NATIONAL INSURANCE BILL

HL Deb 20 December 1954 vol 190 cc515-59

2.50 p.m.

Order for the Day for the Second Reading read.

THE PAYMASTER GENERAL (THE EARL OF SELKIRK)

My Lords, this is an important Bill, although what it does is very simple. There has been presented to Parliament at the same time as the Bill a substantial volume of information and statistics; they cover a wide range of interesting points, from the domiciliary accommodation of the old to the adjustment between National Insurance and private superannuation schemes. I do not propose to deal today with the many varied facets of the problem raised by these papers except possibly through an illustration from time to time. I should, however, like to thank the members of the Phillips Committee for the care and attention, and indeed the speed, with which they have completed their Report, which by any standard will always remain an interesting and important document. I should also like to express thanks to the Government Actuary for the admirable clarity with which he has presented his Quinquennial Report, and particularly for his success in presenting matters of such complexity with an astonishing degree of simplicity.

I think that most of us, in approaching this subject, have really two thoughts in mind. First, we are all glad that it has proved possible to arrange for larger benefits to be paid under National Insurance and Industrial Injuries schemes, to the sick, to the unemployed, to the injured and, perhaps above all, to the old people. I suppose that our second thought is a certain sense of anxiety as to whether this country can, in fact, carry the extensive burden which it is now carrying and the additional burden which this Bill necessarily brings with it.

In moving the Second Reading of the Bill I propose to examine these two points. Before I do so, perhaps I may say this: that it is important, at the outset, to remember that the increase has become necessary because of the fall in the purchasing power of money, and it has become possible only because the economic strength of this country has improved during the last three years. We are now in the middle of the twentieth century, and I dare say that one of the most remarkable features of this century has been the growth of social security. I should like to examine how rapidly and how extensively it has progressed since the time when, during the time of the Government of the noble Viscount, Lord Samuel, in 1908, old age pensions were first introduced. At that time, or in 1910, we were paying £7 million to non-contributory old age pensioners. By 1930, the amount of contributory and non-contributory pensions had risen to ten times that amount. By 1953, the figure had risen to fifty times that amount, and by 1978 it will have risen to one hundred times that amount. Those are payments in volume; but they also represent an increase in the net or real value to the individuals who receive them.

If we examine retirement pensions, it is, I think, roughly true to say that the value of the present pension to the pensioner can be put at about two and a half times the 5s. which was paid in 1914. It is about three times the value of the 10s. paid in 1920, and twice the value of the 10s. paid in 1934. In regard to real purchasing power, the present standard rate will be about 6 per cent. more than the 26s. paid in 1946; about 36 per cent. more than the 26s. paid in September, 1951; and about 15 per cent. more than the 30s. paid to certain pensioners from October, 1951; I think that shows a steady development in both those spheres.

In terms of cash, this Bill means that, with the exception of the pensions which were raised to 30s. in October, 1951, practically all the other benefits will have been increased during the period of this Government by 50 per cent. This includes retirement pensions payable to persons who reached retiring age after October 1, 1951, sickness benefit, unemployment benefit, and all the main industrial injuries benefits. Under this Bill the leading National Insurance rates are all being raised from 26s. to 40s. a week for a single person, while industrial injuries benefit and disablement benefit is raised from 45s. to 67s. 6d. Proportionate increases have been made to dependants. Details can be found in Appendix II of the Minister's Memorandum on the Bill (Cmd. 9338). There can be no doubt that the amount of these increases far exceeds any rise in prices which has occurred during the last three years—in other words, these increases also make up for rises in the cost of living which occurred before this Government came into power. I pass to the second question which I think most of us are asking ourselves—namely, glad as we are to see these benefits, are we putting too great a burden on posterity? Are we, in fact, in this position: that having spent all our money and having borrowed all we can get, we are now pledging our grandchildren's credit? I think it is desirable to look at that question for one moment.

I will first turn to the Industrial Injuries Scheme. Here, of course, one is dealing with a scheme that is intended to be actuarially self-supporting. The fundamental difference between the Industrial Injuries Scheme and the National Insurance Scheme is that the Industrial Injuries Scheme in general did not take in old cases, whereas the National Insurance Scheme did. It is, of course, true that the fund has increased, is increasing and will continue to increase for the time being. But the ever-rising number of disability pensions will gradually eat into this sum, and the Actuary, in his Report, has warned us that contributions may sooner or later have to be slightly increased if it is ultimately to reach a stable condition necessary for continued solvency. We think the addition of one penny, payable by the employer and the employee, imposed by this Bill is the essential minimum increase to meet the cost of the increased benefits which are here proposed. We are awaiting the Actuary's Quinquennial Report on this fund, which we hope will show that there is no heavy, long-term problem—at least, nothing comparable to the problems posed in the National Insurance Fund.

I should now like to turn to the National Insurance Fund. The problem here is not new; it is fairly well known, but it is bigger. The problem arises basically because of the increasing percentage of older age groups in the population. If I may refer to one point which the Phillips Report brought out, it is that our problem is not limited to the percentage increase of population of pensionable age. There are certain other formidable factors—for instance, the increase of old people will be from 7 million to 9½million, an increase of 40 per cent. on the number of pensioners; but the number of pensioners is expected to increase from 4½ million to rather over 7½million; that is, about 80 per cent. The reason is that in twenty-five years' time more people of pensionable age will come into the scheme than is the case now. But even that is not the whole of the story, because the Committee point out that because a certain number of pensioners have postponed retirement, they will be receiving pensions at a higher rate, and accordingly they consider that the increase of pensions to be paid will be at the rate of 100 per cent.—which means to say that in twenty-five years the amount which will have to be paid in pensions is about double what we are paying now.

On the other hand, I think it is fair to say that the Actuary in his Quinquennial Report gives us a slightly more favourable picture than that previously seen. Even taking account of the proposals we make here regarding benefits and contributions, the annual deficit to be borne by the Exchequer will not be very different from the deficits previously forecast on the basis of the present rates. This more favourable picture results from a number of rather complex factors mainly related to the future structure of the population. On the Quinquennial Report, I would point out that in the first five years of the operation of the Scheme, the actual benefit experience has been much more favourable than was anticipated in 1946. This is particularly so in the case of unemployment and sickness, and the result of course is that the forecast was very different from the picture we see to-day. The difference would represent about 25 per cent. had there been no succeeding legislation from 1946 up to the present time. I mention that because it is proper to bear in mind that similar changes might affect calculations in the course of the next twenty-five years. This does not, however, relieve us of the necessity of facing quite boldly the position as we see it to-day. I should like, therefore, to examine the facts which the Actuary has given.

The capital value of the National Insurance Scheme for present and future beneficiaries is just under £33,000 million —that is, about 25 per cent. more than the amount of the National Debt. The capital value of future contributions by insured persons and employers is about £17,000 million, leaving the Exchequer to shoulder a liability of nearly £16,000 million. It is doubtless this consideration which has inspired the Phillips Committee to say, in paragraph 132 of their Report: On pension account alone, a deficit already exists and might be increased at any time; it is open to any Government to announce an increase in benefit rates which its successors will have to finance, and it can, in doing so, add to the future liabilities of the State with a facility that makes even a war seem a laborious method of inflating the National Debt. It can cast the burden on its successors of honouring pledges given to-day without any corresponding, obligation to bring into existence the capital assets that would help to enable the pledges to be kept. Turning to the annual side of the contribution, the Actuary's Report shows that the cost of National Insurance benefits will rise from £622 million in the first year to £1,100 million in twenty-five years' time, of which retirement pensions will account for about £800 million, or nearly four-fifths. These payments will be met from three sources: first, interest on the two Funds, about £45 million a year; secondly, contributions from employers and employees, which vary but will total about £520 million; and thirdly, an Exchequer supplement of about £93 million. The National Insurance Fund may show a deficit for the first time in the coming financial year, and this deficit is expected to grow to £145 million a year by 1960, to nearly £300 million by 1970, and to about £425 million by 1980.

Noble Lords will observe that Exchequer payments in this matter are fairly heavy. It has been suggested that they should have been heavier still, but it seems to me that this view ignores the effect of what Her Majesty's Government are doing by Clause 2 (3), which is to make the Exchequer liable for the payment by 1960 of up to £325 million—an average of £65 million a year. If we add this to the £93 million supplement, it gives an annual average payment of £158 million. This is a larger sum than the Exchequer has ever paid for National Insurance and will represent about 22 per cent. of the total expenditure to be made from the Insurance Fund. This is, of course, considerably more than one-fifth of the total expenditure—not, would point out, simply of the amount of contributions from employer and employee. Thereafter the Exchequer expenditure will rise until it reaches nearly 50 per cent. From these facts it will be clearly seen that we have come down pretty heavily on the side of the principle of contributory insurance which was outlined in the Beveridge Report, a principle which has been maturing slowly but steadily for some forty-five years.

There may be some noble Lords who in this matter are drawn between two considerations: first, the desire primarily to help the least privileged members of our community, those who, often through no fault of their own, are least well-placed; secondly, on the other side, what may be called a hatred of a system which compels those unable to support themselves to disclose their resources and to receive assistance subject to a means test which may involve their eating into their hard-won savings. Doubtless all noble Lords have from time to time been drawn towards one or other of these considerations; and, within certain limits, one tries to get the best of both worlds by having something of both. But in examining whether we are right to emphasise the insurance aspect as we do, I should like to turn to paragraph 296 of the Beveridge Report, where the same question is asked, and see what was the answer given there: The capacity and the desire of the British people to contribute for security are among the most certain and most impressive social facts of to-day. I suggest that the answer is probably the same to-day as it was then.

