HC Deb 22 June 1973 vol 858 cc1003-20

"In section 36 of the Insurance Act 1965, there shall be added the following subsection:

"(8) For each unit of graduated contributions paid or treated as having been paid before 6th April 1972 in respect of which graduated retirement pension is payable to any person under subsection (1) of this section, additional graduated pension shall be payable to him at the following weekly rates:

Income tax year in which payment of the unit of graduated contributions was completed Weekly rate of additional graduated pension
1961–62 3½p
1962–63 3½p
1963–64 3p
1964–65 2½p
1965–66 2p
1966–67 2p
1967–68 2p
1968–69 1½p
1969–70 1p
1970–71 1p
1971–72 ½p"
—[Mr. O'Malley]

Brought up, and read the First time.

11.5 a.m.

Mr. Brian O'Malley (Rotherham)

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

The graduated pension scheme introduced in legislation by the Tory Government in 1959 is as mean, unjust and unfair a scheme as anything that could be found in pensions anywhere. Although pension schemes, both public and private, are not well understood by large sections of the community, there is clear public awareness of the essential nature of the Boyd-Carpenter scheme. Throughout the country it is known as "the graduated pension swindle", and with some justice. The purpose of the clause is at least partly to try to rectify what is a public scandal. Its purpose is to increase the return on graduated contributions in a manner consistent with good pensions practice.

Before explaining the amendment and the background to it, I want to make one request of the Under-Secretary, arising from the clause. When I was considering the subject matter and the drafting of the clause, I turned for information, as one always does, to the latest annual report of the Department of Health and Social Security. The latest report is that for 1971, published as Command Paper 5019 in July 1972. In that report there is practically no information a bout the operation of the graduated pension scheme. There is a brief description of the scheme, but in the statistical tables in the appendices there is no information about the operation of the scheme—for example, the levels of pensions being paid out to pensioners as a result of their payments into the graduated part of the scheme. I am not surprised at that, because it is such a bad scheme. One finds from figures which one can work out for oneself just how meagre are the benefits in the graduated scheme for the contributions that are made.

I put in a very strong request on behalf of the Opposition that when the next annual report of the Department is published it should contain full statistical information about the operation of the graduated pension scheme introduced by the Conservative Government in 1959.

If the flat-rate national insurance pension, which is partly paid out of graduated contributions, had been set at a reasonable level by the present Government to meet the problems of pensioners at a time when prices were rising steeply day by day, it would have been possible to argue that the return on graduated contributions was being met in that way. But that is not the case. The background to this amendment is that throughout this Government's period of office they have handed hundreds of millions of pounds to the better-off—to surtax payers—and have done very little for pensioners. In the Budget debate on 8th March of this year the Secretary of State was forced to admit that if the 1971 and 1972 upratings brought any improvement at all to pensioners, that improvement was, at best, marginal.

The proposed 1973 increase for retirement pensioners, which forms part of this Bill, is being eroded even before it is paid by rises in food prices, currently running at more than 20 per cent. a year. By October 1974, before the uprating that one would expect in the autumn of that year, it is likely that the flat-rate retirement pension at the level proposed in this uprating will represent the lowest percentage of average national earnings at any time in the post-war period.

We can look forward further than that. The Social Security Bill has a financial structure that offers a flat-rate pension to retirement pensioners at only about current levels, in real terms. In those circumstances, we are entitled to examine and try to improve the graduated pension scheme to give better benefits to people who are expected to manage on a flat-rate national insurance pension which, in real terms, is being eroded and reduced in value day by day.

I am not proposing a formula that was not put forward by the Labour Government. Indeed, in the National Superannuation and Social Insurance Bill in 1969 there was a firm proposal to dynamise the graduated contributions.

I shall explain the purpose of the clause for the convenience of the House. Currently, men and women making graduated contributions receive, on top of their flat-rate national insurance pension, an additional pension of 2½p for every £7.50 paid by a man and 2½p for every £9 paid by a woman.

