Lords Sitting of 21 January 1958

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR On the Woolsack.
Prayers

  BUSINESS OF THE HOUSE
  2.35 p.m.
  VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I beg to ask the noble Earl the Leader of the House this Question of which I have given private notice: Whether Her Majesty's Government intend to arrange for a debate on the economic situation with special reference to the recent resignations.
  THE SECRETARY OF STATE FOR COMMONWEALTH RELATIONS (THE EARL OF HOME): My Lords, if noble Lords opposite would like to put down a Motion on this subject we on our side should be happy to reply to it. At present the Report stage of the Life Peerages Bill does not appear to be likely to take much time next Tuesday. I do not know whether noble Lords opposite feel that that would be a suitable day. Perhaps we could arrange talks through the usual channels.
  VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I do not think that Tuesday next would be a good day for us, in all the circumstances, if and when we decide to put down a Motion. I understand that this Chamber of your
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  Lordships, as at present constituted, is part of the Parliament of the country, and in another place the Motion which it was proposed should be put down by the Opposition has now been replaced by a Motion by Her Majesty's Government. I do not know whether the noble Leader of the House is aware of that fact and whether he might not feel it desirable to follow the same procedure in this House.
  THE EARL OF HOME: My Lords, at present I do not think that that is necessary, but if that debate is not to be taken next Tuesday we shall have time to consider all these matters. Certainly a debate can be arranged.

  TRUSTEE SAVINGS BANKS BILL
  2.37 p.m.
  Order of the Day for the Second Reading read.
  THE FIRST LORD OF THE ADMIRALTY (THE EARL OF SELKIRK): My Lords, this Bill is designed to bring up to date the existing legislation for trustee savings banks. These banks have a long and honourable history in this country, starting, I believe, some 150 years ago in Dumfriesshire. They are held in high esteem on all sides and combine the promotion of individual thrift with our national need to increase real savings for capital investment. They are therefore an institution both individually and collectively of the greatest importance.
  To-day there are 84 banks with a total invested capital of about £1,300 million and with rather over 1,000 branches. They

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  are non-profit making institutions and each bank is independently managed by a body of trustees. First let me pay a tribute to the work of these trustees, which is undertaken on a voluntary basis. Their work is an integral and important part of the National Savings Movement.
  The basis on which these banks work is that in the Ordinary department interest at 2½ per cent. is paid on money deposited. This has been the rate since 1888, despite all variation of interest rates, and the Trustee Savings Banks Association has recently confirmed that it does not want any change in this respect: nothing in the Bill will affect this rate. I would mention that my examination shows no significant effect on these figures, either of deposits or withdrawals, since the increase in the bank rate last September.
  The money received in the Ordinary department is invested with the National Debt Commissioners. The rate paid by the Commissioners is fixed by Treasury regulations but restricted under the 1954 Act to a maximum of £2 17s. 6d. for every £100 invested—that is, 7s. 6d. above the rate on which interest is paid to depositors. This is not quite enough to meet the expenses to-day and it is accordingly proposed in this Bill to increase the maximum rate to £3 2s. 6d.
  The actual rate, however, will continue to be fixed by Treasury regulation within this maximum. It will start to operate in the half-year beginning on May 21 this year. The precise figure has not yet been settled but will be based on examination after this Bill has been passed on the most up-to-date estimate of cost of the banks. In the meantime, however, the banks are known to be running into a deficit and exceptional provision is therefore made in Clause 1 to enable a sum not exceeding £300,000 in total to be paid to the banks on that account.
  There is one other provision in Clause 1 to which I should refer. Up to the present time the National Debt Commissioners have paid the same rate to all banks. In fact, however, management expenses have varied between different banks and the Trustee Savings Banks Association have formed a mutual assistance scheme. Under this, part of the surplus of the lower-cost banks is transferred to the higher-cost banks. This is a voluntary
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  scheme in which, however, one or two of the banks have not joined.
  This Bill will allow the Treasury to pay a different rate, fixed according to its costs, to any bank which prefers to stay outside the scheme. This is not intended to penalise such a bank but it will remove the present incentive which exists for low-cost banks to stay aloof from the mutual assistance scheme.
  Turning to Clause 2, I would point out that this relates to the other side of the trustee savings banks: that is, to the Special Investment department. Nearly all banks conduct such business and they are authorised to invest in certain types of securities as a result of which they pay a higher rate of interest to their depositors, rising to-day to about 4 per cent. to 4½ per cent. In recent times deposits in the Special Investment department have considerably increased but are still not much more than one-third of the Ordinary department.
  It is now intended to extend the range of permitted investments and to give a measure of greater flexibility in the amount of each class of security which can be held. The new range of securities which can be held includes local authority stocks with maturities up to forty years, instead of fifteen as at present, Colonial and other Commonwealth stocks up to forty years (previously limited to one year), and also some minor additions which make special provisions for banks in the Channel Islands and the Isle of Man.
  There are also a certain number of smaller amendments which are designed to improve the smooth working of the banks and ease the management of monies invested. All these amendments are acceptable to the Trustee Savings Banks Association. I do not think I need go into these in detail at the present time. I would only add that this movement continues to be of great importance. It has been repeatedly adjusted to meet changing requirements, and these adjustments have enabled it to fulfil its rôle both to the individual investor and to the general economy of the country. I feel sure that the House will be anxious to help the movement with this small Bill and, in doing so, to wish every success to those engaged in this important work,

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  and to express our thanks for the voluntary contribution which is made by the trustees. I beg to move.
  Moved, That the Bill be now read 2a.—(The Earl of Selkirk.)
  2.45 p.m.
  LORD MILNER OF LEEDS: My Lords, may I first declare an interest in this matter, in that I have the honour to be patron of one of the oldest trustee savings banks in the country, the Leeds Skyrac & Morley Savings Bank, formed as long ago, I believe, as 1818. I am sure the House will be obliged to the noble Earl for the lucid explanation of the Bill which he has given. He mentioned the sum of £1,300 million as being the capital of the banks. That sum, of course, represents the assets of the whole of the trustee savings banks in the country, not their own capital.
  THE EARL OF SELKIRK: Deposits.
  LORD MILNER OF LEEDS: Deposits, yes. This measure is, of course, constructive, and is designed to help trustee savings banks by increasing the rate of interest they receive, as compared with the rate they pay to depositors. The trustee savings bank pays £2 10s. per cent. to depositors in the Ordinary branch and has hitherto received a maximum of £2 17s. 6d. per cent. from the Treasury. II is now proposed that that maximum should be increased from £2 17s. 6d. per cent. to £3 2s. 6d. per cent. May I express the hope that the Treasury will be generous in this matter and go up to the maximum of £3 2s. 6d.?
  Whether that be so or not, it is essential that some assistance should be given to the trustee savings banks. Many of them are at present operating with a deficit in their budget. The Leeds bank to which I have referred has to make a claim, under the mutual assistance scheme which was mentioned by the noble Earl, for a quite considerable sum in that respect. All expenses have increased, such as salaries, upkeep of properties, and so on, and it is desirable that these banks should have some reserve with which they can develop their operations.
  The trustee savings bank movement provides, of course, one of the oldest forms of saving in the country and, I think, contributes something like £50 million a year to the National Savings Movement. It is rather remarkable that trustee
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  savings banks should be able to continue, and, indeed, to increase and develop, having regard to the very low rate of interest which, in present circumstances, they pay. Obviously the Government are receiving very cheap money. Money at present is costing them a maximum of £2 17s. 6d. per cent., and in future, unless some other alteration is made, will cost a maximum of £3 2s. 6d. I believe that the time may possibly come, if interest rates generally remain as they are, when all Governments will have to be rather more realistic and consider paying increased interest to depositors, because there is little doubt that monies are being put into alternative forms of investment which are more lucrative than investment in the trustee savings banks.
  Trustee savings banks have, of course, great advantages: easy withdrawals; exemption from income tax on interest up to £15 a year (that is up to a maximum deposit of £600); and those monies are not liable to be reduced in value, except as the general value of money decreases. I think, however, that the primary reason why trustee savings banks have continued to find favour with the public is that they are, very largely, locally managed. The patrons, trustees and managers, and many other of their officials, are voluntary workers. Certainly in the North of England there is a great appreciation of that fact. Trustee savings banks are local institutions, and local patriotism accounts for a good deal. No doubt many people feel that their fathers and grandfathers have been in the habit of putting money into trustee savings banks, and it is for these reasons that the banks maintain their present position.
  The noble Earl has mentioned the increased powers of investment given to the Special Investment department. Obviously that was desirable. Whilst it is not strictly relevant, I feel sure that some consideration will very shortly have to be given to increasing the range of investments open to ordinary trustees operating private trusts. As your Lordships well know, those investments are limited, under the Trustee Acts and nowadays it is essential, in my view, that ordinary trustees should have wider powers of investment. It is, of course, quite possible to give those by will or in the trust itself. But in so far as powers of investment are concerned, I hope that at no distant date some additional powers may be given to

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  all trustees. Again, this is not strictly relevant, but I have often wondered why such powers do not include power to invest in approved building societies where not only would greater interest be received but a valuable social purpose would be served. That, as I say, is outside the purview of this Bill. We on this side entirely support the Bill; we hope that the Treasury will be generous in giving the maximum, and that this Bill will result in continued development and success in this very worthy movement. Finally, I should like to thank the noble Earl, if I may do so, on behalf of the trustee savings banks, for his well-deserved tribute to the trustee savings banks of this country.
  2.50 p.m.
  VISCOUNT MACKINTOSH OF HALIFAX: My Lords, I have no intention of taking up much of your Lordships' time over this Bill, which I am happy to think will receive as helpful, sympathetic and united support in your Lordships' House as it did in another place. As head of the National Savings Movement, of which the Trustee Savings Banks Association is one of the partners—and a very valuable one at that—it would ill become me if I did not support this Bill and pay my tribute to that fine body of men and women who make up the trustee savings bank movement. As a trustee and manager of a trustee savings bank I have been associated with the movement for over twenty-five years—that is, for some years longer than my association with the National Savings Committee itself, and I am a vice-president of the Trustee Savings Banks Association. So I speak of what I know.
  I should like to congratulate the noble Earl, Lord Selkirk, on the clear, concise and sympathetic way in which he has presented the Bill, and my noble friend and fellow-Yorkshireman, Lord Milner of Leeds, for his support and his helpful speech. As your Lordships know, this is a sort of tidying-up Bill, but it contains two main features: first, as your Lordships have heard, to increase the interest paid by the Treasury to the banks, out of which they pay the interest to depositors and the cost of running the banks; and, secondly, slightly to widen the field of investments permitted to the
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  banks for the investment of the funds of their Special Investment Departments.
  As your Lordships have already heard, the trustee savings banks are a very old institution, with more than 150 years of history and experience behind them. The first Parliamentary measure governing the banks was passed as early as 1817. In fact, they were more than 100 years old when the first National Savings Certificate was introduced and the National Savings Committee formed in 1916. At that time, 1916, the total deposit in the trustee savings banks was £77 million. To-day, it is £1,300 million, with over 8 million active accounts. I like to think that the co-operation of the National Savings Committee, the post office savings banks and the trustee savings banks, in what is now known as the National Savings Movement, has had something to do with this wonderful progress. But the main credit must go to the trustee savings banks themselves, so wisely and energetically guided by the Chairman of the Association, Sir Kenneth Stewart, and his colleagues.
  Before I deal briefly with the Bill itself, I should like to pay my own tribute to the wonderful work done by the trustees and managers throughout the country. In a joint stock bank or building society they would be known as directors, but in this case they are either trustees or managers and, with us, they are all voluntary workers who come from every walk of life. These gentlemen operate eighty-four banks, with over 1,000 branches, and unlike the directors of commercial banks, and even building societies, who are paid substantial fees for their labours, our trustees receive not a penny for their services. Indeed, many of them, in addition to their services to the banks, are among the best voluntary workers of the Savings Movement; and this applies equally to a great many of the paid officials of the banks, who look upon their jobs as a social service.
  The trustee savings banks are, indeed, a particularly British institution, being a happy combination between private enterprise, on the one hand, and the Government, on the other; between the local knowledge of local trustees (I was going to call them "directors" because I am so used to it) and the national interest; between voluntary and professional services. In fact, it is just the sort of product of common effort in a common cause

