HL Deb 10 June 1952 vol 177 cc13-22

3.9 p.m.

Order of the Day for the Second Reading read.

THE PARLIAMENTARY UNDERSECRETARY OF STATE FOR FOREIGN AFFAIRS (THE MARQUESS OF READING)

My Lords, the interest of the Foreign Office in this Bill is, I admit, not easily discernible, and I should therefore perhaps explain that in the normal course the Second Reading would have been commended to your Lordships by my noble friend Lord Selkirk. Since he is absent from this country in the discharge of a mission which might otherwise have fallen to me, I have to do my best to understudy him until his return. In the case of this particular Bill I am fortunate, in so far as I shall be surprised if it provokes opposition from any quarter of the House, for indeed its sole purpose is to give increased rates of benefits to some 8,000,000 people under the three separate headings of family allowance, national insurance and industrial injuries insurance in order to bring the existing statutory scales into line with the changes in the cost of living.

It may be that some of your Lordships may regard the present proposals as inadequate. To them I can only say that Her Majesty's Government are bound to have strict regard to the general state of our national finances, and that I shall later on give figures which will, I think, convince the House that the increases now submitted for approval already cast a serious additional burden upon the Exchequer. It may also be that some of your Lordships would desire to see one or other, or all, of the existing schemes now under consideration amended in aspects other than rates of contribution and benefits, to which the present Bill is confined. To them I would say that they will no doubt recall that the main National Insurance Act provides that the Minister shall review the position at the end of the first five full years of the operation of the scheme, a date which will be reached in late 1954 or early 1955, after giving time for the Government Actuary to examine the position and report to the Minister upon it. It would therefore, I submit, plainly be premature to plunge at this stage into any general revision of the scheme until that statutory review has been carried out.

Nevertheless, my right honourable friend the Minister of National Insurance has decided to anticipate that stage by introducing legislation at as early a date as possible to give effect to certain recommendations set out in a recent report by the National Insurance Advisory Committee on maternity benefits. My right honourable friend has also decided to introduce legislation as soon as practicable to make certain amendments of a rather technical nature, which I do not propose to go into, to the industrial injuries scheme, in order to give legislative force to an understanding arrived at between his predecessor in office and the T.U.C.

But Her Majesty's Government look upon the increases in rates now proposed as a matter of such indisputable urgency that they have thought it right to introduce them by means of this Bill, and to exclude from its scope any other matters likely to excite controversy and thus impose delay. I do not intend to immerse the House in mathematical minutiæ. There have been two White Papers issued on the subject of the proposed changes. The first is a Memorandum by my right honourable friend and the second a Report by the Government Actuary—Command Papers 8517 and 8518. And there are the recommendations in the Schedule to the Bill itself, which, taken together, ought to have produced sufficient material for even the most inquiring mind.

It will, I hope, content your Lordships if I restrict myself to citing a few of the more important alterations, whilst indicating the estimated cost of each and the source from which it is to be supplied. I had better mention the three schemes severally, beginning with family allowances. The proposal under that head is to advance the weekly amount payable in respect of each qualified child after the first from 5s. to 8s., the whole expense continuing, as now, to be borne by the Exchequer. At the present 5s. rate the annual cost is already £65,000,000. At the 8s. rate—the new rate—it will exceed £100,000,000, and I may perhaps add for consideration by any of your Lordships who hankers after the extension of this scheme to the first or only child in a family, that to take such a step would involve a further increase in the total account of not less than £130,000,000 a year, a figure which is in present cirsumstances wholly beyond our financial resources.

As regards National Insurance, the Ministry of Labour index of retail prices since July, 1948, when the present rates of benefit became operative, shows a rise from 109 to 135, equivalent to an increase of 24 per cent. The Bill accordingly proposes to meet that situation by raising the basic rate of unemployment and sickness benefit and also of retirement pension and widows' pension from 26s. to 32s. 6d. a week for a single person or a widow, and from 42s. to 54s. for a married couple, increases of approximately 25 per cent. and 28 per cent. respectively, to meet the increase in the cost of living of 24 per cent. to which I have referred.

