§ [Relevant documents: Third Report of the Social Services Committee, Session 1981–82 (H.C. 26-I) on the Age of Retirement and the Government's reply thereto (Cmnd. 9095.)]
§ Order for Second Reading read.9.37 am
§ Sir David Price (Eastleigh)
I beg to move, That the Bill be now read a Second time.
The purpose of my Bill is to make the age of eligibility for the basic state retirement pension—the so-called old age pension—flexible and equal as between men and women. There are a number of means by which these two objectives could be achieved. The one that I have chosen is that proposed by the former Social Services Select Committee in its third report entitled "Age of Retirement".
I was not a member of that Select Committee; I served throughout the last Parliament on the Select Committee on Transport. However, I was so impressed with the report and recommendations of the Social Services Select Committee that I decided to make its report the basis of my Bill.
Being in part an engineer, I do not believe in reinventing the wheel, and the Select Committee had in my judgement drawn out a good blueprint for this particular wheel. I am now offering the House the opportunity to implement the Select Committee's blueprint.
I take this opportunity to congratulate the Select Committee on the thoroughness of its report and the quality of its recommendations. Much of the credit must go to its Chairman, the hon. Member for Wolverhampton, North-East (Mrs. Short), to whom it was my honour and pleasure last year to hand over the chairmanship of the Parliamentary and Scientific Committee. I will not go through a roll-call of praise for each member of the Select Committee, but I must mention my hon. Friend the Member for Macclesfield (Mr. Winterton), who has been an enthusiastic supporter of my Bill. The Select Committee was well served by its clerk, David Natzler.
I am grateful to all my sponsors, whose names appear on the Bill. I hope that the House will agree that they represent a broad church within the House. I wish especially to thank my hon. friend the Member for Brighton, Kemptown (Mr. Bowden) for his help anti encouragement. His deep commitment to the cause of all pensioners is well known to the House.
I have reason to suppose that today is something of a parliamentary first. I believe that this is the first time that any Back-Bench Member has used the opportunity of a private Member's Bill to put into legislation the recommendations of a House of Commons Select Committee, especially of one of which he was not a member.
This is enevitably an enabling Bill. The House will appreciate that a Back-Bench Member does not have the resources available to him to promote a detailed Bill—that can be done only by Government—but he can lay down strategic objectives, and that is what my Bill does.
563 There is no psychological, social or physiological reason why we should all retire from gainful employment at precisely the same age. Indeed, all the ascertainable evidence points in the other direction, to that of flexibility.
As the Select Committee reported:The advantages of great flexibility are obvious. It recognises that an individual's chronological age is an inept and inadequate test of his need or desire to cease work, and that there is a wide variation as to the optimal age and pattern of retirement for different individuals. Some occupations become increasingly onerous with age, while others grow easier and more rewarding. Variations in health, family and economic circumstances are flatly disregarded by the tyranny of fixed retirement and pension ages.This tyranny is recent; until this century many people worked for so long as they themselves or their employers considered them to be fit to do so there was not then, is not now, and never has been a good social reason to lay down fixed retirement or pension ages.In that quotation, the Committee put the argument admirably. Nor surprisingly, the Committee supported wholeheartedlythe introduction of a greater degree of individual choice in both the age of retirement from work and the age of entitlement to a state retirement pension: that is of greater flexibility in retirement and pension ages".In so doing, the Select Committee was following not only the grain of public opinion, but also the views of both Conservative and Labour Governments.
The last Labour Government in their discussion document of 1978, "A Happier Old Age", observed:The age for retirement from regular employment has become increasingly formalised in this country, in that most people are compulsorily retired at the minimum state ages—65 men and 60 for women.They went on:early retirement is a common goal among people whose health is declining or who work in strenuous occupations. It is attractive if it is backed up by adequate pension arrangements, but it is a quite different matter if it involves accepting a substandard pension and thus a reduced living standard in retirement.Nevertheless, they declared:there is support on all sides for a more flexible approach to pension ages.That was in 1978.
In 1981, the present Conservative Government published their White Paper "Growing Older". There we read a clear acknowledgement of the need for flexibility:Fixed retirement arrangements clearly do not suit everyone. There is a great deal of support for more individual freedom in the timing of retirement, and a system of flexible retirement, offering people a genuine choice of retirement age, is attracting growing interest. In principle, when resources make it possible the Government would be in favour of introducing arrangements which would allow more flexibility. It is already the case that some private and occupational pension schemes have different pension ages from the state scheme and freedom to adjust pension ages to the particular requirements of an industry or work-force.Therefore, by autumn 1981, there was general agreement in principle across the political spectrum that a more flexible approach to retirement was desirable. The question was how to achieve it, what would be the extra cost, who would pay, and the timing.
Meanwhile, this need for flexibility was meeting a response from the occupational pension movement. We observe that an increasing number of occupational pension schemes are making provision for earlier retirement; but it also becomes clear that, unless the basic state pension is brought into line, many retirement incomes will be inadequate.
564 The Society of Pension Consultants, in its evidence to the Select Committee, made it very clear that the initiative for greater flexibility lay with the state:As a general point, we would stress that the initiative for any general adjustment in the age of retirement must come from the state. It would clearly be impossible for the generality of employers to adopt anything other than state pensionable age for their employees, except for particular groups to whom special considerations may apply.Since the Select Committee reported, one of our leading pension consultants—Mr. Michael Pilch—wrote as follows in an important National Association of Pension Funds publication "Age of Retirement" of the Select Committee report:The Age of Retirement Report is not perfect. But it offers the only practical solution to the retirement riddle that stands any chance of commanding cross-party support. In the interests of long-term stability, it is vital for the future of occupational pension schemes that a solution to this problem should be found. I believe that the NAPF should press strongly for the acceptance of the Social Services Committee proposals and their early implementation.So say I.
As to the Government's view, I call in aid of my formidable argument the view of my right hon. Friend the previous Secretary of State for Social Services, now Secretary of State for the Environment. In an interview with the journal of Age Concern, entitled New Age, held after the publication of the White Paper, my right hon. Friend was asked:If you were to pick one proposal from the White Paper that you would most like to be remembered by, which would it be?My right hon. Friend replied:I would like to feel that flexible retirement is something which by the time we leave office I will be able to say 'Well, we have launched this. It will take some time to reach full fruition but at least we've got it started.' That would make a very great break from the rather rigid retirement dates that have existed not just since the 1948 National Insurance Act, but right back to when the old age pension first became payable. I think we've got to give people more choice and this seems to me one area where for millions of people there is virutually no choice at all.Who am I to improve on the words of a great Cabinet Minister? I hope that another will follow his predecessor's advice.
There is a need for equality between men and women. The difference in pension ages between men and women is the biggest anomaly in the present pension system and has consequences far beyond pension entitlement. The five-year difference is the major exception to the trend towards equal treatment of men and women in the social security system, a trend which European Community legislation now increasingly obliges this country to follow.
This five years' differential was first introduced in 1940 for reasons that are not entirely clear. The DHSS told the Select Committee:This introduction of sex discrimination appears to have stemmed from successful campaigning, and from goodwill and sentiment created by the contribution of women to the war effort, rather than from either an economic or acutarial appraisal. Nevertheless, it was also argued that it reflected the fact that a man tended to marry a woman about five years younger, so that the differential in retirement age would make it easier for them both to retire about the same time".I may be able to add a little further to these reasons, because clearly the members of the Select Committee were not satisfied that the reasons were overwhelmingly in favour of this change. In 1970, on the old Select Committee on Science and Technology, we were studying population trends. One of our witnesses was the then Secretary of State for Social Services, the late Richard Crossman. I asked him, looking at the matter scientifically 565 rather than politically, to explain why women received their pensions five years before men, when actuarialy they had a longer expectation of life, a proper question from a scientific Committee. Richard Crossman replied as follows—the House may like this—Actuarialy, women are extremely expensive. We know very well, when budgeting the pension scheme, that we must budget on the assumption that the women who retire at 60 will, on average, have 7½ years more pension than the men who retire at 65; on average, they draw 7½ years more pension than the men. This has had to be recognised in the contracting out terms. When we got into the commercial world, they said that the women cost that much more to contract out. People outside worked out the pounds, shillings and pence of it. The justification for it is historical. Sir Winston Churchill, in one of his more expansive moods in the war, gave it to women—and what Sir Winston Churchill has given, who shall take back?Sturdy stuff, from the late Richard Crossman,.
In contrast to Sir Winston and Richard Crossman the Equal Opportunities Commission from its earliest days has been committed to the principle of equalisation. Baroness Lockwood, the then chairman of the Equal Opportunities Commission, repeated her commission's commitment to the principle of equalisation to the Select Committee:We feel that there is now no real justification for a different retirement age. In the six years during which the Commission has been concerned with the problem, only one argument has been advanced for the retention of this differential ant that is the cost of equalisation. There has been no other argument put to us.In the circumstances, it was not surprising that the Select Committee came to the clear conclusion thatthe rectification of the anomaly of different pension ages for men and women must be one of the prime objectives of any new pension age policy".The House will be glad to know that public opinion appears to support the Select Committee. A recent opinion survey found that a substantial majority of people—79 per cent.—were in favour of having the same pension age for men and women. Equalisation was favoured to exactly the same extent by men and women; and there was little difference of opinion between people of different ages.
In those circumstances, I was somewhat saddened to read in paragraph 8 of the Government's reply to the Select Committee these words:Any raising of pension age for women would be unpopular in some quarters, as the survey 'Pay for Equalisation' published by the Equal Opportunities Commission in June this year illustrated".I shall give the House a few figures from that survey, and ask the House to judge whether the use of the words which I have just quoted is a fair description of it.
First, when asked whether the principle of equalisation by sex should be accepted, 78 per cent. of men and 80 per cent. of women wanted equalisation. Only 19 per cent. of men and 17 per cent. of women did not want equalisation. It is curious that the latter percentages were picked out in paragraph 8 of the Department's response, not the 70 per cent. of men and 80 per cent. of women. The survey later asks how equalisation might be paid for. Seventy-four per cent. said that it should be paid for by increased national insurance contributions; 4 per cent. suggested reduced pensions; 10 per cent. suggested the use of money from other areas of Government expenditure; and only 3 per cent. said that it should not be done because it was too expensive. I wonder whether, in the normal use of the English language, the Department gave a fair account. I remind the House that there is no actuarial justification for the continuation of the age differential.
566 According to the Government Actuary, at the age of 60 the average man in the United Kingdom can expect to live a further 15.9 years, to age 75.9, and the average woman a further 20.4 years, to age 80.4. At 60 years of age women have four and a half years more life expectancy than do men.
I hope that I have said enough to establish to the House's satisfaction the two purposes of my Bill—age flexibility and age equality as between men and women. How can those two admirable objectives be incorporated into our existing system of pensions, or how can they be made compatible with the Pensions Act 1975? A flexible system requires a threshold age at which pension entitlement begins. All the evidence suggests that this age should be 60 and that it should be incremented thereafter to 65. Some of those who gave evidence to the Select Committee, including Age Concern, believed that it should be increased to 70. But to lower the male pension age immediately to 60 would cost about £2.5 billion and could increase occupational pension fund contributions by as much as 50 per cent. The majority of the Select Committee could not contemplate the additional economic burden which this would impose on the working nation.
The Select Committee therefore proposed that the pension should be payable from 60 at the same level to men and women, but that at 60 that level should be less than they would otherwise receive at the present state pension ages. It found that a notional common pension age of 63 would in the longer term involve neither the state nor the private sector in substantial cost.
As a result, the Select Committee made the following important recommendation:We therefore recommend a scheme of flexible pension age based on a new notional common pension age of 63. We emphasise that 63 is not a new common pension age since flexibility supersedes that very concept, and it has no connection with retirement. The new state scheme which we propose involves no significant long-term cost, is readily comprehensible, visibly equitable, treats men and women on an equal basis while preserving the principles of the present retirement pension system.It is this recommendation which my Bill attempts to put into legislation. Many important details that flow from this core recommendation are in my Bill, but they can be examined in detail later.
As to cost, the Select Committee reported that the scheme of flexible pension age based on a new notional common pension age of 63need involve no significant long-term cost".I observe that in paragraph 7 of the Department's reply to the Select Committee it repeats the estimate which it gave in paragraph 10 of note 10, on page 461 of the minutes of evidence, that the cost of stabilising at 63 would begreater than £500 million per annum".The DHSS accepted then that this was a very rough and ready estimate, achieved by running together an £800 million cost of reducing male age and a £300 million saving from increasing female age. Compared with the scale of the unknown variables on which the estimates must be based—unemployment, job replacement and now presumably also the level of earnings-related pensions—those sums are both highly speculative and not very large.
The assumptions made about female working patterns are crucial. Will most women decide to stay on until 63 or beyond, or will they settle for a pension at 60 at the abated level? The evidence received by the Committee on the pensions that could be received by a woman of 60 in 567 10 years' time, taking account of earnings-related additions and of occupational pensions, suggests that many will go. Furthermore, most of the costs of raising the female pension age are from the notional displacement of labour—women not releasing jobs as heretofore. Paragraph 4 of note 10 points honestly in the last sentence to two further factors that tend to reduce the extent of job displacement.
The Department's arithmetic is highly speculative, but speculative in favour of the most expensive solution. It might even have been written by the terrible Treasury itself. I do not believe that the Department believes its own figures. As paragraph 8 of the note points out, the figures do not take into account changes in minimum pension age of the other sex, and it goes on to suggest that earlier entitlement to a category B pension arising from earlier male retirement will increase costs. This seems to be saying that if women work later they are displacing jobs; if they retire earlier they are adding to costs.
Given the speculative nature of the estimate, and even given the estimate that employees would have to pay only 75p a week more, which the EOC survey suggests is acceptable to most people, it would, I think, be a pity to get over-obsessed by the figure of £500 million. Indeed, I do not know where the figure of '75p a week comes from. My simple arithmetic tells me that if there are 25 million contributors and a sum of £500 million, it works out at £20 a year per head. That, according to my calculation, which I do not think is wrong, is 40p a week. I should be interested to know how the figure of 75p has come about.
I then asked the relevant question: what contribution would the move to more flexible retirement make to the reduction of unemployment—or, to put it the other way round, to job creation? The Select Committee, having gone into much of the evidence, was rightly doubtful about whetherearlier retirement would have a significant effect on unemployment.Here, I would tell the hon. Member for Wolverhampton, North-East, I am a little more confident than was the Select Committee. There are nearly 1 million males "economically active" in Great Britain aged betweem 60 and 64. There is considerable circumstantial and anecdotal evidence that more men would retire before 65 if, as the phrase goes, the money was right. The Government's job release scheme supports my view. Against that, of course, we have to balance the number of extra women who would remain economically active from 60 to 63. Nevertheless, in my judgment, there would be a clear net gain to job creation as a result of my Bill.
In the context of this Second Reading debate, it would be impolite of me not to make a general judgment on the Department's reply to the Select Committee's report. I shall overlook the fact that this long-awaited reply was published only 18 hours before this debate began. I simply observe that it has taken the Department 13 months to give birth to its reply, and that after so long a gestation it is a pretty thin and sickly child. The best hope that I can give the Department for its survival is that it should be nourished on the rich milk of the Select Committee's report. On its own, the reply is doomed to an early death from anaemia.
568 I take comfort from the words used by my right hon. Friend the Secretary of State in announcing the creation of his new special inquiry into provision for retirement, that he would take into accountthe recommendations of the Select Committee on Social Services in its report on retirement age".—[Official Report, 23 November 1983; Vol. 49, c. 360.]
§ Mr. Patrick Cormack (Staffordshire, South)
Will my hon. Friend accept that that could mean anything or nothing?
§ The Secretary of State for Social Services (Mr. Norman Fowler)
Will my hon. Friend the Member for Eastleigh (Sir D. Price) accept that it means what I said? We shall take into account what the Select Committee said. I entirely reject what my hon. Friend the Member for Staffordshire, South (Mr. Cormack) tried to suggest.
§ Sir David Price
I thank my right hon. Friend for that undertaking.
May I now give a quick description of the Bill? I shall detain the House for only about three minutes. I hope that the clauses are self-explanatory and will require little adumbration by me.
Clause 1(1) sets the common threshold age for men and women at 60. Clause 1(2) establishes the notional common age at 63. Clause 1(3) lays down that no alteration in women's age of entitlement should be made before 1989. That preserves the position of women currently in their mid-50s. The House and my right hon. Friend may feel that longer notice of the change in the age of eligibility should be given. I am open-minded here, because it is a key issue. How much notice should be given to women who expect to get their full pension at 60? I hope to collect views on the subject.
Clause 2(1) deals with the abatement of pensions below the notional common pension age. The second subsection ensures that when a pension is abated, it is for keeps. There can be misunderstanding about that, because some people think that abatement would be only until one reached the notional common age, and that one would then move to the full rate. That is not so. If one does that, the arithmetic goes awry.
Clause 2(3) recognises the position of widows or widowers who rely on their spouses' pension entitlement. That supports the Select Committee's recommendationthat those on abated pensions should continue to receive pension at that level, but that survivors' pensions should not be liable to abatement.Clause 2(4) implements another recommendation of the Select Committee, thata minimum pension income guarantee should then be given to all retirers.
§ Mr. Peter Viggers (Gosport)
As my hon. Friend has studied the matter in great depth, can he deal with a point that worries me? Some people may seek to take the opportunity of abating their pension and retiring early, and then throw themselves on the state and have their income made up by supplementary benefit. Is there not a risk that people may feel that they can get it both ways?
§ Sir David Price
That is a fair point, but of course it is a bigger risk now, when there is flexibility in occupational pension schemes and when men are not entitled until they are 65 to get their state old age pensions. This was a problem a few years ago, when the Government rightly tried to find out whether there was abuse of 569 unemployment benefit. They found that people retired—bank clerks, in particular—at 63, and then relied on unemployment benefit to make up their incomes until they reached the age of 65 when they received their old age pensions. What my hon. Friend the Member for Gosport (Mr. Viggers) says is now a reality. It makes the case for moving towards flexibility.
Clause 3 provides for increments to be paid to those who decide to stay at work beyond the notional pension age. I am suggesting an age limit of 65 on further increments. This is a point upon which I again invite the assistance of the House. Hon. Members may feel that if anyone stays at work beyond 65 they should continue to pay national insurance contributions and in return should earn extra increments to their pensions. I am sympathetic to that argument. If we do that, the arithmetic can be made to balance so that there need be no net cost to the fund.
Clause 4 is necessary to ensure that occupational pension schemes can be brought into line with the changes that I propose to the basic state pension scheme. I hope that at this stage I need not describe the clause in further detail.