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  for which Britain seems to have a special genius. If you were to ask me what is the chief attribute of the trustee savings banks, I think I would say that it is the friendly and personal service—I underline the word "personal"—which they are able to give to their customers. They have only one job in life; and that is to help ordinary men and women to save. And they do it in a superlative way. Never has that service been more valuable to the country than at the present time, when the battle to beat inflation is so vital.
  Your Lordships will have seen that the chief purpose of this Bill is to increase the permitted maximum rate of interest paid by the Treasury to the banks from the present figure of £2 17s. 6d. to £3 2s. 6d. per cent.—an increase of 5s., or one-quarter of one per cent. Out of this, of course, the banks pay their depositors £2 10s. in interest, the small balance being the margin on which the banks operate. I believe that I am right in saying that the present interest rate of £2 17s. 6d. has been unchanged for nearly forty years, during which time the banks have increased seventeenfold, but up to quite recently the increasing volume of business has been sufficient to meet the increase in costs of operation. Latterly, however, the increasing costs have overtaken the expansion of the business, and during recent months they have been running at a slight loss—this despite the fact that I know of no financial institution (and I speak as a director for many years of a building society and a joint stock bank) run as economically as the trustee savings banks. Indeed, that is as it should be, in banks which are leading exponents of thrift. It is this slight loss which this Bill is designed to correct.
  Although the permitted maximum is to be raised to £3 2s. 6d., it is not anticipated that it will be necessary for the Treasury to pay the maximum at the present time, and if the nation can get on top of inflation, it may be a long time, if ever, before the maximum will be needed. T believe that the present approximate total cost of the banks, including the payment of interest on deposits of £2 10s. per cent., is round about £2 19s. per cent. It speaks wonders for the close personal relationship between the trustee savings banks and their customers that even in these days of highly competitive rates of interest, of up to 6 and 7 per cent., and even
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  more, the trustee savings banks still hold their customers with the traditional 2½ per cent. True, these banks are now able to offer the first £15 of interest per annum from the Ordinary department free of tax. Perhaps this is one of the reasons why the oldest and the newest form of national savings—that is, the trustee savings banks and the premium savings bonds—are the securities showing the best results at the present time.
  The National Savings Movement is going through a very difficult time at present, and for obvious reasons. Anything that encourages personal savings, as this Bill certainly does, even if only indirectly, will have the support, I am sure, of your Lordships' House, for although there are many and diverse remedies suggested for inflation, some of them highly controversial, there is one thing on which all Parties and all sections of the community are agreed; and that is, that less spending and more saving is a sure way to beat inflation. I beg to support the Bill.
  2.58 p.m.
  LORD PETHICK-LAWRENCE: My Lords, I do not want to detain your Lordships because I know that there is an interesting debate to follow, but I felt I should like to say one or two words in support of the Bill and of the whole Trustee Savings Bank Movement. I do not think that anyone has any but words of praise for this great institution, which has lasted such a long time and risen to such importance. The proposal to enable the banks to meet their expenses by an increase of the margin between what they have to pay out and what they receive from the National Debt Commissioners is one of which we can understand the importance and which I feel sure we shall all support. The only criticism I have heard, and I do not know whether it is in the least justified, is that the trustee savings banks might be open for deposits for a little longer hours and more frequently than they are at the present time. I do not know whether there is anything in that criticism. I mention it as the only one I have ever heard.
  When these trustee savings banks were first started, many years ago, it was done with the idea of benevolence to the poorest section of the community, who brought their pennies to the banks and saved a few pounds in the course of their long lives to help them in their old age.

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  At that time no one thought that there would come a day when these institutions for taking the savings of small people would play a large part in helping the country in its hour of need. During the war they were of great assistance to the nation in the aggregate of their funds, and even to-day, when there is some possibility of investment and expenditure outrunning the savings of the people, these banks, in their aggregate, taken from quite humble people, are of the greatest importance to the welfare, well-being and financial position of this country.
  3.0 p.m.
  THE EARL OF SELKIRK: My Lords, it falls to me only to thank noble Lords for the support they have given to the Bill. I am sure we are all glad to have heard the words of the noble Viscount, Lord Mackintosh of Halifax, who speaks with such authority on the subject, and of the noble Lord, Lord Pethick-Lawrence, whose support we greatly value. I would only say to the noble Lord, Lord Milner of Leeds, that I will not give any undertaking that Treasury regulations will move to the maximum, but I am glad to be able to say that the matter will not be dealt with in a niggardly manner.
  On Question, Bill read 2a, and committed to a Committee of the Whole House.

  RECREATIONAL CHARITIES BILL [H.L.]
  3.1 p.m.
  Order of the Day for the Second Reading read.
  THE LORD CHANCELLOR (VISCOUNT KILMUIR): My Lords, your Lordships will find the purpose of this Bill shortly stated in the first paragraph of the explanatory memorandum, where it says:
  "The main object of this Bill is to give statutory recognition to the charitable nature of certain trusts and institutions which exist for the purpose of providing recreational or similar facilities, or whose purposes include the provision of such facilities, in the interests of social welfare. Many such trusts and institutions were commonly regarded as charitable until the case of Commissioners of Inland Revenue v. Baddeley; but the governing instruments often contain terms similar to those considered in that case, and considerable apprehension has been felt as to the effect of it."
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  This is a short and, apparently, technical Bill, but it is of considerable importance to a wide range of voluntary organisations—youth clubs, women's institutes, old people's clubs, village halls, community centres and many others which have until recently always been treated as charitable, but whose status has become open to question as a result of the decision of this House in the case which I have just mentioned. It was decided in that ease, in effect. that certain trusts for the provision of facilities for social and physical training and recreation limited to residents in West Ham and Leyton who belonged to, or were likely to belong to, a particular religious persuasion, were not wholly charitable and hence were not entitled to the fiscal privileges accorded by law to charities. This decision might not, at first sight, have been expected to have far-reaching consequences, having been decided, as it was, in accordance with well-established principles. However, many institutions hitherto commonly regarded as charitable, and in many cases of a character substantially different from that under consideration in the case I have mentioned, have trust instruments containing words similar to those which were criticised in the Baddeley trusts, and have been seriously worried about their own position.
  Your Lordships will excuse me for saying one or two words on the legal position. Most of your Lordships will be aware that a perpetual trust for a purpose which is not charitable is void, and even if the trusts escape this pitfall they would not, unless their purposes were exclusively charitable, be entitled to income tax relief. Nor can trustees usually alter the purpose of their trusts merely because they turn out to be not charitable. In the circumstances, Her Majesty's Government have felt it necessary to introduce legislation to clear up the situation by confirming the charitable status of those classes of trusts which, although previously treated as charitable, are now considered doubtful as a result of this case.
  It has taken some time to formulate a solution, because the scope of charity is to be ascertained not only from Statutes such as the Statute of Charitable Uses, 1601, but from decisions of the courts developed by analogy upon analogy over hundreds of years. The Government White Paper Policy on Charitable Trusts, issued in 1955, stated

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  its intention to preserve the case law it is hoped, provide guidance for the and in the present situation the aim must be the least possible modification of the existing law. Moreover, two public Commissions have recently pronounced against any extension of the charitable field. It has therefore been necessary—but very difficult—to find a legislative formula which would clarify the position without upsetting those decisions (including that on the Baddeley case itself) or interfering with the law of charity.
  There are many and obvious good reasons against attempting Ito do this by setting out a catalogue of institutions and declaring their trusts validated. The Bill therefore proceeds by declaring a principle which is to be applied in individual cases by the courts and can be developed by them in the future according to the changing circumstances and needs of the times. Clause 1 of the Bill accordingly declares on what terms and for what class of beneficiary the provision of facilities for recreation or other leisure-time occupation is a charitable purpose. These terms may be briefly described as compliance with a new test of social welfare combined with the old test of public benefit.
  The precise construction of these tests and their application to individual cases is a judicial matter and it is not for Ministers to pronounce on the question whether a particular trust will be charitable under the Bill. But the general intention of the Bill is clear. Subject to the existing test of public benefit, it is to be charitable at law to provide facilities for recreation or other leisure-time occupation with the object of improving the conditions of life of the beneficiaries but not some other purpose, such as the promotion of a particular sport. The beneficiaries must be either the public at large (or female members of the public, to cover the case of women's institutes) or limited classes who are in need of such facilities but are unable to provide them for themselves; that is to say, the young, the aged, the sick or disabled, the poor, and persons in need by reason of their social and economic circumstances.
  These requirements are not a complete definition of social welfare but lay down the minimum conditions without which the test of social welfare cannot be satisfied. In the present clause, the provisions of subsections (2) and (3) will,
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  it is hoped, provide guidance for the judges. Subsection (1) is the operative provision and the remaining subsections of this clause are explanatory. Before passing to these subsections, I might mention that the words "assist in the provision of facilities" are intended, inter alia, to cover those national bodies (such as the National Council of Social Service) which do not provide facilities themselves, but make grants to, or act as the organising and administrative machine for, those who do. The word "facilities" is intended to be widely construed, as is further explained in subsection (3) of the clause.
  It is now made clear that it is charitable to provide not only for outdoor games and amusements, but also for the sort of recreational facilities which are ordinarily provided at village halls, community centres, and women's institutes. I would emphasise that these particular illustrations are given mainly to indicate the intention that a wide and liberal interpretation is to be placed on facilities for recreation and other leisure-time occupation. These illustrations are in no way intended to be limiting or to give any preferential status to the institutions specifically mentioned over the many others which come within the principle of the Bill but which are not mentioned. If some of your Lordships feel disappointed that some meritorious institutions in which your Lordships are interested are not cited, I hope your Lordships will bear this part of my speech in mind.
  I also hope that it will be appreciated that the object of the Bill is to provide a principle capable of flexible application, and this would be defeated if these illustrations were expanded into a catalogue which could never be complete, but would tend to be treated as exhaustive and exclusive. The words, "or any other leisure-time occupation" are intended to make it clear that the Bill applies to recreation in its widest sense and covers, for example, reading, games, physical training, or just "sitting and thinking" in old people's clubs.
  It may be asked why the provision of recreational facilities limited to women will satisfy the test of social welfare, while those limited to men only will not. The answer to this is that the Bill does not set out to make institutions

