NATIONAL INSURANCE BILL

HL Deb 26 November 1957 vol 206 cc489-518

3.9 p.m.

Order of the Day for the Second Reading read.

THE FIRST LORD OF THE ADMIRALTY (THE EARL OF SELKIRK)

My Lords, it is now just three years since I moved the Second Reading of the National Insurance Act, 1954, in this House. This Bill is in direct line of descent from that Act. It is within the general principles laid down in the Insurance Act of 1946 and, I think it is right to say, follows in the natural evolution from the original Pensions Bill of 1908. I think that this House is probably fairly familiar with the major changes which this Bill introduces. There are corresponding improvements which have been made to war pensions, which is done by Royal Warrant, and the higher rates of National Assistance were moved last week. This Bill deals with National Insurance and industrial injuries. It deals at one and the same time with very small figures and with very large figures. I therefore propose, with the permission of the House, to deal with the precise figures.

Under Clause 2, retirement pensions, widows' pensions, unemployment and sickness benefit are increased from 40s. to 50s. a week for a single person and from 65s. to 80s. for a married couple. The industrial injuries scheme is dealt with in Clause 1, and the Second Schedule, and here the rates are increased from 67s. 6d. to 85s. for a single person and from 92s. 6d. to 115s. for a married couple. There are also changes in the allowance for dependent children, which are raised from 11s. 6d. to 15s. for the first child, and from 3s. 6d. to 7s. for other children for whom family allowances are also paid. The 5 per cent. higher rate paid for the children of widows is maintained at the same differential of 5 per cent. The special rates of unemployment and sickness benefit for married women, which hitherto have been different, are now brought together, as originally recommended in the Beveridge Report. The new rate is 34s. The guardian's allowance is increased by 50 per cent., from 18s. to 27s. 6d.

Under the industrial injuries scheme, the pension for widows, at present 45s., is now raised to 56s. Clause 4 (2) of the Bill enables a small improvement to be made in the pneumoconiosis and byssinosis benefit scheme, so that those affected may now draw benefit if they have spent ten years in certain processes in the cotton industry. Formerly, the minimum period was twenty years. The shorter period follows the review by the Industrial Injuries Advisory Council: it has already been introduced into the industrial injuries scheme by regulation, but to extend the benefit to people who contracted the disease through employment before 1948 requires legislation. It is for that reason that it has been included in this Bill.

The Bill, by Clause 3, revokes the tobacco duty relief by which pensioners who are smokers have been entitled to tokens worth 2s, 4d. per week. This scheme was introduced in 1947 to cushion retirement pensioners against the sharp increase of 50 per cent. in tobacco duty in that year's Budget. This provision is a little controversial, but so far as I know there is no one who is to-day prepared to say that the scheme is a good one in itself. It is unfair, for it benefits some and not others; administratively it is very clumsy; and with a cash rise of 10s. per week it is felt that this concession can be withdrawn without undue hardship. With regard to non-contributory pensioners who are paid by the National Assistance Board and are subject to a means test, Clause 3 (2) provides that they are to receive an additional 2s. 4d. per week on their pension, whether they are smokers or not. That will amount to 28s. 4d. for those who receive a full pension.

Whilst I believe that everyone will agree that a general improvement in benefits is desirable, the real question which occupies most of our minds is, how are we going to pay for it. Very broadly, this will be done by three methods; first, by an increase of 2s. in the employee's contribution; secondly, by an increase in the employer's contribution of 1s. 11d. per week; and the third source of payment will be the State, who will pay a supplement of one-sixth of the National Insurance contributions made by employers and employees. This is the same basis as was set in 1951. Under the Industrial Injuries Act the contribution by the Exchequer is one-fifth. Broadly speaking, this will mean a total contribution of 17s. 6d. per week from both the employer and employee, and an additional payment annually by the Exchequer of about £30 million towards the National Insurance fund and about £4.6 million towards the Industrial Injuries Fund.

This, however, is only part of the burden which the Exchequer will have to bear. I would ask the House to look for a moment at the Actuary's report on the financial provisions of the Bill. If your Lordships will look at Table II on page 7 of the Report, you will find that the current contribution for insured persons, including two months at the higher rate operating at the beginning of next year, will come to £567 million and that the contribution from the Exchequer will be £101 million, with interest of £50 million, making a total of £718 million for one year. This will currently show an excess of receipts over expenditure of some £7 million. This situation, however, will be reversed next year when there will be a deficit of about £14 million. This increase will be due in some measure to the large number of people who will qualify under the retirement pension scheme after having paid contributions for ten years, many of whom will come in for the first time during 1958.

Your Lordships will have noticed that the deficit increases quite rapidly in the years that follow. By 1961 it will be over £120 million, and by 1970, over £300 million. These sums will have to be met by the taxpayer. When we add up the capital value created by these pension schemes, we find that their total actuarial value is increased by £8,000 million to £42,000 million; that is to say, a capital value equal to about £1,000 per head of the population, man, woman and child; or to put it in a different way, it is about twenty times the total currency to-day in circulation in this country. Of this sum, the deficit—that is, over and above what will come in from contributions and interest—amounts to £17,500 million. I think it is quite impossible to say that this is not a generous scheme, one far more advantageous to the contributor than would be possible without calling on a substantial Exchequer backing.

One question which naturally arises is: is this joint contribution too high for the present level of wages? Has the total contribution reached a point at which it is too high to be paid by the ordinary man from the wages he is receiving? I make that point because to-day this joint contribution represents 7 per cent. of the average industrial earnings, as measured by the Ministry of Labour's inquiry into the manufacturing and principal non-manufacturing industries, which cover about one-half of the workers of the country. The corresponding percentage in 1946 placed the joint contribution at 7.5 per cent. of the average earnings—a rather higher percentage than it is to-day. So that whether or not the contribution is too high, at all events it is no higher than when the original scheme was set in 1946.

LORD SILKIN

My Lords, may I interrupt the noble Earl to put a question? Will the 7 per cent. be the actual percentage after the increased contributions have been made?

THE EARL OF SELKIRK

Yes, my Lords, that is the position which will result from this Bill. That is the joint contribution of both the employer and employee.

