Scotland who are 45 and over cannot find jobs in other industries because of the independent schemes run by employers?

Mrs. Slater

I think that is so. Some research has been done on this problem. It has been found that as a man approaches the age of 50—certainly when he is 60—if he is suddenly thrown out of work it is almost a sheer impossibility for him to find a job.

Such people are affected by rationalisation of industry. I represent a constituency in which the pottery industry, a craft industry, is centred. It was thought that rationalisation would never apply to that industry. It was thought that it would not be possible to modernise the way in which cups and saucers are dipped, but that is now done mechanically and fewer people are required in the industry. Cups and plates go along on an endless belt and are dipped automatically and the labour of many people is done away with.

Large firms have discovered that through rationalisation, automisation and mechanisation they can considerably reduce the number of persons employed. In my village the firm of British Aluminium is closing down a whole factory and 1,000 people will be thrown on to the labour market. They will be given some compensation, but what is that in place of a job when their unemployment benefit expires in eighteen months? What is that to the man of 55 or 56 who has to wait ten years before he can receive old-age pension? People affected in this way know quite well that a firm such as British Aluminium might give £¼ million in total in compensation, but that has no real relation in value to the large amounts of compensation given to directors. It is not a real share of the cake. The only thing that these people have been able to give to the industry is their work either by hand or brain.

In Firefighter,the Fire Brigades Union newspaper, it was shown that the relation of unemployment pay rates to contributions has been going down steadily over the years. A single man in 1924 earning 56s. a week and becoming unemployed had 18s. a week benefit. That was 32 per cent, of his earnings. In 1955, if he earned £11 3s. he got 40s. a week unemployment pay, 18 per cent. of his earnings. In 1961 earnings were 307s. and unemployment pay was 57s. 6d., or 19 per cent. of the earnings. Thus, the real value of the benefits as a proportion of a man's wages has gradually decreased.

The hon. Member for Acton (Mr. Holland) said that the Bill was another instance of Tory humanitarianism. It is certainly what we understand by Tory humanitarianism, because its real purpose is twofold: it is supposedly giving an increase in benefits to these people before a General Election—there is no possible doubt about that; I am not crystal gazing, for it is one of a series of sensible deductions.

Mr. Bence

It will not work this time.

Mrs. Slater

Secondly, what people do not realise, and will not realise until later, is where the money is being obtained to pay for these increased benefits. Under the Bill the Exchequer proposes to contribute £28 million, plus £2 million for increases in industrial injury benefits. The worker will find £130 million of the extra cost. This is a real burden to the railway worker who is taking home less than £10 a week and to some miners, who are taking home less than £12 a week, for it is another 1s. on their contributions. The Government are supposedly giving increases to those beneficiaries, but the workers themselves will pay for it by the extra 1s. a week which, under the Bill, both men and women will have to pay.

In addition, several hon. Members served in a Committee dealing with the graduated pensions scheme. We told the Government that the scheme would not work, and we have been proved right, because so many people have contracted out of it. As my hon. Friend the Member for Coventry, East said, that was a Bill to suit the insurance people of this country, not the workers. The Government now propose to increase the earnings limit from £15 to £18. What happens as a result of this? As a result, £48 million will come out of the graduated scheme in order to pay for these increases. In effect, it is not the Government who are the generous people in making these increases but the workers, who have to pay in order that these increases may be made.

Let us look at some of these increases. We asked that old-age pensioners should be given increased basic rates. The hon. Member for Uxbridge told us that not everybody needed them. He said that they should get them from National Assistance rather than from an increase in the basic rate. But look even at the new basic rates in the Bill—an increase from 57s. 6d. to 67s. 6d. for a single person and from 92s. 6d. to £5 9s. for a married couple. Many hon. Members opposite have not a clue how far £5 9s. will go for a married couple. Let hon. Members bear in mind the weather which we have been having. Let them remember that many of these old folk have had to pay increased rents over the last year. Look at the price of coal, electricity and gas. Let hon. Members read what was written by an ex-Member of the House, Lena Jeger, in the Guardiantoday. She tells a very sad story of a woman who is going to die, not because she is 80 but because she is cold and hungry and because she has not enough on which to live. As I have said before, there are many people who spend more in one night out than they expect these old folk to live on for the whole week.

Particularly during the last few weeks, these old people have had the extra expense of finding warmth. In addition, many of them have faced the terrible need of having to buy warmer underclothing. I have been told by some voluntary organisations that the requests for warm clothing have increased considerably, so much so that the W.V.S. in my locality have made a public appeal to try to get warmer clothing for people who are living on small incomes or old-age pensions.

What is wrong with us today is that we have a wrong sense of values. We are living at a time when we are repeatedly told from the Government benches that we are living in an affluent society. More and more people are better off, and yet we have the absolute disgrace in this country that we expect millions of our people to live well below the poverty line. As my hon. Friend the Member for Bedwellty pointed out, even the rates in the Bill are not above the subsistence level which is considered adequate today.

When he introduced the Bill the Minister said that more people would be getting a share of the national cake, but the question is, how big a share of the national cake are we giving our people? Last year we made more millionaires in this country; the number increased by about 14. Hon. Members may say that that is not very much, but it shows the difference between the well-off few at one end of the scale and, at the other end, the very large number of people who are suffering a standard of living well below the subsistence level.

The question also arises of the 10s. widow and other widows which was discussed on Friday. Surely on Friday the Minister could have agreed to give some payment to the 10s. widow, who feels a terrible injustice. Instead of promising to look at the matter he could have abolished the earnings rule for widows immediately.

The only sensible solution to the problem of our old people is that put forward by the Labour Party in its book on pensions. The Government adopted some of these ideas when they introduced their graduated pension scheme. But until we have a scheme which relates the amount of benefit which a person gets when he retires to his earnings while he is at work, so that he receives a sum approaching half of his earnings, we shall always be throwing people out of work when they are 60 or 65 into a situation in which their standard of living is suddenly and considerably reduced. The same problem arises with the sick. These are people who, through no fault of their own, find that their needs have increased considerably just because they are ill. We ought to make sure at least that these people are given an adequate amount on which to live while their earning capacity is reduced.

To approach the whole problem from a means test point of view is unworthy of us in Britain. We must make our people realise before the General Election that these increases, which we welcome, because they are some relief to the people who need them, will be paid for by the workers. The danger is that we shall have a General Election between the benefits and the increase in contributions and before people have realised that they have to pay. This is not humanitarianism. It is not absolute justice. It is merely patching up the situation which we have allowed to grow up without getting down to the real approach to adequate pensions and benefits for people who are in need.

8.21 p.m.

Dr. Horace King (Southampton, Itchen)

The hon. Member for Uxbridge (Mr. Curran), who has departed from the Chamber, made a pugnacious speech, characteristically provocative and characteristically thoughtful, and I should have liked to deal with a number of the points that he made. I want to make just passing reference to one point.

