§ 3.4 p.m.
§ Order of the Day for the Second Reading read.
§ VISCOUNT SWINTON
My Lords, I think this Bill will be equally acceptable to your Lordships. As your Lordships are aware, the increases in National Insurance and war disability pensions, and in family allowances, have already been provided for in legislation which has either been passed or is about to reach its final stages in this House. I think that most of it has been passed, and in so far as these pensions fall to be dealt with by Prerogative Instrument, that also has been or is being done. This Bill deals with the much smaller remaining class of public service pensioners. They are people whose pensions are fixed under various Acts. There is one thing common, I think, to all these Acts, and that is that the general principle on which pensions are based is a proportion of retiring salary conditioned by length of service. Therefore, of course, these pensions are fixed: indeed, one might almost say that they are fixed contractual pensions, and they do not vary with the cost of living. But it is fair to say that, when salaries are increased—as a number of salaries have been—then, of course, the pension which is related to the rate of salary increases proportionately.
§ VISCOUNT SWINTON
Yes, provided he gets it while he is still serving. What I said was that they were not conditioned by the cost of living. Of course, if the man concerned has retired he has become a rentier. If the rate of salary goes up while he is still in service, then automatically his pension is proportionately increased. I am rather glad that the noble Lord said that. Of course, these pensions are fixed and, as I say, the pensioner becomes, if I may use the expression, one of the rentier class. It would therefore not be justifiable to single out public service pensioners, as distinct from any other in fixed income groups, for automatic compensation if the cost of living rises. The principle should surely be this: that if there are cases of real hardship those cases should be met or mitigated.
12 That, I think, will be common ground to all of us, because that was the basis and principle accepted in the Act of 1944 and in the Pensions (Increase) Act of 1947. And in the same way, that is the basis of this Bill. When the Bill was being prepared the Government had full discussions with the staff side of the Civil Service, the National Whitley Council and with the Trade Union Congress as regards local government employees and teachers. I am not saying that everyone was satisfied. I have never known anyone fully satisfied with the outcome of one of these discussions. But on the whole I think what has been decided is pretty fair. The increases proposed are up to £26 a year for pensioners who are married, or pensioners with one or more dependants, and up to £20 for single pensioners. The detailed way in which these calculations work is set out in the Second Schedule.
The Pensions (Increase) Act of 1947, of course, dealt with the position as at that date, and made what Parliament considered the right adjustments and improvements as compared with the position at the time of the Act of 1944, which dealt with these pensions after the war. This Bill is intended to deal with what has happened since the 1947 Act became law. The increases which the Bill authorises—if your Lordships pass it—will take effect from October 1, which is the date on which National Insurance pensioners will receive their increment. Pensioners of the Fighting Services are not mentioned; they will receive similar treatment but will get it, as always in the case of Service pensions, by Prerogative Instrument. The pensioners who are to benefit, both national and local authority servants, are specified in the First Schedule of the Bill. Your Lordships will want to know the cost. It is estimated that the increased pensions given under the Bill will cost £4,100,000 from the Exchequer, and £2,300,000 from the local rates. To those figures must be added (and, of course this is an Exchequer charge) £2,000,000 in respect of the increase in pensions for the pensioners of the Armed Forces.
There is one anomaly which has been remedied and which I ought to mention. Under the Bill a civil servant who retired after March 31, 1949, or teachers or local government pensioners who retired after 13 March 31, 1951, will benefit from the increases which are given. I think your Lordships will agree that they ought to come in. All this is set out in a rather complicated calculation, but those expert in this matter will understand the Schedule. I have tried to understand it, but I am not at all sure that I can explain it.
Like the Acts of 1944 and 1947, this Bill is intended to deal with cases of special hardship; therefore we must have an income limit. We have been more liberal than in the previous Acts. Under the 1947 Act, the income limit was £450 for a married pensioner and £350 for a single pensioner. Under this Bill, it is £550 for a married pensioner or a pensioner with a dependant, and £425, as against £350, for a single pensioner. The first £104 of income other than pension will be disregarded in applying the income limits. I must admit that the clauses and schedules look complicated, indeed, almost unintelligible, but that is inevitable when framing a Bill which amends a number of other Acts and refers to Acts which, although I have not counted them up, go well into double figures. I have done my best, I hope accurately to translate this Bill into the vulgar tongue and to state the salient features it is right in these days that we should carefully scrutinise all public expenditure, but I think that, on the whole, your Lordships will agree that this improvement in the pensions of public servants is fair and just and that we ought to grant it. Therefore, I commend the Bill to your Lordships and beg to move that it now be read a Second time.