There has recently been a good deal of discussion about changing the structure of this scheme, and a good deal of ingenuity has been devoted to thinking out alternative schemes for dealing with different aspects of the wide problem of provision for old age. May I make two points in that regard? The first is that a scheme of this kind could not be changed quickly, but only after mature consideration. Secondly, however nice schemes may look on paper, it would be unwise to enter into more far-reaching schemes until the full liabilities likely to arise under them are completely understood and are seen to be within the economic strength of this country. Any other basis would be misleading and would give rise to disappointment from falsified hopes. The Prime Minister has already told us that some of the broad aspects of this matter have been considered by him.

In commending the Bill to the House I would say only this. The scheme—which I think we can fairly say is one of the, if not the, most comprehensive in the world—is working well. It always provides a field for somewhat invidious comparison when, on the one hand, we talk about, as I have said, half a crown, and, on the other hand, about millions, hundreds of millions and perhaps billions of pounds; and it is rather difficult some- times to maintain a sense of balance between those two. I suggest that we have done so in this Bill, and we can go forward with the satisfaction that it is an improvement on what has gone before, and that in our expanding economy we shall be able to carry the growing burden which the community have willingly accepted to bear for those who suffer adversity in our midst and, more particularly, the problems associated with old age, with which much the greater portion of this expenditure is associated.

This Bill has been brought forward at a time of unusual financial stringency. I do not want to go into that question now, but I think it is right to say that all Parties in the State are agreed on the necessity for maintaining the value of money, but almost everyone is reluctant to pay the price when it comes to individual cases. However, even in this state of stringency the Government have thought it right to recognise the necessity of making some improvement in our pension scheme, and they have done so under this Bill at an additional cost to the taxpayer of £35 million a year payable to the two funds and a growing liability in future years, which will run into hundreds of millions of pounds. It may be argued that this is contrary to our general policy. I do not think so; indeed, I should like to put it the other way round. This is a necessity which must be met and which, far from weakening our other policies, must fortify us in order to ensure that the improvements which we are making here will in fact be real and will have, we trust, a lasting value. My Lords, I beg to move.

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

3.22 p.m.

VISCOUNT HALL

My Lords, I am sure that your Lordships are grateful to the noble Earl, Lord Selkirk, for his explanatory statement and particularly for dealing with the finances. Before I deal with the Bill, I am afraid that I have to declare an interest, for I am one of tile few Members of your Lordships' House in receipt of a contributory old-age pension, and so, when this Bill is passed, I shall benefit to the extent of 10s. a week, and others will share the benefit with me.

I am not going to deal very much with the figures which have been given by the noble Earl. Indeed, I cannot question them, because they are completely accurate. One figure which he gave, of £50 million interest, is noteworthy. I think that this is the interest paid upon the large reserve fund of National Insurance. The amount is substantial, and although it has been set aside for contingencies I do not think that it has been drawn upon since it was first established. The size of the fund can be judged by the amount of interest paid upon it.

Then there was the point about whether the contributions were too high. There is no doubt that when not only the industrial workers who are in the lower grades but, indeed, many professional men whose incomes are very low—I have in mind some of the clergy and also some of the young teachers—are called upon to pay the heavy amount which they are now asked to pay weekly, it is a drain upon their incomes. But we have to keep in mind that this money is required for a very great purpose. I am sure that when the people of the country remember the purpose there is little complaint about paying for it. The new rate of contributions is required to increase the payments to a large and deserving section of the population of this country: not only the aged and the disabled but also the many others whom the noble Earl has described in his speech.

But the main interest that is taken in this Bill is in how it proposes to deal with the retirement pensions and the plight of the large number of old people who are receiving these pensions. I have no doubt that we could criticise the inadequate provision made for them even by this Bill; but, despite any criticism of that kind. I want to inform your Lordships that my colleagues on this side of the House will do nothing to retard the passage of the Bill through all its stages. It is a measure which we think is long overdue and was eagerly awaited by the great family of pensioners.

I have wondered whether it is fully realised that there are at the present time in this country something like five million aged persons in receipt of contributory old-age pensions—one-tenth of the population. These men and women, or most of them, are of the generation which for fifty to sixty years of their lives have made the greatest contribution to the building up of the nation's wealth during the past century. Most of us who travel to our homes fairly frequently know that there has been much concern not only among the pensioners themselves but also amongst the general public, and particularly among those who are responsible for the leadership of the old-age pension organisations. They are deeply concerned—in fact, disturbed—about the harsh poverty and suffering of many old-age pensioners.

It is true that old-age pensioners are the main victims of high prices, and inflation as it is to-day affects these old people very much. The poverty of so many of them has become one of our most serious social evils. Their poverty is not always disclosed, for in a large number of cases it is deliberately concealed from neighbours and friends; and this applies to ail kinds of aged people, whether they are pensioners with small additional resources or not, or whether they have no pension at all but are living upon a very meagre income. The general rise in prices has aggravated the distress of millions of these people.

I often meet two of my contemporaries—men who commenced work just about the same time as I did. When young, we all decided that we would save a little money, and we saved sufficient, as we thought, so that in the event of any industrial trouble or difficulty we should have sufficient to last us for a year. Recently I asked one of these friends of mine what he would say was the value of the amount which we aimed at then—which was £100, which he and I each had before 1914. This brought us to the statement, made in another place in the early part of this year, to the effect that £100 gathered in 1914 is actually worth to-day in real value just about £20—that is to say, worth just about one-fifth of what it was in 1914. That is the effect of this devaluing of money. Ever since the incoming of the present Government in 1951, the value of money has decreased by something like 25 per cent. These are the things that affect particularly the old people who receive these very small incomes.

I was rather interested, a few weeks ago, to note the result of a survey which was made by the Ministry of Labour, the survey was made in 1953, and it was the first comprehensive, official inquiry which has been carried out into the spending habits of the British people. The Report was published about three weeks ago. It stated that in 1953 some 13,000 households were visited, and complete and detailed records were made of their expenditure over a period of three weeks. Three budgets were published in this Report—a budget relating to the spending of the very wealthy person, a second one relating to the spending of good industrialists—people receiving wages of something like £18 to £20 a week—and a third one relating to old-age pensioners. The matter was put in this way—beginning, as I have said, with the budget of the wealthy person and coming down from that extreme to the pensioners, or rather to a special class of pensioner, those who were wholly or largely dependent on the Welfare State and not living with other families. These were undoubtedly the worst off. About three-quarters of their expenditure—rather more for the single pensioners and rather less in the case of married couples—went on the essentials: food, housing, fuel and clothing.