This is a scheme of immense significance which we must all want. If we do not, then I am quite certain that we shall not consider the effort to maintain it worth while. Her Majesty's Government believe that the vast majority of people in this country do want this system, because they think, as we do, that payment of right is both fair and necessary as an essential element both of liberty and of human dignity. The noble Lord, Lord Beveridge, has been good enough to give us some good economic arguments as to why this outlook is sound. I will mention only one: that if we rely on payment of assistance subject to test, then the building up of capital becomes a matter of conflict between the individual and the State.

The next question which will doubtless be in noble Lords' minds is whether the distribution of the burden in this matter is fair. This largely centres around the question whether the payment by the man who falls into Class I, 6s. 9d. a week, is too high in relation to the benefits or too heavy a burden for him to bear. This is not an easy matter to answer, because inevitably it contains an element of judgment of circumstances; but perhaps noble Lords will permit me to make some comparisons with the past. Since 1946, benefits have increased over 50 per cent., while contributions have increased 33 per cent. These facts appear to suggest that the burden has been transferred, if anything, towards the Exchequer. Figures in regard to earnings show that the percentage of average earnings paid in contributions to-day is smaller than it would have been under the 1946 scheme. Of average earnings, whereas, under the 1946 provisions, 3.9 per cent would have gone in contributions, to-cay 3.2 per cent. would go in contributions.

I am aware that it may not he quite fair to take average earnings, became this is a minimum scheme essentially devised for, shall I say, those who are least well off in the community. Of course, anyone who wishes to do so can make private provision or, as many now do, enter some occupational pension scheme. I may mention that the Phillips Report shows that something like one-third of the population who are contributing under the National Insurance Scheme are currently acquiring rights also under some form of pension or superannuation scheme. They number about seven million individuals, and this number is increasing. Moreover, at the present time, there are about one million who are actually receiving benefits under some such superannuation scheme.

If we turn now to the lowest paid worker, we find that under the 1946 provision 4.9 per cent. of earnings went in contributions, whereas in 1954 the proportion was 4.2 per cent. I think it is worth remembering that, without the Exchequer supplement, contributions even from the age of 16, from employer and employee, would not be actuarially adequate to meet the cost of benefits when they became due; that is to say, this is a far more advantageous scheme than could ever be contemplated between employee and employer, even if we entirely omit the consideration of the many beneficiaries who come later into the scheme and whose payments, in some cases, cover only a small percentage of the benefits to be obtained. It is perhaps worth recalling, too, that for the people who come into the Scheme at the age of 25, instead of 16, the contributions should be one-third higher; at the age of 35 they should be doubled, and at the age of 50 they should be five times as much as at the age of 16. Of course these increased contributions are not applied; many people do come in at a later stage, and have done in the past. I think that, on balance, therefore, most of us must come round to the view that the Exchequer has taken on as much as it could be expected to do; indeed, we are still a little concerned as to whether it will be able to fulfil its undertaking here in a real sense and in real values.

If I may for one moment refer again to the Phillips Report, I think most of us will find it is encouraging to note that, viewing the subject with the objectivity which so eminent and so distinguished a body can do, they came to the conclusion that the burden of pensions would not he unmanageable in twenty or thirty years' time. I am bound to add the qualification that this was said before the new Scheme was brought forward. I also think it important to recall two points to which the Phillips Committee drew attention. The first was that, in view of the volume of expenditure falling on the Budget, there might have to be a corresponding economy in other directions, even if that meant that pensions were given a special priority. The second point was to emphasise that one of the primary objects to which the thoughts of the State should be directed is that of ensuring that capital assets are growing at a satisfactory rate. I think we must recognise that, in the long run, the only way these burdens can be carried is by increasing the general level of national wealth and maintaining the value of money. It is important to remember that we have already been warned of the existence of inflationary pressure. The more rapidly we can expand the national income and our capacity to produce, the easier the problem will be.

Here, again, I would quote some figures which are not unencouraging. Between 1947 and 1953, national income increased by about 23 per cent. in real terms, while the total employed population rose only by 5½ per cent. This means that over the economy, taken as a whole, output per man has risen, on an average, by something like 2½per cent. per annum over the past seven years. There is as yet no comparable figure for 1954, but the indications are that an encouraging increase in productivity has continued. Our general economic policy must be to study the growth of productivity and productive capacity, and, indeed, to improve on it. And it is for this reason that the Chancellor of the Exchequer, in his last two Budgets, has laid so much emphasis on the need for more productive investment and a policy of encouraging economic expansion, placing the growth of economy as the necessary counterpart to these proposals for increasing pensions. Indeed it is only viewing the matter in that light that these proposals make sense.

This Bill is an expression of confidence in the future strength of the community and our way of life, but this expression of confidence must be supported by positive action on the part of all the people in this country, both in their thoughts and deeds.

May I say this in ending? If we regard this Scheme simply as a means of redistributing the wealth of the country, as a more effective way of cutting up the national cake, it will assuredly fail in its purpose, for the very simple reason that at the present time there are just not the funds available to make payments which eventually will be required in terms of this Bill. If, however, we regard social security as a platform, or as a foundation on which to build greater productivity, in which all, from the leaders of industry to the newest entered apprentice can unite, then indeed we shall have a scheme which will be a boon not only to this generation but also to our children and grandchildren. I beg to move.

Moved, That the Bill be now read 2^a.(The Earl of Selkirk.)

3.16 p.m.

LORD PETHICK-LAWRENCE

My Lords, it is customary in rising to address your Lordships' House to disclose any personal interest one may have in the Motion under discussion. I will begin, therefore, by reminding your Lordships that as it is nearly twenty years since I passed pensionable age, I naturally have a considerable interest in this subject as it affects those who, like myself, are in the later stages of the journey through life. But I have a specific interest as well as a general one in this question, because as Vice-Chairman of a charity known as Cecil Houses, I have a particular interest in their home for old ladies whose old age pensions have an important part to play in the financial structure of that house. But my concern with pensions goes back over more than half a century. I was closely associated with Keir Hardie in his struggle to secure for aged persons a pension, a very modest pension, to which the noble Earl has just referred and which finally came into law in the year 1908. Furthermore, my wife and I were instrumental in bringing to this country from the United States, Judge Henry Neal to advocate what he had already got in his own district of that country, a pension for widowed mothers who had lost their breadwinner-husband and therefore had to do a double duty themselves. And it was to this subject that I addressed my remarks in my maiden speech in the other place.

Those were very cruel days for the poorer members of the community—no sickness benefit, no workmen's compensation, no unemployment allowance, no help towards old age from the community except the grim relief of the Poor Law and the cold bleak walls of the workhouse, wherein husband and wife were shut off from each other's society long before death them did part. There are Members of your Lordships' House today who experienced those days in their youth and whose mothers fought single-handed the valiant battle imposed by those conditions and filled the dual rôle of breadwinner and home-keeper. The Welfare State, as we know it to-day and as the noble Earl has just described it, has been built up during the last fifty years to its present structure by all Parties. The most outstanding addition was made by the noble Lord, Lord Beveridge, when, on the instigation of my friend the late Arthur Greenwood and with the help of an expert Committee, he drew up his famous Report. This was accepted in principle by the Coalition Government of the day and in 1946 was coined into an Act by the Government of which I myself was a member.

This Act has more than once had to be amended and the latest proposals for amendment are contained in the Bill which we are discussing today. A glance at its provisions is sufficient to see that, although it is dealing with essentially human matters, in its text and in its implications it is almost exclusively a financial question. In view of that, I am proposing to tell your Lordships the attitude that I and those for whom I speak in this House propose to adopt with regard to it. It is true that it has not been certified by the Speaker as a Money Bill; nevertheless, we do regard it as mainly concerned with finance and, as such, as far more appropriate to be discussed in another place than in your Lordships' House. Therefore we shall devote our speeches in this debate on the Second Reading to the general provisions of the Bill and we do not propose to put down any Amendments for the later stages of the Bill. We do that not only for the reason I have already mentioned to your Lordships but also because the kind of Amendments we might have put down have been so recently discussed and defeated in another place that it seems to us to be otiose to put them down again. Finally, I am quite sure I am carrying all sections of the House with me in desiring not to delay the passage of this Bill into law. Many administrative steps have to be taken to set the machinery in motion and all of us are anxious that the setting up of the machinery should not be delayed.

What is the reason why the Act of 1946 has needed and needs today substantial revision? Is it due to any major defect in the Act itself? I answer to that question, No, and I am supported in that view by the Government Actuary in his first Quinquennial Review—I shall be referring later to the words which he said on that matter—which in fact has been accepted by the noble Earl who moved the Second Reading. Why, then, has the Act to be amended at all? It has to be amended because of the change in the value of money brought about by inflation. Inflation upsets the physical basis of all contracts which run for a period of time. Benefits, being expressed in terms of pounds, shillings and pence, become quite different in real value when the purchasing power of the pound drops substantially. What might have been adequate in 1946 has become wholly inadequate in 1954. If, therefore, the intention of the 1946 Act is to be carried out, the money rates of benefit must be revised upwards, and that is what this Bill does. On this I think noble Lords in all parts of the House are generally agreed.

