§ Mr. O'Malley
I beg to move Amendment No. 44, in page 56, line 19, at end insert:'(dd) for the Secretary of State, in prescribed circumstances where a premium has been paid in respect of a person, to direct the payment out of the National Insurance Fund to that person or his estate of an amount equal to a prescribed part of the premium;'.This is a technical amendment, and that is my last word on the subject of the Bill as it passes through the House. How- 720 ever, at the risk of being briefly out of order, I should like to thank all hon. Members on both sides of the House, who have taken an interest in the Bill. It has taken a few months to discuss and only the hardy ones of us are left. The rest have very sensibly decided at this stage that they have had enough.
I should like to thank both the hon. Member for Rushcliffe (Mr. Clarke) and the hon. Member for Brentwood and Ongar (Mr. McCrindle) who have led for the Opposition on the Front Bench. We have had one of the most constructive series of debates on a Bill which I have experienced in more than a decade in the House. I certainly appreciate what has been done. It has done good for the reputation of the House and, I hope Parliament as a whole. I am grateful to the hon. Gentlemen.
§ 6.15 p.m.
§ Mr. Kenneth Clarke
I rise not to oppose the amendment but simply to express on behalf of my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) and myself our thanks to the Minister. I repeat what we expressed on several occasions in a fascinating and certainly the most interesting and constructive Standing Committee on which I have served in the short time I have been a Member of the House: our admiration for the skill of the right hon. Gentleman. He adopted a very fair and genuine approach to all our discussions. Had it not been for his expertise and ability to answer our detailed questions so readily, we should have made no progress at all.
It appears that the Minister has completely satisfied all but a small section of hon. Members. I am sure he will continue to do so.
§ Amendment agreed to.
§ Order for Third Reading read.—[Queen's Consent, on behalf of the Crown, signified.]
§ The Secretary of State for Social Services (Mrs. Barbara Castle)
I beg to move, That the Bill be now read the Third time.
This is a historic moment, when we complete the House of Commons stage of the first profound change in pensions policy since Sir William Beveridge formed national insurance after the war. 721 The Bill takes us as great a leap forward as the Beveridge Report did in those faraway days.
This is a very happy moment for Labour Members. I appreciate very much the remarks of the hon. Member for Rushcliffe (Mr. Clarke) about my right hon. Friend the Minister of State. I too, wish to pay a tribute to my right hon. Friend and to my hon. Friend the Under-Secretary, who have borne the heat and burden of the detailed discussions in Committee and, as the Opposition spokesman has just made clear, did so with a pertinacity, clarity and courtesy which was appreciated by all members of the Committee.
We are grateful to Opposition Members for the harmonious passage of the Bill. There have been one or two hiccoughs in the harmony but they were not profound and, I hope, not enduring.
It has been heartening to find that Opposition Members now accept that a modern pension scheme must embody the sort of principles which we have embodied in the Bill; that it is no good starting on a major piece of pensions legislation today except on the basis that it guarantees security in old age; that both the contributions and the benefits must be at a level adequate to take people in old age and widowhood off means-testing and off supplementary benefit; and that a scheme to meet the urgent needs of our society cannot be allowed to take too long to mature.
The older worker who has waited a long time for a proper pension scheme must be helped urgently. Therefore, the maturity period of 20 years brings hope to thousands of older workers who are now approaching the period in which they will have to depend on the retirement provisions that this so-called advanced society of ours has been able to make.
Any modern pension scheme also must have, as ours has, a strong redistributive element. It must correct some of the exploitation that the lower paid have suffered during their working life. As we bring this stage of the Bill to its conclusion, it is a matter for congratulation to know that the lower-paid workers will in old age be lifted more radically than any other members of our society. For example, a married man on £20 a 722 week will, under these provisions, be able to retire on a higher income than he had when he was at work. The £30-a-week married man will be able to retire on three-quarters of his pay.