This was how it worked out. For a single person, it was shown that housing cost 10s. 7d. a week; fuel and light, 7s. 9d.; food, 21s. 10d.; clothing 3s.; durable household goods, 1s. 11d.; tobacco and drink, 1s. 11d.; other goods, 3s. 8d.; transport and vehicles, 1s. 1d.; services, entertainments, et cetera, 4s. 2d. That totalled up, for a single man in receipt at that time of £2 a week pension, to 55s. 11d. The total amount for a married couple was 97s. 3d. In the face of a budget of that kind, one is not surprised to learn of the poverty which exists in so many of the homes of the people of this country. The figures which I have just given resulted from an impartial inquiry which was carried out in the year 1953–54. Since 1953 until the present day the cost of living has gone up by 15 or 16 per cent., so that the position now is infinitely worse.

As I have said, one-tenth of the population of this country are mainly dependent on their old age pensions, and they are to receive, after the passing of this Bill some two months hence, 50s. a week for a single person and 80s. a week for a married couple. That 50s. for the single person means that he will still be well below the amount of expenditure which was given by these surveys some three years ago. And that is not the worst of it. The acid test of whether the pension is adequate or not is the number who apply for National Assistance. In August of this year, the number who applied for National Assistance out of the 5 million to which I have referred was no less than 1,683,000. Many elderly persons will not apply for National Assistance because they regard it as similar to the old Poor Law Relief, and they will suffer many difficulties and hardships in preference to applying for it.

These 1,683,000 persons—almost one-third of the pensioners—whose poverty has been proved, are those who will get less under this Bill. The noble Earl referred to the 10s. per week payable to a single pensioner and the larger amount to a married couple. Those single persons who were in receipt of National Assistance to supplement their pensions, and the married couples in like case, will not get the full amount of the increases, because the National Assistance allowance has been cut by 5s. in the case of a single person and 9s. in the case of a married couple. So actually, the amount which will be given to a large proportion of the 1,683,000 persons will not show an increase of 10s. a week. They will have the increased pension, but their National Assistance allowance will be cut by 5s. The actual increase to them is just 5s. The result of cutting, or reducing, the National Assistance benefit by 5s, a week is that the Government are saving £8 million. It is true that £1,500,000 of that £8 million goes to assist the Industrial Injuries branch. But I wonder whether it is worth while for the Government to save £8 million a year in this way by reducing the benefit of the increased pension through the cutting down of National Assistance. I do not think it is the right way to do things.

Then I should like to bring out another branch of these elderly people who will benefit little as a result of the increased payments which are being made—I refer to the non-contributory pensioners, those who were not employed in industry, who had no opportunity to become insured for National Insurance, but unfortunately had to apply for pensions which are paid by the National Assistance Board. There are 250,000 persons who are receiving these non-contributory pensions—not an equal pension to the contributory pension —and their income at present is 26s, a week. The noble Earl, Lord Selkirk, mentioned that these pensioners, more than half of whom are over 80 years of age, are to receive, not an increase of 10s. a week, not an increase of 5s. a week, but an increase of 2s. 4d. a week, making their total income 28s. 4d. a week; and more than half of them are receiving National Assistance. I wonder whether it is possible to persuade the Government to treat these pensioners in the same way as the other pensioners are treated. They are very old; they are a dwindling number of people; many of them are sick, and it is impossible to expect them, under conditions such as we have to-day, to live on 28s. 4d. a week.

We particularly welcome the increases in the current weekly rates of the industrial injury benefit—to 85s. a week for a single person, and 115s. a week for a married couple, with other proportionate increases based on the assessment of disability. There are two matters to which I should like to refer in connection with industrial injuries. The first is the bringing in to full benefit under this Bill of those persons who have been seriously incapacitated and who at present are covered by the old Workmen's Compensation Acts. Most of these men are suffering from pneumoconiosis, a terrible disease from which a substantial number of miners suffer. If this Bill is passed in its present form, a single man, totally incapacitated, will get £4 5s. a week compensation; but those in the same condition who come under the Workmen's Compensation Act will receive only £2 17s. 6d. a week—the 17s. 6d. having been provided under an Act passed last year. No provision is made in this Bill for any increase to these unfortunate men. Your Lordships can imagine three or four of these men, living quite near to one another in the same road, each of them, by accident, suffering from this dread disease. Those who were certified a month before the new legislation came into operation will receive £1 7s. 6d. a week less than those who were certified not long afterwards.

It is these anomalies which spoil appreciation of a measure which is giving so much in benefit to other people. I cannot understand it. I suggest that we ought to take action in this matter. After all, the date of the accident has in general determined whether a man receives his compensation under the Workmen's Compensation Act or under the Industrial Injuries Act; and as time has gone on the amounts payable under the one scheme, certainly in the cases of total incapacity, have diverged substantially from those payable under the other. This has led to a certain element of hardship in the case of workmen paid under the Workmen's Compensation Act, because the payment these men receive is now out of line with what would be received by a man similarly injured since the Industrial Injuries Act came into operation. That is the position at the present time.

There is no difference in the amount of war pensions. Disabled soldiers, whether they were disabled in the First World War or in the Second World War, each receive the same amount. I would beg the Government to reconsider the position in connection with this matter. The Industrial Injuries Fund will receive, as a result of the passing of this Bill, an additional £31 million a year in revenue; that will be the amount collected for the remainder of this financial year and for the next financial year. Surely, it is not too much to ask that out of a sum of that kind the small amount required to bring the income of these old disabled men up to that of those who are certified under the new legislation should be paid. Therefore I very much hope that the Government will reconsider this matter.

It is not my intention to say much about the withholding of the tobacco tokens, although some of my noble friends on this side of the House may deal with that matter later. I admit that when that legislation was passed in 1947, giving this concession, I at first thought it a little illogical, but it showed a keen desire to help the old folk. I was, and I am still, in favour of maintaining it. It could cause some resentment among some of the non-smoking pensioners, but I know of very little. The giving of these tokens is now well established, and the withholding of them will cause much more resentment than the withholding of financial benefit from the non-smokers, and I think it would be much better that the tokens should be continued.

