HC Deb 17 February 1966 vol 724 cc1607-28

In section 4(2) of the Family Allowances and National Insurance Act 1964 (which relaxes the earnings rule in respect of retirement pensions) for the words "one hundred shillings" there shall be substituted the words "one hundred and twenty shillings" and for the words "one hundred and twenty shillings" there shall be substituted the words "one hundred and forty shillings".—[Mr. Dean.]

Brought up, and read the First time.

Mr. Dean

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

I am sorry that the Chancellor of the Duchy of Lancaster is not in his place—doubtless he has a good reason—because it was he who dealt with this point the last time it was raised. The Clause aims to raise by £1 the amount which pensioners can earn without any deduction in pension; in other words, it would raise the limit from the present £5 to £6. It is precisely similar to the Amendment we moved to the last National Insurance Bill on 3rd December, 1964.

I have said in the House of Commons on a number of occasions, and I say it again, that in my view the only solution to the problem is to abolish the earnings rule. I know that there are complications about that. I know that if the rule were abolished it would mean giving a full pension to people who are working full-time over the minimum pension age. I agree that other changes would be required to get over this difficulty, but, none the less, it is both economically and socially necessary to find a solution to the problem.

Economically, we are short of labour. The National Plan shows clearly that we are short of labour and it points to our elderly people as one of the possible sources of more labour. If this be so, it must be economically right to encourage those who are able and willing to do so to carry on at work after the minimum pension age.

Socially, the most important need is to encourage gradual retirement. The social problems created by a man or a woman working full-time one week and going into full retirement the next are well known, and I need not detain the Committee with them. We need a pension situation which encourages people to ease off gradually. Instead of the sharp break which there always tends to be now, there should be more opportunities for part-time employment.

Thus, on both economic and social grounds, it is clear that the earnings rule, whatever value it may have had in years past, is now out of date and works clean contrary to those highly desirable objectives.

On Second Reading, the right hon. Lady told us that she had referred the whole matter to the National Insurance Advisory Committee. One cannot, therefore, expect her today to say that she will accept abolition of the earnings rule—I neither ask for that nor expect it—but I must put to her one or two questions about the Advisory Committee's terms of reference on this subject. The right hon. Lady defined the terms of reference as being To review the present level of the earnings limit for retirement pension earners and to examine matters arising therefrom; and to report".—[OFFICIAL REPORT, 7th February, 1966; Vol. 724, c. 51.] Is the question of abolition clearly within those terms of reference? I want the right hon. Lady to give us a definite answer to that question because, when the whole question of the retirement condition and the earnings rule was last considered by the Advisory Committee, in 1955, the terms of reference were very much the same as the terms of reference given on this occasion. In 1955 the terms of reference were: To consider whether adjustments in the present earnings limits…are called for, any matters arising therefrom, and to report". On that occasion, the Advisory Committee interpreted the terms of reference as excluding the question of the retirement condition entirely from its consideration, saying in paragraph 9 of its Report, Cmd. 9752: The principle that between age 65 and 70 (60 and 65 for women) pensions should be conditional upon retirement from regular employment is settled Government policy, and as such is excluded under our terms of reference". I hope the right hon. Lady will tell us today that the question of the abolition of the whole apparatus is within the Advisory Committee's terms of reference and that this is one of the matters she expects it to discuss.

7.15 p.m.

The new Clause provides not for abolition but for relaxation. I hope that we shall not have our old friend the review—in this case, the National Insurance Advisory Committee—dragged out again as the reason why nothing should be done. If that be the argument, there are some very good answers. First, the relaxation which we propose introduces no new principle. The suggestion is merely that the relaxation which has been done on many occasions since the war should now be carried a stage further. Therefore, it is no adequate reason to say that the subject has gone to review and that we must, therefore, carry on with matters as they are in this respect, as in so many others which we have been discussing.

On the last occasion when a similar proposal was put to the Committee, the Chancellor of the Duchy replied to the debate. He admitted, in the first place, that the abolition of the earnings rule for the widow had created a fresh impetus for the same move in respect of the retirement pensioner. He said: I know that fresh impetus has been given to the desire to relax the rule for retirement pensioners by the abolition of the rule for widows. I quite understand that. There is no doubt that the complete abolition of the rule for widows puts in fresh relief the existence of the rule now only for retirement pensioners."—[OFFICIAL REPORT, 3rd December, 1964; Vol. 703, c. 841.] I admit that the right hon. Gentleman went on to say that, in his view, there was a difference between the earnings rule for the widow and the earnings rule for the retirement pensioner, but he admitted, nevertheless, that a fresh impetus had been given to the desire to abolish it for the retirement pensioner as well. What he admitted to be true then is equally true today.