The purpose of the clause is clear. It aims to provide some dynamism along with the movement of male average earnings, which is in accord with good pensions practice. For example, for contributions paid in 1961–72 there would be a payment of not only 2½p in graduated pension but an additional 3½p, which represents an upward movement with average earnings during those years. The House does not need to be reminded that the value of the pound has dropped enormously in the period between 1961 and 1973. Indeed, in 1973 the pound, in real terms, compared with 1961, is worth only 57p. Putting the equation the other way round, in 1973 one would need £1.75 to buy what could be bought for £1 in 1961. So, unless we dynamise these graduated pensions, the 2½p in 1961 is worth less than l½p in 1973. It is likely, on any reasonable estimate of what will happen in future, to be ½p by 1985, and by the 1990s, when large amounts of graduated pensions will still be being paid out, the old sixpence in the 1960s, or the 2½p in the early 1970s, will be worth a quarter of 1p or even less.

Clearly, there is a need to give pensioners who have an entitlement for their graduated contributions a better return on their money. Indeed, because there was such a bad return on their money, the public quickly realised that the Boyd-Carpenter graduated pension scheme was rightly described as a swindle.

We should be concerned particularly with those who have already retired and have tiny pensions from their graduated contributions, and those who are near retirement and have no occupational pension whatsoever. We must give first consideration to that large group of men and women who are not contracted out of the graduated pension scheme and who, for any little addition to their national insurance pensions, have to depend on the contributions that they have paid from their incomes of between £9 and £18 a week during their working years.

It may be useful to give some examples of how small are the pensions which can be and have been earned under the Boyd-Carpenter scheme. Taking the 11 years covered by the clause, a man who was not contracted out and was therefore making contributions of over 4 per cent. from his reckonable earnings of between £9 and £18, would today he in receipt of a graduated pension of about 80p. The situation is worse for a woman. She would be receiving about 62p. The widow of a man who had paid such contributions would receive half of what the man received—about 40p.

Another example is that a man who had been on average male earnings throughout the period 1961 to April 1973 would be entitled to an additional pension of £1.17 per week, and his widow would receive only 58p. The effect of the clause would be to give an extra 60p to the man on average male earnings paying into the scheme from its introduction until April this year.

11.15 a.m.

In good private occupational pension schemes there is always provision both for pre-award and post-award dynamism. Therefore, we are bringing into the graduated pension scheme the better features of good occupational pension schemes and introducing the same kind of dynamism that we want to see in the flat-rate national insurance scheme.

It is good that even this Government have been driven to abandon the graduated pension swindle by 1975; but merely to abandon it is not enough. Far into the future large numbers of men and women, many of whom have not been contracted out and had the good fortune to be in good occupational pension schemes, will be dependent on the graduated pension scheme which, as it stands, will give small or even smaller benefits by erosion of the value of the fixed pension that they have earned. Therefore, there is an urgent need to help both the present generation of retirement pensioners and those who in future will have to depend largely on this graduated element for a small addition to the flat-rate national insurance pension.

Mr. Sydney Bidwell (Southall)

I rise briefly to support my hon. Friend the Member for Rotherham (Mr. O'Malley), to seek to anticipate the kind of reply that I think we shall get from the Government, and, I hope successfully to puncture it and get serious consideration of the proposed clause.

It is worth recounting the history of the graduated pension scheme. After a speech by my right hon. Friend the Member for Coventry, East (Mr. Cross-man) at a Labour Party conference in the 1950s, we had, during the pre-1694 period, what my hon. Friend has described as the Boyd-Carpenter scheme in an answer to the national superannuation ideas then current in the Labour Party. I recall that my right hon. Friend the Member for Coventry, East had a tremendous ovation at that conference for the ideas that he was then expounding, because he showed that two-thirds of our old people had virtually been shut out of decent occupational pension schemes. Thus, we had the graduated pension coming in and, as my hon. Friend said, it was an absolute swindle.