To us, another vital principle in the Bill has been our determination to see that in future the manual worker should enjoy the quality of status and treatment which has hitherto been the prerogative of the white-collar man, that he should be able to enjoy, through the pre-award dynamism of the scheme, the equivalent of the final-salary scheme status.
One of the most exciting elements in the Bill is the provision that the retirement pension shall be based on a man or woman's 20 best-paid years. That is a piece of inspired thinking that has come out of the collective discussion in my Department of which we can be very proud.
The House will not need reminding of the importance to me, if not to the Opposition, of the provision to give women complete equality of treatment under the Bill—indeed, better than equal treatment, because I recognise that they will move for the first time in history to a privileged position as they will draw their pension at an earlier age.
I am very proud of the concept of the home responsibility credit, the fact that at last we shall enable the woman who comes in and out of the labour market, because of her family commitments, to count for the purposes of the membership qualification the years she spends at home bringing up a family or looking after an aged relative.
Last, but of course not least, there is the concept that we must ensure in our pensions provision that people will know when they retire that the purchasing power of their pension is sustained. We must eradicate the anxieties that hang over the retirement of so many of our citizens as they see their non-inflation-proofed pensions withering away in value. Inflation-proofing has led us to the new and enduring concept of the partnership between the State scheme and the private pension scheme. One of the most encouraging things that I found in the long discussions both before the Bill was introduced and during its passage was the way in which the private pensions industry, when faced with a challenge, proved capable of rising to it.
723 I remember the long discussions we had on the 1973 legislation of our predecessors, when some of us argued that we needed to set the standards required for everyone and then call on the private pensions industry to rise to them, rather than to tackle the matter the other way round, as our predecessors did, saying "We want private pensions schemes to endure, so we must not set the standards so high that they cannot attain them".
The unique feature of our policy is that we did it the other way round. We said that there must be equality of treatment for women, an adequate pension on retirement, a shorter maturity period, a redistributive element, a 100 per cent. entitlement for the widow, and all the other points that we stressed. We said that above all there must be inflation-proofing of the pension once it was drawn.
Having said that, we added "We also want the continuation of good private pension schemes, so how can we help them to meet these standards?" It is from that new approach that the harmony in the House over this measure has emerged.
I believe that no Government could go back on the principle that the State must, whether for its State scheme membership or in partnership with the members of private schemes, protect the pension against devaluation through inflation. That is why I am sure that the Opposition must know in their heart of hearts, although I cannot expect them to admit it publicly, that their own State reserve scheme could not work. It could not work to produce this principle, because it is not possible to guarantee inflation-proofing under a funded scheme.
We have come together by this inspired policy to agree that it is time this country brought its pension policy in line with the pension policies of other advanced societies, that it is time we no longer dragged along with the remnants of the old poor law approach for people in old age, that it is time we gave peope dignity and security. This policy provides the basis upon which the citizens of this country can retire without anxiety or loss of self-respect.
I am delighted that we have reached the degree of harmony that we have. Of course, we do not agree on every point— 724 we have had our disagreements and divisions—but it is clear that we are united on the central policy.
I recommend the Bill to the House far its Third Reading, in the hope and belief that the policy that it embodies will endure under any Government.
§ 6.27 p.m.
§ Mr. Norman Fowler (Sutton Coldfield)
I congratulate the ministerial team and their departmental advisers on the hard work they have put in on the Bill. I join my hon. Friend the Member for Rushcliffe (Mr. Clarke) particularly in his commendation of the Minister of State, whose reputation in pensions matters is formidable, and of the Under-Secretary, the hon. Member for Rhondda (Mr. Jones), who, despite his protestations, we all know will soon leave us to go to another place.
§ Mr. Fowler
Perhaps the hon. Gentleman would also like to leave for the other place. Judging from the sudden and unexpected appearance of the hon. Member for Oldham, East (Mr. Lamond) in the latter stages of our debate, we presumably do not have to look very far to see who is to replace the hon. Gentleman.