The second main argument the right hon. Gentleman used on that occasion was that the raising of the limit is normally done by regulation and at a different time from a Bill. But he did not attach very much importance to that point, saying that it did not really matter one way or the other. That is another argument, therefore, which bears no weight.

His third main argument was that the rise in earnings since the last increase in the limit did not warrant a further increase at that time, that is, at the end of 1964. I admit that there was some weight, perhaps considerable weight, in that argument at the time, but it does not carry weight today. The figures show strikingly that, in the last two years since the limit was raised, average earnings have risen, in round figures, by about £2 10s. In May, 1963, the limit was raised to £4, and at that time average earnings were about £16. In January, 1964, the limit was raised to £5, by which time average earnings had risen to, roughly, £17 10s. In other words, there was an increase in the earnings limit of £1 during a period in which earnings had risen by £1 10s.

The present proposal is to increase the earnings limit to £6 when average earnings are not far short of £20. In other words, we propose that, after a period in which earnings have risen by about £2 10s., the earnings limit should be raised by £1. Therefore, not only is there a strong case now for raising the limit again because of the rise in earnings since the last occasion when it was raised, but, more than that, if we were to maintain the ratio between the earnings limit for a retirement pensioner and average earnings, one could well argue that there was a strong case for an increase in the limit of not £1 but something like £1 10s.

These are very strong arguments for a relaxation of the rule. We have a situation in which average earnings have increased by no less than £2 10s. since the last change, whereas the retirement pensioner who is earning still has his earnings based on the position of two years ago. That is a strong case for saying that, as other sections of the community have increased their earnings during this time, so the retirement pensioner should be able to earn more before his pension is affected.

The only other argument which could be used is that of cost. I hope that the Government will not use it because, in an Answer to a Parliamentary Question, they stated that the cost of this proposal would be about £350,000 a year. I hope that the right hon. Lady, in view of what appears to be a very strong case, will be able to accept the new Clause.

Mr. Braine

I strongly support the new Clause, which was moved in a cogent and forceful speech by my hon. Friend the Member for Somerset, North (Mr. Dean). If one is not to be misunderstood, it is essential to make it plain that to abolish the earnings rule in its entirety would presumably be neither wise nor practicable. I recall that in 1964 it was estimated that the cost of doing so would be about £100 million, and most of the benefit would go to those in full-time work.

Nor do I quarrel with the basic principle of our insurance system that benefit is paid only when earnings are interrupted, or cease through sickness, unemployment or retirement. But I am utterly against—and I feel that many hon. Members are, too—the present rigidity in our social services. Social conditions change and expectations of better social provision are rising all the time. Average earnings increase and our definition of need alters. This is why I look forward, as I have said before, to the long overdue review promised by the Chancellor of the Duchy of Lancaster.

To relax the earnings rule in the pensioners' favour as circumstances permit makes good social and economic sense. The Minister earlier alleged that we had done nothing to change the Beveridge scheme of social security during the 13 years we were in office. That is not true. We made steady improvements—and right hon. and hon. Members opposite have said so readily, except, of course, at election time, or when their thoughts are turning to elections. They have conceded that in that period there were substantial improvements in our social provisions for the sick, the unemployed and the retired. I want to put that on record in view of the unnecessarily provocative remarks made by the right hon. Lady. In this context, we raised the earnings limit five times—in 1956, 1959, 1960, 1963 and 1964. When we left office, a retirement pensioner could earn up to £5 a week net with no reduction in his pension as against £2 a week net when the last Labour Government were in power. We should get the facts on record.

I support the Clause on two principal grounds. The first is that a further relaxation is well overdue. I am surprised that the Government did not act in this matter when they relaxed the earnings rule in respect of widows in the National Insurance Act, 1964. On both sides then there was general agreement that this was a wise step to take for widows and I recall the arguments used by the Chancellor of the Duchy of Lancaster for distinguishing at the time between the widow who had lost the support of her husband and the retirement pensioner who had simply ceased to get his wages or salary from his former employment. I accept the distinction, but my experience has been, as has the experience of others, that the pensioners at that time did not, and they still do not, appreciate why they were left out.

Moreover, I am certain that there would be a considerable gain to the economy by a further relaxation which would offset any loss of revenue. I would argue that every incentive ought to be given to men to go on working if they wish to do so. I concede that not all pensioners at retirement age are fit enough to postpone drawing their pensions completely in order to earn a higher pension later. I am referring only to those who, having retired, wish to supplement their pensions by doing a relatively light job.

The second reason for my support of the Clause is that it is generally accepted that there should be a relationship between any relaxation of the earnings rule and the rise in the level of wages. During the Committee stage of the National Insurance Act, 1964, the Chancellor of the Duchy of Lancaster 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 in some sort of relationship."—[OFFICIAL REPORT, 3rd December, 1964; Vol. 703, c. 843.] Like my hon. Friend, I have looked into this carefully. His proposal would raise the limit from £5 to £6 as the net amount that could be earned without any reduction in pension. My hon. Friend went into some detail to show exactly how this would work out. Let us consider the effect against the background of changes in average earnings since 1964.