The hon. Gentleman attacked the British trade union movement because it did not do what the American trade union movement did, which was to secure social benefits for union members from the employers. The hon. Gentleman also criticised the British trade union movement for the restraint that it showed in the years after the war when it is quite correct, as the hon. Gentleman said, that terrific power was in the hands of the workers, but they did not use that power to secure the vast profits for themselves that the land racketeers are taking from the country today.

It is worth emphasising—this is a fundamental difference of approach between ourselves and the hon. Member for Uxbridge—that the main line of development of the British trade union movement has been—his indictment is true—that, instead of seeking to secure benefits for some small section, it built up over the last fifty years a political force which secured social benefits not for members of a single union but for the whole of the British people. We would much rather the trade union movement had taken the line that it did in Britain, where we have won, for instance, the National Health Service, than the line that it took in America, where there are health benefits for members of some powerful craft unions in a country which today millions of others are deprived of and eagerly anxious for the benefits of what the Americans call "socialised medicine".

Those who work in the great humane Ministry of Pensions and National Insurance must be very happy indeed when they receive an order from the Minister to do the spade work on a Bill of this kind. I am sure the House would echo any tribute I pay to this Ministry which does so much for so many people. Politics apart, the Minister who has introduced the Bill must be a happy man today when he thinks that by this new law he is bringing some money to people who badly need it. The hon. Member for Acton (Mr. Holland) referred to the bitter past, to the poverty of the poor in those days. I agree with him that we have come a long way from those times, when the trade union movement and the Labour Party were weak and when Tory duchesses campaigned against Lloyd George's first old-age pensions Bill and vowed they would never lick the insurance stamps of domestic servants, whom today they would be very glad to obtain at the wages they then paid. I am always interested in debates such as this to find just how much is common ground between both sides of the House. The Tory Party has conceded the Welfare State. There is not a Tory in the country who dare attempt to pull it down. If the Tory Party ever did so, it would lose that amount of shrinking popular support which it has at the moment.

Mr. Holland

Does the hon. Gentleman agree that the Tory Party at the same time as the Labour Party twenty-one years ago conceded this through the Report of the Beveridge Committee?

Dr. King

I do not want to follow the history of the Beveridge Committee. I remind the hon. Gentleman of one simple fact. It was the Labour Party, when it was in power, which took the Beveridge Report and increased all the benefits of the Beveridge Report at a time when the Tory Opposition could do nothing but damn it with faint praise and tentatively suggest when we raised the old-age pension to 26s. that we might have adopted the £1 proposed in the Beveridge Report. If the hon. Gentleman will turn up the debate, he will find that is true. I do not want to enter into broad polemics. I simply say that there is a fund of common agreement about the Welfare State, but the battles about parts of it are nevertheless very real.

I am very glad that my hon. Friend the Member for Coventry, East (Mr. Crossman) has taken part in this debate. He has done a tremendous service to our movement by the thinking of himself and the trade union group which worked with him on this vital question of national insurance. My hon. Friend will certainly have a great contribution to make in the very fundamental debates up and down the country, in the days ahead. I admit at once that there is no monopoly of humanitarianism on either side of the House. What is at issue is not whether some people in the House are more virtuous than others, not even the question of socialism itself. The debate between us is how quickly we shall move to the inevitable Socialism which some day will come to the whole world. As an old Tory once said, "We are all Socialism now". The proposals which are brought forward today by the present Tory Government would make the late Sir Waldron Smithers turn in his grave again and again. But they do not go far enough.

I apologise to the Minister for my absence at the beginning of this debate. I have spent some hours today in Parliament dealing with deputations of trade unionists who are anxious not about the increase in unemployment benefits but the avoidance of the need to have any unemployment benefit. As we have been a little reminiscent today, it is worth remembering with some satisfaction that today nobody in this country says, what people said when we fought the battle of the unemployed forty years ago, that unemployed are unemployed because they are workshy. Nobody in this country wants unemployment benefit. What the people of this country want is full employment. The men who saw some of us today were anxious not about this debate, but about their prospects of remaining in full employment.

It would be ungenerous not to begin by thanking the Minister for the improvement in the pensions of widowed mothers and especially the allowances for their children. I do not want to refer, except in passing, to Friday's debate. It would be unparliamentary to argue now for the Bill which the Government threw out then. I hope, however, that the country will note that it was the Conservative Party which last Friday threw out a Measure which would have given at least some benefit, some justice, to some widows. I would still ask for what was asked for again and again in last Friday's debate and from both sides of the House in the past few years, for the Government to institute an inquiry into the problems of widowhood itself. I was very pleased to hear my hon. Friend the Member for Coventry, East support this.

Only a fool would say that we have now arrived at the exact answer to every problem of the Welfare State. Surely it is worth looking at least critically at the assumption on which we have based our treatment of widows, namely, that at the age of 50 a widow has certain needs for State aid which she does not have at the age of 49½. Surely it is about time we ended this anomalous position, especially for that group of widows who do not qualify for full National Insurance benefit; the diminishing number of people left outside the National Insurance Scheme because they had not paid enough stamps before they retired. It is about time we brought this dwindling number of British citizens into full benefit.

I know that they are covered by National Assistance and many of us regard this form of assistance with affection and pride. We preach wherever we go that there is no stigma in National Assistance but that the help it gives is the right of every citizen. Having said that, however, it is not regarded in this way by everyone. Although the pension is considered by all to be received as of right, many pensioners consider National Assistance quite differently.

I am profoundly disturbed by the new increase in contributions and I want to examine that as I have done time and again in recent years. Hon. Members know that we finance the benefits we give, and which we shall be increasing by the Bill, through contributions from employers, employees and the State. Frankly, I have never been enamoured by the theory—based on Beveridge and Lloyd George and accepted by the Labour Party in 1946—that everyone should pay something or they will not appreciate what they get. The fear of the great Labour Movement in the past has been that if the benefits came from the State without individual contributions the State, having given, the State could take away. That is certainly true. At present the British citizen regards the benefits he gets from National Insurance as of right and says, "I have paid for them". We all know that literally he as an individual has not paid entirely for them.

Every British citizen believes that the contributions he pays fully covers the cost, that he receives his benefits as of right and that no one dare take them away. Now everyone appreciates the simple fact that the benefits must be paid for by somebody. All we decide when we allocate the employer, employee and State contributions is not whether the citizen shall pay for his National Insurance benefits but how he shall pay for them. The contribution element is a poll tax. The millionaire pays exactly for his stamp what the 10s. widow pays for hers. The same is true of the land speculator who, because of Tory policy, is getting four times the value of the land which he bought only a few years ago. The same is paid by the married man with a large family as a single man with no family. All pay exactly the same contribution, except for the difference between male and female.

The State contribution, on the other hand—or, at least, a good part of it—is charged to the citizen according to his capacity to pay. The 10s. widow, certainly the poorest of them all and the one who is now doing the drudgery jobs of the country and earning very little for doing so, will pay no Income Tax at all. Her payment towards National Insurance through Income Tax is nil. The millionaire, on the other hand, will pay a lot. For exactly the same benefits the rich man will pay much more Income Tax than the poorest person.