Before I come to the other features of the Bill, I propose to deal with the popular misconception regarding the capacity of the country as a whole to support in decency and reasonable comfort its own people in their old age or earlier misfortune. Contrary to popular belief, the sole criterion is whether or not at the time when the benefits are required the country can afford out of its current income the sufficient proportion to satisfy this worthy object. And this is not dependent on the purchasing power of the pound at the time, so long as any changes which have taken place in price level have affected all commodities roughly in the same proportion. Nor is it dependent directly on the existence of any proper scheme of insurance, such as the Beveridge Plan. My Lords, 1954 cannot heap up a pile of food and clothing to be dispersed in 1979. It cannot put into a gigantic money box several thousands of millions of pounds' worth of gold. All it can profitably do is to exercise thrift by directing income from immediate consumption to capital development, thereby ensuring the future productive capacity of the country. This, in effect, is what it does when the Exchequer and other sources are used to create an insurance fund. Lest I be misunderstood, I hasten to add that I am not decrying the value of the insurance principle, which I regard as of very great importance. I am trying only to set out the basic economic facts which underlie the financial superstructure.

Having said that, my answer to the question which the noble Earl incidentally posed, of whether in, say, 1979 the country will be able adequately to look after its aged and afflicted persons, is an emphatic affirmative. I think it is also the answer which the noble Earl gave and which he attributed also to the Phillips Committee, even though perhaps they were not speaking of what will be after this Bill but before it. Of course, that statement of affirmation is subject to the proviso that in the meantime our economy has not been blown to smithereens by war or by some other devastating catastrophe. I am almost sure that that statement was made in one or other of these papers, but there is such a mass of them, when one tries to look up the whole scheme, that the noble Earl will agree that sometimes one mislays such statements. However, I think the noble Earl quoted the figures to justify what I have said.

Hitherto this scheme has been based on two principles: first, that there would be paid continually into the fund on behalf of every worker a premium which in the case of those who enter the scheme at sixteen is sufficient to cover actuarially the benefits to which they are entitled, this premium being contributed in fixed proportions by the worker, the employer and the State; secondly, that the Exchequer has to make a block grant in order to bring into the scheme the workers who are more than sixteen at the time of the start and are in what, in common jargon, to-day is called the pipeline between sixteen and old age. This block grant is not, and never has been, intended to be paid into the Fund as a lump sum, but has always been arranged annually, to be paid as required in later years to cover the deficits as they arise. Here I should like to quote from the Government Actuary on page 29 of the Report, where it says: The annual deficits are not the result of an unfavourable experience, nor are they unexpected. They arise from the grant of full insurance rights when the National Insurance Scheme was introduced and when pension and other benefit rates are increased to practically all existing contributors and pensioners, although past contributions of adequate amount cannot have been paid. In other words, that is what both the noble Earl and I have said: that the part that the State pays in the block grant is paid in order to keep up to the full insurance all those people who are over sixteen either when the Scheme started or when further increases have been made.

In their proposals for meeting the cost of the increased benefit in this Bill the Government are raising the contribution by 1s. per week per worker and 1s. per week from the employer. In so doing, the Government are breaking new financial ground, in that they are for the first time providing a premium paid on account of young entrants in excess of the actual cost of these benefits. This is quite clearly stated on page 13 of the Government Actuary's Report on the financial provisions of the Bill, where he uses these words: The proposed contributions are materially greater than the amounts of the actuarial contributions. I shall have something to say on this matter later. I have said that, though this Bill is not entirely along the lines that we should have liked to see it, we still wish it well and hope that it will come speedily into law. Our main criticism of the Government scheme as a whole is that, owing to faulty timing, the Government fall in certain respects between two stools. They have failed to provide the necessary increase in benefits in time to be available for the winter season; and they have failed to consider at all adequately either the important proposals of the Phillips Committee or those of the Quinquennial Report of their own Actuary.

This is not some wicked view taken by the Labour Party, but a view which has been expressed in circles by no means unfavourable to the Government. I was interested to read these words in The Spectator of December 10, a paper which certainly leans towards the Conservative Party rather than the Labour Party: What the present position called for was not a patched-up expedient but a deliberate and considered piece of legislation of a kind which must one day be forthcoming. All the most urgent questions are still unanswered. The Economist, in its issue of December 11, is still more scathing. In the role of heavy father, for which we are accustomed to look, the Economist tells us (not, of course, in the precise words that I am going to use) that all of us, in both Houses—Government, Opposition, Front Benches and Back Benches—are a set of naughty boys who ought to be whipped and sent to bed; and then "father" will be left to do what is best for the country.

The questions that have to be considered and settled by Parliament, acting as a Council of State, are many and various, and most of them are mentioned in the Phillips Report. Here are some of the more important ones. If the contributions are continually to increase, should they remain, as at present, on an entirely flat basis? On this question there is a great deal to be said on both sides. In particular, it should be noticed that at present the lower-paid workers pay out of their resources not merely a larger proportion of their incomes but a larger intrinsic sum, because the better-paid workers recover part of their contributions in reduction of income tax, whereas the lower-paid workers, who do not pay income tax, suffer the full reduction from their earnings. I am not deciding the point one way or the other but I am putting it forward as a point which I think has escaped a number of people.

Here is another question. Should there be any change in the age of retirement, whether voluntary or compulsory, or does the present option to continue at work, which exists only in certain occupations, fully meet the case? The Phillips Report has revealed to many members of the community something which I could have ventured to put before them before ever the Committee investigated the matter—namely, that a large number of elderly people stay at work because they want to. One thing an old person does not like is to become, as it were, a mere piece of furniture. I remember that a young woman went to call on an ex-agricultural labourer and found him sitting outside his house. She said to him: "Well, Mr. Grimes, what do you do with yourself nowadays?" He replied: "Well, miss, sometimes I sits and thinks, and sometimes I just sits." That is what he is forced to do. But I am sure, from my experience of men of all classes, that most of them prefer to go on creating something and administering to the community, if they possibly can, rather than sit about and do nothing, with their hands folded in front of them. Whether we decide that the compulsory retirement age should be changed or not, I am certain that we must take that fact into serious consideration.

Another question is this. Should the State pension scheme remain, as at present, entirely separate from the superannuation schemes to which the noble Earl made reference? Should these occupational schemes remain unregulated and uncoordinated? Should the combined contribution, hitherto calculated to cover only the actuarial cost of benefit of a person entering the scheme in youth, be raised so as to bear some part of the Exchequer block grant, as the Government are proposing by this Bill? In this connection, I would point out to your Lordships that the increase in contributions is not quite the clear benefit to the Exchequer that is sometimes represented. Consider, in the first place, the contribution which falls on the employer. The addition of 1s. a week—I am taking round figures—means that in the course of the year employers will pay something in the neighbourhood of £50 million. But all that is not a clear gain to the Exchequer—very far from it, in fact. The employer will take one of two courses. He may take it all out of his profits. If he does that, it will represent a reduction in the amount of income tax payable: the Treasury will therefore lose, out of the £50 million it thinks it is getting from the employer, a sum certainly not less than £20 million a year, and probably some surtax as well.

Suppose, on the other hand, that the employer takes the more likely course of putting up the cost of the article which he sells. The effect of that will be inflationary. Perfectly clearly, it is a pure matter of inflation. It may injure him, incidentally, in the course of his export trade but, so far as the home market is concerned, it means that he puts one more ring on the spiral of inflation. Inflation is the nigger in the woodpile against which we have to be particularly on our watch in this pension scheme, because inflation, as I have pointed out, has already damaged the results of the scheme in the past. If inflation is going on continually, we shall be constantly having to raise the rates and the contributions; and where the upward spiral will end no-one can see.

With regard to the workers' contribution, to some slight degree the same conclusion will arise, because some of the workers, at any rate, can deduct the amount of their contributions from their income for the purpose of tax; so that, here again, the Treasury will lose a certain amount of money in income tax from the workers. Quite apart from that, there is the differential result, to which I referred a few sentences ago, on the high and the low paid workers. The Minister, in introducing this Bill in another place, and the noble Earl in his speech, made certain comparisons between the proportion of income taken by the flat rate contribution to-day, and what it will do after this Bill becomes law, with what it did in the year 1946. I was under the impression that those figures dealt mainly with average earnings, but the noble Earl did say that they affected the lowest paid worker.

THE EARL OF SELKIRK

No, I am sorry—the lowest earnings.

LORD PETHICK-LAWRENCE

I must say that I cannot follow the noble Earl's arithmetic here, because, whereas a low-paid earner would be earning £6 a week, the average earnings are something over £12. Therefore, it seems incredible to me that, when the average proportion is 3.2 per cent., that of the low paid worker should be 4.2 per cent. It seems to me incredible that there is such a slight difference. However, the point I am making is this. The low paid worker will have to pay this whole contribution, and though it may seem little to us to have to find 6s. a week, for a man with a family who is getting only £5 or £6 it may be quite a serious item affecting his budget. Therefore, we on these Benches take the view that this is one of the matters that ought not to have been introduced by itself. If it was a desirable thing to do, we ought to have waited until we had a general scheme in which all the points that are open to discussion could have been discussed together, and this should have been taken as one of those.

