HL Deb 26 April 1956 vol 196 cc1269-79

3.7 p.m.

Order of the Day for the Second Reading read.

THE SECRETARY OF STATE FOR COMMONWEALTH RELATIONS (THE EARL OF How)

My Lords, a Bill of the kind for which I am asking your Lordships' approval this afternoon is necessary for two reasons: first, to place the pensions schemes for England and Wales and Scotland on a sound financial footing; and secondly, to introduce a number of improvements which will greatly benefit the teachers. The immediate cause of the Bill is the Government Actuary's Report of 1948, which revealed an actuarial deficiency which was then very substantial and which has increased greatly between then and now.

There has been much dispute as to how these deficiencies should be met, but I believe there is none at all as to the accuracy of the estimates. I have the greatest respect for teachers. They taught me a lot—and I have forgotten a great deal of what they taught me—but I do not ever remember any teacher trying to teach me what an actuarial deficit is, and the irreverent thought passes through my mind that perhaps they did not know. Even so, I must try to tell your Lordships how it is that this formidable gap between the monies which are credited to the superannuation accounts and the drawings which are debited to them arises.

As I understand it, if this had been from the start an insurance fund, premiums would naturally have been related to ultimate benefits, and if the benefits had increased from time to time, so, too, would the premiums have increased. But the superannuation accounts have not worked in that way. The teachers have had the automatic right to higher pensions whenever there has been a salary rise, without being required to pay any additional premiums. The contributions which are being paid in at the present rate will not build up a sufficient credit balance, even with the interest at 3½ per cent., as it runs on the accounts, to meet the pensions for those now in service and the benefits for new recruits., Therefore, the accounts for England and Wales and for Scotland have been in the red, and are running further into the red each year.

The contributions at present paid in amount to 10 per cent. of each teacher's salary, made up as to 5 per cent. from the teacher and 5 per cent. from the employer, who is the local authority. At the time the Teachers' Superannuation Act was passed in 1925, this rate was thought to be sufficient, especially with the 3½ per cent. interest rate on the credit balance in the accounts, to meet any future liabilities. But since then several things have happened. Teachers are living longer and retiring earlier, and, most important of all, salaries have gone up many times. So the position has arisen that there is a substantial actuarial deficit. As early as 1.935 a small deficit was detected, but nothing was done by way of increased contributions; and now the deficiency figure stands at £302 million for England and Wales and £36 million for Scotland.

This Bill makes three major contributions towards dealing with this particular problem. The whole of the deficit as it existed on March 31 of this year—that is, £338 million for England and Wales and Scotland—is to be taken over as a sole charge on the Exchequer. The teachers are not to be asked to pay for the fact that for over twenty years contributions have not been enough to pay for pensions. Under Clause 1 and Clause 30 of the Bill the Exchequer will at once credit £340 million, attracting, 3½ per cent. interest, so that the taxpayer is, in effect, making a present of £12 million a year to the superannuation accounts. I think your Lordships will agree that this is a generous concession and that it clears the decks, so far as the accounts are concerned, for putting them on a sound basis for the future. Secondly, the Bill tries to find a realistic contribution which will preserve solvency for the future. At present, the joint contribution is 10 per cent. The Bill proposes to raise it to 12 per cent. of a teacher's salary. There have been attempts to argue that the Treasury—I prefer to use the words "the taxpayer"—should find all the additional monies for any future bill which has to be paid. There have also been attempts to argue that even if 12 per cent. is necessary, it is wrong to raise the teacher's contribution from 5 per cent. to 6 per cent.

Like some of your Lordships, and many in another place, I have delved back into the past to the 1925 Act. Arguments about what was meant by Lord Eustace Percy in 1925 seem to me to be endless. While it is true that by the Local Government Pension Act, 1937, contributions were increased for new officials only, there cannot really be any absolute comparison between one pension scheme and another. The Government have taken the view that we have to arrive at a solution which would be fair—or as fair as we could make it—to all the parties concerned; to the teachers, to the local authorities, to the ratepayers and to the taxpayers. Having taken the view that the principle of increased contributions from the teachers was fair, the Government had to decide what addition was right. A figure of 1½ per cent. has been mentioned as sufficient. But soon after that figure was suggested it became clear that it would have to be not less than 1¾ per cent. to take into account the improved benefits written in in the earlier stages of the Bill. But taking into account the salary increases which were bound to come soon, the Government thought that 12 per cent.—6 per cent. from the teacher and 6 per cent. from the local authority —was the fair figure. The teacher, then, as we see it, is being asked to start to pay now the rate of contribution appropriate to the benefits that a new entrant will receive and to a new and a solvent scheme.

