§ 2.46 p.m.
§ LORD BEVERIDGE rose to call attention to the problems facing the people and the Government of this country in the coming year in relation to National Insurance; and to move for Papers. The noble Lord said: My Lords, I rise to propose the Motion which has for some time been standing in my name on the Order Paper. The main immediate problem facing the people of this country in regard to National Insurance is the inadequacy of benefits and pensions for subsistence. I am not going to weary your Lordships by recalling, as I could recall, the many individual cases of hardship which have come to my notice and which, no doubt, have come to the notice of many noble Lords here to-day. I will just illustrate that problem by two simple figures. The first is the comparison of the actual National Insurance benefit rate, which in 1952 was increased to 32s. 6d. a week for a single person, with the National Assistance rate which is given to meet the essential needs of people who prove that they are in need and have no other means. That rate, for a single person, is 35s. a week, plus, in most cases, rent. The average amount for rent all over the country paid in addition to that 35s. is something like 11 s. 6d. a week, so that the comparison is between the 32s. 6d. a week of insurance benefit and the 35s. plus 11s. 6d. a week given by way of assistance to those who have nothing else at all.
§ The second figure to which I wish to call attention is the growing number and proportion of persons in receipt of National Insurance benefit who also have to have recourse to Public Assistance. I think that when National Insurance started in 1948, there were some 500,000 people in that position. Every time that the count has been taken since then, the number has gone up steadily; and the last count taken, in the middle of 788 December last, gave a figure of nearly 1,250,000 people in receipt of the full National Insurance benefits who found them inadequate to live on, and who, having no other or inadequate other means, had to seek Public Assistance as well, and were, in fact assessed by the National Assistance Board as needing assistance. That inadequacy of benefit rates, including, of course, pension rates, for subsistence is the immediate problem which is facing hundreds of thousands of people in this country to-day, and millions in prospect in the near future.
§ The immediate problem facing the Government of Great Britain is the review of benefit rates which is required of them under Section 40 of the National Insurance Act, 1946, as soon as they have received the Government Actuary's first quinquennial report under Section 39. The first quinquennial report will cover the period from July, 1948, to March 31, 1954. What the Government Actuary has to do is to report on the financial condition of the Fund and on the adequacy of the contributions to maintain the benefits. It is a purely financial study of the National Insurance Fund. But when the Government Actuary has made that study, then the Government, under the following section, Section 40, have to make a study of quite a different character, not comparing the benefit rates with the possibility of meeting them by the contributions but comparing the benefit rates with the cost of living which they have to meet for the individual citizens. That is an entirely different review. The actual wording of the Act requires the Minister to review the rates with relation to the circumstances of the time of insured persons in Great Britain, including, in particular, the expenditure which is necessary for the preservation of health and working capacity, and including also any changes that have taken place since the rates were last fixed—that was in 1952—and any future changes in prospect. The problem facing the Minister estimating future changes is a difficult one. I imagine that he will have to forecast the policy of the Chancellor of the Exchequer in regard to food subsidies, the policy of trade unions and employers in regard to wages, and so on. And, having made that review, he will be called on to present a report thereon to Parliament.
789§ Sections 39 and 40, particularly Section 40, were inserted by the Government in the 1946 Act because they had accepted in general terms the subsistence principle of the Beveridge Report in relation to benefit rate. By Section 40 they set out to defend the principle against changes in the value of money. There is no reasonable doubt—it ought to be clear from what I have already said, in the comparison of benefit rates with assistance rates or the numbers of people seeking Public Assistance to-day—what the review of benefit rates in relation to cost of living is likely to show if it is made in the present year or any time immediately afterwards. Having regard to the terms of Section 40, it is hard to see how the Government will be able to avoid proposing a substantial increase in benefit rates. And even if insurance contributions are raised proportionately at the same time, since any rise in the insurance contributions can apply only to the future and not to the past (the past contributions have been paid in order to qualify for benefit in the future: they have gone and cannot be raised) a large proportion of any immediate cost of increased benefits or pensions will inevitably fall upon the Exchequer. It may be £100 million, it may be £150 million a year immediately. That is the immediate problem, and I shall later express the hope that it will be treated as an immediate problem by the Government of Britain.