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  charitable which were not ordinarily regarded as charitable before the Baddeley decision. In general, recreational institutes and clubs confined to men of full age have been treated in the past as not being charitable; and it is not thought that this should be altered. Women, on the other hand, have seldom in the pas been in a position to provide these facilities for themselves, and it is thought that the charitable status hitherto enjoyed by women's institutes and the like should be preserved.
  I now pass from facilities provided for the public at large to those for the classes enumerated in subsection (2) (b) (i) of Clause 1. It has long been established that the poor, the sick, the aged and the young are proper objects of charity, and comparatively small classes of these will suffice to establish the element of public benefit. With these have been included the class of persons in need by reason of their social and economic circumstances—a phrase intended to cover such cases as may arise from time to time of persons who, though not actually poor, find themselves cut off from their home surroundings: for example (I must declare an interest, because I have been President of the Gordon Smith Institute for Seamen in Liverpool for many years) merchant seamen in port away from home.
  It has seemed to the Government—and I hope your Lordships will agree—that the principles underlying the Bill are, in general, consonant with the decisions of the courts in this somewhat obscure corner of the field of charity. But particular care has been taken to preserve in its integrity the principle of public benefit on which so many determinations of charitable status have depended—for example, that the employees of an industrial firm do not form a sufficient class for the purposes of charity.
  May I say one word as to the operation of the Bill? The Bill is retrospective in its confirmation of the charitable status of the institutions whose status is in doubt. Subsection (4) of Clause 3 deals with income tax and provides that such institutions will lose no tax benefits as the result of the Baddeley case. Subsection (5) makes somewhat similar pro
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  visions about the lower rates of duty on conveyances of land. To complete this account of the retrospective application of the Bill, I would observe that the general effect of subsections (2) and (3) of Clause 3 is that anything lawfully done in the past on the assumption that trusts covered by the Bill were not charitable, shall remain effective. I will give your Lordships one example. A trust which had, before the introduction of the Bill, been wholly or partly wound up or otherwise dealt with on the footing that it was invalid, is not revived by the Bill.
  The remaining clauses need not detain us long. The object of Clause 2 is to validate the large class of trusts established or assisted by grants from the former Miners' Welfare Fund or the Coal Industry Social Welfare Organisation. Such trusts have hitherto been treated as charitable, but will not necessarily be made charitable by Clause 1 because the beneficiaries are, in many cases, limited to miners, ex-miners and their dependants, and the trusts are not for the benefit of the public at large. It is proposed that these trusts should be treated as if they are and always had been charitable, and should not simply be declared to be charitable like the trusts within Clause 1. This distinction in drafting is intended to ensure that the Bill does not infringe the principles underlying the law of charity generally and, in particular, the test of "public benefit" which I have just mentioned.
  The Bill in general applies only to England and Wales. The law of Scotland as to public trusts is different, and trusts such as we have been considering would not be invalidated. In Northern Ireland, the law of charity is based on English law, but the Northern Ireland Parliament have power to legislate. There are, however, limitations on their powers to do so retrospectively. Clause 4 removes these limitations in so far as is necessary to allow a corresponding Bill to be passed at Stormont. Clause 6 (2) is worthy of some attention, because in certain cases the statutory references to charity in Acts applying outside England and Wales (like the Income Tax Acts) are construed in accordance with the English Law of Charity. Clause 6 (2) therefore ensures that in these cases the Bill will operate to extend the references in their application also to Scotland and Northern Ireland so

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  that tax relief will be applied on a uniform basis throughout the United Kingdom.
  The Bill is expressed to bind the Crown in Clause 5, because if a trust within the Bill was invalid and the settlor had at the time of the gift intended to divest himself of any beneficial interest, the Crown could claim the property as bona vacantia; and the Bill extinguishes any such claim. At this point it may be appropriate to announce that Her Majesty's consent has been obtained to the introduction of this Bill in so far as it may affect the interests of the Crown.
  There has been little precedent for legislation of this kind for many years, and the Government have felt the need for great caution in venturing upon an untried field. They have exercised great care to avoid even an appearance of encroachment on the traditional functions of the courts, and I hope that your Lordships will feel that this measure will be of assistance to all concerned with the law of charity by supplying a degree of certainty where the law is in doubt, and providing a firm foundation on which recreational charities can be established. I beg to move.
  Moved, that the Bill be now read 2a.—(The Lord Chancellor.)
  3.20 p.m.
  LORD MILNER OF LEEDS: My Lords, my noble friend Lord Nathan, who your Lordships will remember presided with such acceptance over the Committee relating to Charitable Trusts, had hoped to be present this afternoon, but owing to indisposition he is unable to be with us and I have been asked to say a word or two in support of this Bill. The Bill is not an unimportant one. It covers, I imagine, some thousands of trusts of one sort or another. The noble and learned Viscount on the Woolsack has mentioned a number of organisations which might come within its purview. They include youth clubs, village halls, community centres, institutes of various kinds, including women's institutes, the Playing Fields Association, presumably; old people's charities, and possibly even the Y.M.C.A. and Y.W.C.A.; and, no doubt, a great number of others. It is obviously very desirable to make the law in regard to their position clear and certain.
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  As I understand it, the case to which the noble and learned Viscount referred decided that the ambit of some of these trusts, or, at least, of that particular trust, was too wide to bring it within the hitherto accepted definition of charitable. Because of that decision there has been considerable doubt in the minds of a great many organisations as to whether they might consider themselves charities and so entitled to the advantages which that position would give them. Charities, properly so called, have advantages: for one thing they have tax exemption. Latterly, there has been, as I think the noble and learned Viscount will agree, a tendency to enlarge the definition of what is a charity, and efforts are made by promoters of one sort or another to bring all sorts of organisations within the purview of the term. But the Legislature, quite properly, has endeavoured—I will not say to set a limit, but certainly to avoid the enlargement of the position of charities which has existed since 1601; since, indeed, the days of the first Elizabeth. This Bill is intended to remove doubts and to ensure that the advantages hitherto obtained by charities, strictly so called, should continue.
  I would only observe in regard to Clause 1, and I think in regard to Clause 2, that all those bodies carrying on recreational and similar activities are not made charities in the strictly legal sense. The term used in the Bill is that they
  "shall be and be deemed always to have been charitable,"
  which is not quite the same thing, but presumably it gives the same advantages as if in fact they had been charitable trusts within the law. There is some special provision, obviously very necessary, in the case of miners' welfare trusts. Mining communities are largely in one village or town. Very often these trusts are limited, by the very nature of their occupation and the geographical position of the pits and their residences and so forth, to a particular class of the community, which was not ordinarily contemplated by the law of charities hitherto. Therefore they are specially mentioned in Clause 2 of the Bill.
  I agree with the noble and learned Viscount on the Woolsack that the whole question of what should be regarded as charitable in the legal sense is rather a

  19
  delicate matter. It is obviously not desirable to increase the number of charities or varieties of charities entitled to the various exemptions and advantages. On the other hand one does not wish to limit in any way the position of charities properly so called. I would compliment the draftsmen on the way in which they have dealt with the matter in this Bill. The Bill will clear away doubts. It will enable those entitled to tax exemptions to continue to have them. It will also entitle them to such benefits as may be obtained from the Ministry of Education in the way of grants, and will generally clear up doubts. For those reasons we on this side support the Bill.
  3.25 p.m.
  LORD AMULREE: My Lords, I should like briefly to join the noble Lord who has just sat down and to welcome this Bill on behalf of the noble Lords on these Benches. There is one point that is especially important: for the first time we have it officially laid down that recreational charities will now become properly recognised as charities—a matter on which there has hitherto been some doubt. Hitherto, most of the charities have been for people in some bodily or physical need. That kind of work has largely been taken over now by the various local authorities and the central authorities. Therefore I think the time has come when the purpose and point of recreation and the purpose of what may be called social welfare are now recognised. By encouraging these charities we shall be doing a great deal to make a healthy and prosperous community.
  3.26 p.m.
  LORD BURDEN: My Lords, may I say a word or two in support of the provisions of this Bill? I would call attention to one aspect of what might arise in the operation of the Bill which I do not think has been mentioned. As recently as December of last year the Minister of Housing and Local Government appointed a Committee to consider the operation of the law so far as charities are concerned. That committee obviously has not yet reported. Undoubtedly the position has become difficult, in view of the decision referred to by the noble and learned Viscount on the Woolsack. But the local authorities, or the body representing the municipal bodies in this country, are alarmed that the Bill could extend the
  20
  scope of exemption from rating. That may be right or it may be wrong, and I am not going to pronounce upon the point. But your Lordships will be aware that at the present time, in view of the proposed abolition of percentage grant and the institution of block grant, local authorities are naturally very apprehensive at what might be a further loss of revenue to them. I am not going to say whether that loss of revenue is right or wrong. All I am asking is that the noble and learned Viscount will consider whether it would not be advisable that this aspect of the Bill, admirable Bill as it is, should be discussed with the local authorities' associations to prevent any difficulties or trouble in the future.
  3.28 p.m.
  LORD LUKE: My Lords, I, too, should like to give this Bill a warm welcome. I think it will be most welcome to all those people and organisations who have been concerned with providing the recreational facilities which are covered in the Bill. The Baddeley case affected a wide section of voluntary societies and their work which had been going on for a great number of years—some thirty, some fifty, and some perhaps even longer than that. That work was of great value to the community and I think it was thoroughly appreciated. It was always considered by them, throughout the years that they were organised, to be charitable work. As the noble and learned Viscount has already pointed out, however, during the last few years since that case was heard there has been considerable doubt and uncertainty about status, and, indeed, doubt and worry over the continuation of that work. Therefore, I should like to express gratitude to Her Majesty's Government for appreciating the dilemma in which these organisations have been placed and for their prompt action in making a readjustment of the status of these societies and associations.
  The noble and learned Viscount has already enumerated the principles in the Bill, but I wish to repeat them because I like to hear these provisions for the public benefit—for instance, the words "in the interests of social welfare", "improving conditions of life", and "those having need". Noble Lords will be aware that there is, indeed, still considerable need for recreational facilities of all kinds in this country. Then there