In so doing it removes an anomaly which was created by the National Insurance Act of last year, which destroyed the sound principle of uniformity by conferring increased rates of benefit upon certain classes of the community alone. Thus, widowed mothers and retirement pensioners over the age of 70, if men, or 65, if women, were selected for preferential treatment, as also were those who had reached the normal pensionable age—that is, 65 and 60 for men and women respectively—by October 1, 1951. These differentiations are abolished by the present Bill; and the principle of uniformity is fully and, I am sure, rightly, restored—a step which has been cordially welcomed on all sides.

The system of encouraging later retirement incorporated in the original Act remains unchanged, but the amount of the increments was increased by the Act of 1951; and the inducement offered is now three times as great as the figure contemplated by Lord Beveridge in the section of his Report which originally put forward the plan. Thus, on the new basic rates proposed by the Bill, a single man or woman will be enabled by deferring retirement to qualify for a pension of up to 47s. 6d. a week and a married man for pensions for himself and his wife up to 79s. a week. Her Majesty's Government trust that in the interests both of the country and of the individual widespread advantage will be taken of these facilities. In the field of industrial injuries benefits are also increased, from 45s. a week for a single person and 61s. for a married couple to 55s. and 76s. 6d. respectively, and the rate of disablement pension for 100 per cent. disability is similarly raised from 45s. to 55s. A number of other increases are introduced, in particular one from 30s. to 37s. for a woman widowed as the result of an industrial accident.

These manifold changes will inevitably involve a very arduous effort on the part of the administrative staff of the Ministry concerned. Nevertheless, it is the firm intention to make the new rates effective at the earliest possible moment, in the case of widows', unemployment, sickness and industrial injuries benefits as early as the end of July, in the case of family allowances by the beginning of September and in the case of retirement pensions at the beginning of October.

At this latter date the new rates of contribution will also become payable, for it must always be remembered that, apart from family allowances (which are non-contributory), this is a scheme of insurance, in which benefits can never be divorced from contributions. Accordingly, the total weekly contribution payable in respect of an employed man under the two schemes combined is stepped up to 10s. 9d., of which the man's share is 5s. 9d. and the employer's 5s. That represents an increase of Is. 4d. above the present level, that amount being divided equally between the two parties. There are also corresponding increases for employed women and self-employed and non-employed persons, and in every case there is an accompanying increase in the Exchequer supplement.

I undertook to give some particulars of the estimated cost of the changes in the insurance schemes proposed in the Bill. I have already mentioned the figure in respect of family allowances. As regards industrial injuries, the total initial increase is expected to be about £3,500,000 a year, a figure slightly in excess of the increased receipts from higher contributions but still not calculated to have any appreciable adverse effect upon the fund in the near future. But the outlook in regard to national insurance, where the sums involved are far larger, is much more disquieting and must be taken into very serious account in any constructive appraisal of the future of social security. The additional cost consequent upon the passing into law of this Bill is likely to be £59,000,000 in the first full year, rising to £80,000,000 in 1957–58 and £102,000,000 in 1977–78. Meanwhile, the extra income from higher contributions and Exchequer supplement will probably remain fairly constant at a figure between £65,000,000 and £70,000,000 a year.

On this basis, it follows arithmetically that in twenty-five years' time the additional expenditure involved by this Bill will exceed the additional revenue by as much as £36,000,000 a year. That is already an uncomfortable position, but in the context of the estimated total future income and expenditure of the fund as a whole, as distinct from the increase provided for by this particular Bill, the prospect is, I am afraid, even more sombre. The ratio of elderly people to the whole population of the country is mounting and, mainly because of the growing expense of retirement pensions, expenditure will begin to exceed income as early as 1954–55, and front then onwards the gap will widen rapidly. In five years from now, the deficit will be over £100,000,000 a year, in fifteen years £275,000,000 a year and in twenty-five years nearly £420,000,000 a year, an amount in excess of the current net total yearly cost of the entire National Health Services in Great Britain. Manifestly a most formidable problem is thus created.

