OLD AGE PENSIONS BILL. (Hansard, 31 July 1924)

§ THE UNDER-SECRETARY OF STATE FOR THE COLONIES (LORD ARNOLD):

My Lords, this Bill deals with the removal of what is known as the "thrift disqualification" from the existing system of old age pensions. This is a matter on which all political Parties were in agreement at the last General Election and pledges were given in the Election manifestoes of each of the three Parties to remove this disqualification.

Your Lordships will be aware that the Majority Report of a Treasury Committee which considered this question in 1919 recommended that the "means limit" should .be abolished and that pensions should be payable to all British subjects at the age of 70. This proposal, which would cost an additional £18,000,000 a year, must certainly be ruled out in the present state of the national finances, but within such limits as the country can afford this Bill removes the grievance which is often felt that by reason of thrift people are debarred in their old age from State assistance to which they would otherwise be entitled. In translating this intention into a scheme which is administratively practicable, the Government have been forced to the conclusion that it is impossible to discriminate between the various kinds of thrift, whether the thrift has taken the 195 form of an annuity, an allowance from a friendly society or interest on capital saved and invested. Nor do the Government discriminate in this Bill between means resulting from thrift and means resulting from benevolence. Accordingly, this Bill in effect proposes a concession which applies to means resulting from both thrift and benevolence.

Although there is a demand for the complete removal of the means disqualification, the feature of the old age pension scheme in the past which has given rise to widespread agitation is that money which a man has saved for himself is taken into account at present and his pension is correspondingly reduced. This Bill is intended to deal with that grievance, and the penalty on thrift is substantially alleviated by the present measure. It is not necessary to detain your Lordships more than two or three minutes in putting before you its provisions. Let me take one or two illustrations in order to make clear what is effected by the Bill. Hitherto, a man who had means of 10s. a week—and under the term "means" are included earnings or savings or income from savings or benevolence—I say a man who has 10s. a week from whatever source is entitled to the old age pension in full, that is, to another 10s. a week. Thus, he can have with pension a total income, of £l a week. If, however, his total income is more than 10s. a week, his pension is correspondingly reduced.

I will now indicate what the position will be under the new scheme as enacted by this Bill. First, I will take the case of the man over 70 who is not earning anything. The plan is, broadly speaking, that such a man will be allowed an income himself of 15s. a week from savings or benevolence or both. If his total income from these sources is exactly 15s. a week, he will be allowed to have the old age pension of 10s. a week, making a total income of 25s. a week. Lastly, I will take the case of a man over 70 who is earning money. His pension works out rather differently. For instance, a man may be earning, say, 16s. a week and have other means from savings, and so forth, of 9s. a week, making a total of 25s. a week. In this case he will only be allowed to deduct from his total income of 25s. a week the 9s. a week which comes from savings and so forth. This would 196 leave him with 16s. a week, and to this would only be added 4s. a week pension. The point is, broadly speaking, that the excess of earnings of a man over 10s. has to be deducted in arriving at the amount of pension which he will receive.

To indicate a further benefit under this Bill I would explain that the man I have just spoken of could have as much as 15s. a week (instead of 9s.) from savings and still get the same pension—that is to say, he could have 15s. a week from earnings, 4s. a week from pension and 15s. a week from savings, making a total income of 35s. a week, but not more. May I say a few words in explanation of this last illustration. The reason for the provision in the Bill in respect of earnings is that in the existing state of the labour market the Government do not consider it desirable to encourage the employment of old people over 70 years of age. But I may point out that the present position of persons who are earning money is in no way prejudiced by this Bill, and so far as they have means derived from sources other than earnings they will share in its benefits.