Thus all State Revenue is raised by one of two methods; either according to one's capacity to pay or on a flat-rate basis. Surely no one can challenge what I hold to be a firm political and moral truth; that to make people pay according to their capacity to pay is fairer than to make all people, irrespective of capacity, pay the same amount? Yet in the last few years a far greater proportion of the cost of these benefits has been put on the shoulders of the British citizen as an extra poll tax—and the Bill we are considering does exactly that. It will be seen, therefore, that while I welcome the proposed increases I object to the way they are being financed. The benefits, by and large, are not being given by the Government just like that but are being paid for by the workers, and the employers, too, by way of increased contributions. I look forward to the day when my hon. Friends will take over the Government and when, I hope, among the other things, we shall examine this whole matter and institute a fundamental rethinking of the whole question of National Insurance.

Among others there are two important questions to consider. The first is the basic standard of living below which no British citizen should fall—especially as we take into account the contrast between the kind of living indulged in by the richest person and that led by the poorest. We must remember, too, that among the richest people are not necessarily those who work the hardest. Some of them merely receive the greatest reward, often without doing any work art; all; drawing fantastic unemployment benefits, as it is sometimes ironically said.

The second question is how far we are right in imposing the cost of National Insurance by the flat-rate principle on the shoulders of every British citizen. I believe that this pressing poll tax element, added to by the Bill, should be drastically reduced and I share the view of the hon. Member for Coventry, East that this poll tax has reached intolerable limits. I echo what my hon. Friend the Member for Stoke-on-Trent, North (Mrs. Slater) said about the timing of the Bill, especially when one recalls that most of us have ourselves found it rather difficult to get by in this record winter.

The discomfort which has been felt by every hon. Member this winter is nothing compared with the misery which has been endured by the poorest people. How much better it would have been if the Government had taken the advice and request we made early last year and had seen that, at any rate, the old folk of this country might have had an extra sack or two of coal to meet the freeze-up. I cannot commend the Bill without at the same time criticising the Government for their tardiness in introducing it. Had it come before Christmas it would have made for a happier Christmas and a more comfortable winter for many people.

I hope that not one penny will be taken from the parallel increase which is necessary in National Assistance benefits. I know the old problem, but I warn the Government that when the old-age pensioners draw their National Insurance increases in the spring, if such people who also draw National Assistance find that that assistance has not gone up by the same amount they wilt charge the Government with having robbed them of some of their pension increase. I plead with the Government to accompany this by a direction to the National Assistance Board to make the increase by exactly the same amount.

8.39 p.m.

Mrs. Barbara Castle (Blackburn)

This debate has revealed how far short we are of providing an adequate social insurance scheme appropriate to a country of our level of industrial development, civic pride and humane consciousness. Of course we all welcome these increases. I might say that on this side we welcome them with some astonishment. It is certainly a memorable day when a Conservative Government give a 10s. a week increase in the pension.

So far, so good, but the question with which my hon. Friend the Member for Sowerby (Mr. Houghton) opened the debate is still highly relevant. He asked why the Government have announced these increases at this particular time. What is the motivation behind this Measure? Is the motivation behind the timing based on social considerations, economic considerations, or purely electoral ones?

Taking the social consideration first, is the motivation simply that, having been concerned for a long time with the fact that the sick, the old and the widows have been near poverty, the Government have been straining to do something? That will not stand up because, as my hon. Friend pointed out, if the Government's purpose was purely social, the time for that action was clearly several months ago, so that we could be in time to meet the most urgent need.

What has happened between November last, when we begged for such action and the Government was stalling, that has been enough to make all the difference? Clearly, if this decision is socially necessary in January it was far more socially necessary in November, before the strain of the winter need fell on the people with these low incomes. It would have given us at least a fighting chance to get the improvements through in time to be of use during these very harsh few months through which we have all been going.

I would suggest to the hon. Lady the Parliamentary Secretary and to the Minister that the feeling of the old-age pensioners is one of anger at the untold misery to which they have been unnecessarily exposed. I received a letter this morning from an old-age pensioner in Blackburn, who writes: I am writing you in regard to the rise in pensions of 10s. a week, fixed for May 27th. Many more like myself feel it is only a poor effort to have to wait so long, it means practically five months before we receive it. The present rate of pension has been inadequate for far too long particularly with the very severe winter we have had to contend with. It is from this old-age pensioner that the suggestion has come that I put to the Minister during his speech. She asks: Seeing we have to wait so long, may I suggest that we should have it back dated from the official announcement on Wednesday, January 23rd. I will be pleased if you will hand this letter to the Minister of Pensions. I hereby do it verbally, and in all sincerity because, I repeat, if this is socially necessary but purely administrative difficulties prevent it coming into operation tomorrow, when it is needed most, at least the Minister might make the logical gesture of generosity by enabling these old people to have a lump sum of their arrears of a realistic increase in pension when the administrative arrangements have been made. There is nothing impossible or very novel about this; nothing we should just dismiss, or wave aside as being totally inconceivable.

I have another suggestion to make to the Minister. Is there really nothing we can do while these people are waiting for their increases? The Minister referred to the proposed increases in National Assistance scales, but some of us—I myself for one—have been battling hard for some weeks with the National Assistance Board to try to get an automatic payment of a fuel allowance to every old-age pensioner on a supplementary pension. That is not because it is only they who have needed this extra help, but because they were an obvious category easy to deal with under the National Assistance provisions.

I have written to Lord Ilford, the Chairman of the National Assistance Board, more than once and have said that we have had the most phenomenal winter in the memory of most people and have asked whether we cannot do something in the name of a humane country which at least has grown out of Dickens' day to give an extra bag of coal to old-age pensioners. The reply I received was to the effect that his officers were authorised to make these fuel allowances in appropriate cases where the circumstances require. What a total failure of imagination there is in this. Does anybody imagine that any old-age pensioner living on National Assistance has not required an extra bag of coal this winter?

I do not know what the fuel bills of hon. Members opposite are like, but I know dozens of comfortably off people who are saying cheerfully, "I have central heating. It is costing me £2 a week" and they can just survive. I know what my electricity and coal bills are in my striving to keep warm during the past few months. This is the kind of mental background against which we are still considering social welfare. Following on Lord Ilford's reply, I tabled a Question to the Minister of Pensions and National Insurance today. It was not reached for Oral Answer and I have just received the Written Answer.

My Question was: To ask the Minister of Pensions and National Insurance, what steps he is taking to ensure that old-age pensioners are able to purchase an adequate supply of coal this winter. The Answer reads: I presume that the Question refers to old people eligible for national assistance. National assistance allowances, which include provision for normal fuel requirements all the year round, were increased last autumn, and additional fuel allowances are provided to meet special needs in more than 400,000 cases. I understand that the Board has recently asked its local offices to be especially alert to recognise cases of hardship arising from the present severe weather. All I say is that the Board cannot have been asking clearly enough or insisting that its officers are sufficiently alert.

