§ 2.49 p.m.
§ Order of the Day for the Second Reacting read.
§ LORD KERSHAWMy Lords, I beg to move that this Bill be now read a second time. It gives me great pleasure to introduce the Bill to your Lordships this afternoon, as it sets out to do something which I am sure will command the sympathy of the whole House. The rise in the cost of living which has taken place since the rates of benefit under the National Insurance scheme were fixed in 1946 falls particularly hardly upon those living on small, fixed incomes, who, because they are no longer in the field of employment, do not benefit from wage increases. It is the aim of this Bill to help such people by improving the National Insurance benefits for retirement pensioners and for widows with children. Other classes whose position is particularly difficult are helped by the proposed improvements in the increases for children, which are payable with all benefits, and in the guardians' allowance for those having the care of orphans.
I should like at the outset to remind your Lordships, and to emphasise, that this Bill is an interim measure. You will remember that under the Act of 1946 the Minister has a statutory duty to carry out a quinquennial review of rates of benefit. The first such review is not due until 1954, by which time it is hoped that there will have been sufficient experience of the working of the scheme to enable a thorough and comprehensive examination to be made of all its provisions and of the financial liabilities involved. But in view of the fact that the scheme 6 assumed an 8½ per cent. rate of unemployment, it has been found possible to make these improvements of benefits without increasing the contributions of insured persons and their employers beyond those which are fixed in the Act of 1946. Your Lordships will, however, appreciate that these changes are without prejudice to what may be done when the whole scheme is reviewed in 1954.
The statistics of applications made for National Assistance in supplementation of National Insurance benefits have given a clear pointer to those classes who most frequently find their insurance benefits inadequate to their needs. These are retirement pensioners over 70 and women pensioners over 65; widows with young children to look after; and, among other beneficiaries, those with children to support. The Bill proposes to increase benefits for these groups. The standard rate of retirement pension for men over 70 and women over 65 is to be increased by 4s. This will raise the standard rates for these persons from 26s. to 30s. a week for a single man or woman, or a widow, and from 16s. to 20s. for a married woman receiving a pension by right of her husband's insurance. The widowed mother's allowance, for widows with children under school-leaving age is to be increased from 33s. 6d. to 40s. a week, and there is to be an extra 2s. 6d. for children, other than the first in the widow's family, in addition to the family allowances she receives for them. This means that a widow left with, say, three children will now get 55s. a week, including family allowances, instead of 43s. 6d. The improvement in the rates of benefit for children is to be extended to all beneficiaries under the scheme—that is, to retirement pensioners with children, and to persons receiving sickness or unemployment benefit or industrial injuries benefit.
Loss of wages from whatever cause, whether age, sickness, unemployment or accident, brings the greatest hardship to the families with children, and I am sure your Lordships will agree that we are right in seeking, in this Bill, to do something to help them. So it is proposed that the eldest child should attract a benefit of 10s. and others 2s. 6d. each, in addition to the family allowance of 5s. which is paid for each child after the eldest. An amendment to the original 7 Bill also increases from 12s. to 13s. 6d. a week, the guardian's allowance paid to people caring for orphaned children.
These are the main increases in rates of benefit—bigger retirement pensions for the older pensioners, improved widowed mother's allowance and new benefits for children.
Your Lordships may now be asking what is to be done for younger pensioners, the men between 65 and 70, and women between 60 and 65. What does the Bill propose for them? Here the provisions are perhaps a little more complicated and their purpose not so immediately obvious. I should like first, therefore, to make a general point, which I would ask your Lordships to bear in mind as a background to these provisions. The point is this. It is becoming a commonplace to say that we are living longer nowadays; and this fact will have important repercussions upon our economic and social welfare. At the beginning of the century there was only one person of the present pensionable ages for every ten people of working age. At present the proportion is one to five, and in less than a generation it will be one to three. If people do not go on working longer, the proportion of non-workers in the community will grow to a point where the burden on the working population may become insupportable. If we are to maintain our standard of life it is of the utmost importance that all those who are fit and able to do so should stay at work beyond the minimum pensionable age. This will, of course, demand a new attitude on the part of both employers and employed. Employers must be prepared to keep their older workers a little longer, and work-people, young as well as old, must be brought to think it the normal thing for men and women to stay on at work longer. Happily, in these days of full employment there is little danger that by doing so the older folk will be robbing younger people of their jobs.