In January, 1964, when we raised the limit to £5, the average earnings totalled £17 10s. Today, we are proposing that the limit should be raised to £6, and average earnings have risen to about £20. That rise of £2 10s. in average earnings is two-thirds greater than the increase which took place between the relaxation of the earnings rule by £1 between May, 1963, and January, 1964. Thus, the Amendment is fully justified on social grounds and more than justified on economic grounds. Society must adjust its attitudes towards the whole question of retirement. That means that Government and Parliament must give much greater thought to the problem than up to now.

7.30 p.m.

When I was at the Ministry of Health, I once asked an eminent physician why it was that, on average, women lived longer than men. He laughed and came back with the reply, "The answer is quite simple—women never retire". The more one thinks about that, the more true it seems to be. I am sure that most hon. Members would agree that we should get away from the present rigidity in the retirement condition. I know that many of my constituents wish to do so. In my "surgery" every Saturday morning, I have many old-age pensioners coming to see me and more than once they have told me that they want to carry on working and do not appreciate the earnings rule. They say, "I have earned my pension. Why can I not go on working a little to supplement it?" It is very difficult to answer that sort of question.

Acceptance of the principles contained in the Clause would be a move in a direction socially desirable and in the best interests of pensioners who do not want to continue to work flat out, but who want to do some work. Nobody says that the man who has done his share and who has worked hard all his life should continue to work flat out unless he wishes to do so, in which case he is covered by the provisions for deferring pension and getting a higher rate when, finally, he retires.

The provision which we suggest is socially desirable and it would be welcomed by pensioners generally. It would enable many citizens, who at the moment are prevented, to have the feeling that they were continuing to be useful and productive members of the community. It is on those grounds that I strongly support this proposal and I hope that the right hon. Lady, even if she cannot give any firm indication tonight, will show that she is generally sympathetic to the objectives of the Clause.

Dame Irene Ward

The arguments in favour of the new Clause have been very well put by my hon. Friend the Member for Somerset, North (Mr. Dean) and my hon. Friend the Member for Essex, South-East (Mr. Braine) and I do not propose to go over their reasons again. However, I must not miss this magnificent opportunity to say something about the National Insurance Advisory Committee, which has featured in these debates for many years.

When I heard the right hon. Lady give exactly the same answers as Ministers of my party gave, I wondered how the new Government could represent themselves as a modern, up-to-date, go-getting Government. It may or may not be true, but I have always somewhat suspected that this earnings rule, established as it was by the Labour Government of 1945, largely for protection purposes—and I accept their importance—was wanted by the trade unions. Certainly, nobody has ever denied it and it is probably a statement of fact.

However, the trade unions have moved a long way forward in the last couple of decades and I should have thought that their position was so secure that they could spare a little thought for those who, in their retirement, still wanted to keep going and do a useful job. All the psychologists and all the health people say that the great thing for the elderly is to have an interest in life and that to have something to do is probably as important to life among the elderly as getting a little extra money. When people retire and have nothing in particular to please them or amuse them, it is very exhilarating for them to be able to do a useful job and it seems ridiculous that they should be deprived of a reasonable amount of money being added to their pensions.

I have a rather suspicious nature and I have always somewhat wondered, especially since the earnings rule has been relaxed for the widows—and I was very pleased that it was—when there did not seem to be any difficulty about it, whether the Advisory Committee had not wanted to do that all the time. On the other hand, there are many spinsters who have to stand on their own insurance and earn their own retirement pensions. It is all very well to say that women work longer and live longer, but the longer one lives, the more is required to keep one happy and comfortable. The time has surely come for a greater relaxation of the rule.

Over the years, the Advisory Committee has studied every aspect of these matters. I do not suppose that there is any member of that Committee who does not know every detail of how any proposal would effect the economy, the trade unions and employment in certain areas. The members of that Committee must be bored when every time a proposal comes forward—from either party—the Minister takes refuge in referring it to the Committee. If all the facts are known, I would have thought that we could get the Committee's advice in the twinkling of an eye. I suspect that the fact that we do not means that referring matters to the Committee is one of the ways in which the Minister puts off additional expenditure. I think that the reference is a smokescreen and that we could very well do without this Advisory Committee.

After all, Ministers must have some idea of life themselves and need not always rush to an advisory committee which has existed since 1948. At the beginning, Ministers probably did not know all the details of the industrial position and how relaxation of the rule would affect the economy, but, after 18 years, Ministers and "shadow" Ministers must know all the answers themselves. I suspect that all this is a manoeuvre. It may support the trade union view and it may show the world how careful we are about spending public money. In fact, however, in these circumstances we could make economies which would make the money available.