That is my Bill. I offer it to the House. I believe that it represents an important benchmark in the gradual development of a more personal and a more sensitive approach to retirement. I am sure that it is more in tune with people's aspirations for their retirement than the tyranny of a single universal year for retirement, whatever that year is.
Let us remember that retirement from whole-time paid employment does not mean retirement from life. Let us face our advancing years like a good wine: let us not age, rather let us mellow. I personally have the daunting example of a kinsman of mine, who, in the last century, served the House continuously for 63 years. He died at the age of 96, still a Member. Charles Pelham Villiers was the oldest Father of the House on record. He did not age, he mellowed. I hope that the Government's attitude might mellow.
§ 10.9 am
§ Mrs. Renée Short (Wolverhampton, North-East)
The House owes a great debt of gratitude to the hon. Member for Eastleigh (Sir D. Price) for introducing his Bill today. It is a unique compliment to the Select Committee system that a private Member should take up the recommendations of a Select Committee of which he was not a member and produce a Bill on which we hope—I echo his concluding words—we shall see some action from the Government quickly.
I should like also to pay a warm tribute and give the warmest thanks to all those witnesses who appeared before the Committee and helped so greatly in the production of the report. We are grateful for the high quality of their evidence. I also offer my warmest thanks to the members of the Select Committee, only one of whom is in the Chamber.
§ Mrs. Short
Some have gone to other places and some lost their seats unfortunately, but I hope that the influence, example and experience of work on the Select Committee will go with them into the other walks of life in which they may find themselves.
The Committee also went to France and met the Minister of Pensions, which was an interesting experience. The Committee deserves the thanks of all of us.
570 The Bill is not an early retirement measure, but it includes that provision; it is not just about equality, but it includes that; it is not just about flexibility, but it includes that. It is rather an attempt to reorder the basis of thinking about retirement pensions, which is, as the hon. Member for Eastleigh said, very much overdue.
Many rather contentious matters are subsumed within it—the earnings rule, dependency, widows' pensions and the future of the earnings-related scheme and others. For those reasons it would be most valuable were the Bill to go to the Committee so that all those issues could be explored. One would hope that it would then go further.
The Select Committee's recommendations and conclusions are clearly set out in the report. There was no division of opinion. As we said in paragraph 58:There is no good social reason to lay down fixed retirement or pension ages.The Committee wholeheartedly supportedThe introduction of a greater degree of individual choice in both the age of retirement from work and in the age of entitlement to a state retirement pension.Our proposals were all about greater flexibility. I should have thought that the idea of giving people more choice about these matters, which may be the most important decisions in people's lives, would commend itself to the Government. I cannot believe they want to continue in their fifth year of office with a system that denies fundamental choice to individuals as they come to the end of their working career, or is choice to be allowed only to benefit the fit, the able and the more prosperous in our community?
The Committee wants flexibility and equality. None of us would have put our names to a report that proposed to continue for ever the greatest remaining source of inequality between men and women—the state pension age. It is an anomaly that successive Governments have allowed to drift on.
While we are not the only country to have a different pension age for men and women, we soon shall be. We learnt that Belgium was shortly to equalise pension age. Pressure from the European Commission towards general equalisation and individualisation of social security benefits is likely to persuade other European countries to follow a similar course. All the women's organisations from which we took evidence accepted that the age differential should end. The Equal Opportunities Commission, from which the hon. Gentleman quoted, has been active in promoting discussion on equalisation. I should like to pay tribute to its determination to press forward despite the Government's indifference.
The occupational pension sector has shown that it is willing and enthusiastic about the idea of equalising the state pension age. The issue will not go away, and the Government will be under considerable pressure to support the proposals. I promise them that. Our report and the Bill provide a unique opportunity to grasp this nettle. I am mixing my metaphors, but we must not let our fingers be so soft-soaped by honeyed words from the Front Bench as to let the occasion slip.
§ Mr. Toby Jessel (Twickenham)
I should always he delighted to address the hon. Lady with honeyed words. My hon. Friend the Member for Eastleigh (Sir D. Price), when introducing the Bill, referred to remarks made many years ago about the age differences between men and women when they marry and, therefore, the differential in retiring age, which would tend to lead to men and women 571 retiring at the same time. The Bill would increase the proportion of married couples retiring at different times because their ages are different. Has the hon. Lady considered the social effects of that? Will it mean that more married women will be working when their husbands have already retired? If so, does she think that that matters?
§ Mrs. Short
I am not so sure that there is much age difference at present. People are getting married younger and their ages are nearer each other. The basis for the previous theory about this has rather disappeared. I do not have any rigid ideas about how long people should work. It should be a matter of choice and flexibility. People should have the right to decide these matters for themselves. It means, however, that the economic circumstances and climate should be right to allow them to choose. We do not have them now. We should not look at this blueprint for the near future and beyond within the context of the terrible economic circumstances in which we find ourselves today.
I would like to see people able to retire at 60 on a pension—and one at a level well above the present level of basic pension. Nothing in the Bill before the House today makes that less achievable; far from it. It simply offers a framework for calculation of the amount of pension to which a retired person is entitled. It says, rightly, nothing about the actual level of that pension, which must remain a matter for decision by the Government of the day in the light of their priorities.
The reduced or "abated" pension payable under clause 2 of the Bill to those who retire before the new notional common age of 63 may well be greater, even when abated, than the equivalent pension paid today at state pension age. The Committee was confident that, with the gradual build-up of the earnings-related pension scheme under the 1975 Act, even an abated pension based on the present, pitifully low levels of basic pension would, with the earnings-related addition, be sufficient at least to keep a man who retires at 60 well above supplementary benefit level. If we had not been so confident, we could not have recommended the system of abated pensions as set out in clause 2 and paragraphs 100–110 of our report.
We did, however, make doubly sure, and I call the House's particular attention to clause 4(2). For the first time, this provides an unconditional minimum income guarantee, so that no pensioner's income should be such as to lead to reliance on supplementary benefit. That should receive the support of the House.
There is, therefore, no danger that we would be beckoning 60-year-old men into the false promise of retirement only to leave them stranded with an insufficient income for the remaining decades of their lives. As the hon. Member for Eastleigh pointed out, life expectancy is increasing and people who retire do have decades of life, and I hope active life, in front of them. Many people—men in particular—wish to retire earlier and to be eligible for a state pension. The gradual lowering to 60 of the threshold for state retirement pension provides for this section of the community.
The Committee also received a considerable weight of evidence showing that many people resent being mandatorily retired and prefer to continue work, either full-time or part-time. We therefore propose to continue 572 the present, perhaps little understood, system of increments for two years after the notional age of 63 so that those continuing in employment would be able to earn and pay towards a slightly higher pension or a lump sum at the age of 65. We could have extended that beyond 65 but the Committee judged that it was right that at 65 a state pension should be unconditionally payable, so that a revised earnings rule would bite only up to 65. That is in clause 3 of the Bill. When the Bill reaches Committee, as I hope it will, hon. Members will want to examine such judgments in detail. I hope that they will be given the chance to do so.
I wish to deal with the position of women under the Bill. I do not conceal that, in the long run, equalisation of pension at any age will work financially to the disadvantage of women. That is inevitable. The Committee said in paragraph 70 of the report in respect of equalisation:There is and can be no easy solution; the correction of an existing inequality—or the removal of a privilege—cannot but lead to a deterioration in the position enjoyed by the privileged party.Our solution minimises that disadvantage. The Bill does not raise the age of female entitlement to a pension—the House can be assured that I would not have agreed to that—nor does the Bill interfere with the reasonable expectations of women expecting a retirement pension, within the next five years at least. Clause 1(3) of the Bill provides thatNo alteration shall be made to the age at which a woman is entitled to a full pension before 1st January 1989.That reflects the Committee's recommendation. A common notional age of 60, whatever its other attractions and financial problems, would be of positive disadvantage to women. Working women would have to pay considerably increased national insurance contributions to pay for male pension age to be reduced, while themselves not benefiting at all. That would be unfair.
Once the scheme proposed in the Bill is fully mature in 1996, women will have to wait an additional three years before receiving a full pension. Is that acceptable to women? Before too hasty replies are given to that question, let us try to listen to the voice of women as expressed to the Select Committee. Three messages emerged clearly from the evidence given to us. First, there was a unanimous recognition of the case for equality; secondly, there was a unanimous call for greater flexibility; and, thirdly, there was a recognition that a compromise would have to be found to achieve equality and flexibility. Those are contained in the hon. Gentleman's Bill.
The Soroptimists told the Committee thata common age of 63 would eventually be supported by many of those sharing our concerns".The Women's National Commission—a Government sponsored body—told us that it would welcome the phased introduction of a system of flexible retirement. The United Kingdom Federation of Business and Professional Women—I think that its view deserves serious consideration—proposed a common pension age between 60 and 65. The National Council of Women of Great Britain wrote to me following the publication of our report supporting the ideas contained in it. A broad section of women's opinion supports the proposals.
But there are real and tangible gains for women in the Bill. A major one—and I hope that hon. Members will appreciate its significance—is not in the Bill but in the 573 Committee's recommendations and I hope it will be discussed in Committee. It would raise from 60 to 65 the age limit for employment protection for women. The Committee was told by a number of experts, including David Hobman of Age Concern, whose evidence was of great value to us, that there was a danger that the possibility of an earlier state pension brought with it the danger of more widespread mandatory retirements. Many women are today mandatorily retired at 60, in circumstances where a man so retired would be able to claim for unfair dismissal. In practice, retirement ages are a matter for collective bargaining by the appropriate trade union, and neither the Committee's report nor the hon. Gentleman's Bill proposed to interfere with that. But the change proposed would, I believe, be seen as a signal to both employers and employees.
Many women—for example, in clerical and secretarial positions—would have the possibility of further years of employment if that was what they wanted. Evidence that the Committee received showed that many women work beyond 60 where that is permitted—50 per cent. of women civil servants do so and many women working for local authorities do so. The average age of women's retirement from the National Health Service is more than 60, although nurses and midwives can retire at 55. The average age of women's retirement from teaching is 61.4 years. One thing that our report offers is the possibility of extending that right to many who are denied it by discriminatory provision embodied in statute law.
I therefore believe that the Bill provides as fair a deal for women as can be expected at present, and that the working woman of today is realistic enough to accept that equality has its costs as well as its benefits.
What about the Government's reaction? I remind the Government that in order to get the type of answer that we hoped to get we delayed final consideration until the House resumed in October 1982. We gave our Committee colleagues the whole of the summer recess—that is what they asked for—to look through all the evidence and to make up their minds about the recommendations. They had quite a long time to do so. The report was presented to the Government in October 1982 and the reaction was favourable.
I have before me a letter written to me by the hon. Member for Hornsey and Wood Green (Sir H. Rossi), the immediate predecessor of the Minister for Social Security. We presented our report in October 1982, not October this year. In his letter dated 5 January 1983, the hon. Gentleman said:We are as anxious as you to ensure the earliest possible issue of the formal Government response to the Committee's reports, so that they can be debated while fresh in everybody's minds. For reasons I know you will readily appreciate that is not always as easy as it sounds"—I wonder what was the difficulty—but I can confirm that we are making every effort to ensure that our response to your latest report on the age of retirement is available to the Committee by the end of February at the latest.Where are we now?
§ Mrs. Short
Indeed. The letter continued:Without prejudice to our final considered response, I should like to congratulate you and the Committee on this report. In reading it I was struck by the clear and considered way that the key issues had been analysed and by the care that had been taken to produce proposals that are workable if the necessary political consensus can be achieved.574 We achieved it in Committee. The letter went on:Whatever the timescale eventually decided for change, I feel certain that you are right to see the future development of pension schemes firmly in the context of the twin principles of flexibility and equality. I have no doubt that your report is an important benchmark on the road to achieving these goals.Since the letter was written, it looks as if the sand got in the works. Perhaps the Minister will tell us what has been happening in the Government machine.
§ Mrs. Short
The reply was promised in February. It was postponed to April, and we have just got it. I wonder when we would have got it had it not been for the activity of the hon. Member for Eastleigh. We should probably have had to wait until after Christmas.
Therefore, I hope that we shall get the reply that the Select Committee expects from the Government. I agree absolutely with what the hon. Gentleman said. The Government are now proposing to hold yet another inquiry. Will the Minister tell us why there should be yet another inquiry to sift through all the views and experiences that have been collected in the report? The work for it has been done. The Minister should now be promising the House that the Bill will be allowed to go into Committee and that he will present his proposals as soon as possible.
§ Mr. Toby Jessel (Twickenham)
The five year difference in retirement age between men and women has always been something of an anomaly. That was brought home to me 12 years ago, in 1971, when I was approached by a constituent who claimed to have changed sex from a man to a woman. My constituent wanted a retirement pension at 60 instead of 65.
I pondered the matter carefully, and decided to take it up with the Department of Health and Social Security—not with the local office but at ministerial level. The Minister in charge, my hon. Friend the Member for Woodspring (Mr. Dean), was then the Under-Secretary of State; he is now your colleague in the Chair, Mr. Deputy Speaker. He was always one of the briskest Ministers for sending quick replies to hon. Members, but on that occasion there was an uncharacteristic delay. I had to send two or three reminders, and it took three or four months to receive a reply, which said that as this person had only reached the age of 47 no decision need be taken until the age of 60. That age is now not in the too distant future. I warn my hon. Friend the Minister for Social Security that within a year or two that case could land on his desk; and if it does it will not be possible to defer the decision indefinitely.
The problem of that constituent would be solved eventually by the Bill of my hon. Friend the Member for Eastleigh (Sir D. Price) who moved it with characteristic style and distinction. It is clear that he put a tremendous amount of work into the preparation of his speech as well as the Bill. I congratulate him warmly on that. What worries me about the Bill is that economic strain will be imposed on the working sector of the population, which in the distant future it may not be able easily to sustain. The more flexible retirement age that my hon. Friend proposes will, on the whole, lead to a greater proportion and number of early retirements.
I shall refer to some demographic trends. There is already a trend for fewer people of working age to support 575 a larger elderly population. I shall quote statistics from a table produced by the Council of Europe on what it calls in, its jargon, "dependency ratios". The table for the United Kingdom shows our dependency ratio, which is the proportion of people of non-working age per 100 population of working age, including children at school as well as retired and elderly people and women who are not in jobs. In 1970, the proportion was 75, in 1975 it was 76, in 1980 it was 74, in 1985 it is expected to be 73 and in 1990 it is expected to be 73. There is a sharp drop in 1995, when the figure is expected to be 70 and in the year 2000 it is expected to be 68.
That is not surprising if one looks at the graph for the birth rate since the second world war. In the 25 years immediately after the war there are two bulges with a dip in between, resembling two humps on the back of a camel. After 1945 there was an increase in the birth rate, which peaked in 1948 or 1949. That was due to the large number of marriages soon after the war. The rate dipped to a trough in 1955, and increased again to another peak in 1962 or 1963, after which it fell. It fell, but not so steeply until 1970. Thereafter it fell very steeply as a result of the increasing use of the pill coupled with the increasing fashion of there being only two children per family.
From 1970 to about 1977 the birth rate dropped rapidly so that by 1977–78 it was one third what it had been in 1962. From 1978 it increased slightly until 1980, but only to about the level that it had been in 1976 or 1977, after which it broadly levelled out again. Of course, we all know that the only certain thing about birth rate predictions is that they are almost invaribly proven to be wrong. Nevertheless, there seems to be a fairly steady trend of two children per family in a large proportion of families. There have been no violent hiccups in the birth rate graph over the past four or five years.
The effect of this change of balance between the number of retired people and the number of people of working age will be that from the 1990s and into the first 20 years of the next century there will be a smaller proportion of people of working age to support a large elderly population. The economic burden that will be imposed, even without my hon. Friend's Bill, will be severe. There is little doubt about that. We should take it into account when we consider the Bill.
Whether one talks about the matter in terms of costs, as the Government are apt to do, or in terms of higher taxation on individuals via general taxation or social security contributions, the effect is much the same. In this country people have been brought up with the notion that our social security system is contributory. There is a vague assumption that when people pay their social security contributions they go into some sort of bank account to accumulate for their retirement benefits, which they are entitled to receive when the time comes.
The entitlement exists but there is no bank account in which these sums sit. There never was. The social security contributions never paid any overwhelmingly large proportion of the total costs of the social security system, including all social security payments and the National Health Service. Ever since the 1940s a large proportion of the costs of the social security system has fallen upon general taxation. The taxes paid by the work force in any 576 one year provide the resources needed to pay for the social security system, including all pensions and the NHS in that year.
§ Mr. Nicholas Winterton (Macclesfield)
I consider that my hon. Friend is labouring this matter. Is he aware, and if he had considerable business connections he would be aware, of the numerous early retirement schemes implemented by companies throughout the country? That shows that industry and business believe that early retirement is beneficial and can be paid for. Is my hon. Friend also aware that such schemes are offered to a large extent by the huge public corporations, especially where people perform hard manual tasks, and retire early? Many people do not work in the latter stages of their life—but are registered for employment—as they are not fit to perform the type of work that they carried out for the majority of their life. Will my hon. Friend direct his attention to that recent development, which would reduce the cost greatly—something that he is overplaying, rather sadly, in the debate?
§ Mr. Jessel
I am grateful to my hon. Friend for that remark. He is referring principally to company pension schemes. I was referring principally to the national security scheme and state pensions. If the state pension age is effectively reduced for men, as it would be by the proposed scheme, I am worried that the costs to be met by the working population would be very considerable. Furthermore, if the retiring age were reduced by legislation, it would be irreversible, because it would be politically impossible ever to raise it later. I also think that there would be considerable political difficulty, not in the party political sense, but in terms of public acceptance, in effectively increasing the retiring age of a significant proportion of women from 60 to 63, which is the intention of the Bill, even with the flexibility to which my hon. Friend the Member for Eastleigh referred. Much anxiety would be caused to many women who are approaching the age of 60 if they then thought that they were expected to work until they were 63.
The hon. Lady the Member for Wolverhampton, North-East (Mrs. Short), who is a great protagonist of sex equality, referred to that aspect of the Bill. As to the legal rights of equality between men and women, she is a leader among those who move with the times. Apart from the obvious physical differences, there are other differences between men and women, one of which is that many women, besides performing a job of work, must perform exhausting domestic chores when they get home.
§ Mr. Jessel
Furthermore, a large proportion of working women also look after elderly parents, which is an increasing burden upon them which many willingly perform. Over a period of many years the burden tends to have an exhausting effect. I believe that those reasons can sometimes justify women retiring earlier than men. I hope that will be regarded by the House as plain common sense.