Clearly, however, this is a matter which goes beyond National Insurance policy; it is part of general employment policy, and in dealing with it I may be accused of straying too far from the subject. Yet the financial implications for National Insurance of a steadily increasing pension population are most serious, and are relevant factors to be considered. It 8 is calculated that the Exchequer contribution to the Fund will have risen to about £450,000,000 in 1977–78. Also, the National Insurance arrangements made for elderly persons must, clearly, have an important influence on the attitudes to continued employment, not only of insured persons themselves but of employers, trade unions and the community in general. Here I should like to remind your Lordships that the principal Act of 1946 was itself designed with an eye to the future burden on the community of an increasing pension population. The noble Lord, Lord Beveridge, has discussed that problem in his Report, which was the basis of our whole scheme, and it was the Act of 1946 which for the first time made it possible for people to continue in insurance without any change in conditions for five years beyond the old pensionable age, paying their contributions, remaining covered for sickness and unemployment benefit, and with a prospect of a higher pension on their eventual retirement or on completion of the five years if still at work then.
I come back now to the Bill which we are considering, and in particular to the point I raised a moment ago about the provisions in the Bill for men between the ages of 65 and 70, and for women between the ages of 60 and 65. We now have our background, and shall be able to appreciate the purpose of the provisions. First, by Clause 4(3), this group of persons will be affected by the proposal in the Bill to raise the increments of pension which can be earned by working on after pensionable age from 1s. 0d. to 1s. 6d. for every twenty-five contributions paid after this provision of the Bill comes into operation. This means that in future a worker who postpones retirement for the full period of five years up to the age of 70 will, from that age, have added to his increased rate of pension of 30s., an extra 15s. a week, instead of 10s., as at present, so that he will have a total pension of 45s. The increments of pension which a married man can earn for his wife will still be 1s. while they are together, but if he should die before her any increments he had earned for her would thereafter be paid at the 1s. 6d. rate. This means that the combined pension of a married couple, where the wife herself is not working, can be as much as 75s. a week, and if the husband dies first his widow can get 9 45s. a week. If the wife is separately insured in her own right and works until 65, they will now be able to get 45s. each—£4 10s. 0d. a week between them.
The second provision for this group of persons, men between 65 and 70 and women between 60 and 65, is for those who do not stay on in regular employment. There will be some people who will find a full-time job too much for them after 65 or 60, as the case may be, and they will decide to retire and take their pension. Your Lordships will know that it is a condition for a retirement pension to men under 70 and women under 65 that they must be retired from regular employment. It follows from this that there must be some limit set to the amounts they can earn without affecting their pension after retirement. At present, a pensioner is allowed to earn £1 in any week without reduction of his pension. The Bill proposes to raise this limit to £2. This will give a little more margin to those pensioners who feel that they cannot continue in full-time employment but are quite capable of doing a part-time job. But it is not intended that advantage of this concession should be taken by people who could and should, in the national interest, continue as regular workers, looking forward to the better pension which they can get later on.
The third provision in the Bill for men between 65 and 70, and women between 60 and 65, is also for those already retired and receiving pension. At the moment, the rule is that once a man has retired and taken his pension he cannot revert to his former position as an insured contributor, and earn increments. There are good reasons for regarding retirement as a final act. It is important that a man should not lightly give up regular employment. Once he has done so, he may not find it so easy to get back into employment if he changes his mind. The Bill, however, introduces new and more favourable conditions for people who stay on at work when they are beyond minimum pensionable age and it has been decided to allow those already retired to tike advantage of those conditions during a limited period. A pensioner already retired will have six months within which to decide whether to go back to work again and start paying contributions for a bigger pension. While he is back at work he will, of course, forgo 10 his pension, and will pay contributions each week in the normal way. His contributions will earn him increments of pension at the new rate. To give him cover for sickness and unemployment benefits, should he need them, he will be allowed contribution credits for the period for which he was retired. If his wife is of pensionable age she will have become accustomed to receiving the pension which she gets by right of her husband's insurance. It is not proposed to disturb her pension; she will go on drawing it, though her husband goes back to work.
There is one other provision, which was introduced into the Bill in its passage through another place, which concerns men between 65 and 70 and women between 60 and 65. It has been argued that in spite of the opportunities offered by the Bill and the changes of attitude in industry which the Government are seeking to foster, it may not in practice be at all easy for the person who has been retired for a year or two to get back into work and so earn a bigger pension. It is therefore provided that the new increased retirement pension, which will normally be paid to men at 70, and to women at 65, shall be paid on their retirement to all persons who on the appointed day will be between 65 and 70, in the case of men, and between 60 and 65, in the case of women. Persons who reach pensionable age after the new provisions come into force will be in a different position. They will be able to consider, against the background of the new conditions introduced by the Bill, whether to retire or not, and it is much easier for a man to stay on at work for a bit to earn a bigger pension than it is to go back to regular work when he has once retired.
