§ Order of the Day for the Second Reading read.
§ THE FIRST COMMISSIONER or WORKS (VISCOUNT PEEL)
My Lords, this Bill, of which I beg to move the Second Reading, is intended to replace the provisions affecting teachers in pensionable service under the School Teachers (Superannuation) Act, 1918, which was the first comprehensive Act providing superannuation benefits for teachers, and the Elementary School Teachers (Superannuation) Acts, 1898 and 1912, which deal with certificated teachers in public elementary schools. The Act of 1918 was framed on a non-contributory basis, but by the amending Acts of 1922 and 1924 provision was made for contributions from the teachers, which expire on April 1, 1926. Difficulty arises in putting contributions into a non-contributory Act, and it was in order to consider what was the permanent provision to be made for the teachers that a Committee was set up under Lord Emmott to consider the whole que6tion. I may, perhaps, be allowed to 180 say here that the Government are very much indebted to Lord Emmott for the great trouble that he and his Committee took in going into this most technical and rather intricate subject. This Bill is very largely framed upon the proposals of his Committee. In one or two points it departs from those proposals, and I trust, therefore, that he will deal kindly with the Government because they have framed nine-tenths of their Bill upon the inspired text.
I come then to the main object of the Bill, which is to provide superannuation benefits for teachers who are in contributory service after April 1, 1926. Teachers who retire before that date will remain subject to the provisions of the Act of 1918 as slightly modified by the Bill. The qualifications for superannuation allowances and the rates of those allowances are substantially the same as those laid down under the Act of 1918. Perhaps one of the important alterations made in the qualifications is that, whereas under the Act of 1918 teachers who did not satisfy the Board on their entry to recognised service of their physical capacity would not be entitled to benefit., these provisions are not repeated in this Bill. Any one, therefore, who is considered fit to serve as a teacher in grant-aided service is eligible for benefits under this Bill. The provision debarring aliens from benefit is not repeated in the Bill.
Now, except in the case of allowance for physical infirmity, the minimum pensionable age is sixty and the normal period of service is thirty years of teaching service or service analogous to teaching, of which ten years must have been recognised or contributory service, but generally service in a grant-aided school, for convenience to be described as grant-aided service. But to meet the convenience of some teachers who have entered the profession late, or of others who may wish to retire before the age of sixty and wait for their pension, it is possible to qualify on a service of two-thirds of the number of years between the age of entry into grant-aided service and the age of sixty-five, provided that there are ten years of grant-aided service. This is a new provision which was not contained in the Act of 1918. There is also a provision which is to the advantage of married women. If a married woman is 181 absent from service the period of thirty years' qualification is reduced by the number of years of her absence up to a maximum absence of ten years. This provision is more to the benefit of the pensions of married women than were the similar proposals in the Act of 1918.
The superannuation allowance itself is, of course, one allowance, but it is divided into two portions. The first is an annual allowance at the rate of one-eightieth of the teacher's average salary—the "average salary" means the average of the last five years of grant-aided service—and an additional allowance or lump sum of one-thirtieth of the same salary for each year of grant-aided service. A teacher who breaks clown while in grant-aided service after ten years or more of such service is entitled to superannuation allowance on the same basis, and for a shorter period of service to a gratuity of one-twelfth of his average salary for each year's service. Provision is made in Clause 5 for the payment of death gratuities, in respect of the service of teachers who die in grant-aided service after not less than five years' service, equal to an average year's salary.
Now, all these benefits under the Bill are given as a matter of legal right, and can be withheld or reduced only in the case of misconduct which causes a teacher to cease his employment or accelerates his death or retirement. It is expressly provided that in no case shall a teacher receive less than the value of his own contributions, including contributions under the Acts of 1922 and 1924, with three per cent. compound interest. This may not at present be of great importance to the teachers but as time goes on it will be, of course, of considerable value. Probably the value of a teacher's contribution after thirty years of contributory service will be about twice his average salary.
As regards the proportions in which these contributions are to be paid, the Bill provides, as do the Acts of 1922 and 1924, for contributions from a teacher equal to 5 per cent. of his salary and for similar contributions from the employers, as from the date of April 1, 1928. For the first two years all the contributions of the latter, that is, of the employer, are paid by the Exchequer. The Bill provides that if a local educa- 182 tion authority is the employer the contribution of the authority shall rank for the Board's grant as if it were an expenditure on salary. In the case of public elementary schools the authority is treated as the employer. The effect of that is that in the case of teachers in public elementary schools, except in a very few cases, 60 per cent. or three-fifths of the authority's contribution will come back to the authority by way of grant, and 50 per cent. or one-half in the case of other teachers employed by the authority. This is rather more favourable to the authority than the suggestions made in the Report of Lord Emmott, in which it is suggested that in that case the State and the employer should divide the 5 per cent. between themselves in equal proportions. It is not possible to make the same kind of arrangement in the case of those employers whose grants are not on a percentage basis. But I understand that in these cases the contributions of other employers in the case of non-rate-aided but grant-aided schools will be dealt with under the Grant Regulations.