In my constituency there is a woman mayor who has done an absolutely first-class job of humane civic leadership during her year of office. One morning, during the cold spell, she though, "This is downright intolerable. There must be old people in Blackburn's old houses who simply cannot endure this weather without some extra warmth." She called the council together while my battle was going on with the Chairman of the National Assistance Board. The council launched an appeal and within days had collected £850 and money was still pouring in. Within days the council had distributed over 950 bags of coal to the needy old-age pensioners, and more will have been delivered since that figure was announced.

In my constituency alone, therefore, there are 1,000 old-age pensioners who needed an extra bag of coal at the very time when the National Assistance Board officers were failing to deliver coal because there was no actual sickness in the house, or the rain was not coming through the roof. In my constituency, 2,500 old-age pensioners, during the past few days, have been given a bag of coal, tins of soup, or other food, and blankets and hot water bottles to enable them to survive while we sit here complacently talking about how generous we are to be on 27th May. I suggest in all seriousness to the Government that this kind of attitude is still infusing the whole administration of our social welfare services.

The old-age pensioner who wrote to me today has not lost sight of the moral of the situation. She writes: A good thing we have had our mayor's marvellous effort in raising £850 for coal and food for the old-age pensioners during this terrible spell. If we had a pension to fit in with the present cost of living we would not need help of this sort. I do not think that we should become too complacent about the social approach to the solution of the problems of the needy sections of our population.

Is there another purpose behind the Government's action, apart from the quite obvious one, referred to by my hon. Friend the Member for Stoke-on-Trent, North (Mrs. Slater), of the electoral benefit? I give credit to the Government for the possibility that they may have a more reputable motive in mind, namely, an economic one. This was pointed out in the Guardianin its leading article the other day. This increase in benefits and pensions is an obvious piece of emergency pump priming. This is a way of distributing and injecting into our stagnant economy an increase in purchasing power, and as such we welcome it.

Clearly, this is the most obvious Keynsian way of dealing with unemployment figures that are rising continually. But if that is so, does not a whole lot of the statistical data that we have had from the Government this afternoon become irrelevant? Is not all this accountancy and bookkeeping in the National Insurance Fund merely defeating its own end? If the purpose is to provide a stimulus to the economy, or to inject more purchasing power, cannot we do it more thoroughly and more wholeheartedly?

As Nye Bevan used to beg us to do, let us get away from the Treasury mind and get an economist's mind instead. If we do so we shall find, as the Minister pointed out, that the person who pays for the old-age pension is the man who is at work. The person who pays for the increase in old-age pensions today is the man who is at work today. When the time comes for him to retire, the people who are fit and active and working then will pay for him.

Of course, this is the sensible economic argument. But what is the logic of it? The logic of it is that if we are to afford to keep the old people properly our main job is to keep the active people in work. The best basis for the finances of the National Insurance Fund is to have 100 per cent. use of our productive capacity. That ought to be the purpose behind the Minister's aim. But what does he do? He is so alarmed at deficit financing that he gives us deficit producing and, having given with one hand, he takes away with the other.

The Minister himself said that the increased cost to the National Insurance Fund will be £206 million. How is it to be met? A sum of £178 million is to be provided from increases in the contribution half of which is to come from humble working folk. Only £28 million, or 14 per cent., is to come from the Exchequer. All we are doing is to give more purchasing power to some desperately hard-up people on unemployment and sickness benefits, or old-age pensioners, and then to extract that purchasing power from the pockets of the working class. What a typical, crazy Tory roundabout that is. The trouble is that the Government, being Conservative, do not have an expansionist mentality and simply cannot see behind the cold books of accountancy to the human and economic realities.

I suggest to the Minister that the best way of priming the pump is for him to go back on his whole pattern for financing the National Insurance Scheme, to get rid of the rule that he laid down that the Exchequer contribution shall be only one-quarter of the flat-rate contributions and to let us have an expansionist attitude towards the increase in our social service payments.

We have had some challenging speeches, notably by my hon. Friend the Member for Coventry, East (Mr. Cross-man), on the need for a new approach to sickness and to those on sickness benefit. I thoroughly agreed with what my hon. Friend said. But should not this new attitude to sickness benefit, to which we still have a Dickensian approach, be widened to go further still? This thought has been stimulated in my mind by a letter which I received only this morning which encouraged me to participate in the debate.

It is a letter that brought home to me the need for us to have an entirely new look at the needs of the permanently invalided. It is a letter which comes from a lady in Camberley who is working with a young man who is completely paralysed with respiratory poliomyelitis. She is helping him to write a book. He contracted polio in his twenties when working a farm in Kenya. As a result, he is completely dependent on National Assistance benefits.

My correspondent writes to me as follows: For five and a half years he has been able to move nothing but his eyes, tongue, lips and jaws. His breathing is entirely dependent on an electric pump connected to a permanent tracheotomy tube. His brain is perfectly normal. Naturally, I have come to know a good deal about his circumstances and the humiliation that he, and others like him, suffer because they have to live on charity. They receive no State aid other than the maximum National Assistance grant of £4 15s. a week. On the other hand, if this young man would throw up his gallant attempt to live a life of his own in his own home and consent to be hospitalised for the rest of his life—he is only 30—become a patient again and drag out his existence in the chronic ward of some hospital, with probably few but senile patients for company, then his financial worries would be at an end. Then, the Ministry of Health would assume full responsibility for assistance, using a scandalous amount of the taxpayers' money. He has worked out that he could live at home on £12 a week. The average cost of a patient in hospital was given in the national Press recently, for 1962, as £39 per week…. He has already appealed to those persons and Departments whom one might expect would be concerned for the welfare of the totally disabled; to… his Member of Parliament, the National Assistance Board, the Ministry of Pensions and National Insurance, the Ministry of Health—all in vain. Miss Edith Pitt paid… a personal visit. She was most sympathetic, but afterwards could only write to"— his Member of Parliament: 'The problem is predominantly a financial one. Here, I am afraid, my Department is unable to help in any way. There is no power under the National Health Service Act to give financial assistance to patients… I am sorry… And there the matter rests. This lady, however, reading the proposed new schedule of increases for industrial injury benefit, points out that if the man had been industrially injured instead of disabled for life, he would have been entitled under the new increases to 100 per cent. disablement benefit of £5 15s. a week, constant attendance allowance of up to £5 and an unemployability supplement of £3 7s. 6d., making a total income of £14 2s. 6d.

Because his total disablement did not result from industrial injury he has to try to live on £4 15s. a week, out of which he has to pay rent and rates on a tiny bungalow on a council estate, bills for electricity and gas, laundry, postage, food for himself and his nurse-housekeeper, and a telephone, which is essential as he can never be left alone in the house. The letter goes on: His wonderful nurse-housekeeper and the woman who conies to relieve her for a few hours are at present paid by the charity of various people, and, of course, he can never be certain how long they will be able to continue their help. Their constant anxiety affects his health and happiness more than anything else. I leave this thought with the House, that the time has surely come for us to recognise that some people can become as permanently disabled by natural causes as they can by accidents. That being so, why should they not receive the sort of constant attendance allowance or unemployability supplement we give to our other unfortunates? If we were to do that we should perhaps enable thousands of people in a similar plight to live in relative happiness at home, instead of becoming in hospitals a much greater financial burden on us all. This is just another example of the fact that we need to have a new and an entirely human approach to the gaps in our social welfare services.

