§ 3.54 p.m.
§ Dr. M. P. Winstanley (Cheadle)
I beg to move,That this House, believing that the application of the earnings rule to retirement pensions is producing undesirable anomalies between different classes of pensioners, depriving the nation of potentially valuable contributions to the economy and having adverse effects upon the mental and physical well-being of individual pensioners by encouraging an undesirably abrupt transition from full work to complete retirement, urges Her Majesty's Government to seek an early opportunity to abolish the rule.It came as something of a surprise to me to have this valuable opportunity to ventilate this subject, since I entered my name in the Ballot only 30 seconds before closing time, which only goes to show that it is always wise to buy the last ticket in a raffle.
From the number of hon. Members in all parts of the House who have raised the matter of the earnings rule—and it has been raised frequently, from all sides of the House—I venture to hope that I am batting on a fairly easy wicket. In saying that, I mean no disrespect to the bowling of the Joint Parliamentary Secretary, which I have not yet seen.
We have come a long way in our attitudes to social security provisions generally, and there have been great changes, particularly in recent years. Certainly, we are moving away from the situation in which we tended to regard all social security provisions as a kind of necessary charity to be directed solely at those who were in urgent need. Indeed, in the past people tended to look on pensions as necessary for those who were unable to save for their old age, either because of the nature of their employment or, perhaps, because of their total lack of employment.
We also looked on pensions as necessary for those who escaped what was in the past a common provision—capital grants of one kind or another, legacies from rich relatives to maintain a spinster or old people. There were also those whose families were not in a sufficient state of affluence to support them. For all those people, there was a general feeling that pensions were necessary for the needy poor, the pious hope at the same 1010 time being expressed that the underserving poor would not quite get through the net.
Now we have changed almost totally in our attitudes and we tend to regard pensions—certainly I and my hon. Friends regard them—not so much merely as something for a special need, but as an entitlement and as part of the remuneration and reward to every citizen for the contribution which he or she has made to society in his more active years, either in work or in bringing up families, or in one or another acting as householders, housekeepers, housewives and so on. This is the final instalment, as it were, of payment to the citizen for the efforts which he has made. It is a very commendable transition, moving from a position of charity to the present position, which is clearly one of entitlement.
Perhaps we have not quite moved far enough. From my own point of view at least, I would like us to have moved to a situation in which retirement pensions were automatically linked to current wages so that pensioners automatically shared in any increases in the nation's prosperity, to which their earlier efforts had clearly contributed. We have not quite got to that stage yet, but we are nevertheless moving that way.
I am quite ready to give credit to the Government for the steps which they have taken. Some of them, perhaps, have been a little bit tardy. I regret, for example, that they have not proceeded as rapidly as they might have done in replacing what the former Chancellor of the Duchy of Lancaster, now Minister without Portfolio, referred to when he said:We intend to replace the existing discredited graduated scheme".—[OFFICIAL REPORT, 23rd February, 1966; Vol. 725, c. 426.]There has been some delay in carrying those words into practice. Nevertheless, the Government have made progress and I welcome it. We welcome in particular the fact that relatively recently they abolished the earnings rule for widows. At that time, the Government were urged from many parts of the House to extend the abolition of the earnings rule to other fields, particularly for retirement pensioners.
In that regard, the answer which the House got was not exactly forthcoming. 1011 Once again, the former Chancellor of the Duchy of Lancaster said, at the end of his answer:I hope that the Committee will feel that it is a sufficiently plausible case for doing nothing with the earnings rule at the moment."—[OFFICIAL REPORT, 3rd December, 1964; Vol.703, c. 844.]One hopes that whatever answer we get on this occasion, it will not merely be a matter of stonewalling and doing nothing. I should not have thought that this Government would like to be remembered as one which could always find difficulties for any solution. However, they have abolished the earnings rule, and we thank them for that.
At the same time, in abolishing the earnings rule, they have created certain anomalies between different classes of pensioners whose needs in many cases are identical. If one proceeds to remove anomalies piecemeal in a field of activity like social security, it is inevitable that, from time to time, further anomalies will be produced, merely by having removed one. All the time we have to look forward to when we have abolished them all, and that cannot be done all at once.
I am concerned with this particular anomaly relating to the earnings rule for retirement pensioners. I have no doubt that there is a substantial demand from the public for the rule to be abolished, because it is a constant cause of frustration and irritation, and many individual citizens are aware that the provisions operate differently between themselves and their neighbours, which leads to social disharmony and discontent. It is an anomalous position about which many hon. Members receive letters with great frequency and regularity.
I do not want to take a purely negative point of view and look merely at reasons why we cannot abolish the earnings rule. There are three compelling reasons favouring its abolition in relation to retirement pensions which ought to make the House feel that it is time that we looked at it.
Firstly, its existence creates anomalies as between one group of pensioners and another. I will come back to that in a little more detail later, but there is always a case for removing anomalies which exist.
1012 Secondly, there is no doubt that the presence of the earnings rule and its application to retirement pensions tends to deprive the economy of potentially valuable contributions which many pensioners could make. I do not want to exaggerate the importance of it, and I do not say that all pensioners could go back immediately to full-time work, but it is the case that many retired people could make quite a valuable contribution to our economy in one way or another, and they are discouraged from doing so by the presence of the earnings rule.
The third and final reason, which I believe to be the most compelling of all, is the social one. The existence of the earnings rule tends to encourage an undesirably abrupt transition from a position of full-time work to sudden and complete retirement. The social consequences of that are considerable, and I will come back to those in due course as well.
I wish to proceed as expeditiously as I can, because I am sure that there are other hon. Members who want to contribute to the debate. I revert to my first reason, the anomalies, and I shall take one example which will illustrate the position and enable hon. Members to draw their own conclusions.
With assistance from people who have helped me in this matter, I have discovered three ladies, two sisters and their sister-in-law. Perhaps I may call them "the three sisters". They are not my constituents, and I am not entitled to divulge their identities at this stage. They live together, sharing a flat. So far as I have been able to discover, they have virtually identical requirements in that they live the same sort of life and share the rent, rates and general outgoings of the premises which they occupy jointly.
It so happens that these three ladies work in the same department store, two in one department and the third in another. All are on comparable rates of income and in comparable positions. One sister is a widow, and one is a spinster. Their sister-in-law is a deserted wife. If one assumes that they are each earning rather more than £10 a week in their work, one finds rapidly that their positions are entirely different. They are all between 60 and 65. By virtue of the abolition of the earnings rule, the widow 1013 is in receipt of her pay of a little more than £10 a week and, in addition, has a pension of £4 a week which is untouched. She grosses round about £14 a week.
Her sister, the spinster, who eats exactly the same amount, does not wear twice as many clothes and has no additional outgoings, earns precisely the same amount. The whole of her pension is disqualified because she has reached that stage of earnings which results in the deduction of the total pension. One sister gets £4 a week more than the other, although her contribution to society is no greater. I cannot see how that position can be maintained or how the Government can justify it.
The sister-in-law is in a curious position as a deserted wife. If I were to follow the intricacies of the various anomalies arising from her position, we would be here for hours and I might not be able to disentangle myself from the net. She, too, would be receiving retirement pension were the earnings rule not operating. Her husband lives abroad and has had no contact with her for years. If he died, she would be become £4 a week better off overnight. I do not say that that exists as a constant incentive to the lady to encompass that event, but it points to an extraordinary anomaly whereby a lady's total income will escalate suddenly in that way owing to an event which has no personal impact upon her in terms of her dependence and which has no real relevance, having occurred to someone living a long way away.
I am quite sure that the Joint Parliamentary Secretary will accept that the presence of anomalies of that kind is socially disadvantageous. It makes for disharmony, for invidious comparisons and for frustration and resentment. Surely there are good positive reasons for getting rid of such anomalies if it should prove possible.
I do not wish to say too much about the contribution to the economy which pensioners could make. Clearly it is a matter which is within the common knowledge of all hon. Members. I do not suggest that pensioners should be encouraged to do more than they are capable of, but there are many pensioners who could be fulfilling valuable rôles. I know that in various parts of the country there is an unemployment problem, but there are many firms who have difficulty in 1014 recruiting employees for employment of the large part-time variety for which pensioners would be peculiarly suitable. From time to time, I have seen such jobs filled to the advantage of the firm concerned and to the ultimate benefit of the people filling them.
I know that it may be argued that there is nothing in the present regulations preventing a person carrying on working after retirement age or stopping a person getting a job. The fact remains that the presence of the earnings rule acts as a continuing disincentive at a time when the incentive should be in the other direction.
Old people—though perhaps I should not call them old when I am talking about women of 60 to 65, and men of 65 to 70—often resent discrimination of this kind. They sometimes suffer from a feeling of inadequacy because they are no longer able to make a contribution to society, and when they find themselves penalised in this way it tends to make them rather resentful and to take the attitude that they will not carry on working if every shilling they earn is to be deducted from their pension. I am not saying that it is reasonable, but I am saying that it does happen in every constituency.
Whatever temporary steps the Government take to deal with the economy, the fact remains that if Britain is to make progress we cannot afford to neglect, or to discard, or to disregard, any contribution which any citizen, of whatever age, can make to it. I believe that we have to move to a situation in which everybody is making the maximum contribution possible, and I believe, further, that at the moment we have a pension system which is tending to militate against that, and tending to act as a disincentive.