Finally, there is the relationship of the pensions scheme to National Assistance. That, of course, does not come directly into this Bill, but the Government scheme with regard to pensions would have looked very odd if the poorest persons in our community—those who draw National Assistance owing to their poverty—had been the only people to get no rise in their income. Of course, we know that by what I think Sir Winston Churchill would have called a "most fortunate coincidence," the National Assistance Board have chosen this particular moment to decide that there ought to be some increase in their rates also. Most of us understand the reason why these increases are less than those given to their better off neighbours, but I doubt very much whether the older people themselves will take that complacent view.

Now what are the conclusions of the whole matter? The first one that I draw is that we must do everything possible to avoid inflation, which upsets all promises made for the future. Under its spell we are like the Red Queen in Alice Through the Looking Glass, who had to run as fast as she could the whole time, in order to remain where she was. For the rest, I and the members of my Party can regard this only as an interim measure, and we shall press for a full discussion on all the issues involved, so that we may all of us, not thinking in terms of Party, but as a Council of State, build a sound scheme which will make this great country of ours greater still in the consideration which it shows to the young, to the old, to the unfortunate and, indeed, to the whole of our population.

3.48 p.m.

LORD BEVERIDGE

My Lords, I am sure that all those present would like me to begin by thanking the noble Earl who has spoken on behalf of the Government for the lucid and persuasive way in which he has put his case. I should also like, as I am sure most of us would, to thank the noble Lord who has just sat down, not only for his interesting observations but even more perhaps, for the promise that no Amendments to this Bill will be put forward on behalf of his Party, so that the Bill may be sure of a rapid progress. I am the more happy to thank the noble Earl who has spoken for the Government because I recollect an earlier debate on February 10 of this year in which I did not feel quite so grateful to him. I was then pressing the Government for speed; for ignoring, if necessary, what the Government Actuary wanted to say about the finance of the scheme; for hurrying on the Committee of Sir Thomas Phillips; and for putting into that Committee some of the spirit of my noble friend who presides over me on this Bench, Lord Samuel and his Commission upon the Coal Mining Industry in 1925–26. I can assure your Lordships that under Lord Samuel's driving force we produced in six months a much longer Report than the Sir Thomas Phillips Committee have produced in, I think, eighteen months, or nearly eighteen months. I had hoped that the Phillips Committee would have had their work done in time for real consideration before die Government came to hold that debate. In that debate, however, the noble Earl who speaks for the Government insisted that we must wait for these Reports, and, further, that there was no likelihood of getting the Reports this year.

I should like to begin by congratulating the noble Earl and his Government on doing so much better than the rather cheerless programme they had before them suggested. The Sir Thomas Phillips Committee have reported, and the Government Actuary reported before the end of November. Indeed, the Government have done better, because they have added a third most interesting Report as the result of a special inquiry made by the Ministry of National Insurance and Pensions as to the reasons given by individual men for retiring or for continuing at work at sixty-five years of age. All of those Reports are of human interest and great importance. The tragedy that none of them really came in time to guide public opinion or to be considered nearly as carefully as they deserve to be before a decision had to be taken on this Bill.

The Report of the Phillips Committee was actually published after the Government proposals had been announced. The most important recommendation of the Committee for raising the statutory pension age was excluded, in practice, by the announcement before its publication, made by the Minister of Pensions, of the intention to raise pensions without reference to age. The recommendation was formally rejected when the Minister in another place spoke in introducing this Bill. Therefore, while I congratulate the Government on the modified speed that they have put into their "reporters," I am afraid that the reporters themselves have had slightly shabby treatment. Secondly, I have to congratulate the Government on the speed of their own proposals. Finally, and most important of all, I congratulate them most heartily and unreservedly on the main nature of their proposals, first, for strengthening benefit as of right rather than by assistance subject to a means test, as the main instrument for dealing with lack of income, whether through unemployment, sickness, accident or old age; and, secondly, for maintaining, so far as it still can be maintained, the insurance principle by raising contributions as they raise benefits.

I think I can illustrate the positive commendation which I should like to make of the Government proposals by referring to the main criticism, the most vigorous criticism that I have seen, of their proposals in the article in the Economist to which the noble Lord, Lord Pethick-Lawrence, has already made reference. It is in an article on pensions in perspective. Lest your Lordships should have any doubt as to my views of that article, let me begin by saying that it seems to me to fall gravely short of that judgment and sense of perspective which we have hitherto regarded as one of the great features of the Economist.

What does the article do? First, it describes the end of insurance. It uses a phrase about the "wreck of the National Insurance Scheme." It does so because it has apparently at last become clear to the Economist that the National Exchequer, for years to come and, indeed, indefinitely, will have to find a large part of the money needed to pay the pensions which will fall due. There is absolutely nothing new or unexpected in that. It is all set out in the Government Actuary's Report, that if, when you introduce a pensions system, you want to bring in some of the people who are already well advanced in years, or advanced even past the earlier years, you must somehow find money from other sources than their contributions for back services. That is the experience of any employer who starts a pensions scheme and wants not to postpone it for fifty years but to bring in the people who are more than sixteen when they join. There is nothing new or unexpected in it. It is all carefully set out in the Government Actuary's Report. It was all carefully set out in the Beveridge Report of 1942, which gave all these figures of increasing expenditure from the Exchequer as the number of old people rose.

Of course, one can say that this is not insurance, but that is merely quarrelling about words. Is it not really insurance if money comes from outside other than the contributions of the employers and the employees? No employer who starts an insurance scheme with money for back services would admit that it was not insurance. But, much more important and, to me, much more disastrous, is the objection this article raises to the raising of benefit rather than the increasing of National Assistance. It describes as "completely lacking in human compassion" the fact that, while putting up the benefits by 7s. 6d. a week, the Bill proposes only a meagre half-crown rise in National Assistance. That assumes, of course, that National Assistance was in the right relation to benefit before. Actually, it can be seen that National Assistance was unduly high in relation to benefit before.

The article goes on to its central thesis, that it is extravagant, under any social insurance system, to give money to people who do not really need it and who have any money of their own: in other words, that we should give up the whole of insurance and benefits as of right in favour of assistance, subject to a means test for everybody. That is the central thesis of this remarkable, this astonishing article. What does that mean? It means that the State should say to everybody: "We will help you in proportion as you have failed to help yourself. The more you have done for yourself, or tried to do for yourself, the less we will do for you. Therefore, be wise; do not do anything for yourself." That is the moral, that is the effect, of assistance subject to a means test. We must have it; we cannot abandon it altogether; but to make it our main feature in dealing with this question is to make State action the enemy of individual action. The State says: "I will do something provided you do not. I will use my money power, my power of helping you, in order to discourage you from helping yourself or thinking about Yourself". That is really universal pauperisation.

The right view, the contrary view, is that what the State should do is to make a firm basis of minimum over and above which the individual can build up himself for what he wants above the minimum. That gives liberty and variety in the community, and liberty and variety are more important than dead equality to which universal assistance, subject to means test, would reduce our whole people. The Economist is simply living in the Dark Ages; and I think that anyone reading that article and contemplating what it involves, what I have called the universal pauperisation of the people of this country, will see at once the outstanding merit of this Bill; and that is why I, for one, welcome wholeheartedly the Government's proposals. I agree that substantially they have covered the decrease in the value of money in the pensions provided under social insurance. I only hope that they will be encouraged to go on to the still harder task of preventing any future decrease in the value of the money in my pocket and in everybody else's pocket—because the fact remains that it is diminishing and is not being increased by this Bill. Next time I hope that the Government will do something still better, and will prevent inflation and preserve the value of the money in our pockets.

Let me come to the second main question posed by the noble Earl who spoke for the Government—namely, can we afford what is proposed in this Bill; or, alternatively, can we, without harm, materially reduce the cost of what is proposed by this Bill? The Phillips Committee made one proposal for diminishing the cost. They proposed to raise the minimum statutory age for drawing pensions by three years—for men, from 65 to 68; for women, from 60 to 63. They proposed to do it by three stages of a year, spread over at least fifteen years. To go with that, they proposed to lessen the conditions required for sickness and unemployment benefit so that a person could get sickness and unemployment benefit more easily in the years between 65 and 68, and 60 and 63.

There are many criticisms of detail which one can make on this proposal of the Phillips Committee. The first is that there is no medical evidence at all as to the capacity of man to work after 65 up to 68, or of how long that capacity lasts. All we know is that about six men out of ten do continue working after 65, but we do not know for how long. There is no real medical evidence as to their capacity; and, as the Phillips Committee themselves said, this proposal is based on lack of any precise evidence. I think there is here a clear indication of the speed at which the Committee had to work. They proposed to preserve the existing retirement condition between 65 and 68. This would mean that in future for the two years between 68 and 70 only (there is no retirement condition after 70), we should keep all the fuss, unpopularity and administrative work involving the retirement condition. I am certain that if the Government are, in fact, going to raise the age to 68, and are, as new, to have no retirement condition after 70, they had better do away with the retirement condition altogether. But these are criticisms of detail.

My main criticism of this proposal is that it does not touch the main problem of paying for pensions. The estimate of the Phillips Committee was that their proposal would, by 1978, save £50 million a year—that is, one-fifteenth—out of a total expenditure on pensions of £665 million, or one-seventh of the expenditure of £364 million incurred by the Government on making up deficits. To have all this apparatus, raising the retirement age over fifteen years and, in so doing, making pensions a part of political controversy all over the country, for the sake of £50 million a year, out of a total expenditure of £665 million, seems to me to be not worth while. As your Lordships know, the Government have already rejected that proposal, and I imagine that it is dead. I do not say this because I feel that on principle all question of the minimum pensionable age ought to be excluded from consideration. I do suggest, however, that the only chance of getting a rise in the minimum pensionable age, the statutory retiring age, and of compelling people to go on working rather than draw pensions, would have been to combine that as a kind of bargain with raising the rate of benefit and pensions now, perhaps with the abolition of the retirement condition. That was the only chance, and that chance has gore.