I am sick of this advice from the Advisory Committee. This continual reiteration fills me with gloom. It would be a very good idea to ask the Committee to give the facts concisely in a brief memorandum. It does not need to chew over the whole thing again and I am sure that it has a file that would reach almost to the roof of this building. I am all in favour of this Clause. I think that it is very moderate and could not possibly do anyone any harm.

Sometimes people believe what they hear and see on radio and television. I do not believe for one moment that the team in the Ministry of Pensions and National Insurance ever said over the air that it would be so adamant over such a small sum. The retirement pensioners do not have a clue about what the Advisory Committee is. They think that it is the Ministry, those glorious Ministers who go on to television with such persuasive charm. They think, "Dash it all, they are letting us down".

This point will help us to win the next General Election, but if I have to choose between getting this little bit of added pleasure in fighting the election campaign, or giving the pensioners this concession now, I would rather see the right hon. Lady grant this small relaxation for the retirement pensioners. In view of the increase in fuel costs and heating—

Mr. Pentland

Ah, ah.

Dame Irene Ward

It is no good saying "Ah, ah". It is a reality. It is all right sitting in this overheated Chamber, but electricity prices go up. Hon. Members opposite say that it is bureaucracy gone mad, but they do nothing about it. All I am saying is that one wants to give as much comfort as one can to retirement pensioners and, at the same time, to give them as much interest in life as possible. Let us abolish the Advisory Committee and let the Minister take the decision herself.

Mr, Kenneth Lewis

We have had a long debate and I do not want to detain the Committee. I would like to underline one or two points which have been made, and make some of my own. I believe that the rule should be relaxed because pay has gone up and because there has been a considerable rise in the cost of living in the last few years. A lot of these pensioners get their extra £1 anyway and nobody knows about it. The difficulty is that where one has a rule as tight as this is, those who get away with it enjoy doing so and others who can only find the kind of work where they are on some one's payroll find themselves handicapped because it is known exactly what they earn and the earnings rule bites against them.

Mr. Pentland

That is a very interesting point. Is the hon. Gentleman really saying that some of the old-age pensioners, for whom we are concerned when discussing the relaxation or abolition of the earnings rule, are really getting away with something?

Mr. Lewis

Of course I am saying that. They get paid, but they are not on anyone's payroll and therefore the earnings rule does not affect them. I am being perfectly straightforward. If they are working on a casual basis, which is accepted by the Ministry of Labour and which is not looked at by the Treasury, they are not breaking any rules. It is just something which is accepted as being a fair way of increasing incomes. This rule bears hardly on the people who cannot do this. The right hon. Lady has put this matter to the review body. Why have the Government not made a decision on this themselves? Why do they have to go to the review body?

7.45 p.m.

I was interested in a statement made by the National Insurance Advisory Committee recently on this matter. The body has been asked to look into the earnings rule and into other matters related to it. This is interesting because it has been asked to look at the regulations which enable the elderly retired to draw unemployment pay, although they have not reached retiring age. Are the Government considering whether this unemployment pay should stop? The Committee is also being asked to look at the position of people drawing unemployment pay who have retired earlier than the normal retiring age. Presumably, the right hon. Lady has asked the Committee to look into these matters. The third paragraph of the Committee's statement, as set out in The Times, reads: Critics of the present position have often expressed the view that many retired professional people, especially where they have gone to live in rural or coastal districts, have really left the employment field and claim unemployment benefits and credits with no real intention of taking another job. The right hon. Lady is suggesting that the review body should look at what she obviously thinks exists, the position whereby professional people who retire early are drawing unemployment pay and do not intend to work. She knows perfectly well that when people sign on at the employment exchange they have, after a certain period of time, to take a reasonable job offered to them or their unemployment pay can be stopped.

Miss Herbison rose—

Mr. Lewis

I will give way in a moment. I ask the right hon. Lady what was the point of having the review body look at this?

Miss Herbison

I merely wish to ask the hon. Member what part of the new Clause applies to those who are under pension age? I will be grateful if he can tell me.

Mr. Lewis

We are asking that the earnings rule should be relaxed. If it were relaxed it would mean that many of the questions which the right hon. Lady is putting to the review body would be unnecessary. In asking these questions she is prejudging matters which may never arise. If the earnings rule is relaxed, there is no need to ask questions of this kind. These people want to earn. They want to be able to increase their income over and above their pensions by earning. We assisted them to do this when we were in power, and there is no reason why the Government should not be able to make their own decision without putting questions of this sort to the review body.

Mr. Charles Curran (Uxbridge)

I speak with some reluctance to the right hon. Lady on this matter. We have been round this mulberry bush so many times that she is familiar with all the words. Therefore, I will not repeat more of them than is strictly necessary.