The phrase "grant-aided service" is not, perhaps, absolutely accurate when it is used as a substitute for "recognised or contributory service." In fact, not only are some forms of non-grant-aided service actually pensionable, but the Bill contains provisions enabling various forms of non-grant-aided service to count towards the ten years of recognised or contributory service required to qualify, and bringing the salary for such service, if it comes within the last five years of service, into the calculation of the average salary, although the years of service do not actually count as pensionable years under the Bill.
Under Clause 21 of the Bill, in addition to this, power is conferred on the Board of Education, with the consent of the. Treasury, to make schemes for applying its provisions, with modifications, to the teachers in private schools outside of those in which service is pensionable under the Bill, and to persons employed as teachers by other Government Departments or in institutions aided by them, and to give effect to reciprocal arrangements made with authorities administering statutory schemes of superannuation for teachers in any part of His Majesty's Dominions. These particular provisions, of course, 183 follow the lines of Lord Emmott's Report and their object is to promote a movement throughout the teaching profession to make it. possible for a teacher so far as practicable to leave service which is pensionable under the Bill for other forms of teaching service, or services connected with teaching, without prejudicing his position with regard to his pension.
The years of service in Scotland and any other forms of service mentioned do not count for years of pensionable service, as I have said; but in the case of organisers, with the specified previous teaching experience, employed by local education authorities, the Bill provides for the treatment of their service, after April 1, 1926, in the same manner as that of teachers in grant-aided service. But it has not been possible for the Exchequer to take over the whole charge in respect of their previous service. No contributions have been paid in respect of it, and the Bill provides that in respect of this service before April 1, 1926, one-half of the combined teaching and organising service, or total grant-aided teaching service, whichever is the greater, shall be taken as pensionable service. In Clause 14 there is a provision which enables the employers to buy for the organisers a pension in respect of the years of service which do not rank for a pension under the Bill. Various matters of detail are left to be dealt with by statutory rules made by the Board, with the consent of the Treasury, and the Bill requires that those rules shall only be made after consultation with the representatives of local educational authorities and of the teachers affected. This, of course, is intended to carry out, though in a different form, the proposals of the noble Lord about the Advisory Committee, and to secure that those matters (as he suggested) shall be discussed in a formal and confidential fashion with those who will be immediately affected.
In Clauses 17 and 18 the Bill enables service with the Forces during the great War to be included. The Bill is drawn very widely in this respect, but I would like to say that this matter was very closely considered by Lord Emmott's Committee—and very carefully and very sympathetically considered by his Committee—and they came to the conclusion that they could not recommend a depar- 184 ture from the principle that War service should only be recognised where a person had been a teacher previously to his War service. The next point I have to deal with is the question of finance, and that is the one point on which the Government have not found it practicable to adopt all the proposals of Lord Emmott. I understand he has placed upon the Table of your Lordships' House certain words which regret that the Government have not seen fit closely to follow his recommendations. One very important financial recommendation has been followed, and that is that upon the Exchequer is laid the whole burden in respect of past service.
§ VISCOUNT PEEL
I will give some figures a little- later on to my noble friend. Instead of providing for a fund into which contributions should be paid, contributions are to be paid to the Board, and by the Board to the Exchequer. The State undertakes the liability of making payments under the Bill as they fall due, and the position in respect of these financial obligations is shown in an account which is to be credited with the contributions, and treated as bearing three and a half per cent. interest. I should like to add that it is intended that this three and a half per cent. interest should be a fixed sum for a long period, equalising as it were the prices of money during many years.
Several objections have been made to this proposal. The first is that the security of the. teachers is diminished, and that at some future date larger contributions might be demanded of them in order to secure the financial stability of the scheme. The second objection, I think, may generally be said to be that the plan is not consistent with sound principles of finance. As regards the first objection, which more particularly affects the teachers, an Act of Parliament would be necessary to alter their contributions, and supposing you had a Government which was dishonest enough to try to make some alteration, it might be suggested that if a fund was set up they would be also dishonest enough to make a raid upon that fund, but if you exclude, as I think we fairly may exclude, the possibility of dishonesty in any future Government, and 185 put it upon the same basis of honesty as the present Government, we may say that as regards security the teachers would have better security than they would have if a fund were established. They have, in fact, the full guarantee of the Treasury. If there was a fund of the sort indicated it is possible that by means of a higher rate of interest the fund might increase a little more rapidly, but many of us know that invested funds have a way of diminishing as well as of increasing, and, therefore, the security given by the Treasury guarantee would be far better than a fund which was liable to these risks and fluctuations.
As regards the second objection—the canons of finance—the method adopted in the Bill is that which is usually adopted by the Government of this country—that is to say, in paying for liabilities as they arise, sometimes (as in the case of War Pensions) apparently at a heavier charge to the taxpayers of the present day as compared with those of the future, and sometimes (as in the case of this Bill) with apparently the opposite effect. Supposing the system advocated by the noble Lord, Lord Emmott, were adopted, undoubtedly the burden on the country would be heavier by several millions for a considerable number of years, but would ultimately, after forty years, be lighter than in the Bill. It does not follow, however, that the taxpayer of the future would be better off if the proposals of the noble Lord were accepted. If the money that was going to the fund were applied to the reduction of debt it is quite clear the burden would be equalised, but whatever arguments the noble Lord may put forward in favour of a fund, it would not, I think, be possible to contemplate the setting of it up in view, especially, of the very heavy burden that it would throw upon the Exchequer in the next few years. Bearing in mind that the Exchequer bears the whole cost of the back contributions, besides making a large contribution to the pensions of the teachers, they may fairly, I think, be allowed to place that burden upon the taxpayer in a way which falls less heavily upon the taxpayer of the present time, and possibly rather more heavily, on the taxpayer of the future, who by that time may be able, through reduction of Debt and so on, to take better care of himself.