I come now to the last of the three reasons, the social considerations. I regard these as the most compelling of all. It is now generally accepted that the process of retirement should be one of gradual adjustment, rather than a sudden, sharp, and often traumatic single step. Doctors, medical officers of health, welfare workers, sociologists and people who are in touch with the problem of retirement take the view that it should be a gradual process, and that we should not continue measures which tend to make it a sudden step.
1015 It is interesting to note in that connection that at a recent conference held under the auspices of the Council of Europe in Strasbourg, at which the Government were well represented, there was a good deal of discussion on this question of the process of retirement, how it should be encompassed, and how it should be phased. Indeed, the following Resolution was passed:Noting the increasingly clear need to distinguish between the fully active population, those very elderly and fully retired, and an intermediate group neither fully active nor fully retired;Recommends to the Committee of Ministers of the Council of Europe to invite the Governments of the member countries"—of which we are one—to: reconsider traditional ages and financial provisions for retirement in the light of this."In the light of this" is relevant to the previous discussion.
§ The Joint Parliamentary Secretary to the Ministry of Social Security (Mr. Norman Pentland)
Did the hon. Gentleman say "for retirement"?
§ Dr. Winstanley
Yes, and it is interesting to see what the Report says about a Paper delivered by the French delegate. It says:We need to distinguish more sharply than we have done between different classes of old, to encourage those who can still work to do so, and discourage premature retirement … There is a good deal of evidence, for example from earning curves in the independent professions, that older men and women, even if still nominally in full employment, become in practice part-time workers as they move towards retirement age. Conversely, the psychologists as well as the economists remind us that sudden retirement is damaging: it is expensive to the economy and damaging to the pensioner's personality".It was in the light of comments of that kind that the Conference of the Council of Europe took its decision, which appears to have been enthusiastically supported by Government representatives, by the Chief Medical Statistician from the Central Registry, and also by the Chief Actuary in the Government's Actuary Department. It is was possible for the Government enthusiastically to support that sort of view in Strasbourg, it seems that I am not being too optimistic in expecting them to support the same sort of view here at home.
1016 In many ways that Resolution and that Report say very much what my Motion says. I do not want to elaborate on this point of the social necessity of employing older people, but in my many years in general medical practice I have spent a great deal of time dealing with problems arising purely and simply from retirement, how to manage retirement, how to cope with it, and how to phase one's activities in a period when one begins to go into a decline. In many people I have seen the catastrophic effect which can result from sudden idleness following an extremely busy life.
Among the Members in this House there are quite a few of advanced years but who are far from idle. I hate to think of what would happen to somebody like the right hon. Member for Easington (Mr. Shinwell), who is at present keeping us out of Europe single-handed, if he were suddenly forced to retire. I think he would burst if he were suddenly stopped from leading an active life. We therefore have to look at this problem and decide what is the most desirable phasing for the individual concerned.
The present Regulations act as an incentive to people to stop working suddenly. By bringing in different regulations and by abolishing the earnings rule, we could allow people to phase off their work more gradually in the period of retirement. I am sure that this would be socially advantageous in many ways.
The hon. Gentleman may argue that a person is encouraged to remain at work in many cases because of the increased pension which he may thereby earn. If the hon. Gentleman does the necessary arithmetic—in fact I am sure that he has done it already—he will see that this argument is largely bogus. because a person who elects to continue in full employment—I am not necessarily recommending that people should continue in full work; it should be phased—automatically gives up a pension which amounts to £208 a year for five years, and, also automatically, continues to pay a considerable contribution towards his National Insurance stamp. The forfeiture of pension for five years amounts to £1,040, and his additional contributions amount to £175. Thus, one way or another, he pays £1,215. I am sure that the hon. Gentleman will agree that 1017 someone who earns a pension which is increased by £1 a week, which he starts collecting at the age of 70, must be a person of extreme longevity in order to benefit arithmetically. I therefore do not accept the argument that the present provisions, which allow for an increase in the pension to be earned, act as an encouragement to people to remain at work.
Those, generally, are the reasons why I think the House should consider very carefully whether the earnings rule should be maintained—the importance of removing anomalies, the importance of seeing that we do not deprive ourselves of the important contribution to the economy which could be made by more fit and old people continuing to work, even though they may continue to work to a limited extent, and, finally, the extremely important social considerations.
With regard to the social considerations, it must be remembered that a great part of the social services are occupied dealing almost exclusively with the problems caused by sudden retirement. Whenever this proposal has come forward in the past, there has been a tendency for the Government to make sympathetic noises, and to produce terrifying sums of what it would cost, in order to explain that it cannot be done. I accept that one has to do the arithmetic to see what this proposal would cost, although my right hon. and my hon. Friends and I would prefer to see this money collected in a different way, and based on a graduated payroll tax to replace the present S.E.T.
We accept that, in whatever way we collect it, it will cost money. But the calculation is incomplete if it merely consists of a computation of one side of the account—the side showing how much it would cost. The Minister ought to endeavour at the same time to calculate the other side of the account and discover how much it would earn—how much it would save in terms of an additional contribution to the economy, and how much it would save the welfare services generally if they were not perpetually involved in sorting out the sometimes quite serious social problems arising from retirement. I do not say that we can say that £X or £Y will be saved; nevertheless, the amount saved must he considerable.
1018 There are appealing reasons for getting rid of the earnings rule finally and, therefore, getting rid of the anomalies and so assisting this limited group of people—women between the ages of 60 and 65 and men between the ages of 65 and 70. If we could do this it would bring conspicuous advantages. Hon. Members on both sides of the House have raised this question on many occasions, and I hope that at the end of the day those hon. Members opposite who have frequently expressed this point of view will support my Motion. If they decide not to support it, I hope that they will stop stumping round the country telling people that they do not agree with the earnings rule, and want to see it abolished.
The Motion does not call for abolition tomorrow or the day after; it merely seeks an expression of opinion by the Government that they finally recognise that the earnings rule is anomalous and unfair and that it is having certain undesirable social effects, and it calls upon the House to take a firm decision to seize an early opportunity to abolish it. I hope that the House will support my Motion.
§ 4.22 p.m.
§ Mr. Philip Holland (Carlton)
I congratulate the hon. Member for Cheadle (Dr. Winstanley) on his choice of subject, but I cannot help feeling that, in spite of the long list of reasons he gave for urging the abolition of the earnings rule, he has missed the nub of the argument in favour of his proposal. His arguments are valid only to a degree which varies with each reason he gives, and therefore they are to this extent arguable and partly answerable. I want to support his proposal with an argument which I believe goes to the heart of the matter, and which in my opinion is unanswerable. I am sure that he will not complain about that.
The earnings rule can be justified only so long as our National Insurance Scheme is based upon the Beveridge principle of providing benefits against the interruption and loss of earning power. If the reason for benefits is a loss of earning power, a person whose earning power is not impaired cannot receive benefit. This is the basic argument against abolishing the earnings rule. But, as we know, the reason for basing the National Insurance Scheme on this principle was that the Beveridge Committee's deliberations were 1019 carried out against a background of the massive unemployment of the 1930s. Today, massive unemployment can occur only if the Government grossly mismanage our economy. There is no excuse for it, with the "know-how" that we have today. The Government today think they have all the international brains they need to help them avoid this catastrophe in the future.
Last summer the Prime Minister told us that he expected little more than a seasonal rise in unemployment in the autumn and winter. No matter what we might think, if the Government believe that we are not going to return to the massive unemployment of the 1930s they must work on the assumption that massive unemployment is no longer the raison d'être for a National Insurance Scheme. In that case, the Beveridge principle is no longer relevant.
We have an idea of the Government's attitude to the Beveridge principle from what was said on 13th June this year in the Committee on the Social Security Bill. The Minister of Social Security then said:In these last months we have breached Beveridge principle time and time again. I do not think it is a sacred principle.She then went on to cast doubts on her own words by giving as examples of breaches of the Beveridge principle improvements in the benefits that are still being paid against the interruption and loss of earning power. She gave an example of strengthening the principle and called it an example of a breach of principle. In fact, the only breach of this basic principle during the years since Beveridge was the one last year—the abolition of the earnings rule for widows who are widowed over the age of 50. The Minister did not mention this in the examples that she gave last June, so I assume that it was a purely accidental breach of principle and not a deliberate act of policy.
The hon. Member for Cheadle pointed out that by taking this one abolition in isolation some of the anomalies about which he has been talking were created. Nevertheless, in the same debate on 13th June, the right hon. Lady said, categorically:I am not in the least worried about the principles of Beveridge. The Beveridge Report was a wonderful job and all right for its time, 1020 but we are in a very different time today."—[OFFICIAL REPORT, 13th June, 1966; Vol. 729, c. 1160.]I agree wholeheartedly with her words. I hope that when she made that statement she was doing more than using a mere platitudinous form of words, but unhappily her attitude as revealed by her actions since is not very encouraging.