  21
  are the words "the public at large", and really all the words in Clause 1 (3) are the meat of the whole proposal, especially the following:
  "the provision and maintenance of grounds and buildings to be used for purposes of recreation for leisure-time occupation."
  That, indeed, is very wide.
  I would, however, make one query of the noble and learned Viscount. Although he mentioned the word "clubs", the word "clubs" does not appear in the Bill at all. It seems to me that where there are associations of people formed for the set purpose of providing just these recreational facilities, and which are receiving assistance to do so, then there should be some name—perhaps not "club", but some title—given to them, because these associations are of necessity formed by membership and are not formed by just the public at large. Of course, in these cases the membership is not exclusive—I am referring to such bodies as boys' clubs, girls' clubs and other associations formed for recreational purposes.
  The Bill does not, probably quite rightly, make sport a charity, but it seems to me that it covers all recreational activities, both indoor and outdoor—this is the important part—for those who, in the absence of some grant or provision from a body formed for the purpose, would not have them. I take encouragement from the words of the noble and learned Viscount when he said that these are the minimum conditions in the Bill, and that a liberal interpretation would be placed on the trust, and so forth, which will be formed for the purpose of the provisions.
  As to the need, I do not wish to detain your Lordships, but, speaking as I am on behalf of the National Playing Fields Association, I would say that it is not without interest that the applications for playing fields and playgrounds up and down the country run into hundreds—indeed, thousands. That shows that there is still great need and that we are, as it were, only catching up with the lack of these particular facilities. I have no doubt that there will be general agreement that nothing should interfere with progress in providing them. It is within your Lordships' knowledge that in the 1960's there will be an even greater need, with the large increase in the numbers of boys and girls who will be leaving
  22
  school at that time. In conclusion, I should again like to express appreciation to Her Majesty's Government for this Bill and hope that it will have a speedy passage through Parliament.
  3.33 p.m.
  LORD CONESFORD: My Lords, I shall not detain the House for more than two minutes. Needless to say, I agree that this Bill should have a Second Reading and I intervene only to draw attention to a point which I think will require further attention in Committee. My noble and learned friend the Lord Chancellor, in his lucid explanation of the provisions of the Bill, gave some reasons for what are, at first sight, the quite extraordinary provisions set out in the second sub-paragraph of Clause 1 (2) (b) of the Bill. This lays down the requirement that, in order to benefit from this Bill—now I quote the actual words—
  "the facilities are to be available to the members or female members of the public at large."
  I cannot immediately recollect any precedent for those remarkable words. There has been a tendency in our legislation to introduce equality for women, but to introduce superiority for women is to some extent a novelty. Recently, a witty novelist spoke of all animals being equal but some being more equal than others. Now, apparently, we put women in that class.
  The noble Lord, Lord Milner of Leeds, mentioned the advantages that might be gained by such bodies as the Y.W.C.A. and the Y.M.C.A., but if he will examine the provisions to which I am drawing attention I think he will see that he is wrong and that, if either of these bodies can benefit at all, it can only be the Y.W.C.A. and not the Y.M.C.A. I only draw attention to this remarkable provision. I know that my right honourable and learned friend explained the reasons that no doubt the learned draftsman had in. mind, but I cannot think that Parliament will be willing to pass those words without further examination.
  3.35 p.m.
  VISCOUNT BRIDGEMAN: My Lords, my noble friend who has just sat down may well be right, but I hope he will excuse me if I follow my noble friend Lord Luke rather than him. Before I follow either of them, however, may I

  23
  draw attention to one point which I think is a very satisfactory one connected with the presentation of this Bill? This is a Government Bill, and, as a Government Bill, it is very properly brought before us. When other wrongs have to be righted and suggestions are made that a Government Bill should be brought to right the wrong so often we are told of the difficulty of finding Parliamentary time. This Bill is an excellent example of how, when the object is agreed to by all Parties, as it has been agreed to in this House to-day, there is no trouble whatsoever, except possibly with the Parliamentary draftsmen, in bringing forward a Government Bill of this sort. I hope that this will be remembered as an excellent example of a Government Bill properly brought and quickly passed through all stages, certainly in this House.
  Having said that, I should like to join wholeheartedly in what was said by my noble friend Lord Luke, whose remarks I need not repeat, in welcoming the Bill in this House. Like him, I have been discussing the provisions of the Bill with a number of organisations, including the one which the noble and learned Viscount on the Woolsack did the honour of mentioning specifically—namely, the National Council of Social Service. That body has asked me to say how much they appreciate the bringing of this Bill and—if I may add this—the draftsmanship of it. There are other bodies which have already been mentioned and which are going to benefit in the same way. There are the youth organisations, including the pre-Service organisation. There are organisations such as the National Council of Physical Recreation. I do not want to give all their names in particular.
  As the noble and learned Viscount the Lord Chancellor has said, the actual claims which each body may or may not have to come under the benefits of the Bill will be decided by the Inland Revenue authorities, case by case. If it turns out, as a result of the Bill, that those bodies which secured tax exemption before the Baddeley judgment are to continue to secure tax exemption, that will meet the case of most of the charitable organisations that I can think of, because most of them did enjoy tax exemption before the Baddeley judgment; so they are back to the position which they were in before, which they
  24
  thought to be all right but which, to some extent, turned out to be a fool's paradise. That position is now remedied. I was slightly horrified, if I heard the noble Lord, Lord Burden aright, when he suggested that a different principle should be applied to rates. I could not agree with him there, for I should have thought that if Parliament decided that certain classes of organisation should be relieved from taxation, the same principle should apply to rating. It crossed my mind to wonder exactly what was the justification for dealing with one industrial organisation, the Miners' Welfare Fund, separately from other industrial organisations, which I understand is done. However, I do not want to go into that now.
  I will come back to the note of general approval which has been struck so often in this debate. I feel that this Bill by its Title has done something rather wider than its actual purport in this House. It has got us away from the ideas of the eighteenth and nineteenth centuries in regard to charity. The noble Lord, Lord Milner of Leeds, mentioned that the history of this matter goes back to 1601, when ideas of charity were largely connected with giving soup to poor people. Here we have got away from all that, for the Bill makes it clear that we are thinking not of giving soup or loaves of bread to a class of person who we hope disappeared with the arrival of the Welfare State but of dealing with the promotion of proper leisure-time activities. The noble and learned Viscount on the Woolsack mentioned one class of person—the man who "just sat and thought". But the story goes on, "Sometimes I just sits", and I hope that person, too, was included. With those words may I add my welcome to this Bill.
  3.42 p.m.
  THE LORD BISHOP OF NORWICH: My Lords, it will be familiar to the minds of all Members of this House that a large number of these trusts and institutions have been and are affiliated to, or in some way under, the ægis, direct or indirect, of the Church, and it is right therefore that one of the Spiritual Lords should rise for a moment to welcome this Bill. Up and down the country there are organisations, not only the large and national efforts but small local ones,

  25
  which in their own way are doing a representative useful service, in many ways and over many different ages. Some are long established and some are of yesterday, because, thank God, it has always been one of the traditions of the Church of England that it stands for the social welfare of the whole community.
  One small point to be remembered in regard to the difficulties caused by the Baddeley judgment was not only that it gave anxiety to bodies carrying on admirable service of this kind in regard to recreational leisure-time activities for social welfare but that, had the position remained unchanged, it might have seriously hampered the growth of new efforts of the same kind, because those responsible might fear for their taxability in regard to the question of charitable work. It is therefore with regard to the future, as well as to the past and to the present, that I should like to add, on behalf of all these bodies, a word of deep relief and satisfaction that their position is to be thus clarified and their work encouraged. We thank Her Majesty's Government for the action they have taken.
  3.44 p.m.
  THE LORD CHANCELLOR: My Lords, the main tenor of the few words I shall say in reply is in gratitude to your Lordships for the reception which the House has given to this Bill. I am glad to think that that tone ran through every speech, from that of the noble Lord, Lord Milner of Leeds, to that of the right reverend Prelate who has just delighted the House. I do not think that the noble Lord, Lord Milner of Leeds, had any points on which he wanted specific information, but, if he has, he knows that he has only to ask me and I shall be delighted to give it. I was glad that he drew attention to the two inquiries, one under the noble Lord, Lord Nathan, and the tax inquiry under my noble and learned friend Lord Radcliffe, both of which pointed out the danger of extensions of charity. What this Bill is doing, however, is seeking to restore and clarify the position which everyone believed to exist before the Baddeley judgment was given.
  I am grateful to the noble Lord, Lord Amulree, for what he said. With regard to what was said by the noble Lord, Lord Burden, I should like to point out
  26
  to him, as I have just said, that the Bill is not intended to increase the scope of charity; and therefore the position of local authorities will not, in my view, be any different from what it was before the Baddeley judgment was given. If the noble Lord has any specific point in mind, I should be glad if he would get into touch with me, or ask the local authorities' association to do so. In the meantime, I will draw the attention of my right honourable friend the Minister of Housing and Local Government, to the speech of the noble Lord, so that he can give me his views. I hope that the noble Lord will convey to the Association that I shall be very anxious to consider any doubts they may have, and if they will write to me the matter will have my fullest attention.
  LORD BURDEN: My Lords, I am much obliged.
  THE LORD CHANCELLOR: My Lords, I was very glad that the noble Lord, Lord Luke, spoke to-day, because the whole House is aware of the great work and attention which he has given to the National Playing Fields Association, and many others, in this context. As to the position of clubs, under this Bill they must of course rely on Clause 1 (2) (b) (i), as I believe he had in mind, for the test of charitable status. Youth clubs, for instance, are generally provided for those in need by reason of their youth. Again, if there is any further point of doubt, I should be grateful if the noble Lord would write to me, or come and see me, when I should be glad to discuss it with him.
  As is usual on these occasions, my noble friend Lord Conesford is not only a well of English undefiled but also a champion of the male sex, and very worried if it suffers any unfairness in regard to the other sex. I should like to say one or two words on that point. As I said in moving Second Reading, broadly the position is that men's clubs have always been regarded as (to use a phrase of Sir Reginald Hill, whom I so often led in tax cases) "self-regarding and therefore non-charitable," whereas the position of women is rather different. What we desire, as I believe my noble friend appreciates, is to protect the position of women's institutes, and to ensure that there is no doubt about their charitable status, even although they are for one sex.