The details of the Bill are rather complicated, but I think I have said enough 186 to show that it is designed generally to secure adequate pensions for those teachers who serve in the grant-aided schools of the country, and to establish a scheme which will facilitate freedom of movement throughout the teaching pro fession, not only in England and Wales but in the whole of the British Empire, and, further, that this Bill is designed also to settle a long and very controversial subject in the interests, and I believe also to the satisfaction, of the teachers. I beg to move.
§ Moved, That the Bill be now read 2a.—(Viscount Peel.)
§ LORD EMMOTThad given Notice to move to insert, after "That," the words "this House, whilst regretting that the contributions to be paid under the Bill by teachers and employers are not to be funded, but to, be used as appropriations-in-aid for the current expenditure of the year in which they are paid, resolves that." The noble Lord said: My Lords, I wish in the first place to thank the noble Marquess the Leader of the House for so readily ands courteously agreeing to put down the Second Reading of this Bill for a day on which it was convenient for me to be present. I should also like to thank the noble Viscount who has moved the Second Reading, for the kindly recognition he gave of the services of the Committee over which I had the honour to preside. I will deal later with the actual Motion on the Paper. Before doing that I want to deal with the rest of the Bill. The noble Viscount has asked me to be tender with it; but he had no need to make that appeal. So far as the rest of the Bill as a whole is concerned, I say it is a good Bill and one to which I give a wholehearted and even enthusiastic support.
§ It is true that the Bill is extremely complicated in ids, terms, and if your Lordships will only look at paragraphs (c)and (d)of subsection (2) of Clause 13, and subsection (4) of Clause 20, you will see there language which may be clear to lawyers but which is calculated to make the brain of the ordinary layman reel. Probably complication in this question is unavoidable for the whole subject is complicated. It was a very tangled situation with which the Committee over which I had the honour to preside had to deal. It was an example of the evils of crude, hurried 187 and ill-thought out legislation passed by a House of Commons quite insufficiently advised of the cost of the transaction they Were being asked to sanction. The scheme of 1918 was a non-contributory scheme, and in proposing it to the House of Commons the Government absolutely ignored the excellent contributory scheme working most satisfactorily in Scotland. They never appeared to have appreciated that the result of their action in 1918 would be to break up that excellent Scottish scheme which was working so well.
§ After the 1918 Act the Burnham Committee was set up and the Burnham scales came into force. The original Bill gave an advantage to the teachers of that day equivalent to an increase of salary of 26 per cent. That is the advantage they got from a non-contributory pension scheme. But when the Burnham scale more than doubled their salaries—and that was the effect—the advantage they obtained from pensions alone was equal to something over 60 per cent. increase on the average of their salaries at the time when the 1918 Bill was introduced. After the hot fit came the cold; after the spacious days of 1918 to 1920 came what is vulgarly known as the "Economy stunt." The Geddes Committee was appointed, and the Geddes Committee, among many other things, suggested that teachers ought to contribute to their pension scheme. The Government accepted that proposal and legislation to that effect was hurriedly introduced into the other House. Of course, that legislation made an alteration in the contract under which the teachers were serving, and the teachers not unnaturally regarded it as such a serious alteration as to amount to a breach of faith.
A Committee was appointed with Mr. F. Acland as Chairman, with these terms of reference:—
To report, whether in fixing the Burnham scales any undertaking was given or implied that pensions should continue to be non-contributory.
The Chairman of that Committee brought in a draft Report in which he asked the Committee to agree with him that they were bound to find that an undertaking was implied, but the majority of the Committee, by four against three, a bare majority of one—and the present Home Secretary, Sir W. Joynson
Hicks, was in the minority—decided that no undertaking was implied. I do not think that in the whole course of my Parliamentary experience I have ever known a transaction more unsatisfactory and reflecting more discredit on the powers that be. That was the situation with which we had to deal. We had no tabula rasa on which to write; we had to make our own scheme. Undoubtedly if the whole matter had been referred to us as res integra we should have suggested a scheme similar to the Scottish contributory scheme. But we found the pitch queered by this hasty and hurried legislation of which I have already spoken, and we had to do our best.
§ The noble Viscount was good enough to speak kindly of the Committee over which I had the honour to preside, and I should like to pay my tribute to my colleagues. We had the invaluable assistance of experts in various Government Departments, the Treasury, the Board of Education, the Scottish Education Office, and the aid of the Government Actuary, a singularly able civil servant. We had also another actuary of great reputation, Mr. Fraser, and the assistance of Sir Michael Sadler and Miss Tuke, both eminent educationists, and Lord Kenyon, representing local government. We had no members of the House of Commons, and for a Committee of this kind I do not think that is a bad precedent. I never had the pleasure of working with a Committee which appeared to be more ready, every member of it, to throw his or her mind into the common stock, and I should like to pay a special tribute to the civil servants who were my colleagues. They tried hard to modify what I may call Departmental predilections in order that we might present a sound Report and, in all its essentials, a unanimous Report. I asked two of these civil servants where they got their humanity from. I will not give you their names nor can I tell you in public the very interesting reply they made, but I must say that all these civil servants appeared to be trying their best to look at the broader human aspects of this question.
