HC Deb 16 December 1971 vol 828 cc852-9
The Secretary of State for Social Services (Sir Keith Joseph)

With your permission, Mr. Speaker, and that of the House, I should like to make a statement about reviews of pensions.

As the House knows, the Government are pledged to protect the purchasing power of the national insurance retirement pension and related benefits by a review every other year. In September this year the up-rating restored the value of the 1969 pension in full and provided a small improvement in addition.

The Government have been aware of the growing concern during recent months, which has been shared by hon. Members on both sides of the House, about the position of pensioners at a time when prices have been rising sharply. The Government are confident that their policies are bringing inflation under control. But on general social grounds they have come to the conclusion that the arrangements for reviewing pensions should be brought into line with those for supplementary benefits, which are already reviewed annually. This would end the difficulty that, at the present biennial up-ratings of contributory pensions, those on supplementary benefit receive a smaller increase because they have already had part of it in the preceding year. The Government have, therefore, decided that in future pensions and related benefits, including war pensions and industrial injuiries, will be reviewed every year.

This improvement on the arrangements proposed in our White Paper "Strategy for Pensions" will be embodied in due course in the Bill to implement our pension proposals, but the adoption of annual reviews will not have to wait for the main reconstruction of the national insurance scheme to take effect. There will be an up-rating in the autumn of 1972 and every year thereafter, with, of course, a review of contribution levels.

Because of the organisational requirements for annual reviews both in my Department and in the Inland Revenue Department, the up-ratings will, after next year, take place regularly in the latter half of November. The up-rating in 1972, however, will be in October, half-way between the 1971 and the 1973 up-ratings.

We also intend to move to annual reviews of public service and Armed Forces pensions, and these reviews will take effect from 1st December each year beginning in 1972. At the same time the opportunity will be taken to reduce from 60 to 55 the minimum age from which increases are normally paid under the public service and Armed Forces schemes.

We have made good progress this year with improvements in social security benefits both by general up-ratings and by selective measures to give extra benefit to particular groups, and the Pensions (Increase) Act has already greatly improved the position for public service and Armed Forces pensioners. I am confident that the House will welcome this further evidence of our determination to give practical help to the elderly and other vulnerable members of the community.

Mrs. Shirley Williams

I am sure hon. Members on both sides of the House will be very glad indeed to hear that an- nouncement. The right hon. Gentleman the Prime Minister a few moments ago accused my right hon. Friend the Leader of the Opposition of having no policies, but the Secretary of State for Social Services will know that we have been advocating this policy repeatedly for the whole of the past year. [HON. MEMBERS: "Oh."] I must congratulate the Secretary of State, who is very good at seeing the light.

I should like to ask two questions. First, the right hon. Gentleman will appreciate that many elderly people reading this news will believe this may mean an immediate increase in pensions. Will he make it absolutely clear in any statement to the Press that this does not mean an immediate increase in pensions? Will he consider seriously whether anything can be done right away on the lines of our debate last week? Secondly, will he say whether the opportunity to reduce the minimum age for public service and Armed Forces pensions implies that this will now become the minimum age for most public service pensions schemes—because, as the statement reads, many people will draw that conclusion?

Sir K. Joseph

I am glad that the hon. Lady and the whole House are pleased. However, the hon. Lady should not adopt a high and mighty tone about the advocacy of this policy. For six years the Labour Party geared its performance to a two-year cycle. In fact, right hon. and hon. Gentlemen opposite went into the General Election with a draft Statute that they had laid before the House tying themselves by law to a two-year cycle. It was not the hon. Lady who as recently as last May, only seven months ago, during the Second Reading of the National Insurance Bill, advocated an annual up-rating. In fact, the first to advocate an annual up-rating was my hon. Friend the Member for Billericay (Mr. McCrindle), and he did it in the course of his Second Reading speech.

It is true that there is to be no bonus for pensioners. In giving publicity to this statement, for instance in the notice in the Lobby of the House, the Government have been especially careful to avoid any impression that there was to be any immediate increase.

As for the hon. Lady's question about the Public Service and Armed Forces pensions, I should prefer to leave that to one of my hon. Friends who is an expert on the subject. I think that the hon. Lady's conclusion is correct. But there may be some small minority for whom it is not correct. Perhaps that question might be asked of my hon. Friend who is concerned with these matters.

Mr. McCrindle

First, I thank my right hon. Friend for his kindly mention of my Second Reading speech on the National Insurance Bill? I congratulate him on introducing this reform. While lip service has been paid by many hon. Members opposite, it has fallen to my right hon. Friend to introduce the change. May I express the hope that when the first annual review is contemplated we on this side will not just try to keep pace with rising prices, as we have done so often in the past, but will make it a first positive move to increase the standard of living of the people concerned?

Sir K. Joseph

By the action that the Government have decided upon and announced today, I think we shall be bringing great reassurance to the vast bulk of people who receive national insurance and other benefits.

Mr. Pardoe

Leaving aside the claims and counter-claims of the two major parties as to which of them first thought of this, may I remind the right hon. Gentleman that the measure that he has announced today has been the policy of the Liberal Party for nine years? I do not begrudge the right hon. Gentleman yet another suit of Liberal clothing. We shall weave others from time to time. Is he aware that a rate of inflation of 7 per cent. cannot by any stretch of the imagination be described as being "under control"? Is not it a fact that he has been converted to the principle of an annual review because inflation is not under control?

Sir K. Joseph

No. The Government are taking two steps which are of special importance to the elderly and those on benefits. We are getting the rate of inflation to abate; the figures show that we are succeeding in doing that. We are also introducing an annual up-rating.