§ Mr. Cormack
My hon. Friend appears to have misunderstood the basis of the Select Committee's report and the Bill. There is no compulsion. The object of the Bill is to give flexibility. The matters that my hon. Friend has advanced remain unchanged. There will be no compulsion upon any woman to retire at 63 or 65. The Bill provides an opportunity to do so if she wishes.
§ Mr. Jessel
I am grateful to my hon. Friend. Flexibility in the Bill can lead to changes in the way people act, their expectations and what they consider to be the norm. That attitude can in turn have economic effects upon individuals, their families and the country.
I shall not vote against the Bill. It has great merit and much to commend it. I am uneasy about the matters to which I have referred. I hope that the sponsors of the Bill and the Government will direct their minds to my comments, to which I shall in due course be interested to hear answers in the hope that my comments will be considered in Committee.
§ Mr. Laurie Pavitt (Brent, South)
I join in the usual congratulations to the hon. Member for Eastleigh (Sir D. Price). I apologise to him for not being in the Chamber to hear his speech. I have known the hon. Gentleman for some time and I know that when I read his speech I shall find that it was delivered with his usual lucid exposition, touched with compassion and humanity. I am not flattering the hon. Gentleman, but when he attended the recent debate on the National Health Service his contribution was one of the few by Conservative Members which showed understanding of the problems. My congratulations are tinged with a little envy. On at least 250 occasions my name has gone into the hat for Bills or motions, and it has not come out once, but I have some time to go.
I wish to draw your attention to a problem, Mr. Deputy Speaker. After my hon. Friend the Member for Wolverhampton, North-East (Mrs. Short) finished speaking, the electronic loop which assists hon. Members to hear the debate was switched off, and therefore I had difficulty in following the speech of the hon. Member for Twickenham (Mr. Jessel). I hope that the Officers of the House will correct the problem in due course.
The hon. Gentleman and I serve on the Council of Europe. Much of what he said referred to demography which he and I have been considering in a wider context than just the United Kingdom. The Bill touches succinctly on the problem that there are more people over the age of 65 than ever before, but by the end of the century there will be more people over the age of 95, and by the end of the decade more than 1 million people will be over the age of 75. Our calculations must consider the fact that the proportion of the population of pensionable age will be higher if the Bill is enacted.
I part company with the hon. Member for Twickenham when he tries to relate the problem to taxation and resource availability. I contend that we are dealing with priorities in the way in which we use our resources. We are in a period of the greatest technological change since the industrial revolution. We can now produce more products with fewer people than ever before. If we can make the necessary adjustments to our economic and industrial system, there will be more than enough resources coming from those who are employed and taxable to meet the objects of the Bill.
I remind the House that we cannot divorce our consideration of the pensionable age from the way in which we care for the elderly. The Bill is another move towards a more civilised concept.
During recent years we have begun to regard the elderly in the same way that we regard the disabled—with some compassion. The elderly are thrown on to the scrap heap when they reach the age of retirement, so we must 578 be concerned about them. Yet as a philosopher once said, "The only old person is the one who is 20 years older than me." So to those aged 20, anyone aged 40 is antediluvian. I assure the House that I would have to be as old as Manny Shinwell to feel old—although there are times when I would be honoured to feel as young.
The Bill aims to help us in our approach to those past the age of 60, so that they can continue to live with some dignity. I welcome the comments made by my hon. Friend the Member for Wolverhampton, North-East about clause 2(4). We have all experienced the problems of elderly constituents who come to see us at our surgeries. For example, last Saturday I was visited by an elderly retired person who has always paid his way and been proud of his work and proud of his independence. He had received a tremendous electricity bill. I regret that the Government have given another twist to that spiral.
I asked my constituent if he knew about the special heating allowance. Such a person is too proud and dignified to want charity. He has always believed that his statutory pension should be sufficient—but it is not. Such a person will not ask anybody for anything. Although hon. Members and others constantly tell them that they have been wage earners all their lives and that help 'with their heating bills is not charity but their right, they are reluctant to undergo the means test. Such people have endeavoured throughout their lives to put a little money aside for their old age, but they then face the problem of whether they are on the margin for additional allowances. We write to the Minister or the local DHSS office to determine whether that person is outside the margin for help.
The general approach of hon. Members today has been in favour of flexibility. There is a vast difference between the way in which the state pension system affects an ordinary working person and the way in which it affects the professional classes. The statutory age for retirement was introduced in 1911 in the Lloyd George Act—but it works in two different ways. A working man who reaches. 65 or a woman who reaches 60 is, willy nilly, immediately given their cards, irrespective of their feelings. In 99 cases out of 100 that is the end of their working lives. On the other hand, Mr. Ian MacGregor, at the age of 70, finds the Government willing to pay him £1 million—a very large salary—to keep him in useful employment.
Another classic example is the general practitioner who retires at the age of 65 but, 24 hours later, has signed for his pension and then returned to work. He receives both pension and salary. He can do that until he is 90, and only then must he retire.
If we have flexibility of choice, it must apply equally to the ordinary working man and the professional man. I appreciate that present high unemployment makes that difficult. The person about to be pensioned off may be preventing a younger person from being promoted, which in turn prevents a vacancy arising for a school leaver—and goodness knows there are so many school leavers who go straight on to the dole after passing their O and A-levels.
However, we must consider the human problem—and all hon. Members have experienced such problems with their constituents. A man may be held in great esteem at work. He may be a shop steward or the chairman or secretary of the social club. He is socially significant at work. He is proud of his skills, and does a fair day's work for a fair day's pay. He holds his head high because he is 579 not only satisfied with the contribution made by his skill and conscientious attitude, but happy with the regard in which he is held by his colleagues. He suddenly has a birthday, receives his gold watch from the management in the works canteen, and has to leave.
The greatest disease affecting the elderly is loneliness. That person may well have been unfortunate enough to lose his spouse a few years previously. It is tragic that he suddenly finds himself on the scrap heap. He may visit his colleagues on a Friday and have lunch with them in the canteen—he is trying to reach out to them and everyone is sorry for poor old Jack.
The drafting of the Bill by the hon. Member for Eastleigh shows a great understanding of the sort of problems that I have described. He has included a great deal of flexibility.
The crux of the argument will come from the Minister for Social Security. I hope that his reply to the debate will reflect his knowledge of the education system. We are looking for two assurances from the Government. First, a private Member's Bill will reach the statute book only if the Government give it the green light and are prepared to find time for it. For example, my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) introduced the Chronically Sick and Disabled Persons Act 1970, but it reached the statute book only because the Government were prepared to give it time. I expect the Minister to tell us that the Government will give the Bill the necessary time, and assure us that the Government Whips will go all out this week to help the Bill, in contrast to their efforts last week to prevent the Chronically Sick and Disabled Persons (Amendment) Bill from being given its Second Reading.
Secondly, the Government and the Chancellor of the Exchequer are obsessed with balancing the budget. It is crucial that we know whether the Government are prepared to provide the necessary finance to implement the provisions of the Bill. As drafted, the Bill provides a great deal of flexibility. There is no reason why it should not reach the statute book after the Committee has dealt with any necessary amendments and readjustments. There is no reason why money should not be found to implement all the provisions of the Bill. After all, the Government, at the drop of a hat, have found £3 billion for the Falklands. After all the arguments we have heard in the House—including those from my late colleague Anthony Crosland—about where the third London airport should be sited, it is, as The Guardian commented recently, rather ridiculous to put it in the middle of the south Atlantic.
The money can be found if the will to find it is there. In spite of the difficulties involved in Star Chamber Cabinet decisions, a high priority should be given to finding this money. None of us can pay our debt to those who went before, who raised our standards of living and produced so much for the benefit of so many. This Bill provides the least that the Government can do.
§ 11 am
§ Mr. Patrick Cormack (Staffordshire, South)
I am delighted to have the opportunity to speak in support of the admirable Bill introduced by my hon. Friend the Member for Eastleigh (Sir D. Price). I congratulate him on one of the most lucid expositions of a Bill that I have had the pleasure of hearing. My hon. Friend is a master of the 580 subject. He has obviously studied it with enormous care. He treated the House to an exposition which could not fail to persuade hon. Members.
My hon. Friend was admirably supported by the hon. Member for Wolverhampton, North-East (Mrs. Short), a constituency neighbour of mine. I am glad to pay tribute to the work that she did. It was in the best traditions of our Select Committees. An issue of great importance was examined on its merits without partisan feelings obtruding and distorting the result. Her Committee produced a good report which does her and her Committee great credit. The House should be proud that its Committee has produced such a report.
I speak with feeling, because I served on the Select Committee on Education, Science and the Arts in the last Parliament. We too produced a number of reports. I was particularly involved in one on funding the arts. It is appropriate to mention that because my hon. Friend the Member for Eastleigh, the hon. Member for Wolverhampton, North-East and my hon. Friend the Member for Twickenham (Mr. Jessel) have a special interest. I have a slightly jaundiced view on this subject. Both reports are of equal quality and importance and were produced in October last year. The hon. Member for Wolverhampton, North-East has the advantage over me because her Committee's report has at least received a reply. We still await a reply.
I make no criticism of the Ministers who have been responsible for the arts because they have shown a commendable interest in the report. The fault does not lie with them.
The hon. Lady's report is based on evidence from vast numbers of individuals and organisations. The questioning was of a high order. The report is of considerable quality. My hon. Friend the Member for Eastleigh paid full tribute to that. After a year the report, which runs to many pages, makes numerous recommendations, uses cogent arguments and is backed up by volumes of evidence, has received at the last minute just before today's debate only two pages and one and a half paragraphs in reply from the Government.
I do not make a partisan point, because this is a House of Commons matter. It is an important matter for all who have served, are serving or will serve on Select Committees. To be on a Select Committee and to study a subject in depth makes great demands on an hon. Member. When preparing our report on the arts I spent, on average, two full days a week working on it, not only when the House was sitting but throughout the recesses. We even held meetings in August 1982. I am sure that the hon. Lady's experience is similar.
We read, analysed, discussed, debated and produced. The Government's response was a two-page flimsy document. It just is not good enough. The document is flimsy to the point of being an insult to the Committee and therefore to the House of Commons. The present Minister for Social Security cannot be held responsible because he has been appointed to the post only recently. I am sure that he would not have been happy if he had been in post and this flimsy document had been produced. I make no personal criticism of my hon. Friend.
I was glad that my right hon. Friend the Secretary of State was stung to reply when I made a brief interjection in the speech of my hon. Friend the Member for Eastleigh. 581 He said that the words that he used the other day paid more than lip service to the report. Of course I believe him and look forward to the result with interest.
Paragraph 11 of the flimsy reply states:In the light of these important considerations, and other major questions in the pensions field, the Government is setting up an Inquiry chaired by the Secretary of State for Social Services to consider pension issues.I am glad that the Secretary of State is to chair the inquiry and that the subject is to be investigated seriously, but the hon. Lady had a fair point when she asked why we needed another full inquiry when an all-party Select Committee spent such a long time analysing the subject.
I speak with feeling. I am sure that the hon. Lady spoke with equal feeling and that my hon. Friend the Member for Macclesfield (Mr. Winterton) will echo our remarks. If we expect busy Members of Parliament to serve on Select Committees, to analyse and investigate on their merits subjects of crucial national importance, it is up to the Government to take their reports seriously. It is up to the House of Commons to take action in the near future to ensure that every major report by a Select Committee is debated, if not on the Floor of the House in some special Committee, preferably within six months and certainly within 12 months of publication. Not all such reports could be debated on the Floor of the House, so perhaps we need special procedures. There is no reason why we should not set up a special Grand Committee to handle Select Committees. When hon. Members have laboured long and arrive at conclusions of great national importance, their reports should be discussed. The public has a right to demand that and the House has a duty to provide facilities.
§ Mr. Pavitt
I underline the importance of what the hon. Member says. Our programme consists of hot spots and dull spots. Often an unpopular time is chosen to discuss such reports and they do not receive the attention that they deserve. The Whips should ensure that our reports are discussed at peak time.
§ Mr. Cormack
I do not entirely agree. Every day is an equal day. Today is Friday and hon. Members who are particularly interested in the subject altered their personal arrangements to be here. We cannot expect everything to take place in peak viewing hours. I believe that we should dispense with the charade of voting throughout the night, but I do not object to sitting through the night as we did earlier in the week, when the Chamber was almost full, to discuss the new parliamentary building. I did not mind that. We have to find time. I should prefer Select Committee reports to be debated on Thursday afternoons, but I do not mind if we discuss them at midnight or 1 o'clock in the morning. The important thing is that they are debated.
The Select Committee's report is admirable and the logic of its conclusions cannot be confounded. The Bill translates the report into potential legislation. The proposal is modest and the fact that my hon. Friend the Member for Eastleigh has included a commencement date of 1987 underlines that modesty. I hope that my hon. Friend the Minister for Social Security will say that the Bill is acceptable to the Government in principle. That is the least that we should expect of him.
The Bill has many merits. It is in line with my philosophy of flexibility in all things. I was impressed by what the hon. Member for Brent, South (Mr. Pavitt) said about the terrible emotional shock facing someone who 582 has worked all his life and suddenly finds that all is over. If flexibility were built into the system so that people could have a say in choosing their date of retirement, the blow would be softened considerably. When we feel that we have a choice, we are often much happier than when decisions are imposed upon us.
I was honoured when my hon. Friend the Member for Eastleigh asked me to be a sponsor of the Bill. The House has a duty to recognise the fact that there have been significant changes in employment. It is not realistic to suppose that, as we move into the 21st century, everyone can expect a job from the age of 16 to 60 or 65. There must be flexibility.
Harold Macmillan, who is one of the great survivors, put the issue beautifully in a recent television broadcast when he quoted Aristotle and said that the purpose of work was to enjoy leisure. By Jove, Mr. Macmillan has enjoyed his leisure—and to the great benefit of us all. He has written books, made television appearances and uttered words of wisdom and caution. We have to accept that flexibility will be increasingly important if we are to tackle the appalling social consequences of unemployment.
The hon. Member for Brent, South said that the curse of retirement was loneliness. The curse of unemployment is hopelessness. If we are to give new generations hope and prospects, it is essential that we have flexibility over the age of retirement. I do not know the figures—I hope that my hon. Friend the Minister will provide them for us—but if we institute a common retirement age of 63 there will be an enormous extra potential for many young people who feel that their lives are without hope. If, by such a realistic readjustment, we can help to bring hope to those young people, we shall be doing a service to all sections of the community. That is the spirit in which the Government should approach the Bill and in which the House should constantly urge the Government, whatever reply we receive from the Minister for Social Security today, to take action on the retirement age during the lifetime of this Parliament.
As my hon. Friend the Member for Eastleigh said, the previous Secretary of State for Social Services nominated legislation on the retirement age as one of his keenest aspirations. The cast has been shuffled, but the Cabinet remains much the same and the previous Secretary of State, in his new office as Secretary of State for the Environment, has been given a post of equal, perhaps even greater, importance. I hope that the new Secretary of State for Social Services shares his predecessor's aspirations. There are no reasons of logic or economy why the Bill or something like it should not be on the statute book well before 1987.
I commend the Bill to the House and, much more important, to the Government. My hon. Friend the Member for Eastleigh and the hon. Member for Wolverhampton, North-East have done us a great service. I hope that "Price-Short" or "Short-Price" will pass into the language like "Rooker-Wise". Let us remember that the third of the triumverate that included Rooker and Wise was Lawson—a fact that is frequently and conveniently forgotten. Let us hope that Short-Price-Lawson will bring the flexibility and hope that will add a new social dimension to the structure of life for all our people.
§ Mr. Albert McQuarrie (Banff and Buchan)
I shall be brief, because I know that a number of other members of 583 the Select Committee wish to stress to the House and the country the need for the Bill. I congratulate my hon. Friend the Member for Eastleigh (Sir D. Price) on introducing the measure.
As my hon. Friend the Member for Staffordshire, South (Mr. Cormack) said, it is unfortunate that the Government's reply to the report has taken so long. It was published only yesterday. However, I am glad that the Secretary of State is to chair the proposed inquiry. I only hope that the Bill will not be thwarted by that study. I hope that my hon. Friend the Minister for Social Security will tell us how long the inquiry is expected to take. So far, we have been given no idea of the time scale.
The inquiry's terms of reference are:To study the future development, adequacy and costs of state, occupational and private provision for retirement in the United Kingdom, including the portability of pension rights, and to consider possible changes in those arrangements, taking account of the recommendations of the Select Committee on Social Services in their report on retirement age.If that is the intention, it minimises what my hon. Friend the Member for Eastleigh said in introducing the Bill. I hope that the Government will assure us that the inquiry will not prevent the Bill from proceeding through the House and reaching the statute book.
I cannot wholly agree with some of the Bill's provisions. But, as my hon. Friend the Member for Eastleigh reminded us, the resources are not available for a private Member to produce a Bill which is as well drafted as most Government Bills. However, he has drafted it as widely as possible and drawn attention to those provisions that may require debate and amendment in Committee.
One of the most important aspects brought out today is the need for flexibility. However, it is not only a matter of downward flexibility. Upward flexibility is also required. If a person reaches the age of 65, is fit and healthy and would rather be in work than retired, he is justified in wishing to remain at work. We have seen examples of it in the House, and there is no greater example than that of the former occupant of the Chair. The former Speaker, at the age of 73, has moved to another place as Viscount Tonypandy. I hope that he will continue to work in the Palace of Westminster for another 20 years, knowing his love for this House and the place to which he has now gone. He is a classic example of someone who has served Parliament well beyond retirement age.
I take issue with my hon. Friend the Member for Eastleigh about clause 3(2), in which he suggests:No additional increments shall be earned after a claimant has reached 65 years of age.My hon. Friend intends the notional common pension age to be 63, with increments available for a period of two years up to the age of 65. At present, on reaching the age of 65 a person ceases to pay national insurance contributions but enjoys a 7.5 per cent. per annum increase in his income until he reaches 70, when it ceases.
The Select Committee suggested that the House should consider the possibility of a person who continued to work after the age of 65 being required to continue paying national insurance contributions. I agree with that. If a person is in employment at the age of 65, continues to work and to enjoy payment for his services, there is no reason why, if he is also enjoying a 7.5 per cent. increase in the pension that he will receive when he is 70, he should not pay national insurance contributions. I hope that that 584 will be considered in Committee and that my hon. Friend will seek to delete clause 3(2) and to substitute for it a provision to the effect that when a person reaches the age of 65 and continues in employment he should pay the appropriate national insurance contribution.