Let me give one example—and I have not picked it out as a particularly favour- able one. Under this Bill, a teacher retiring in 1965 will have paid contributions amounting to less than one-third of the benefit he will receive. I think it is true to say that for this extra 1 per cent. which the teachers are being asked to pay, they will get solid and substantial returns. I have given the figure of the actuarial deficiency as it has been calculated. Perhaps I might express what is needed in terms of income. The teachers' accounts need an income of £49 million a year to support the benefits. At present, contributions and interest together are producing only £33 million. The extra £16 million will be found, under this Bill, in these proportions; £12 million from the Exchequer, by way of interest on the £340 million which will be found by the taxpayer; £2 million from the local authorities and £2 million from the teachers.

The decision that the rate of contribution should be equal as between the local authorities, the employer, and the teacher, the employee, should be read in conjunction with Clause 4 in the Bill, which affects England and Wales, and Clauses 29 and 30, which affect Scotland. If subsequent inquiries reveal a deficiency—and inquiries are now to be held every five years—then the higher percentage contribution required to make up the deficiency will be paid entirely by the employer, that is, the local authority, helped by Exchequer grants. So the future levels of teachers' pensions, in so far as they cause a deficit, will be met entirely by the national and local taxpayer. I have tried to understand and to find substance in the opposition which the teachers have expressed to this Bill. I have tried to do so genuinely, because I have no doubt—and the same, I am sure, is true of your Lordships—about the value of teachers to the community; nor any doubt that the taxpayers wish to do them well. Nor have I anything but sympathy for them in the plight in which they find themselves, along with many other skilled persons—and they are extremely skilled—when they think that their skill is not sufficiently rewarded. But there are very real benefits which will accrue to them from this Bill, and I hope your Lordships will agree that those who have to pay the bill for these pensions are giving the teachers not only a good, but a generous deal.

In conclusion, I should like to mention, shortly, one or two improvements, because my right honourable friends the Minister of Education and the Secretary of State for Scotland have used this Bill to make some improvements which we believe will help the teachers a great deal. Clauses 5, 6 and 7 govern the benefits, a teacher can receive on his retirement, and there are practical improvements made there. Pension and lump sum are, for instance, to be calculated on his total period of service, and not, as at present, on only the completed years. Three years is substituted for five years as the period for calculating the average salary on which the pension will be based.

Teachers generally (I know this is particularly true of Scotland, from what I remember when I was there) have been keen to find some way to help their widows and dependants. At present, a teacher can provide for his widow or other dependants only by surrendering part of his own pension on retirement. The Minister of Education has been sympathetic to the desire of the teachers for a scheme financed by additional contributions, but neither the employers, the local authority, nor the Government feel able to consider a scheme on that basis at present. Under Clause 8, however, the Minister is empowered to start a scheme whereby the teacher will be able to make provision for his widow and dependants out of the lump sum which he would have received if he had remained single. It is the Minister's firm intention to have discussions with the teachers, to consult with them and to make regulations under his powers.

I know that your Lordships have always been keen to find a way by which teachers who wish to serve overseas may be able to return to this country without forfeiting their benefits. There is much to be done by teachers overseas—we have only to think of the need of the teaching of English, for instance, in Asia and the Middle East to realise that. Clauses 17 and 18 make practical proposals, so that teachers can go overseas and teach and return to their profession in this country without surrendering their benefits.

I know that my noble friend Lord Strathclyde would have wished to be here to-day, but lie had engagements in Scotland which he could not cancel. Part II of this Bill makes provisions for Scotland in the same way that Part I provides for England and Wales, but the form has had to be different because our systems of legislation have in the past followed rather different patterns. Technically, this is a Superannuation Bill but with these additions, only some of which I have listed, it has a greater scope and significance. I hope that your Lordships will give the Bill a Second Reading to-day and accept that it makes a valuable contribution towards establishing social security for the members of this great profession, so helping to recruit to it men and women of brains and character who can give no finer service to their fellows.

3.23 p.m.

LORD SILKIN

My Lords, the noble Earl, in introducing this measure, introduced it as if the question had arisen for the first time subsequent to 1948, when the actuarial report showing a deficit on the Pensions Fund was first publishes, but I think I can satisfy your Lordships that this matter has a much longer, a much more chequered and quite a discreditable history. For instance, a Bill was introduced last Session for the same purpose of increasing the contribution of teachers to the Superannuation Fund. In that Bill there was none, or there were very few, of the compensating factors which the noble Earl now prays in aid to induce the teachers to swallow this bitter pill.