§ Moved, That the Bill be now read 2a. —(Viscount Swinton.)
§ 3.12 p.m.
§ LORD PETHICK-LAWRENCE
My Lords, I rise to say on behalf of my noble friends who sit with me on these Benches that, so far as I know, all give their support to this Bill, which does something, and something quite considerable in view of the total cost, to relieve distress which would otherwise continue to press upon the shoulders of those who get humble pensions. Without committing myself to saying that there will not be some Amendments that may be moved later on, I can assure the Government that there will be no opposition to the principles of the Bill and that we shall 14 co-operate in securing its passage to the Statute Book at the earliest possible moment.
Having said that, I should like to add that no one who is acquainted with all the facts that lie behind this claim for increased pensions—least of all, I am sure, the noble Viscount, Lord Swinton, who moved the Second Reading, or the Chancellor of the Exchequer or the Financial Secretary to the Treasury, who from the Government point of view are responsible for "vetting" its provisions—will feel that even this Bill, good as it is, does full and substantial justice between pensioners generally. I have been long of the opinion that whenever a contract is made covering a period of years, and more so if the number of years is considerable, with the fluctuating value of money there is nothing like equal justice between the two contracting parties. I used to put it in this way: there can be no justice in any contract expressed in monetary terms unless the pound bought the same basketful of goods to-day. That is essentially true. Whether such a pound can ever be created may be a matter of opinion, but the fact is indisputable.
I would give one or two illustrations of that. When I was a boy, prices were continually falling and a year or two before the turn of the century they reached their nadir. It may be interesting to record that I can remember the time when oranges were sold at six a penny, and even big Jaffas were only 8d. or 9d. per dozen. A whole quartern loaf—a 4 lb. loaf—cost 3½d. or 4d., and prices of other foods were of similar dimensions. After the turn of the century, prices continued to rise, and, with the exception of a short period in the 'twenties and early 'thirties, when they fell catastrophically, they have been rising ever since. We did not have the inflation which occurred in other countries, which went to such an extent that there was a time when a farmer on an extensive farm, with a large part of the purchase price in the form of a mortgage, could redeem the whole of the mortgage by the sale of a single egg. We have had nothing like that here, but we have had a substantial change in the value of money.
It is true that anyone who calculated what he might expect to get when his working life ended and when he became dependent on a pension has been, and is, 15 bitterly disappointed in the standard of living which he is enabled to attain by the pension he actually receives. I would go so far as to say that in any community where prices are continually rising, even to the limited amount they have done in this country, the rest of the community is riding on the backs of those who in their latter years receive a fixed pension in terms of money. How does that stand with regard to this Bill? In the first place, I know the limits of this House, and I know that clearly it would be impossible for us to graft on to this Bill any substantial proposal to increase its scope. In the second place, as an old Treasury man, I know the feeling about repercussions and that it would be quite impossible for us to expect the Government to make any firm promise of any further wide increase in future. But I wish to place on record that in my opinion grave injustices remain and my hope that, if and when it proves possible, some further investigation will be undertaken with a view to such redress as may seem expedient. I do not ask for more than that. I ask that all I have said should be noted in the hope that at some future date it may be possible to have an investigation so that the grave injustices existing can ultimately be remedied.
§ 3.20 p.m.
§ LORD HAILEY
My Lords, I should like to add my support to certain considerations which have been put before your Lordships by the noble Lord, Lord Pethick-Lawrence, as I have been asked my many of my Civil Service pensioner friends to put before your Lordships certain matters in connection with this Bill. I need hardly say that my friends do not find it quite so acceptable as the noble Viscount, Lord Swinton, hopes that it may be to your Lordships; and, as a pensioner myself, I am naturally in sympathy with their point of view. A pensioner—though I am bound to say I had not regarded myself hitherto as a rentier, a term which, in my youth, was regarded in some quarters as one of opprobrium—
§ VISCOUNT SWINTON
Let me hasten to tell the noble Lord that I was not referring to him as "vermin", but was alluding to the great middle-class with deep respect.
