HC Deb 09 November 1972 vol 845 cc1363-72

11.39 p.m.

Mr. Eric Cockeram (Bebington)

I wish to draw the attention of the House to an anomaly in our social security system which was drawn to my attention by a constituent but which on further examination I find has general application. Indeed, if we add up the number of people who are affected by this anomaly at present and the number who may be affected when they come to draw their old-age pensions, it would not be an exaggeration to say that nearly a million people could be affected.

Our national social security system is paid for by the weekly stamp. Unfortunately, however, the qualification for the different aspects of social security benefit all have different systems of assessment. For unemployment benefit, for example, one has to have a card stamped up to date for one year. The old-age pension requires an assessment of the stamps on the cards over one's entire working life. The earnings-related supplement does not require any stamps on the National Insurance card. Industrial injuries benefits, similarly, are not regulated by stamps. Maternity grant and maternity allowance are without qualifications and, similarly, widow's benefit, sickness benefit and graduated pension are all different.

In short, the various social security benefits have been grafted on to a system by successive Governments, and it is not surprising, therefore, that the public are bewildered and confused and that there are anomalies in the system.

Tonight it is the anomaly affecting the sickness benefit and the old-age pension to which I particularly wish to draw attention. These two benefits are the two most widely known and most widely drawn. It is probable that no working person in Britain goes through life without benefiting from one of these benefits, if not both. The qualification for drawing weekly benefit when off work sick is somewhat complicated. I need not mention all the details but, broadly, an up-to-date National Insurance card which has been stamped regularly for the past three years qualifies a person to draw that benefit when off sick.

A man aged 64, for example, with a National Insurance card which has been regularly stamped over the past three years would be entitled, if off sick in his 64th year, to draw National Insurance benefit for sickness. Any deficiencies in his National Insurance card in earlier years, perhaps when he was in his twenties or thirties, would be disregarded; the important period is the past three years.

When we turn to the old-age pension, however, and follow the case of a man aged 65 who contemplates retiring—the principle is the same for a woman except that her qualifying age is 60—we find that the qualification is quite different from the qualification for sickness benefit. The method of assessment of the old-age pension depends on the stamps on the card over the entire working life. The number of stamps put on successive cards throughout the man's working life is totalled, that total is divided by the number of years for which he has worked, and an average number of stamps per year is ascertained. If the average is 50 or more—obviously it may be up to 52—the man is deemed to have a full qualification and is entitled to the full old-age pension. If, on the other hand, he has an average of less than 50 stamps per year on his cards, throughout his working life, when he draws his old-age pension it is a reduced pension. The extent of the reduction is on a scale which is published and available to all concerned.

This is acceptable, because clearly someone who has, perhaps, only half the possible number of stamps each year on his card should not receive the full pension a person would receive if he had stamped his card every week. If the person who had an inadequate record of stamps, an inadequate payment throughout his working life, were to draw the full old-age pension, there would be no encouragement to others to stamp their cards regularly. That is accepted as being fair.

In the case of this constituent, Mr. L. T. Archer of Wynfield, Column Road, West Kirby, Cheshire, he found that when he reached the age of 65 years, when his records were turned up, he had an average of only 49 stamps a year, one less than the qualification for a full pension. In consequence, when he came to retire—he was aged 65 years in 1969, at which time the full pension for a man with a wife aged over 60 years and qualifying for a pension was £8.10—his pension, had he drawn it, would then have been reduced to £7.80. Mr. Archer did not grumble about that because he accepted that he had not got an adequate or a complete stamp record.

Since Mr. Archer retired in 1969—indeed, since the election in 1970—there have been two increases in the old age pension. The pension now is just over a third more than it was two years ago. This constituent, if he were to retire today, would be entitled to £10.90. That would be reduced, because of his not quite complete record of stamps on his cards, to £10.48p. Mr. Archer accepts that. However, if he had been off ill prior to the age of 65 years, which I do not think he was in his last few years, he would have had full sickness benefit paid to him because his National Insurance cards had been adequately stamped over recent years. The deficiency which brought his average below 50 to 49 stamps a year arose approximately 25 years ago, shortly after the War.

Mr. Archer elected to continue work. He enjoyed satisfaction from his job and he was a conscientious and hard working person. The consequence was that he had to continue stamping a card and paying a contribution not only to his pension but to his sickness benefit. He would have been entitled to receive free treatment under the National Health Service, if he had retired, without paying a stamp. However, he continued to pay a stamp, and continued to work.