This Bill is merely a stopgap and it will have to be replaced by something much more visionary when we get a Labour Government.

9.2 p.m.

Mr. Alan Brown (Tottenham)

Although I have sat throughout this debate, I am afraid that, as I have only five minutes in which to make my speech, I shall be able to refer to only a very little of what has been said. I consider it a privilege to pay my tribute to the hon. Member for Sowerby (Mr. Houghton) and an honour to know him, as it is always a pleasure to listen to him. He is indeed a perpetual fount of knowledge, as my noble Friend the Member for Hertford (Lord Balniel) has already said, if in slightly different words. The hon. Member, of course, has a wealth of knowledge on all aspects of the matter before us.

I desire to take up one sentence in the speech which he made this afternoon because I think there is much truth in it. This year, he said, the old and the infirm have had the worst period ever. Certainly nobody, try as he may, can deny this very simple fact. The bitter cold, the intensity of its arctic severity, and the very long time it has lasted—if, indeed, it is yet over—have indeed brought a measure of suffering to the old folk the like of which I have never known in my constituency.

I would crave the indulgence of the House for the three minutes left in order to bring to its attention the presence in my constituency of an organisation which provides a whole series of vital services designed to better the conditions of life of the aged and infirm, conditions of life which are quite inseparable from old age, with its accompaniments of infirmities and drawbacks, conditions which will face most of us here in our turn. I refer to the Old People's Welfare, which is practically 100 per cent. conducted by voluntary workers. It provides such amenities as a meals on wheels service for those old folk who are too infirm to be other than housebound and too frail or sick to have the strength to cook a meal for themselves even in their own homes. Further, this organisation keeps in touch with all our old folk, even from day to day, to make sure, as far as humanly possible, that none of our old folk living alone has fallen sick or is otherwise in need of help.

I mention this Tottenham Old People's Welfare because even in good weather, in ordinary times, discounting the shocking conditions with which we have latterly been afflicted, if it were not for this organisation, the lot of the aged and infirm in Tottenham would be considerably worse.

The point is that despite all the benefits enjoyed today in the Welfare State it remains a fact that the State can provide only the barest materialistic needs, and then only deliver to the nearest Post Office. However munificent and generous be this or any other future Government about assistance or pension rates, the State never can, nor ever will be able to, provide the personal and intimate services, because they can be supplied only by the dedicated voluntary social worker who calls on the old people as a friend. I commend to all hon. Members on both sides of the House to give serious consideration to the inauguration in their constituency of a similar welfare service for the old folk if they have not already got one. Personal help, so badly needed. such as I have mentioned—the meals service; immediate aid, which is most important; fuel, clothing and personal attention—these are the things which no amount of money handed in by the State to the Post Office can provide.

I so highly commend this work that I desire to pay tribute to the selfless work of the wife of a gentleman who was for many years a most respected and honoured Member of this House—Bob Morrison. I refer to the work that is being done, and has been done for many years, by Lady Morrison.

I should have liked to say much more as president of the old-age pensioners at Tottenham—there are nearly 1,000 in the clubs—and I could have told the House many interesting things, but I am afraid that my time is up.

9.7 p.m.

Miss Margaret Herbison (Lanarkshire, North)

There has been some speculation on this side of the House about why the Government brought in this Bill at this time. I am convinced that they were forced to introduce it now because of the very great rise in unemployment. What makes me more convinced of that is what has been happening in Scotland and the north-east of England. There we have had a very high rate of unemployment for a very long time, a subject which has been continually raised in this House, but in which the Government showed little concern. Within the last few months unemployment has begun to hit the prosperous areas of the country, and I feel sure that when that began to happen there were "panic stations" in the Cabinet because the Government realised that any meagre hope they had of victory at a general election would disappear unless something were done to mitigate even a little the financial hardship among the unemployed. It seems to me that it is for that reason, and almost that reason alone, that the Bill is before us.

The sordid misery and poverty of our old people, described so often from these benches today, is the greatest indictment of many that can rightly be levelled against the Government. This has been almost the severest winter within living memory of these old people. They have been suffering for months privations that no human being should ever have been asked to suffer. Now they must wait until winter is over until the end of May, before there is financial easement for them. It is wrong that only callous electoral considerations make the Government move even at this time.

During the weekend, in Scotland and many other parts of the world, there have been social evenings celebrating one of the greatest of all Scotsmen, Robert Burns. He wrote this about the old folk; But see him on the edge of life, With cares and sorrows worn; Then age and want—oh! ill-matched pair Show man so made to mourn. Burns wrote that two hundred years ago. Today, want and privation are still close associates of the vast majority of our old people.

During this dreadful weather we have had press and radio appeals for blankets and warm clothing for old people. My hon. Friend the Member for Blackburn (Mrs. Castle) has told us today of what the Mayor of Blackburn has been able to do. In my village last week children going to school were each carrying a huge lump of coal which was put into cwt. bags and as a collection given to old people in order to give warmth and help them keep body and soul together.

I want to repeat the plea made by my hon. Friend the Member for Blackburn. If it is impossible to pay these increases until nearly the end of May, then cannot the Government seriously consider giving them retrospectively? I can think of many uses to which the old people could put a lump sum at the end of May. They could buy the warm blankets which so many of them desperately need. If they have already got blankets as a result of these appeals, they could buy warm underclothing. Those who have both blankets and underclothing might be able to replace some of their bed linen or their table linen or even buy the crockery which again so many of them desperately need. If increases can be given retrospectively to some other people in the community, then surely they could be paid retrospectively to our old people, who are quite definitely the worst off financially.

At this stage I want to ask the Minister about National Assistance scales. He says that the National Assistance Board is to bring forward new scales. When he made his announcement about the increase in pensions, he said: Meantime, the Bill I am presenting today includes a temporary provision which will have the effect of ensuring that a person whose unemployment or sickness benefit is supplemented by National Assistance will not get' less advantage from the benefit increase in March than he would if the Board's proposals were in operation at the time."—[OFFICIAL REPORT, 23rd January, 1963; Vol. 670, c. 84.] I am almost certain that the Minister and the Parliamentary Secretary already know the scales of National Assistance which will be fixed and I want them to say whether the 10s. increase in benefits proposed in the Bill will be matched by a corresponding increase in National Assistance benefits. If the increase in National Assistance is less than 10s., then the most badly off people in the community will be getting less than a 10s. increase, and on this side of the House we consider that the 10s. increase itself is inadequate.