§ LORD HAILEY
I ought to add that such exiguous pension as I draw from the Indian Government will not be affected by anything done as a result of this Bill. It is quite true, as the noble Viscount said in moving the Second Reading, that this Bill does a little better than was held out in another place by the Chancellor of the Exchequer when he forecast that he might have to make allowances of 5s. to 7s. 6d. a week to pensioners, or about £20 a year. The provision does go up to £26 in the case of persons with dependants, and £20 to those who have no such dependants. Also it does—and one ought to be grateful for it—raise the income limits up to which the pension is admissible, a point also made by the noble Viscount, Lord Swinton. In 1944 the upper ceiling, if I may put it in that way, or the income limits, were £300 a year for a person with dependants, and £224 a year for a person who had no dependants; and in 1947 the figures were respectively £452 a year and £350 a year. Now they are to be £550 a year for persons with dependants, and £425 a year for those without dependants. But, in spite of these advantages, it is not astonishing to find that those who are designated as the beneficiaries of this measure are exceedingly critical of the treatment that has been given to them. All the restrictive features of previous legislation are repeated—the means test and the refusal to correlate the increases to the actual fall in the value of money—and on this occasion there has been added the fact that the increases, instead of going back to January 1, as they did on the last occasion, now come into force only on October 1. But, over and above all this, there is the serious objection felt by the senior members of the Services that the permissible limit of pensions up to which the present increases are available remains as low as £550 in the case of a person with dependants, and £425 in the case of a person without dependants.
As I have said, all these restrictive measures are repeated here. Take, first of all the means test. One wonders whether the Treasury really holds the view that pensions are some kind of eleemosynary grant, instead of being, as they have always been held to be, a species of deferred pay. But the application of a means test to an allowance granted on account of the fall in the value 17 of money is, in any case, entirely illogical, in view of the fact that no means test was applied when the actual pension was granted. The Treasury do not say to Government servants: "You have earned a pension by your service in proportion to the pay you have drawn, but, nevertheless, we shall reduce that pension if you have been foolish enough to save money to buy a house, or to invest in the Savings Bank." How is it then logical that a means test should now be applied, when a small increase—and a very small one at that—is being given to pensioners on account of the fact that these pensions are now being paid in what amounts in truth to a debased currency?
Secondly, there is really no relation at all between the pensions and the rate of the fall in the value of money. It will be quite sufficient to point out to your Lordships some obvious facts there. The cost of living index, taken at 100 in 1938, rose to 203 in June, 1947. There was a new cost of living index adopted in June, 1947, and taking the figure as 100 at that date, it rose to 133 in March, 1952. That is, there was roughly a rise of about 35 per cent., not since 1938, but since 1947. Or, to take another method of assessing the progressive fall in the value of money, if the value of the sovereign was 100 in 1938, it was 67 in 1944, and 48 in 1951. I need not attempt to calculate the exact ratio that the increases now given bear to this progressive fall in the value of money. I would only repeat here a calculation made in another place (and I pay great credit to the arithmetical genius who produced it): that the increase now given amounts at the utmost to 2s. 5d. a day, but it may fall, owing to the operation of the Schedule, to 2d. a day. It is not an increase that would make any one die with gratitude.
But the chief point I want to make is that to which I have previously referred—namely, the objection to the legislation provision now proposed which puts the limits up to which increased allowances are permissible as low as £550 or £425, as the case may be. What is the real justification for refusing to extend compensation to pensioners in receipt of more than that amount? The principle of compensation for a fall in the value of money is not in any question. That has been fully admitted in successive legislation, beginning in 1920, repeated in 1924, 18 and again, as your Lordships have heard, in 1944 and 1947. One must admit the relevance of the consideration that we must, first of all, take account of cases of real hardship—everyone would be in agreement there. But, while giving first place to cases of real hardship, there seems to me no ground for refusing to admit what is really a question of right, or a question of obvious justice. The pensioners of senior standing have a reasonable ground of complaint. They see their former juniors, or their subsequent colleagues, entitled to a considerable increase of pay, due mainly to the fall in the value of money, and that increase of pay is automatically followed by an increase in pension.