§ If I have said anything hitherto which may make your Lordships think that I regret the enormous improvement in the position of the teachers owing to the Burnham scales and the superannuation scheme, I beg of you to put that thought on one side at once. There was a sentence 189 in our Report which ran something to the effect that all felt, and some most strongly, that there is much in the past to be atoned for. No doubt teachers were grossly underpaid in the past and the Burnham scales and superannuation schemes have probably not done more than justice to remedy the unfortunate position they were in years ago.
§ The Bill, broadly, as the noble Viscount has said, where it is not more generous than the proposals we made—and it is in one or two respects—carries out the recommendations of the Committee over which I had the honour to preside. I regret that the thirty years qualifying service is still retained, but I admit the great concessions that are made, particularly in the case of women, in regard even to that point. The scale of benefits of the Bill of 1918 is preserved, teachers' contributions are maintained, as the Committee advised, and I congratulate the Government, and particularly in this case the Chancellor of the Exchequer, on having secured the agreement of local authorities to their contributions on lines which, if they are not precisely as we recommended, come very near to being so.
§ I think it was a great achievement to get the agreement of the local authorities to contributions on their part. It is a wrong system altogether to have the men who have to make the appointments and fix the salaries entirely divorced from the Cost of superannuation. They ought to bear their share of the financial reponsibility. The State continues to bear the whole cost of back service. Teachers will be able to withdraw their contributions on leaving the service with 3 per cent, compound interest, and, in case they rejoin the service—as, of course, many-women do who marry and become widows—they are able to resume their old posit ion as regards superannuation by repay-ins: what they have withdrawn with 3½ per cent, interest. That is, I think, a very fair and reasonable provision. Gratuities in regard to death and disablement are satisfactory. Complete reciprocity is established between service in England and service in Scotland. I do not quite know what has happened as regards service in Ireland, and perhaps the noble Viscount will, if he can, inform the House about that before this debate concludes. I understand that Ireland is rather left high and dry, and I think the House 190 should be informed as to what has happened in that respect. There is also complete reciprocity between the teaching service in the schools and in the Universities. Teachers may go up to four years abroad and continue to count those years to pension on payment of the 10 per cent. which would be paid by the teacher and his employer if he remained in this country. That is a very just and proper provision. Organisers and inspectors who are appointed by the State or by the local authority are allowed to participate in this scheme on fairly satisfactory terms.
§ A number of minor cases of hardships, with the details of which I need not trouble your Lordships, in regard to teachers in blind and deaf schools, in regard to War service and in regard to calculation of full-time service, have been remedied, and I desire especially to thank the President of the Board of Education for having gone distinctly beyond our recommendations in regard to one point—namely, the bringing in of as large a number as possible of non-grant-aided schools. I have given a good deal of time and attention during the last three years to educational subjects, and I have been a little appalled to find that, whilst. the superannuation scales and the Burnham scheme together have. done a great deal for the teachers, they have also, incidentally, had en extraordinarily stereotyping effect in tending to keep teachers in their present posts. The proposal to bring a number of non-grant-aided schools, even including private schools, into the ambit of these superannuation schemes on certain terms does something to restore a certain amount of fluidity to the teaching profession and is a reform of great value. In leaving this branch of the question I cannot too highly praise the statesmanship of Lord Eustace Percy and of His Majesty's Government in this respect.
§ It is an ungrateful task to turn from the very sincere praise that I have given to the great bulk of this Bill to the one major point on which I feel that the Government are making a profound mistake. My Committee was unanimous in supporting the principle of funding, at least for the contributions of teachers and employers. So far as I am concerned, I would have gone a good deal further than that, but it was not practicable. The Government, however, have decided to use these con- 191 tributions as appropriations-in-aid for the ordinary expenditure of the year in which they are paid. That is a new and an un welcome precedent in an affair of this magnitude. I want to say a word or two about precedents. The case of the Civil Service is no precedent at all. These teachers are not civil servants, and the Civil Service scheme is non-contributory. My own opinion, for what it is worth, is that the Civil Service scheme itself is mistaken in that respect. I believe that the moral effect of contributions, with the necessary corollary of a power of withdrawal of the contributions on leaving the Service, is an infinitely better lesson in thrift and in the desirability of saving for old age than any non-contributory scheme could possibly be. I am totally at war with those people in this country, in eluding a few, I believe, but I hope very few members of my own Party, who are opposed to the principle of contributions in regard to insurance and pensions. The Civil Service scheme, I say, is no precedent at all.