I invite the right hon. Lady to recall the position she took up when she was on this side of the Committee and I was on the benches opposite and we were both in agreement in attacking the earnings rule. There was more than one occasion when I not only attacked my own Government but voted against them. The right hon. Lady understands perfectly well the human case against this rule. We are seeking to erode it, to lift the ceiling a little higher. I fancy that as things are the only way in which this rule can be removed is by lifting the ceiling to the point at which it does not make any difference. If the ceiling could be lifted not to £6, which we urge in the new Clause, but to £100 it would make no difference to anybody, and everybody would be pleased with that solution. I do not know whether the Minister recommends doing that. If she does, my hon. Friends and I will be glad, even at this stage, to see whether we can amend the Bill to give effect to that.

I ask the right hon. Lady, without inflicting on her a procession of the familiar arguments, to address herself to some direct questions. We all know that the rule was created by the Labour Government in 1948 for two reasons. The first was that the 1948 Act gave people benefits only if they were unable to work. It was argued that if we gave people retirement pensions it was not right that they should draw the pension and go out to work. Secondly, it was created for the implied reason that we were giving people a retirement pension which was big enough to enable them to support themselves without earning money. That assumption has long since gone by the board. The processes of post-war inflation have reduced the value of the pension to the point at which nobody can seriously argue that it is possible to live on it by itself. That has been true for 20 years, and it is true today. Therefore, the implied basis of the rule, namely, that we were giving people a subsistence pension on condition that they retired and therefore that we were entitled to attach to that pension the penalty of the earnings rule, has vanished. I ask the right hon. Lady to tell us whether she agrees with that.

For 20 years this rule has been supported rigorously by the trade unions. They have always been the watchdogs of the earnings rule. They have always barked in a very familiar chorus. They argue that if we give people pensions without tying strings to the money they will take the pension and go into the labour market and work on the cheap. It is said that this is a method of creating an army of cut-price workers. I ask the right hon. Lady whether she believes that now. Does she think that in 1966 anyone can seriously argue that we should keep the earnings rule in order to protect trade union rates of pay? It is now self-evident that in a full employment labour market the trade unions are perfectly capable of protecting wage rates without penalising the pensioner. I invite the right hon. Lady to say whether she dismisses this argument as bogus.

The Chairman

Order. It is time that the hon. Gentleman applied his arguments to the figure in the new Clause.

Mr. Curran

I agree, Sir Samuel. I am asking the Government to lift the ceiling, but, in doing so, I have to deal with the argument for keeping the ceiling where it is, which is that it should be at its present level in order that the rule shall fulfil its purpose. It can be argued, in reply to me, that if we lift the ceiling we remove the reason for the rule and therefore that the ceiling should not be lifted. I fancy that that will be the reply to what I am saying. I want to anticipate it and deal with it before it is made.

I ask the right hon. Lady whether she agrees that by keeping the ceiling where it is she is stimulating a widespread feeling of injustice in our society. We are all familiar with the fact that people who draw retirement pensions feel, whether it is reasonable or not, that they should get the money as of right. To tell them that they get the pension only with a retirement condition which must be guarded by the earnings rule is to say something which may make sense in Whitehall but which makes no sense outside Whitehall.

May I say parenthetically to the Joint Parliamentary Secretary that I congratulate him on his naivety when he interrupted my hon. Friend the Member for Rutland and Stamford (Mr. Kenneth Lewis). I heard him express amazement, incredulity and shock at the suggestion that there were pensioners who earned extra money and evaded the earnings rule by not declaring their earnings. I understood the hon. Gentleman to say that he could not believe that. He thought that this was an incredible, astounding and completely unbelievable statement. He must have lived a very sheltered life. He must have been guarding his innocence jealously if he does not know that there are—

Mr. Pentland

Is the hon. Gentleman aware that I was born in a colliery village and lived in a colliery village all my life—a very sheltered life indeed!

Mr. Curran

It is all the more remarkable that someone who has lived all his life in a colliery village should say that he could not believe that pensioners earned money and evaded the earnings rule by not declaring their earnings. Does he really say that that is something of which he has never heard?

Mr. Pentland

Will the hon. Gentleman tell us the retirement pensioners in Uxbridge who are deliberately evading the rule by not declaring their earnings?

Mr. Curran

That is a very good question, and I should be glad to answer it—

The Chairman

Order. The hon. Gentleman must confine his remarks to the figure in the new Clause.

Mr. Curran

I agree, Sir Samuel.

This limitation is bad. Any other limitation would be equally bad. I do not accept that if we keep the rule as it is and decline to lift the ceiling, we shall be supporting the Parliamentary Secretary's suggestion—

Mr. Pentland

I am not making any suggestion.