In future, what we really have to do to cover the expense of pensions is to trust to increasing productivity. As the noble Earl has already pointed out, in an interesting paragraph of their Report, paragraph 147, the Phillips Committee take a relatively low estimate of increasing productivity. Their estimate adds 1½ per cent. per year, so that by 1979 our national income would have risen from £14,000 million a year to £20,000 million a year. That increase could easily stem the growth of pensions from £334 million to £365 million, which is the growth we have to face. If we can maintain our productivity, and our growth of productivity, there is no question but that we can afford what is now proposed in this Bill. The other line to work on is not the compulsory continuance at work of people who cannot work because they are too ill to work or cannot get work, but the voluntary continuance at work of all who want to do it. Of course, in many cases that involves a change of the employers' attitude, and in many cases, as the Phillips Committee said, supervision of the employers' own pension scheme and superannuation schemes. That is the direction in which we should look, rather than to a raising of the pension age.

I am bound to say that, to my mind, there is a good deal more to be said for the proposal to abolish the difference between pension ages—that is for men, 65, and for women, 60. That is subjected to a strongly worded note by the only woman member of the Committee, Dr. Janet Vaughan, who was most anxious to assimilate the women's pension age of 60 with that of men at 65. Historically, we are almost, if not quite, alone in making this difference. Of other countries from which the Phillips Committee took evidence, seven had the same age for men and women, including the United States and Canada, and most of the countries I know of, except Australia and Denmark. Historically, also, the principle of pensions for women at 60 rests on nothing but two legislative blunders. The first was in 1925, when contributory pensions were first introduced. The people who devised that scheme were a secret committee of civil servants in the deepest recesses of Whitehall—or so they were once described by our present Prime Minister. They agreed on a pension for a man at 65 and for his wife also if she was 65, but not if she was younger than the husband. That, of course, was ridiculous, because most wives are younger than their husbands, and not only younger but busier, for they are bringing up families. Yet no provision was made for them. Had that committee looked at any other branch of insurance, like unemployment or sickness, they would have seen that there were allowances for wives; but that committee made none.

When, in 1940, this situation became too ridiculous to be allowed to continue, another amendment was made and the age for women's pensions was lowered to 60, instead of 65, on the assumption that the average wife was four or five years younger than her husband. Many wives were much younger than that, and they got no benefit. That situation has now been put right. The sensible thing was done, and an allowance was given to the wife who is dependent, irrespective of her age, when her husband becomes pensionable. But Her Majesty's Government in 1940 still proceeded on the age-for-pensions basis, and when they brought in married women who were living with their husbands they felt bound to bring in single women who were working for their living: and those women got pensions also. Let me say at once that I do not believe one can now go back on that provision. As the Phillips Committee have said, to abolish the differentiation would achieve a saving of £20 million, but at the cost of compelling single working women or married women to go on working on their own. Politically it would be difficult to get that suggestion accepted.

I dislike this retiring age for women at 60 for a reason quite other than the expense of the pensions involved. I believe it is wrong to give any able-bodied men or women at 60 the idea that they may safely retire into leisured ease as there is no need for their services. There will be great and growing need for the women of 60 to 65 to give, in the homes and elsewhere, the care that will be needed by the masses of older people, those from 75 to 85 years of age. There is an immense problem in giving care to the really old people, and to the elderly who are becoming feeble. They need that care, in a sense, even more than they need money. The problem of the aged will not be solved by any action on pensions. I hope that after this debate to-day, when we have settled pension rates, we may have a discussion on the human and social problems of provision for old age, as they are admirably but briefly illustrated in the Phillips Committee report.

There are nearly one million pensionable persons living alone, and their isolation from their families has undoubtedly increased. The chance of those who want employment getting such employment is affected by employers' pensionable schemes. There is an all too easy abuse of hospital facilities by families who want to get rid of their old people into hospitals, where they occupy beds badly needed for other purposes. There are the difficult financial problems facing central and local authorities. All these points are dealt with in the Phillips Committee Report. The general conclusion is that a full re-examination of the services for the old is needed. It was not possible to make that re-examination before considering this Bill, but I hope that we shall discuss the Phillips Committee's Report. I will come back to the main problem raised by the noble Earl who spoke for Her Majesty's Government: how we can best bear together the burden of old age. The Government Actuary's figures for 1979, although they may be familiar to noble Lords, are worth repeating, for they are rather staggering. By 1979 the number of men over 65 will be 3,330,000; of women of 65 and upwards, 4,710,000; and of women from 60 to 65, nearly one and a half million. There will thus be nine and a half million persons of present pensionable age. That figure, though staggering, is not in any way new. As the Government Actuary points out, it is rather less than the figure forecast in the Beveridge Report.

As the noble Earl who has spoken for Her Majesty's Government has quoted the Beveridge Report, may I say a few words on it from this point of view? I have heard that Report referred to, even in your Lordships' House, as a painting of a glorious picture of easy life for all of us. That was not the nature of the Beveridge Report. It did not in any way profess to usher in what an elder contemporary poet of my time described in 1919 as "the brave new world"— The brave new world begins When all men are paid for existing And no man must pay for his sins. That was Kipling's view of the "brave new world" in 1919. It was not the view of the author of the Beveridge Report in 1942. That Report faced reality. I foresaw the difficulties of the immediate aftermath of war, and for that reason I favoured the postponement of full pensions for five, ten or even fifteen more years until we had surmounted those difficulties. I have been interested to look back and see what answer I gave in 1943 to the question whether we could have the abolition of want immediately after the war. We clearly could have abolished want before the war. I named the conditions under which we could do it after the war, and two of them are worth noting to-day.

The first condition is that the world after war is a world in which the nations set themselves to co-operate for production in peace, rather than to plot for mutual destruction by war, whether open or concealed. I had entirely forgotten that I had forecast the cold war in December, 1942. The second condition is that the readjustments of British economic policy and structure that will be required by changed conditions after the war should be made so that productive employment can be maintained. The first of these conditions, with its unexpected forecast in 1942 of the cold war in which we live to-day, has, of course, not been satisfied. Does it follow that we ought to abandon the aim of abolishing want? I suggest that certainly it does not. With increasing productivity per head, all that was aimed for in the Beveridge Report, all that is aimed for in this Government Bill, is well within our powers.

Secondly, I would urge that the redistribution of income so as to guarantee the individual enough to live on, as of right, when he cannot work for any reason, should have a priority in the use of our resources second only to that of defence: that has priority for the nation, and it should have priority for the individual. That, I think, is the justification of the contributions that we ask the individual to make. But we are bound to remember the conditions which make full employment and our present standard of living easy to-day. Those conditions are that in the cold war we have allies, as well as enemies; and if peace returns and these alliances cease, the second condition, that of a reconstruction of our economic structure to meet a world at peace and not arming itself for war, becomes absolutely vital. It is no good denying that if pace comes, the time ahead for Britain may be much harder even than it is to-day. We shall have to readjust our immense population on a small area, and maintain the selling power of our products abroad in face of all the nations that want to make the same kind of products themselves. After World War I, when we thought we had peace, we all fell into a pit of mass unemployment. After World War II, when we get peace we may not find productive employment at high standards nearly so easy to get as we should like it to be. That is one of the problems we have to face.

Let me just sum up in three sentences what I have tried to say. The first and most important thing—and I am sure it will be echoed all over the country—is to welcome this Bill as making the abolition of want on honourable terms, by pensions and benefits, as of right, a first priority for all of us after defence: we can, we must, afford that. The second is, of course, that even to do that would leave unsolved any number of problems—the social and human problems of the old, as I have mentioned; the general problem of preventing inflation; the destruction of the value of money; and, finally, the problem of how, if peace should return, this country would find it possible to be prosperous and active and provide full employment in those conditions. Do not let any of us—either Government or individual—think that there are easy times ahead for this country.

4.25 p.m.

LORD ARCHIBALD

My Lords, it is something of an ordeal, and certainly a great responsibility, to follow the noble Lord, Lord Beveridge, in a debate of this kind, because it is on a subject upon which he speaks with probably the greatest authority of us all. It will be understood, therefore, that I should be extremely rash were I to try to follow him on the ground which he has covered. I am glad that in this debate I can follow the lead which has been given by my noble friend Lord Pethick-Lawrence and discuss the Bill which is before us on something of a non-Party basis. That does not mean that we view the matter in a casual, a light-hearted or an academic way. On the contrary, as has been said, the Bill affects the lives, the comfort and the well-being of millions of our fellow-citizens, and particularly the poorer among them, and the great human issues involved make this a matter of very deep feeling and great concern to all of us.

Some of us find it very difficult indeed to approach this subject in at all a dispassionate way. We have strong feelings based, as my noble friend Lord Pethick-Lawrence has said, on bitter memories of early experiences. I can remember my own parents, in my childhood, struggling to make a contribution to the upkeep of a widowed—and, naturally, in those days, pensionless—grandmother, my father's mother. From a wage of less than 30s. a week, it was not easy to make such a contribution and still to provide for the needs of their own home and two children. Old age pensions have certainly reduced, if they have not entirely removed, that burden on working-class homes. But the memory of the bad old days still lingers.