§ There is, it is true, a precedent in the case of the Poor Law officers and the police. It is rather old history, but the Bill dealing with their contributions makes no provision for funding. But, besides this matter being relatively small compared with the question of the teachers', Poor Law officers' and police pensions are notoriously discredited because they were based on the same happy-go-lucky principle that this Bill based upon. What happened then ought to have been a stern warning to the Government not to follow the example set by that Bill. In the case of the Local Government and other officers Superannuation Act, 1922, the Government of that day pursued an entirely different course. By that measure not only must the contributions of the employees be funded but a like amount is to be paid in by the employer, the local authority, and the local authority is also bound to add each year the actuarial cost of back service, estimated on a maximum period of forty years. for all who contribute to the scheme and may become beneficiaries under it.
The wording of the clause—I leave out a few unessential words—is as follows:—
Such amount as may be certified by an actuary … as necessary in order that the fund may he solvent, to be calculated so as
to cast upon the local authority, so far as may be, an equal annual charge for a period not exceeding forty years from the appointed day.
That Bill was founded on the Report of a Committee on the superannuation of persons employed by local authorities, in which this sentence occurs:—
It is a sound financial rule that provision should be made each year to meet the liabilities incurred in the year, no matter when they may mature; in other words, that, when a liability is created, an asset should also he created to extinguish it.
If this sound principle had been adopted in this Bill, not only would all the contributions, both from teachers and employers, have been funded, but back service would have been liquidated by an annual payment of approximately £4,500,000 a year, extending over forty years. After that no further payment on account of back service would have been required.
§ As it is, the actual amount of back service being paid at the present moment is something in excess of £3,000,000 per annum, it will reach a peak figure of about £5,800,000 in 1940, and after that it will gradually decline until it disappears altogether in 1993. If that course had been followed and if, for forty years, the Government had paid £4,500,000, the actuarial cost of funding for back service, plus£1,250,000 for future service, after about forty years they would, as the noble Viscount suggested, though he did not give the figures, only have to pay £1,250,000 for the future. Contrast that with what will happen under this Bill. Remember that the Government accept responsibility for back service equivalent to an annuity of £4,500,000 for forty years, but instead of providing for that liability they are using the contribution made for future service in order to pay for the back service.
§ LORD EMMOTT
No, but they have accepted responsibility for the whole of the back service, and what they are now paying is almost entirely for back service. The Government, while professing to accept liability for back service, are using these contributions which are made entirely for future service. I do not want to use harsh words, but I cannot look upon 193 this transaction in any other way than that as a legalised malversation of funds. If a trustee did such a thing without being protected by law he would be in the dock directly, and Parliament would never allow an insurance company to do anything of the kind. It is a profligate and improper course, and the result is that in the next few years the net cost of the hole proceeding to the Government will be £1,000,000 or less—it would be next to nothing now if the local authority contributions had begun—for the next few years the cost to the Government will be £1,000.000 or less, but it will gradually go On increasing to a net cost of £6,000,000 per annum, and that will go on in perpetuity.
Three-fourths of that £6,000,000 represents the cost of the back service for the present generation. Lord Eustace Percy, in another place, said that the taxpayer to-day and to-morrow gains enormously. That is obvious to the meanest understanding. It is another way of saying that he is to be allowed to shirk his obligations. Lord Eustace Percy went on:—The taxpayer of the future benefits quite as much and indeed much more, by the devotion of a given sum to the reduction of War Debt than by the investment of that sum at current rates of -interest in a separate fund.What relevance has that to the actual state of affairs? Where is the "given sum" which is being invested in the reduction of War Debt? If the £4,500,000 for forty years was being devoted to the repaying of War Debt the argument would have had real substance in it, but no such provision is being made by this or any other Bill, and therefore the statement seems to me to be absolutely meaningless. I am aware of the Treasury practice of which the noble Viscount has spoken. It is a bad practice and is becoming dangerous. The Treasury has one rule for itself and another rule for everybody else. If the teachers' superannuation had been put under a local scheme, if each local education authority or each county had had to make its own fund, the Treasury would have been the first to insist upon funding as it did under the Superannuation Act of 1922 for local government and other officers. What is sauce for the municipal goose is not, however, sauce for the Treasury gander.
194 The Treasury principle, in theory, is obviously unsound. In old days it hardly mattered, but it is becoming dangerous now for this reason. Our future commitments in regard to Old Age Pensions and Insurance are far from being at their highest level and are being increased enormously this year by the Widows, Orphans, and Old Age Contributory Pensions Bill. I have in my hand the Report of the Government Actuary on the financial provisions of that Bill, and at page 20 are given the amounts of the Exchequer contributions, extending over forty years, for Health and Unemployment Insurance, Old Age Pensions under the existing law and under the new Bill, and for War Pensions. For the year 1925–6 War Pensions are estimated to cost £67,000,000, and the total of the Exchequer contributions is put at £94,000,000. Thirty years later—namely, in 1955–6—the amount of War Pensions will have decreased to £21,000,000, but the total payable under the whole of these accounts is put at £99.8 millions. That calculation takes no account of the liability under this Bill. I have ascertained that from the Government Actuary.