I agree with the noble Earl, Lord Selkirk, that reconsideration of our National Insurance services is necessary. The general opinion is that this Bill will be the last for dealing with the social insurance services, since little further progress can be achieved on the existing lines of National Insurance. I believe that we need a measure dealing in a comprehensive manner with all National Insurance schemes, including the National Assistance Board. All these matters should be integrated into a Ministry of Social Welfare. To the degree that this Bill will give increased benefits which alleviate the conditions of the pensioners and others, we on this side welcome it; and, as I have already said, we shall not impede its passage.

3.53 p.m.

LORD AMULREE

My Lords, I should like to join with the noble Viscount who has just spoken in giving a welcome to the Bill which is before your Lordships' House. I cannot give it a particularly warm welcome, because although it provides for some increase in the pension paid, particularly, to retirement pensioners—I think of those in particular—the actual sum is not a great deal. One wonders what numbers it will remove from the list of those pensioners who need to obtain extra assistance from the National Assistance Board. The number who obtain this assistance now is considerable, and what is especially sad is that the number is going up every year. Dealing with the type of person with whom I deal most in my life, I find that it is quite impossible for them to live on the present retirement pension, and whether the addition of 10s. will convert a practical impossibility into a possibility, I am not at all sure. If one could guarantee stability in the future, there might be some hope, but I think the same situation will arise again in a short time—that is, that about 1½ million pensioners will be applying for assistance; and their number will begin steadily to increase.

While I am speaking about National Assistance, I should like to touch upon one subject, which is that it might be possible one day for the Government to separate the form of Board, or the place to which retirement pensioners go for assistance, from the general Assistance Board. Many retirement pensioners—and I do not think one can blame them—do not like the thought of applying for assistance. They are rather embarrassed at going to a place where all sorts of unfortunate people—some through their own fault, and some not—are forced to go as well. What I should like to see is some new term for "assistance". Once upon a time there was the term "supplementary pension". I think that was preferable to "assistance" and at the same time I should like the money to be given to the people from a different office. As I have said, many people do not apply because they do not like to; and many more do not apply because they do not know where to apply or what to ask for. Whether that could be made more widely known, I do not know. People get very stupid about that sort of thing, but it is amazing how many people one finds who do not seem to know about the possibilities of National Assistance.

The noble Viscount who has just spoken referred in a moving way to the condition in which many retirement pensioners live now, and I should like to support every word he said. In my own limited field I can confirm every statement he made. With regard to the removal of the tobacco concession, broadly speaking I welcome that, because I would far rather see a pension made a viable basis—if I may use that phrase—rather than bolstered up with all sorts of little concessions one way and another. But I am not at all sure that the timing of the removal of this concession was quite right. Although I think the principle is good, I cannot agree that the timing is either quite right or fair to a number of these pensioners.

One thing I was pleased to note is that the number of workpeople suffering from pneumoconiosis has been cut down. That is a step in the right direction. As has been said—indeed, the noble Earl who moved the Second Reading mentioned it—I wonder whether the present system of pensions is quite right and whether we have not got to work out something new. That is why I was hoping my noble friend Lord Beveridge might be able to come and speak on this matter, because he knows a great deal more than most of your Lordships about National Insurance in all its forms. Unfortunately, he cannot come, and I have to think about things myself.

One of the things which I am pleased to see, and which I believe should be encouraged in every way possible, is the great increase in the numbers of pensions paid by private firms and, I think, by the nationalised industries, to their employees. I wonder whether the noble Earl can tell me this: supposing the pension paid by a private firm is more than a certain amount, does that mean a deduction from the national retirement pension? I know that if a person under the age of seventy is in employment and earning more than a certain amount, some deduction does take place. I am not quite sure whether the private pensioner who gets a retirement pension would get something deducted. I am sorry that I did not give the noble Earl warning of that question, but if he can answer it I shall be grateful.

I think the time must come when some scheme will have to be worked out—it will be difficult and complicated, as noble Lords on my left have found out—whereby a pension can in some way be related to the income a person is receiving before retirement. A. man earning quite a substantial wage who suddenly retires at the age of sixty-five, or whatever age it may be, finds that his income is cut by an enormous amount and that he has to depend upon his retirement pension. I know that this is a difficult matter to discuss in your Lordships' House now, but I trust that the Government are aware of this matter and are trying to work out some kind of scheme towards that end.

What one would like to envisage one day—perhaps this is looking too far ahead—is a time when there will not be a necessity for compulsory retirement pensions. Certain persons, obviously, will always need a pension. What one would like to see, if the cost of living can become stable, is that the wages paid to people shall be such that they will be able, without subjecting themselves to great difficulties during their, working life, to save enough money to ensure that a pension will not be necessary. One would like to see some encouragement given to the various schemes of co-owner-ship whereby employees can obtain shares in the business for which they work, either by purchase or by allotment. The schemes of co-partnership worked very well in their time, but I believe that we have to move further forward from that, so that the retirement pension may be a very temporary support—a temporary crutch, as it were, if a person needs it—but will not be regarded as a permanent requirement of all people when they retire. Possibly when I mention these points I am looking rather too far in the future for it to be a practical matter, but I trust that something of that may be coming along. Therefore, as I said before, I welcome this Bill because it gives some increase to a large section of our people who are suffering very much at the present time.

4.1 p.m.

LORD HAWKE

My Lords, any National Insurance Bill presented by my noble friend Lord Selkirk is always clearly and agreeably presented, and I hope noble Lords realise the many hours of hard work that lie behind that simple and clear presentation. All these Bills bring out the anomalies, and I do not think that private insurance is any exception to the rule that wherever one has a system of insurance of any sort one must have hard cases and anomalies, some of which were related by the noble Viscount, Lord Hall. But these Bills bring out our two great problems, which are our ageing population and the inflation of our currency. The noble Lord, Lord Beveridge, wished us to embark on a strictly contributory scheme in which the benefits would be related to contributions, but when the time came it became politically impossible to implement such a scheme, and the scheme we have to administer to-day is one where the benefits do not follow—or, shall I say, more or less do not follow—contribution at any rate in an actuarial sense.