  27
  If my noble friend Lord Conesford had some doubts about the position of men's clubs that have an aspect of public benefit, I should like to say this. It is possible that occasional apparent exceptions to the rule I have mentioned with regard to men's clubs may be found—for example, where a local institute, originally provided for men only, has come to be used by both sexes of the public as a village hall, or where an institute which provides educational facilities confined to men has been treated as an educational charity. This is a difficult point, and I should like to assure my noble friend that the Law Officers and myself did give great attention to it. But we were very anxious to make clear—and I am sure that every one of your Lordships will support us—that women's institutes should not be prejudiced, because we all know the great work that they do. If my noble friend has any ideas on improving the draftsmanship, I have no amour prow on the subject and I shall be pleased to consider anything he may suggest.
  LORD PETHICK-LAWRENCE: May I ask one question, and that is for a definition of the precise meaning of the words "at large"? Supposing there is a women's institute, for instance, which is in a certain village, and it is called by the name of that village and its members are confined to women of the village. Does Clause 1 (2) (b) (ii) cover such a case? I should not have thought that the facilities were to be "available to the…female members of the public at large," though it is a matter of interpretation. If that club is confined to a particular village, can paragraph (b) (ii) be counted in favour of that institute?
  THE LORD CHANCELLOR: I am very anxious not to appear to be giving a legal ruling, because one cannot do that until one has the terms of the trust in front of one. But, of course, on the point that we were just discussing, the difference is between members of the public at large—that is, both sexes—and a body which may be locally limited to women. Broadly (if I may put this to the noble Lord, Lord Pethick-Lawrence), there are a number of cases on the general law of charity which have allowed local application:
  28
  that is, if a charity is given for an area, that is enough. Examples are particularly obvious in the case of towns where a charity has been given for a town, or a burgh in Scotland, or other limitations of the area. But I think that the noble Lord may take it that women's institutes or community centres are safe under this Bill. Nevertheless, I should like to study what he said and write to him, so that I may give him an answer clearly to his specific point.
  My noble friend Lord Bridgeman, apart from his general blessing to the Bill, raised two points. One was that this was an example of a Bill which was generally acceptable, and which had managed to avoid the difficulty of lack of Parliamentary time, of which Ministers speak so often. I hope that my noble friend will count it a virtue in present Ministers that we have taken that step, and will not be too severe on us in the future. The other point he mentioned was the Miners' Welfare Fund—and to the great joy of us all the position of miners to-day is very different from what we remember it to have been, say, thirty-five years ago. But I should like to remind my noble friend—and I am sure he will take the importance of this point—that the money has been subscribed, and often locally subscribed, on the basis that the subscribers were giving to a charity. It seems to me quite wrong that, in that special position, a great deal of money having been subscribed over the years, the fund should not retain the position which everyone believed was the true position, and remain charitable. That was the reason which mainly influenced me; and I think my noble friend will see the force of it.
  I am grateful to all noble Lords and to the right reverend Prelate for what they have said, and may I repeat generally what I have said—namely, that, if there is any specific point, I shall be only too glad either to reply to letters or to deal with the matter if noble Lords care to come and see me personally. My Lords, with that I ask your Lordships to give the Bill a Second Reading.
  On Question, Bill read 2a, and committed to a Committee of the Whole House.

  TRANSFERABILITY IN PENSION SCHEMES
  3.57 p.m.
  LORD BEVERIDGE LORD BEVERIDGE rose to move, to resolve, That in view of the need for maximum output in the present economic situation of the country and the consequent need for making the best use of ability, skill and strength of workers of all kinds, any pension schemes established by employers or their associations should on principle be framed to allow of change of occupation without loss of accrued claim to pension, and that Her Majesty's Government should take all steps in their power, including any necessary changes in taxation, to secure that all such pension schemes accord with this principle. The noble Lord said: My Lords, I shall use very few words on the first part of this Motion. In the present economic situation of Britain there is no need to argue at length that maximum individual and collective output of all workers is indispensable to Britain. The days of easy prosperity for us as industrial leaders in the world have gone, and the going of easy prosperity coincides with insistent demands for more and more prosperity. It is not going to be at all easy to meet those demands. What we want cannot be obtained by having more money or by redistributing money; it can be obtained only by the maximum output of all workers. There are many obstacles to maximum output, far more serious than that which I have chosen for this Motion to-day.
  I have made that choice for two reasons: first, the rapid growth since the end of World War II of occupational pension schemes; and, second (I am putting a Motion for the Government to consider here), that these schemes can be influenced by the Government by their approval of such schemes and by their taxation policy. There have been two—not one—great changes in the provisions for old age since World War II ended: there is compulsory social insurance, brought into effect in 1948, providing subsistence pensions for all, or practically all; and there are the occupational pension schemes organised by employers or their associations for their employees. When the war ended there were 3 million or so people in such schemes and there are now more than 8 million out of a total working
  30
  population of working age of, say, 22 million. But the proportion is really much more than 8 or 9 to 22, because the 22 million includes some 7 million women, whose provision for old age in many cases, if not in most, will be made not by themselves but through their husbands' insurance. In mentioning these two changes one ought not to forget the older, and at one time much more important, provision for old age than either of these—that is, through friendly societies, private insurance, private savings and the like. These should not be forgotten in anything we do about old age.
  My theme is the second of these changes—the occupational pension schemes. They have been the subject of varied legislation in successive Finance Acts from 1918 to 1956. They have been the subject of two extremely valuable Reports, both made in 1954—the Report of the committee under the chairmanship of Mr. Tucker. K.C., on Taxation Treatment of Provisions for Retirement, and the Report on Economic and Financial Problems of Provision for Old Age, published in December, 1954, by a Committee under the chairmanship of Sir Thomas Phillips. May I say a personal word of welcome to the Report of that Committee and to its Chairman, who was one of the three brilliant young men of the Civil Service whom I selected nearly fifty years ago from the best younger brains in the Board of Trade (I was allowed to do so) to assist me in starting labour exchanges and unemployment insurance. He succeeded so well that in World War II, when he had risen to the top of the administrative tree, I had the delight of working under him as under-secretary in the Ministry of Labour, until I was lured, or sent, away to write the thing called the Beveridge Report.
  I am not going to discuss taxation provisions or occupational pension schemes in general, or go into details of the different schemes. I will sum up the broad results in one paragraph. Most of the existing occupational pension schemes involve a loss or diminution of pension rights through past service if an employee changes his occupation or, it may be, if he changes his employer. It is now permissible for an employer's pension scheme to allow pension rights unaffected by change of

  31
  employment. But that is permissible and not compulsory, and it is not usual in practice. Moreover, when such pension rights are given on change of employment, the procedure is often complicated. To sum it up: most existing occupational pension schemes, in so far as they affect the labour market at all, discourage the free movement of labour, and to that extent they tell against the maximum output, which is indispensable to this country to-day.
  What is the remedy for that unsatisfactory position? Is the remedy to be found in the scheme of national superannuation that has been put forward by the Labour Party recently? That scheme is designed to secure for every worker in old age, not equal subsistence, but half his wages, raised by compulsory contributions from employers and employees and an Exchequer grant, and it is to be dynamic in the sense of being guaranteed against inflation. That means that what a man is to get in old age is to be greater than it would otherwise have been if inflation is continued and prices have gone up.
  There is one good thing about this national superannuation. Being national in itself, it would give the employee who changes his job a right to carry his accrued rights with him. More than that, the scheme proposes that employers' pension schemes, as a condition of approval, should give transferability and maintenance of pension rights, for which I am pleading in this Motion. I will say nothing about guaranteeing the pensions against the rise of prices, other than that it would make "complete hay" of the finance of national superannuation, and if it were applied to employers' occupational schemes it would be utterly inconsistent with the demand that the occupational pension schemes of private employers should be supported by actuarial reports. Just think of making an actuarial report under those conditions!
  I am afraid that transferability is the only good thing that I can find in national superannuation. The more I look at it, the less I like it. To me it seems clear that it would encourage inflation. It says to the worker, "If you want a really good pension, be sure you get really good wages while you are working." It encourages him to ask for more and more wages. This plan of covering people by
  32
  putting up the pension if prices have gone up between the time when they worked and the time when they retired will protect them so far as the State is doing things for them, but it does not give any help in the case of private insurance or anything they do for themselves. National superannuation would encourage people to ask for more and more wages when they are young, because the more they get when they are young, the more they will get in their old age, without lifting a finger to improve their conditions or having to think about themselves.
  I am still enamoured of the Beveridge principle of treating all the citizens of this country alike and not making an aristocracy of richer workers who will get bigger pensions because they have been richer workers and without lifting a finger to get them. This is a subject which cannot be discussed to-day. I only mention my doubts about this scheme to lead up to a suggestion I want to make to my friends on my left. We cannot discuss it to-day, but I beg them to put down the subject of national superannuation, if and so long as they believe in it, for full discussion in your Lordships' House. Let them make their case and answer or convert their critics. Let them convert me. I personally am always open to persuasion by good argument, as I was in 1941 and 1942 when writing the Beveridge Report.
  Provision for old age is not a Party issue, any more than National Insurance was a Party issue fifteen years ago, and it ought never to be treated as such. Is there any Assembly in the whole world to compare with this House for excellence in debating human problems on their merits, without Party ties? Frankly, I do not think there is. I should like to see this great problem, on which the Labour Party are quite rightly putting forward their views, discussed in this House. I, for my part, should be only too happy to be converted; but I should be still more happy if we could convert them. Let us have that discussion.
  Meanwhile, to me it is clear that the remedy for the unfortunate position of employers' occupational pension schemes is to clear them of their one defect by accepting my Motion, in principle, and by putting it into practice in practical ways. Here I come back to the Report of the Phillips Committee. I would beg

  33
  every Member of this House who feels any concern about the provision for old age and retirement and about what should be done in regard to occupational pension schemes to read Section (v) of that Report on occupational pension schemes. I will mention only a few outstanding points. First, the Committee favour occupational schemes as a means of saving against future burdens that will arise for growing numbers of old people. Already they show that something like £300 million out of our £1,500 million of annual savings are made through such schemes. Secondly, they point out that the tax concession on such schemes involves a loss to the Exchequer of some £100 million a year; and that means that somebody else has to pay more taxation because of these schemes. Therefore, say the Phillips Committee, the provision of these schemes must be serving a real social object and should not conflict with any national aims.
  From there comes the argument that preservation of pension rights on a change of employment, including employment between the public services and private employment, is in the general national interest. It would, in particular, among other things, assist the employment in useful work of older people which the present terms of these schemes often discourage. At the end, the Committee
  "come with some reluctance to the conclusion that the climate of opinion is not ripe for applying compulsion by changing conditions of State approval and tax remission for such schemes."
  I am here to ask your Lordships one question arising out of that important finding of the Phillips Committee. After expressing their reluctance to apply compulsion, they record their approval of the importance of getting the change made somehow or other. Has not the climate of opinion on this matter been changed, since the Phillips Report of 1954, by the floating of Labour's national superannuation scheme last October? Instead of getting the State to do everything for everybody according to the decisions of civil servants and Ministers, I ask all, whether employers or not, who feel that old age should be covered by equal subsistence for all citizens, guaranteed by all, by the State, and who wish to Preserve variety and individual responsibility in planning for age—I hope the Government feel like that—such
  34
  as come through employers' schemes, through the individual thinking for himself, through private insurance, through friendly societies, to support and accept the principle of my Motion.
  In the Motion I have twice used the word "principle" and I have stressed that in my speech. I believe the principle of my Motion is unquestionable; but, as a practicable man, I am bound, before concluding (and I am nearing the finish), to call attention to two practical problems that have to be solved in applying this principle. The first problem is that of the treatment of existing occupational pension schemes already in force organised by employers other than the State. Most of these schemes do not, in practice, give transferability. They have been approved without it. It is clearly not worth while to apply the new principle of no loss of pension rights on change of employment only to new schemes and leave the whole 5 million or more in existing occupational schemes outside public services untouched.
  On the other hand, having given approval on one basis, on such an issue, affecting action taken by so many employers and associations and affecting millions of people, the State should not make changes of policy without trying to get consent to, or understanding of, what they are doing. I hope, in fact, that the climate of opinion, particularly among employers who manage these schemes, will have been changed considerably by Labour's project of national superannuation. I hope that the more they study those words of the Phillips Report, having established schemes on one basis they will gladly and willingly change them to the new basis which is necessary for maximum output and mobility of the labour in this country.
  May I come to my second point, how one should deal with the State's own scheme of Civil Service pensions. I know personally the difference between a pension scheme with a tie to one employer and a pension scheme which has no such tie. In my long life I have been both a pensionable civil servant and a pensionable administrator in a university. For the years in which I worked desperately hard in the Civil Service as a pensionable official I have not one penny for my retirement