Mr. Curran

I want to deal with the Parliamentary Secretary's assertion that he cannot believe that pensioners ever draw the pension and evade the rule by not declaring their extra earnings. He asks me whether I can give any examples from Uxbridge. I do not propose to act as an unpaid "nark" for the Ministry of Pensions. I should have thought that it was widely known that there were quite a number of old gentlemen and old ladies drawing the pension who earned a little extra money and evaded the rule by failing to declare it. I repeat that if the Parliamentary Secretary has never heard of this, he must have been living in a world of his own. That is something of which everybody must be aware.

8.0 p.m.

I want to ask the Minister one other question. Can the Advisory Committee, to which the right hon. Lady has referred the matter, recommend abolition of the rule? Is it competent for the Advisory Committee to say that the rule should go? Is it required simply to say whether the rule should be modified? This goes to the root of the argument. Suppose that the Advisory Committee recommends abolition of the rule. What then? Would the Government act upon that, or would they simply tell us once more that we must await the outcome of the celebrated review with which the Chancellor of the Duchy of Lancaster is so busy?

I repeat that I do not want to inflict upon the Minister at great length all the familiar arguments, but I should like to get an idea of the way in which her mind is working. I ask these questions, therefore, for explanatory reasons, in the same way as I should be glad, if I had the chance, to put them to the Chancellor of the Duchy of Lancaster.

Mr. Pentland

I listened carefully to the case put by the hon. Member for Somerset, North (Mr. Dean) and other hon. Members. I agree with the hon. Member for Uxbridge (Mr. Curran) that many of the arguments which we have heard this evening have been ventilated many times in the past.

I want briefly to put the Government's case concerning the new Clause. We simply feel that the time has now come for a more thoroughgoing re-examination of the position. As announced by my right hon. Friend on Second Reading, we have asked the National Insurance Advisory Committee to undertake this task.

Hon. Members have asked how wide the terms of reference are. They will be wide enough to enable the Advisory Committee to consider every possible avenue relating to the problem. It is as wide as that. If the Advisory Committee recommends abolition of the rule, that would be fair enough. To put the matter beyond doubt, I will quote the terms of reference: To review the present level of the earnings limit for retired pensioners and to examine matters arising therefrom, and to report. These terms of reference are simple and very wide.

The last examination was conducted in 1955–56 when a similar reference was made, under the previous Government, to the Advisory Committee, which on that occasion produced a useful report containing a number of suggested changes, most of which were subsequently adopted by the former Administration. Since then, as the hon. Member for Somerset, North has indicated, the level at which the earnings rule begins to operate has been raised on a number of occasions. On three of those occasions, however, the change was made by Regulations. The Advisory Committee was simply called upon to consider whether an increase to a specific amount proposed by the Government was justified. Those were the terms of reference on those occasions.

We have also to consider that in the last 10 years there have been important developments in National Insurance, such as the increases in the level of benefits and changes in the provisions governing increments. There has also been the introduction of graduated contributions and benefits. Quite apart from these substantial changes, a number of lesser problems and difficulties about the working of the earnings rule have arisen which, in the Government's view, could be usefully examined by the National Insurance Advisory Committee.

There are, for example, deductions which are made from the pension in respect of earnings exceeding the basic level to which the hon. Member for Uxbridge referred. At present, these deductions amount to 6d. in the 1s. for the first 20s. of earnings above the level and 1s. for every 1s. thereafter. The Clause does not propose to alter this. It makes no mention of it. It might, however, be desirable to consider whether an extension of this proportionate band would now be appropriate. This, too, is a question which the National Insurance Advisory Committee will consider. In addition, the way in which earnings are calculated, including the special problem of people whose work is intermittent or whose earnings cannot easily be expressed as a weekly rate, ought, no doubt, now to be considered.

There is also the problem of allowable deductions from earnings, including the existing somewhat anomalous rule under which Income Tax collected under P.A.Y.E. from salary or wages may be deducted but no allowance can be made for tax paid in other ways. It is against this background that the Government felt that it would be right to give the National Insurance Advisory Committee the opportunity of considering the matter once again.

Another point which has been made—and this must be borne in mind—is that to introduce a change now in the limit as suggested by the Clause would prejudice the review by the Advisory Committee.

Mr. Braine

I am listening carefully to the hon. Gentleman's patient explanation. Over a year ago, the Chancellor of the Duchy of Lancaster said that the normal reason for relaxing the rule was to keep it in harmony with the general level of wages. There has never been any dispute about this on either side. Is the hon. Gentleman seized of the fact that since the rule was last relaxed early in 1964, average wages have risen so much that the rule is now totally out of harmony? In other words, the question did not have to be sent to any advisory body for advice. It is now clear that the earnings rule is totally out of harmony with present-day realities.