We have the quinquennial review by the Government actuary and that serves chiefly to horrify us with the figures he produces of the future. The particularly alarming one is the figure that we have five workers supporting one pensioner to-day, whereas in 1979–80 there are going to be only three workers supporting one pensioner. That is the theoretical position of the future; but how practically alarming the actuary's figures are must depend on three factors: the national income of the period which we are discussing, the progress of the inflation up to that date, and the politics and, of course, the attitude of the voters of the day to the aged of the day. We have already seen the standard pension having to go up from 26s. to 50s. to meet inflation. The greater part of that, of course, was caused by the devaluation of the £ in 1949, but other inflation occurred before and it has gone on since.

For the future one can only wonder to what extent the Government actuary is cautious in his approach. The most important figures which he has to work on are the Mortality tables, and as the big figure in National Insurance is the pensions figure, representing in 1978–80 £978 million, any change or any improvement in experience on the mortality tables could make an immense difference. one way or the other. Then, again, he has to prognosticate unemployment. This is not so important as the other, because in the year ahead which I am taking unemployment benefits represent a figure of only £92 million. He estimates on a 4 per cent. basis. I personally should have thought that that was a gloomy point of view, because I do not believe that democracy would stand a perpetual rate of unemployment of 4 per cent. That means 1 million unemployed. I think that before we reached that stage we should have passed through Socialism to near-Communism. Half the nation would be employed watching the other half and there would therefore be no unemployment. So I think that that is a gloomy figure.

For another item he also takes a gloomy figure, and that is in regard to interest. Interest is only £50 million, which represents the interest on the funds accumulated by noble Lords opposite in their stewardship of the plan, an accumulation which, if they had wished to be generous, they might have paid out to some of the hard cases which the noble Viscount, Lord Hall, mentioned. But there is the accumulation of over £1,000 million and the actuary is reckoning on 3 per cent. interest on that fund. That I should have been inclined to regard as gloomy, because I do not see democracy ever saving enough money in the future to make an interest rate of 3 per cent. permanently probable except by vast printings of money.

Therefore it is clear from these enormous and mounting figures we see ahead of us that the approach can only be an empirical one; that is, to see that the cash income of the day more or less balances the cash outgoings. As the years go on we get further and further away from what is the strict actuarial basis, because the young are paying for the old. I do not say that that is wrong, but it is not actuarial practice. An example, given in the quinquennial survey, is that the worst possible actuarial case is that of the gentleman who was 55 in July, 1948. Ten years later, in July, 1958, he gets a full pension, and that full pension will be actuarially worth ten times what he contributed for it. People in other positions are less actuarially unsound on the same basis. A new entrant to-day, my inquiries lead me to believe, could get far better terms from an insurance company than he can get from my right honourable friend the Minister of National Insurance.

The worrying thing is that pensions should really spring from savings, free savings invested in the means of production, and savings achieved by restraint from consumption. Many people honestly believe this scheme to be based on that. In practice, it just is not so. The employer's contribution becomes part of the costs of industry and is passed on to the consumer, which is inflationary. The employee's contribution is regarded as part of his cost of living—as my noble friend Lord Brocket said, speaking on the Address, any deduction from the weekly wage packet is regarded as a deduction from wages—and that tends to manifest itself in wage increases, which tends to inflation. I believe that the £600 million or so in contributions which comes in every year is really firmly entrenched in the inflationary position of the country at this moment, and that any increase in contributions tends to have a further inflationary effect.

This is the drawback in any compulsory scheme, because where you enforce a compulsory saving or deduction on a man, regardless of whether he can afford it or not, it acts as a sort of blunt weapon, and the whole class upon whom you inflict this thing tends to try to contract out of the burden by passing it on to somebody else, which in the case of wages means the consumer. It is no 'substitute at all for voluntary savings achieved as the result of voluntary refrainment from consumption by people who can really afford to save. That is why I think it is so important that we should do everything we possibly can to encourage supplementary forms of saving which are really financed by self denial. I have never yet seen a National Savings poster which says, "If you do not fancy life on the old age pension, it is time you started to save now", but that is the sort of thing that I believe the National Savings movement should be saying to people, and that is what I believe Ministers, too, should be saying, because it is the truth. But this National Insurance pension has become a sort of political issue.

So much for the principle of the thing. When we get down to the amounts, it is obvious that the poor pensioners must have some more. It is also obvious that their circumstances vary tremendously. Lord Beveridge meant that the scheme should provide a minimum subsistence to be supplemented by private saving or some sort of National Assistance Board. In effect, that is what is provided at the moment. Many old age pensioners have private savings of their own, but for those who have not life is definitely no picnic. I am afraid, too, that the value of their savings has declined tremendously owing to inflation. I ask the noble Viscount, Lord Hall, whether, if he put his £100 into a "with profits" endowment policy, he would have lost five-fold, as he did by keeping it in cash.

My Lords, I am glad that the Government have acted. They have to raise the money to pay for the increased benefits, and I can see no other proper way of doing it except by raising the contributions. The Chancellor must be desperately hard up at the moment, with the nationalised industries all clamouring for more money and the National Savings movement bringing in so little. I think that we can almost regard the Bill as a sort of compulsory implementation of the Commandment: Honour thy father and thy mother, because this burden falls on the young for the benefit of the old. That is not a had thing, perhaps, in an age which regards it as proper to push "Granny" out of the way as soon as she gets a bit of a nuisance. But do riot let us pretend that it is a deflationary measure, or that it is scientifically actuarial. It is humanitarian, it is empirical, it is inflationary, but it is inevitable.

4.16 p.m.

LORD SILKIN

My Lords, we have just listened to a most interesting speech, with a good deal of which I agree. I agree that the effect of this Bill is bound to be inflationary. I agree with the noble Lord, Lord Hawke, that it is inflationary both as regards the contributions of the employer, who will tend to recoup himself in prices for the additional contribution, and also from the point of view of the worker, who will regard the additional contribution as part of his cost of living. But I thought that the noble Lord fell into some error in comparing the benefits that are provided by the State scheme with what could be provided under a private scheme. I agree that the person who was fifty-five in July, 1948, is doing fairly well out of this scheme. But, of course, that is the point of a State scheme. The State scheme is intended to benefit all sections of the community, and not to deal with every individual on an actuarial basis. I think that, on reflection, the noble Lord would agree with me there.