§ Behind that immediate problem—the inadequacy of subsistence rates and the need to take some action to make them adequate under Section 40 of the Act—lies, for the people and the Government alike, the problem of meeting the growing cost of retirement pensions. That is estimated to involve the National Insurance Fund in a continually increasing deficit, amounting in 1977–78 (this is the official estimate) to something like £417 million. That deficit will have to be met from taxation. It arises simply from the growing numbers of persons of pension age, and it is liable to be increased, of course, if the rate of pensions is increased, as I am suggesting it will have to be. It is not surprising that, looking at those figures, the Chancellor of the Exchequer should have set up a Committee to inquire into the financial and economic conditions of provision for old age. Obviously, he must have a hope, 790 and we must all have a hope, that the Committee may find some means of lightening this burden upon future taxpayers. Quite clearly, the only effective way of lightening the burden is, in one way or another, to lengthen the norm it working life; and no doubt the conditions under which the normal working life can he lengthened will be one of the main subjects for discussion by the Committee, under Sir Thomas Phillips, whose appointment was announced by the Chancellor of the Exchequer in July of last year.
§ I hope, and I think we must all hope, that their Report will be completed rapidly and will be available at about the same time as the Government have to consider the Government Actuary's report and make their review of benefit rates. We must be content to wait for that Committee's Report, but I think it is worth while to mention some of the important points which we shall look to them to cover. Postponement of the age at which pensions begin to be drawn saves money to the National Insurance Fund only if there is work available and if the people whose pensions are postponed are able to work. That involves an investigation of the possibility of finding employment, and regular employment, for people after the age at which normally they would retire. It involves an investigation of the capacity of old people to go on working. If they do not find employment, then they come to the National Insurance Fund for unemployment benefit, if they are unfit for employment, then they come to the National Insurance Fund for sickness benefit. So the only safe way lies in finding employment for them, lengthening the working life. The possibility of that, of course, depends upon a study of the attitude both of the old people themselves and of the younger people. One of the reasons which have led to a pressure in the past to lower the pensionable age has been the desire of young people in many occupations to have the chance of earlier promotion; and if work goes on longer, promotion will be delayed. In fact, there are now in existence many private superannuation schemes involving an earlier age of retirement even than the present one under the National Insurance Fund. One of the really interesting and important things for the Phillips Committee to investigate is the nature and working of 791 these superannuation schemes and their effect upon the opportunities for employment of older people.
§ Apart from those issues, on which I think we must defer final judgment until we have the Report of the Phillips Committee, there are two general issues of fairness as between different sections of the community which I should like to raise to-day, so that they may, I hope, be considered by the people of Britain generally. It is possible to save on pensions only by causing older people to go on working longer than they have worked in the past, so there arises the first question: Is it fair, and how far is it fair, to urge or to require older people to go on working in place of enjoying leisure in retirement, while people of working age, already with shorter working hours than most of those older people enjoyed, go on pressing for more leisure for themselves, whether for shorter hours or for longer holidays? That is one question of equity.
§ Another question is: Is it fair for the present generation, while committing their successors to large, growing expenditure on pensions, to make no provision in advance for building up a fund to meet that expenditure? We do not, in fact, under National Insurance build up a fund as is done in private insurance. We leave it to future generations, out of taxation or contributions (both, of course, are a form of taxation) to find the money for the older people, who have established their claim to it by their present contributions. It is possible—and I hope this will be the case—that our successors will be able to meet this need of the growing body of pensioners for pensions even though no fund is available, even if it has to be met out of current taxation—and, indeed, it must be met out of current productivity. But I think we shall be able to do that only if we do not use up all advances of productivity as we make them now in getting larger wages or incomes for ourselves.
§ Some very difficult problems of finance and equity are raised to-day in relation to retirement pensions. In addition to the two questions which I have named—first, whether we can fairly ask old people to go on working, although they have perhaps worked harder or for longer hours than the present generation; 792 and secondly, how we are to provide for the burdens which we are legally throwing upon our successors—there remains a third general question which applies to all of us; namely, can the financial basis of social security be made sound if money prices continue to rise. The principle of National Insurance is that contributions by each person and his employer, with a relatively small contribution by the Exchequer—really about five-sixths come from the insured person and his employer, and one-sixth or even less from the Exchequer—should be sufficient, if they are paid through working life and if they are funded with interest, to provide all his benefits, including pensions. Those contributions have to be paid throughout life for fifty years. But the contributions that were paid from 1946 to 1952 were paid as for a 26s. a week benefit and pension. Those contributions are inadequate in regard to the 32s. 6d. benefit which was established in 1952; and the contributions established in 1952 will be inadequate if pensions are put up further. The loss to the National Insurance Fund on the past contributions is irrecoverable.