Unfortunately, last year Mr. Archer had three weeks off work through sickness. To his amazement, he discovered when he sought to draw sickness benefit, which formerly had been paid to him in full, that his sickness benefit was less than the standard amount. He naturally queried that and he was told that his sickness benefit after the age of 65 years but not before was reduced because of his inadequate stamping record nearly 25 years ago.

Therefore, when Mr. Archer and anyone else in this position—it is of general application—is off sick at the age of 64 years they will get full benefit. But if they opt to continue working and to continue to stamp their cards and then are unfortunately off work for some three weeks, their sickness benefit is reduced.

Mr. Archer was naturally incensed. Not only did he make inquiries about the matter but he took his case to appeal. I pay tribute to the social security staff who handled the inquiry and the appeal. He took the matter to his local office, Hordern House, Birkenhead. The staff did all that they could to help him. Unfortunately they are bound by the regulations. Although his sickness was fully investigated, they concluded that whether it be an anomaly or not, which in my opinion it is, they had to reduce his sickness benefit.

Therefore hard-working, conscientious people who are fit and well, mentally and physically, who have served their country for many years, who elect to continue to do so by continuing to work, are being treated as second-class citizens. They are having meted out to them a standard of treatment which is not meted out to younger people. This group of people at that age are not the malingerers or the "skivers" whom we hear so much about in a number of industries today. If they were, they would have retired and drawn their pension. These are hardworking and conscientious people who elect to continue in work, often at a reduced salary, at 65. It is most unfortunate that we should penalise them by reducing their sickness benefit.

In effect, therefore, these different methods of calculating social security benefits, different methods for sickness and different methods for pension, depending on whether one is under 65 or over, produce an anomaly which penalises those who continue in work. It treats them as second-class citizens, and they draw less in pension than they would have drawn had they retired at 65. Clearly people of this age are not the malingerers or trouble makers.

I ask the Minister to look into this matter and see whether he can ensure that people of this age group—65 plus—who are off sick are able to draw the same sickness benefit that they would have drawn had they been off sick prior to pensionable age. Perhaps my hon. Friend will have to limit the number of weeks in the year during which they can draw this benefit, but that would be less of an anomaly than the present system. Alternatively, he may prefer to refer this case and others of that nature—for there are many of them—to his National Insurance Advisory Committee, a committee constituted to examine cases which need some investigation and where some recommendation or consideration might be given for some changes.

Alternatively, if he cannot do either of those things which could be beneficial, by removing this anomaly in the next few months—perhaps 12 months—I hope that he will give serious consideration to ensuring that this anomaly is not perpetuated after 1975 when, according to the Government's recent White Paper, the new social security scheme will probably come into effect. I hope that when that new scheme comes into effect we shall not perpetuate an anomaly of this nature.

11.53 p.m.

The Under-Secretary of State for Health and Social Security (Mr. Paul Dean)

I am grateful to my hon. Friend for raising this general issue arising from a constituency case. I am obliged to him, too, for the generous tribute that he has paid to our staff. I shall certainly see that they hear about it.

I fully understand how my hon. Friend feels about this case. It looks unfair to him, considered as an individual case. I think that if I were in the shoes of his constituent I would probably feel exactly the same about it. However, I do not accept that this means that the people concerned are second-class citizens. I hope I shall be able to convince my hon. Friend of that.

Looked at as an individual case, I fully understand the point that my hon. Friend is making. Equally, I entirely endorse the other point he made, namely, that we want to encourage those who wish and are able to go on working to do so after the age of retirement. It is for this reason that we have in the scheme the increment system which enables people to get a higher pension as a result of postponing their retirement, and we have an earnings rule which enables people in retirement to earn a certain amount without losing their pension. As my hon. Friend knows, the earnings rule has been relaxed on a number of occasions. I hope this shows clearly that the scheme does try to assist those who go on working after normal retirement age.

I should like my hon. Friend to look at the wider picture. There are over 23 million contributors to the scheme. They are all sorts and conditions of men and women and include large numbers of dependants. Their needs and circumstances are extremely varied. In a scheme of this magnitude, it is not possible to fit exactly the needs and circumstances of each individual. The scheme has to take broad categories; it must have rules which are workable and clear; it has to try to produce a fair balance between different groups of people, between different types of benefit. That is the practical reality, and it underlies the regulations concerning sickness benefit for people over retirement age.