The Government is mortgaging the future to an extent entirely unknown to our ancestors. The present position of industry in this country is anxious, if not alarming. Judging from all previous history there is likely to be a fall in gold prices during the next fifty years, and that will add greatly to the burden under this Bill. It is improvident and reckless finance to use for current expenditure contributions made under this Bill for future service, instead of funding them. I prefer to base my main argument on the inherent unsoundness of this principle, rather than upon the risk of repudiation, but the history of 1922, when the previous contract made with the teachers was altered under what is called the economy "stunt," ought to have warned the teachers and the local authorities of the danger they run. Whatever people may say about the future, it is inconceivable to my mind that funds provided by the teachers and employers out of their own money should be raided; it is much more conceivable, in face of future financial stringencies and a fall in prices such as occurred between 1874 and 1895, and in the face of a possible fall in world wages, 195 that the terms of the contract may be altered when no fund exists—if there is no fund set apart representing the actual contributions of the teachers and their employers.
I do not hesitate to say that if the question of funding were referred to an impartial Committee of your Lordships' House there would be a unanimous report in favour of it. In these circum stances I have put down an Amendment with regard to the Second Reading of this Bill. It does nothing to prevent the passage of the Bill. This is a Bill which we cannot amend, because privilege is written on every line. I could not dream of asking your Lordships to throw out the Bill. It is a good Bill as to ninety-nine-hundredths of it, apart from this one provision, and legislation on the question is overdue; but if I have convinced your Lordships that the finance of the Bill is unsound, then I hope you will join with me in protesting against it in the only way which appears to me practicable.
Your Lordships will render a service to the country if you make it a little more difficult to pass such legislation in the future. I understand that the Government must oppose any such Motion. I presume it is the decision of the Government, but even so I cannot help hoping there may be members of the Government who secretly sympathise with me in regard to this question. I have asked my political friends not so issue a whip on this question because no element of Party enters into it. The view I have put forward was supported by members of all Parties in another place, but they did not seem able to push their views in the Committee stage, and that is why the Bill has come up to us as it has. But you, my Lords, are not bound by what was done by the Government. I hope that you will support me in making a protest against throwing our liability unfairly, as this Bill does, upon our children. I beg to move.
After the word "That," insert: "this House, whilst regretting that the contributions to be paid under the Bill by teachers and employers are not to be funded, but to be used as appropriations-in-aid for the current expenditure of the year in which they are paid, resolves that."—(Lord Emmott.)
§ VISCOUNT HALDANE
My Lords, in the first place the many persons concerned are to be congratulated on this Bill having got so far as it has got. For a good many years past this question has been one over which great controversy has raged. There were two different schools—those, including the local authorities in Scotland, who were willing to accept the principle of the local authorities making contributions to the pension scheme, and the local authorities in England who were not so willing. Well, by negotiation of a happy order this difficulty has been got over. The local authorities have been brought in—they have been bought off, because the two years' moratorium is the price which has been paid to them. But it has been well worth doing, if it has led to the solution of a very formidable question. Now we have a Bill which I do not myself presume to judge in detail, but which, as far as I can learn, covers the whole field which it is required to cover.
I think it is to be deplored that the contributory principle of this Bill was not adopted long ago. I remember well the controversy of 1918. Not only was that controversy made more acute by the fact that in Scotland the contributory principle was being adopted, but there was another thing, which my noble friend Lord Emmott did not mention, and that was that in providing for the pensions for University teachers in the Universities and University colleges, which were being aided by the Treasury grants through the Treasury Grants Committee, there was a contributory system, which has worked extremely well, and which was put forward and pressed at that time as the example which ought to be followed in dealing with the whole body of teachers. It was rejected, and the consequence has been the shedding of many tears, and now at last we have them wiped out by this Bill. A year ago the difficulty was that Scotsmen, who were quite ready, wanted their Bill passed at once, and the English, who were not ready, wanted this put off for an almost indefinite time. By negotiations, in which three Governments have taken part, this has been got over, and this Bill is the result.
I am not going to ester upon it in detail, but I wish to say a word on the point which was raised by the noble Lord, Lord Emmott, about the rejection of the 197 principle of funding. I much prefer to see something on paper which represents funding, because it is a good and sound principle to deal with your money as an ordinary trustee would. But, on the other hand, when you are dealing with the State, you are dealing with what ought to be security equal to that of any trustee, because the funds of the State represent the very highest form of security in which you can invest. It ail comes to this. This Bill contains a covenant: can you depend on the covenant being carried out? If so, I own, notwithstanding my natural proclivities, that I do not think it matters profoundly whether you proceed by funding, or whether you proceed by laying down the covenant in clear terms, which are not likely to be violated.
I understand Lord Emmott— who has given so much attention to this whole question, and to whom we owe so much in connection with the Committee aver which he presided, and for the results which it attained— to say that lie is not apprehensive that the covenant contained in this measure will be broken. What he was more apprehensive about was that, with changes in the value of money and in the value of commodities, some sort of question of revision might arise. I do not quite see that any such question is open upon the terms of this Bill, but, if it were open, I am not sure that it would not be just as much open if you had funding as if you had not, because I can sue possibilities for manipulating in the one case nearly as much as in the other. I look upon this Bill as constituting a contract containing a covenant, and I am anxious that it should be clearly understood that, in passing it, Parliament gives the assurance to the teachers and the local authorities and all concerned that there is no intention of departing from the terms which were laid down, either directly or indirectly by manipulation. If not, there will be a sense of insecurity, and I hope that sense of insecurity will not arise.