  35
  in old age. I have not one penny because, as the Treasury letter explaining this to me said most kindly, I had not, in leaving the Civil Service for university, produced any evidence of mental or bodily incapacity. I did, despite that letter, go on to a university and become pensionable under what is known as the Federated Superannuation Scheme for Universities. In so far as I am able to pay my bills at all, although rather precariously, I am able to do so because, in spite of many changes of employment in the universities and from the universities, I still have something left from the Federated Superannuation Scheme for Universities.
  But this story of my personal experience does not end there. I have given in a published work (I shall be glad to give a reference to any noble Lord who wishes to know it) a perfectly simple example of how the Civil Service pension scheme, at a critical period when World War H was threatening, prevented the Minister concerned with preparing for war from getting the person he thought best to help him for a particular field. That happened to be myself. He could not get me because of the Civil Service rules about pensions and the Treasury attitude on them. I give that as one example, but there are many more.
  Of course, those single illustrations are not the gist of the argument. The gist of the argument is that if the Government accept the principle of this Motion for employers other than themselves, they must, somehow or other, accept it for themselves. They must begin to look at home. I do not say that there might not be a few highly secret and special tasks in the Civil Service which one might be compelled to take, if at all, as a life vocation with provision for old age dependent on staying in the Service; but those exceptions cannot be treated as applying to the great and growing mass of the civil servants in ordinary work—clerical, administrative, industrial and the like. Exceptions do not make good rules. My principle, if it has any sense in it at all—and as the Phillips Committee thought it certainly had—applies to the State and to the citizen alike. What is sauce for the private employer goose is sauce for what I hope your Lordships will not mind my calling the Government gander. I beg to move.
  Moved, to resolve, That in view of the need for maximum output in the present economic situation of the country and the consequent need for making the best use of ability, skill and strength of workers of all kinds, any pension schemes established by employers or their associations should in principle be framed to allow of change of occupation without loss of accrued claim to pension, and that Her Majesty's Government should take all steps in their power, including any necessary changes in taxation, to secure that all such pension schemes accord with this principle.—(Lord Beveridge.)
  4.25 p.m.
  VISCOUNT HALL: My Lords, in the unavoidable and regrettable absence of my noble friend Lord Macdonald of Gwaenysgor I have been asked to say a few words on behalf of my colleagues on this side of the House—though I am afraid that I am a very inadequate substitute for my noble friend. We are grateful to the noble Lord, Lord Beveridge, for introducing this Motion. There is no greater authority on this subject than the noble Lord, and no one makes a more interesting speech upon it than he does. We will not trouble him much to-day in connection with what he has said, because I can tell him at once that the principle of his Motion will be sympathetically considered and possibly agreed to. I have been in touch with the Trades Union Congress, who say that they have no objection, and that they will consider the matter and give a considered reply upon it before very long.
  With regard to the other matters, particularly the question of the Labour Party's proposed pension scheme, the noble Lord is quite right and just in saying that it is not an opportune time to discuss that matter fully on this Motion. But we can assure him that we hope in the course of a short time to put a Motion down on the Order Paper, so that we may have a full debate upon this matter. I trust that at that time we shall be able to convince him that it is the right kind of scheme to follow his scheme, and that he will be as strong an advocate for its application as he was for his own scheme, which has been so successful from the time it was introduced.
  One point which the noble Lord raised in connection with that scheme was

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  the question of pensions running after wages. He was afraid that, if pensions were based upon wages, there would always be an excuse for an increase in wages, mainly for the purpose of having an increased pension. But what are all the superannuation schemes in the country based upon at the present time? What is the Civil Service scheme based upon? Upon the salaries of the persons who receive the superannuation. Indeed, every occupational scheme which is concerned mainly with the company staffs in industry is based upon remuneration. It is impossible to go off at a tangent, as the noble Lord did this afternoon. The noble Lord has already given his view upon the Labour Party scheme, in the speech which he made in November when he was addressing the Corporation of Insurance Agents in London. The noble Lord said of the Labour Party's pension scheme:
  "Although the Labour Party's scheme has been worked out by a lot of serious economists, it is not really a serious contribution to the future."
  The atmosphere, the surroundings, of that luncheon party must have convinced him that they were the right people to talk to without giving very much thought to the subject, and I trust that we shall be able to convince him that the scheme is not so bad as he thinks.
  I have nothing more to say upon this matter, because, as I said, I am here just to give the views of my colleagues on this side of the House. We certainly trust that the Government will consider this Motion, and consider it seriously. As the noble Lord rightly said, one-third of the employable persons in this country are in occupational pension schemes. It is extremely difficult for them, if they transfer from one employer to the other, to carry their pension schemes with them, and there is not always adequate compensation for the contributions which they have paid towards those schemes. It is a question of many men having to remain in a calling or industry in which they are not very happy, and possibly not suitable, simply through fear of lack of security, because there is not this possibility of transferring their pension rights to another employer. I am sure that your Lordships' House—and this is not a political question—will be in great sympathy with that principle. I should say that, whatever faults the
  38
  Labour Party scheme has, it does include this point of transferability and I should have thought, strong as the noble Lord is for his Motion to-day, that that fact alone would have convinced him that there was some good in the scheme and that it is not all bad. As I said, we are in complete sympathy with his Motion and certainly support it.
  4.32 p.m.
  LORD SINCLAIR OF CLEEVE: My Lords, in rising to address your Lordships' House for the first time I hope that: any shortcomings in the manner or form of my remarks may be viewed with that indulgence which I am comforted to think has become traditional. This Motion raises, I think, a number of important practical issues. When I am asked to approve something in principle my first instinct is to look very carefully at the wording of what it is I am to approve in principle, and secondly to look to see what the major practical implications are. Although I have much sympathy with a great deal of what the noble Lord, Lord Beveridge, said, in the light of the experience I have had—admittedly primarily in relation to what are known as the privately administered contributory funds—there are certain qualifications or criticisms that I feel bound to try to bring to your Lordships' attention. The views I shall express are my personal views; I have not sought to canvass support in industry for any of the constructive suggestions I hope later to make.
  But there is one point on which I think I can speak for industry, and indeed for all concerned with the operation of these schemes of various types and that is in regard to what the noble Lord, Lord Beveridge, was good enough to call tax remission, in the sense that it is some remission which is accorded to these schemes, or those responsible for them, and for which the community at large has to pay. With all respect, I suggest that that is not quite a fair view of the position. The logic of it seems to me to be this: the payment of a pension direct is of precisely the same character as the payment of wages or salaries. Both are charges on the undertaking that is making the payment. If the pension is provided by a series of instalments paid into a fund, and the interest on those instalments is not subject to income tax, well, if one believes in actuaries—and I do; in fact I think that, on the whole, they live up to

  39
  the motto of their Institute, cerium ex incertis—the resulting sum of those instalments plus the interest that has accrued without being subject to tax, is just precisely the sum, neither more nor less, which is required to pay the ultimate pension, which is taxable in the hands of the recipient in precisely the same way as a pension paid direct or a wage or salary would have been. There is, here, I suggest, no remission which involves a subsequent burden on the rest of the community.
  I should like to make one brief remark on the statistical picture in regard to this matter, in reply to what the noble Viscount, Lord Hall, said. It is true that approximately one-third are in occupational schemes, but the most important fact I think—because one must look primarily at the position of men in considering this subject—is that, of the total men employed, nearly half are in occupational schemes. In manufacturing industry, so far as I have been able to ascertain, the proportion of men is not quite so high, rather nearer 40 per cent. than 50 per cent. There is another aspect of the statistical side which is worth considering in this connection, and that is the rate of turnover of labour. It is remarkably high and it has been remarkably consistent for the last ten years.
  Taking the average of the last three years for which figures are available as a standard, 1954 to 1956, your Lordships will find that the average turnover for men over the whole field of employment was 28 per cent., and for women 44 per cent. Those figures include retirements and deaths, but even when allowance is made for those, the figures are certainly over 20 per cent. for men and 30 per cent. for women. Those figures are undoubtedly swollen by movements after very short service, changes of occupation by people who like change for the sake of change—and there are some who are constitutionally incapable of sticking at one job for any time. But when every conceivable allowance has been made, the turnover is still surprisingly high. I think the noble Lord, Lord Beveridge, in referring to that aspect, did say that, in so far as these occupational schemes do affect that situation, he thought there was a good case for the Motion he was
  40
  submitting. But the fact is that they affect the situation very little, and we have to keep that in mind.
  I suggest, my Lords, that there may be other reasons for considering something on the lines of what the noble Lord, Lord Beveridge, has suggested. My two main points of criticism on his proposal, either in principle or in detail, are these. To attempt to enforce on existing schemes a standard which could, and in most cases I am sure would, materially alter the financial basis on which they were originally approved and established seems to me very difficult to justify. To attempt to enforce any condition on such funds while there are many firms who have no scheme at all would seem to be unjust. To attempt, at this stage, to compel every firm to have a scheme measuring up to some particular standard is, frankly, I think, impracticable. The essence of the problem seems to me to lie very much this way. A man has a perfect right to offer his services where he chooses, subject to due notice to his employer; but equally, on the other hand, a firm has a perfect right to fix its conditions of service, including its provisions for superannuation in such a way as seems to it best calculated to enable it to have the service—management, staff, and workpeople—that it needs.
  My Lords, I feel that this phrase which appears in the Motion "accrued claim to pension" should be studied as to its implication. I can see no other meaning than what is otherwise known as full transfer value, or in fact the calculated value of the member's interest in the fund at the time of withdrawal. In this country we have many different types of scheme; but, of course, we have many different types of industry and different types of firms within those industries. So it is not surprising that there is this variety of type of scheme. I do not think that it is necessarily a bad thing; it means simply that these different types of scheme are the schemes which have been thought to be best suited to the needs of the people who have them. After all, I do not think that industry works best in a strait-jacket. I do not think this is a case in which a completely uniform standard is required.
  Moreover, speaking particularly of the privately administered contributory fund,