The Bill of last Session brought about severe criticism from all Parties in another place and from the country. It was not proceeded with. It resulted in the downfall of the then Minister of Education, Dame Florence Horsbrugh, and the appointment of Sir David Eccles, who now reigns in her stead The teachers believed that this Bill, having been dropped before the Election, would not be revived; but in fact after the Election it was once more revived and a similar Bill, with one or two sweeteners, was once more introduced. I want freely to admit that there have been certain improvements made as a result of pressure from all Parties in another place, and particularly from the Opposition side of the House, as is quite natural, and the Bill to-day is a substantially better Bill as regards the advantages, apart from the question of superannuation, than it was when it was first introduced. Certainly it is a far better Bill than it was as introduced in 1954.

But the story begins long before even 1954. In the First World War it was decided for the first time that teachers should be superannuated, and a superannuation fund was established in order to attract teachers and to create a more efficient educational service at the end of the war. As an inducement to people to become teachers, this fund was created without any contributions at all being required from the teachers. Large numbers of teachers were recruited on that basis. Then came the Geddes Axe, and in 1922 teachers were asked to make a contribution. Perhaps that is putting it rather mildly, because the contribution was imposed upon them, but they then believed that this was quite a temporary matter and that they would be relieved of the payments when the financial position of the country improved. But in 1925 a Bill was introduced for the purpose of making this levy, as it then was, a permanent contribution by them of 5 per cent. The teachers believed, and sincerely believed, that a bargain was then struck under which no further additional contribution would be required of them.

Like the noble Earl, I have delved into the past, but I do not propose to weary your Lordships with the history of what was said and not said something like thirty years ago. The point I want to make—and I make it with all the emphasis I can—is that the teachers have believed ever since 1925, and sincerely believe to-day, that there was a pledge given that the rate of superannuation would not be increased above the 5 per cent. I freely believe that any other noble Lord may well take a different view, and I admit that Lord Eustace Percy, who was the then Minister, has stated that his recollection of the matter is that he had no intention of giving such a pledge; but the fact remains that the teachers genuinely believed that such a pledge was given, and they regard the imposition of an additional contribution as a breach of faith OD the part of the Government. I do not think that anything the noble Earl has said or could say will shake them on that.

It is therefore not surprising that this apparently innocuous increase of 1 per cent. in the superannuation rate should have created such passion and turmoil among the teaching profession. It is not even as if they are complaining of one act of breach of faith; they regard the 1925 Act as a breach of faith. They were induced to enter the teaching profession at that time on the representation that superannuation would be non-contributory. Then they found that there was this levy of 5 per cent. which was incorporated in legislation, and they find today that there is a further increase.

But if one is looking for the reason why this Bill has aroused such feeling in the teaching profession, one has to look at the whole picture and not merely at this particular increase. The noble Earl has explained that there are certain improvements in the Bill which will enure to the benefit of teachers. I do not know whether he meant to imply that those improvements in themselves justify the increase in the levy. In fact, they do not. Taken by themselves, the value of the improvements represents one-third of 1 per cent. as an advantage to the teachers, and the remaining two-thirds of 1 per cent. represent their contribution towards the deficiency in accordance with the valuation. The deficiency was not first discovered in 1948, as the noble Earl appears to believe. This deficiency has existed for a long time; I think it was even referred to in 1935 or 1936, although it was then smaller.

THE EARL OF HOME

As a matter of fact I did say so. The noble Lord must have missed it.

LORD SILK IN

Then I misunderstood the noble Earl. At any rate, the deficiency has been in existence for a very long time, and its existence has been known. That fact, I think, is worth mentioning, because it gives colour to the feeling of the teachers that there was to-day no particular reason why this deficiency should be dealt with any more than there was some years ago, even before the war.

Let us just examine this deficiency for a moment. I do not want to weary your Lordships by going into figures or valuations, butone thing is quite clear; and that is, that for a great many years to come the amount of the contributions which will be paid into the fund will exceed the payments out of the fund. For how long that situation will last, nobody can forecast. It may well be twenty years; it may be even longer. The noble Earl spoke of a greater drain on the fund because of increased salaries and because of teachers' retiring early. So far as increased salaries are concerned, that is coupled with increased contributions, and the higher the salary the greater the contribution. Therefore, one would assume that increased salaries would not by themselvs cause a greater drain on the fund; nor necessarily would earlier retirement, because the assumption is that teachers who retire earlier will draw less out of the fund, both by reason of their drawing a lower salary and because the number of years upon which the superannuation is calculated will he less. Therefore, neither of these is a factor which will cast a greater burden on the fund itself.