Why did it earn that title? It was because the benefit was so poor in relation to the amounts paid in. If we compare the value of the contributions with the extraordinary rises in the cost of living we see that it is an even bigger swindle. The Under-Secretary will no doubt ask why we consistently refer to this as a swindle, since a Labour Government operated it between 1964 and 1970. All I can say is that we were conscious of the swindle, and on the back benches, at any rate, were aware of the delay in getting down to the brass tacks of introducing new pension arrangements.

I hope that the Minister will not clutter up his mind with this kind of political argy-bargy. The present pensions are quite inadequate—£6.75 rising to £0.75. They are particularly inadequate in view of ever rising food prices, especially protein foods.

The Conservative Government's scheme was designed to pressurise employers and employees to opt out of the graduated pension swindle and get them into better occupational pension schemes. Such schemes may be the music of the future but the next Labour Government will put the emphasis on State provision based on earning entitlement. We may not go along quite the same path as West Germany and other European countries.

The comparable economy is that of West Germany, and that leaves us standing.

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

The hon. Member for Rotherham (Mr. O'Malley) began by speaking of a swindle in describing the graduated pension scheme. His hon. Friend the Member for Southall (Mr. Bidwell) repeated the phrase. I remember very well the reprimand which those using that phrase received from the right hon. Member for Sowerby (Mr. Houghton). No one is more expert on pension matters than the right hon. Gentleman. What he said was that any politician who uses the word "swindle" was doing grave damage to pensioners, because they were confusing the issue. I much regret that the hon. Gentleman has not succeeded in getting out of his old ways and has not taken the wise advice of his right hon. Friend.

Mr. O'Malley

The hon. Gentleman is right—and I admit it at once—that my right hon. Friend the Member for Sowerby (Mr. Houghton) said that he had never described this as a swindle. What he did say was that if anyone in the City had tried to run such a scheme he would have found himself in prison.

Mr. Dean

The right hon. Gentleman made it quite clear, as have Governments of both parties, that every penny that goes into the scheme through graduated contributions is used for the direct benefit of pensioners and other beneficiaries. To describe that sort of arrangement as a swindle does not help pensioners to understand the real problem.

One of the objects of the scheme was to try to ensure that more money came into the scheme, so that higher pensions could be paid. One of the fairest ways of doing that was to ask those with a higher level of earnings to pay rather more than those with a lower level. It is sad to hear the Labour Party arguing against that. We have carried that a stage further in another Bill going through Parliament. This will mean a much fairer distribution of the cost of pensions among the working population. It will remove the regressive element, which means that the lower-paid pay into the scheme a greater proportion of their earnings than do the higher-paid.

I am surprised to hear the Labour Party arguing against what I would have thought was an elementary aspect of social justice—they would probably prefer to call it redistribution. The hon. Member for Rotherham went on to say that the Government had done little for pensioners. He knows that that is unfair. This Government introduced annual reviews of pensions—the first Government ever to have done so.

Mr. Dennis Skinner (Bolsover)

Under this Government there should be a review every month.

Mr. Dean

For the first time ever, each winter pensioners will know that their pensions will be increased at least enough to compensate for the rise in prices over the past year. I need not labour the record——

Mr. Skinner


Mr. Dean

—except to quote the figures. I am sorry that the hon. Member for Bolsover (Mr. Skinner) does not want to hear them. When this Bill comes into operation the rate of pension will have been increased by no less than 55 per cent., while the figure for the cost of living increase is 26.3 per cent. This is a substantial improvement in the value of the pension. The hon. Member asked me for further information about the graduated pension scheme. The annual report is now a document of formidable length. We must be careful not to get it so big and unwieldy that it no longer serves the purpose for which it was intended.

The amount of graduated pension earned by a man reaching the age of 65 at the end of April 1973 and having paid the maximum rate of contributions throughout would have been £1.30. In November 1972 the average weekly amount of graduated pension received by persons entitled to it was 25½p for men and 11 p for women. This is in addition to the basic level of pension which, if the Bill is passed, will rise to £7.35 at the beginning of October for a single person and £11.90 for a married couple.