Again on another aspect of the provisions of modern insurance I have my own recollections. I was only a boy when my father died. There were no widows' pensions in those days, and, like other working-class widows, my mother had to go out to work. Widows who have to go out to work, after having been married and having kept a home for many years, are in a very difficult position indeed. They have almost always to go out to work as unskilled labour—as cleaning women and the like. My mother, in fact, had to take a job as a school-cleaner, and seeing the effect of that work on a woman who had had her own happy home for many years—the effect on her physically and on her spirits—is still one of my bitterest memories. I am sure that noble Lords in all parts of the House will agree that it is the purpose of legislation such as this to ensure that a widow with children has such a pension and allowances as make it unnecessary for her to go out to work. She is, I think, much more usefully employed—socially usefully—in making a home for her children, and in being available to bring them up, guide them, lead them and control them.

Perhaps I should apologise to your Lordships for these personal reflections, but I should like to add one more. When my father died, I had to leave school and go to work. Although I had a scholarship which would have covered the cost of schooling, naturally it did not provide a living, so I had to go out and earn it. I make no complaint about that; it did me no great harm, if any at all, although I shall always envy, in a very mild way, those who have had the education that I missed. In that connection, I appreciate that the position is much better to-day, but I think it is still not at all satisfactory. In too many cases, when the breadwinner dies the brilliant child who would otherwise remain at school and go on to university on scholarships has to leave school and go to work. Maintenance grants which cover the student's own costs are not enough in the areas of some education authorities to make any contribution to represent what the student would otherwise have been earning, and in some areas they are even not enough to cover the student's own costs.

I am not speaking of this only or mainly from the point of view of the child concerned. My point is more that, as a nation, we cannot afford to have some of our best brains deprived of their full education in this way. This is a matter on which I think the Minister of Pensions and National Insurance and the Minister of Education should get together and work out a scheme. It has relevance to the principle which we are discussing and to the rates of benefit, but it is also within the purview of the Minister of Education, and I would ask the noble Earl, Lord Selkirk, if he would put the point to the Ministers concerned.

Coming more specifically to the Bill, as my noble friend said, it cannot really be considered except in conjunction with the draft National Assistance Amendment Regulations. I cannot follow the noble Lord, Lord Beveridge, in his thanks and congratulations to the Government. I welcome the Bill for the provision which it makes so far as it goes, but I cannot say that I find it entirely satisfactory, and certainly I cannot say it is generous. The figures which Dr. Summerskill gave in the debate in another place have not been challenged, I believe. Among other things, these figures show that approximately one million retirement pensioners are drawing National Assistance supplementation. These are obviously the most needy of the old age pensioners. Under the provisions of the Bill and draft regulations, 70,000 will get an increase of from 5s. to 7s. 6d. a week and 130,000 will get from 2s. 6d. to 5s., but 800,000 will get only 2s. 6d. When we come to widows who are drawing National Assistance supplementation, we find again that 6,000 will get between 5s. and 7s. 6d., and 8,000 between 2s. 6d. and 5s., but 81,000 will get only 2s. 6d. increase. It is the same with sick benefit. Over these three categories there are just over one million who, under the provisions of the Bill and draft regulations, will benefit to the extent of only 2s. 6d. a week. For those not in receipt of National Assistance supplementation, the increases of benefit are reasonable, but reasonable only in the sense that they restore the 1946 purchasing power. Are we satisfied that that really is enough?

During the debate this afternoon it has been stated that national productivity and production have increased substantially since 1946. Should not the aged widows and the sick benefit in some degree from this? If the national cake is bigger, as it has been shown to be, are they never to have a slightly bigger slice from it? I think they should. If prices continue to rise, as they very well may do—there is no sign of their levelling off or falling off—it will be only a little time after this Bill is passed and its provisions have actually come into operation when the benefits will have fallen again below their 1946 level. Then there will be a demand for their increase and for a new Bill. I agree that in calculating the increases the figures have been rounded off to slightly above the arithmetical calculation of the 1946 purchasing power, but substantially the purpose has been to restore that, and my point is that even if that has been achieved, or slightly better, it will be only a little while before the benefit will be lost by the continued rise of prices. I think our problem is to find a way of dealing with that position. Is there not some way in which we can ensure that the benefits are not inadequate most of the time because of rising prices?

That brings me to what I regard as the fundamental issue. I share the view, which has been criticised by the noble Lord, Lord Beveridge, that this is not any longer, if it ever was, truly an insurance Bill. The actuarial basis which one expects to find in insurance is absent to too marked a degree. The basis of the assumption that the new rates have some relevance to insurance is surely that prices, wages and everything else, are going to remain stable for the next forty-nine years; otherwise the calculations about the actuarial position of a new entrant at sixteen and the whole forty-nine years of his payments become rather meaningless. Looking back at the course of prices and wages and of money values generally over the last forty-nine years, he would be a bold man who would suggest that they are likely to remain anything like stable over the next forty-nine years.

This is a system (I do not want to quarrel about words) of State benefits with a contributory provision. I am not suggesting that the contributory provision should be removed, but I do suggest that the present method of arranging the contributions is wrong and becomes even more wrong when increases of a flat rate character are made. I had intended to go into the question of the inequity of the scheme as between various levels of wages, but what my noble friend has said has made that unnecessary. But I think we should apply our minds to recasting this side of the scheme, if not to recasting the whole scheme. The starting point—and I hope there will be general agreement on this—should be that the pension, sick benefit, unemployment allowance, or whatever the provision may be should provide a decent, reasonable level of subsistence. Personal savings, private pension schemes or superannuation schemes would provide the amenities above subsistence level; but for those for whom ill health or bad fortune has meant no saving, who are not in any private pension or superannuation scheme, there should be, at least, subsistence provided.

National Assistance should not come in to the extent that it does at present, with the numbers such as I indicated earlier. In my view, it should come in only to cover the emergency, the unexpected and the unforeseeable. To have over one million people on National Assistance at any given time seems to me to be fundamentally wrong. Having determined the amount required for a basic subsistence level, I strongly urge that it should then be linked to the cost of living index, and that it should be reviewed, say, every six months. If wages, as they are in many industries, can be linked to the cast of living index, I see no reason why pensions and allowances should not be similarly linked. I would say that it is bordering on the indecent that old age pensioners should have to organise and agitate in order to get the value of their pensions, not increased, but merely restored. Linking the pension with the cost of living index would make that unnecessary.

I recognise that if payments are put on a cost of living sliding scale, then the contributions must also be geared in some comparable manner. That means something much more flexible than the present stamp system. I suggest that a reasonable method would be a percentage payment on wages and salaries, with a comparable payment by employers. This percentage on wages and salaries would probably be (I have not the necessary figures with which to work it out in detail) of the order of 3 per cent. It would be more equitable than the present method as between different levels of wage earning; and it would ensure that if prices and wages continued to rise, as they have done for some considerable time, the income from which to pay pensions and allowances would rise proportionately and at the same time. Incidentally, I believe that such a system would greatly reduce administrative costs both in industry and in the Ministry. As a small employer, keeping my own wages books, insurance cards and so on, I know that I would much rather calculate the appropriate percentage on the wages and send a cheque, say, every month, as I do for P.A.Y.E., than have the bother of keeping cards and buying, fixing and cancelling stamps every week. If noble Lords argue, as they may do, that an increase in income tax would be even fairer than the 3 per cent levy, I am not going to cross swords with them. But, in my view, the percentage levy has certain definite advantages.

If I may digress for a moment, I would point out that reference has been made to the fact that if pensions and allowances were put under general taxation it would involve a means test and make an end of payment as of right. That is an argument which I simply cannot follow; I regard it as being quite fallacious and without foundation. The Health Service is almost wholly financed out of general taxation, but we use it as of right; so are the roads, and so is education. We use as of right many services provided out of general taxation. Why should pensions and allowances be different? But if this objection is raised to putting the whole scheme on general taxation, at least it cannot be applied to the change from fixed contributions to a percentage payment such as I have suggested.

I have put forward these reflections perhaps a little emphatically in manner, but I assure your Lordships in no dogmatic spirit. I know perfectly well that they are not acceptable to either major Party at present, but to me they represent the lines along which we should be thinking. The present Bill can be only an interim measure. A scheme which links benefits to the cost of living and contributions to the level of earnings would, I feel, be an improvement. It would have the advantage, which I am sure will appeal to the noble Earl, Lord Selkirk, that it would, to a considerable extent, take the question of pensions and allowances and their proper level, out of the field of Party politics.

4.47 p.m.

LORD WISE

My Lords, as the attendance is getting remarkably thin, on a day when I think the House might well have been fuller, in view of the matter which is before your Lordships, I propose to deal only with one or two points. I feel that I should endorse from the Back Benches on this side what was said by my noble friend Lord Pethick-Lawrence, that we rather look upon this Bill as an interim measure. We hope that in the succeeding months the Government will be able to look again at the question of insurance generally, in the light of comments which have been made on the present Bill, not only in your Lordships' House but in another place, so that they may bring before us a more comprehensive Bill. It has been said that, in order to expedite payment of the benefits provided by the Bill to a reasonably early date, we on this side of the House do not want to put forward Amendments, or to discuss this matter later at any great length. I agree with that view. Whatever I may say will, I hope, be taken into consideration by the Government if and when a further Bill is produced.