I am sure that the ministerial team will also think it right to congratulate the opposition team, as the Minister of State already has done. They will congratulate in particular my hon. Friend the Member for Rushcliffe, who is always articulate and wise, my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle), and other Members who served on the Committee.
The Opposition do not have the resources of the Government. Nevertheless the breadth of the amendments put forward by the Opposition and the concessions that have been gained point to the very hard work done by the Opposition team.
It would be right to state the basis on which the Opposition have approached the Bill, which is the third pensions Bill the House has debated in six years. First there was the Crossman scheme, and then followed by the Joseph proposals, which became the Act of 1973. We still believe that it would have been better to preserve that Act and persevere with it.
725 Let me say to the hon. Lady, on the question of rights of women, that she really can claim no monopoly in that respect, as it was that Act which represented a very great advance for working women in this country. We vigorously opposed the repeal of that Act. As a former chairman of the Parliamentary Labour Party put it, we believed that it was a basis upon which we could build. However, the Government had a majority. They repealed the Act. We then had to decide on our attitude to this Bill.
In our 1971 White Paper "Strategy for Pensions", the last Conservative Government said this:The present state of uncertainty about the development of State and occupational pensions has lasted too long and must be brought to an end. Pension provision can only thrive when there is confidence in the future.It has been our aim as far as possible to get that confidence into a piece of legislation.
The alternative, frankly, was that the pensions industry would see a situation in which successive Governments achieved nothing in relation to pensions but the destruction of the plans of their predecessors. That would not have produced certainty. That would have produced chaos and would not have been in the interests of anyone.
The main sufferers would have been the pensions industry and millions of men and women who would have found their pensions threatened.
In Committee one of our main tasks was to get terms from the Government to enable the occupational schemes to continue and to develop. In many ways it is the terms that the Government have produced for the occupational schemes that we regard as the acid test of the Bill.
First, occupational schemes depend upon real savings. They are anti-inflationary. The money is actually there to pay for the pension when it falls due. It is money saved. As the Minister said last night, it is deferred wages. In these days particularly, I would not have thought anyone needed to emphasise the importance of that.
Second, occupational schemes provide an invaluable source of finance for industry. If occupational schemes were 726 diminished, industry would be faced with the problem of finding another source of finance. Given the present position of investment, given the figures and the business intentions that we have seen, I do not think anyone would want to see that happen.
Third, occupational schemes are to the benefit of the public. An occupational scheme is, above all, to be judged by the benefit it provides for the individual member of that scheme. An occupational scheme is capable of being much more sensitive and much more flexible to the needs of the individual than any all-embracing State scheme can be. Good occupational schemes can be of considerable benefit in preserving and maintaining good industrial relations.
There is no doubt that there are some very good occupational schemes in this country. I should like to refer to a very important survey carried out on occupational schemes by the Noble Lowndes organisation. It showed that 88 per cent. of employers now introducing schemes for the first time are introducing final salary schemes, and that 74 per cent. of new schemes have provided widows' pensions on death of the husband in retirement.
From every point of view the preservation and development of the occupational schemes was a cause for which we considered it vital to fight—from the point of view of the individual member of the scheme and from that of the economy. In Committee, therefore, my hon. Friends proposed a series of amendments aimed at this goal, and with the co-operation of the Government I believe that we have achieved considerable success.
There have been major concessions from the Government on the buy-back price for firms which ceased to contract out and when schemes wind up. There have been major concessions on the buyback price for early leavers, and also technical amendments such as that relating to the retirement increments which my hon. Friend put forward this afternoon.
Our aim has been to provide the conditions in which as many firms as possible contract out. The question tonight is whether those conditions are enough to enable them to do so. In this respect 727 I reinforce and re-emphasise what my hon. Friend the Member for Rushcliffe said last night. He said that we and the right hon. Gentleman have received a letter from the joint working party which was formed to facilitate the exchange of views between the pensions industry and the Government. That joint working party consisted of the Association of Consulting Actuaries, the CIB Society of Pension Consultants, the Group of Nationalised Industries Pension Funds—a significant inclusion—the Life Offices' Association, the Association of Scottish Life Offices and the NAPF, together with the CBI. In other words, it represented virtually the whole of the the pensions industry.