Everyone, even hon. Members opposite, with one or two exceptions, realises that the proposed increases are inadequate. With one exception, every hon. Member has tried to make the Minister appreciate that the present basis of National Insurance gives inadequate benefits. Adequate subsistence benefits are impossible with the present flat-rate system. This matter has been brought to the Minister's notice not only today but in other debates on National Insurance in the last year or 18 months. Many of us hoped that in their next National Insurance Bill the Government would make a radical change in the system, but we have had the same old story—increases in benefit coming too late and being inadequate even to give a subsistence level standard of living.

It has also been strongly argued that the increase in contributions places an intolerable burden on the lowest wage earners. The Minister gave us some percentages, but I have tried to find for myself the effect of the increases on the lowest paid worker. A man earning £9 a week—and nearly half the incomes in Britain are at or below that level—pays 8 per cent. of his earnings in flat-rate contributions if he is contracted out.

Sir S. Summers

Is the hon. Lady saying that half the men in this country earn less than £9 a week?

Miss Herbison

No, I was careful to say that half the earnings were at or below that level. The man earning £9 a week pays 6½ per cent. of his earnings in contributions if he is in the State graduated scheme.

The Government should have realised —because most Members have realised it, and the writers in our responsible journals and newspapers have also realised it— that a poll tax, with flat-rate contributions, can provide no solution whatever to the problem facing British social security. The increased benefits under the Bill do not provide an adequate subsistence level, in spite of the intolerable increases in contributions for many of our people.

I want to refer to those people who will receive no increase under the Bill. On Friday we had a fairly long debate about the widow who receives 10s. a week. She received 10s. in 1948, and she receives 10s. today. It seems very wrong to us that no increase has ever been given to that widow, and that no increase is proposed in the Bill.

There are other cases in which I am extremely interested. In mining areas and steel industry areas one finds men suffering from pneumoconiosis.

Mrs. Slater

And in the Potteries.

Miss Herbison

There one finds byssinosis. The time-barred cases are receiving smaller benefits than those who, since 1948, have been suffering disability either from an industrial disease or an industrial accident. Under the Bill an increase is being given to those who are in receipt of Industrial Injuries benefit, while for the men who are much worse off financially no increase in the basic rate is proposed. When I was at home at the weekend, a number of these people came to see me and asked me to make the strongest possible plea to the Government to include them in the Bill's provisions.

The Minister—as did the previous Minister—boasted about the increases given in pensions and other benefits during the eleven and a half years of Tory Government. He spoke about the relative value of these pensions. If someone who knew nothing about the financing of the scheme had listened to the Minister he would have come to the conclusion that this was a most benign Government, and that the Chancellor of the Exchequer was, in the main, financing the increases already given by the Government and to be given under the Bill. We are told that in a full year the extra benefits will cost a little more than £200 million. Of this, £130 million will have to come from increases in the flat rate contribution; £48 million will come from the graduated contribution, and a miserly £28 million from the Chancellor of the Exchequer.

We compare this £28 million, divided among nearly all the people in Britain, with the £80 million in tax rebates being given this year to the relatively few Surtax payers. It is when we make that kind of comparison that we realise how miserly are the Government. Not only have they shown that they are not prepared to pay fair shares for pensions, unemployment benefit and sickness benefit; they are evading their responsibilities almost completely by filching once again from the graduated contributions this extra £48 million. By raising the ceiling to £18 the Government are getting £48 million, and the only reason for raising the ceiling from £15 to £18 a week is to get that £48 million. The reason is exactly the same as was given for the introduction of the swindle of the graduated scheme when the Government presented it first. Under that scheme the Government got rid of the deficiencies, and we know from the White Papers how great it would have been. They limited the liability on the Exchequer and placed the burden almost solely on the contributor, no matter how ill-equipped, financially he might be to meet it.

More and more people are beginning to realise that this was an underhanded and disreputable method of manipulating the finances of the National Insurance Fund. For almost twelve years the Government have been in power and they have failed to find a solution to the undoubted dilemma, of which we are all aware, in respect of the present scheme. The benefits and the provisions in this Bill are geared to what the Government think the lowest paid can afford. The lowest paid worker, the labourer, will pay an extra 1s. 1d. a week even though he may earn less than £9 a week, and the highest paid executive in the land will pay the same amount.

Even if we look at the graduated scheme we find that for many years to come those who contributed to it will have to have recourse to National Assistance when they retire, and that to me is a disgraceful state of affairs. This Bill has revealed to many of us that more than ever there is a case for an entirely new basis of insurance in order to ensure an adequate benefit for everyone. The history of the Tory Party, shows that the party opposite has shifted the burden of payment for social services from the taxpayer to the National Insurance contributor. Time and time again this has meant a harsh exaction from the lowest paid worker. That is my first indictment of the Government's scheme.

The second indictment is that the level of the National Insurance benefits and of the present scheme have deliberately been kept below the subsistence minimum, and far too many of our old, sick and unemployed will have to have recourse to National Assistance. The original purpose of National Assistance was to provide an umbrella for those who were not covered by their own contributions. But it has been perverted by the Government who have made it a major instrument of policy. We take great objection to that. My hon. Friend the Member for Motherwell (Mr. Lawson) asked, just over a month ago, for information from the Minister of Pensions and National Insurance. He wanted to know what the present value of the single adult retirement pension was expressed in terms of 1946 prices. He found that the present pension was worth 31s. 6d.

From Answers to previous Questions, we find that during the twelve years of Tory Government, from 1951 right up to 1958, only in a single year was the true value of the pension higher than the 1946 level. That one year was 1955, when it was 5d. above. The Minister need not look puzzled for these replies come from his, or his predecessors, Answers. We find that in 1958 they were worth 3s. 9d. more. Now, with this addition, the pension will be worth, in 1946 figures, about 37s. That is the measure of the improvement. What it will be worth at the end of May we do not know. If there is an increase in the cost of living it will be lower than 37s.

In these enlightened days in which we have heard so much talk about the prosperity of this nation, to expect our old people to live on this amount, shows the total inadequacy of the increases. That total inadequacy is evident when the Government, announcing the increases, have to tell us that National Assistance scales will go up at the same time. We do not know if it is to be at the same rate; that we shall have to find out.

Many suggestions have been made to the Government from both sides of the House. In the short time left to me I want to put to the Minister particularly the lines along which he should be thinking. The hon. Member for Hertford (Lord Balniel) suggested that we should use our money in such a way that the worst off would be helped, but the categories he picked out comprised people of over 70 years of age. I want to help the worst off no matter what their age is. The only way to do that is by having a completely different basis for National Insurance.

I suggest to the Minister, first, that we should have wage-related benefits for sickness and unemployment. It seems wrong that a person who may be earning £20 a week has suddenly to fall to the miserable level of the unemployment benefit rates. That is the first thing I want the Government to think about. The present flat rate contribution with this miserly graduated scheme will not give benefits which will provide even minimum subsistence. We want the Government to think about the introduction of a single graduated contribution which would be a percentage of income which all could afford.