The first point that comes to my mind was raised by the noble Earl, Lord Selkirk, in regard to the percentages of wages represented by contributions paid by wage-earners. The figures which he gave us, and which the Minister gave in another place, were that the 1946 percentage was 3.9 and the percentage now, 3.2. I am interested, as noble Lords know, in agricultural matters, and when we are dealing with the lowest paid worker it might be considered that the farm worker is in that category. So far as my calculations go, it seems to me that on a wage of £6 a week (I am taking the present wage, and I will take the present contribution) the farm worker's present contribution represents 4.8 per cent., not 3.6 per cent. or 3.2 per cent., of his wages. On the assumption that his wage will not increase—although we hope that it will in the next month or two—the payment of 6s. 9d. per week represents a percentage of 5.6. Therefore, under this Bill, assuming that the wage is the same as at present, the worker will not go into the lower percentage category but the proportion of his contribution will be increased by nearly 1 per cent. That is a very material matter for a farm worker on a low wage. He is called upon to pay 6s. 9d. a week, the equivalent of £17 11s. 0d. per annum, which is a lot of money. From that point of view, I hope that, when this new Bill comes before us, some consideration may be given to the lowering of the rate of contribution for people with lower earnings.

The additional contribution by the farm worker amounts to £2 12s. per annum—that is, 1s. per week. If we assume (I do not quite know the precise number) that there are 650,000 farm workers in this country, it means that the additional contribution from that section of the community alone will be in the nature of £1,350,000 per annum. I know that it may be argued that there may be some tax deduction, but you will find generally that the farm worker is not liable to income tax, although he pays tax indirectly, and that particular amount does hit him substantially.

Having assumed that the farm workers will be called upon to pay an additional £1,350,00 a year in contributions, let me now look at the Exchequer contribution in regard to the farming industry. On the basis of one-seventh, the Exchequer contribution in regard to farm workers will be about £200,000 a year. There your Lordships see the difference between the additional amount to be paid by the lower paid worker and the Exchequer contribution in respect of those particular workers. That is important, in my view, for not only does it create some difficulty for the farm workers but the farming industry also will have to make substantional additional payments in regard to contributions. Naturally, I assume that the farmers themselves will receive some relief by way of income tax, not only in respect of their own contributions but also in respect of their contributions for their workers. I therefore suggest to noble Lords opposite that, in any reorganisation of the scheme, some consideration should be given to the lower paid workers.

There is one other point in regard to the Exchequer contribution which I wish to make. I do not know whether, by the figures which I am about to quote to your Lordships, I can prove that the Exchequer does not make a contribution but makes a profit—but we shall see. According to the Minister (I think this Came out during the debate in another place), the additional contribution thrown upon the Exchequer by this Bill is roughly in the region of £25 million per annum. The figures were £23 million for the National Insurance and £1 million for the Industrial Injuries insurance. The Minister said that there was a saving to the Exchequer from the National Assistance of £13 million, by reason of the fact that the additional payments would be made from National Insurance and not from National Assistance. That leaves a balance of £12 million. But the Exchequer are called upon, so far as I understand it, to pay an additional £15 million for war pensions, which leaves a balance of £10 million to be paid by the Exchequer in regard to National Assistance. The saving is £13 million on National Assistance, and the net payment by the Exchequer for National Insurance is £10 million. Whether or not I am right in assuming that there is no payment from the Exchequer, but that they are saving money I should not like to say, but those figures came out from the debate in another place.

May I now ask the Minister one personal question which perhaps affects many noble Lords in this House as regards their own contributions? At the present time, as non-employed persons we are called upon to pay (I think it is) 5s. 7d. a week for National Insurance. But on page 11 of the Bill, in the Third Schedule, the weekly rate of contribution for non-employed persons between the ages of eighteen and sixty-five is 6s. 6d. a week. Like many other noble Lords, I happen to be over sixty-five, and as persons over sixty-five are not mentioned in this Bill I am wondering whether my contribution will in future be 5s. 7d. or 6s. 6d. Like many other noble Loris, came into Insurance in 1948, and I still have to pay for another three years before I draw a pension. I may be told that I have to make the requisite number of ten years' contributions, at whatever rate is in force at the particular time at which I pay it. Perhaps the noble Earl can clear up that small personal question.

There is one thing I should like to say, in view of what vas said, not only by the noble Lord, Lord Pethick-Lawrence, but by the noble Lord, Lord Archibald. I was born in the nineteenth century, in a generation in which widows, children and old people generally were treated quite differently from the way in which they are at present treated. I am particularly concerned now with the question of the widows, because I may tell your Lordships that my old mother, who passed on two years ago, was left a widow in 1888 and remained a widow for sixty-four years. I came through those sixty-four years as one of two sons of a widow who, during the whole of that time, did not have a penny piece of assistance or pension from the State in any way. Your Lordships will therefore realise how concerned I am now that the widows of to-day and of the future should have a far better time than my old mother had with two young children. A young widow with very small means, she had various possibilities open to her and to us boys, but those possibilities were pretty desperate. I am glad to say that they were not accepted in any way by my mother. Suffice it to say that, through hard work, intelligence and industry, things proved much better than they might have been, and much better than they did, perhaps, to other young widows with young children similarly situated.

Therefore, watching, as I have done, the progress of insurance from 1908 onwards, I am happy that the widows of Britain, and the young children of Britain, too, are now treated in a far better way than they were treated in my young days. I do not want this Government, or any Government, to be parsimonious or callous in regard to the treatment of the widows of Britain, because, to a great extent, they are the flower of our land. Therefore, I hope that in the future not only will substantial increases be made in what can be given to them by way of pensions but that we shall be able to add to the very small pension of 10s. a week which at the present time is given to some widows.

I want to conclude on a personal note to the noble Earl, Lord Selkirk. I was serious the other day in my suggestion about changing the name of the National Assistance Board. I hope that something may be done in that direction in the future. Your Lordships will remember the days of the workhouse and institutions, and you will agree with me that the names "hotels," "old people's homes" and "hospitals" find far better acceptance among our people than anything which had any connection whatever with the old Poor Law days. Therefore I hope that in future we can be guided by the fact that we have cut out from our everyday language the words "workhouse" and "institution" and have brought into our language the words "hospitals," "homes" and the rest. We may be able to cut out not only the word "Board" but also the word "Assistance." In his broadcast on Saturday evening, the Minister made reference to the fact that old folks did not like to come for assistance. I can bear out that statement. I do not want a further reply but I hope the noble Earl will think in those terms in the future.

5.5 p.m.

LORD MATHERS

My Lords, those of us who have come here to-day in a week that will end with Christmas Day should look upon ourselves as amply rewarded for having taken the trouble to be here to hear the debate that has taken place. The debate to which we have listened has been a most remarkable one. It seems to me that what has been said here to-day, and the tone in which it has been said, add to the reputation that this House has for the wise and dispassionate consideration of matters of public concern. First of all, we had the noble Earl, Lord Selkirk—we know he is an airman, of course—taking us right up into the stratosphere and dealing with astronomical figures. I do not know whether he has ever been in the stratosphere as an airman, but, in any case, he certainly took us to great heights in some of the figures that he gave us regarding the amounts involved in the problem that we are discussing.

Then it was a real joy to listen to the speech of the noble Lord, Lord Pethick-Lawrence, who always speaks in that wise way that betokens much thought and great human sympathy. I could easily have allowed any observations of mine to go by the board and simply have said that I took his lead on the matters we are discussing. Next we had the author (with his collaborators, of course) of the Beveridge Report. There, again, we had experience and knowledge demonstrated to us in a remarkable way. His strong plea that there must be a discussion of the Phillips Report in the not distant future is a plea, I am sure, that must have earned approval from all noble Lords who heard the reasons that he advanced. The autobiographical details that were given by the noble Lords who sit on these Benches, it seems to me, were powerful arguments and a powerful reason for our giving great consideration to matters of pensions and allowances.

I think of the fact that last week we were dealing with National Assistance. To-day, we are dealing with National Insurance benefits. It is somewhat remarkable. I tried to make some remarks last week on difference of treatment—in a way, on the difference of classification—of individuals. I took the opportunity of pointing out last week that we were dealing with husband and wife on National Assistance on a new basis of 63s. per week, plus rent, which was an increase of 4s. a week over the previous scales, whereas to-day we are dealing with arrangements which will result in the payment to a husband and wife of a scale of benefit of 65s.—certainly without any additional allowance for rent. That 65s. takes the place of the previous total benefit for man and wife of 54s. Therefore the new retirement benefits are to be raised by 11s., whereas the National Assistance benefits are being raised by a standard of 4s., although, of course, they can vary. In the circumstances, that does not seem to me to be reasonable. If I were to go into that question at length to-day I should be dealing with a mater that we dealt with last week. The position is that the new National Assistance scales which come into operation in February will be on a different standard from that of the National Insurance scales which come into operation in April.

When I listened to the broadcast on Saturday night, I thought the Minister of Pensions sounded rather complacent. and that he was inclined to claim a great deal of credit for this Government for doing what is proposed in these scales of allowance. My own reaction to his broadcast was to think that no one had a greater obligation to give increased benefits, because he is a member of a Government which has, as a policy, withdrawn checks upon the rise in price of basic commodities. The noble Lord, Lord Pethick-Lawrence, made some wise references to the question of inflation. Certainly there has been inflation in recent times. I know that arguments can be advanced (I have admitted this before); but, whatever may be said about what the cost of living index shows, I say most definitely that the fact that these increases are so clamantly necessary to-day is due in large measure to the fact that the Government in power to-day have, as a policy, the removal of restraints upon profiteering and upon rising prices. That has led to this position, and it has certainly made the position much more difficult to deal with.