I have now covered the main provisions of the Bill. There is one feature about it, however, upon which I should perhaps say a little more. So far, I have spoken only of the earnings rule which limits the amount a retirement pensioner can earn without reduction of pension. It is also proposed to raise the earnings limit for widow pensioners from 30s. to 40s., and (again as the result of a change made in another place) for those receiving widowed mother's allowance, to 60s.; and the widowed mother will not have the amount of her allowance which is 11 allocated to her children reduced, however much she earns. Another change of a related character, which has been introduced as the result of representations in another place, is that a married man who is a retirement pensioner with a wife herself under pension age, or who is on sickness benefit and likely to remain so for a long time, will no longer lose the increase of benefit for his wife, if, to help maintain the home, she is earning above the 20s. a week which normally governs the payment of such an increase. For these particular wives, the limit will now be 40s.
This is perhaps a convenient point to refer to the fact that the National Assistance Board propose to increase their rates to bring them in line with the higher age pension rates—that is, 30s. for a single person, and 50s. for a married couple. This means that pensioners receiving supplementary allowances from the Board will nevertheless be able to benefit from the increase in pension rates. It also means that there will be improved rates of assistance available for all in need. It is intended to bring in the new assistance scales at the same time as pensions are increased.
I turn now to the cost of the new proposals in the Bill. The Government actuary estimated that the new proposals in the Bill as first introduced would cost £39,000,000 in the first full year. Of this total, £33,000,000 was for improved pension rates; £2,600,000 for the increase in widowed mothers' allowances and the increases for their children; and £3,200,000 for the new children's benefits for the families of other beneficiaries. The cost of the increased pensions will rise to £80,000,000 a year in twenty-five years' time. There will also be an additional charge of about £300,000, which may ultimately rise to £400,000, upon the Industrial Injuries Fund for the improved increases of benefit for children. Since these estimates were made it has been decided to give the increased rates of pension to men who are between 65 and 70 and to women between 60 and 65 on the appointed day. This will not, of course, be a permanent cost, but it is estimated at £7,000,000 in the first full year, 1952–53. After that year, the cost will decline, and will disappear in five years. I have already mentioned that, pending 12 the general review, it will be possible to meet these costs without making any increases in contributions beyond those provided for in the Act of 1946.
A re-assessment of future liabilities has now been made on a more realistic estimate of the likely trend of unemployment, and to keep the Fund approximately in balance over the next few years it is proposed to adjust the annual Exchequer payments to the Fund. These payments are composed of two parts. There is the Exchequer Supplement, which is a fixed amount paid in respect of each contribution paid by or in respect of insured persons; and there is, in addition, an annual lump sum payment. It was originally intended to reduce both these Exchequer payments, but, as a result of representations in another place, it was decided to abolish the annual lump sum payments altogether for the next few years, and to make a smaller reduction of the Exchequer Supplement as from October 1, 1951. I should, perhaps, add a word of warning here. This does not mean that the Exchequer payments to the Fund will be permanently reduced. The rising cost of pensions alone will require the resumption of annual lump sum payments to the Fund in a few years' time of rapidly increasing amounts. The adjustments now being made are merely to correct the assumptions originally made about the rate of unemployment. The long-term commitments of the Fund remain unchanged and, as I have already said, Exchequer liability will now rise over the next twenty-five years to about £450,000,000.
I should like to say a final word about the appointed days. The Bill allows different appointed days to be fixed for different provisions. It is the intention to bring some provisions into operation almost immediately after the Bill becomes law. These are the new earnings rules, the new rates of increment of pension for postponed retirement, and the provisions enabling pensioners to resume employment and qualify for increments. It is hoped to start paying the main improved benefits to people who have reached the age of 70 from September 1, 1951. This is a month earlier than was first planned. I am sure your Lordships will appreciate the great amount of work involved in increasing pensions for over 3,000,000 pensioners. It is not only a question of 13 the administrative arrangements which have to be made to have adjustments made in the current pension order books in the hands of pensioners, but there is also the printing and assembling of large quantities of new order books. A good deal of additional information has to be obtained from the beneficiaries, in order that the children's increases can be paid. Everything possible is being done to speed up the work, and a month has been gained; but it is unlikely that there can be any further advancement of the date. For the one million-odd pensioners who on the appointed day will be under 70—under 65 in the case of women—a slightly later date has had to be fixed—namely, October 1. This is the earliest date by which the increases proposed for them can be put into payment.