The proposal in the new clause is broadly to dynamise the graduated pensions.

Mr. Bidwell

Are the figures that the Minister has just given related to what the single and married pensions will be October? If so, his figures are not correct.

11.30 a.m.

Mr. Dean

The figures that I have just given are what the pensions will be when the increases in the Bill come into operation in October.

The proposals in the new clause to dynamise the graduated pensions cannot be considered in isolation. We have to consider the background against which the contracting-out arrangements were formulated, and clear statements made by Ministers at that time. It was on the basis that graduated pensions would continue to be paid in the money terms in which they were earned that employers decided whether their employees should be contracted out. It would be wrong to change the terms retrospectively.

When graduated pensions were introduced the undertaking was given that no employee who was contracted out would be worse off as a result. To increase the graduated retirement benefit now would be to break that undertaking and would be unfair to those employees who were contracted out.

It is true, of course, that some who were contracted out at the time and who are contracted out now are members of occupational schemes that provide some increase in the pension after award, but this is certainly not the case by any means for all these people and there is therefore no guarantee that these occupational pensions would be increased, if at all, to the extent proposed in the new clause.

The hon. Member referred to an earlier Bill produced by his Government, but the original decision of that Government was precisely the decision that this Government have made. It was only after outside pressures were exerted on them that the previous Government changed their plans in this respect. So it is significant that their first proposals were exactly those that the present Government have introduced.

Mr. O'Malley

The pressures on the last Government, when I was in the hon. Member's job, were strongest from some people who were running poor schemes, who objected to the Government's political decision to dynamise the graduated contributions—precisely what the new clause would achieve. Some of the representatives of those schemes, of which any decent employer would have been ashamed, came to see me on precisely this matter. They were the people who were putting pressure on. The conclusion to which we had to come was that the prime responsibility of the Government was to give justice to the people who were still in the Boyd-Carpenter scheme and were being given an appalling return on their money.

Mr. Dean

Whatever the reasons for the previous Government's change of policy, I am merely saying that they changed their policy. Their original decision was the one that we have made, for the reasons that I have explained.

The Government clearly stated their policy nearly two years ago in the White Paper "Strategy for Pensions". That policy was then formulated in the Social Security Bill at present before Parliament; the reasons for the policy were clearly set out at that time, and many occupational pension schemes have of course planned accordingly.

Whatever anyone may feel about the pros and cons of the argument, to go back on a decision clearly announced nearly two years ago and put in legislation now well on its way through Parliament would be extremely bad and unsettling for occupational pension schemes which have now made their plans and arrangements on the basis that the Government will do what they said they would do.

Stability in occupational pension schemes is badly needed and has been badly lacking in recent years. That is another strong reason against this eleventh-hour proposal. Planning in occupational pension schemes is very much a long-term business. One cannot expect them to be able to plan improvements for their existing pensioners and for the members of their schemes who will become pensioners in future if the Government are constantly changing their minds and unilaterally changing the contracts that they made earlier on the basis of which schemes made their decisions. These are powerful reasons against the new clause.

Another reason is the cost. It is estimated that the new clause would cost £30 million in 1974–75, rising to £45 million in 1980. This, of course, would be on top of an additional cost for pensions and other benefits of about £570 million, which has to be found by the contributor and the taxpayer. All this would go to the better-off pensioners—those with earnings above a certain level who have been contributing to the scheme. Here, also, one has to consider priorities when dealing with such large sums. It is for these reasons that I recommend the House not to accept the new clause.

Mr. William Hamilton (Fife, West)

I was not on the Committee and therefore did not hear the arguments there, but I have listened carefully to the Minister and my hon. Friend the Member for Rotherham (Mr. O'Malley), and on balance I thought that my hon. Friend had the better of the argument.