Let me take a typical case. I am assured that the figures are precise, though the dates are representative. It is the case of a man retiring in 1942 after 40 years' service and with a pay of £2,200. If his successor retires in 1953, his salary will be at the greatly increased rate of £3,250. The former incumbent of the post is entitled to a pension of £1,100, while the successor will have a pension of £1,625. There will have been a common period of service of twenty-seven years, but the pension of the second holder of the post will be £525 higher, and it is that much higher mainly on account of the consideration given to the fall in the value of money. I do not grudge the holder of the second post his good luck, but I feel that it is reasonable to ask for some consideration for his predecessor. As the noble Viscount said, it is true that pensions are contractual. But I think—and I take the same point here as the noble Lord, Lord Pethick-Lawrence—that it was of the essence of the contract that the money consideration given by way of pension should bear some sort of relation to the value of money when the contract was concluded. Surely that implication was essential.
One does not want to be extravagant or immoderate in the language one uses on behalf of one's friends in a case like this, but I think one night be permitted to suggest that if the State is going to stand by the wording of its bond, if it is going to adopt the very unenviable historical position of Shylock in that respect, then it would be very unfortunate indeed if it found itself unable to make any concession to those who have given the best 19 of their lives to the service of the State and public. I think it would be creditable to the State if it were to follow the example which has been set by some of the great banks and industrial houses, who are now giving increased allowances at every stage of pension to those of their employees who are suffering from the fall in the value of money. No doubt it is a matter for debate whether the banks have profited by inflation, but one thing is quite certain, and that is that the revenues of the State have immensely increased as a result. I think the State might very well pay some consideration to the case of those of its former servants who have been the victims of the process by which its revenues have been so greatly increased.
§ 3.35 p.m.
§ LORD AMMON
My Lords, I have one thing in common with the noble Lord who has just spoken—that is, that had I not taken a different course a good many years ago, at this moment I might have been one of those who were pleading for an extension of and an increase in the Pensions Act. I rise to draw attention to some dissatisfaction which exists, particularly among those on the smaller scale of pay and, therefore, with the smaller pensions. At the same time, I am not decrying or minimising in any way the amount which has been voted on this occasion.
There are two or three things of general policy which are of some serious moment. There seem to have been introduced something of the old Poor Law system and almost a denial and a going back on what was fought for and conceded with the passing of the 1912 Act—namely, that pensions are, to a large extent, deferred pay. It is to those things that I wish to draw attention. The application of the scheme has rather an extraordinary effect so far as those receiving the smaller incomes are concerned. While I agree with the noble Lord, Lord Hailey, that those who were on the higher salaries and who retired five, ten or twenty years ago have had no increase in their pensions, their case is not quite so clamant as those on the smaller scales. At the same time, it is worth noting—and attention should be called to it, particularly having regard to the criticism which is sometimes uttered about the Civil Service—that they have not made undue calls on the national Exchequer.
20 Now this Bill, unlike others, is on a flat rate, and is not based on percentages, as have been the other Increase Acts in the past. Therefore, its very operation has a hard effect on those on the smaller scale. May I give one or two instances? The Bill provides that in no case shall an increase of pension granted under it exceed one-third of the gross pension. This provision will have the effect of giving the smallest increases to the pensioners with the smallest pensions—for example, to those who, by reason of late entry into the Civil Service, or of discharge at an early age on grounds of ill-health, received on retirement pensions based on very small salaries and on short periods of service. For example, a married man who retired on a basic pension of £45 and has since received an increase of £18 under the Acts of 1944 and 1947 (making his gross pension £63) cannot receive, under the present Bill, an increase of more than £21, whereas, if his gross pension were now £78 or more, he could receive the maximum increase of £26 provided for by the Bill.