§ That is simply an illustration of the obvious fact (though it is one that really needs to be emphasised as much as possible) that a continual decline in the value of money makes hay of social insurance finance, as it makes hay of private finance and saving. That is a simple fact which those of us who are concerned with government need to learn. It has already been learned by all the people who have privately tried to save for themselves, and now find the value of their savings cut down. On this point I am delighted to be able to cite the authority of a great name, the greatest name in this country—that of our Prime Minister. I do not know how many of your Lordships are aware that more than once when he has been dealing with social problems, whether in broadcasts or in Minutes to the Cabinet—in Chapter IV of his book on the last World War your Lordships will find a Minute and you will find him stressing the same point in a recorded broadcast which he made in March, 1943—he has emphasised at some length his view that reasonable stability of money is an essential for good citizen life, so that saving and forethought should not be wasted. Having cited that great name, 793 that great authority, I hope that in urging that the Government should take whatever steps are open to them to promote as soon as possible the reasonable stability of money, I shall be pushing at an open door. Whether the door will be equally open when I beg the Government to act rapidly on the other problems that I have named, I do not know; but all the same I should like to ask them to act rapidly.
§ The inadequacy of benefits and pensions for subsistence is a fact currently coming home to hundreds of thousands of people, and coming home to millions when they look forward to the future. It will come to the Government's official notice in the two Reports that. I have mentioned—that of the Phillips Committee, and that of the Government Actuary, which I hope they will receive at about the same time. I appeal to the Government to do what they can to get those two Reports at about the same time, and in a very short time from now. I know that the Phillips Committee has a great deal of ground to cover, but, recalling that it was appointed in July, 1953, I am reminded of another committee of inquiry to deal with an equally urgent economic question that was also appointed in July—in July, 1925—under the chairmanship of my noble friend Lord Samuel, who sits with me on these Benches. I refer to the Royal Commission on the Coal Mining Industry. We had to cover a lot of ground. We were told that we must make our Report rapidly because, in fact, there was urgent economic need for saying what should be done about the coal mines. We made our Report, and I assure your Lordships it was as long as any Report of the Phillips Committee is likely to be and it dealt with as great a variety of contentious questions. That Report was completed in eight months from the time when we were first appointed: in six months from the time when we really got to work. It was presented in March, 1926. I beg the Government to ask the Phillips Committee to act with that kind of speed. If they will act with that kind of speed we can have all the essential facts on which we can decide as to the future of pensions and age of retirement. We can have it all by the middle of this year, I should think—quite certainly by the early autumn.
794§ I come to the Government Actuary. Of course, if you allow the Government Actuary to spread himself indefinitely on all the figures that are produced by the million, by the millions of people who are subject to National Insurance, he can make a magnificent statistical study. I hope he will do so some time. But, seriously, can one think that on the main question of the relation of contributions to benefit it would really be difficult for the Government Actuary to come to a sufficient, broad conclusion with a relatively little expenditure of time? And if the Government Actuary wishes to take more time for his Report, then I suggest that the Government are not bound to say: "We cannot consider the inadequacy of subsistence rates at all until we have the Government Actuary's Report." In fact this Government, I am glad to say, without waiting for any Government Actuary's Report, did consider benefit rates in 1952, and put them all up. You are not bound to wait until you get the Government Actuary's Report. So once again I say I am sure it would be well to wait if you do no; wait too long. I hope the Government will be able to deal with these problems of insurance this year—not "next year, some time, never."
§ To go back to that major underlying issue of the stability of money—on which I have already cited our Prime Minister and I rejoice in the views which he has expressed—I would point out that we shall not be able to make sense of social insurance unless we can get reasonable stability of money. And, clearly, getting reasonable stability of money means the opening of negotiations between the Government, the Opposition, the employers' associations and the trade unions, as to the conditions under which reasonable stability can be obtained. Are not those negotiations likely to be infinitely more fruitful if the Government, by their speedy action on the problems of insurance which are now arising in the homes of so many people, have shown their interest and if they have not simply said: "Well, subsistence for old age pensioners can wait till next year, or the year after that, or until the time comes when we have leisure"?
§ I want to add one final reason for speedy, not dilatory, action on this matter, and that is that, above all, we 795 should endeavour to settle the problems of pension rates and benefit rates by agreement, and not under the shadow of a coming Election. One of the worst things I can think of—or which any of us, I believe, can think of—is for the question of benefit rates or pension rates to be the subject not of reasoned settlement but of counting votes, for and against. We have a placid time now, when no doubt the Government hope, and I certainly hope, no immediate Election is in prospect. Let us, in the absence of Elections and votes, try to get this matter settled by agreement on its merits. There is not much time; so many things are best done in this country in the intervals between Elections and not in the shadow just before Elections come. That is because we are so much nearer together in the intervals than at the Elections themselves. I have raised these issues now because, whether they are urgent in our consciousness or not, they are urgent in the consciousness of many poor people throughout the country. Wise action involves examination of facts and arguments. That examination is in hand. But let it go quickly, not slowly. Let it he no excuse for delay. I appeal to the Government, above all, to do all they can for speed, and to feel themselves to-day what people all over the country are feeling: that something should be done about pension and benefit rates soon—not "next year, some time, never." My Lords, I beg to move for Papers.