Whenever I hear any Government plead in aid the cost of a proposal, I try to put it in other perspectives and think of other things that have cost much more than the proposal would cost and are far less worth while. I need not name them now, but I could give a long list of things on which the Government have not hesitated to spend £30 million, £40 million or £50 million and which are much less worth while than this proposal.

We have heard ad nauseam the argument about the alleged swindle that was maintained by the Labour Government. We regret that we did not produce our scheme much earlier in the 1964–70 Parliament and get it into law before the 1970 catastrophe. But that is past history. We still believe that it is a swindle and we maintain that when we get a Labour Government, as we shall at the next election, we shall take steps somehow to absorb this into our new scheme.

It is not realistic to talk of abolishing a scheme that has been in existence for 12 years or so, but how the Government can defend a scheme in which the benefits and contributions remain the same after 12 or 13 years, when they have been at great pains to shout from the rooftops how they have sought to protect all sections of the community from inflation, astounds me. It does not stand up to rational argument.

If one works out the simple arithmetic, a contribution of £7.50, giving 2½p per week extra pension, means that a person has five years or so of pensionable life before he even gets his £7.50 back. These sums are derisory. Inflation has meant increased wages—and the Government quote as a merit the fact that wages have gone up more than food prices and more than the retail price index as though it were their declared intention to see that that happened. In fact, they do all they can to stop from happening what they quote as an example of their success. They say to the unions, "You must not have this substantial wage increase, but we accept all the plaudits going because we can prove by statistics that wages have gone up a lot more than prices in the period that we have been in office." Higher wages are what the Government's whole policies are designed to stop.

Meanwhile, however, the pension situation has remained static. As wage levels rise, more and more people are brought into the graduated scheme and more cash is collected. Yet the 2½p remains the same. So the sums are getting more and more indefensible.

Mr. Sydney Bidwell

With the average male expectation of life, an enormous number of people will never live the five years to get their contributions back.

Mr. Hamilton

Of course that is why from the beginning we called the scheme a swindle. It was blatantly apparent that the scheme was simply another tax to finance the existing national insurance scheme without increasing contributions sufficiently to maintain the increase in pensions in the way that pensioners needed. This was an ill-concealed additional tax taken from the higher-paid workers rather than surtax payers and the rest. The more honest thing would have been to increase direct taxation on the higher income groups. In fact, the reverse has happened under this and previous Conservative Governments.

When the Government talk about sanctity of contracts one need not remind them that I criticised the Child Poverty Action Group on one occasion after the last election because it was so naïve as to believe what Conservative leaders were saying—that they would increase family allowances. The Child Poverty Action Group said in 1970, "We believe Mr. Heath—he is a jolly good lad. We will see he gets power." He got power but did not do what he promised. Let us have no talk about the sanctity of contracts or promises. We shall debate next week in another context another legal provision whereby we shall retrospectively renege on a contract made to certain individuals.

11.45 a.m.

The Government will have to think about how to protect pensioners. It is not a sufficient argument to say that this provision will benefit the higher paid. Since when was this Government's conscience troubled by the fact that more help was going to those who deserve it least? That is what all the Budgets since 1970 have been about. They all gave help to those who needed it least. That is the great trouble. That is why the country is in such turmoil.

For the Government to parade figures attempting to show that old-age pensioners have never had it so good and that they are better off than ever before is contrary to all the post that I get on pensions. I do not think any Member on this side of the House gets any letters from pensioners saying how well off they are under this Government and long may it last. On the contrary, one gets letters pleading poverty from people scraping around and trying to get another 10p or 20p from the Supplementary Benefits Commission.

All we are trying to do by new Clause 1 is give protection to a relatively small number of our people who have been badly treated and have had no account taken of their position in the last 12 years, when every other section of the community has had some steps taken either by their trade unions or by the Government to protect them from inflation. These people have not had such steps taken for them and it is time something was done for them.