  41
  I believe it is true to say that in the great majority of cases appreciably the larger share of the fund consists of sums that the firm has put in—larger in relation to the employees' contributions. That is simply, or mainly, because of the necessity to provide for a back service liability at the time of the inception of the fund, to pay increasing sums in respect of that same back service liability as the general level of salaries and wages rises and therefore the ultimate level of pension rises, and also to provide a back service liability for further benefits that may be, and very often are, introduced in the course of the existence of the scheme.
  But these payments are by no means uniform; there is certainly a difference or variety in the different funds, even within this group of the privately administered contributory funds. Therefore I think this uniform standard of accrued claim, in the sense of the members' interest in this fund at the time of withdrawal, could operate very unfairly as between one firm and another. Secondly, I think it is important that there should be given to the Committee of Management a discretion to distinguish between different causes of withdrawal. To my mind, the man who is discharged on the ground of redundancy has a distinctly greater claim than the man who withdraws from a fund in order to better himself. Therefore there must be some flexibility. Lastly, I think there should be some qualifying period of pensionable service. Those are some of the practical questions that arise on a strict reading of the Motion. But, having said all that, I personally believe that if a fund can be so constituted that some retirement benefit reflecting or related to more than temporary or incidental service is credited to a man who leaves on withdrawal before pensionable age, it is a good thing.
  That brings me to my third and last part—the practical approach. If enforcement by Statute on existing funds is impracticable or unjust, can we find a reasonable standard to apply as a condition for approval of new funds—a standard that would not be a deterrent to the continued increase in the establishment of these new funds? That seems to me to be one of the most important features of this matter. I think the extension should be encouraged and not stunted. If that can be done, would it
  42
  be a good thing? Out of it could there evolve, as I believe there could, a code of good practice applicable over the whole field? I think it is, possible, though not easy, to do that.
  I am going to venture to take the hurdle of outlining the kind of conditions that I think might be considered. With your Lordships' permission I should like to read four clauses, so that I may have on the record precisely what it is that I mean. May I say that these conditions relate, of course, to the privately administered contributory fund. First, if an employee who has been a member of the fund for a minimum qualifying period leaves his employment (otherwise than on dismissal for misconduct) before becoming entitled to an immediate annuity and does not exercise his right to take out his own contributions plus interest, such member shall be credited with a sum not less than that defined hereunder, provided always that it does not exceed full transfer value as calculated at that date. Secondly, that the sum should be set aside in the fund at the time of the employee's withdrawal and should continue to accumulate at the rate of interest applicable to the fund until his retirement from work, his attaining of pensionable age as defined in that fund, or his death, whichever of these should first occur.
  Thirdly, on retirement from active work, if he is then retiring from employment in a firm which has an approved fund or scheme, the credit from the first fund should be transferred to the ultimate one and its value added to the pension he draws from the ultimate fund, so that on his retirement he may have one pension from one source; or if he is then retiring from employment in a firm which has no approved fund or scheme, then the credit in the first fund should be converted into an annuity and be paid to him by that fund for the rest of his life. Fourth and last, if he dies before retirement from active work, or before reaching pensionable age in the first fund, then his widow or personal representatives would receive from the first fund such a sum as would have been paid by that fund had he died at the time he withdrew from the fund.
  My Lords, at first sight that might seem complicated. I am quite sure that

  43
  it is not unworkable in privately administered contributory funds. I believe that it would raise no great tax complications. A great many contingencies have to be covered as indeed these particular clauses that I have read suggest. It cannot be done very simply, and it may be that modifications would have to be applied for the adoption of any such principle in regard to insurance schemes. But I think that the insurance companies would have no difficulty in making adjustments to conform, as and when conformity was required.
  I could perhaps give an example of the kind of thing I had in mind—I am not suggesting this necessarily as the only or even the best standard, but it is a possible standard, I think; that is, that the qualifying period of service should be 10 years, that each year after 10 and up to 15 the employee would be credited in the fund with 20 per cent. of the value of his accumulated contributions, plus interest, so that after 15 years' service, and from then onwards, on withdrawal his credit would amount to twice his own contributions, plus interest. That is a suggestion which could be applicable to men. No doubt some adjustment would have to be made for women, because so much smaller a proportion of women serve through to pensionable age. Obviously, also, the suggestion does not apply to noncontributory funds.
  My Lords, I do not presume to have found the complete answer to this problem. I believe that in the past discussion has sometimes foundered on the rock of there being nothing between, on the one hand, no commitment or condition, and, on the other, full transfer value or accrued claim to pension. I hope that what I have said may be some small contribution to the finding of a practical solution, and therefore may be regarded as constructive.
  4.51 p.m.
  LORD BRAND: My Lords, I am sure all your Lordships will agree with me that we have had a most interesting, remarkable and constructive speech from my noble friend, Lord Sinclair of Cleeve. I had for some years the privilege of working very closely with him in Washington, and I can assure your Lordships (if that is necessary) that you will always get valuable and constructive speeches from him. He has had a remarkable career in
  44
  many spheres and has held highly responsible positions in private business and in government; and nobody is better informed on all aspects of industry.
  In this discussion I find myself in something of a quandary. It was, and is, my intention to say something about the Labour Party's superannuation plan. My noble friend Lord Beveridge, and the noble Viscount, Lord Hall, both stated that this was not the time or the place to discuss that scheme, but they then proceeded, to some extent, to discuss it, and I am therefore going to allow myself some slight latitude in discussing that scheme, unless your Lordships object. In logic and in principle, what the noble Lord, Lord Beveridge, has said is quite right. In the sense of providing mobility of labour, it would be valuable if men and women had the opportunity to change from one occupation to another—though from figures given by the noble Lord, Lord Sinclair of Cleeve, it is evident that there is at present a great deal of mobility. As far as I could follow the legal clauses read out by the noble Lord, it seemed to me that his proposals would be satisfactory in many cases; but there are, of course, different kinds of cases. I know of one or two where the man or woman contributes nothing at all, the company contributing the whole. The object of the company in doing so is to bind their good employees to themselves so far as they can, in order that employees should not leave at a moment, which may be awkward for the company. Such schemes would have to be considered separately.
  The noble Viscount, Lord Hall, thought that there was no difference in principle between the Labour Party superannuation plan and private occupational schemes, but there is, of course, a deep difference. The basis of practically all occupational schemes is what is called the "funded" system, whereby if at any moment the fund should cease to exist all existing liabilities could be fully met and everything due to people serving in the company could be fully provided for up to that moment. The Labour Party scheme is something totally different. Its authors say that it would be impossible to make it a funded scheme, and therefore it is based on what is known as the "assessment" principle. That principle is to maintain current equilibrium between income and outgoings yearly, any necessary adjustments to contributions and benefits

  45
  being made annually or at longer intervals. There is no certainty that if such a scheme were to be wound up it could meet its obligations at any particular moment.
  The Labour Party scheme envisages the need for a reserve fund, and its authors go so far as to estimate that their reserve fund should start with about £800 million, supposing the scheme to begin in 1960; that in ten years it will have grown to £4,550 million, and in another ten years to £7,800 million. Their object is that this reserve should be able to protect the fund from the effects of inflation. In fact, they promise that inflation will in no way affect members of the fund. So far as I can see, they base their belief on the intention to invest this reserve of £8,000 million, not perhaps in British Government securities but mainly in equities—which they have hitherto despised as the kind of investments from which nobody should be allowed to make large profits. Whether or not they could buy all equities in the market for £8,000 million, I do not know. They base their faith in them on the fact that in the last twenty years equities have had marvellous rises. I suppose they assume that they will continue having a marvellous rise, and that that will enable them to assure the members of their scheme that, whatever inflation comes, they will not suffer. But that is, I think, all moonshine. In my life I have seen very great inflations in other countries, and at a certain period nothing expressed in monetary terms is worth anything. So to speak, you have to begin again at the bottom.
  My objection to the scheme, really, is that it is in almost every respect inflationary. About £1,000 million a year of contributions has to be provided, and that is obtained by claiming 10 per cent. of the total earnings of the community. The employee pays 3 per cent., which would amount to £244 million, according to the present estimate; the employer pays, although not quite double that, yet a good deal more, amounting to £407 million—that is 5 per cent.—and the taxpayer pays 2 per cent., amounting to £278 million. As the noble Lord, Lord Beveridge, said, these contributions are supposed to provide all wage earners and salaried people with half the income that they are earning when they retire. An employed man, therefore, not only pays 3 per cent. of his earnings, but certainly will have to
  46
  pay higher prices for his commodities, because the employers must recoup themselves for their payment of £400 million. He will be taxed to the extent of 2 per cent., being a taxpayer, for the £278 million of taxes will come mainly from the great mass of people because, with progressive taxation, that is the only source from which the money can come. He therefore pays considerably more than 3 per cent. towards the 10 per cent, of total earnings which the fund must have.
  The Life Associations of England and Scotland, in a pamphlet that I should advise all your Lordships to read, calculate that to obtain the results of the Labour superannuation scheme what will be wanted is not 10 per cent. of total earnings of the community but about 14½ per cent., so that the total payments will have to be greater. But the employee does not get, as he would under a private scheme, the exact result of what he has put into the fund, because the richer employees, those with higher wages or higher salaries, are to contribute a good deal towards the pensions of the people with lower salaries. There is, in fact, a considerable redistribution of wealth under this scheme. What I should call a surtax is imposed upon the people who have higher wages and salaries in favour of those receiving lower wages. That may be a step towards equality, which I understand the Opposition so much desire; but my own belief is that if a man not only has to pay his contributions but has to pay for the scheme through taxation, and has to see prices rising because of it, and if, in addition, he has to forgo part of what he has contributed for the benefit of others, it is almost certain that he will demand more wages: therefore the scheme will produce an inflationary effect. That would be a disaster to this country in our present situation, when our first objective, the first objective of all Parties, must be to bring inflation to an end.
  I should like indeed to ask this question: if all pensioners are to be protected against inflation, why should not owners of Government bonds be protected, or the trustee banking funds we have been talking about, or indeed anybody in the community? I remember a friend of mine who is an economist, Mr. Peter Wiles, and who was a member of my College of All Souls, at one time asking,