Another notable example of persons continuing to work after retirement age is that of a great many of our civil servants. They are retired compulsorily at the age of 60, but most of them take up other employment while still enjoying their index-linked pensions. Many police officers retire after a specified number of years to take up highly paid security jobs and again enjoy the benefit of an additional income. Miners have a flexible system and can retire before they reach 65. Although they do not receive the state pension, they are paid a union pension, providing them with an income to keep them out of the realms of poverty. I could quote many other examples, but I do not wish to delay the House.
There are other categories of people who have no chance of flexibility. I hope that the Bill will give them that chance, especially if the age of retirement for them is lowered. A good example occurs in my constituency among those engaged in the fishing industry. At a very young age, men start to go to sea and fish. When they reach the age of 55 or 60 they are no longer able to perform the arduous task of fishing in rough seas. As self-employed persons they are not entitled to unemployment benefit and have to rely on supplementary benefit if they can obtain it. There we have a good case for reducing the age of retirement for men.
We must not forget the chronically sick and disabled. When we consider the case for reducing the age of retirement for men from 65 to the notional age of 63 for both men and women, we should also consider the possibility of the chronically sick and disabled moving to a full retirement pension at the age of 55, because it is obvious that they cannot work. I am aware that the chronically sick and disabled are in receipt of disablement allowances. But those allowances are subject to reviews and investigations by medical officers. Once it is established that a person is chronically sick, if the state pension can be brought into line with the amount of money that he would normally receive as a chronically sick person, he should be paid it as a fixed sum and then he will know that his income is permanent rather than an allowance paid to him on a temporary basis.
My hon. Friend's Bill highlights the point that, of the 2 million people who at present enjoy increased increments, the majority are women. In my view, that justifies raising the age of retirement for women to 63.
It will take a considerable time to introduce the changes proposed in the Bill. We have been told that if we had reduced the retirement age for men this year, it would have cost about £2.5 billion and that it would have been impossible to do it. Instead of bringing down the retirement age for men from 65 to 63 and raising the retirement age for women from 60 to 63 in one fell swoop, it should be done in stages. In that way the effect would not be so great on the people concerned. My hon. Friend may feel that there is some merit in that.
The hon. Member for Brent, South (Mr. Pavitt) spoke about the unemployed and the increased employment opportunities that would be created if the retirement age were lowered. It is clear from the available statistics that that would not happen. If we take into account the money at present paid out in unemployment benefit and the 585 amount that would be saved by providing the employment arising from the vacancies created by people retiring earlier, it would still exceed the £2.5 billion mentioned in the Select Committee report.
My hon. Friend the Member for Staffordshire, South spoke of how younger people would increasingly have to pay to keep the older people in society. We must not forget that those younger people will expect, after working for perhaps 40 years of their lives, the then younger generation to keep them. If the pension keeps inflating, national insurance charges will go up accordingly, and we must be careful not to let them become prohibitive. That must be borne in mind as we debate the Bill because we cannot reach the point at which the younger element is having to pay unduly to keep the older element.
My son once told me that he would like to retire at 25 and start work at 50. Whether or not that is feasible, we cannot place an obligation on future younger generations to keep an aging population. After all, for the rest of this century and well into the next Britain will continue to have an aging population.
I will not speak longer because many other hon. Members wish to take part in the debate. I welcome the Bill and congratulate my hon. Friend the Member for Eastleigh on introducing it. Like others, I hope that it will get its Second Reading and that in Committee the Government will give it the necessary support. We are showing that we in Parliament are looking after the interests of the pensioners and are anxious to ensure that no person should work longer than necessary or work if unfit.
Above all, people must be given the freedom to decide whether to continue working or to retire. Psychologically, retirement is not always good. Indeed, it can be dangerous. Many people have retired to the fireside and, after six months with pipe and newspaper, have died because they had no other interest in life. When we consider how many hon. Members have stayed on in politics because of their interest in their work, we must permit all individuals to have freedom to work or retire as they see fit. Again, I welcome the Bill.
§ Mr. Max Madden (Bradford, West)
In presenting his welcome Bill, the hon. Member for Eastleigh (Sir D. Price) said that it might be unique for a private Member's Bill to embrace the recommendations of a Select Committee report. It must also be unusual, if not unique, that 48 hours before that Bill was presented for Second Reading the Government should have announced the setting up of an inquiry into an important part of the Bill, namely the consideration of the age at which men and women should retire. I hope that later in the debate the Minister of State will make clear the Government's intentions for the measure.
I echo the hope expressed by my hon. Friend the Member for Brent, South (Mr. Pavitt) that the Government's actions will be different from those displayed so formidably by the Government Whips last Friday when the Bill presented by my hon. Friend the Member for Liverpool, West Derby (Mr. Wareing) to combat and eliminate discrimination against the chronically sick and disabled was wrecked by Conservative Members obeying that fiercely imposed Whip.
I pay tribute to the contribution that the members of the Select Committee made to the pensions debate. I 586 particularly thank my hon. Friend the Member for Wolverhampton, North-East (Mrs. Short) for her contribution as Chairman of that Committee and for her speech today, which characterised the compassion and care that she brings to these matters, especially the future of the National Health Service and the social services generally.
As hon. Members have emphasised, we are concerned with two major considerations. One is that, whatever the official retirement age for men and women, the pension should be adequate to give them a reasonable and adequate standard of life. The second is that we must be sure that, whatever we do about the age of retirement, there are no adverse effects on women. Those points were made forcibly in the evidence presented to the Select Committee by the TUC, which said at page 127, paragraph 7:Earlier retirement is desirable to provide more job opportunities, to achieve equality between men and women, and particularly to permit people who have given perhaps 40 years' service to the British economy to enjoy their last years of life in relative ease. Yet without an adequate income, early retirement is merely a means to extend the penury and poverty that is still the lot of so many elderly people now. The TUC would oppose any general move towards early retirement which does not guarantee a proper income to the pensioner. In the TUC's view, an adequate income at the normal State retirement age for a retired person is a State pension equal to at least one-half of average gross earnings for a married couple and at least one-third of average gross earnings for a single person.On page 135, paragraph 54, the TUC evidence continued:It should be made quite clear, therefore, that we strongly believe that sexual equality should be achieved by a levelling up and not by a levelling down process. The TUC regards the right to a period of retirement after a lifetime of work as essential and has always sought to extend this right, and also to make it more meaningful, through the provision of decent pensions. Although the option of a common retirement age higher then 60 might be financially attractive, the TUC firmly rejects it, as it represents, in the name of equality, a diminution rather than an increase of women's rights.I also, not least as a sponsored member of the Transport and General Workers Union—but for other reasons too—draw the attention of the House to the evidence submitted to the Committee by Jack Jones, the former general secretary of that union, to whom I pay tribute for the magnificent campaign that he has led in Britain, which has focused attention in recent years on the plight of pensioners in a way that many others have failed to do.
In his and other evidence we are reminded in the report that there is no panacea for making a significant contribution to increasing employment by some of the measures that have been suggested, including some that have been made in the debate. We must look at a series of measures, a whole package of ideas, if we are to improve employment opportunities. We must look for a shorter working life—a shorter working week, sabbaticals, retraining, work-sharing, reducing overtime and expanding employment—but most important, as hon. Members have emphasised, more resources must be devoted to preparing people for retirement by pre-retirement courses and counselling.
We must recognise that retirement, like so many other, things, is firmly based on class. There are substantial class differences among the people about whom we are concerned. It is significant that, of those who die ort retiring, 70 per cent. are working class men. Middle class men tend to live longer. They enjoy their retirement, feel much healthier in it, and obviously take a different view of it. There is a high incidence of suicide among men in 587 the first year of retirement, and that has a great deal to do with what my hon. Friend the Member for Brent, South said about a role. Retired people are as concerned about their role and about how they are perceived in society as they are about income. However, income remains an imperative and crucial consideration.
We have heard much about women, and women are living longer. We should not lose sight of the fact that women live in the most grave and dire poverty. Women on supplementary benefit outnumber men three to one. They tend not to work in the professions in the numbers that they did. More women do semi-skilled work in industries such as light engineering, electronics, chemicals and the retail trade. It is significant that there are few occupational pension schemes in the retail trade, certainly not as many as we should like.
I am sure that the majority of us want to see pensioners free to live a life with dignity on an adequate income. Pensioners should not have to choose between eating and heating, and, unfortunately, that is the choice for so many pensioners today. Two out every three pensioners are living at or very near the point of official poverty. Pensioners should be encouraged to report to, and obtain, medical help if they do not feel well and should have proper access to doctors, residential homes and sheltered accommodation or proper residential hostel care. They should lead normal lives and not lives of grinding poverty, boredom and worry, waiting behind their lace curtains for death in the certain knowledge that their modest pensions and the inadequate death grant are insufficient to give them a decent burial.
§ Mr. McQuarrie
I am following the hon. Gentleman's speech with great care and attention. Surely he is not suggesting that the position is as he suggests, with hundreds of thousands of pensioners on the breadline or at death's door, with no access to doctors and so on. If he is, he is far wide of the mark. I commend his ultimate objectives, but I deny that the alternative is what happens now.
§ Mr. Madden
The hon. Gentleman may refute this, but if he had been in the debate on the plight of pensioners on Wednesday he would have heard what I have said echoed by many hon. Members representing constituencies throughout Britain. I am afraid that the reality to which I have been referring is to be found in many areas, particularly those suffering from mass unemployment and great poverty.
Pensioners should have sufficient income to be able to lead a worthwhile life. They should be helped through opportunities to read, study, hear music and mix socially, and should be able to afford to give presents this Christmas to their families—grandchildren, nephews and nieces. They should have proper community help, reasonable support from home helps, meals on wheels and chiropody services. They should be physically mobile and have access to comprehensive and good standard concessionary fare schemes. They should be able to have holidays and visit their relatives regularly. More pensioners should have telephones in their homes. Many regard the telephone, quite rightly, as a lifeline in an emergency.
I referred to the inquiry that the Government announced on Wednesday. Will the Minister give an assurance and some further information? On Wednesday, we asked for, 588 but did not receive, a clear assurance from the Government that the inquiry, whatever its considerations and whatever conclusions it reaches, will not interfere with the 1975 earnings-related pension scheme. Will the Minister deny the rumours that widows will cease to be entitled to pension entitlement on the basis of their husbands' contribution to the scheme? Will the Government publish the full list of those who serve on the inquiry and the arrangements for receiving evidence? On what sort of timetable will the inquiry work? When is publication expected, and will publication be in part or as a whole?
On Wednesday, Member after Member on the Conservative Benches, when there was pressure from the Opposition for a significant improvement in the basic state pension, said that there were inadequate resources for what we should like to see. During the debate, it became clear that that was not the case. The different priorities of the previous Labour Government on pension payments and benefits were startlingly contrasted with the record of this Government. I shall not dwell on the figures, but I am sure that they embarrass Conservative Members. Suffice it to say that it was clear that the record of the previous Labour Government showed that an opportunity was given to all pensioners to have a share in the increase in living standards. That has not been the case under this Government.
We are asked where the money can come from, but we can say that this is a question of priorities. The Government are choosing to spend enormous resources on a given range of expenditure, while our priorities are significantly different. The Government have enough money to be able to spend more and more on weapons of war, particularly nuclear weapons. They have enough money to overpay defence contractors by millions of pounds last year, and to spend on fortress Falklands. They have millions to allow the drug companies to rip off the National Health Service and to subsidise private medicine. They have billions to finance the deficit between Britain and the Common Market and can contemplate spending further millions on the consequences of abolishing the county councils. Worst of all, they have billions of oil revenue that they are squandering on financing mass unemployment.
Sadly, the Government have taken other decisions that directly affect pensioners and again this is a question of priorities. Many of us are concerned about the recent announcement on housing benefit. The Government appear to have large sums of money to continue to subsidise and assist well-off owner occupiers at the expense of the most needy, particularly pensioners, on housing benefit. It cannot be justified that pensioners on a small private pension will lose £4.50 a week as a result of cuts in the housing benefit.
§ Mr. Nicholas Winterton
On a point of order, Mr. Deputy Speaker. Many of us wish to speak on the Second Reading of this private Member's Bill, and some of us have to go many miles north later this afternoon. May I have your ruling as to whether a speech which is much more suitable to the debate we had on Wednesday night than to today's debate, and which has no relevance whatever to the clauses of the Bill, is in order?
§ Mr. Deputy Speaker (Mr. Ernest Armstrong)
It is certainly in order. This is a Second Reading debate and speeches can go quite wide.
§ Mr. Winterton
Further to that point of order, Mr. Deputy Speaker. Will you tell the House how the hon. Gentleman's remarks are related to any of the clauses in the Bill?
§ Mr. Madden
I should have thought that it would be apparent that, when discussing the age of retirement, we must consider the pension and the other considerations that I mentioned.
The London Housing Aid Centre, SHAC, commenting on the effects on pensioners of housing benefit cuts, stated:While the working poor, the homeless and the badly housed are bearing the brunt of this latest round of cuts, the well housed, well off owner occupiers remain unscathed. Mortgage tax relief, which is estimated to cost £2.5 billion in the current financial year, and the value of which increases for those paying tax at the higher rates, has suffered no cut at all. The disparity in treatment of assistance towards the housing costs of the well off and the poor could not be more stark.
§ Mr. Cormack
Mr. Deputy Speaker was entirely right in what he just said, but may I tell the hon. Gentleman that until now the House approached the Bill in a bipartisan spirit, commending warmly the report of an all-party Select Committee in which hon. Members on both sides of the House supported the proposal that has been translated into potential legislation by my hon. Friend the Member for Eastleigh (Sir D. Price). The hon. Gentleman does neither the House nor the cause a service by making a partisan speech.
§ Mr. Deputy Speaker
Order. Perhaps I can help the House. On Second Reading we can have a wide debate, although all remarks should be related to the provisions of the Bill——
§ Mr. Madden
The Minister of State said frequently on Wednesday that he was not confident that what he was telling the House would be transmitted to Opposition Members' colleagues outside. I am not confident that Conservative Members will convey my messages to their colleagues outside, but I assure them that whatever we say about the age of retirement will not convince or persuade others unless there is a belief that the Government, supported by Conservative Members, will show real determination to change priorities and dramatically to increase state pensions. Until that is done, there will be no public confidence that a change in the age of retirement will be of great consequence.
The amount of the state pension is of paramount concern to pensioners and to Opposition Members. Much though Conservative Members may dislike it, the Opposition will continue to complain about the state pension and the Government's priorities, which we believe are entirely wrong and which do no service either to the general public or especially to pensioners. The Opposition believe that pensioners must share again in rising living standards. Conservative Members may not wish to hear it, 590 but I will tell them that if the Labour method of calculating the pension was now in force single pensioners would be better off by at least £2.95 a week and a married couple would benefit by at least £4.65 a week.
The aim of the Opposition, and of a future Labour Government, is that those who create the nation's wealth should, when they retire, have a fair share of that wealth. Retirement should be a satisfying, enjoyable and worthwhile phase of a person's life. Retirement, at whatever age, should not lead to a significant fall in income and to great anxiety about making ends meet. The Bill is a major contribution to the pensions debate. I hope that the inquiry will enable all those with an interest in pensions to express their views, and I hope that that will lead the Government to announce an improvement in the state pension system such as I have outlined. Retirement should be a liberation from the demands of daily work. It should not impose indignity, hardship and worry on the millions of retired people who live in such circumstances.
I congratulate the hon. Member for Eastleigh on introducing the Bill. I hope that it will go to Committee, but its fate and that of pensioners lies firmly in the hands of the Government and of Conservative Members. I hope that the Minister can give us a sign of how the Government intend to proceed on this important measure.
§ Mr. Nicholas Winterton (Macclesfield)
I shall direct my comments to the Bill that was so precisely and constructively presented to the House by my hon. Friend the Member for Eastleigh (Sir D. Price). As the longest-serving Conservative Member on the Select Committee on Social Services, which is chaired most competently by the hon. Member for Wolverhampton, North-East (Mrs. Short), who spoke most eloquently in the debate, and having served on the predecessor to the departmental committee—the Social Services and Employment Sub-Committee of the Expenditure Committee—I have for many years taken a great interest in the deprived sections of the community and in those who deserve the Government's and the country's help. I refer especially to those who have reached retirement age.
My hon. Friend the Member for Eastleigh was rightly unhappy about the Government's attitude to the Select Committee's report and to his Bill. It is sad that the Government chose to publish their reply to the third report of the Social Services Committee only 18 hours before this Second Reading debate. My hon. Friend the Minister of State was not responsible for that, and I do not lay the blame at his door, but the Government's response was a stillborn baby. No further inquiry is necessary. As the hon. Member for Wolverhampton, North-East said, the Committee heard exhaustive evidence on this matter from a range of organisations. In addition to the DHSS, which is served so competently by my hon. Friend the Minister, the Committee heard evidence from the Department of Employment, the National Association of Pension Funds, the Occupational Pensions Board, the Trades Union Congress—whose evidence was widely quoted by the hon. Member for Bradford, West (Mr. Madden)—the Equal Opportunities Commission, the Life Offices Association, Age Concern, the Society of Pension Consultants, the Confederation of British Industry, the National Federation of Self-Employed and Small Businesses Ltd., the Institute of Personnel Management. the Association of Consulting Actuaries, the Institute of 591 Actuaries, the Faculty of Actuaries, the Management and Personnel Office, the Treasury—which is so despised by many hon. Members—the National Pensioners Convention, the National Federation of Old Age Pensions Associations, led by Jack Jones—again referred to by the hon. Member for Bradford, West—Help the Aged, with Mr. Hugh Faulkner, and the Government Actuary's Department. I could continue with the list, but I shall not.
What is the use of a further inquiry into this matter? I remind the House and my hon. Friend the Minister that a Conservative Government set up the departmental Select Committees to give the House more power and more ability to monitor, survey and perhaps even to supervise some Government Departments. If they set up those Committees in good faith, they should take seriously the reports of Select Committees on matters of considerable national importance.
This inquiry into the age of retirement was superbly researched. Our recommendations are constructive in every way. Moreover, the Bill that my hon. Friend the Member for Eastleigh has introduced, which I stress is an enabling Bill, does not at this stage commit the Government to a penny of expenditure. It gives the Secretary of State the power at some time in the—1 hope—near future to introduce legislation.
If the economy is beginning to improve, as I believe it is, and as the Government keep telling us it is, the time will come in the near future when we shall be in a position to implement the recommendations in our report and the measures contained in the Bill that was put forward so articulately this morning by my hon. Friend.