I may perhaps add a very few words upon the relation between national insurance and national assistance rates. It is unfortunately true that, even apart from the rent allowance which can be paid as part of national assistance, the standard rates of national insurance benefit, even after the increases now proposed, will still fall short of the national assistance scales which start this month. Her Majesty's Government have given much thought to this situation but they have come to the conclusion that they can go no further than the advance made by the present Bill. It is at least a step forward and as big a step as can possibly be taken in the circumstances of to-day. I trust that, by your prompt approval of this measure, your Lordships will enable the Government to take the necessary action at the earliest possible date to put the proposed increases into beneficent effect. I beg to move that the Bill be read a second time.

Moved, That the Bill be now read 2a.—(The Marquess of Reading.)

3.26 p.m.

LORD KERSHAW

My Lords, every member of the House must be grateful to the noble Marquess for the clarity with which he has described the provisions of this short but comprehensive and highly technical Bill. If I may say so, I think he has proved himself an efficient and wonderful stand-in for his colleague the noble Earl, Lord Selkirk. I have been interested in this subject for many years, and the Bill seems to me to be the first Bill to deal within its tour corners with so many features of our social security system. As the noble Marquess has already explained, sickness insurance, unemployment benefit, industrial injuries, family allowances, retirement pensions and widows' allowances are all brought into the ambit of this one Bill. As I say, I think it is the first time that such a thing has happened.

Let me say at once that we on these Benches welcome the Bill and shall do everything in our power to give it a speedy passage through this House. At the same time, we deplore, as I am sure does every member of your Lordships' House, the necessity for the Bill. The rise in the cost of living is the reason for the Bill, as the noble Marquess has said. When I remember that the Chancellor of the Exchequer (I think it was) estimated that the cost to the community of reducing the subsidies on food would amount to Is. 6d. a week per head, it seems to me, speaking as one who is not an economist, peculiar economics that now, in addition to the Is.6d. per head that the subsidies represent, we are to pay 8d. more in contributions to produce £65,000,000 or £70,000,000 a year, which, of course, must at all times be a cost on industry.

The comprehensive nature of the Bill to which I have referred in itself calls attention to the great advance that has taken place in this country in the last forty years in our approach to our responsibility to our fellow men. There has, in fact, been a complete revolution of thought in this connection. I remember, as many noble Lords here must remember, the agitation of forty years ago when the contribution at that time was 7d.—4d. from the man and 3d. from the employer. That produced all sorts of threats of civil disobedience. But to-day with the total contributions at 10s. 9d. (as I think they are now) we have complete unanimity on this matter in both Houses of Parliament. Whereas the benefits in those days were 7s. 6d. a week, to-day we speak of benefits of 54s. for a man and wife and 10s. 6d. for each child. Therefore, the supporters of this small Bill can take comfort in the fact that it has done something to diminish, if not entirely abolish, destitution in this country.

But, as the noble Marquess has said, the position is not without great anxiety. I find it extremely difficult to understand why the extra rates of contribution under this Bill are insufficient to pay for the extra benefits provided by the Bill. That seems to me to be quite wrong. As the noble Marquess has said, it will mean a deficit of £36,000,000 a year in twenty-five years, which, added to the deficit already estimated in the original scheme, of £417,000,000 a year at that time, will produce a deficit of over £450,000,000 a year. It may be and probably is wise, taking the long view, to defer the solution of this particular difficulty until such time as the nation is not required to spend £1,100,000,000 a year in arms, or £500,000,000 a year on servicing the National Debt of £26,000,000,000. It may be thought, too, that a nation which can afford to spend £1,500,000,000 a year on drink and tobacco, and hundreds of millions in gambling, may well at that time be able to afford to cover the deficit of £450,000,000 a year.