Under the escalator clause, as set out in the Second Schedule, this is what happens to some of those on small pensions. In the case of a person who retired on January 1, 1950, on a pension of £150, the amount of increase offered is only £16, which represents 11 per cent. of the 20 per cent. increase in the cost of living since that date. Anyone retiring a year later on a pension of £200 will receive an increase of £11—that is, 5½ per cent. compared with a cost of living increase since January, 1951, of 16 per cent. Those cost of living increases fall heavily on those whose pensions and incomes are as low as £150, of whom there are a tremendous number in the lower grades of the Civil Service and in the other classes who will be affected by the passing of this Bill. I hope that there will be an increase of at least about £30 instead of £20, and certainly some sort of undertaking (and this for wider civil servants generally, as well as those whom I am representing to-day) that there will be an inquiry into the whole question of Civil Service pensions, particularly in their relation to the cost of living, in order that they may be brought back again on an even keel and be more equitable in comparison, one with the other.
§ 3.40 p.m.
§ VISCOUNT SWINTON
My Lords, perhaps I may out of courtesy reply. The noble Lord, Lord Pethick-Lawrence, made one of his very interesting speeches. He did not. I know, expect me to give a complete answer "off the cuff," so to speak, on what in the present state of the nation, ought to be our attitude towards contractual pensions and other contractual obligations established over the years. It would not carry us a very long way. There might be a claim against Doctor Dalton! I agree with the noble Lord that inflation does fall most heavily upon the man or woman with a fixed income. But my answer to that would be that in the national interest as well as in the interest of every individual, the right way to try to tackle that is not by a complete, or indeed an annual, review of every contractual outstanding obligation; it is by trying to maintain the value of the pound and by trying to prevent any further inflation; and that I certainly promise the noble Lord and the House we will do our best to carry out. I hope and, indeed, from his speeches I know, that we shall have his help in that direction.
There was a claim made by the noble Lord on the other hand—and I think it was also Trade by the noble Lord, Lord Hailey—that people ought to receive increases in pension, however high their pension is, because the value of money has depreciated. It is all very well to argue like that. The noble Lord talks as if this money came out of some inexhaustible purse. He said that all he was asking for was justice. But what he is asking is that the taxpayer should be called upon to find more money in order to give an addition to a contractual obligation. The whole essence of this Bill, as of the Acts which have gone before it, is that nobody is entitled to an increase of this sort as of right. The pension he receives is the pension he contracted for. The noble Lord, Lord Halley, said that if the value of money improves, the Treasury do not say to the pensioner that he ought to get so much less. Of course they do not—because they stand by the contractual obligation into which they have entered. It is the same with the interest on a mortgage: it has to be paid at the agreed rate. So does the rate of interest on bonds issued in the case of 22 nationalised industries. That cannot be altered with the varying price of money. You can alter these things only by coming down on the taxpayer.
Therefore I think we have to be very careful in what we do. It is not a case of right; it is a case of asking the taxpayer, who is very over-burdened to-day, to find more money in order that cases of hardship shall be assisted. But the financial position of this country to-day is not so lush that we can afford to do more. We have in fact been very generous, as both noble Lords acknowledged; the limits have now gone up to £550 and £425. This is intended to meet cases of hardship. It is an eleemosynary payment: it is nothing else; it is not a thing to which anybody has a right. We have to do as far as we can, what is right and just. If, in the event of there being a Budget surplus, we were to say: "Let us pay this money out of that surplus." I cannot imagine how a worse impression could be created in the world at large. Certainly, it was not that sort of attitude that earned us the tribute, only recently paid us, in the O.E.E.C. Report.
Naturally, the man who has served a shorter time will get a smaller pension than the man who has served a longer time, and therefore he will get a smaller increase. But that is the way in which a pension works. The cost of a pension is conditioned by the salary upon which a man retires and upon the length of his service; and so the pension must depend upon the length of time the man has served. I am not expert in this matter, I admit, but I have no doubt that the calculations that the noble Lord made have been worked out accurately. If it is a matter of administration, it can be considered; but I must say frankly that if it is a matter of altering the conditions imposed in this Bill, and thereby increasing the burden on the taxpayer, then, apart from the fact that we have our limitations as to what we can do, I do, not think that in the circumstances it would be a reasonable thing to ask. After all, this is a considerable extension, both in scope and in amount. Some noble-Lords have talked as if this Bill was not worth while. Well, I could easily withdraw it; and if I did the taxpayer would be £10,000,000 or so better off. But I do not think that that would be agreeable.
§ On Question, Bill read 2a, and committed to a Committee of the whole House.