May I say a word about the figure of £500 million which is said to be the cost of the Bill. It is said that £500 million is the cost to the Government of raising the age at which a woman retires and reducing the age for a man, to make a common age of 63.
§ Mr. Winterton
Yes. That is important. I am delighted that my hon. Friend made that comment from a sedentary position. I quote a press release from the Secretary of State for Social Services, in which he talked about the Government honouring their pledges on the National Health Service and announced a £800 million increase in health spending. On the question of hospital and community health services he said:The English position is this. Next year we are planning to increase public expenditure on hospital and community health current services in England by £400 million over spending this year. That means a total of some £9 billion for 1984–85. These figures provide scope for real growth of some 1 per cent. over this year's spending. We are therefore planning to provide the extra resources needed next year to cope with the increasing numbers of very old people in our society. These pressures will run at just under 1 per cent. in the next few years and we are fully aware of the importance of coping with these demands.So the Government are aware of the need to deal with the elderly in this country, although the press release referred to the "very old". They estimate that the figure is about £400 million. All I can say is that the humble measure that my hon. Friend seeks to introduce would probably cost the Government £500 million at some time in the not-too-distant future. I believe that Conservative Members, in the main, would be happy for the Government to spend that amount. If we had a referendum on the subject—I do 592 not suggest that for a moment—I believe that the country also would support a move to bring flexibility to the retirement age.
I do not need to emphasise what happens in the European Community, where attempts are being made to persuade member states to move towards a common retirement age. The hon. Lady made that clear in her speech, and we found clear evidence of that when we visited Europe during the inquiry.
If Select Committees are to mean anything—my hon. Friend the Member for Staffordshire, South (Mr. Cormack), highlighted this issue in his speech—and if we are to spend hours, week after week when Parliament is sitting—and occasionally when Parliament is not sitting—inquiring into important matters, the Government are surely honour bound to treat the reports seriously, bring them forward for debate earlier, and take more seriously the Committee's recommendations. It is a great shame that we have had to wait 13 months for this debate. I do not wish to upset my hon. Friend the Minister for Social Security, but it is an insult to the Committee and the House that such a trivial, flippant and flimsy piece of paper should be produced just a few hours before this debate, giving no more than a brief summary of the report, although, of course, the Government said that they would set up an inquiry.
I hope that my hon. Friend the Minister, who has sat patiently through our debate, will give us a firm commitment that the Government accept the Bill in principle and that they will give it a fair wind. I hope he will say that the Goernment will allow the Bill to go into Committee, so that some of the points raised by my hon. Friends the Members for Twickenham (Mr. Jessel) and Banff and Buchan (Mr. McQuarrie) can be properly debated. The country as a whole will benefit greatly from the modest proposals that my hon. Friend's Bill seeks to introduce.
Some hon. Members have spoke this morning about the trauma of retirement. The inflexible retirement ages of 60 for a woman and 65 for a man, in many areas of the country and in many industries, is a traumatic experience, as was rightly said by the hon. Member for Brent, South (Mr. Pavitt). One Friday a person is in work, on the Friday afternoon he receives his retirement gift—a gold watch, a clock; a token of the esteem of his workmates and of the management of the company in which he may have served for more than 40 years—but the following Monday he is in an altogether different world. Is it surprising that so many people, particularly in our traditional industries, live for such a short time after retirement? It is a crying shame. Many of those people have a great contribution to make to society—much of it perhaps in a voluntary capacity. They have a wealth of experience, skills and craft sikills indeed, they have a wealth of life—which they can pass on to the younger generation.
A more flexible policy on the retirement age would be a great boon to people who perhaps, because of the heavy nature of their work, can no longer continue their work satisfactorily or efficiently from the point of view of their employer. That aspect has been overlooked. Some people have to stay at work to meet their commitments, doing a job which they cannot do effectively, not to the best advantage of their employer, because they cannot afford to retire. By reducing the retirement age to 60 ultimately for both men and women, and making the retirement age 593 more flexible, we shall do a service not only to the individual concerned but to industry and the national economy.
§ Mr. Madden
Is the hon. Gentleman suporting trade union negotiations on collective agreements in many of the industries about which he is concerned, which seek to enable workers in those industries to retire a good deal earlier than 65?
§ Mr. Winterton
I do not wish to go beyond the scope of the Bill. It would be dangerous to do so. As I sought to imply in an earlier intervention, there are industries where people retire well before the age of 60, the age that my hon. Friend seeks to establish in his Bill. That happens in some heavy industries, and also in some of the not so heavy industries. We know that it happens in what I shall call certain managerial positions. Some major companies in this country retire their chief executives, directors and senior management at 55—some even at 52. We have talked about the police, but we have not mentioned local government where it is common for senior officers to retire well before the age of 60. The precedent has been set.
I hope that the Minister will intervene to give us an assurance that he will not seek to divide the House or talk the Bill out, and say that it will receive a fair wind from him to go into Committee. If he does that, he will be doing us a service. Ministers who now hold different portfolios have stated that they support the principle. My right hon. Friend the Secretary of State for the Environment highlighted the need for flexibility in his statements and the aspirations that he had hoped to implement during the previous Parliament.
The House set up the Equal Opportunities Commission, which for years has been advocating equality of retirement ages for men and women. Why do not the Government now accept the recommendations that have been made and proceed along the modest lines put forward by my hon. Friend the Member for Eastleigh?
I accept that the traumatic experience of many men and women can be offset to an extent by the Bill's provisions, but I accept also some of the observations made by the hon. Member for Bradford, West. We must look further ahead, and I am sure that the Select Committee under the continuing chairmanship of the hon. Member for Wolverhampton, North-East will do that.
The country must make more adequate provision for leisure and amenities not just for the young, the young unemployed in particular at this time, but for those who will retire at the age of 60 who are still physically active and want to participate in society and contribute to community life.
I have talked about the Bill in macro-terms. The detail of the Bill was dealt with superbly by my hon. Friend the Member for Eastleigh and further discussion is more appropriate in Committee.
The Bill's purpose and intentions are clear. They are constructive and supported by virtually all those organisations that gave up their valuable time to give oral evidence to the Committee over many months. In addition, we received many detailed and well-produced memorandums from other bodies and individuals that wholeheartedly supported what we were seeking to do—equate the age of retirement between men and women and make it more flexible.
594 I pick up the words of the hon. Member for Brent, South. We want to guarantee those who have served us well a good and happy retirement with a standard of living of which this country should not be ashamed.
§ Mr. Peter Viggers (Gosport)
There are few opportunities in the House to discuss retirement pensions in general terms. It is fortunate that we can do so today during the Second Reading of the sensible Bill introduced by my hon. Friend the Member for Eastleigh (Sir D. Price) on flexible retirement and in the light of the excellent report by the Select Committee on Social Services chaired by the hon. Member for Wolverhampton, North-East (Mrs. Short).
I had not previously read the report. I am impressed by the quality of thought and the quantity of research that went into it. It is an excellent basis upon which my right hon. Friend the Secretary of State for Social Services can consider the subject. It is a proper framework and platform for my hon. Friend's Bill.
My hon. Friend the Member for Macclesfield (Mr. Winterton) made a characteristically thoughtful and forceful contribution. I think he sells the Secretary of State short, because pensions are complicated. They are financially important and all the issues involved are interrelated.
I should like to pay tribute to my right hon. Friend who identified the fact that a major problem had existed in pensions for many years—the problems of the early leaver, the lack of pension portability, the inequity between men and women, and many of the inequities of the private schemes. For instance, many older retired pensioners are less well treated than those who retire now.
It is characteristic of my right hon. Friend that he should choose not just to kick the ball into touch, as some might, but to lead from the front and set up an inquiry to cover the whole subject of pensions, their administration and benefits.
With respect to my hon. Friend the Member for Macclesfield and others, it would not be right, in the light of the problems which have been identified of the early leaver, non-portability of pensions and the other issues., for the Government to support legislation on flexibility and a common retirement age for men and women without putting them in the equally important context of the other outstanding pension issues.
There is no doubt that my hon. Friend the Member for Eastleigh and the Select Committee have identified an important point: there is no justice in men having a later retirement age than women. It was perhaps a misconceived sense of chivalry in 1940 which caused the Government to decide that women should retire at 60 and men should retire at 65. That civalrous feeling did not take account of the fact that women tend to live longer than men, as any actuarial table will show us. As my hon. Friend pointed out, women have seven and a half years more pension than men. That throws out all pension scheme costings and makes nonsense of pensions administration. There should be an equal retirement age. it is not a matter of whether the Government will act on this point, but of when and how. As to when, it is right that there should be a full inquiry. As to how, I am sure that my hon. Friend the Member for Eastleigh will agree that the Government must be closely involved in the drafting of legislation to ensure that it takes account of all features.
595 I shall make some more general points about fairness in pensions. There is a tendency for those who seek to improve pensions, whether service pensions, of which I have some experience, in the public sector generally or in the private sector, to concentrate on those who are currently working to try to ensure that their pensions are better when they retire. There is a tendency to forget the unfairness which is thus caused to those who retired some time before. Older pensioners, be they war-widowed service pensioners or pensioners in the private sector, tend to be overlooked. There are some serious anomalies.
I am conscious that this debate will no doubt be used as a reference point for discussing pensions, and I should like to make a special plea for widows who have been widowed twice. The point is simple. If a woman is widowed she will frequently become entitled to a service pension. If she remarries, she forfeits that pension and is therefore thrown upon her second husband for support. Frequently, if the people are older, the man she marries may have retired. His widow will not be entitled to a pension when he dies. It means that a woman widowed twice will receive no pension from any employment scheme. That can be grossly unfair.
I have a constituent who is a war widow. She remarried and her second husband died. She is left with no service pension. An officer's widow has now married a senior officer. Should he die she will have no widow's pension. This point is of general applicability. I am convinced that the Government should grasp this nettle. The Government should give a lead in pensions matters because no one else can do so. If they were to lay down guidelines that the pension of the first husband, the widow's first pension, should be capable of being reinstated, the cost would be minimal and many older people would be enabled to remarry if that were their choice. That is a special plea.
There is no reason why an individual should not retire at 63. Flexibility is important. It is right that individuals should be able to decide for themselves to work through until perhaps 65 or seek to retire earlier, and that their date of retirement should be reflected in their pension. I said to my hon. Friend when he presented his Bill that I am anxious that early retirement should not encourage individuals less thoughtful for their long-term benefit than might be prudent to retire earlier when their long-term income is less than they would wish it to be. We have a duty to ensure that pensioners' long-term interests are looked after despite themselves. That point causes me some concern.
There is a second problem with early retirement. I have never taken the view that work is a finite quantity. It is a cake that can be cut up. If one individual chooses to be unselfish and to retire early, thus not taking his slice of the cake and not carrying out his piece of work, that work should automatically be available for someone else to take on. I am afraid that the world is not that simple. As Samuel Brittan pointed out in a recent article in the Financial Times, the argument is the other way. If one is seeking to encourage employment, one should be encouraging people to work longer, thereby earning more wages themselves, which enables them to buy more goods and thus to add fuel to the economic cycle and by remaining in work to add their skills to the common good. The argument does apply in a limited number of cases where the job to be done is repetitive and automatic, but I believe that in most case 596 early retirement will lead to a heavy cost. I fear that the cost of £500 million which my hon. Friend put upon the Bill will be exceeded.
A further major problem of pensions administration and one that will no doubt be faced by the inquiry chaired by my right hon. Friend the Secretary of State is that of the early leaver. It is quite as monstrous and indefensible as the difference in the age of retirement between men and women that a person who works in a job for 40 years and stays with one company will receive a pension substantially higher than someone who has carried out a similar job working for four different companies—10 years for each company. The problem of the early leaver must be grasped. It cannot be grasped in isolation because it is part of the bigger problem of the lack of portability in pensions.
Whereas some years ago an individual's decision on housing was the most important financial decision of his life, now the decision on his pension may be the most important single financial decision. I see no justification for the fact that an individual, as a member of a pension scheme, has few if any rights over the investments of that pension scheme and no access to the substantial amount of money that is funding his pension. I should like to see an incisive view taken by the inquiry. I should like to see it consider whether an individual should be given more rights over his pension funds and whether it should be possible for an individual who has worked and built up pension rights and funds to be able to call for an amount equal to his contribution to be transferred into his own pension scheme, perhaps based on unit trusts, and for him then to have access to some of his pension entitlement, if he chooses, for instance, to set up in business by himself.
§ Mr. Nicholas Winterton
My hon. Friend is developing an interesting argument and I am not out of sympathy with him, but surely he is not suggesting that the progress of the Bill should depend upon those considerations. The Bill can go ahead irrespective of those points, which can be dealt with at a later date. Flexibility and equality between men and women surely have little to do with those other matters. Although they are important and should be dealt with by Government at an early date, does my hon. Friend not agree that the Bill should go into Committee so that the many detailed points, some of which he is perhaps about to mention, can be discussed?
§ Mr. Viggers
The point that I sought to make—perhaps I made it in a way that rendered it incapable of being readily apprehended by my hon. Friend—is that all issues of pensions are inter-related and it would not be correct for the Government at this point to proceed with my hon. Friend's Bill without taking cognisance of the other issues of pensions administration.
I give great credit to my right hon. Friend the Secretary of State for Social Services. He identified the pensions problems and it was he who for the first time convened a conference on this subject. My right hon. Friend is leading from the front in deciding that he will chair the inquiry himself, thus taking personal responsibility for ensuring that something comes out of the conference and the inquiry. It would not be right for this individual issue to proceed without being put in the framework of the other pensions issues to which I have referred.
It should be possible for individuals to be given access to the pension funds that have been built up and held on 597 their behalf. In some cases—I do not suggest that it is a large number—an individual might well decide that he wishes to set up in business and that it would be helpful for him to have access to the funds for that purpose.
§ Mr. McQuarrie
My hon. Friend will be aware that the trade unions have amassed millions of pounds in their pension funds which they are quite likely investing, particularly in agriculture in places such as Scotland. How does my hon. Friend propose that the individual union members would be able to have access to the money that the pension funds are putting to such useful purposes for the benefit of their members in later years?
§ Mr. Viggers
I was about to address myself to that point. I do not know the answer, but I think that it lies somewhere along these lines. Clearer guidelines should be brought in for pensions' administration, and the individual pensioner for whom the pension fund is being accumulated should have better access to knowledge of how his pension fund is being administered. There should be clearer guidelines on how the scheme is being administered by the trustee and the investment managers.
I declare an interest, although it is not a financial one. I am a trustee of a pension fund in which I have no beneficial interest. Like everyone else in the Chamber, I am entitled to pension rights. That has caused me to consider pension funds and what Sir Thomas Browne, in the 17th century, called the secret magic of numbers. One starts with the view that actuarial assumptions are fixed immutable laws like science, but one gradually realises that actuaries are artists rather than scientists and that the rules are far from fixed. One realises quickly that a great deal of discretion is given to trustees and investment managers.
Having mentioned the word "actuary", I cannot resist saying that the Financial Times "Men and Matters" column has been seeking to find a working definition of "actuary". The best one that has been produced so far is that an actuary is a man who found accountancy too exciting. There is another definition, which is that an actuary is a man who tells us now what an accountant will tell us in 10 years' time.
The pensioner, as he contributes month in and year out, does not know where his pension is invested and has little opportunity to find out. It might be helpful for the Government to lay down clearer guidelines. I am not sure about that. The concept of the Government laying down scenarios to which all actuaries must conform is 1984 territory. I fear that the Government Actuary is no more likely to produce exactly the right answer than a large number of actuaries working independently. That would be a negation of private enterprise. Considerable light should be thrown on this mystery. I hope that the Secretary of State will enable that to be done in the inquiry.
I back the ideas behind the Bill, and I congratulate my hon. Friend the Member for Eastleigh on introducing it. My limited reading of the Bill leads me to see nothing in it to which I object. I hope that all the points that my hon. Friend so thoughtfully proposed will become law, in the context of the wider inquiry into pension matters that is to be chaired by my right hon. Friend the Secretary of State.
§ Mr. Robert McCrindle (Brentwood and Ongar)
As one who for a long time has taken an interest in pension 598 matters both at national level and in relation to occupational pension schemes, I was pleased to be approached by my hon. Friend the Member for Eastleigh (Sir D. Price), who asked me to act as a sponsor of the Bill. I was pleased to find myself in the company of hon. Members from both sides of the House. I recall very well the period when pension matters were the subject of party polemics. I concluded then, as I should have to conclude now, that that does no good for pensioners. Therefore, I pay tribute to the cross-party agreement on pensions that was reached in 1975. That has been the broad basis upon which we have pursued these matters ever since. Once again to have a Bill before us that has all-party support and flows from a report produced by an all-party Committee is very much in line with what I should like to see.
I concede that the announcement by Her Majesty's Government of a wide-ranging inquiry into various matters relating to pensions must affect the Bill and its subject matter to some extent. However, that does not detract from the Bill's importance as an exercise in exploring a vital issue that is becoming of increasing importance to everyone.
Some of my hon. Friends have wondered why it is necessary to have an inquiry into retirement age when the Select Committee produced an exhaustive report. I understand the point that they are trying to make, but the Government are right not only to set up that wide-ranging inquiry but to see as part of the purpose of the committee chaired by the Secretary of State for Social Services an examination of the relationship between the critical subject of retirement age and several others that I respecfully suggest are equally critical.
We must consider the relationship of widows and widowers with the basic pension entitlement of a man, especially under an occupational pension scheme. We must also consider the growing tendency to question—again I refer to occupational pension schemes—the expectation developed throughout our years of work that we should look to our retirement pension on the pasts of two thirds of our final salary, and whether that should continue to be the correct basis upon which to proceed.
I believe that choices must be made, and that is why it was important that my right hon. Friend the Secretary of State announced on Wednesday the forthcoming inquiry. It is important to assess the desirability of moving to early retirement for men and a common retirement age for men and women. I do not think that that can be divorced from other equally important considerations.
I do not regard early retirement as the great panacea for the reduction of unemployment. I have always questioned whether the jobs vacated by men of 64 and 65 are those most likely to be suitable to the jobless unemployed who tend, for the most part, regrettably, to be in their 20s and 30s.
I understand but question the practicality of the theory that, if jobs are vacated by people aged 60, those aged 50 will move up and people of 40 will move into the jobs performed by those aged 50. While I am second to none in my desire to see an improvement in unemployment levels, I do not believe that anyone has proved that we cart reduce unemployment by forcing people to retire earlier than they would often wish. In other words, although am by no means opposed to an earlier and common retirement age, I do not think that we should automatically contribute to the solution of our unemployment problem in that way.