The working party's summing-up of what the Government had put forward was that, while they appreciated that the Government had tabled amendments which recognised the existence of their problems, they did not feel that the immediate conditions for making contracting out a possibility quite yet existed. This again was the point put so well by my hon. Friend this afternoon. There were two suggestions, concerning the five-year roll-on and the suggestion, which my hon. Friend the Member for Brentwood and Ongar made last night, that the incentive in the Bill to contract out is too small.
It would be out of order for me to press further points which are not in the Bill and which were pressed both last night and in Committee. My hon. Friend has put the case very well and fully for an extra incentive to contract out, but that has not been accepted. What the Government have said is that they will look at the first point when the Bill goes to the House of Lords. In essence, the case which has been put by my hon. Friend the Member for Rushcliffe is that there is still an element of open-endedness in Clause 41 and that, when the new actuarial tables are issued a sufficient period should be provided before these come into force, so that companies have an adequate opportunity to pay premiums on the old basis for which they were funded. Therefore they are seeking a five-year roll-on period.
The Minister has given an assurance that he will look at this again and that he has an open mind on the subject. We 728 urge him from the Opposition side to accept the unanimous suggestion of the pensions industry that he should do that and take a step towards the minimum conditions on which the industry set such store.
Underlying all our talks and deliberations on the Bill has been our concern at the current rate of inflation. This is really the most essential and crucial point of our discussion, and it was significantly absent from everything the right hon. Lady said this evening. The assumption of the Bill remains that average earnings rise by 8 per cent., that average prices go up by 5 per cent. and that occupational schemes will get a 9 per cent. return on investment.
The position at the moment is that the yield on investment is very significantly lower than wage inflation—a point made by the Minister of State on Second Reading. If that continues it will lead to a very serious position indeed for the occupational pensions industry. Since then the position has worsened.
The pensions industry seeks an incentive. In my view, the greatest incentive which could be given is a new effective policy to control inflation. There is some tendency from the Government benches in social services debates to talk as if inflation is not a matter for them. Nothing could be further from the truth. In this Bill we can see the immense dangers that inflation brings. Yesterday the Government brought in their mobility allowance, and I am glad to see that the Minister who is concerned with the disabled is with us. We welcome the value of that provision. Nevertheless, that allowance will be steadily eroded unless we bring inflation under control.
That is the point made by the Child Poverty Action Group in its pamphlet "Back to the 30s for the Poor" in which it argued that inflation would eat up the new social security benefits announced before Whitsun by the Secretary of State. As the Child Poverty Action Group said,Today inflation is disguising the crisis faced by Britain's poor.It may be disguising it, but there is no question that inflation is hitting the poor hardest of all.
Let me give as an example the mobility allowance, which is something we welcome in principle. The allowance was 729 announced in September 1974 at a figure of £4. It has now been put up to £5. The Government sought to claim some credit for that. Yet inflation has already eroded this benefit. If inflation continues at its present rate—the rate that we have experienced for the past six months—the mobility allowance of £4 announced in September 1974 will need to be £5.64 to retain its original value when it is introduced on 1st January 1976.
That is the measure of our inflation. That is the measure of the problem facing the nation and in particular facing those who are most vulnerable. That is one measure of the crisis facing us, particularly the poor and the disabled whom successive Governments have sought to help. There is no monopoly of concern here. There is a crisis facing the pension funds. Inflation is affecting the individual member in the schemes, the level of savings and investment in the schemes and the very existence of such schemes. If the Bill is to be successful, inflation must be tackled now.
§ 6.43 p.m.