In conclusion, I would only repeat what I said at the beginning: I am sure we shall all sympathise with the purpose of the Bill, and welcome this move to help those in greatest need. Your Lordships may feel that I have dealt with this matter at greater length than appeared on the surface to be necessary, but that is only because so many changes were made in another place that it was felt advisable to deal with the matter rather more fully than otherwise would have been done. With the assurance that your Lordships will welcome the Bill, I ask you now to give it a Second Reading.
§ Moved, That the Bill be now read 2a.—(Lord Kershaw.)
§ 3.13 p.m.
§ LORD TWEEDSMUIRMy Lords, I am sure we are all grateful to the noble Lord, Lord Kershaw, for his clear exposition of this rather complicated measure. Behind all his actuarial calculations and all his words there lies a great human problem. We on this side welcome any measure which will assure to people in the evening of their lives who have fallen into need that basic minimum standard of life to which all Parties in the Coalition Government agreed. As the noble Lord has said, this Bill is a sign of the times, a sign of the rising cost of living and of the consequential adjustments that go with it. It recognises frankly that retirement pensions as they now stand are no longer adequate for a minimum standard of living. A large group of citizens will benefit by the increase; but another large group, almost as old, some younger by 14 only one day, will miss the provisions of the Bill. They will still be at the mercy of prevailing conditions if they fall into need, and will have to seek aid from the Assistance Board. One of the proposals of the Bill is to encourage the elderly to return to work. That is an admirable object, with which we all agree: and, nationally, it is one of the first importance at this moment. I do not believe that we shall ever get far alone those lines until employers—Government, local government and private—take a careful look at this whole situation to see just how the more elderly can be fitted into the pattern of industry. We shall have to approach employers with energy and sympathy to persuade them to support any measures which Parliament may pass, if we are really to succeed in this project.
The noble Lord, Lord Kershaw, has told us how, on Committee stage in another place, a concession was made which benefits about 1,000,000 more citizens than would have been included in the original draft of the Bill. All good luck to the 1,000,000 who receive the benefits. I cannot, however, help feeling concerned about one or two anomalies which have arisen as a result of that concession, and which were pointed out with considerable force in another place by a member of the noble Lord's own Party. I point the fact out without rancour, because I am sure that His Majesty's Government are just as concerned about the anomalies as we are on this side. I should like to put three of them to the noble Lord. First of all, a man who does not reach 65 until after the appointed day will get no increase for five years, unless he qualifies for National Assistance. Secondly, a man who is 65 before the appointed day and still in work will receive 26s. a week, plus 16s. for a dependant, or for his wife if he is married, if he falls sick or becomes unemployed. But if he had retired from work, he would get a pension of 30s., and if his wife had also reached 60 before the appointed date, her pension on her husband's insurance would be 20s. a week. Thus, unless I am mistaken, and I do not think I am, if two couples in the same age groups both fell sick or became unemployed, the one still in work would receive an aggregate of 42s. a week and the other, who had retired, would receive 50s. Perhaps the noble Lord will say 15 a word on that point afterwards. The third case is that a man over 70, or a woman over 65, will get the higher pension, even if he or she is in full-time employment; but the man between 65 and 70, or the woman between 60 and 65, who is retired and has gone back to work again in response to our appeals, will have his or her pension reduced on account of earnings. The difference between 69 and 70 can be just one day.
The noble Lord has told us about the appointed days, but I am not sure whether they are absolutely or only provisionally fixed. Again, perhaps, he will say a word later on that matter. I should like to draw the noble Lord's attention to this aspect of the Bill. In regard to full-time employment of those who had retired, I am glad to see that provision has been made by which, if a man tries to get employment again after retirement and fails, he will not be held to have lost his option if he puts down his name at the Labour Exchange; such registration will count as keeping alive his option. I should like to ask one question here. Suppose this same man, who has come back from retirement, gets a post and falls sick after a few days or weeks: he will not have contributed sufficiently long to be eligible for full rates of sickness benefit. Are there any arrangements for giving him credit in order that he may be able to draw the ordinary sickness benefits?