No doubt the passing of this Bill means a certain amount of money. We all know that economy is very necessary at this time, but I wish the advocates of economy would discriminate a little. There are some economies by which you can make yourself pay a great deal more in the future than you gain by your 198 economy, and the salaries of the teachers are one of those things. An efficient body of teachers is required to secure the future of this country, and this Bill is a contribution of its kind to the provision of such an efficient body of teachers. Therefore I hope that my noble friend Lord Banbury, whom I see opposite on the watch, will turn a discriminating eye on the kind of economy which this Bill contemplates, and not lump it together with other things into which the eye of the economist may well penetrate.
I do not myself feel much apprehension that the position of the teachers will be worse in the future by any means. I do not think that it would be easy to depart from the covenant contained in this Bill. I do not lay as much stress upon the advantage of funding as ray noble friend. I can see the temptation to the Government at the present time, and I think it is rather a legitimate temptation. They want to spend as little money directly out of their pocket as they can, and therefore, instead of raising money and funding it, it is better from their point of view to use the money at once in the way it is being used. I do not gather that, in the view even of my noble friend, there is much difference in the results on paper between the one way and the other. It is only a question of security, and, as I am not really apprehensive about this security, notwithstanding ray sympathy with my noble friend, I am doubtful whether he will gain very much even if he secures his declaration.
§ LORD BANBURY OF SOUTHAM
My Lords, I quite recognise the difficult position in which the Government are from the very foolish desire of the House of Commons in 1918 to pass as much legislation as they possibly could in every Session without in the least considering whether that legislation was good or bad. I presume that this Bill is an attempt to remedy the bad legislation of 1918. It is a very complicated measure, and I do not profess thoroughly to understand it; but I listened with admiration to the very powerful speech of the noble Lord, Lord Emmott, and, if I understood him, I venture to agree with him in everything he said. As I understand it, the Government propose to take the contributions of teachers and employers and instead of putting them into a fund out of which eventually, as 199 the demands increase, they shall meet the demands, they are going to live, so to speak, from hand to mouth. I remember that something of the same sort was done by a certain company, with the result that they did not in the least know after a certain number of years what their commitment was. If, on the other hand, the money were put into a fund, I presume that the Government would obtain actuarial opinion as to whether or not the fund was solvent and would know where they were.
As it is, I understand they are going to follow, if I may say so, the bad advice of the noble and learned Viscount opposite because they happen to be rich. I am not sure that the country is rich. I understood the noble and learned Viscount to say that a trustee would not do this, but as the Government have the liability and as their resources are boundless—I do not agree that they are, but presuming they are—it does not matter whether they take the ordinary precautions which the noble and learned Viscount admits a trustee would take or go on from hand to mouth, possibly relieving the taxpayers and ratepayers of the moment and putting a further burden upon the taxpayers and ratepayers of the future, who, as far as I can understand, will have enormous burdens placed upon them, to an amount which nobody can foresee at the present moment. Therefore, if the noble Lord goes to a Division I shall have much pleasure in supporting him.
I was going to ask my noble friend what the estimated cost would be, but I understand it is impossible for him to give an answer because, from the way they are proposing to manage the finance, the cost will vary as the years go on. If my noble friend could give your Lordships some indication as to whether or not we are going to save money by this Bill, as I presume we are, I think it would be of advantage. May I call my noble friend's attention to Clause 21 of the Bill, the reference to Which was the only part of the speech of the noble Lord, Lord Emmott, with which I disagreed? That clause gives power to the Board, with the consent of the Treasury, as I understand it, to bring teachers in who are not employed in a rate-aided school. I do not know why that should be done, but the clause provides:—… that no such scheme shall be made unless the Treasury, after consultation with 200 the Government Actuary, are of opinion that the contributions to be paid under the scheme may be expected to be equal in value to the benefits payable under the scheme in respect of such contributions.If the Actuary turns out to be wrong, who is going to pay the difference? Will it he the taxpayer or the teacher in the private school?
I have had a good many years' experience of superannuation in railway companies. My noble friend was a director of the same railway company as myself and he knows perfectly well that the actuarial calculations were invariably wrong, that at the end of every five years it was found that the fund was not solvent, and that the contributions to be paid under the scheme did not equal in value the benefits payable. My noble friend knows that as a fact and, therefore, I would like to ask him who is going to pay if, as is practically certain, the same result is brought about by the application of Clause 21? Perhaps my noble friend will be able to answer those questions.
§ VISCOUNT PEEL
My Lords, my noble friend Lord Banbury has asked me some questions about the difference between the amount which would fall upon the taxpayers in different years according as the funds were established on a funding or account basis. He will excuse me, I dare say, from answering as to the whole number of years because it would be tedious to your Lordships, and if I may take certain years I think it will illustrate well enough the kind of difference to which I refer. Taking, for instance, the year 1928–29, the Exchequer charge on a non-funding basis (that is, on an account basis) is £770,000; on a funding basis it is £4,081,000. The additional charge to the Exchequer and the taxpayer in the year 1928–29 of the fund as compared with an account would work out, therefore, at £3.311,000. Taking a year some years later, 1933–34, I will give the difference as I think that will be sufficient, and there the additional charge would be £2,807,000. In the year 1938–39 the additional charge for the fund as compared with the account would be £2,275,000. In the year 1943–44 the difference runs down to £1,603,000, and in the year 1948–49, twenty-three years from now, the difference is about £882,000. I think that will give my noble 201 friend seine idea of the difference in the incidence of charge upon the taxpayer of the two systems of funding and an account, and it is very satisfactory to find that my noble friend would rather pay a heavier charge in taxation during the next few years than leave anything more to posterity to pay.