It is important that the House should know whether the Minister now renounces the interruption and loss of earning power as the basis for paying National Insurance benefit. It would also be helpful to know what new principle she suggests putting in its place. As an Opposition back bench member it is not incumbent upon me to spell out the details or make proposals or suggestions to the Government about what should be done, but because I am anxious to see improvements in social security—and I do not care who gets the credit so long as we get the improvements—I would like to make a suggestion to the Government.
I suggest that the criterion for paying benefits should not be the interruption and loss of earning power, as it is today, but simply the criterion of poverty. This is more in keeping with present times and the problems of today. If the loss of earning power is no longer the criterion for paying benefits the earnings rule becomes irrelevant. If poverty becomes the criterion for paying benefits, other than a straight return on contributions paid, much of the saving on subsidies now being paid to people who do not need them should offset some of the costs of abolishing the earnings rule for those who do. But it is not a simple arithmetical sum, because with the change of the whole basis of the National Insurance Scheme as the reason for paying benefits the whole thing goes into the melting pot and everything is altered, with repercussions right across the board.
A decision would have to be taken, first, on where to draw the line between "poverty" and "adequate means". Until that line is drawn, it is impossible to do the sums. Nevertheless, this does not affect the argument. Any Government who have the will to do something can always find the means. If the Minister is determined enough, and if the Minister without Portfolio can achieve the backing of the Cabinet, the sop of sympathetic words can readily be 1021 translated into constructive action. I hope that this will be so, but past experience persuades me that such a hope may join the long list of pious hopes expressed by back benchers on both sides during the series of social security debates in 1966. But if firm Government action, early in 1967, proves my fear to be groundless, with the hon. Member for Cheadle and certainly with a large number of National Insurance beneficiaries, I shall have a very happy New Year.
§ 4.30 p.m.
§ Mr. Thomas Steele (Dunbartonshire, West)
The subject of the Motion is not a new one. The earnings rule for retired pensioners has been with us for some time. I clearly remember the early debates on this subject. One of the great opponents of any abolition of the earnings rule was the trade union movement, which was very conscious that the retired pensioner might be used as cheap labour. Circumstances have changed remarkably. The trade union movement today is no longer afraid of that happening and feels itself strong enough to prevent this kind of pressure being brought on old age pensioners.
Nevertheless, we must consider the earnings rule as applied to pensioners with great care. The hon. Member for Carlton (Mr. Holland) talked about Beveridge. In the early stages, many possible changes were not made because we were too conscious of Beveridge and too anxious to stand by the six ideas which he put forward. We have left behind that idea. Particularly with regard to widows with children, we departed from it a long time ago. I was happy that we did.
The hon. Gentleman propounded a new conception today, which he himself will, on consideration, recognise is far removed from Beveridge. The idea that all benefits should be paid because of loss of earnings or earning capacity got us into a great deal of trouble with the 10s. widows and others, but this principle still applies for pensioners and it would be dangerous to get too far away from it—
§ Mr. Holland
The distinction which I was trying to make was between loss of earning power and poverty. We might find, if we recast the whole thing on the 1022 basis of poverty, that some pensioners who were retired from work were not in such need as other pensioners. The line must be drawn somewhere, even for pensioners and I would not exclude them.
§ Mr. Steele
I was coming to the subject of poverty. I understand the hon. Gentleman's approach. He might think that mine is rather illogical, but the House has determined the line which he mentions, that under the new system—it was called National Assistance but now has some other name, although its basis is still the same—there is a line below which people will not fall. The unfortunate thing is that we also have the wages stop. People who are working are sometimes denied the full rate which this House laid down as the minimum because they are unable to earn the amount of money which we said that they should earn.
My criticism has never been of the Government, but of the trade union movement, because it has never been able to obtain for people in industry the minimum that this House laid down. There may be problems about children. In future, my right hon. Friend the Minister of Social Security and the other Members of the Government may be thinking of a new approach to family allowances to overcome that problem. What the hon. Member for Carlton said about poverty interested me and I was also interested in what the hon. Member for Cheadle (Dr. Winstanley) said about this subject being something which ought to be weighed in the balance.
Let us consider the two propositions. The hon. Member for Carlton says poverty should be measured; the hon. Member for Cheadle says that we must weigh in the balance the advantage of having these men at work and what it costs the nation the other way. I have another consideration, which falls between these two. A number of Questions on this point answered by my right hon. Friend show that to wipe out altogether the earnings rule would cost £110 million a year; perhaps the Parliamentary Secretary will confirm that figure.
This is a fairly large sum, but the hon. Member for Cheadle seems to be unaware of who will get it. It is not the 20,000 people who are at the moment caught up by the earnings rule, because if 1023 we abolish it altogether, all those people who are at present working because they deferred their retirement would all be treated as retired and have to get this money. How will the people who are working and deferred their retirement be considered by the hon. Member? He talked about the poverty line. The person who is able to work and continues to work will get his wages and retirement pension and is bound to be above the poverty line—
§ Mr. Holland
Whether the man will get his benefit for working will depend on his earnings. This would determine whether he was below the line and would get the benefit or above the line and would not get it. This is the point of having another criterion.
§ Mr. Steele
The criterion which the hon. Gentleman now mentions smells very like the means test to me. How can we make a decision? Either the man will get his retirement pension plus the wages he has earned, which I imagine would be well above the poverty line or, the hon. Member now says, the matter must be decided by some other criteria—and how can it be decided unless by a means test, which I should not like at all. I believe that if we have £110 million to add to the purchasing power of the people, then we ought to consider carefully where to give it. I am not sure that we ought to give it to the pensioner who is over 65 but is still working.
§ Dr. Winstanley
The hon. Member, I am sure inadvertently, is distorting my argument. I was not so concerned with the immediate recipients of the £110 million, or whatever the sum is, as with the effect of the change of the rule on those already receiving the pension and not working. I argued strongly that it was a social necessity, not purely the necessity of those people who would get the additional money.
§ Mr. Steele
I understand the hon. Member, and I hope to come to my own solution, but I feel that the first candidate for the £110 million ought not to be the man between 65 and 70 who is still working. There are other people who would be the first candidates.
It seems to me that one problem which has arisen is that the amount paid to a 1024 man for delaying his retirement is not sufficient. We must give a greater incentive to the men who stay at work. The incentive given at present to the man between 65 and 70 is not sufficient. May I give an example? One old-age pensioner worked from 65 to 70 and earned all the increments to which he was entitled and then retired at 70; and he complained very bitterly to me that he was no better off, in that people who had not worked from 65 to 70 but who had drawn the retirement pension, were now getting more money per week than he got because of the assistance to which they were entitled. This is wrong. We all must agree that it is wrong. This is why I am delighted that the National Insurance Advisory Committee is at present looking at the whole question of this type of benefit and what ought to be done. I strongly urge that we should look very carefully at the question of the increments, which are now out of balance with the other part of the scheme.
We now have graduated benefits for sickness and graduated benefits for unemployment, and we also have the redundancy scheme. I heard an interesting criticism recently of the redundancy scheme at one of my own Labour Party meetings. I said that it was a helpful criticism for it was the first time that a group of Labour people had ever criticised a Labour Government for being too generous, and that was the kind of criticism to which I did not object.
While I agree that we must have a good hard look at many aspects of our social benefits, I believe that we should be wrong to take the abolition of the earnings rule for the retired pensioner as our first priority. The £110 million which I mentioned could be put to far better use. I strongly urge that the Government in their reconsideration of this matter should think very hard about increasing the increments for men who work between 65 and 70, because these are the people we want to encourage to go on working.
When I gave lectures on social security in the early days I used to say that the difference between a man and a woman in retirement is very simple: the woman never retires. She goes on from day to day doing the same kind of thing as she has always done. But the man who 1025 retires completely changes, for he has to find some other new outlet. I beg your pardon, in advance, Mr. Deputy Speaker, when I go on to say that such a man only becomes a damned nuisance about the house. We ought to encourage these people to go on working, and the best way to do that is to give attractive increments to enable them to do so.
§ Dr. Winstanley
Before the hon. Member sits down, may I put a question to him? Much of his argument has been about which group is in the greatest need. Would he at least accept that the excellent investigation by the Ministry, published under the title "Financial and Other Circumstances of Retirement Pensioners", shows that the plight of spinsters between 60 and 65 is every bit as bad as, if not worse than, the plight of widows between 60 and 65 for whom the earnings rule has already been abolished?
§ Mr. Steele
I am always hesitant to talk about spinsters. I remember very well the passage of the Act in 1946 when my right hon. Friend the present Minister of Transport was very active in the Committee. One day she argued about equality for women in respect of contributions, benefits and so on, and the next week she argued for special consideration for spinsters. The trouble about women is that they always want to have it both ways. Either they must have equality in respect of contributions and benefits or they must decide that they are women, that they are the weaker sex and that they are entitled to more advantages, They must make up their minds.
If one looks at the longevity tables one finds that women live longer than men. They will, therefore, be a greater burden on the insurance scheme, if I may use that unfortunate phrase. But I am very conscious of this problem, which was very much in my mind when I was at the Ministry of Pensions and National Insurance, when we received a deputation from spinsters. In their plea this deputation indicated the effect of World War I and World War II on their circumstances. When they told us that their situation arose because of what had happened in those wars and that but for those wars they might have been in a far happier situation, there was no answer to that plea. All I can say is that we are con- 1026 scious of that situation, but I am not so sure that spinsters want to be treated in a special way, although they are so treated at present.