In regard to retirement pensions, clearly, once the principle of retirement pensions has been accepted, there must be some ruling on what a man can earn after retirement and on the hours during which he can work and still be regarded as retired. We need a scheme which, while upholding the principle of retirement, will not discourage a man who, through failing health or dimming capabilities, decides that he is capable of working only part-time. The present position is governed by one of the earlier appeals made under the main Act. I think the rule runs like this: that where a man has retired and is doing merely occasional work, he must establish his case; and he can establish his case if he proves that he is not working for more than twelve hours a week or is not doing more than a quarter of the normal hours that a full-time worker at that job would be doing. It is not easy to fit people into part-time employment, 16 unless they work for definite periods. Usually, when a man who has normally worked morning and afternoon goes on to part-time, he works each morning or each afternoon of the week—a half of a day's work. If he works every morning on a five-day week he does fifteen hours a week, and thus puts himself outside the ambit of this ruling. Alternatively, of course, if he can prove that, because he has changed his job to a totally different one, he is doing more or less casual work, he continues to be treated as retired. I believe it is important, if the purposes of this Bill are to be achieved, and the elder people are to be induced to continue to take part in productive industry, that they should be encouraged to go on using the skill they have gained over many years' experience at the same job, rather than to change to another one.
That brings me to my second question. I believe that there is a strong case for appointing a special committee to consider the workings of this earnings rule. At the present moment there is little reliable information upon which we can base conclusions, and I would ask the noble Lord whether he and his colleagues will give consideration to the setting up of such a committee. In conclusion, I would say this. As the noble Lord, Lord Kershaw, has said, this is an interim measure, and the principal Act is due for review in the year 1954. However, if the cost of living continues to advance at its present rate, how long will this 4s. increase last? Will there not be the strongest possible case for conducting a review of the Act earlier than the year 1954, which is still three years hence? Were we not all warned by the right honourable gentleman, Sir Hartley Shaw-cross, as recently as last week that prices are likely to go on rising? I have felt it necessary to draw attention to certain anomalies in this Bill, which I am sure concern the Government just as much as they do noble Lords on this side of the House. In doing so, however, I do not want it to be thought that I do not welcome the Bill as warmly as anybody. But if we are to attract the elderly men into productive industry, it must be done on a nation-wide scale, and at the moment we have a long way to go before that is achieved.
§ 3.23 p.m.
§ LORD KERSHAWMy Lords, I speak again only with the leave of the House, but I am grateful to the noble Lord for his sympathetic reception of the Bill. Perhaps his last few words provide the answer to what he said: that this Bill is an interim measure, merely attempting to do something within the financial ambit of the present Act, by altering the assumed rate of unemployment—at present 8½per cent.—first to 1½ per cent; then to 2½per cent. and then to 4 per cent. Under the Bill, the money will be provided for the various provisions. The review which is to take place is of a kind which I believe would incorporate the suggestion of the noble Lord, that a special committee should consider one phase of the problem. I feel that they would be bound to consider the whole of the problems that have arisen during the five years' administration which by then will have taken place. The noble Lord probably overlooked the fact that it would be relatively easy, say, for a man between 65 and 70, to attract increments equal to the higher rate of benefit that will be paid to the other people. Eighteen months' employment, or less than eighteen months, after the age of 65, would produce an increase of 4s. 6d. a week in his pension, and so make it 6d. more than that of those people who are benefiting immediately. I hope that the noble Lord realises that particular point.
The other suggestions the noble Lord has made in his speech will be faithfully considered; but as they amount in the main to administrative matters, it is not necessary to incorporate them in the Bill at any stage. The appointed day is to be fixed by regulations. I can assure the noble Lord that September 1 has already been decided upon as the date for the major part of the benefits—those for people of 70 and over. Some of the changes made by the Bill will be introduced almost immediately, as I mentioned in the course of my speech. The change in the case of the only other category—that of people between the age of 65 and 70 on the original appointed day—will come into effect a month later—namely, in October, instead of September. I do not know that there is any other point that I need mention, except perhaps the question of retirement. 18 Surely, that is linked up with the increased amount that is now allowed to be earned before there is any reduction in benefit—namely, 40s., and 60s. in the case of a widowed mother with children. I hope the noble Lord has seen what is a generous concession in that respect. It is not a matter of so many hours' work. Once retirement has been effected, the method of dealing with benefits is by earnings: how much the pensioner is earning since his retirement.
§ LORD TWEEDSMUIRI hesitate to interrupt the noble Lord, but surely the question of hours worked also comes into it.
§ LORD KERSHAWNo, not really. Once a person has retired, he is then a retired person, even though he goes back to work. The only question on his going back to work is what is the amount of his earnings. The amount allowed used to be 20s., and all over that figure affected his rate of benefit. In future it will be 40s. That is the only change that has been made in that respect. As the noble Lord said, this is a complicated Bill, and all the more so because it is an amending Bill to amend a much larger Act. But I can assure the noble Lord that the points that he has raised have been considered and I believe, are largely met.
§ On Question, Bill read 2a; Committee negatived.