Mr. Boyd-Carpenter

Does my right hon. Friend's statement mean that sup- plementary benefits will be reviewed and increased at exactly the same time as national insurance benefits, at the times of the year that my right hon. Friend has mentioned? Does his statement exclude the possibility of making adjustments in supplementary benefits, if necessary, at other times of the year?

Sir K. Joseph

The answer to my right hon. Friend's first question is "Yes". The answer to his second question is "Yes"—in any conceivable circumstances that I can foresee.

Mr. Bidwell

Will not the right hon. Gentleman agree, if we are going into history, that the Labour Party up-rated the value of the national retirement pension in real terms by 20 per cent. as soon as it came into office and sustained it all the way through in real terms? While I welcome the right hon. Gentleman's statement, does he not think that there is a certain amount of urgency, in view of the phenomenal rate of inflation, about doing something before next October?

Sir K. Joseph

No. I have been careful not to over-state the case. Because of the real improvement in September, the pensioner is marginally better off in buying power this Christmas than he has ever been since the pension scheme was introduced.

Mr. Hall-Davis

Is my right hon. Friend aware that it has been the established practice for many years to deal with wages and salaries annually, and that it has been a cause of considerable resentment amongst pensioners that Governments of former days have not been able to make the same arrangements for them? Is my right hon. Friend aware, further, that his decision will be greatly welcomed and that even when inflation is reduced to a more modest level, as it is beginning to be, it will still be the cause of extreme difficulties to pensioners who have to budget very tightly?

Sir K. Joseph

My hon. Friend has spoken of one of the reasons why, for general social purposes, the Government have taken this decision.

Mr. McBride

Is the right hon. Gentleman aware that, having succumbed to pressure for an annual review, he should now turn to the paramount consideration of the value of benefits? Is he aware, further, that in September his hon. Friend the Minister of State, Welsh Office was presented with a petition signed by 50,000 people in Wales asking for a rate for a married couple of £14 and for a single person of £8? Are not rates of that kind the minimum on which Welsh and British pensioners can maintain dignity and decency in old age?

Sir K. Joseph

There is no question of the Government submitting to pressure. Hon. Members on both sides of the House and people outside have come increasingly to recognise the social advantages of annual up-ratings. But the Government had to take account of all the relevant implications before deciding that it was practicable to enter into a commitment to this new policy.

As for figures to which the hon. Gentleman has referred, they would involve massive increases in contributions with who knows what effect on the cost of living and on prices. I think that we must continue to move step by step.

Sir B. Rhys Williams

May I congratulate my right hon. Friend most warmly on his statement? I believe that all people of good heart would like our pensioners to have an increase. But will my right hon. Friend also take steps to make it clear that the redistribution of income in favour of pensioners must be at the expense of other members of the community?

Sir K. Joseph

Yes. I agree with both my hon. Friend's points.

Mr. Houghton

May I ask the right hon. Gentleman whether he or one of his hon. Friends can remove any possible misconception about that part of his statement affecting public service pensioners? I rather think that the right hon. Gentleman's answer to my hon. Friend the Member for Hitchin (Mrs. Shirley Williams) may have left a wrong impression. In his statement, the right hon. Gentleman said: At the same time the opportunity will be taken to reduce from 60 to 55 the minimum age from which increases are normally paid under the public service and armed forces schemes. This has nothing to do with the age of retirement or with the age of superannuation. I submit that it has to do with those who retire on special grant before the normal retiring age, who may now get increases from the age of 55 instead of waiting until they are 60. Will the right hon. Gentleman say whether that is so?

Sir K. Joseph

That will be so once the legislation has been amended as necessary. The legislation is now in another place, and my right hon. and noble Friend who is concerned with it in another place will be clarifying the position in the very near future.

Mr. Tebbit

Can my right hon. Friend go as far as offering some broad hints to the controllers of the pensions schemes of the nationalised industries? I have in mind principally railway men. Historically, they have very low pensions and would greatly benefit from a similar annual review such as that which my right hon. Friend proposes for State pensioners.

Sir K. Joseph

My hon. Friend knows that in "Strategy for Pensions", on which the Government will legislate in due course, there are a number of requirements imposed on private occupational pension schemes which seek exemption from the State reserve scheme.

Mr. Heffer

Will the right hon. Gentleman accept, from one who advocated this proposal during the last six years of the Labour Government, that this is a very welcome statement? I am sure that the whole House and the country will endorse that. Nevertheless, will he return to this question of the immediate position of old-age pensioners? He said that the increase granted during the early part of the autumn led, I think his words were, to a small improvement—[AN HON. MEMBER: "Marginal."]—or a partial improvement. This winter old-age pensioners will suffer immense hardship because of the rising level of prices unless they are given additional help now. Therefore, will he reconsider that part of his statement and take into consideration the views of the T.U.C., which is pressing for some immediate grant, bonus, or heating allowance to help our old people over this Christmas and the difficult winter months?

Sir K. Joseph

I am grateful to the hon. Gentleman for what he said at the beginning. He should accept as a fact that, despite the rise in prices, pensioners now have more buying power than at any previous Christmas, and pensioners over 80 have considerably more buying power in proportion than ever before. [Interruption.] That applies to every person over 80. I take very seriously the views of the Trades Union Congress on this subject. I met the General Secretary of the T.U.C. yesterday. But, in the light of a very recent increase which has left a marginal real improvement in the buying power of the pension, I cannot offer any prospects of an immediate bonus.

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