§ 4.50 p.m.
§ Mr. Cyril Bence (Dunbartonshire, East)
I am surprised by one statement in this Motion, namely, that the application of the earnings rule to retirement pensioners producesundesirable anomalies between different classes of pensioners, depriving the nation of potentially valuable contributions to the economy and having adverse effects upon the mental and physical well-being of individual pensioners by encouraging an undesirably abrupt transition from full work to complete retirement …Obviously, there are psychological difficulties for someone who has been engaged in manual work all his life and who is suddenly deprived of that manual work, staying at home with his wife who, after a few weeks, regards him as a bit of a nuisance around the place.
I suggest, however, to the hon. Member for Cheadle (Dr. Winstanley) who, like myself, is reaching the age of retirement—though I believe I am a little in advance of him—that one can always find work to do at home. I remember visiting a retired friend of mine. He lived in a semi-detached villa. When I visited him he was coming out of the gate with a shopping bag. He had been retired for about 12 months. I said, "How are you enjoying it?" He said, "Terrible. My missus is the worst employer I have ever had." She had him cleaning windows and shopping. The man was always busy. In fact, he lost weight after he retired. He was working harder than he had ever worked in his life. This is a situation for which one must prepare oneself. When one retires, there are many jobs that can be done at home and if one does those jobs one will not be a nuisance.
This abrupt change from retirement is not due to an inability to function, the change is felt because of the abrupt loss of income.
§ Dr. Winstanley
No, it is a sudden transition of the rôle of the individual in society. I have seen old men, and not so old men, weep after a relatively short time in retirement merely because 1027 of their feelings of inadequacy, the feeling that they were no longer part of society and making a contribution. The hon. Gentleman cannot deny that there are many people in this position.
§ Mr. Brian O'Malley (Rotherham)
My hon. Friend the Member for Dunbartonshire, East (Mr. Bence) is right when he says that one thing which immediately worries many people when they retire is the loss of income, but at the same time my hon. Friend ought to give some weight to what the hon. Member for Cheadle (Dr. Winstanley) said. One thing that is noticeable is the number of men who, having had a long working life, suddenly begin to crack up when they retire. I wish my hon. Friend would consider how important it is when men suddenly find themselves apparently not wanted in society. The hon. Member for Cheadle is quite right.
§ Mr. Bence
I have been forestalled of course. The first reaction is to this severe loss of income. However, it is not long before—I have seen this so many times—notwithstanding the fact that people get used to a drop in their income after a time, they feel that they have no rôle to play in society. I believe that the drop in income contributes to this feeling. One does not have this feeling immediately after retirement. The first sense of loss relates to one's diminished income. After a time—I have many friends in this situation—people get this awful feeling that society does not want them, that they have no rôle to play and they have nothing to do.
Quite apart from ill health, I think this is a problem with which we are all faced eventually. Most of us are aware of the possibility. Men leave Parliament and they find other things to do, though I agree that it is not everyone who can find another occupation. I recognise this fact, but that happens whether we have an earnings-related rule or not. Instead of it happening at 65, it happens at 70 years of age. The fact is that it happens. I know a man who will be 88 in February. He has been retired since he was 1028 65 years of age. He is absolutely bored to tears. His income is all right—
§ Mrs. Gwyneth Dunwoody (Exeter)
If I may interrupt my hon. Friend, when he says that the social attitude to retirement is wrong, I believe he is drawing the right conclusion from the wrong facts. He is approaching the problem from the wrong end. We have to start planning for retirement much earlier in our working life and come to terms with what is involved in it, from the point of view of work and the social conditions and stresses.
§ Mr. Bence
Yes, there is no doubt that because of centuries of working and toiling until one drops, we have never considered preparing ourselves for retirement. Very few men and women prepare themselves five or six years before retirement. I agree with my hon. Friend that because of a long historical background of working until one collapses, because people could not retire and did not have the means to do so, we have never considered—in fact, we do not consider today—preparing elderly people for the leisure that will come to them later in life. We do this with children. We talk about educating our young people for leisure. We talk of widening the scope of education so that young people can enjoy greater leisure in a society where probably the working week will be one of four or five days. But we do not do anything of the sort for old people.
§ Mr. Holland
There are courses for retirement run by a large number of companies in industry during the last five years of the working lives of their employees.
§ Mr. Bence
This, I think, makes my point. One of our priorities in the use of funds, if there are funds at our disposal for old people, is to create the conditions in which they can spend their retirement using their faculties and capacities. But to do it in the way suggested by the hon. Member for Cheadle would only create more anomalies.
Reference has been made to anomalies between retirement pensions and widows' pensions. But there are other anomalies. Policemen retire at 55 with good pensions, and they take other employment, still drawing their pensions. Teachers retire, and as long as they are not employed in education they can take on other work 1029 and still draw their pensions. Civil servants can retire after 40 years' service and work in other fields, and they do not lose any of their pension.
The proposal before the House would not change those anomalies. A widow's pension must not be confused with what is called the retirement pension. A widow's pension is not based on retirement; it arises from the loss of a partner who was the sole source of income of the family. Therefore, the abolition of the earnings rule for the widow is different from abolishing the earnings rule in respect of retirement pensions. If we abolish the earnings rule, the pension is not a retirement pension; it is a pension at 65 years of age. With the introduction of the earnings rule the designation "retirement pension" can be abolished and one is left with a pension at 65.
There are many institutions that give pensions at 65 years of age. One can take out annuities with insurance companies. One gets an annuity at 65 years of age, whether one is working or not. Surely the hon. Gentleman does not suggest that the State should do that?
§ Mr. Bence
The hon. Gentleman is suggesting that we should run it in exactly the same way. If we did that on an actuarial basis right across the whole of our society, including widows' pensions and retirement pensions, I do not know whether it would be viable. I doubt very much whether the cost would justify the benefits that it would bring to people about to retire.
§ Dr. Winstanley
I said that the important object was the abolition of the earnings rule relating to retirement pensions for men between 65 and 70 and women between 60 and 65. In so far as that was my object, I nodded assent. I go no further.
§ Mr. Bence
It would be far better if we enlarged the concept of pensions related to earnings. A man could work until he was 70 and then earn a higher related pension. With a higher pension related to his earnings, the abruptness of retirement of which I have spoken would not be so bad as it is now, especially for a man earning £18, £20 or £25 a week. That initial abrupt break being less 1030 severe, the problem of the other break, the feeling of not having a rôle to perform, or of not being able to function in a useful way in society, could be solved.
I therefore believe that the best way to solve the problem is progressively to raise income-related retirement pensions as far as we can, not in the very trivial way provided by the graduated pension but in a better income-related retirement pension, whether paid at 65 or 70. One could make it progressive between 65 and 70.
I cannot speak for all the professions—I was in the engineering industry. But I believe that the time will come, even in my lifetime, when the task of executives at some of the top levels will be too much for them when they have passed the age of 55. The pressure in industry and management is great, and, even on the factory floor, with high-speed machines it is often such that when a man is 65 he may not longer be able to perform his particular function.
For men to continue then in many forms of industry in machine shops and on some of the automated processes involving conveyor belts would not he desirable. This is not an argument in support of my case; I am trying to be fair to all the cases. It would very often be better if a man were retired from such a process at, perhaps, 55 and he should have an opportunity to enter some other activity.
I used to say that it seemed to me that I was born to be a tool-maker and would be a tool-maker all my life. Fortunately, I was not. But when I look back over my life I think that it would have been a good thing if I could have moved through many different occupations.
§ Miss Mervyn Pike (Melton)
Would the hon. Gentleman agree that the pattern of employment in the future will probably be that people have two or three different jobs during their working life?
§ Mr. Bence
That is my point, that people could move through various functions in life. We talk about redeployment of labour, and we now have the training boards. There are many ways in which a man who has retired from industry at 55, 60, 65, or whatever the retirement age is, could well be employed in the training centres. With a little 1031 training in the techniques of teaching and conveying his skills, arts or understanding of a particular organisation, he could be usefully employed in all sorts of institutions and organisations that may be created in the future because of the need in our scientific and technological age to move people from one form of employment to another.
But I do not think that the abolition of the earnings rule on retirement pensions would help that in any way. If the earnings rule were abolished there would be a tendency for men to stay in a job which it would be better for them to leave. If they were retired and could be brought into institutions where—
§ Mr. John Pardoe (Cornwall, North)
I am following the hon. Gentleman's argument very carefully. Can he tell me why his arguments do not apply to the widows' earnings rule, and why all the disadvantages of abolishing the earnings rule for men are not applicable to widows?
§ Mr. Bence
There are schemes under which a wife with children who becomes a widow can undergo training for all sorts of jobs. She may have been a housewife for 15 or 20 years and not have been in employment since she married. She can get training in all sorts of skills and then go into other occupations. I say that this could also be done with people who are retired. It would be better to use the taxpayers' resources to do that sort of thing than in abolishing the earnings rule. If one abolishes the earnings rule, employers in general will keep on people who the hon. Gentleman says in his Motion perform a useful function. But, speaking as an industrial worker, I know many men working in industry on machines at the age of 60 who could do other work on retirement, especially in view of the new training boards and all sorts of new social institutions that may be created.