§ Mr. David Penhaligon (Truro)
I cannot be as complimentary about this Bill as other hon. Members have been. I have struggled as best as I can in Committee and in the House to understand the great arguments between the pensions industry and the Government. There have been occasions when I have not fully understood those arguments. That put me in the majority because there have been times when the discussions have been extremely complicated.
In an attempt to examine the matter generally I went back to the original White Paper "Better Pensions." The line from that White Paper to which I would like to draw the attention of the House is under the second heading on the first page dealing with dependence on supplementary benefits. It says:Of about 8 million retirement pensioners—some 2 million—or about 25 per cent. also receive a supplementary pension.Widows form the largest part of these and very nearly 60 per cent. of widows are on supplementary benefits.
The White Paper goes on to say that in the opinion of the Government there are probably another million pensioners either just over the supplementary benefit 730 level or able to claim supplementary benefit if they wish, even though it might be a small amount.
In the next paragraph the White Paper says, and I totally agree:It is wrong that such large numbers of pensioners should have to rely on supplementary benefit.Understandably, men and women resent the fact that after a lifetime of work and service to the community they have to rely on this type of assistance to keep them out of poverty.
Although I may not have understood some of the clauses I did understand Clause 6. This deals with how the money which the Bill will bring into the pensions business will be distributed. As the years pass the percentage of people retiring on supplementary benefit will decrease. It will never totally disappear.
For those who have now retired the Bill is not good enough. The Government claim that they will increase the basic pension in line with average earnings, and I believe that they will but that means that the poorest in our society, those who are either on supplementary benefit or just around that level, will experience no real improvement. The disappointing thing about the Bill is that it condemns these people to this situation for the rest of their lives. There are some good aspects of the Bill, but this one means that if a person retires on supplementary benefit he or she will die on it.
The amount of money involved in the Bill is an enormous percentage of total Government revenue. We have committed ourselves to a structure of expenditure it will be difficult to change. Let me examine some of the expected final situation payments. This Bill will give the average wage earner in this country a man earning about £55 a week, if he has done his full years of service, a basic pension of £11.60, his wife's pension of £6.90 and a supplementary allowance of £11. These are in April 1975 terms. The total figure will be £29.50, which is a great deal better than anything we have had for a long time. That point is worthy of recommendation.
However, the pensioner who has been retired longest will be on the smallest income. I would have liked to have seen a proportion of this additional component 731 gradually being built into the basic pension. If the additional component were an average £7 a week instead of £11 it would mean that we could give £4 to the basic rate. The person in the average position would be no better off while the £80 a week man in April 1975 terms would be £4 a week worse off, but those people to whom the White Paper referred would receive a real increase in their pensions and hence in their standard of living. It is regrettable that we have committed so many people in society to retirement on supplementary benefit.
I am delighted that we have reached the end of the rail in the great pensions debate. I am a recent recruit to this House and so have not had to survive the previous Bills. In 40 years' time this Bill will still be the basic legislation on which we calculate pensions. By that time people will begin to see that it is good, but I am afraid that we have condemned an enormous number of people to a supplementary benefit existence for the rest of their lives. We have done that because we have increased the amount of money that the public will have to provide towards pensions to the maximum figure that it can be imagined they will stand. There will be no transfer of money as the years pass to increase the living standards of those now condemned to supplementary benefit.
§ 6.56 p.m.
§ Sir Brandon Rhys Williams (Kensington)
Unfortunately, because of commitments to another Parliament I have been unable to make any serious contribution to the long debates on the Bill, although that may not be a matter for regret because the House has heard me on the subject of pensions to such an extent on previous Bills that my views are well known.
I was pleased to hear the Secretary of State speak of the harmony that has been achieved on the Bill because that is the most important thing we have to achieve if we are to do our pensioners the good they deserve. I am delighted to see that it has indeed been achieved in the closing stages of the Bill.