599 Secondly, and more importantly, I am disinclined to throw people of 64 and 65 on to the scrap heap if that is not where they wish to go. I am against compulsory retirement at 63. I am very much in favour of moving towards greater flexibility than applies today.
§ Mr. Madden
I am most grateful to the hon. Gentleman for dealing with the important topic of loss of skills from industry. Does he consider that the dramatic reduction in training opportunities, which has taken place because of the abolition of several training boards, contributes to or inhibits the trends to which he is rightly referring?
§ Mr. McCrindle
I have not, for some time, considered that training boards are, or ever were, the ideal basis for industrial training. We must consider not only industrial training but industrial retraining, towards which this country has moved insufficiently fast. That underlines my argument. Instead of assuming that men in their 40s and, 50s should wait to inherit the jobs of those who are obliged to retire early, we should be moving, as we are now, to training and retraining those in their 30s, 40s and, indeed 50s, rather than relying on an artificial means of solving the difficult problem facing the country.
Choice in the date of retirement, flexibility between one pensioner and another and true equality of the sexes on retirement age are desirable objectives which the Bill seeks to define and move towards. At the very least, the debate must assist the forthcoming inquiry. I should be surprised if the words uttered here today did not help the inquiry to focus on this important matter.
I hope that I will be forgiven if I express the views of those running the occupational pension schemes. The general complaint that there is sometimes a tendency to ignore the cost implications to occupational pension schemes of a move that may be desirable in social, and even political and economic terms. I am aware that the membership of the inquiry will include some leading people in the occupational pensions world. I hope that as the inquiry progresses there will be a growing recognition that there are many desirable objectives towards which we should move, but that in addition to the cost to the taxpayer in national pensions an additional cost is imposed on members of occupational pension schemes. It sometimes appears that Governments of both political complexions do not take on board the burdens we impose upon the schemes in expecting them to follow our lead on this or that improvement in pension provision.
The Bill seeks to raise the retirement age for women from 60 to 63 and to reduce the retirement age for men from 65 to 63. That will introduce an element of justice and equality for both sexes, but I am under no illusion that the move will not be opposed by some women—and who can blame them? If they are now approaching the age of 60, they have done their forward budgeting in the expectation of retiring at 60. That is why any attempt to impose a higher retirement age in the short term would be wholly unfair. Time must be given to allow women to adjust to the new position.
It is well known that women not only live longer than men but retire earlier. By standardising the age of retirement for both men and women, with a notional common pension age of 63, the balance is to some extent redressed. In this age of equality of opportunity, that must 600 be something to which, given time to adjust, women are less likely to object than would sometimes appear from press reports. Perhaps I am only a blind optimist, but I hope that, in addition to the benefits forthcoming to women in equality, they will be prepared to bear some of the small disadvantages.
The Bill requires that a statutory pension should be made available from the age of 63. But that does not prevent anyone from working to the age of 65 or beyond; nor does it prevent anyone from retiring before the age of 63
One of my disappointments in the Government and their immediate predecessor is that the move towards the abolition of the earnings rule for those over 65 has been lamentably slow. Throughout the early 1970s I advocated the desirability of working away at the earnings rules so that it would eventually disappear. I am sad to find that in 1983 it is still with us in a sizeable form. I hope that the Minister will explain the Government's approach to that important issue.
The Bill provides for men and women to be pensionable from the age of 60, albeit at a reduced pension. It is simply not good enough to suggest that we should move towards retirement for all at the age of 60 unless we recognise that the cost involved in the immediate term would be the unacceptably high figure of £2,500 million. We must take into account the interests of working people who pay tax. The nub of the matter is whether those who wish to retire at 60 should be allowed to do so and whether they are prepared to accept a pro rata rate of reduced pension. The proposition is widely acceptable and it is at the heart of the Bill.
Age Concern has said that it does not disagree with the principle of actuarially reduced pensions for early retirers, but that on current levels of state pension that would be unacceptable. I have great respect for Age Concern and I understand its reservation. However, that is all the more reason why the target date for the implementation of the Bill's provisions should be set some way ahead; then there can be, with economic growth, a disproportionate increase in the level of pensions, so that Age Concern's apprehensions are acted upon.
I have stated many times in the House that we should introduce a faster rate of increase in retirement pensions than we have in recent years, not least because I am much in favour of allowing people the choice to do with their income in retirement precisely what they wish to do. For that reason I have opted against concessionary television licences and concessionary bus fare schemes. I do not believe that on reaching the age of 60 or 65 we become so devoid of a responsibility that we cannot plan our own lives as we did when we were at work. To some extent, the House insults elderly people by assuming that we should introduce various concessionary schemes and tell the elderly how to spend their money.
We should aim for flexibility. We must take account of individual wishes. We must balance the preference of the man who cannot wait to be retired so that he can turn his attention to gardening, travelling or his hobby, against the wishes of the person who wishes to go on working not just to 65 but 70 and beyond. Flexibility must be the watchword of our approach to national and occupational pensions. The Bill takes a large step towards that.
By all means let us have flexibility. By all means let us focus on 63 as a compromise age, but let us clear our minds of the implication that if only we press a little harder 601 or tax a little higher we can move towards an acceptance of retirement at 60 for all, with no loss of pension provision. That is to live in cloud cuckoo land. It is, therefore, wise to accept, as it so often is in this vale of tears that we are obliged to live in, a reasonable compromise such as that in the Bill.
The Bill states that increments will be payable in respect of retirement deferred beyond the notional age of 63. It says that it will be payable either as "an incremented pension" oras a lump sum on retirement".I am worrried about the implication of providing a lump sum rather than an increment to the pension. Lump sums are the order of the day in occupational pension schemes. The lump sum is governed by regulations. It is not unusual for a lump sum to be paid. I do not wish to challenge that. If the national pension, instead of being increased weekly, involved the payment of a lump sum the Exchequer would be caused particular problems if all the pensioners who reached pensionable age in a given year opted for the lump sum rather than the increment. In addition, if one receives a lump sum, there is a tendency to spend it on some large ambition which one might have nurtured for years. I do not wish to prevent that, but we have to accept that it might result in many pensioners ultimately being forced to apply for supplementary benefits. That is why I do not entirely support the provision of a lump sum option.
The Bill recommends that no additional increments should be payable after a claimant reaches the age of 65. Will not that act as a disincentive to those who would otherwise continue working after that age? That involves consideration of the earnings rule and I repeat as strongly as I can that I hope that the Government share my belief that we should abolish that rule.
Changes will be required in occupational pension schemes to enable men and women to take their pension at the new common retirement age of 63 or between 60 and 65, depending on the wishes of employers and employees. Some occupational pension schemes provide for an earlier retirement age than the national scheme. However, there are relatively few such schemes and I underline again that if we move towards flexibility of retirement age and expect occupational pensions to follow that lead extra funds will have to be found.
My hon. Friend the Member for Gosport (Mr. Viggers) rightly welcomed the Government's recent announcement about the pensions of job changers, but if we add the cost of unfreezing the pensions of those who have left an employer's scheme to the cost of occupational pension funds moving towards acceptance of earlier and flexible retirement ages, it will be seen that a considerable economic burden will be placed on those schemes.
Pension schemes can continue to be viable only if they obtain finance from the employer who sets up the scheme, the employee who benefits or—most likely—from both. Occupational pension schemes must be taken along hand in hand with the Government as the proposed inquiry progresses.
We have few opportunities to discuss pensions. We do not have a full House and there is no pressure on us to curtail our remarks, so I hope that I shall be forgiven if I move a little beyond the provisions of the Bill.
I listened with great interest to the recent statement of my right hon. Friend the Secretary of State for Social Services about the Government's plans for the pensions of early leavers. There is no doubt that, at whatever age 602 people retire, they resent having their pensions eroded in the way described by my hon. Friend the Member for Gosport, just as those who have retired from private occupational schemes that are not index-linked resent their neighbours enjoying public service pensions which are index-linked.
I disagree with my hon. Friend when he suggests that we cannot move on the subject of early leavers in pension schemes without covering the whole gamut, including portable pensions and the rest. I do not accept that, and I hope that the Minister will confirm my understanding of the Government's position that the legislation which we hope is to be introduced in the Session 1984–85 will deal with the need to uprate frozen pensions and that any legislation which flows from the inquiry being chaired by the Secretary of State may have to follow. If it is possible without delaying the former to bring the two together., that will be perfectly acceptable, but I hope that my hon. Friend will assure us that we shall not hold back, having at long last decided what to do about job changes, until every detail has been explored by the inquiry.
I agree that it is high time that we obtained more information about what is going on in our private pension schemes. Of course the best pension schemes keep their members fully informed, but I believe that people have a right—if we have to make it by statute, so be it—to know where their money is being invested, how their pensions are being built up and several other pieces of information which it is insulting to assume cannot be understood by the average man in an occupational pension scheme.
There is a great deal of talk about the desirability of so-called portable pensions. Broadly speaking, I am a supporter of the idea, although I have to admit that there are some disadvantages. One is that at present, whereas an employer deducts contributions from employees and remits them to one location—the insurance company or the occupational pension fund—if we give freedom to individuals to have their private portable pensions, the employer has to be prepared to make the deductions and to direct them in several hundreds, perhaps several thousands, of different directions. I mention that in terms of the viability of pension schemes in general.
Whether we talk about the age of retirement or the amount that a person gets when he reaches retirement. a shake-up is evident in the occupational pensions world. I have been associated with it for some time, and I welcome that development. Someone said to me the other day, "We cannot move to portable pensions because we are using all the expertise and investment at present available." I do not accept that. The creation of the portable pension system would bring forward new people to offer their wares. That is why I broadly endorse the idea of moving towards the provision of portable pensions. Competition here, as in most other areas, will do the pensioner a power of good. and I am unashamed in my support of this conception.
My hon. Friend the Member for Eastleigh has done the House a great service in promoting his Bill. I am a little divided in my mind about whether the best way forward is to take it through Standing Committee, although I noted with pleasure the relish with which my hon. Friend the Member for Macclesfield (Mr. Winterton) anticipated service on that. I hope that the usual channels have taken note of my hon. Friend's volunteering for service should that be the case. I leave it with an open mind.
603 We have had a wide-ranging debate, many minds will have been clarified and, at the very least, we are almost bound to start moving in the general direction that my hon. Friend the Member for Eastleigh wishes us to take. Whether we do it by his Bill or by the inquiry which is to be chaired by the Secretary of State, I do not know, but I am convinced that there is an inevitable and irresistible movement towards a flexible retirement age, and it is to that broad concept that I give a warm welcome.
§ 1 pm
§ Mr. Michael Knowles (Nottingham, East)
I agree with my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) that often in politics there is a mood when things seem to be right, when matters move in a certain direction, and that is true of pensions today.
Had my hon. Friend the Member for Macclesfield (Mr. Winterton) still been in his place I would have offered him the consolation that perhaps the Government's White Paper on pensions, which was published yesterday, was prompted by that desire for change. I am not sure that I believe that. However, there is a time and tide in the affairs of men, and it seems that that time has come for pensions.
Much of the feeling that change is needed in pension matters has come about through the work of the Social Services Committee. I read its report with interest. Many acknowledgments have been paid to the hon. Member for Wolverhampton, North-East (Mrs. Short) for her chairing of that Committee, and the work that the Committee did has been a tremendous help. About 11.5 million people are in occupational pension schemes. The Bill is part of the general move towards more fairness in pensions and therefore I support it.
The other area to which much attention has been paid is portability, but it is not only in pensions that portability will have an impact. Over the years employers have had to come to terms with the fact that when an employee passes the age of 40 he is practically a captive in their employment. It is extremely difficult for somebody of that age to move. I have heard some dramatic and lurid language used to describe the position of employees as they get older. "Employers know that they have got them then," some say, and the difference paid in salaries between someone in his early 30s and someone in his early 40s is significant. On the one hand the employer is trying to retain him and on the other he knows that he will keep him, however he treats him. That is the view that some people take. That feeling has had an effect on industry and commerce. The introduction of portability would change that situation dramatically and bring some new ideas into the whole employment market.
§ Sir David Price
The point that my hon. Friend is making is relevant to the plea that we in the House often make for more movement between Government service and the private sector, and between the academic world and the world of industry. Several Select Committees have emphasised the need for us to become more one nation and not a public sector nation and a private sector nation.
§ Mr. Knowles
When I was the leader of a local council I tried to implement that idea by swapping local government officers with employees in certain companies. After all, society is a synthesis of both public and private 604 sectors and to get people to see the point of view of the other sector they should move into that area. The great stumbling block that I found was pensions.
I agree with my hon. Friend the Member for Eastleigh (Sir D. Price) that portability would have beneficial effects. However, when we in politics put forward ideas we do not necessarily appreciate the long-term consequences. In other words, there will be effects other than the direct ones at which we are aiming, some of which will be beneficial, but I do not doubt that some others will be painful, even though we are not aware of them now.
The hon. Member for Bradford, West (Mr. Madden) spoke about mortgage interest relief, a subject of great difference between the parties. I have never viewed tax relief as any sort of subsidy, but that is probably due to the different views held by the parties about property rights. I see property possession as depending on the individual and not a benefit granted by the state. Therefore, tax relief, where individuals are given relief for helping themselves and allowed to keep more of their own money, is not the same as subsidy, where one expects someone else's money to be put into one's hand. I am always a supporter not of subsidy but of various forms of relief to enable people to become more independent both of the state and of employers. We want individuals in their own right to own their own houses and their own pensions.
An idea that never came to fruition, even in West Germany, was that of the social market in the original Erhard scheme for pensions, a quasi-independent body under state supervision, in which individuals rather than companies would be linked so that individuals would carry the rights rather than being bound in with many other people under a collective scheme.
§ Mr. McQuarrie
The hon. Member for Bradford, West (Mr. Madden) also spoke of mortgage interest reliefs, and my hon. Friend will be aware that when the hon. Gentleman was doing so he meant the owneroccupier in the private sector. However, the hon. Gentleman failed to say that there are millions of council house tenants who can purchase the council houses that they occupy and who similarly enjoy tax relief on the mortgage than they get for the purchase of their council house.
§ Mr. Knowles
I take my hon. Friend's point, and thank him for making it.
The other point to be made about pensions, which is a problem for all our social services in the state sector, is that we must move from the basis of "pay as you go" to more of an investment basis. This is especially true in pensions. "Pay as you go" might have been a sufficient system if some of the hypotheses behind Beveridge had proved to be true over the long term. They have not so proved, and the only rational thing to do is to adjust our behaviour accordingly. We should be investing, rather than paying, as we go.
This could be the right time to make that change because it looks as though demography would work in our favour over the next 20 years. If we leave it much beyond that, demography will work against us, and an increasing percentage of the population will be retired and wanting, quite reasonably, a higher standard of living, while the working population will be saddled with an ever-greater debt. If we move to an investment basis now we may be able to cope with it. If we continue on the "pay as you go" system, we shall be piling up a massive problem for our 605 successors to deal with in 35 years' time. Even given luck, there is not much chance that I shall be here then. This is a challenge that we must examine.
There are some interesting figures on how much we already spend. For instance, the contributory retirement pension is already 17 per cent. of the outgoings of the national insurance fund, 45 per cent. of the social service pensions and 15 per cent. of all Government expenditure. If we do not now grab the opportunity to unhook ourselves from the problem, in 25 or 30 years' time those figures could take off, have a massive effect on the rest of Government expenditure and preclude all other spending. The pressures would become enormous. This is an important point, and I shall be interested to hear my hon. Friend the Minister comment on it. Will this idea be looked at by the group that the Secretary of State will be chairing, and will it see this idea as a possible way forward?
§ 1.9 pm
§ The Minister for Social Security (Dr. Rhodes Boyson)
The House and the country owe a debt of gratitude to my hon. Friend the Member for Eastleigh (Sir D. Price) for bringing forward the Bill. Having come high in the ballot for private Members' Bills—the parliamentary bingo system—he took up this matter because he was so concerned about it. He made that clear during an amicable meeting that we had during the summer. He said that we must not reinvent the wheel; that we already have the Select Committee, a Bill, and a Government commitment to an inquiry. My hon. Friend said that his Bill was based on age flexibility and equality, which are important.
I did not realise that C. P. Villiers was an ancestor of my hon. Friend. He was prominent in my period as an academic historian, and I shall re-examine his works with keen interest. I shall also keep an eye on my hon. Friend and test him against the great effect that C. P. Villiers had in the House and in Britain.
On my journey to the House this morning I looked up my hon. Friend in "Who's Who" and found that he entered the House at the same time as I was appointed to my first headship in my native Lancashire. My hon. Friend the Member for Nottingham, East (Mr. Knowles) said that there was a time and place for all seasons, and 1955 was a vintage year in many ways.
§ Sir David Price
My hon. Friend will recall that Charles Pelham Villiers was for a long time chairman of the Poor Law Commission, the modern equivalent of which is either Minister or Secretary of State at the DHSS.
§ Dr. Boyson
I am grateful for that intervention. My hon. Friend and I could play tennis with that subject for some time, for the entertainment as well as possibly the education of the House. My first published work was a history of the Co-operative Society in Lancashire, which was formed three years after the Rochdale pioneers venture. My second publication was a history of the poor law in Lancashire from 1838 to 1871. When I return home I shall look in the index of that book for a reference to my hon. Friend's ancestor, and we must discuss the matter further when we are not surrounded by an audience.
The hon. Member for Wolverhampton, North-East (Mrs. Short), whom we all respect, warned my hon. 606 Friend, and possibly all Conservative Members. against soft-soaping by honeyed words. I have never been very good at soft-soaping by honeyed words, and that is certainly not what the Labour party thought of my windup speech in the House two days ago.
My hon. Friend the Member for Twickenham (Mr. Jessel) warned me that unless I move quickly from my present post I shall have to decide upon the problems of one of his constituents who is almost 60 years old but who, because he has changed sex., does not know whether he is considered to be male or female for pension purposes. Fortunately, his constituent is not yet 60 years old. I hope that I shall have moved on before that problem lands on my desk. However, it is really a problem for the Secretary of State, not the Minister of State.
The hon. Member for Brent, South (Mr. Pavitt), whose constituency is a little nearer to central London than is mine, said that this debate on the age of retirement is only part of a review of retirement in general. Other hon. Members said that there should be a review of our attitude towards people over 60 years old, and to their fulfilment in society and in the family. Flexibility in the age of retirement will mean that we can free people to live their lives as they please, some with full-time work, some with part-time work, and others with no work. My hon. Friend the Member for Staffordshire, South (Mr. Cormack) mentioned the key age of 63.