Be that as it may, I remember that in the early days of this scheme of social insurance, the National Health Insurance, that whenever there was a suggestion that the benefits should be increased—and therefore, of course, that the contributions should be increased—we were always faced with the suggestion that there was a limit to which industry could be charged with the cost of these schemes. I want to say at once that, whether the contributions are paid by the employer or by the worker, they come out of the products of industry. We were told then that we must be careful. Then, your Lordships may remember, we were talking of a figure of 6d. or 7d. a week, and not one of 10s. or 11s., as we are now. We were told then that we must be quite sure that whatever was paid in this way did not militate against our effective competition with foreign competitors in our trade. I just throw out the point that this touches on the very much larger subject of the relative standards of life in relation to international trade—it might be thought improper to discuss the matter further at his time.

At the same time, what I think is relevant to this Bill, which in its main features is attempting to diminish the effect of the contingencies of life which interrupt the earning capacity of our workers, is that, from whatever source the monies come, whether from the worker, the employer or the State, in the last resort it adds to the cost of production and it can be met only by increased productive values. By that I do not necessarily mean longer hours or harder work; but it does mean that in the next twenty-five years of which we have just been speaking we must take the long view and increase our technical and mechanical aids to the workers, as well as advance our technological knowledge. In developing that aspect I should be trespassing on the debate which is to be initiated to-morrow by the noble Viscount, Lord Samuel. Nevertheless, the outstanding fact is that, in some way or other, during the next twenty-five years we must produce £500,000,000 a year in contributions if we are to maintain the social services that we now have.

As the noble Marquess has said, the Government Actuary is charged to examine this scheme after five years, and it may well be that the Government Actuary will be able, as Government Actuaries have done in the past, to alter the basis of his actuarial calculations and so produce a good part of the £500,000,000 of which I have been speaking. I have known it done to the extent of £2,000,000 or £3,000,000, or perhaps even £10,000,000, but whether he will be able to do it to the extent of £500,000,000 I should not care to say. But what I hope is that, simultaneously with this examination by the Government Actuary from the actuarial standpoint, there will be a departmental Committee to consider the whole of these schemes from the social angle, in order that the difficulties and anomalies which have occurred in the last few years may be ironed out, and that we may get a more practical scheme for our people. Having said that, I assure the noble Marquess that we on this side of the House shall be delighted to give this Bill a Second Reading.

3.36 p.m.

THE MARQUESS OF READING

My Lords, I am grateful to the noble Lord, Lord Kershaw, for his assent to this Bill on behalf of himself and his colleagues on the opposite Benches, and for his agreement that within its limitations it is likely to perform a useful function. We have, of course, had to give careful thought to what the increase in the contribution is going to be, as well as to the increase in rates of benefit, and we have come to a conclusion which in our view represents the fairest partition between the various financial aspects of the Bill. I agree entirely with what the noble Lord says about the necessity for long-range consideration of the very heavy financial burdens imposed by this Bill, and also with his thesis that the ability or inability to pay when the time comes will depend largely upon what he has called productive values.

With regard to the quinquennial review to which the noble Lord referred, that, of course, is not likely to take place until, as I think I said originally, some time in 1955. It would be of little value to move it forward because, until the statutory quinquennium has expired, it is unlikely that there will be sufficient material available to make the review really effective. When that time comes, the field which will be covered will, in all probability, not be merely the financial aspect but also the general operation of these combined schemes in the interval of time which has elapsed. Although, as I say, it would be premature to embark now upon such a review, the situation will, one hopes, by the end of that period have taken shape so that the various aspects can be examined. I will certainly put to my right honourable friend the noble Lord's suggestion that when the moment comes a departmental Committee, or some other suitable body, should examine not merely the financial but the social implications of the combined schemes. I think I need only repeat my gratitude to the noble Lord for his acceptance of the Bill, and perhaps add to that my personal gratitude for what he was so kind as to say about myself.

On Question, Bill react 2a, and committed to a Committee of the Whole House.