However, we must remember that we are still treating our pensioners in Britain in a most deplorably inadequate and 732 mean way; so that the House must not be satisfied, even though we now almost have a framework in the shape of an Act. Inflation is eroding pensioners' benefits every day. We have come to a crossing point, like the change from Newton's physics to relativity. We have to explore a complete new world in establishing the basis of the relationship between the working population and the population of retirement pensioners. In the old days, relationships were based on hard arithmetic; the arithmetic may have been too hard, but at any rate it was comprehensible. Now the relativities have to be thought out afresh each year—even each month—in order to decide what we owe our pensioners.
However, if we are unable to return to the elementary or even the advanced principles of arithmetic and actuarial calculations we must clarify our concepts of the moral principles of entitlement. I was glad to hear the Secretary of State refer to self-respect in old age, which we certainly must hold on to. I also think she has done no harm in striving to establish a unisex basis for pensions. I have had a sneaking sympathy with what she has been trying to do, although I felt that she was premature for two reasons. First, we do not yet have equal pay for women and, secondly, we have not yet established the basis of reward for the woman who works in the home. Therefore, there are, about the way in which we reward the female population, two enormous problems still unsolved. To hurry ahead on the pensions side was a little premature. Nevertheless, the time will come when the work that the right hon. Lady has done on this will be accepted as part of an integrated and satisfactory pensions scheme.
I have referred so often to the root of entitlement that right hon. and hon. Members laugh at me now. However, it is important. I welcome the Bill because it separates the citizenship element, which is basic and universal, from the earnings-related element, which has to be calculated for each person in relation to his life's contribution. It is because the Bill separates these two principles that Governments in the future will be able to change the structure of the benefits without destroying the scheme itself. This is all-important. In the Crossman Bill it was not possible. As soon as we 733 started to tinker with the edifice the whole thing was destroyed. In the Joseph Bill it was certainly possible, but other changes, notably inflation, made it difficult to proceed.
Now we have a Bill that will soon be an Act. The pensions dispute will come to an end—except in one sense. The House still has a tremendous amount of work to do if it is to ensure that the resources allocated to old people are enough. That is a continuing, on-going, daily task for those right hon. and hon. Members who care about this subject.
§ 6.54 p.m.
§ Mr. Robert Boscawen (Wells)
As one of the few back benchers who supported the 1973 Act and the 1975 Bill, shortly to become an Act, I am committed to paying my respects to the ministerial and Opposition teams who have brought the Bill through all its stages of great complexity. In spite of the fact that at all times they pleaded that it was a simple Bill and that they were trying to treat and expound it with the greatest simplicity, it is, perhaps, one of the most complicated Bills the House has ever seen. I pay my respects to the ministerial team and to all those who backed it up, because a vast amount of work was involved in bringing the Bill to a fruitful conclusion.
The Bill has achieved the aim of a civilised pensions scheme in a modern society, namely a guaranteed, inflation-proof pension with equal treatment for women. The secondary aim was to achieve a partnership between the private sector, the pensions industry, and the State. We shall have to wait to see whether that partnership will work and endure. First and foremost, it is up to us and to the industry to ensure that it endures, because if it does not the whole scheme will fall apart and be far too expensive to work. It is vitally important that in the years ahead whatever party is in power listens not only to the industry but to other back benchers, so that the partnership between the occupational pensions sector and the State sector works for the rest of the century.
I congratulate both Front Benches on their harmony. I did not share it all the time, as hon. Members know, because I wished to maintan the privilege of a 734 back bencher to move a lot faster, further and quicker than the Front Benches.
The pensions Bill should have done more for existing pensioners, especially those on supplementary benefits. I know—and the Minister of State has explained this to me on a number of occasions—that there are powers within the Bill to bring existing pensioners within the earnings-related additional element at an earlier stage than would be the case purely through their contributions. I am sure that Conservative Members will be pressing for that as soon as economic conditions allow. It is because I want to see that take place as soon as possible that I object to part of the Bill.
All hon. Members agree that this is a remarkable achievement. It has progressed with harmony and is a substantial step forward. I hope that it will be successful.
§ Question put and agreed to.
§ Bill accordingly read the Third time and passed.