The noble Lord also referred to savings. In principle, I agree with him that it would be desirable for as many people as possible to supplement by a private pension scheme, either through their work or as the result of savings, the benefits provided under the State scheme. Indeed, I understand that the Trades Union Congress would cordially support any scheme which is provided by employers with contributions from workers. But to-day not everybody is able to save. Noble Lords will be aware that a large percentage of people are living on the borderline of poverty, their earnings, or their income, being just sufficient to enable them to live without actual privation. I would say that probably more than half the population are in that position to-day: they are not able to save in order to increase their pensions. So while it may be true that a considerable number of people are making provision—it would be wrong to underestimate the number of people who are supplementing their pensions—one has to recognise that there will always be a large number who are not.

We are grateful for this Bill. It does not do very much; it is a little measure. But we are grateful for anything that helps to improve the standard of living of our people. An indication of the inadequacy of the increases is given by the figures mentioned by my noble friend Lord Hall, which the noble Lord, Lord Amulree, also quoted, of the proportion of old age pensioners who have to ask for National Assistance.

THE EARL OF SELKIRK

My Lords, the noble Viscount, Lord Hall, gave the figure of the total number of people on National Assistance, not only old age pensioners.

LORD SILKIN

My Lords, I think I have seen figures which showed that in 1956 the total was just under one million.

THE EARL OF SELKIRK

Yes, that is more likely.

LORD SILKIN

I believe that that is the approximate figure. It does not vary a great deal, and I believe that about 20 per cent. represents the number of old age pensioners who have to seek National Assistance to supplement what they are given. My own view is that this additional sum will not substantially reduce their number. I have two reasons for that belief. One is that there has been a substantial increase in the cost of living since the last pension rate was fixed, three years ago; and I think that all we are doing is catching up with the increase is the cost of living since the rates were last fixed. I made this point to the noble Lord, Lord Chesham, the other day, in connection with National Assistance. I do not know whether the noble Earl may be able to say to what extent we have caught up with the increase in the cost of living, or whether perhaps we have gone beyond it. My own view is that we are just about catching up with the increased cost.

THE EARL OF SELKIRK

My Lords, I take it that the noble Lord, Lord Silkin, is referring to pension rates.

LORD SILKIN

My Lords, I am speaking of pension rates over the whole field. I should be interested to know whether the noble Earl is able to give the House any calculations showing the extent to which the cost of living has gone up since 1954, when the rates were last fixed, as compared with the increases given by this Bill. During the whole of those three years, those increases have been taking place gradually, and people entitled to benefits have been suffering. To-day they are catching up—whether wholly or in part the noble Earl may be able to tell us.

My second reason for doubting whether this additional payment will have any substantial effect on reducing the number of people applying for National Assistance is that I do not know to what extent these increases take into account increases in rent, both actual and prospective. As the noble Earl will know, there have already been certain rent increases, and further increases are inevitable as a result of the operation of the Rent Act. Those increases will arise very shortly.

I now turn to the question of the very large deficiency which has been mentioned. Like the noble Earl, I turn from very small figures to a very large one—the £17,500 million, which is the estimated deficiency on the pensions account. Here I want to follow the noble Lord, Lord Hawke, in expressing some doubt as to the validity of that enormous figure and of the assumption on which it is based. The deficiency estimate must be based, of course, on the number of old people whom we shall have to support—or, rather, on the proportion of old people to contributors. I believe that it has been too readily assumed that the number of old people in proportion to the population is bound to increase. Putting it at its lowest, I am doubtful about that proposition. It has been true in the past, largely because of improved conditions which have resulted in longevity of the population as a whole; but I imagine that there must be some limit. This House is, of course, a fine place for inducing longevity, but it may be that we have now reached the limit.

Without going into the kind of calculations which actuaries make in this matter, I believe that there is a cycle, and that at certain times there is a higher proportion of old people in relation to the population than there is at others. I feel that the assumption that the number of old people is necessarily going to increase, and that this is a burden which we shall have to bear, is at least open to some question. I also agree with the other doubts of the noble Lord, Lord Hawke, on the assumptions lying behind these figures. I do not know whether the noble Earl, Lord Selkirk, is able to comment upon that. I am not putting my case very high: I merely question these assumptions, and I should be interested to hear whether the noble Earl is able to give this figure of £17.500 million with real assurance.

Next, I want to say a word or two about the amount of the contribution. The noble Earl stated that under the new rates the contribution will amount to about 7 per cent. of average industrial earnings. I believe that he reckoned this to be 0.5 per cent. lower than in 1946. An average is a misleading figure.

THE EARL OF SELKIRK

I agree.

LORD SILKIN

My Lords, I do not pretend that 7 per cent. is a high figure for a large number of industrial workers; but, on the other hand, it may be an oppressive figure for a certain number of people. That is the difficulty whenever we talk in terms of averages, rather than of actual amounts. I can assure the noble Earl that an increase of 2s. per week will be very material to some people, while to others, even other workers, it will not be very much. While I feel that, faced with the alternative of having the increased benefits at the price of the increased contribution or not having them at all, one would plump for the increased benefits, in spite of the increased contribution, nevertheless the noble Earl must not be surprised if, in due course, there are some repercussions. This is not in any way a threat, or even a prophecy, but a bare statement of opinion. He must not be surprised if some lower-paid workers find that this 2s. a week is a real hardship and that, as a result, some representations are made on that subject. I think that this increase in the contribution, coupled with the withdrawal of the tobacco tokens, may very well cause a certain reaction.

I myself would not justify the tobacco token as the most logical of institutions. I think that it is unequal in its effects, and I think all the criticisms that have been made about it are justified. It is something like this Chamber; it cannot be justified logically, but few noble Lords opposite would be prepared to agree that it should be abolished forthwith. Even those who are most ready for some change would want it to be gradual. I would say the same about the tobacco token. If there is to be any change in this illogical benefit I think it should not be made in the abrupt manner in which it is being made.

Before coming to my final point, I want to say a word about the further development of the Insurance Scheme. I agree with both my noble friends Lord Hall and Lord Amulree that we have to do some fresh thinking in the matter. I believe the time has come when we must think again, particularly about the flat-rate contribution. It seems to me that if this is a national scheme, as distinct from a private scheme based on strictly actuarial lines, then one cannot justify payment of the same contribution by people with widely varying incomes. I agree that in the case of a purely insurance scheme one can: the same benefits are given and, therefore, different rates of contribution cannot rationally be demanded. But this is not such a scheme; this is a social service scheme. We are talking about a social service, and therefore we cannot justify asking the person who is earning £8 a week to pay indefinitely the same rate of contribution as is paid by the person who is earning £2,000 a year. And I think there are many other matters that call for revision.