§ Miss Pike
I cannot follow the hon. Gentleman's argument. He is saying that the £110 million that would be spent if the hon. Member for Cheadle (Dr. Winstanley) got his way would be better spent on training people to do other jobs like lecturing in training colleges and so on. But I do not see how those men will be encouraged to go on to use that training if the earnings rule is still applicable.
§ Mr. Bence
I think that in 20 years' time the retirement age will be reduced in many branches of industry, and in some cases where it is now 60 it will be 55. I believe that many of the middle and senior executives could do very useful work outside an industrial unit in industrial training boards and various institutions that may well be created as a result of changes in our social structure and changes in the techniques of management and administration in modern industry.
It seems to me that to recognise this and at the same time to abolish the earnings rule, looking upon its abolition as an instrument to avoid abrupt retirement from a man's function, is an anomaly in itself. I do not see how that can be possible.
I take the example of a designer in an engineering plant retired at 60—he would probably not retire at 55—who was then kept on. If the earnings rule were applied, the probability would be a tendency, certainly if it were a smaller company, to take into account that he would still pick up his retirement pension. I do not say that the large organisations would do this, but I have no doubt that in many industries in which competition was very strong there would be pressure to depress incomes or salaries at that level in those circumstances.
§ Dr. Winstanley
This is relevant to the point which the hon. Member for Dunbartonshire, West (Mr. Steele) made about the attitude of the unions. Will not the hon. Gentleman agreed that this is happening at present in a slightly different way? With the application of the earnings rule, there is a tendency now for incomes to be depressed because the people on retirement pensions have an incentive to keep their incomes below levels at which the rule would apply. What the hon. Gentleman fears is already happening as a result of the earnings rule, therefore, and people are prepared to accept low wages because they know that any more would go back to the Exchequer.
§ Mr. Bence
I accept that that may be so in certain cases, but a general abolition of the earnings rule would mean that many employers would tend to think of people between, say, 55 and 70 years of age in terms of a deflated income scale at the particular level of function. Over the years, if the earnings rule were abolished for people between 65 and 70 years of age, there might well be a depressing effect on the rewards and general income level of people working at certain functions in an industry.
Although I have a good deal of sympathy for what the hon. Member for Cheadle has suggested, I feel that, if one looks at pensions and retirement right across the board, it is clear that the better way is to concentrate our priorities on an improved relationship between retirement pension and average earnings for the individual during, say, the last three or five years of his working life. I regard this as of more importance.
§ 5.12 p.m.
§ Mr. Brian O'Malley (Rotherham)
The House is grateful to the hon. Member for Cheadle (Dr. Winstanley) for raising this subject today. We are all conscious of the problems confronting the whole range of citizens who reach retirement age, including the wives of men who retire from work. Before coming to the Motion itself—I understand the hon. Gentleman's motives and I have every sympathy with them—I think it right to sketch in the background to the situation which we are discussing.
The hon. Member for Cheadle will be the first to recognise the efforts which this Government have made, in very difficult economic circumstances, to ameliorate the conditions of the people about whom he is concerned. In his Motion, the hon. Gentleman speaks of the nation being deprived ofpotentially valuable contributions to the economyby retired people who are not working. Before the House can come to a decision on a matter of this kind, it should understand what the situation is and what the balance between people over 65 and the rest of the working population is. It is fundamental to the argument that the trend in the post-war period has been, and it will in future increasingly be, that the working part of the population aged under 65 will become a smaller propor- 1034 tion of the population as the total increases. There is now an increasing number of men and women over 65 in relation to the total population, and this increase will continue, so far as we can foresee, for the rest of the century.
Looking at the economic realities, therefore, one must ask how we can encourage men and women over retirement age to carry on and make a contribution to the economy. I am entirely with the hon. Gentleman when he says that we must do what we can as a nation to encourage them to do so. Hon. Members opposite have had a lot of things to say in the past few months about the National Plan. In spite of present difficulties, it is undeniable that, once the present phase of the economic cycle is over—over for the last time, I hope—we are likely to have a chronic manpower gap in British industry. For this reason, all of us on both sides must support the hon. Member for Cheadle in his general proposition that the Government, any Government, must do what they can, within the possibilities open to them and considering the economic circumstances at any time, to encourage these people to play a larger part in the nation's economy.
In his Motion, the hon. Gentleman speaks of theundesirably abrupt transition from full work to complete retirement".In my intervention in the speech of my hon. Friend the Member for Dunbartonshire, East (Mr. Bence), I said that I agreed with that. All of us will know from personal experience of many individuals who have retired at 65, apparently fit and well both mentally and physically, but who, within a few weeks or months, have completely changed not only in their mental but in their physical well being. I am sometimes surprised by what I see of this in my home town and in my constituency. Men who have been working in the coal mines and who retire apparently fit at 65 years of age sometimes, quite quickly after retirement, find themselves going downhill physically.
There is one qualification which should be made here, however, when we speak of the desirability of encouraging people to work longer and contribute to the economy. There are some industries and occupations in which I would not want people to work any longer, once they 1035 have served their lives there. I say this as a Member whose father worked the whole of his working life in the coal mines. I am entirely at one with those who suggest that, for example, people who have worked in the coal industry or in the heavy end of the steel industry might well be given opportunities to work in more congenial jobs. This would be helpful.
When I see—this is really going against the hon. Member for Cheadle; however, I think that he perhaps agrees with me because I see him nodding—the work put in in some of our heavy industries, not only would I say that the people concerned should not work after 65, but I would like to see them, as is done in some other countries, finishing work of that type before they are 65. I am pleased that the hon. Member is in agreement with me on that.
Therefore, with this background and with sympathies of this kind—I do not think that there is anything between me and the hon. Member on this—we look at the position of retirement pensioners after 65 and say "How do we encourage them to work, and how do we prevent difficulties of the transition?" As the hon. Member said, some firms do something by providing training courses for retirement. I understand that a large firm in my constituency which is soon to be publicly owned does this, and I regard it as a very valuable kind of course to be run.
But when one attempts to answer those questions one immediately runs into an enormous number of difficulties. It was suggested, for example, when there was a discussion on the abolition of the earnings rule for widows, that anomalies were created or that if one does one thing, then certain other things follow. This is always the problem. If one is involved in legislation on social security or, particularly, taxation, and does something for a desirable reason, other things flow which are less desirable. This is one of the problems that the Government—any Government—and the House of Commons must face up to, that as soon as one implements something desirable, something less desirable flows from it. One has to consider how to get round the problem.
Therefore, while I am agreeing with the hon. Gentleman on the two objects that 1036 he is trying to achieve—that people should be encouraged to work so that they can make a contribution to the economy after they would normally have retired, and that the abrupt transition, which I think is a fact in many cases, should be prevented—one comes to the point: What can a Government do about it? Obviously, any Government must consider the matter in the light of the economic circumstances of the time and also the general philosophy which must underly the social policy of the Government.
One of the major difficulties is as follows. The hon. Member said that the cost to the Exchequer would be in the region of £110 million. If the Exchequer can afford to spend from within its budget £110 million on this purpose, I would agree with him wholeheartedly. But there is a difficulty, and it is the difficulty in a democracy. There are a large number of spending Ministries within a Government, all of which require funds. We have all said on election platforms and in this House that we want better schools for our children. The hon. Gentleman spoke about primary schools the other day. Governments are under pressure from organisations and individuals who want an increased amount of money spent on the roads.
§ Mr. Eric Lubbock (Orpington)
One of the problems in education is where we are to find the teachers. Many retired teachers would be encouraged to go back to work by the Motion of my hon. Friend the Member for Cheadle (Dr. Winstanley).
§ Mr. O'Malley
I am completely in agreement with the hon. Member. I believe that he imagines that there is a difference between us; it does not exist. I am posing the question which his hon. Friend posed: how do we deal with this? I was a teacher for a time and I know the difficulties, particularly in industrial areas like mine, where schools have a chronic shortage of teachers. Throughout a whole period of years a staff may be three or four short and supply teachers will be coming in all the time. There is always the difficulty of maintaining reasonable class levels. So I am certainly in agreement with the hon. Member for Orpington (Mr. Lubbock).
§ Mr. Will Griffiths (Manchester, Exchange)
I appreciate the argument 1037 that my hon. Friend is advancing. Has he considered that if the earnings rule were abolished the Revenue would be considerably fortified by the increased spending power of the pensioners? Therefore, a great deal would accrue to the Chancery through spending by pensioners on objects which carry indirect taxation as well as direct taxation.
§ Mr. O'Malley
Yes, indeed. This was what I wanted to put to the Parliamentary Secretary. We were told that the proposal would cost £110 million. Would it be as much as that? I hope that the Government will do something about this in the full-scale review which they are carrying out in which these problems and facts must inevitably he dealt with. I hope that the Minister will say something about this.
I hope that my hon. Friend will recognise the problem of a democracy, particularly with a Government like the present one, where a whole range of problems has to be dealt with and vast amounts of money are needed, partly because of neglect in the past, but partly because of the problems that one will always have in a democracy which is a humane one. It is really the problem that the demands of the democracy and the citizens within it will always tend to outrun the economic and financial resources. I should not be surprised if that was not one of the problems which the Chancellor and the Government are having to contend with at this time. All I say is that in terms of expenditure, whatever the amount of that expenditure—whether it is £110 million or a very much reduced sum in view of what has just been said—there would he some financial cost to the Treasury, and that has to be fitted into the priorities.