Mr. Pentland

That may be so. That is what we want to find out from the Advisory Committee. I have already said that the terms of reference are wide enough to include consideration of abolition of the earnings rule. Therefore, my view is that if the Clause were accepted, it would prejudice the review.

If the National Insurance Advisory Committee in due course reported in favour of an increase in the existing limit, such an increase could be brought in by Regulations, which would be subject to the affirmative procedure. Of course that can be done. I hope that in view of what I have said, the Opposition will withdraw the Clause. If not, I must ask the Committee to to reject it.

Dame Irene Ward

How long does the Joint Parliamentary Secretary think that the Advisory Committee will be sitting clucking over this question?

Mr. Pentland

We do not know that, any more than the previous Government knew when these matters were referred to the N.I.A.C.

Dame Irene Ward

How often does the Committee sit?

Sir K. Joseph

We have a certain amount of good will for the Joint Parliamentary Secretary, and we are at the end of nearly two days of debate, but I must tell him that his was a shockingly disappointing reply. My hon. Friend the Member for Somerset, North (Mr. Dean) deployed a formidable case. He was supported by a number of other hon. Members who spoke cogently and trenchantly. We had from the hon. Gentleman a flabby and inadequate reply.

Here is a small piece of good which the right hon. Lady can approve and which would cost a negligible amount

of money in terms of the National Insurance Fund. It has not been controverted that the cost of the Clause would be £350, 000 per annum. As my hon. Friend the Member for Essex, South-East (Mr. Braine) has just stressed, the £5 is totally out of step with the new average earnings, and all that the hon. Gentleman can do is to tell us to wait for a report. Granted that a report may make sense on the subject, but here is a step that would be sensible and humane, and it would facilitate that gradual retirement which all sides of the House agree is the right emphasis for us to help the elderly to adopt. I hope that, in view of that very inadequate reply, my hon. Friends will divide on the Clause.

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 95, Noes 100.