It is indeed remarkable that this most complex and comprehensive scheme, as the noble Earl has described it, has stood up as well as it has done. I think that it is a great tribute to everybody concerned that it has been, on the whole, a remarkable success; and I am glad that the noble Earl paid it a tribute, because it was not a tribute which some of his friends have paid to this service. It is not everybody in the noble Earl's Party who is in favour of the Welfare State, and I am glad that he himself paid this particular scheme the tribute that he did. But I think that the time has arrived, as was said by my noble friend, when there should be a review of the whole matter and, in my judgment, particularly of the flat rate of contribution. I agree with my noble friends that we welcome this Bill, so far as it goes. I understand that there is the desire that it should become law by 5 o'clock on Thursday next. We shall certainly do everything we can to help the Government in achieving that object.

4.34 p.m.

THE EARL OF SELKIRK

My Lords, I should like to thank noble Lords for—shall I say?—the qualified good reception which they have given to this Bill. It is always moving to hear the noble Viscount, Lord Hall, describe the adversities of life. Of course, they still exist. They are not as widespread or as severe, or as widespreadly severe, as they were, and we are grateful for that. But, as I said, when we view them from here we must, I think, look at both sides of the picture. I think, frankly, that the noble Viscount. Lord Hall, and the noble Lord, Lord Arnulree, looked rather too much at one side. There are two sides to this picture, and the contributions which are made from public funds are to-day formidable.

The noble Lord, Lord Silkin, I must say, looked at all sides of the picture—and he did not like any of them: he disliked the lot. He thought the benefit was inadequate; he thought that the actuary was probably unduly pessimistic; and he thought that the flat rate was too high. My Lords, mathematics is a difficult subject but you cannot get round it: that is the problem. I do not want to comment on what the actuary said. One very interesting speech dealt with certain of the assumptions upon which he worked, but it will be very difficult to say what will be the bank rate or the rate of lending in 1970 and whether average costs in the 1970's are likely to be this figure or that. It would be very rash to say. It would also. I would say to the noble Lord, Lord Silkin, be very rash to assume that the actuary is fundamentally wrong. I personally think that the best assumption that can be made has been made and, as the noble Lord knows quite well, it has been adjusted from time to time over the years.

LORD SILKIN

If I may intervene for the purpose of the record, and not in order to interrupt the noble Earl, I would say that I did not ask the House to assume, nor did I myself assume, that the actuary was fundamentally wrong. I raised a few doubts that were in my mind and I did not go beyond that.

THE EARL OF SELKIRK

I accept readily what the noble Lord says. But he did invite me to make certain assumptions, and I am declining the invitation. The noble Lord asked whether we had caught up. I can say that we have fully caught up; indeed, we have done more than that by quite a good deal. I will give one figure on this point because we have really caught up in a remarkable way. If we take the basis on which standard benefits were made in 1946, the figure to-day would be 42s. 9d., but we are paying 50s. I think that that shows the measure by which we can say that we have caught up.

LORD SILKIN

The noble Earl is answering a question which I did not put. I thought he was going to answer that. I said, as compared with 1953.

THE EARL OF SELKIRK

I will give the figure for October, 1952, if that helps the noble Lord. I can give the figure for April, 1955. I am sorry I have not the figure for 1953, but I will give either of those to which I have referred if the noble Lord wishes to have them. For 1952 the equivalent figure would be 38s. 9d.; for 1955 the equivalent figure would be 44s. 9d. I think it is fair to say that we have more than caught up and. indeed, we can assure ourselves that at no time have those who have benefited under this scheme been better placed than they will be under this Bill, if it is passed. There is one other point on the question of longevity.

LORD LATHAM

My Lords, may I interrupt to inquire whether we may interpret that statement to mean that at no previous time has the pensioner received more for what he has paid than at the present time?

THE EARL OF SELKIRK

What I am merely saying is that, in terms of money, the benefits received to-day are better than those that would have been received at any other time. As I have already explained, the contribution which is made is slightly less than at other times.

As the noble Lord has referred to it, may I mention the point of less well-paid personnel? I shall take three categories: coal mining, manufacturing and agriculture—coal mining as the well-paid category, manufacturing as the middle category and agriculture as the less well-paid category. I will give the figures for 1946, and this is the worker's contribution only. The figure for coal mining was 3.3 per cent., whereas in the Bill it is 2.7 per cent.; the figure for manufacturing was 4.1 per cent., whereas in the Bill it is 3.8 per cent.; and the figure for agriculture was 5.3 per cent., whereas in the Bill it is 5.0 per cent. I am giving only an impression as to how the burden of contributions falls on those with different standards of wages and salaries, and suggesting that, on the whole, the distribution of the burden is more favourable to those on the lower standards than it was at the time when this scheme of insurance was introduced. I think I may say that the benefits have a distinctly better purchasing power to-day; those concerned are, in fact, better off.

Now I would turn to the question of longevity which the noble Lord has mentioned. The fact is that more people are reaching retiring age, and the reason substantially for this is the high birth rate in the early years of the century. These are the facts, and, as I see it, we cannot get around them. What is happening is not so much that people are living longer but that more people are living to a ripe old age. The ultimate span is not itself longer, but there are more people now of advanced years. I do not think anyone could say that there is a way of getting round that. The fact is that more people of pensionable age are actually entering into the pensions field.

LORD LATHAM

My Lords, does that mean more than this: that people in the early days of the century did not make provision for the liabilities which faced them?

THE EARL OF SELKIRK

It means that in the coming years more people will have paid their contributions and will come into the contributory pension scheme, whereas formerly people did not do so.

May I now turn to one or two points which were raised by the noble Viscount, Lord Hall. He mentioned non-contributory pensions. These, as the noble Viscount knows, are being superseded by the contributory scheme. One might argue that they should be abolished altogether and that the people concerned should be dealt with by way of National Assistance. It is not true to say that anyone has to live on 26s. or 28s. 4d. a week. It will be supplemented under the National Assistance Scheme, which would make it 45s. plus rent.