Thirdly, the Government should be considering a much heavier contribution from employers. This would bring the system into line with contributions made by employers on the Continent. If I had had the time I would have quoted from what I think the Government would agree are very reputable papers. I quote one, from the Financial Times: All the same, one can assert with some confidence that if the United Kingdom joins the Common Market and if, in accordance with the Rome Treaty, social security benefits are harmonised up, the Englishman in the dole queue stands to gain. That is a measure of how far we have fallen below what is happening on the Continent.

We want for all our people, for the old, for the sick, for the unemployed, benefits in times when they are old or sick or unemployed which will give them the chance to have a decent life of comfort and dignity. They have been denied that, and no matter how much the Parliamentary Secretary may try to show us by statistics that they are so much better off, this winter has shown how miserable they are.

In conclusion, I wish to quote a letter which I received this morning, not from one of my constituents but from someone in Essex: It is, of course, as ever "— talking about the Bill— typical of the parsimony of the Tories in being nowhere near sufficient to meet the needs of the needy. I am now"— and this is underlined— positively certain that the Tories never will improve, and have no real intention of improving, the lot of the underdog. We have felt that for a long time. In by-elections the nation has shown that it is feeling it very much, too, like this correspondent of mine, I have no hope that the proposals put forward from this side of the House today will ever be accepted by the Government. I hope that the Bill is a prelude to an election. I hope that the election comes quickly, so that we shall have a Government with a social conscience—and not only a Government with a social conscience but a Government with the ability, the knowledge and the know-how to bring in a social insurance scheme which will really meet the needs of our people.

9.37 p.m.

The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Mrs. Margaret Thatcher)

This has been an extremely wide-ranging debate, with many hon. Members putting forward a large number of different ideas, some differing in fundamental principle from one another and some differing in detail.

Many speakers have made play with General Election dates. May I, therefore, at the outset, point out that the last major increase in National Insurance benefits was in April, 1961, about 18 months after the last General Election, and that the previous major increase in National Insurance rates was in 1958, about 20 months before the Election.

Mr. Crossman

May we have the National Assistance increases, to complete the series? It was six weeks before the election.

Mrs. Thatcher

And the last National Assistance increase was as recently as last September. I do not think that anyone who is looking at the figures and trying to deduce a principle from them, rather than having deduced the principle before looking at the figures, will get very fair.

As well as matters of general principle, hon. Members have raised a number of detailed points. The hon. Member for Sowerby (Mr. Houghton) raised the question of modified pensions, by which I take it that he means those people who were late into the old contributory pension scheme and, because of their shortened contribution records, had a modified rate of pension awarded. That is now a piece of history, as he knows. Most of these people were members of other pension schemes, which was one of the reasons why they were late into the old contributory scheme. They will, of course, benefit proportionately by the increases in the Bill. They will get their 17 per cent. or 18 per cent. increase rounded to the nearest suitable figure.

The hon. Gentleman also raised a technical question—one expects him to be very quick off the mark with the intricacies of the National Insurance Scheme— about those people who have not yet retired but are within the five years of retirement age group. He asked what happens when they are working, but come to claim sickness benefit. He said that under the ordinary rules the amount they could claim would be governed by the amount of retirement pension which they could get and if sickness benefit goes up before pension their benefit would, therefore, be cut down if they are within this retirement period.

I am glad to tell the hon. Gentleman that we propose to make special provision in the Commencement Order and Increase of Benefit Regulations under Section 26 of the National Insurance Act, 1946, to meet this difficulty. The provision we shall make is that for this group of people the retirement pensions shall, as it were, be deemed to come into action at the same rate as the sickness and the unemployment benefit. This follows the precedent of 1952.

A number of hon. Members asked whether we could not get these increases in before 27th May. My hon. Friend the Member for Uxbridge (Mr. Curran) asked this. The hon. Member for Feltham (Mr. Hunter) drew rather unflattering comparisons between our schemes and that operated by the football pools. It takes quite a time. Eighteen weeks is a comparatively short time for the retirement pension and long-term benefit increases. There are about 6½ million order books to be up-rated. This has to be done on top of the ordinary work of the local offices. This is already swollen at this time of the year with extra sickness benefit claims. I must confess to the House that we live in fear of an epidemic affecting the staff at the offices when we are trying to work to as tight a margin as we are this time.

Various hon. Members suggested we could give up-rating directions to the Post Office. This would be quite impossible. After all, there are about 150 different rates of insurance benefit payable. The number of permutations and combinations of the allowances would render the compilation of a ready reckoner quite impossible. The sum of 57s. 6d. could be broken down into several different components. For example, it might be made up of 53s. 6d. flat-rate pension due to a contribution deficiency and increments of 4s., making a total of 57s. 6d. It might be made up differently, of a flat-rate pension of 51s. due to a contribution deficiency, increments of 6s., and a graduated pension of 6d., bringing the total up to 57s. 6d.

We cannot, in fact, say on any particular figure that this can have arisen from only one set of circumstances and therefore we could not provide the Post Office with a ready reckoner to up-rate.

Mr. Lawson

If every single adult is to be rated up by 10s. does not that make it easy? The Government could merely write 10s. more on to the books.

Mrs. Thatcher

That would be quite inequitable as between beneficiaries. There are varying needs of which the National Insurance Fund tries to take account. There are many things which can affect the rate—the different rate of dependency increase, the different number of dependants, contribution deficiencies, increments, graduated payments, adjustments for periods in hospital, advance adjustments for earnings. All this means that the up-rating has to be done by skilled people in the local offices. It has to be done individually on each of the different books.

For short-term benefits it is not quite so difficult. There are not as many books. There are about 200,000 for the long-term sick. The limiting factor there is getting instructions to the local offices in time for them to make the requisite calculations for benefits paid on a daily rate and not on a weekly rate, which may make quite a difference. We are, therefore, bringing those benefits into action just as soon as possible, for the benefit week beginning 7th March.

Mrs. Castle

In view of that, cannot the payments be made retrospective?

Mrs. Thatcher

Certainly not, because we should have to keep account throughout the whole of the interim period of the precise amount paid out in each week and the orders, in the meantime, would have been cashed.

A number of hon. Members have mentioned unemployment benefit and I want to make it clear at once that I think that the economic factors at any given time should not be used to determine the long-term policy of the National Insurance Scheme. They can change quickly. It seems only a short time ago since the House was thinking of the possibility of a pay-roll tax on employers' to stop them hoarding labour. Perhaps such a tax would have been peculiar to the circumstances of that time.

I wish to make it clear that the unemployment figures have not governed the increase to the beneficiaries of the National Insurance Fund. As hon. Members have said, we have over 5½ million retirement pensioners. Their claims are every bit as important as the other beneficiaries whose needs and requirements come to the fore at particular times.

The hon. Member for Bedwellty (Mr. Finch) mentioned the limitation on the number of days for which one can claim unemployment benefit, now varying with the contribution record up to a maximum of 492 days. This provision replaced the old transitional provision—Section 62—and I do not think that it would be a good provision to bring back. It was a discretionary payment and I understand that it did not work very well.