We are dealing with a fund which for a great many years will be in balance and will not call for any other contributions from anybody other than those actually settled. In, possibly, twenty or thirty years' time, if things go as they are and if nothing unforeseen happens, there will be a deficiency to be made up each year. The noble Earl said that it will be £16 million a year; the Minister of Education said on the Third Reading of the Bill in another place that it will he £14 million. It may be that between the time when the Minister made his Third Reading speech and to-day the deficiency has increased, or it may be that the figures are so inexact that a matter of £2 million makes little difference. The contribution which the teachers are asked to make towards this £14 million or £16 million is, however, only £2 million a year; and if, in fact, we are talking in such round figures that £14 million or £16 million are interchangeable, and that the deficiency is either one or the other, is it really worth while stirring up this hornet's nest in order to extract an additional £2 million a year from the teachers?

I have referred to the background to explain why the teachers feel so passionately about this matter. But, quite understandably, behind this background that I have referred to there is a still stronger ground for discontent—namely, as the noble Earl himself said, perhaps not as strongly as I propose to say it, that the profession is hopelessly underpaid. The normal maximum salary for men to-day, that is, after a great many years' service, is £13 18s. 10d. a week —call it f14 a week if you like—before deduction of superannuation contributions. The normal maximum salary for women is less, but it will be equalised by 1961. If superannuation is deducted at the 6 per cent. rate proposed after October 1, if this Bill comes into operation, the maximum salary, after deduction, will be, for men, £13 15s. 0d. a week and, for women, £10 9s. 0d. a week. I admit that in certain special cases there are additions. 'There are additions for people with good Honours Degrees and for people with very special duties; but at present the ordinary run of teacher—95 per cent. of teachers—cannot look forward to anything more than a maximum net salary, after deduction of superannuation, of £13 15s. 0d. a week.

I do not want to draw invidious comparisons between the profession of teaching and that of any other profession or occupation. Comparisons will madly come to your Lordships' minds, and I am far from saying that, for instance, a person engaged in the building trade or in any other industry, such as the motor car industry, is a less worthy citizen than a teacher. But we have in our minds certain standards, and it is always recognised that professional people have certain standards to maintain and certain expenditure to incur. I believe we should all agree, if we think about it, that a maximum remuneration of £14 a week for the professional man in these times is plainly inadequate. Since the war, the cost of living has gone up two and a half times, but teachers' salaries have not kept pace: their salaries have about doubled, so that they are even worse off than before the war. Furthermore, generally speaking the ordinary worker is better off than he was before the war, even allowing for the increase in the cost of living. Wages have gone up more than the percentage increase in living costs. The teacher has not only not made up for the increase in the cost of living but has not shared at all in the general improvement, so that he is not only absolutely worse off than he was before the war, he is relatively worse off, too. I believe it is important that we should realise these things and appreciate why there is such strong feeling about what might be regarded as a relatively minor increase in the superannuation contribution.

Moreover, the teacher's work has increased. He has constantly had imposed upon him additional duties which he has taken on with great cheerfulness and willingness but which have encroached upon his leisure. A teacher normally has a certain period for his lunch, but he has been asked largely to sacrifice that by concerning himself with children's meals and with collecting meal money. I have known a great number of teachers who have devoted their Saturday mornings and other leisure days to taking their children, quite voluntarily, to places of educational value. They have done so without any complaint. Now they feel, I think with some justification, that this imposition upon them is really the last straw.

As the noble Earl has said, teachers are an important section of our community, and traditionally we pay them great tribute. Apart altogether from this question of the standard of living, I feel that if teachers are to do their duty to the children in the community, they ought to have the opportunity of engaging in cultural activities, in travel, in seeing places abroad, in reading the latest cultural works, in hearing the latest music and in similar things. We want our teachers to be cultured and to instil some of that culture into the children they teach; but on a maximum salary, after deduction of superannuation, of £13-odd a week, at a time when the teacher may have a family of his own to maintain and educate, is it really possible for him to indulge in anything except the struggle for ordinary bread-and-butter for himself and his family? Any thought of engaging in cultural activities is entirely out of the question.

This Bill strikes a further blow at the standard of living of the teacher. Every Member of this House has at some time paid lip service to the value of the work which teachers are doing. This Bill is a very poor practical recognition of that work, and it is for that reason that I feel it ought not to be supported. Naturally, the Bill has made progress in another place and I suppose it is too much to hope that this House will not approve of the Second Reading. It has become a tradition that we, in this House, do not vote against Second Reading; but if the tradition were otherwise there is no measure which has been brought before this House in recent times that I myself would more cheerfully vote against.