My hon. Friend the Member for Banff and Buchan (Mr. McQuarrie) talked about the timing of the inquiry. The intention of the inquiry is riot, as an ex-Prime Minister once said, like certain Royal Commissions, to take minutes and wait years. The intention of the inquiry is to reach conclusions as soon as possible. On Tuesday the consultation documents on early leavers will be issued, and early in the new year we shall have the one on disclosure—another matter that has been mentioned this morning. The inquiry into giving priority to portability of pensions, which again has been mentioned this morning and the inquiry in which much of what we have said today will be subsumed, should report in the summer or, at the latest, the early autumn of 1984. It is not a mechanism of delay. It is a mechanism to pull the thing together. If we do things in parts, there can be problems in future.
My hon. Friend the Member for Eastleigh said that in 1940 the age of retirement for women was brought down from 65 to 60. That was because of the war effort, Churchill's feelings on the matter, and, as my hon. Friend said, the fact that at that time women were likely to be five years younger than the men they married. We are still landed with that decision. It was seen as one decision, not as part of a whole. It is important now, in dealing with both state and occupational pensions, to survey the subject as a whole.
The hon. Member for Bradford, West (Mr. Madden) asked whether the Bill would risk the 1975 settlement between both parties and affect the position of the widow—whether she could continue on her late husband's contributions when she became a widow. That issue was raised on Wednesday. That was the first occasion on which I had heard about the widow being under threat, and, as far as I know, my right hon. Friend the Secretary of State had never heard about it. On that occasion my right hon. Friend said: 607My aim in setting up an inquiry is not to call into question the fundamental pensions structure that was established in the 1970s with all-party agreement … Rather, it is to ensure that our pensions structure is soundly based".There is no threat to that agreement. He also said, and I can put it no firmer:We do not intend to change the position of widows."—[Official Report, 23 November 1983; Vol. 69, c. 357–62.]I want to put that clearly on record.
My hon. Friend the Member for Macclesfield (Mr. Winterton) served on the Select Committee. His name is on the document, alongside that of the hon. Member for Wolverhampton, North-East. My hon. Friend spoke with considerable knowledge at times and great passion. He has always spoken with passion—and long may he do so—to inflame and enlighten the House from time to time. One cannot say that those are honeyed words. They are a tribute to the strength of his feeling on political matters.
My hon. Friend the Member for Gosport (Mr. Viggers), who is not present in the Chamber, asked about the double widow—a woman who has been widowed twice—and the effect on her pension. I cannot answer that question this afternoon. It is a technical matter. If my hon. Friend will give me the details, I shall certainly take up the matter.
It was a pleasure to listen to my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle), who has always been interested in pensons and is very knowledgeable on the subject. We all enjoyed listening to him. I should like to reiterate that the setting up of the inquiry is not a means of delaying matters. It is a means of bringing them to a head and having the complete picture painted at once.
§ Mr. McCrindle
In the event of the inquiry not reaching the advanced stage that we hope, do the Government still intend to introduce legislation in respect of early leavers? Although ideally we should try to legislate for all these matters at once, I hope that a failure to reach agreement on all the other matters that we have been discussing will not delay the introduction of the important Bill in respect of job changers.
§ Dr. Boyson
I give my hon. Friend the assurance that that will be the case. We have already made clear in the consultative document and in speeches that we hope to bring legislation forward on that point in 1984–85. The same will apply to disclosure.
My hon. Friend the Member for Nottingham, East said that there was no idea more powerful than an idea whose time had come. We can now move ahead on pensions. The time has come.
Several hon. Members attended the occupational pension conference that we held in September. It is plain that the pension funds are now ready for and expect action on this matter. If there is no action, they will be blighted. They will be unable to bring in new developments in case they are out of line with the Government's future legislation. The occupational pension schemes may have been against provisions for the early leavers, but now they want to know what is happening. Even if my right hon. Friend or I wished to be dilatory, neither of us would be allowed to be dilatory because pressures in the House and from outside would ensure that something was done.
I pay tribute to my hon. Friend the Member for Eastleigh and also to the Chairman and members of the 608 Select Committee for the considerable work they have done and the interest they have created. I am sure that we shall make some satisfactory progress in the near future.
I shall be returning to the Committee's report during my speech, but before doing so I thing it would be helpful to review the history of pensions in the United Kingdom to appreciate the position we have now reached about the retirement age.
The Government have been involved in state pensions since the Old Age Pensions Act 1908, which brought in a fixed pension age. Before that there was no fixed age. If a person wanted to work and there was a job available for him, he could. If there was no job, that was his retirement age. At times it was earlier than he wanted to retire. When state pensions were introduced, a pension age had to be laid down. Old age pensions were introduced because, towards the end of the 19th century, social commentators had drawn attention to the acute poverty of many old people and the apparent inadequacy of the poor law to alleviate it. In 1906 Asquith, the then Chancellor of the Exchequer, promised to introduce national old age pensions as soon as there was a Budget surplus.
The 1908 Act provided for a means-tested pension at a maximum of five shillings a week. It was payable to men and women aged 70 on an annual income of less than £21, with a reduced pension on a sliding scale for those with incomes of less than £31 a year. That Act established the principle that in certain circumstances anyone over 70 was entitled to income support from the state, financed by taxation. It was a move forward to the state providing benefits for its citizens. The contributory principle was not introduced into state old age pensions until the Widows' Orphans' and Old Age Contributory Pensions Act 1925. The Act reduced pensionable age for both men and women from 70 to 65 from 1928. The Old Age and Widows' Pensions Act 1940 reduced pensionable age for women to 60 but left the men's age unchanged at 65. The hon. Member for Wolverhampton, North-East (Mrs. Short) may have heard this before, but she had the privilege of sitting on the Social Services Committee. The rest of us are bringing ourselves up to date with the required information. I shall not go into further detail about the woman's pension age being reduced to 60 in 1940 except to say that the problems of the five-year difference between male and female retirement age show the disadvantage of making one decision and not looking at the overall pattern.
The Beveridge report of 1942 which inspired the National Insurance Act 1946 changed the basis of the state pension scheme from one based on age to one based, initially, on retirement from work. The beginnings of a flexible age of retirement came in at that time. It provided flat-rate benefits for the main contingencies of sickness, injury, unemployment, widowhood, retirement and death. The benefits were paid for by flat-rate contributions levied on employers, employees, the self-employed and the non-employed. In addition, the Treasury provided a supplement related to the income from contributions. The funds for the Treasury supplement came from general taxation. The scheme introduced a measure of flexibility into the age of retirement. It was possible for a man or woman to defer retirement for up to five years beyond the normal minimum age, which remained 65 for a man or 60 for a woman. In return it was possible to earn increments 609 in respect of the pension forgone. As part of the definition of retirement over the five-year period the payment of pension was subject to an earnings rule.
Reference was made to that earnings rule by my hon. Friend the Member for Brentwood and Ongar. I can tell my hon. Friend that we have increased this year from £57 to £65—a 14 per cent. increase—the amount that an individual can earn without it affecting the amount of his pension income. Where earnings exceeded a specified limit, at that time as now, the pension was subject to reduction. However, after the age of 70 for men or 65 for women, no such earnings rule applied and it was possible for the pension, including any increments, to be paid regardless of whether the person was actually retired. The provisions relating to pension age and retirement have continued substantially altered from 1946 to th—e present day. The suggestions in the Bill and the suggestions of the Select Committee are making much more flexible what began at that time as a recognition that not everyone wanted to retire at the same time.
There have, however, been pressures for change over the intervening years—and not always changes in a downward direction. That must be put on the record. Concern about the potential financial burden of an aging population led the Phillips committee in the 1954 "Report of the Committee on the Economic and Financial Problems of Provision for Old Age" to recommend that pension age should ultimately be increased to 68 for men and 63 for women. One sometimes wonders, when dealing with issues in this House or outside, when one is convinced that one is getting near the final settlement, what debates will be taking place in this House and elsewhere in 20 years' time.
§ Mr. Andrew Rowe (Mid-Kent)
Does my hon. Friend know the result of the recent deliberations in the United States in the debate on the issues of raising the pension age?
§ Dr. Boyson
There was a radio programme last week called "The Greying of America", of which I have the manuscript. Unfortunately, I have not had time to read it all or I would have been able to give a splendid reply to my hon. Friend. But at least I am aware that this matter is being discussed in the United States. My wife heard the programme, not me. It is obviously important to get everyone in the family involved in the political scene and that is part of what is known as a continuous WEA exercise in every family. When I arrived home last Friday she said, "Drop everything, you must get 'The Greying of America'."
My hon. Friend made an interesting point, as he always does. For the first time, America finds that it is an aging country. She has been a young country because of the large percentage of immigration, particularly from Europe and South America. She has come to the conclusion that to satisfy those people, keep them socially orientated and to serve the community, the age of retirement should be raised rather than lowered.
§ Mr. Harry Cohen (Leyton)
Does it make sense even to consider raising the pension age when there is mass unemployment in western countries?
§ Dr. Boyson
As I am speaking in the British Parliament and not in the American House of Representatives, I am not suggesting that the pension age should be raised. All 610 I was saying was that it is interesting, sociologically and historically, to look at the debates that have taken place. In 20 years' time, the debates may go the other way. Perhaps the hon. Member could speak to his hon. Friend the Member for Wolverhampton, North-East about what the Select Committee recommended. It was not convinced that there would be a great reduction of unemployment if the retirement age were reduced. The pieces do not fit into each other like a jigsaw. Areas where there is heavy unemployment are not necessarily the places where retired people wish to live. As my hon. Friend the Member for Nottingham, East said, the job of a person who retires at 64 or 65 is not necessarily the one that a young person leaving school has the skills, training or interest to take. I recognise the hon. Gentleman's concern about that matter.
In 1940 the retirement age for women was reduced to 60. We are again discussing retirement age 43 years later. One would never have presumed in 1940 that there would be such a change in the social climate that we hope for the full backing of women when we wish to make the retirement age the same for both sexes.
There was a recommendation to increase the pension age in the Phillips committee in 1954. I remind the House of what it said in paragraph 308:The medical evidence and the numbers of elderly people who do in fact work until ages well beyond the minimum pension ages of 65 for men and 60 for women, indicate that over a wide field these do not by any means represent the limit of working life. There is evidence that the desirability of encouraging and facilitating the voluntary postponement of retirement is being increasingly recognised. But voluntary postponement of retirement, important though it is, will not in our opinion do all that is necessary to meet the needs of the situation as it will develop in the future. Some increase in the present minimum pension ages appears to us to be inevitable.It is interesting that the committee considered it to be inevitable. It continued:Adequate notice of some years must be given before such an increase can properly come into force, and, therefore, action is required now. We recommend that provision should now be made to raise the ages at which the standard rate of pension can be claimed by one year after an interval of not less than five years, and that the ages should ultimately be raised in the same way to 68 for men and 63 for women.That was in 1954.
The hon. Member for Wolverhamption, North-East will be interested to know that Dr. Janet Vaughan produced a minority report saying that the retirement age should be the same for both sexes. The movement to reduce the retirement age began 30 years ago. Several Governments have been urged, at times of high unemployment, to reduce the male pensionable age to 60. The Governments have had to face the substantial cost involved in bringing about that change.
The Labour Government in their memorandum of evidence to the Equal Opportunities Commission in September 1976 argued against such a proposition. among other reasons, because of cost. I shall quote from the memorandum:A further consequence of a lower pension age would be a longer period when people would earn little or nothing and have to rely on pensions and their own savings. There would be a greater chance of people running down their private resources, and having to resort to financial help or supplementary benefit or not being able to contribute to the costs of extra care or comfort they might need in advanced age. Thus, not only would the working population be made poorer through the higher cost of pensions, but men aged 60 to 65 who have no occupational pension would be poorer living on pension rather than earnings.611 Alternative solutions put forward as a means of reducing the cost include the proposal by the Equal Opportunities Commission in its 1978 consultative document entitled "Equalising the Pension Age". The commission proposed equalising the pension age for men and women at 63, which is the age recommended by the Select Committee on Social Services and in the Bill. This, too, involved additional costs, but the commission proposed that women's pensionable age should be raised before starting on phasing in a lower pensionable age for men to help avoid significant costs in the early years of such a scheme. In 1978 the Labour Government set out their broad policy in their consultation document "A Happier Old Age" and discussed the various options for reducing or equalising pension age and their costs and other implications. Comments were sought on the desirability of equalising pensionable age at whatever age could be afforded between 60 and 65 and on the possibility that pensions at less than the new scheme's full level should be made available to those who chose to retire earlier.
I shall quote a passage from that document:For the present, therefore, the Government considers it preferable to protect and improve the level of pensions rather than to increase their number.That important matter is referred to in the report of the Select Committee. The documents show some changes in the age of retirement and deal with whether men and women should retire at the same age.
Both the 1978 document and the Select Committee's report consider whether preference should be given to providing adequate pensions, to which the hon. Member for Bradford, West referred, and whether this should be a priority as against the flexibility of retirement age.
§ Sir David Price
Does my hon. Friend appreciate that as we advance from 1975 more people can expect more from their occupational pension and it will become proportionately more important? In determining the deployment of resources within the state scheme there should be more elbow room for flexibility than if the position were static, and if the occupational pension element were not increased.
§ Dr. Boyson
My hon. Friend has raised an important matter. Occupational pensions have increased substantially in recent years. In 1946 almost everyone, apart from those in public service or with enlightened employers, were dependent upon the state pension. My hon. Friend the Member for Gosport said that in the long term the pension can be more important than the buying of the house, which is the most important piece of property that pensioners possess.
I trust that all hon. Members believe in self-help through ownership of property. The Government believe in the sale of council houses because it gives people a stake in a property-owning democracy. Another form of self-help is a portable pension—the greater the amount of money contributed to occupational pension schemes, the less we need to worry about state schemes. Of course, I accept that a state pension should be sufficient to meet basic needs.
From the Navy onwards, I have always been in public service. I do not apologise for that because there are some splendid men and women in public service—including 612 Members of Parliament. When I had responsibility for education, I thought that the term "early leaver" meant the 16-year-old who left school and could not be persuaded to take higher education. I now recognise that there is another type of "early leaver"—someone who changes his employment but whose pension is not transferable.
In 1981 the Government published their White Paper "Growing Older". In it we expressed the view that a scheme combining a common pension age with effective and worthwhile provision for flexible retirement had attractions as a long-term aim.
§ Mr. Neil Thorne (Ilford, South)
I support the concept of portable pensions because that relieves the community of vast expenditure in social security payments. However, will my hon. Friend think not only of the present state of employment, but the future position for which we all earnestly hope—a sound economy supported by full employment? What can an employer offer an employee to encourage him to remain in his service, rather than move to other employment? Employers often commit substantial resources to the training of an employee. Although I fully support the idea that people should have the advantage of mobility of pension, we must remember that an employer must protect his investment.
§ Dr. Boyson
My hon. Friend makes an interesting point, but I cannot comment on it now, as I need to think seriously about it. However, I accept that the balance between the two sides is important and I understand the concern of an employer who is about to lose an employee.
I wish to deal with the report of the Social Services Committee on the age of retirement, to which we published our response yesterday. I accept that our response has not met with universal approval in the House. The Committee's main recommendation centres on the twin principles of equality between the sexes in pension age and a degree of flexibility either side of a common pension age. It rightly rejected the suggestion that the pension age for men should be reduced to 60 because of the considerable cost involved for both the state and the occupational pension schemes. The cost to the state scheme alone would be some £2.5 billion at 1981–82 benefit levels.
The Committee recommended gradual progress to a common pension age of 63, at which a full state pension would be paid, together with the facility for men and women to retire earlier on a reduced pension from age 60, and the opportunity to earn a higher pension by deferring retirement up to age 65. Such a scheme would also give rise to considerable costs to the state and occupational pension schemes, but the Committee made it clear that other ages could be selected, depending upon the resources available.
As we have acknowledged in our response to the Committee, there was considerable support for a common pension age of 63 linked with flexible retirement provisions. We had made it clear in our White Paper "Growing Older" that we had some sympathy for the principles of equality and flexibility. But we cannot escape the fact that the costs would be significant. If such a scheme had been fully operative in 1981–82 the net additional cost to the state scheme alone, according to departmental figures with which my hon. Friend the Member for Eastleigh does not necessarily agree, would have been about £500 million a year.
613 Of course, there would be heavy costs in the first 10 or so years of such a scheme as men took advantage of the reduced pensions age or the flexible retirement provisions. Furthermore, the Committee proposed that pensions taken earlier than the common pension age should be abated at a rate which was less severe than a true actuarial abatement and that there should be a minimum pension guarantee for all pensioners. These proposals would also add to the cost of such a scheme.
The Committee has very properly recognised that for some years there will be a serious gap between the pension incomes of those already retired or currently retiring and those retiring at the turn of the century who will have the full benefit of the increased pensions payable under the Social Security Pensions Act 1975 and has identified the filling of this gap as a priority over any improvements in pension age for any call on additional resources.
The Committee also referred to the projections of future employment and demographic patterns and noted the fall in the ratio of persons of working age to those of pension age and the increasing cost of paying pensions over the next 50 years. The problem is the payment of pensions into the next century. Whilst the Committee considered that the principles of retirement and pension age should not be based on those projections, it clearly recognised that they could not but affect future policy.
My hon. Friend's Bill makes provision for a scheme on similar lines to that recommended by the Social Services Committee. That is a scheme which, by 1996, will provide a common pension age of 63 for men and women, together with provision to allow earlier retirement from age 60 on an abated pension and increments for deferred retirement between ages 63 and 65. It also proposes a common pension age between 60 and 65 in respect of members of occupational pension schemes.
As I have made clear, even at 1981–82 levels, such a scheme would cost the state scheme alone a considerable sum. By 1996 the cost will be considerably higher because the earnings-related additional pension under the Social Security Pensions Act 1975 will be approaching maturity, and significantly increased pensions will be in payment to people then newly retiring. There would also be heavy transitional costs in the first 10 years or so since the effect of reducing men's retirement age to 63 and permitting earlier retirement from age 60 will vastly increase the overall number of people newly retiring. In addition to the costs to the state scheme there would also be increased costs for occupational pension schemes, since about 90 per cent. of people in private sector schemes currently have the same pension ages as those in the state scheme.
§ Sir David Price
Will my hon. Friend answer the question that I asked in my original speech about why his Department determines that if the £500 million be the correct figure—which I question—and there are 25 million contributors the increased contribution will be 75p a week? Simple arithmetic tells me that it should be 40p.