Mr. Marcus Worsley (Chelsea)

Hon. Members opposite have frequently used the word "swindle". The pension scheme introduced by the Conservative Government in 1958 was, I believe, based on a false premise—that one could have a viable national insurance scheme with a procedure for opting out for some members of the scheme into occupational schemes. The Labour Government, when they eventually produced their pension scheme in 1970—the hon. Member for Fife, West (Mr. William Hamilton) was right in saying that it took them an eternity—fell into precisely the same error. The Crossman plan, as it was called, tried to do precisely the same thing.

The great merit of what the present Government have done is to break away from the opting-out provision. We have two pensions now, the basic State pension without opting out, and a pension above that, either occupational or under the funded State Reserve Scheme, which does not merit the criticisms which have been made of it.

I have a great deal of sympathy with what the hon. Gentleman said about what has happened to the graduated element under the 1958 Act. But once a bargain has been made—and my hon. Friend the Under-Secretary of State was right to say this—when one has built up all sorts of expectations and when the opting out and opting in have taken place on a definite and stated principle, which was the case, one cannot retrospectively change the basis. This is why the Government are right, despite forceful arguments to the contrary, to stick to their guns on this matter, and it is why the Labour Government initially were right in taking the same line.

Mr. O'Malley

I would like to correct one error which has crept into the debate. The Under-Secretary of State made the same comment as the hon. Gentleman has just made. The 1964–70 Labour Government did not originally make the decision that the graduated pension arrangements should stand. They drafted a completely new pension scheme in which the graduated pension scheme was considered with all the other alternatives. They then decided to do two things—first, to abolish that scheme and, secondly, to provide dynamism for the people who had to depend on that scheme for a little additional income on top of their flat-rate benefit.

Mr. Worsley

Of course I understand that the Labour Government wished to abolish the scheme, but originally they did not wish to "dynamise the bricks"—I am glad that the hon. Gentleman did not use that jargon. I understood that the initial proposition was that it should not be dynamised. If I am told that I am wrong, I accept the correction. It was my understanding that the Labour Government changed their attitude under pressure.

I return to my point that once a bargain of this sort is struck it must be kept. However, looking back on it, I believe that it was an error to have made a bargain quite of this kind. I repeat that the Labour Government, in the plans that they stuck to, the plans that they eventually put to the House, intended to make just such a distinction once more, just such an opting out.

Therefore, all of this debate underlines the Government's wisdom in the basic structure of the new two-pension scheme. Therefore, the real moral of the tale is that the Government have got their pension structure right and that the Labour Party continues to make the mistakes of the past which occurred in the Crossman scheme.

Mr. Michael Meacher (Oldham, West)

The core of the argument in this debate is that the 2½p payments per unit of graduated contribution will be so decimated by inflation that, as my hon. Friend the Member for Rotherham (Mr. O'Malley) has put it, it will be down within a decade from 2½p to probably less than ½p and to a miniscule amount by the time that the final recipients get this graduated pension.

To that argument—it is an argument which the hon. Member for Chelsea (Mr. Worsley) said is entirely justified as it stands—the Under-Secretary has made no reply. I will come on to what the Under-Secretary said, but what he said did not relate to this crucial point.

The first point the Under-Secretary raised was that earnings-related contributions were being introduced entirely for flat-rate benefits. As the hon. Gentleman knows perfectly well, that is totally irrelevant to the point of the amendment. Moreover, he should know perfectly well, if he is challenging us on redistribution, that the redistribution formula within the Crossman scheme would have been a great deal more distributive. That is entirely irrelevant to the point of the debate.

The Under-Secretary went on to talk about the annual review, which is a further red herring drawn across the trail. However, as the hon. Gentleman mentioned it, I put it to him that he knows full well that the Government reluctantly introduced it only when we had reached a sky-rocketing level of inflation and no other course was open to them. The hon. Gentleman knows that. It would not have been introduced had we not had a level of inflation going up to 10 per cent. and more and the Government would not have protected pensioners otherwise.