In regard to the main point which was dwelt upon with great force by Lord Emmott, I really think it was, if I may say so, partially answered by the arguments I brought forward and also by the noble and learned Viscount opposite. After all, you could hardly compare the position of the Government with that of a trustee with his limited resources. I agree with my noble friend Lord Banbury that the resources of the Government are not illimitable; but they are illimitable when compared with the resources of a trustee, and after all, on the question of security, if you desire complete security I do not see what better security you could possibly have than the guarantee of the Treasury that these sums should be paid. There was a good deal of criticism, I think, among different classes of teachers upon this point and at first I believe, and more especially in Scotland, where I suppose they are more critical, they were inclined to agree with the noble Lord, Lord Emmott. But I understand the general opinion now among teachers has come round to the fact that they really get as good, and probably a better, security by the guarantee than they do by the fund, possibly all the better because, as the charge falls over a good many years in the future and will be less probably, there will be less temptation than there otherwise might be (if such temptation could assail any Government) to play false to the teachers under such an arrangement. I think that is the answer.
The State having taken upon itself these very heavy liabilities, having made the position of the teachers secure, having taken upon itself all the weight of the hack payments, and also three-tenths of the contributions—that is to say, the teacher pays five per cent., the employer pays five per cent., and the State hands back to the employer in the form of grant 202 three-fifths of the contribution—having taken all these burdens upon itself it does not appear to me too much for the State to say that it will Parry these burdens in the way which it thinks most reasonable and right, having regard to all the other liabilities that are falling upon it. We have the great authority of the noble and learned Viscount opposite that this is legitimate action, and in those circumstances I hope your Lordships will not adopt the Amendment of my noble friend Lord Emmott which seeks to alter the whole of the finance on which the Bill is based, and might throw a heavier burden in return for the benefits secured for the teachers, upon the taxpayers of the next few years than the Treasury or the Government intends to do. My noble friend Lord Banbury of Southam asked me whether the actuaries had made a mistake. I assume that the services of the best actuaries in the country were obtained, and I do not think I ought to be called upon to say whether or not they have made a mistake. We are entitled to assume that they have done their work efficiently.
§ LORD EMMOTT
My Lords, I shall not detain your Lordships long, but I do want to say, first, that I deeply regret that my noble and learned friend Lord Haldane and the noble Viscount opposite should have made their defence of the Government scheme rest upon the question of repudiation. That is not my point. I say as a matter of right that this generation, which has assumed this responsibility, ought to do something to provide for it, instead of which the Government are throwing a charge of £4,500,000 or £5,000,000 a year on future generations for a thing that they have suddenly undertaken themselves. I say that is not financially sound, and I go further and say that it is not morally right. I must also point out that in view of the kind of legislation that we may have in the future this example of how to throw on future generations a burden that we ought to bear is a dangerous and a wicked precedent which I hope will not recoil on their own heads.
§ On Question, Whether the words proposed to be added by Lord Emmott be inserted?—Their Lordships divided:Contents, 21; Not-Contents,41.203
|Lincolnshire, M. (L. Great Chamberlain.)||Aberconway, L.||Meldrum, L. (M. Huntly.)|
|Banbury of Southam, L. [Teller.]||Raglan, L.|
|Beauchamp, E.||Chaworth, L. (E. Meath.)||Stanmore, L.|
|Strafford, E.||Clwyd, L.||Strachie, L.|
|Westmeath, E.||Emmott, L. [Teller.]||Stuart of Wortley, L.|
|Farrer, L.||Treowen, L.|
|Allendale, V.||Gainford, L.|
|Novar, V.||Hemphill, L.|
|Cave, V. (L. Chancellor.)||Vane, E. (M. Londonderry.)||Forester, L.|
|Gage, L. (V. Gage.)|
|Salisbury, M. (L. Privy Seal.)||Howard of Glossop, L.|
|Bertie of Thame, V.||Jessel, L.|
|Cecil of Chelwood, V.||Kylsant, L.|
|Argyll, D.||Haldane, V.||Lawrence, L.|
|Sutherland, D.||Peel, V.||Mostyn, L.|
|Muir Mackenzie, L.|
|Shaftesbury, E. (L. Steward.)||Southwark, L. Bp.||Ponsonby, L. (E. Bessborough.)|
|De La Warr, E.||Arnold, L.||Somers, L.|
|Eldon, E.||Bledisloe, L.||Somerleyton, L.|
|Lucan, E. [Teller.]||Danesfort, L.||Templemore, L.|
|Midleton, E.||Dunmore, L. (E. Dunmore.)||Thomson, L.|
|Morton, E.||Elphinstone, L.||Wharton, L.|
|Plymouth, E. [Teller.]||Fairfax of Cameron, L.||Wynford, L.|
|Stanhope, E.||Faringdon, L.|
§ Resolved in the negative and Amendment disagreed to accordingly: Bill read 2a and committed to a Committee of the Whole House.