In any case, I hope that we shall not need to think about extending the duration of unemployment benefit. There are other, far better, solutions to the problem and I hope that the steps which have been taken by the Chancellor of the Exchequer will have worked through the economy before that time.

Mr. William Ross (Kilmarnock)

Dear, oh dear.

Mrs. Thatcher

The hon. Member for Bedwellty also took the opportunity, as he always does, to reiterate his arguments which we went through—and he will remember them well—on the occasion of the last increase which came into effect in January, 1962. He used the same arguments and put forward the same views today as he did then. Some of the old workmen's compensation cases will benefit from the unemployability supplement and constant attendance allowance ans some will benefit as well from the National Insurance increases.

A good deal has been said about the Exchequer contributions. I agree that it was never laid down as a fixed and determined principle for all time and that it has varied very much. There are two methods of Exchequer contribution; one as a supplement to expenditure as under the old Health Insurance Scheme and the other as a supplement to contributions as under the old Unemployment Scheme. Neither on its own was completely successful in relation to those two schemes and when the new scheme came into operation a combination of the two methods was brought about.

The Exchequer payments took the form of a proportion of the contributions of employees and employers and an annual lump sum payment to cover the estimated deficit which was expected to materialise in the early days of the Fund. In fact, that deficit did not materialise and it is interesting to look at the accounts of the early days of the Fund, particularly in relation to the strictures made about the degree of benefits which are borne by contribution payments.

In the year 1948–49 the cost of benefits from the Fund was £252.7 million. The employer and employee contributions together were £248.6 million. Thus, in that year the benefit expenditure was borne almost entirely by contributions. In the following year it was closer. The cost of benefits was £360.9 million, and employee and employer contributions amounted to £360 million. There was a similar relationship in the following year.

Because of this surplus in the Insurance Fund, the method of making Exchequer payments was changed under the National Insurance Act, 1951, and there was no provision for deficit payments. These were reintroduced in 1954 for a short time but, again, they were not used to the full extent, and in 1959 the scheme went over to the pay-as-you-go basis, and the Exchequer supplement was fixed in accordance with the proportions given by the hon. Member for Sowerby.

The absolute figures of Exchequer contribution to the fund are not inconsiderable. Last year, 1961–62, they were £187 million; the estimate for 1962–63 is £190 million, and for 1963–64 £212 million. This is an increasing amount as, of course, it is bound to be as the contributions go up, and it represents a substantial contribution by the taxpayer to the cost of National Insurance benefits.

One has also to remember that the taxpayer pays heavily towards the other parts of the Welfare State. One has only to look at the increase in Assistance expenditure—increased provision for those who are in need—where the extra money spent goes, by definition, to those in need. That expenditure has increased from £47¾ million in 1949 to £190 million in 1962. This is where the taxpayer is making his contribution.

The taxpayer contributes also to the National Health Service, where the amount met by the Exchequer has increased from £366 million in 1949–50 to an estimated £730 million in this year. Therefore, the taxpayer as such is making a very substantial contribution to the Welfare State, but one has to remember that taxpayers and contributors are not necessarily different people, and the two together represent the total contribution of the community towards the National Insurance scheme and towards the Welfare State.

I want now to turn to the many suggestions for changes that have been made today. My right hon. Friend the Member for Reigate (Sir J. Vaughan-Morgan), my hon. Friend the Member for Uxbridge and many other hon. Members have put forward the principle of greater selectivity in National Insurance benefits. Others, taking the contrary view, have said that what is wanted is a larger, massive flat-rate increase.

If one adopts the principle of greater selectivity, one must remember that the very scheme itself is based on a selective principle; the principle being that those who earn should take upon themselves the responsibility for their own welfare, and that only when they cease to earn, or cannot earn, do they get substantial benefits. That operates as a fairly powerful principle of selection in the first place in regard to older people, who are regarded as having retired in any event at 70 for men.

This, at least, would be an insurable contingency, as my right hon. Friend the Member for Reigate pointed out, but it is a difficult, and, in some ways, a distasteful job to have to select which misfortune is worst under the scheme. If one were to say that being without a job should attract a higher rate of benefit, one would be saying that the man on short time, who can get two days' unemployment pay in six, should have the preference over, say, the man with wife and family who has for many years been chronically sick. There are many degrees of misfortune, and I myself would not like to say that the unemployed should have preference over the chronic sick, or to choose very wide variations between other groups of beneficiaries.

We have, of course, agreed upon one preference which, as long as I stay here, I am firmly determined shall be maintained and that is the preference given to the widowed mother. This is a different kind of benefit. It is one of the few long-term benefits before retirement age. This is a different kind of misfortune and I think that the preference we have given to the widowed mother should be abundantly maintained.

Other people have suggested different directions for different developments. The hon. Member for Sowerby and the hon. Member for Coventry, East have suggested varying forms of graduated benefits. As I understood them, the two schemes put forward were very different, and the scheme of the hon. Member for Coventry, East seemed rather different from the T.U.C. scheme which was put to the Minister the other day.

It is not my privilege to reveal what was said at a particular deputation, but certain references have been made to what was said at that deputation. I am making no comment, except to say that the scheme of the hon. Member for Coventry, East, which seemed to me a completely wage-related scheme based on percentage contributions giving percentage benefits, did not seem to bear a great deal of relationship to the scheme put forward by the T.U.C., which, I understand, was a graduated scheme as applied to the short-term benefits.

There is no lack of directions in which change could be made, but there is a wide difference of view about the direction we should take. It is not necessary to have an outside inquiry in order to decide the direction of change. The scheme which we have now has shown itself susceptible to quite a number of changes introduced in the ordinary business of Government in the past, as for example the graduated scheme. In the ordinary course of events we shall continue to change the scheme in the direction which we decide it should go.

Nothing that has been said should mask the fact that the Bill will bring greatly improved cash benefits to about 8¼ million people. [An HON. MEMBER: "About time, too."] An hon. Member accused my right hon. Friend of waffling on a previous occasion. This has been no waffle. He has produced very large benefits indeed, which will benefit a very large number of people, 8¼ million under the National Insurance provisions and another ¾ million under the Royal Warrants and the war pensions provisions. I think that the country will hail this as a further advance in National Insurance.

Although the hon. Lady the Member for Lanarkshire, North did not wish me to give statistics I can only reiterate those that my right hon. Friend gave in his opening speech and point out that since the 1960 Act was presented as a Bill we should need, on the basis of the Retail Prices Index, an increase of 5s. 1d. to bring the single rate up to what it was then, whereas, in fact, the increase is 10s. On average earnings we should need 5s. 3d. to bring the single rate back to its value in November, 1960, whereas, once again, we are getting 10s.

This is a great advance in relation to the cost of living and to average earnings. It is a greater advance for the married man with family commitments and that, we think, is a very desirable feature of our scheme.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Commitee of the whole House.—[Mr. Peel.]

Committee Tomorrow.