§ Dr. Boyson
I was worried about not the division table, but the way in which the sum is worked. I shall give the House the answer which I am told is correct from the departmental view. It is my duty to do that. With my Secretary of State sitting next to me I have no alternative.
614 The paper says that an extra cost of £500 million would add 40p per week to contributions. After I have read out the paper, I shall put it in the post to my hon. Friend the Member for Eastleigh. I hope that he does not ring me up about it at the weekend, but he can have a word with me about it next week and, if necessary, we shall meet the people who have written the paper for me. I am sure that they would be delighted to meet my hon. Friend.
The £500 million is the net cost to Government funds. It includes the extra cost of retirement pensions, offset by extra tax revenue. The cost to the national insurance fund would be substantially higher than £500 million. That is why a contribution increase of 75p a week would be necessary. So ends the reading for today.
§ Sir David Price
I am not being personally aggressive to my hon. Friend over the rules of simple arithmetic, but he knows that the figures that his Department gave to the Select Committee were challenged by the admirable mathematicians in the Equal Opportunities Commission.
§ Dr. Boyson
I was trying to think of a suitable reply. My right hon. Friend the Secretary of State has suggested one, and it is more diplomatic than mine would have been. I will stand by that.
Fortunately, I have found another piece of paper, which was buried under the others. It says that the Select Committee accepted the estimates and commented:We are therefore satisfied that the Department's estimates of the costs of reductions in male pension age are broadly right:, and that the passage of time will increase rather than decrease them, as would an improvement in the employment situation.I shall base my case not on the costs involved, but on the fact that an inquiry is to be held. Before that, I must remind hon. Members that other demands are to be placed on occupational pension schemes, especially if legislation on early leavers is introduced. Such legislation will mean that the money to pay early leavers will have to come from the piggy bank established by funds in the good years of investment, from higher contributions or from a change in the distribution of funds.
When considering the costs involved in flexible retirement ages, one must think not only of the state system. Costs will be imposed on occupational pension schemes. Admittedly, the costs of disclosure should not be heavy, because firms ought already to be disclosing the information that we want them to disclose.
Generally, legislation should bring all firms up to the standard of good firms. If the state moves too fast and legislates for actions that are not accepted anywhere, the result is usually confusion. However, when the state moves on disclosure and early leavers it will establish as common practice the practice of the best firms. However, costs will be attached to such legislation and it seems to the Government that, if possible, all adjustments should be made at the same time, or at least adjustments should be made when it is known what others will be necessary in the future.
We in Government believe that the entire area needs looking at carefully. That is demonstrated by the fact that the Select Committee produced its report and that my hon. Friend the Member for Eastleigh regarded it as so important that he chose it for the basis of his Bill, for which we are all grateful. In addition, in today's debate no difficulty has been experienced in getting hon. Members to contribute, because they and their constituents 615 are also concerned about it. As a result, the Secretary of State has decided that there should be an inquiry covering disclosure, early leavers, franking, portable pensions, the balance between the state sector and occupational pensions and the age of retirement, which I suggest can be subsumed in that.
Suggestions have come from the Select Committee and from the Bill. They will form the major input into the inquiry. It will give full consideration to all the valuable evidence obtained by the Social Services Committee and the recommendations in its report. Consideration will also be given to the views put forward by hon. Members on both sides of the House. The inquiry will also take account of other evidence, such as the report of the Government Actuary on the long-term financing of the scheme, as well as matters that may be addressed to it by interested bodies.
The hon. Member for Bradford, West asked whether the names of the people involved in the inquiry would be disclosed. They will be. The appointments are almost completed. The point has been made by my right hon. Friend the Secretary of State that it will be an open inquiry. Newspapers that I have read in the past two days have welcomed the news that it will be an open inquiry, where anyone who wishes can make his individual input. The inquiry will move fairly rapidly to its conclusions because the Secretary of State considers that the time has come when we have enough information, with sufficient impetus behind it to get results.
The Government cannot support the Bill, but we are grateful to my hon. Friend the Member for Eastleigh for introducing it because it highlights a problem that will not go away. Something has to be done about it, but it will have to be done following my right hon. Friend's inquiry.
Today's debate has been extremely useful. The work of the Select Committee has been similarly useful. It is almost as though the inquiry had already begun because, in a sense, it started today. My hon. Friend is to be congratulated on the way that he introduced his Bill. I trust that he agrees that it represents, with the debate today, an important input into the full inquiry. As a result, we hope that we shall be able to review the entire scene with a view to getting it right so that we can introduce developments that will settle matters for at least a generation.
§ Mr. Andrew Rowe (Mid-Kent)
I am grateful for being called, bearing in mind especially that the Minister pointed out that there was never any shortage of Government Members to speak on this important subject.
I must apologise for not being here throughout the debate. Today is the third Friday running that I have been in the House and, for that tiny minority of my constituents who do not read Hansard every day, it seemed important that I should appear at least for a short time within the boundaries of my constituency. If the standard of the lessons being handed out was as high during the earlier part of the debate as it was in the Minister's speech I, who am trying to become more familiar with pensions matters than hitherto, feel even more sorry that I missed so much of the debate.
I wish to raise the principle of pensions. It is extraordinarily difficult for any Government or any political party to draw a statisfactory line between paternalism and an uncaring laissez-faire attitude.
616 We in the Conservative party have an honourable tradition of trying to get that balance right. We may have reached the point when that balance should be reassessed, and I therefore welcome the inquiry that the Government have set up into portability and other matters as a forum in which to debate this important principle.
It is old-fashioned paternalism with a thoroughly commendable intention that employers should be expected to make pension provision for their employees. For a large number of employees, however, the situation has changed. I believe that most employees, given the opportunity, would be happy to make their own pension provision. If they could do that—perhaps with a contribution from their employers—the problem of portability would disappear because they could continue with their own pension provision in whatever employment they chose to follow.
As someone who has changed his occupation several times—but hopes fervently never to have to do so again—I have a personal interest in the subject. There is no doubt that I have suffered financially from being unable easily to take my pension from one occupation to another.
The pattern of employment has changed dramatically in recent years. Many people, including those in middle age, are now changing jobs, perhaps because they want different working hours or only part-time work. The case for allowing a large number of people to make their own pension arrangements seems unarguable. Indeed, I believe it to be part of Conservative philosophy to say that most adult British citizens should be encouraged and assisted to make their own choice as to how to look after themselves in their old age.
Looking at the other side of the question, some people would find the whole problem too complex. Some would have occupations that were so ill-paid or uncertain that they could not make provision for themselves. The stress that the Government are putting in encouraging occupational schemes is commendable because, as more people made their own provision, more money would be available for the pensions of those unable to provide for themselves. I agree with the majority of hon. Members that the amount that many people, particularly the elderly, have to live on is not adequate and that we should do all we can to improve matters.
I urge the Minister to look at the issue not just in terms of the size of the pension but in terms of the principle of moving away from a paternalistic society in which it is left to the employer or Government to make all the provision. People should be able to choose for themselves. With that choice would come greater opportunity to borrow or start a business against one's pension. Let us allow people to do all those things that adults, making provision for themselves, should be allowed to do.
§ 2.5 pm
§ Mr. Neil Thorne (Ilford, South)
I am glad to follow my hon. Friend the Member for Mid-Kent (Mr. Rowe) and delighted that he was able to join us this morning. He made some important observations about occupational pension schemes that follow from the intervention, which he heard, that I made in the speech of my hon. Friend the Minister for Social Security. I congratulate my hon. Friend the Member for Eastleigh (Sir D. Price), as have many of my colleagues, on his introduction of this important Bill.
I know that my hon. Friend the Member for Mid-Kent was joking when he said that many Opposition Members 617 were waiting to speak. There have been one Liberal Member, no Members of the Social Democratic party and only four Labour Members on the Opposition Benches. That is an appalling commentary, considering the way in which they hold themselves out as the champions of pensioners and those on low incomes. It shows, when the chips are down, what they think of those people.
The most important part of the Bill is where it attempts to overcome the resentment felt by so many people. Female pensioners resent the fact that their working lives are cut short when they feel that they have a lot more to offer. Therefore, particularly in the Civil Service, where females have to reach a certain position by the age of 55 to merit further promotion, females find themselves cut off from such opportunities at an earlier age than their male counterparts. On the other hand, many men resent the fact that women who retire at the age of 65 receive a higher pension than men of that age because of the additions to women's pensions for service after the age of 60. My hon. Friend the Minister said that he would be looking into the flexibility of this system. That is wholly welcome and will go some way' to alleviating those two major problems.
There are major psychological problems for women, who feel that they are cut off in the prime of their working lives, which is wrong. It is wrong if one has made promises to people that they will have an opportunity to retire at a certain age to which they are looking forward then to change the system when they reach that age. Therefore, any new system must be phased in over a period. This matter deserves our careful attention. I know from my hon. Friend's remarks that it will receive such attention by him and his officials.
Another aspect that may be the direct responsibility of my hon. Friend—if not, I am sure that he will be consulted on it—relates to pensions for service widows. I am not sure whether he is aware that service widows' pensions differ greatly. The widows of service men who have given their lives in the service of the country in the south Atlantic and Northern Ireland are dealt with more generously than were the widows of service men who gave their lives in the second world war. Such disparity is wrong, and the two should be brought closer together. It is time that we showed our gratitude to those service men who gave their lives to preserve what we now enjoy by paying due respect to the widows they left behind, so that they need not claim social security benefits to make up for the inadequacies of the system.
If an officer serves his full term and marries the day before he retires, his widow will receive a pension. Recent regulations have made it possible for the widow of a service man who got married the day after he retired to receive a similar pension. However, that was not the case 10 years ago. One may say that we should look after only those widows who supported their husbands while they performed their service, but we forget that it has often been in the national interest for a service man to remain single during his service because it makes him much more flexible. Moreover, the services had no need to provide married accommodation, nor marriage allowances. Where is the justice in victimising the widow of a service man who served his country faithfully, and who got married only after retirement, by not giving her a pension? If my hon. Friend the Minister is not responsible for this matter, I am sure that he will be consulted about it by the services. 618 I hope that he will offer the advice that he normally offers in such circumstances, which is to do the right thing. At present the right thing is not being done for those women.
My hon. Friend the Minister acknowledged my intervention about portable pensions. I hope that we can provide the portability that is essential to a healthy industrial economy, but we must also be aware that some employers give an additional pension to make up for the fact that they do not have to spend much time training someone else to do that job.
My hon. Friend mentioned the desirable effects on the economy of council house sales, which give people a greater stake in life and represent a kind of pension because they can build up some credit for their old age. However, we should view the sale of property in one's declining years to others with a right to remain for life with some concern, because several companies offer to purchase property in return for a pension. We should sound a word of caution to anyone who contemplates doing that. Those who take advantage of such offers are giving away a substantial element in their future care and family commitments. I have noticed during the course of my long political career that old people who have assets to leave to their relatives receive more family care than those who have no assets. I welcome the council house sales programme because it helps considerably in that respect.
§ Mr. Thorne
Yes; and it is an extremely important aspect. The WRVS has been given an increased grant by the Government during the past few days for the specific purpose of helping to provide extra care. I hope that that will deter people from throwing away the opportunity to pass on an inheritance to their nearest and dearest, and thus ensure a satisfactory family connection for the rest of their lives.
I shall not delay the House longer, because I am anxious to hear what my hon. Friend the Member for Eastleigh has to say. I am grateful to have had this opportunity to speak in what I consider is one of our more important debates.
§ Mr. Deputy Speaker
Does the hon. Member for Eastleigh (Sir D. Price) have leave of the House to speak a second time?
§ Sir David Price
With the leave of the House, I should like to reply to the debate. I thank all those who have taken part in it for the constructive way in which they have approached my Bill. I am deeply touched by the warm reception that it has received.
We have had an interesting debate. Every hon. Member who has spoken, apart from covering the general points, has made an individual contribution. In fact, there were so many that I fear I shall not have time to do justice to them all. Perhaps the House will forgive me, therefore, if I go straight to the reply of my hon. Friend the Minister for Social Security.
I note the number of reassurances that he gave me. His first reassurance was that the Secretary of State's inquiry which was announced last Wednesday, and to which I 619 referred in my speech, will be completed by the end of the summer, or by early autumn at the latest. That is important. As I understood my right hon. Friend's speech on Wednesday, he looked forward to legislation in the next Session of Parliament on part, if not all, of the results of that inquiry. I was not quite clear whether it would cover all the results, whether the matters that we are debating today would be included, and whether it would cover the aspects of occupational pensions that so worry us. Does my hon. Friend wish to intervene at this point?
§ Dr. Boyson
Perhaps I might help my hon. Friend on that matter. Neither I nor my right hon. Friend the Secretary of State can say what will be in the Queen's Speech, as all hon. Members know, but there is an option for legislation in the 1984–85 Session on early leavers, disclosure and the other matters.
§ Sir David Price
Clearly there are two arguments, both in the Department and in the House. Perhaps it is better for the Government to wait and introduce a large pensions Bill to cover the matters that we have discussed today, and the important aspects of occupational pensions. Portability, early leavers and disclosures in occupational pensions are not in my Bill because of the limits on what one Back-Bench Member of Parliament can attempt to do in a Bill. It is not that one is not aware of their importance. The next reassurance that I was pleased to receive from my hon. Friend, although I did not think that I required it—plainly Opposition Members thought that they did—because I thought that it had been given by my right hon. Friend last Wednesday, was that the inquiry and its recommendations will be within the broad strategy of the 1975 all-party pension settlement.
When I first came to the House, we used the word "agreed settlement" in relation to denominational schools. My hon. Friend used the word "settlement" in relation to the 1975 Act, which settled the fact that in the future people could look to two sources for their retirement income—the occupational pension and the state.
I appreciated my hon. Friend's acknowledgment that the time had come for action across the pension front. We could all produce appropriate quotations. I say that we are taking the tide at the right moment. He recognised that the report and the recommendations of the Select Committee in respect of flexibility and equality between the sexes—the two objects of my Bill—form a major input into the inquiry. He went so far as to say that he thought that today had started the inquiry. I was glad to hear that.
My right hon. Friend and my hon. Friend's position seems to be that my Bill is right but that the timing is premature. That is not foreign to my disposition. I have often found myself a little ahead. I do not think that one is ahead. I think that these matters are circular. Governments of all parties are rather like merry-go-rounds. They are one of the prancing horses. We simple Back Benchers, the ordinary men in the street, hold our views, and at one moment the prancing horse is at the opposite end and the Whips say "Dear boy, you are rocking the boat." Six months, two years or four years later the roundabout has completed its course of 360 degrees and one is in the full flood of respectability and orthodoxy. Today's rebel is tomorrow's conformist. 620 Conversely, today's orthodoxy is tomorrow's rebellion. Provided one stays here long enough one is in and out of fashion rather like the length of women's skirts.
The Bill is right, but it has been introduced at the wrong time. If it is any comfort to the hon. Member for Wolverhampton, North-East (Mrs. Short), during the last Parliament I chaired a Select Committee on a matter about which I will not bore the House. We took a view diametrically opposed to that of the Government. We had a debate and I voted against the Government on a three-line Whip. Two years later I am glad to say that the Government did what we recommended. I ask the hon. Lady not to be too discouraged.
I shall make a point about the standing in the House of Select Committees and their reports. If hon. Members serve for a long time on a Select Committee, and believe in the system, they must carry the views that they form on the Select Committee to the Floor of the House. There must be no doubt about that. I shall not mention the names of those hon. Members who have or have not done so; I am making a general point. If we want to make the Select Committee system a successful part of the parliamentary scene we must maintain the views that we form in Committee on the Floor of the House.
I do not think I dealt sufficiently with job opportunities in early retirement. I took a more optimistic view of that than the Select Committee because if one studies the figures produced by the Department of Employment on the category of citizens that it calls "economically active" one finds that they include those in employment, those who are regrettably seeking employment and those who are temporarily sick. One would also discover that there are 513,000 women of the ages of 57, 58 and 59. But those past the age of 60, who are currently economically active, number 262,000. In other words, roughly half of the economically active women have not taken retirement at 60. That suggests to me, first, that the idea of moving up to this notional age of 63 must appeal to a good many ladies and, secondly, that already half of them are working after 60. So if the common notional age goes up to 63 I do not believe that a great many more will stay on at work, whereas one would expect about 250,000 men of 63 and 64 to take advantage of the common notional age of 63. There would clearly be a net gain on those figures.
The hon. Member for Wolverhampton, North-East, for whose support I am most grateful—she was grateful to me for my support of her Select Committee so let us call it mutual—referred to the earnings rule. We have not discussed the earnings rule in the context of flexibility of pensions but it is an important consideration. I believe that we shall have to retain the earnings rule for those who take abated pensions before the common notional age—in the case of my Bill, it is 63—because the consequence of abolishing the earnings rule would be to frustrate the whole concept of abatement. It is interesting to know that, whereas in February of this year the gross cost of abolishing the earnings rule was given by the Department as £140 million, today the gross cost would be £160 million, although the earnings limit has increased from £57 to £65. I found that anomaly a little difficult to understand until I looked into the matter and discovered that benefits have increased and that, although the earnings rule limit has been raised, it is costing more even at the higher earnings limit. I hope that I shall be able to have further discussions with my hon. Friend on this matter.
621 The hon. Member for Wolverhampton, North-East talked about European pressure both for equalisation and flexibility. In the interests of brevity, I shall make only a passing reference to what is happening in Europe but it is extremely important for us to take on board. The longer we are members of the Community—it is acknowledged even by the Opposition Front Bench that we are likely to remain members of the Community—the more it will influence our affairs. The Council of Europe, in a document of 10 December 1982 entitled "On the Principles of a Community Policy with regard to Retirement Age", recommendedMember states to be guided by the following principles in order to achieve the progressive introduction of flexible retirement within the framework of different retirement pension systems and taking particular account of the freedom of collective bargaining.There will be more pressure for flexibility, as we have seen in other areas of social policy. There will be equal pressure for equality of age.
It is interesting to observe that an EC directive of December 1978 makes a definite and declared exception in respect of state schemes which at that point already had a difference in treatment between men and women. That puts the pressure on the occupational pension side. If we are trying to force equality on the occupational pension side, it must also be on the state side. Going back to the principles of the 1975 Act, I believe that the two must go in parallel. It is also interesting, in the European context, to see what is happening in Germany, where there is a move to enable people to retire at 59 on 65 per cent. of their pay. That is a great deal more than what people who retire at 65 get here——
§ It being half past Two o'clock, the debate stood adjourned.
§ Debate to be resumed on Friday next.