I am hoping that the Government will soon be able to announce that they will be able to give some kind of increase generally to retirement pensioners. I am very much aware that it was the present Government which gave the largest increase for very many years when they took office in October, 1964. I am hoping that my hon. Friend will have something to say about that in order to assist precisely the people about whom the hon. Member for Cheadle has been talking. I am in sympathy with the hon. Gentleman about this, and I hope that he will recognise that this genuinely is a problem, that while between him and 1038 me there is nothing because I should like to see the earnings rule for retirement pensioners abolished, I appreciate that it would create some difficulties and anomalies. I can also understand the attitude of the Government; they are subjected to pressures from spending Departments, and some kind of priorities obviously have to be determined in this regard.
§ Dr. Winstanley
I am sure that the hon. Gentleman will recall that I put this precise point to the Minister, saying that it was no good his coming along with one side of the sum and saying what it would cost unless at the same time he came along with a computation of how much it would save in a variety of ways apart from those which the hon. Gentleman has mentioned.
§ Mr. O'Malley
The hon. Member for Cheadle is raising a similar point to that raised by my hon. Friend the Member for Manchester, Exchange (Mr. Will Griffiths). It is important that we should have some information about that—I see that the hon. Member is nodding, and I am glad that he is with me on this—bearing in mind that there genuinely is a problem arising from the pressure on the Government.
The second aspect is how to keep people at work. A great deal could be done by employers to make part time work available for many people who would like a job but cannot get it. In my area, there are large numbers of such men and women, some of whom I see in my surgery on Saturday mornings. They want a part time job but cannot find one.
This is not just a question of the earnings rule. Other factors are involved, as the hon. Gentleman recognised. I hope that my hon. Friend the Joint Parliamentary Secretary will say something about this. I know that it is not strictly speaking the concern of his Department, but I hope that he can tell us what kind of advice or encouragement the Ministry of Labour is giving or what advice or encouragement it could give to employers to provide part time work for retirement pensioners.
§ Mr. O'Malley
Everyone recognised the need for some deflation when my right hon. Friend the Chancellor of the Exchequer introduced his Budget. At the time I would have preferred another fiscal weapon to the S.E.T. in order to achieve the objective. But I want to know the evidence on this matter. Some months ago I asked a supplementary question of my hon. Friend concerning the barriers to part time employment. In my area—and I have made some inquiries—I can find no evidence at the moment of the effect mentioned by the hon. Lady. To help the economy and to spread the transition into retirement, part-time employment could be very helpful, and I hope that we shall hear what the Ministry of Labour is doing or can do to encourage it.
Financial inducements are the nub of the Motion. While we can do a number of things to get people to take on part-time employment after retirement, none is more important than financial inducement. The question, therefore, becomes what kind of financial inducement should be offered. On the one hand, the hon. Gentleman speaks of abolishing the earnings rule, but we must consider this within the context of Government spending generally. There is probably a case in terms of manpower for raising quite sharply the benefits which would accrue to anyone who carried on work after the age of 65. There is some such inducement at the moment but perhaps the Government could consider—they may be already considering it in their full-scale inquiry—what it would cost to increase quite sharply the benefits which would accrue to anyone who worked for a year or two or several years after the normal retiring age. I have the impression that, if there were quite a substantial inducement here, it would go a long way to help the situation.
§ 5.35 p.m.
§ Miss Mervyn Pike (Melton)
I am sure that we have all enjoyed this debate, which has been useful and interesting and gives an opportunity to the Joint Parliamentary Secretary to give, as I hope he will, the conclusions that have been reached by the National Insurance 1040 Advisory Council on this point. In February, the right hon. Lady the Minister of Social Security referred this question to the Council and said that she hoped that it would report very soon. She stressed that she considered the matter of some urgency.
Although I agree with everything that the hon. Member for Cheadle (Dr. Winstanley) said, I am not asking today for the complete abolition of the earnings rule, largely because we recognise that there are two important arguments against such total abolition. The first must be the financial considerations. Any Government faced with a bill for £110 million or £120 million extra must think hard and deep about the priorities at this time of financial stringency. Then there are the theological considerations, as I call them, of the retirement principle itself.
First, then, the financial implications. We have not yet heard what the Minister has to say, and he may tell us that the Government have decided to abolish the earnings rule. But even if the Government have decided that it is right to abolish the earnings rule in principle, he will no doubt claim that, in the present economic and financial difficulties, it would be irresponsible to press for complete abolition now. That is why it is important to have answers to the questions that several hon. Members have put.
It is important to re-examine the estimates which have been made of the cost of abolishing the earnings rule completely. In 1964, the Minister without Portfolio said that it would cost £120 million. Today we have heard the figure of £110 million. It may be nearer £130 million. We would likes to hear the latest estimate, and also to be told how it has been calculated.
As the hon. Member for Cheadle and others have said, this figure could rest on the unrealistic assumption that all the 400,000 men and women now at work beyond retirement age would immediately stop work and collect their pensions. This would not be the case. Surely, in the expanding economy which we hope to resume once again, the work done by a number of people working past retirement age would add considerably to the gross national product, quite apart from 1041 the money brought in by extra spending capacity and the savings that would be made in the social services. All this would have an impact on the economy as a whole. Quite apart from all this, there would be added wealth from the extra earning power at a time when we were trying to extend the economy as fast as possible.
If we are not asking for complete abolition now, surely the Joint Parliamentary Secretary will agree that the time is well overdue for a relaxation of the rule. During the Committee stage of the National Insurance Act, 1964, when rejecting an Opposition Amendment to raise the earnings rule by 20s., the Minister without Portfolio said:The normal reason for relaxing the earnings rule is to keep the condition of the rule in harmony with the rise in wages, to keep the two things on some sort of relationship. The Committee will appreciate that wages have not risen since March of this year by an amount which would justify relaxing the rule by 20s. at this moment. …"—[OFFICIAL REPORT, 3rd December, 1964; Vol. 703, c. 843.]Since May, 1963, when the earnings rule was last relaxed, male industrial earnings have risen by 25 per cent, to £20 a week on average and, therefore, the case for relaxing the earnings rule is, on the Government's own argument, very strong indeed. If the Government still feel that, in view of the very difficult financial consideration, a 20s. rise in the rule would be too big, why should we not have something less, 15s. or 10s., because surely some relaxation of the rule is now overdue? It has been relaxed on three different occasions, but the present rule limit of £5 is quite unrealistic in view of the different increases in costs and the fall in the value of money.
The most powerful argument in this respect is surely for an increase in the deferment increments. This is a subject first mentioned today by the hon. Member for Dunbartonshire, East (Mr. Bence), who was followed by others. Surely the time is now well overdue for an increase in the increments which are earned by continuing to work after pensionable age has been reached. I will not go into the arithmetic—hon. Members have already done that, although I do not know whether it was accurate—for the Parliamentary Secretary has all the re- 1042 sources of the Ministry to deal with the arithmetic.
The theory of the increments has always been that they should be related to the amount of pension forgone, and there has been no increase in the increment since 1959, although there have been three increases in pension, two under the Tory Government and one under the present Government. An increase in the increment is not only overdue, but would go a long way to meeting the case which was argued today. So much for the powerful arguments which the Parliamentary Secretary will no doubt be able to bring forward on the subject of cost. We all recognise these arguments, but we feel that what we have said would go some way towards meeting them.
There are no doubt many hon. Members who bring forward the argument of principle, what I call the theological argument on this subject. It is a principle which we ought to consider again. Surely the time has come for a realistic appraisal of the whole problem of retirement. Most of the debate today has concentrated on the human and social problems of retirement rather than the economic consequences which flow from it.
Beveridge based his philosophy on two main assumptions—that the retirement pension would be enough to live on, which is never has been and presumably for some time will not be, and, secondly, that there might be a recurrence of mass unemployment so that it was desirable to encourage people to retire. That point of view is now wholly out of date and is accepted by nobody. In the present economic and social climate we want people to stay in work.
§ Mr. Will Griffiths
The hon. Lady is reminding us of a situation which has continued since the war. Why did not she and her associates in office do something about the earnings rule for widows and widowed mothers? I introduced a Private Members' Bill twice, and they blocked it.
§ Miss Pike
I am saying that I think that the time has now come to look at that principle. My right hon. Friends argued at that time, as no doubt many hon. Members opposite will now argue, that we could not have any more anomalies, because once an anomaly crept in 1043 there was increased pressure to permit others. For a long time people held to this principle. I am saying that it is now time to look at the whole principle of the retirement pension.
We must encourage people to stay at work if we are to have an expanding economy. This we all accept on purely economic grounds. We must have an expanded labour force, and even in the technological revolution, which we hope will gain momentum, we shall need not fewer people—there might be a different pattern of employment—but more people actively employed in the community as a whole, not necessarily so many on production lines, but more people in all sorts of different kinds of employment as our society moves forward.