I think that this scheme of National Insurance is good and sound. In my experience, the contributions that are exacted are not objected to by those who have to pay them. I have not found workers complaining about the contributions that they make, and I do not think that there will be any great difficulty about the increased contributions that are being asked for under this Bill. The worker will take this in his stride. As a matter of fact, he is not troubled about it very much because it is deducted from his wages before he gets them. I do not think that, even if he were to examine them very closely, he would be greatly aggrieved about increased contributions for the improved benefits that are found to be necessary at the present time. Indeed, workers say to me that they recognise the scheme that is in operation as one of the greatest blessings that they have known; they look upon it as something that is administered for them, something that they could not administer for themselves. At the end of the day, on an examination of other methods of making provision for their old age, they find that they have a real bargain in this scheme.

It may be necessary to look at this question of contributions. There have been powerful arguments used with regard to them, but my experience leads me to say that I do not think that there will be any great difficulty so far as the contributors are concerned. No doubt we shall consider these matters later, along with all the other issues that have been raised here to-day, and raised in another place much more strongly and vehemently than they have been raised here. We shall look at these things, but at the moment we are very glad to see that a move is being made to meet the position by increased benefits.

I say to the Government that their duty is to take steps to maintain the value of the new scales by keeping down the cost of living. Let these scales be a real advance upon the position as we have seen it, and do not let that advance be frittered away by allowing prices to get out of hand in the future, as they have in the past. Let us strive for a better condition of affairs where there will not be exploitation. I know that that means a reversal of this Government's policy. They have cried aloud, "Set the people free! "What has resulted from setting the people free—indeed, what it was designed to do—is to set them free in large measure to exploit and to be exploited. If that is allowed to continue, then, before we are very much older, we shall require a new set of National Assistance regulations and a new Bill to raise the amounts of National Insurance benefits. I ask the Government to recognise that fact—because it is a fact—and to act accordingly.

5.19 p.m.

LORD WOLVERTON

My Lords, when I came to support this Bill to-day I had no intention of speaking because I thought several noble Lords much more experienced than I would be speaking from these Benches on this important measure. But I feel that voices from the Back Benches should not be completely silent, and that I should warmly support Her Majesty's Government for bringing forward this most important measure. When all is said and done, although the attendance in the House has been rather thin to-day, this is perhaps the most important measure of this Session.

I have been interested to hear some very good speeches, particularly from the noble Earl who introduced this Bill, from the noble Lord, Lord Pethick-Lawrence, who has such great experience, and from the noble Lord, Lord Beveridge. The main criticism in opposition appears to be the faulty timing in bringing forward this measure. I would remind noble Lords opposite, however, that Her Majesty's Government had to await the Report of the Government Actuary and the Phillips Committee. I know that Her Majesty's Government asked that the work should be dealt with at all possible speed, to enable these matters to come through in the summer and early autumn. The work was done at very high pressure, and when the Reports were in front of the Minister no time was lost in framing the Bill, which was mentioned in the gracious Speech. The speed with which the Bill has passed through another place is very gratifying, and I was pleased to hear that noble Lords opposite do not intend to put down any Amendments, in order to enable the Bill to get speedy passage through this House.

I heartily agree that Her Majesty's Government must do everything possible in future to avoid further inflation in this country. I understand that this Bill meets the position caused by the very heavy inflation that has taken place since 1946, and possibly does more. I think the Minister quoted a figure of 15 per cent. as the improvement. I cannot allow the noble Lord, Lord Mathers, entirely to "get away with" the suggestion that all the great inflation has occurred in the last three years, under the present Government. There was much more inflation in the six years of the Government supported by the noble Lord than there has been in the last three years, though I admit that there has been a little. No Government is faultless, and we must do our utmost to ensure that this benefit, which we hope will speedily be given to people in need, will be of real value to them in the future. Until now, I did not realise the tremendous amount of work that falls to be done after this Bill gets on to the Statute Book. Unless the necessary administrative machinery is carefully prepared, the whole scheme may go wrong, and chaos may result. It will take about three months to handle these matters, so I hope that we shall put the Bill on to the Statute Book at the earliest possible moment. I heartily support Her Majesty's Government in bringing it forward, and I hope that it will give a good deal of relief to those who so sorely need it.

5.23 p.m.

THE EARL OF SELKIRK

My Lords, I should like to thank the House for the very warm welcome given to this Bill. I thank the noble Lord, Lord Pethick-Lawrence, particularly for saying that he would offer no delay, thus enabling the Bill to go through. We always appreciate listening to the speeches of the noble Lord, with the mature judgment that he possesses. At the same time, he appeared to want a bit of both worlds; to have full consideration of the Phillips Committee Report and to have pensions increased. In asking for that discussion I think he was pushing things a little too far. He would have been a most irresponsible Minister who took precise action before the Quinquennial Report. I had a very awkward time with the noble Lord, Lord Beveridge, in February, but I then made that point clear, and I hope that the noble Lord realises that this was the right course and that it would have been quite wrong to hurry things more than we have done. The Minister had to be sure that there was nothing in the Phillips Committee Report which can directly contrary to what he is proposing. The noble Lord wants a full discussion of this matter, and of course we will have one. A host of problems is raised, many of which were mentioned by the noble Lord, Lord Pethick-Lawrence, in the course of his interesting remarks on this important problem; but, frankly, to-day is not the time to discuss them.

I must tell the noble Lord, Lord Pethick-Lawrence. That we are not breaking new financial ground in the calculation of the actuarial contribution: it is substantially the same as was done in 1946 and in 1951, and also, I believe, in 1952. There is no new principle involved in our manner of approach at all.

LORD PETHICK-LAWRENCE

The Government are going a great deal further.

THE EARL OF SELKIRK

The principle was there in each case; there was a margin to meet the emerging cost. It may be a little more this time, but it existed in each case. The noble Lord, Lord Archibald, has gone but I would say to tae noble Lord that it is always wrong to use the word "generous" discussing pensions, unemployment or sickness benefit, One way or another. It is not the business of Her Majesty's Government at any time to be generous with public money, so that in that connection the word is misused. The noble Lord tried to convey that not enough was being paid. As the noble Lord was a member of the Party in power at that time, it must be pointed out that these rates are, in real terms, 36 per cent. higher than those obtaining when his Party were in power. I will go further: when the Labour Government were in office in 1951, the unemployed benefit then paid was lower than was paid by a Tory Government some twenty years earlier, again in real terms.

The noble Lord, Lord Wise, raised a number of points on agricultural wages. Whilst agreeing that there is a problem here, I found it a little difficult to follow all his calculations. The percentage of the contribution today, compared with the agricultural wage, is lower than it was in 1946. It is obvious that lower paid workers will have to pay a higher percentage in this flat contribution. I believe I am right in saying that the purpose in the mind of the noble Lord, Lord Beveridge—and it was accepted by the Socialist Government in 1946–was that this is a minimum which must apply to all. If that minimum is not paid, then, to all intents and purposes, one cannot justify the payment of at least a level of subsistence, a broad subsistence basis, within a contributory system. If we were to go below that, tie benefit would be below that subsistence level and would serve no useful purpose; that is the reason for the flat payment and flat contribution.

The noble Lord, Lord Wise, offered some calculations on contributions in regard to cost. If we take the three fields of benefit, this Bill, National Assistance and war pensions, the figure in the coming year will be about £25 million—leaving out altogether the £325 million which is included in this Bill and which the Treasury have undertaken to meet. I do not doubt that the noble Lord is perfectly sincere in what he says about the title of the National Assistance Board, and be point will be borne in mind; but this is not something which one can change by waving a wand. I entirely agree that it may be considered common policy between Parties. With regard to the much-discussed 10s. widows, a point which the noble Lord brought up, they, of course, fall right outside the general terms of the 1946 scheme. Frankly, it is somewhat fortuitous whether or not a widow as such falls within the scheme. The matter is being considered by the Advisory Council on National Insurance, who may be able to bring the whole matter of widows into better consideration. There may be cases of hardship but there are a number of cases where the widow is quite young and is able to work fully.

One noble Lord asked what contribution he would have to make. I hesitate to give advice of this kind free over the Table, but I believe that he should be paying 6s. 6d., though whether he has retired or has deferred retirement I do not know. I should like to thank the noble Lord, Lord Mathers, for two things he said. He spoke about inflation, and in what he said on that subject, he supported Lord Pethick-Lawrence and Lord Beveridge. I am sure that these schemes will simply fall away unless we are able to keep this matter in hand. In my opinion, the attitude of Lord Archibald—if I may say so with respect, in his absence—is entirely wrong. His attitude of trying to get round to the effect, instead of dealing with the cause, will never provide the answer to this particular problem. I also wish to thank Lord Mathers particularly for saying that he believed—and I am sure he is right—that the extra contribution is something which the ordinary man in this country will be willing to take in his stride. I think that I have dealt with most of the questions raised, and, unless any noble Lord has anything further to ask, I hope that your Lordships will now agree to give the Bill a Second Reading.

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