It is fair to say that it was laid down in 1946 that the non-contributory scheme would continue but that no new people reaching the age of 70 after the year 1961 would be admitted. Therefore, although the scheme will continue it will gradually be brought to a close. The reason for keeping it on is that there were a certain number of people who were too old to enter National Insurance and the only thing for them would have been National Assistance. Secondly, they were not eligible for National Assistance without disclosing or disposing of some of their assets. It is for that reason that the scheme has been kept going. All we have done is to make a small addition by way of compensation for the tobacco voucher.

The noble Viscount raised the question of workmen's compensation. As the noble Viscount knows, we made some addition to that last year. He knows that workmen's compensation cases have to some extent been brought into the National Insurance Scheme in regard to sickness benefit. Benefits under the Industrial Injuries Act are now available, such as those for constant attendance, unemployability supplement and dependants' benefit. The noble Viscount knows also that under the industrial diseases—pneumoconiosis and byssinosis—benefit system these cases get 17s. 6d. extra from last year. The scheme of the Industrial Injuries Act is basically different from that of the workmen's compensation scheme. Workmen's compensation depends on loss of earnings and industrial injuries on loss of faculty. There is a fundamental distinction between these two.

VISCOUNT HALL

I am pleased that the noble Earl has mentioned that. I would remind him, however, that it is still true that men incapacitated who were certified under the old workmen's compensation scheme do not have any of the benefits to which the noble Earl referred, apart from the 17s. 6d. which was granted to them last year and which made their total income £2 17s. 6d. Others, of course, were brought in by new legislation, which does not apply to them. May I, while replying to that matter, mention figures which I gave and which the noble Earl suggested were possibly wrong—they were figures in connection with National Assistance. I was quoting figures given in another place on the occasion of the Second Reading of this Bill. It is possible that they are confusing as one reads them in Hansard. I will not read them now. As one reads Hansard one is inclined to take it that the number I gave was the number of old age pensioners who were receiving National Assistance. However, I will not pursue that point now: perhaps the noble Earl and I may have some discussion about it.

THE EARL OF SELKIRK

I will certainly examine the point. The figure which the noble Viscount gave was 1,683,000. I think that that is probably the total of the National Assistance personnel.

What the noble Viscount suggested in regard to workmen's compensation was making the Industrial Injuries Scheme completely un-actuarial. At the present time it is actuarial. This, I suggest. is something which should be approached with caution. Unlike the National Insurance Act, the Industrial Injuries Act is entirely actuarial, and I think it would be a pity if it should cease to be.

VISCOUNT HALL

Was it not touched last year when the 17s. 6d. was given in addition to the £2 which they were receiving? The number is so few that the principle would not be destroyed if those few could be granted, in addition to the 17s. 6d. which they were granted last year, a further addition in the same way as that given last year.

TILE EARL OF SELKIRK

I think that what the noble Viscount says is true. The Fund is able to carry that increase, but I feel that it ought not to be expected to carry a great deal more. As the noble Viscount knows, the Fund is already out of pocket, and we have had to put up the contributions more than the percentage increases of the benefits arising out of the Fund.

The noble Viscount mentioned that there are a certain number of pensioners now receiving National Assistance who will not get the full benefit of the additional 10s. Of course that is so. In cases where National Assistance is given, these people are in this position: they are getting, in addition to their pension, certain assistance from National Assistance, and that assistance has recently been increased by 5s. What the noble Viscount is asking is that they should get the further 10s. under the Bill as well. They have already been assisted by National Assistance, and I am afraid that it is on that basis that they must be treated at the present time. I think a moment's reflection will show that it is correct that it should be so. I should like to say that the National Assistance Board, in fixing their 5s. increase, have taken the ending of the tobacco relief into consideration. The words they use in their Explanatory Memorandum are these: In making these proposals the Board have taken into account not only changes in prices but also the effect on a number of pensioners receiving supplementary assistance of the Government's proposals for withdrawing the tobacco token concession. So this matter has been taken into consideration.

LORD LATHAM

Which merely says that what they have been formerly getting as National Assistance they will henceforth get as pension.

THE EARL OF SELKIRK

It depends on the circumstances. A certain number of people will, of course, be freed of National Assistance. The precise numbers, I am afraid, I do not know, and I do not want to delay the House by going further into this point. The noble Viscount, Lord Hall, said he had always recognised that the tobacco duty relief was illogical. Lord Amulree complained only of the timing, and Lord Silk in merely suggested that its ending was a little bit abrupt. I do not know how the Government could be more gentle in a matter of this kind. How could they cushion the removal of a token of this character? I would ask this question: do you really think that old age pensioners should be paid in kind, rather than in cash? If they are to be paid in kind, are you really going to say that they should have, perhaps, beer, a few sweets or clothing and things of that sort? I do not think that would be desirable. I would point out that this concession is costing about £16 million a year, or, as I might interpret it, the capital cost of six frigates. I do not think we should shed many tears about this. The position at the moment is really unfair as between those pensioners who smoke and those who do not, some of whom benefit by it while others do not, I think, in the circumstances, that it is proper to get rid of this scheme. It is administratively unsound, and I feel that it is wrong to keep it any longer than is necessary.

In endeavouring to answer all the questions asked I have been rather long, and I apologise to your Lordships. But in looking at this matter I think we must be careful to see both sides of the question. I should like to quote just one sentence from the Labour Party's examination of this policy of pensions, which is interesting, and I agree with it. It says, in the introduction: If the old are enabled to spend more, the rest of us will have that much less to spend. That point cannot be too forcibly pushed into everyone's understanding of this problem. We can well deny ourselves more, if we want to try to do it that way. One way out is by increased production. But can it be seriously suggested that an increase in production will necessarily be passed on to the old? That may be an assumption, but it is the only way by which it can be done.

In the meantime, under the present pensions scheme, people are getting something which is far better than they could hope to get under any other scheme. I do not think that the sort of proposals made by my right honourable friend the Minister of Pensions and National. Insurance would be made by any insurance company, especially as they have consistently taken into account the cost of living. To-day a man reaching the age of sixtyfive will get a pension of a capital value of £2,650. If that man has paid all his contributions continuously since 1926, the total sum paid will be £210. In twenty years' time, if he had contributed everything he could, he would have contributed only £970. I know that some people say that we have not done enough. But I think we have done a great deal, and we have done it within the measure and strength of our economy. I can assure the House once more that when this Bill is passed those whom we want to benefit will be better off than they have ever been before. That, I think, is an achievement of which we can be proud.

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