There will be this change in the pattern of employment and I believe that there will be increasing demands for people in the social services. All the proposals which all of us have made and all of the plans which all of us wish to make and all of the policy proposals which we all wish to put forward require not only large sums of money, but the services of many people in fairly skilled capacities.
Society is getting more humane and the social conscience is becoming more and more active and there are new ways in which we can help people in society, and many more people will be needed in the different facets of our social security services and the social services as a whole. This provides tremendous scope for people approaching retirement age. Older people can often go into this work and undertake, for example, much of the administration and the day-to-day work, thus freeing others for the more active jobs.
As the hon. Member for Rotherham (Mr. O'Malley) said, fairly dramatic changes in the age structure of our society are taking place. Statistics show that in England and Wales there are about 7.3 million people of pensionable age and more, which is 15.2 per cent. of the total population. Those figures are expected to rise by 1976 to 18.5 million, or 16.2 per cent. of the population, and the figures are rising all the time. In 1964, the expectation of life of a male at birth was 68.6 years and for a female 74.7 years. We now know that the expectation of life 1044 is increasing all the time. I will not bore the House with all the statistics available to us, but they give some idea of the shape of the future age structure. Even so, we cannot make a realistic assessment of what the age structure will be, because there are constantly break-throughs in medicine and in other ways which enable people to live longer and have more active lives longer.
The belief that we have to keep people active is not new. I was asked why we had not done something about it when we were in office. As long ago as 1953, the need to encourage the employment of older people was recognised in the Report of the National Advisory Committee and extracts from that report clearly ran through the views expressed at the United Nations to which the hon. Member for Cheadle referred and had been expressed in the House for many years.
We must recognise the psychological and sociological dangers of abrupt retirement. For instance, the suicide figures go up remarkably steeply, particularly for men, at retirement age. I think that this is because of the feeling of not being wanted, the feeling of being useless in society. It does not happen so much with women, because to some extent they never retire. They always have the responsibilities of their homes and do not have the same break with society once they leave active employment. Nevertheless, there are these dangers in an abrupt break in the pattern and this creates difficult psychological and sociological problems.
Most people who are interested in this subject will have read the very valuable survey carried out by the Yorkshire Council for Social Service and Retirement, one of the most valuable surveys which we have had. No doubt plenty of information is coming to hand all the time.
The present situation is disliked also because it leads to a lot of fiddling and tale carrying. We all know—many of us from personal experience or from constituency experience—that many white lies are told about people allegedly working after retirement, that we get anonymous letters written to Members of Parliament—I occasionally get them— 1045 telling tales of people said to be fiddling or bending the law in one way or another.
This is always a bad thing, and it is disliked, particularly by those who try to keep on the right side of the law and who are penalised by it. The abolition of the earnings rule for widows has led to several anomalies. I was interested in the tale told by the hon. Gentleman the Member for Cheadle of three sisters. I have one about two sisters, and it is almost a sadder tale than the first. In this case there are two sisters, both over 60, both working in the same concern and earning more or less the same. One is a widow and the other a spinster The widow has all the added security resulting from her husband's savings and resources, meagre though they were; she has grown-up children, able to look after her if need be, whereas her spinster sister has none of these resources yet she is considerably worse off.
I have never been one of those who said that it was a reason for not doing a thing because it brought up difficult and dangerous anomalies. But these anomalies are very real. What is the solution? I said that I did not agree entirely with the hon. Gentleman the Member for Cheadle. I want to see a relaxation of the earnings rule, an increase in the deferment increments and I also want an intensive examination of the whole retirement principle, against the background of what we are trying to do.
The occupational pensions scheme put forward by my party at the last election is one of the best ways of getting round this difficulty. It fulfils the essential requirements of retirement in a society which should be able to achieve very high earnings in the years ahead, if things go as we hope. The scheme would be flexible and could take account of ill-health and early retirement. Under the scheme people could take a part-time job, even if they are drawing their pension. I pay into an occupational pension scheme and when I leave this House I shall be able to draw my pension and do some other job. I am one of those, I hope, who will always do something and be actively employed, even though it is only gardening. One feels that one 1046 is more useful in society if one is doing this. This is the way that we must go. This can bring about gradual retirement without any of the anomalies so rife in this matter.
There is nothing more to say except to reiterate the arguments made. We do not know what the Joint Parliamentary Secretary is to say. This is my first time back in the House, I am slowly emerging from an attack of jaundice. I hope that I am not taking a jaundiced view of what I think the Joint Parliamentary Secretary will say, but I hope that he will not tell us once again that he is still awaiting the results of the review of his right hon. Friend the Minister without Portfolio. He has had plenty of time now. I do not know what he was doing in 13 years of opposition. Surely he was thinking about this and trying to plan his policy. Beveridge managed to produce his report in 12 months—he has had two years and greater help from outside experts, because the subject has expanded enormously. In addition he has had the benefit of international experience.
§ The Minister without Portfolio (Mr. Douglas Houghton)
The hon. Lady has overlooked the fact that when we came into office the cupboard was bare.
§ Miss Pike
The cupboard might have been bare from the right hon. Gentleman's point of view, but I would remind him that he has given no idea of what he would like to do. All that we have had is the excuse that he has had no money. When he was in Opposition he would never accept the excuse that money was short, and said that where there was a will there was a way. I say the same thing to him now. There are resources. I know that he has to get his priorities right, and I assure him that in opposition we have no intention of being irresponsible and asking for things that we do not believe are possible.
At the same time we would like to know some of the guidelines that he has marked out. I hope that we will get from the Joint Parliamentary Secretary not just another delaying move but some positive ideas of what is to be done. We all want to help those retirement pensioners who can be actively employed and who can lead a useful life. We want 1047 them to be able to work, for their sakes and for the sake of the community.
§ 5.55 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Social Security (Mr. Norman Pentland)
It may be convenient if I reply now to what has been a most interesting debate. It has certainly ranged far and wide, much wider than the terms of the Motion on the Notice Paper, and I have been bombarded with questions which are really the responsibility, not of my Department, or of my right hon. Friend the Minister without Portfolio, but which should more accurately be put to the Minister of Health, the Minister of Labour and even to the Chancellor of the Exchequer, who was at one time asked to take part in the debate.
I have listened carefully to the speech of the hon. Member for Cheadle (Dr. Winstanley), and I recognise that, like him, many hon. Members on my own side of the House have strong views about the earnings rule and the effect, or the so-called effect that it has upon the retirement pensioners. I shall start my remarks, therefore, by reminding the House of the details of the rule, because some misconceptions have grown up about it and its effects. I am not saying that these have been developed here but outside, even in my own constituency, there are two common misunderstandings about the earnings rule.
The first misunderstanding is that it concerns old-age pensioners and the second is that it somehow operates to stop pensioners working. The best way for me to deal with the first point is to remind the House that old age pensions generally were superseded in 1948. What we now pay to the very great majority of elderly people are retirement pensions. As my hon. Friend the Member for Dunbartonshire, East (Mr. Bence) pointed out, retirement pensions are a very different matter to old-age pensions. Old-age pensions were either accompanied by a means test or else they were pensions of only 10s. a week—and we can all remember that—paid from the age of 65, whatever the pensioner might be doing. Retirement pensions began at £1 6s. a week in 1946 and are now £4 a week for a single person. They are paid to people over the minimum pension ages 1048 who have retired from regular work. In other words they are subject to a retirement condition. It is this which mainly distinguishes them from old age pensions and I shall refer to this fundamental distinction later.
§ Dr. Winstanley
Would the hon. Gentleman also agree that this same pension which he correctly calls a retirement pension is paid to people over 70, even though they have not retired and are in full employment?
§ Mr. Pentland
I will come to that shortly. The second misconception which has been developed today, is that the earnings rule operates to stop people working, or to limit the work that they can do.
Again I should like to make the position clear. The earnings rule is emphatically not a rule which says to a pensioner, "You must not work and earn more than £5 a week". The rule at present works like this. It applies only for the first five years after minium pension age—that is, between 65 and 70 for men and between 60 and 65 for women. Pensioners over those ages—and they are the majority—are not affected by the rule at all. That is the rule which has been decided by successive Governments and which the country has accepted must be applicable to the retirement pension.
§ Mrs. Anne Kerr (Rochester and Chatham)
Is it not correct to say that, while the earnings rule applies to spinsters between the ages of 60 and 65, it does not apply to widows between 60 and 65?
§ Mr. Pentland
I am advised that it does not apply to widows. I shall take up that point later.
If the pensioner is subject to the rule, no adjustment is made to his pension unless he earns more than £5 net in a calendar week. If he earns more than £5 his pension is adjusted. I emphasise the word "adjusted". The pension does not immediately stop altogether, as some people imply. The adjustment is at the rate of 6d. taken off the pension for each 1s., of whatever earnings there are up to the first £1 in excess of £5 in the week, and at the rate of 1s. for each 1s. of earnings above £6 a week. For example, a pensioner who earns £5 10s. a week net has his £4 pension reduced by 5s. A 1049 pensioner who earns £6 a week net has 10s. taken off his pension. It is not until a pensioner has earned £9 10s. a week net that the whole of the pension of £4 ceases to be payable.
I readily admit that neither my right hon. Friend the Minister nor I are entirely satisfied with all the aspects of the operation of the earnings rule.