Division No. 31.] AYES [8.12 p.m.
Alison, Michael (Barkston Ash) Grant-Ferris, R. Peel, John
Allason, James (Hemel Hempstead) Grieve, Percy Prior, J. M. L.
Amery, Rt. Hn. Julian Griffiths, Peter (Smethwick) Pym, Francis
Batsford, Brian Grimond, Rt. Hn. J. Quennell, Miss J. M.
Bennett, Sir Frederic (Torquay) Gurden, Harold Renton, Rt. Hn. Sir David
Bessell, Peter Harrison, Brian (Maldon) Scott-Hopkins, James
Black, Sir Cyril Harvey, John (Walthamstow, E.) Sharples, Richard
Blaker, Peter Hastings, Stephen Shepherd, William
Boyd-Carpenter, Rt. Hn. J. Hawkins, Paul Sinclair, Sir George
Braine, Bernard Hobson, Rt. Hn. sir John Spearman, Sir Alexander
Brinton, Sir Tatton Hordern, Peter Steel, David (Roxburgh)
Brown, Sir Edward (Bath) Hornsby-Smith, Rt. Hn. Dame P. Studholme, Sir Henry
Bryan, Paul Irvine, Bryant Godman (Rye) Summers, Sir Spencer
Bullus, Sir Erie Johnston, Russell (Inverness) Taylor, Sir Charles (Eastbourne)
Burden, F. A. Jones, Dan (Burnley) Taylor, Frank (Moss Side)
Buxton, Ronald Joseph, Rt. Hn. Sir Keith Teeling, Sir William
Clark, Henry (Antrim, N.) Kilfedder, James A. Thompson, Sir Richard (Croydon, S.)
Clark, William (Nottingham, S.) King, Evelyn (Dorset, S.) Thorpe, Jeremy
Cooke, Robert Kirk, Peter Tiley, Arthur (Bradford, w.)
Craddock, Sir Beresford (Spelthorne) Legge-Bourke, Sir Harry Turton, Rt. Hn. R. H.
Curran, Charles Lewis, Kenneth (Rutland) van Straubenzee, W. R.
Davies, Dr. Wyndham (Perry Barr) Lubbock, Eric Ward, Dame Irene
Dean, Paul McAdden, Sir Stephen Weatherill, Bernard
Deedes, Rt. Hn. W. F. MacArthur, Ian Webster, David
Doughty, Charles Mackenzie, Alasdair (Ross&Crom'ty) Whiteaw, William
Eden, Sir John Mitchell, David Wilson, Geoffrey (Truro)
Elliott, R. W. (N'c'tle-upon-Tyne, N.) Monro, Hector Wolrige-Gordon, Patrick
Eyre, Reginald More, Jasper Woodhouse, Hn. Christopher
Fletcher-Cooke, Charles (Darwen) Mott-Radclyffe, Sir Charles Younger, Hn. George
Fraser, Ian (Plymouth, Sutton) Murton, Oscar
Glover, Sir Douglas Noble, Rt. Hn. Michael TELLERS FOR THE AYES:
Goodhew, Victor Onslow, Cranley Mr. McLaren and
Grant, Anthony Page, R. Graham (Crosby) Mr. Dudley Smith.
NOES
Allen, Scholefield (Crewe) Buchan, Norman (Renfrewshire, W.) Dell, Edmund
Atkinson, Norman Butler, Herbert (Hackney, C.) Diamond, Rt. Hn. John
Bacon, Rt. Hn. Alice Carter-Jones, Lewis Edwards, Robert (Bilston)
Benn, Rt. Hn. Anthony Wedgwood Castle, Rt. Hn. Barbara Fletcher, Raymond (Ilkeston)
Bishop, E. S. Chapman, Donald Floud, Bernard
Blenkinson, Arthur Conlan, Bernard Foot, Sir Dingle (Ipswich)
Boston, Terence Corbet, Mrs. Freda Fraser, Rt. Hn. Tom (Hamilton)
Bowden, Rt. Hn. H. W. (Leics S. W.) Cousins, Rt. Hn. Frank Freeson, Reginald
Bray, Dr. Jeremy Crossman, Rt. Hn. R. H. S. Grey, Charles
Brown, Hugh D. (Glasgow, Provan) Darling, George Griffiths, Rt. Hn. James (Llanelly)
Brown, R. W. (Shoreditch & Fbury) Davies, Harold (Leek) Hamilton, James (Bothwell)
Hamilton, William (West Fife) McLeavy, Frank Prentice, R. E.
Hamling, William (Woolwich, W.) Manuel, Archie Pursey, Cmdr. Harry
Hannan, William Mason, Roy Redhead, Edward
Hart, Mrs. Judith Mendelson, J. J. Reynolds, G. W.
Hazell, Bert Mikardo, Ian Robinson, Rt. Hn. K. (st. Pancras. N.)
Herbison, Rt. Hn. Margaret Miller, Dr. M. S. Ross, Rt. Hn. William
Hobden, Dennis (Brighton, K'town) Molloy, William Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)
Holman, Percy Monslow, Walter Silkin, John (Deptford)
Howarth, Harry (Wellingborough) Morris, Charles (Openshaw) Skeffington, Arthur
Howell, Denis (Small Heath) Murray, Albert Slater, Mrs. Harriet (Stoke, N.)
Howie, W. Newens, Stan Small, William
Hoy, James Noel-Baker, Rt. Hn. Philip(Derby, S.) Soskice, Rt. Hn. Sir Frank
Hughes, Hector (Aberdeen, N.) Norwood, Christopher Stones, William
Hunter, Adam (Dunfermline) Ogden, Eric Tomney, Frank
Hunter, A. E. (Feltham) O'Malley, Brian Wainwright, Edwin
Hynd, H. (Accrington) Oram, Albert E. (E. Ham, S.) Wallace, George
Hynd, John (Attercliffe) Orme, Stanley Warbey, William
Johnson, Carol (Lewisham, S.) Page, Derek (King's Lynn) Weitzman, David
Kelley, Richard Palmer, Arthur White, Mrs. Eirene
Kerr, Mrs. Anne (R'ter & Chatham) Park, Trevor (Derbyshire, S. E.) Willis, George (Edinburgh, E.)
Lawson, George Parker, John Zilliacus, K.
MacDermot, Niall Peart, Rt. Hn. Fred
Mclnnes, James Pentland, Norman TELLERS FOR THE NOES:
Mr. Ifor Danes and Mr. Harper.

Schedules agreed to.

Bill reported, without Amendment.

8.22 p.m.

Miss Herbison

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

I think that it is almost wonderful that a Bill of this nature, bringing in a completely new concept for one part of National Insurance, has got through the House so quickly, and I thank hon. Members on both sides for ensuring that we got it as quickly as possible.

I should like to thank you, Mr. Deputy Speaker, and your colleagues, who had to sit through these highly technical debates. I think, too, that the officials of my Department who have had to work at top speed should be congratulated and thanked for the work which they have done on the Bill

I think that that is all that needs to be said at this stage, and I hope that the Bill will be given a Third Reading.

8.23 p.m.

Sir K. Joseph

We on this side of the House join the Minister in thanking you, Mr. Deputy Speaker, and your fellow Chairmen for keeping us in order during these two days.

We also join the Minister in the tribute which she paid to her officials for drawing up the Bill, though we suggest that but for her majority we would have amended it in parts. We are glad to have played our part in expediting a Measure whose basic principle is common to both sides of the House, and we hope that it may speedily reach the Statute Book.

Question put and agreed to.

Bill accordingly read the Third time and passed.