Finally, I should like to give your Lordships an idea of the extent to which the present system of old age pensions will be modified by these proposals. The population over 70 years of age is 1,600,000, and the number of old age pensioners is 917,000. Thedata on which to estimate the number of persons who will be eligible for pensions for the first time are very hypothetical, but it is thought that these will number about 173,000. Thus, with the 917,000 existing pensioners, the total number of pensioners may reach 1,090,000. The estimated cost of the scheme this year is £2,000,000: for the first full year it will be about £4,150,000; it will continue to rise, and in a few years' time will reach £7,000,000. It may interest your Lordships to know that the reason for the estimated advance of the future cost to £7,000,000 is due to two factors—first, the increasing longevity of the people, and secondly, about 70 years ago there was an exceptionally high birth rate. These two factors coming into operation, the cost will be, in a few years' time, about £7,000,000. I have now briefly, but I hope adequately, outlined the provisions of the Bill, and I beg to move that it be read a second time.

197 Moved, That the Bill be now read 2²— (Lord Arnold.)

§ LORD EMMOTT:

My Lords, I should like, even at this late hour, to say a very few words in support of this Bill. Had time allowed I certainly should have had some criticism to make as to its form. I should also have liked to go into the reasons why I do not think this can be regarded as a permanent settlement of the question of old age pensions, As it is, I will only say, in regard to the matter of form, that I think this Bill is one of the worst cases of legislation by reference that we have had, but as that has been a complaint about legislation ever, since I entered Parliament, and I have no doubt will be a complaint for the next 100 years, I will not waste more time on that part of the question. This is another of those Bills that we certainly cannot amend without infringing on privilege, even if we wanted to amend it, and I do not suppose we do. Even in another place the Financial Resolution was so strictly drawn that amendment, except on matters of detail, was almost impossible there. In fact, amendment of any material character was rendered quite impossible by the form in which the Resolution was drawn. There is one defect in the Bill in that earnings are not denned. In another place a strong effort was made to get a satisfactory definition of earnings, but it was found impossible to do so.

This Bill is, however, a real encouragement of thrift. The noble Lord in charge of the Bill has explained what its provisions are, and I will not follow him in regard to them. I simply say that of all things needed at the present time, an inducement to thrift is most needed of all, and the system of old age pensions up to the present has been a penalisation of thrift. It is a curious incongruity that in this Bill unearned increment is treated with special favour, whereas under the Income Tax law it is treated with special disfavour. Personally, I do not complain of the treatment of it in this Bill, because I have never been able to understand the attitude of mind that accepts as beyond argument the view that unearned increment should be treated less favourably than earned. This Bill is a real boon to over 200,000 people—173,000 mentioned by the noble Lord, and a considerable number at present receiving pensions of less than 198 10s. who will have their present pensions increased.

I do not feel inclined to be too critical that the Bill does not go further. The first necessity at this time is economy and thrift. The nation is much nearer to financial disaster than it believes, and if the Lord Chancellor will allow me to say so, a remark like his the other day in connection with another Bill, that it only cost an additional one per cent, of the income of this country, absolutely makes me shudder. One per cent, of the income of this country is two or two and a half per cent, of the wages paid. It is sixpence on the Income Tax. It is half the Super-Tax now paid by all the rich people in the country, and it is an enormous burden to add to the taxes we already have depressing our industry and making foreign competition so extremely difficult. I do not think we can afford more and this instalment is as great as we can give.

I would only say one word on the point that this is not a permanent settlement. It is against the findings of the Committee to which the noble Lord has referred, and while it shifts the amount and the area it does not do much to remedy the inquisition grievance of which old people complain. It is indefensible that a man over seventy years of age who is hale and vigorous should be penalised as he is by not being allowed to earn more than 10s. a week without suffering in his pension. I think the allowance to him should be more. A permanent solution of this question will, I hope, be found on another line; in a system of contributory insurance in which all insurances may be brought together—national health insurance, unemployment insurance and old age pensions—and under which a man who has contributed to such a scheme of insurance will have the right to an old age pension and will not have to have his circumstances inquired into. That I hope is the line which will be taken in future years. I believe it would prove to be a permanent solution.