There is nothing in the earnings rule which says that a pensioner shall not earn more than £5 or which puts a limit on his earnings. I emphasise that we have this rule, not to make things more difficult for retirement pensioners, to save a little bit of money, to tax a pensioner's earnings, or anything like that, but because it is necessary to have a rule about earnings as long as we have a retirement pension.
We could have an old-age pension without a retirement condition and an earnings rule, but a retirement pension is what we have chosen, quite deliberately, because it enables us, and has enabled other Governments, to pay more money to those pensioners not working or not working, substantially.
Some people may say, "Do away with the retirement condition and earnings rule, but pay the present rate of pension just the same, and not a lower rate of old-age pension." But I must remind the House of the considerable cost which would be involved. It would mean paying a pension to all those over minimum pensionable age, including those men and women who are continuing in full-time work and not drawing their pensions, and we should have to find another £110 million a year to do it—over £2 million a week.
There has been reference to the question of looking at the other side of the picture and considering how much would be saved by the benefits which would accrue to the economy as a consequence of abolishing the earnings rule. I think that everyone would agree that to do this would be to make a hypothetical assessment; we just do not know. How much would be saved is a matter of speculation. But what we know for certain is that if we abolished the earnings rule we would need immediately £110 million.
The hon. Lady inquired about how this figure was made up. My information is that the payment of pensions to people at present deferring retirement would 1050 cost the country £104 million. The earnings deductions which would no longer be made would be £2 million. The loss of contributions now paid would be £11 million. That gives a gross cost of £117 million. The saving on unemployment and sickness benefit paid to people over pensionable age would be £7 million. That leaves a net cost of £110 million.
§ Mr. Will Griffiths
The figures which my hon. Friend has given are extraordinarily interesting. I think that he has indicated that the figure of £104 million applies to pensioners still at work—in other words, pensioners whose entitlement to pension is wholly extinguished by the amount of work that they do. Is my interpretation correct?
§ Mr. Pentland
In the main, people who have deferred their pension or had it wholly extinguished. I shall refer later to the figures involved. We are now concerned with cost. Whether we like it or not, this is the cost involved and the amount of money which would have to be found if we were immediately to abolish the earnings rule. The House must also remember that the bulk of this extra money would be paid not to the retired people but to people who are at present in full-time work.
My right hon. Friend the Minister has said on more than one occasion in the House and to officials of the old-age pensioners' associations who have been to see us that if she were in the happy position of having an additional £110 million a year to spend, this would hardly be the first priority to which she would wish to devote it. I entirely agree. I think that we must all accept that if the Minister had £110 million to devote to what we would term the correct priorities, the abolition of the earnings rule would not have first priority.
Much has been said today about the desirability of encouraging older people to work. Indeed, that is one of the points to which the hon. Member for Cheadle refers in his Motion. Certainly we wish to encourage older people to work when they can and to the extent that they can. The present arrangements under the National Insurance Scheme provide a very flexible way of securing this. A pension is provided which is payable on retirement. But "retirement" does not mean that the person concerned must 1051 give up work altogether; the National Insurance Act provides that he can be treated as having retired from regular employment if he does not propose to work regularly or to any considerable extent. If a person works regularly in his normal work, he does not get his pension right away. He gets, however, a bigger pension when he does retire. It is not for me in the context of this afternoon's Motion, to go into the why and the wherefore of the fact that the increased pension is not bigger when that person reaches the age of 70. As I have said, once a man reaches the age of 70, or a woman 65, the pension is payable without any further condition about retirement or earnings.
Therefore, a person really has ample choice. He can stop work and take a pension as soon as he reaches the minimum pensionable age. From my experience as a miner, and now as a miner's representative and representing an industrial area in the County of Durham, I know full well that retirement at the pension age appeals to many miners and I am sure, industrial workers of whom my hon. Friend the Member for Rotherham (Mr. O'Malley) spoke, who would wish to retire at 65.
Indeed, in my part of the country, we are in the sad and unfortunate position that although they would like to continue working, many miners now have to be retired between the ages of 60 and 65 because of the declining manpower demand in the coal industry. This applies to Durham and, I am quite sure, to Wales, as it does also to Scotland.
Therefore, we must face the fact that there are many industrial workers who, even if they wanted to, are not fully able to carry on after retirement age at the job at which they may have worked for as long as 50 years. On the other hand, the pensioner may choose not to give up work completely at that age. We accept that he may want to continue to do some work. The retirement condition and the earnings rule together do not prevent that. If, however, such a person's earnings become substantial, an adjustment is made to the pension which is payable. Otherwise, there would be nothing to stop a pensioner making a token retirement and then resuming work and drawing his pension together with full wages. We must 1052 face these facts when we talk about abolishing the earnings rule.
Incidentally, although the question raised by the hon. Member for Cheadle of the pension scheme which the present Government were expected to introduce is outside the terms of the Motion, I repeat, as we have said many times recently in the House, that we have given a pledge that before the end of this Parliament we will eliminate the present graduated pension scheme and introduce a real earnings-related pension scheme of our own. I cannot develop that further at this stage, but it is something that we have said time and time again.
I have referred to the person who could make a token retirement and, possibly, continue to draw full wages. These are the dangers which I would like the hon. Member for Cheadle to ponder when he considers the abolition of the earnings rule.
§ Mr. Will Griffiths
But the pensioner can earn only, at maximum, another £5. In other words, he extinguishes the pension completely at £9 a week. That is not a very princely sum.
§ Mr. Pentland
I accept that. We are not talking about how much would be gained one way or the other. It is the principle that we must have, and which the country and successive Governments have accepted, of having an earnings rule for a retirement pension. The principal thing involved is that we have a retirement pension.
§ Mr. Pentland
I am sorry, I cannot give way. The other main choice for a man is to carry on working as long as he feels fit to do so because, by postponing taking a pension, he can get a better pension when ultimately he retires. As hon. Members have said, this is the increment system, which, again, is outside the scope of today's debate.
If a man continues in his employment but is prevented temporarily at any time from working because he is sick, he is entitled to get sickness benefit at the same rate as his pension would have been payable for those weeks. If he falls out of work for a time, he can get unemployment benefit in the same way.
1053 The hon. Member for Cheadle said that the rule deprived the economy of useful labour. Perhaps I can give the House a few figures based on inquiries we made last year to see whether we were successful in our aim of providing a flexible set of arrangements. In June, 1965, there were 370,000 persons who had not retired and were not drawing their pensions although they were over the minimum pension age of 65 for men or 60 for women. They were working and paying contributions. Of the larger number—between 1¼million and 1½million people—who had retired and were subject to the earnings rule., more than 200,000 were known to be working to some extent. Only about 20,000 of them, however, were working to such an extent that their pension was either reduced or wholly extinguished under the earnings rule. Therefore, over one-third of the people in the age group theoretically subject to the earnings rule were working to some extent. This certainly does not suggest to the Government that there is any discouragement here. Rather do we seem to have essentially the very sort of flexible arrangement for gradual retirement which the hon. Member for Cheadle wants.
I come now to what, for the purposes of this debate, is probably the most important point, to which the hon. Lady the Member for Melton (Miss Pike) has referred. I said earlier that neither my right hon. Friend nor myself were entirely satisfied with all aspects of the existing earnings rule. It was for this reason that in February this year my right hon. Friend referred the earnings rule to the National Insurance Advisory Committee. That committee was asked to examine the subject as a question—not merely the level at which the earnings rule should start to operate, but also all the associated matters including, in particular, some rather technical matters which attach to the earnings rule.
I understand that the Advisory Committee has not yet completed its Report but that it is likely to be completed and presented to my right hon. Friend quite soon. It will, of course, be published and I am sure that it will be an important 1054 contribution to our thinking on this subject. I am afraid this means that I must refrain from taking up many of the points that have been made this afternoon. It is obviously right and desirable that the independent Advisory Committee should make its report without prejudice from either myself or anyone else. We will have to wait and see exactly what recommendations it brings forward.
I think that I have dealt, though not in the order in which the hon. Gentleman mentioned them, with two of the three aspects which he developed in his speech. The third one can be disposed of very quickly.
The hon. Gentleman cited the example of three sisters. The hon. Member for Melton gave another example, and my hon. Friend the Member for Rochester and Chatham (Mrs. Anne Kerr) raised the matter of spinsters. In the hon. Member for Cheadle's example, two of the sisters were, respectively, a widow and a spinster. The third sister was a deserted wife, but I am afraid that we cannot deal with her case. We are not concerned with deserted wives in this debate.
The answer is quite simple. A single woman aged between 60 and 65, in full-time work in a department store earning £10 or more a week, in all probability would not have a retirement pension subject to the earnings rule. She would not be accepted as retired at all, in the first place. She would be paying contributions and earning increments for her pension when she eventually retired.
I have not disguised from the House our view that the details of the earnings rule have got out of date, and that there may well be some other imperfections. We have asked the National Insurance Advisory Committee to look into the matter. That being so, I am sure that we must give it a clear field in which to make its recommendations. In view of this, I must ask the hon. Gentleman to withdraw his Motion. If he is not willing to do so, I must ask the House to reject it.
§ Question put and negatived.