The argument was made for us by the hon. Gentleman when he said that the average level of the graduated pension payments was 25½p for men and 21p for women. That is a very forceful point. It is of course a point for us, a point which makes clear how minute this already is, what an extremely poor scheme it was, what a swindle the scheme was, and, unless this kind of protection—inflation-proofing—is introduced, what an awful swindle it will be as the rate of inflation has increased in the 1970s over the rate in the 1960s.

The main argument which the Under-Secretary saw fit to introduce in resisting the amendment was that the dynamising of the Boyd-Carpenter scheme could not be taken in isolation. He said that some employers at least would be in difficulties if the undertaking were broken that members of their schemes would get only the money value for the contributions paid in under that scheme.

That is precisely the argument which sacrifices the Boyd-Carpenter pensioners to the interests of the private schemes. That is precisely what the hon. Gentleman is saying. It is precisely the argument against a structure with a very poor State scheme to induce reluctant employers to set up minimum benefit private schemes. This situation arises. It has arisen again under the Social Security Bill. There is some minimal protection there.

Under this scheme, which was the first time that this was tried, there was no protection and we are unable to have retrospective protection on the grounds that it would damage sanctity of contract, that it would embarrass some employers who have set up very poor schemes and if the State scheme were even minimally improved it would mean that those employers would be in difficulties: either they could not pay out or they could not pay out in full the small extra payments which would have to be given in all fairness, as the hon. Member for Chelsea said, to those whose payments are very small now and are getting smaller every year.

The only other point that the Under-Secretary made concerned the question of cost. He said that the cost would be £30 million now rising to £45 million. He also made the rather curious remark that the benefit would go only to the better-off pensioners.

I point out to the House that this is a totally inaccurate argument. As the scheme was originally introduced, graduated contributions were paid on the earnings range of £9 to £15. It was raised to £18 and then to £21 and it has been successively raised since. In other words, it is precisely the broad bracket of virtually the whole of the working class up to the level of the average pay of higher-paid skilled workers and excluding only a few of the lowest-paid unskilled workers that this scheme has been deliberately aimed at, and contributions were not demanded on a graduated basis from salaried workers who were at a much higher salaried level. It was precisely the broad bracket of ordinary workers who paid towards this. It is they now, if they were not contracted out, who are to be deprived.

The essence of the debate centres on the inadequacy of a pension structure which is geared to a very poor State scheme which cannot be improved because of the fear of undermining minimum benefit private schemes. The pensioners who are locked into this poor State scheme are sacrificed in the interests of getting more employers to set up more private schemes because that is in the interests of the private insurance industry. That is the key to the debate.

One can see the Government's embarrassment. They are locked in a situation where they admit the justice of the argument, but for the sake of their friends in the private insurance industry they cannot get out of this situation. It is a situation which will recur under the Social Security Bill where the dynamising formula for minimum benefit private schemes under that Bill is almost certainly inadequate given the levels of inflation which we have been having in recent years, and I predict that we will be having this kind of debate in future years over the next decade if that Bill comes into operation.

Therefore, it is quite clear that the Boyd-Carpenter pensioners are being swindled out of a decent pension scheme because the Government have locked themselves into this extremely unsatisfactory pension structure. It was a swindle before. It is becoming an even bigger swindle as a result of the Government's failure to accept this moderate amendment.

Although I can see the Government's difficulties, given what they have done, I hope very much that they will be prepared to reconsider the fact that they can at least provide some improvement—some uprating—for those who have found themselves in this situation, which is not of their own making and which they were not warned about.

The Bill was not introduced in 1959 on the basis that there has to be stability in the Government's thinking on pensions and that there would be a Social Security Bill very many years later. The Government should not have got themselves into this situation in the first place. This is the real pith of the argument.

Even if this formula, which would give minimum protection to the Boyd-Carpenter pensioners, cannot be accepted, I hope the Government will be able to think of other ways in which they can protect the pensioners whom they are sacrificing to their own political interests.

Question, That the clause be read a Second time, put and negatived.

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