My hon. Friend is familiar with the rules and regulations and complexities, so I will not repeat them but will come straight to the point about sickness benefit and the reasons for it. If sickness benefit is claimed by someone who is over pension age who has not retired it is paid at the weekly rate at which the flat rate retirement pension would have been payable if he had retired at pension age. Dependency benefit for the wife is payable on a similar basis. This is done under Section 19(3) of the National Insurance Act.

This is not mean-minded bureaucracy. There are two practical reasons based upon equity between one person and another. If it were not for this rule there would be little to prevent a person with a poor contribution record over the years but a good one in the year or so before pension age from getting what would, in effect, be a full pension for five years from the age of 65 to 70 by the simple device of refraining from giving notice of retirement and claiming sickness benefit. My hon. Friend went some way to concede that this would be unfair to people who had paid a full contribution over the whole of their working lives. It would also be unfair to the man who was forced to retire at 65, possibly because of ill-health or because his job was no longer available to him.

So, although I see the point made by my hon. Friend, I hope equally that he will see my point that were we to do what he suggests it would mean that a man with a full contribution record or who was not able to go on working after retirement age would feel a grievance. Equally, there would be a real incentive, or temptation, for a man with a poor contribution record to try to work the system to improve his entitlement by remaining on sickness benefit.

There is also the point, mentioned by my hon. Friend, with regard to the graduated pension entitlement and increments. My hon. Friend asked: cannot this be taken into account in deciding sickness benefit? The graduated pension and increments are designed as an addition to the flat-rate pension when a man is retired from regular employment or is treated as such at the age of 70. It would defeat the purpose for which these benefits are intended if they could be paid with other benefits during a period when a man is not retired.

Then there is the question of contributions. In equity, it seems right that people who remain in employment at pension age should continue to pay contributions to the scheme like all other people earning. Such contributions count for increments to pension on retirement, and it does not make any difference to those increments whether the basic retirement pension is payable at a reduced rate or not. The graduated contributions, of course, count for graduated pension.

My hon. Friend asked me whether we would refer the question to the National Insurance Advisory Committee. The Committee has considered it along with other closely allied aspects of the scheme, and the present arrangements are based on a recommendation that it made in 1956 when it reported on the questions of earnings limits for benefits. The position has remained basically unaltered since then.

However, having put the other side of the case I hope I can end on a more hopeful note. Changes in the national insurance arrangements were proposed in the White Paper "Strategy for Pensions" which was published about a year ago. My hon. Friend deduced quite correctly that while at least some of the points he has raised tonight will not be removed entirely, they will be eased by the proposals in the White Paper. There are three respects in which that is so. First, obligations under the graduated pensions scheme will end. The graduated scheme will be wound up in 1975, and there will be no further graduated pensions, although rights earned up to that date will be preserved. There will then be a basic pension under the basic scheme and an earnings-related pension—a second pension, earned with a job—normally through an occupational scheme. That will help to deal with some of the points mentioned by my hon. Friend.

Second, the contributions to the basic scheme will be earnings-related, and that will mean that the lower paid, including those over pension age who are probably past their earnings peak, will pay less in contributions than they are paying now. That will go some way to meeting my hon. Friend's point. Third, the contribution conditions will be somewhat easier so that there should be fewer people getting the lower rate through an inadequate contribution record.

Mr. Cockeram

Is my hon. Friend able to give an assurance that when the Government's White Paper proposals are implemented the person of pensionable age who is off sick will not receive less in sickness benefit than he would have received prior to being of pensionable age?

Mr. Dean

I cannot go as far as that because were I to do so I would be saying that people over pension age who have a deficient contribution record should be enabled to get round this by remaining on sickness benefit, and that would raise the anomalies to which I referred earlier. It would be unfair to the person with a full contribution record or the person who had suffered from ill health or was unable to maintain himself in employment.

I cannot say therefore that the new arrangements will meet that point entirely, but they will at least go some way to deal with the points my hon. Friend made. I hope, therefore, that he will feel that although I have not been able to meet him fully he has made a valuable contribution to the formulation of policy in this area by focusing attention on one aspect tonight, and I hope therefore that he feels, as I do, that the debate has been worth while.

Question put and agreed to.

Adjourned accordingly at four minutes past Twelve o'clock.