  47
  in his youthful enthusiasm—he is a very good economist—"Why should not we all make ourselves comfortable during inflation? Why should not everybody have his income put up as the value of money goes down? Why should the pensioner or the bondholder, or any of us who has to suffer, not make himself comfortable?" That policy would mean that inflation must inevitably increase faster and faster and end up in a riot, as it did in Germany. Whatever efforts are made to protect the pensioner from inflation under this Government scheme will mean that the burden will fall more on the other sections of the community.
  I believe myself that the Labour scheme is much too grandiose and that it might produce, because it is so huge, very serious results if times became bad. I do not believe in going to the taxpayer to make him pay for pensions for others, except, as was said by the noble Lord, Lord Beveridge, for the basic subsistence pension, to which we all agree and which now, undoubtedly, is too low. Beyond that, I believe that we should follow the road of extending private occupational schemes, where the employer subscribes and where the employee subscribes but where the taxpayer is not asked to contribute. By that means we shall benefit the country much more than by any grandiose scheme. This grandiose scheme will certainly affect personal savings, and it will certainly do tremendous damage to the schemes in which 8 million people are already deeply interested.
  I hope that perhaps the few words I have said will give your Lordships some incentive to read the full document that the Labour Party have produced on this scheme, because a lot of thought has been given to it by them. At the same time, I suggest that you should read the statements made by the greatest experts on the subject in the country who are the actuaries of all the life associations in England and Scotland, as to the demerits of the scheme.
  5.10 p.m.
  LORD MCCORQUODALE OF NEWTON: My Lords, I think that the House must welcome and applaud the initiative of the noble Lord, Lord Beveridge, in bringing this matter of transferability of pension rights in private pension schemes before your Lordships this afternoon, and, if I may humbly say
  48
  so, for doing it in his usual charming and pellucid style. It is now over three years, I think, since the Committee presided over by Sir Thomas Phillips reported, and this is the first time that these matters have been debated in Parliament. I feel also that this debate has been noteworthy beyond many others for the extremely weighty and interesting speech of the noble Lord, Lord Sinclair of Cleeve, who has an unrivalled knowledge on these matters. I hope that the success of his speech will encourage him to address us often in future.
  I certainly cannot agree in total with the terms of the noble Lord's Motion which, as he himself has admitted, are against the conclusions, although conclusions reluctantly come to, of the Phillips Committee, and which in my opinion would do great damage to a cause which I believe we all have at heart—that is, the further extension of these schemes so that more and more wage earners and salary earners can be covered.
  LORD BEVERIDGE: My Lords, the noble Lord has said that what I said was contrary to the conclusions of the Phillips Committee. The Phillips Committee said in 1954 that the time had not yet come. This in 1958. Does not time sometimes make a difference?
  LORD MCCORQUODALE OF NEWTON: But I do not believe that the climate has changed to a great extent up to the present time. I would emphasise what I have said, that I believe that this Motion, if carried, would do great harm to the cause of extending these pension schemes in industry. I do not think we can expect employers to provide large sums for pension schemes if transferability becomes compulsory. There is one point that I should like to take up with my noble friend Lord Sinclair of Cleeve. In the important remarks he made on transferability, I think that he was directing his attention to contributory schemes. I would remind your Lordships that there are a great number of non-contributory schemes covering wage earners, schemes where the employers provide the whole contribution.
  I think that we must differentiate between the different sorts of pension and the different sorts of people covered. We cannot legislate for them all in one sweep. There are civil servants, to

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  whom the noble Lord, Lord Beveridge, referred—and our hearts bled for him in the sad tale he had to tell about his own experiences. The position of the Civil Service is interesting, and I should like to draw your Lordships' attention to it for one moment. Transfer without loss of pension rights is possible between different types of public employment. A public servant who resigns his position before the age of fifty to take up an appointment outside loses everything, not only the State's contribution but all his accrued pension rights. The granting of the right to pension to those over fifty who leave was a provision intended to facilitate not the mobility of civil servants but their retirement after the war, especially of those who perhaps had found the war years too long and were not fully efficient. It is significant that the Report of the Royal Commission on the Civil Service did not recommend any extension of mobility.
  In regard to senior salaried staff, an employer who wishes to get hold of a particular senior man will surely be able to make some suitable arrangement with him about superannuation. I think that schemes apply in this connection at present, and I do not think that we need to waste too much time over them. I think that the pension schemes which have been introduced to cover the humbler salaried staff are almost all contributory, and that payments, usually with interest on the contributions of the contributor, are always his to take out. I think that it the great number of these schemes the trustees of pension funds are enabled, on grounds of hardship, to transfer employers' contributions to the men as well. It has been calculated, as my noble friend Lord Sinclair of Cleeve mentioned, that if both employers' and employees' contributions were made transferable in such cases it would mean a reduction of nearly 10 per cent. in the final pensions of those who stay in the scheme, and that would have to be made up somehow. Seeing that these schemes belong to all the members in them. I wonder whether all the members would be prepared to sacrifice 10 per cent. of their final income to enable a few of their number to clear out earlier and go to employment elsewhere. This is a point that would have to be considered by them.
  I come to that section of the community to which I should like to refer more pre
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  cisely: that of what I may term the manual workers. We all wish to see schemes covering them extended. It seems to me that the crux of the Motion turns on the phrase about the mobility of labour. The noble Lord, Lord Beveridge, has based a great deal of his claim on the necessity for the mobility of labour. To my knowledge, the assertion that existing pension arrangements seriously hamper the desirable mobility of labour has never been substantiated by the facts. So far as I can make out—and I have tried to explore this matter—the phrase first appeared in the Report of the Watkinson Committee, upon the somewhat rash assertions, if I may say so, of some officials of the Ministry of Labour. I have never been able to find that any adequate factual evidence to substantiate this statement was ever given at that time. A most interesting and valuable discussion on the whole question of the transferability of pension rights, or as they prefer to call it, the preservation of present pension rights, has been taking place among the actuaries, and I should like to lend high praise to the discussion at their meeting in Edinburgh in March last year, which appeared in the Transactions of the Faculty of Actuaries. I was interested to note that Mr. Brown stated that housing difficulties and high taxes might well be far more potent factors leading to immobility of labour than possible loss of pension rights.
  But I would go further and challenge altogether this contention that high mobility of labour is in the national interest or is a good thing in itself for anybody concerned. Of course, there are cases where the expansion of new industries or the contraction of old crafts make some considerable transfers of labour necessary, but for every one person to whom all these apply there must be tens, or even hundreds, where the national interest and the man's own interest is that he should stay with the firm he knows, doing the job he knows, where he is efficient. On grounds of efficiency and economy alone, that must be in the national interest. For the turnover of labour, as the noble Lord, Lord Sinclair of Cleeve, has said, is far too high in this country and certainly does not need to be encouraged further, as would be implied from the Motion of the noble Lord, Lord Beveridge.

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  Here I would challenge one sentence of the Phillips Report. In paragraph 247 they state that
  "mobility of labour is obviously desirable if the economy is to remain flexible."
  I cannot see where they get the word "obviously" from. I should have thought it was obvious from the figures that have been laid before us that the mobility of labour is far too high, and not too low. The latest figures that I have been able to collect correspond closely to those which the noble Lord, Lord Sinclair of Cleeve, has given, and they come from an inquiry instituted by the British Institute of Management. They reported a year ago on the labour turnover in manufacturing industry on a sample number of firms. They reported that the labour turnover of men, women and young people, was no less than 41 per cent. in those firms, which, translated into averages, means that the whole of the people in the outfit changed over to a new firm every two and a half years. Surely that must be too high.
  Then they estimated, further, what was the annual actual direct cost of this labour turnover, in advertising for new people, interviewing new people and the hundred and one things that happen when a transfer of labour takes place, and they put it at something of the order of £230 million. A great deal of that is sheer wasted money. The cost of replacing an employee they found to be from £5 to no less than £400 in the case of a skilled man. They took half of the firm's investigated, which was the worst half from the turnover point of view, and they found that the cost of labour turnover alone added no less than 10s. a week to the wage cost of every employee in those firms. Yet it would appear that the noble Lord, Lord Beveridge, calls for more and more of this mobility of labour and this wasteful expenditure. I hope that I have said enough to explode the myth that there is too little mobility of labour to-day, and to show that the reverse is the case.
  I would wholeheartedly agree with what the noble Lord, Lord Sinclair of Cleeve, paid on the subject of taxation; and if anybody wishes to look it up, Mr. Bacon, a celebrated actuary, certainly not of my Party, confirmed in his remarks at Edinburgh what Lord Sinclair of Cleeve has said. It is quite illusory to
  52
  suggest that the State by income tax relief is subsidising these schemes in any way. Then there seems to be some misapprehension with regard to describing pensions as deferred pay. In the case of manual workers, I do not think this can be regarded as tenable, for these workers will be receiving the trade union rate whether they are in a pension fund or not; and, therefore, pension contributions cannot be regarded as pay.
  It seems to me that the best case that can be made out for transferability, in some way or other, of the whole of the contributions lies on the ground of individual hardship in special cases. I should like to see—and here I speak personally—the trustees of any and every scheme, whether contributory or not, given power to allow complete transferability in special cases of hardship. I think we must remember that these pension funds arose out of a desire by employers to encourage and reward long and loyal service, and that in the past they were normally paid out of current earnings. It was largely because of some distressing cases in the thirties, when some firms went bankrupt and there was no money left to pay even the accrued pensions, that everybody recognised that it would be much better if proper actuarial schemes were produced so as to safeguard the contributions made on behalf of the men up until then. But there is, as we know, at the British Employers' Federation a strong feeling that the firm's contribution—and, as I have said, in many cases the firm is the only contributor—should not compulsorily be made to pass with the man who leaves, and especially when he leaves, as is usually the case, to go to a rival firm, for that would merely mean subsidising one's own rival. If, as the noble Lord, Lord Beveridge, proposes, this became compulsory, I can imagine no action which would stop more quickly the present spread and development of these pensions funds, which is going on satisfactorily at the present time.
  I trust, therefore, that after this discussion—and I think it is most valuable that we should have had this discussion—the noble Lord will not press his Motion and so frighten off any prospective people who are contemplating fresh schemes. As I have said, I should like to see trustees given discretionary power to allow transferability on hardship grounds. Let us encourage, so far as we can, the growth

  53
  (at present it is a favourable growth) of private pension schemes of all sorts; let us encourage the trustees to have discretionary powers in hardship cases, wherever it is desirable; and let us go into the points and suggestions made by the noble Lord, Lord Sinclair of Cleeve, as I am sure they are valuable. But let us also encourage the employee to stay at his job, in the knowledge that, if he does, at the end of the day there will be a satisfactory addition from the firm which he has served so well to his State pension.
  5.28 p.m.
  LORD SALTER: My Lords, we have had a comparatively short debate on this subject to-day, but, I think, an exceptionally interesting and valuable one. I should like, in particular, to refer to two speeches: that of the mover of the Motion" the noble Lord, Lord Beveridge, and that of the noble Lord, Lord Sinclair of Cleeve. Lord Beveridge, of course, is the doyen of those who have studied problems of social welfare, and he speaks on any subject within that sphere with a record of authority and experience that is not only not equalled but not approached, I think, by any living man. We are indebted to him for bringing this subject before us, and I think he may have at least this satisfaction from the debate: that practically everyone who has spoken has agreed with him that something must be done to modify, in some cases at least, those provisions of existing occupational pension schemes which prevent transfer or impose undue personal hardship in the case of a particular transfer.
  It was interesting to me to note from the speech of the noble Lord, Lord Sinclair of Cleeve—and he, of course. speaks with great authority, in view of his responsibility for the current management of an important occupational pension scheme—that in the case of a change of job he is in favour of transferring not only the value of an employee's contribution, but also, on a discretionary basis, what represents the employer's contribution up to something approaching, or even in some cases, I understand, reaching full, transfer value. Having heard both the noble Lord, Lord Beveridge, the noble Lord, Lord Sinclair of Cleeve, and other speakers to-day, I offer the reflections that occurred to me as the debate proceeded upon the arguments put before us, as I had come with no preconsidered either theme or scheme.
  54
  The first impression made on my mind was that the extent to which desirable mobility is now impeded by the present occupational schemes as approved has been somewhat exaggerated in the speech of the noble Lord, Lord Beveridge, and also, perhaps, in the Phillips Report. In the second place, I should draw the conclusion that it would be impossible, certainly unwise, to try to make compulsory anything like a full transfer value on change of jobs by a man who was a beneficiary of an occupational pensions scheme. For a number of reasons, to one of which I will refer in a moment, I think it is of the utmost importance that occupational pensions schemes should not only be maintained, but extended, and if you were to remove altogether that important motive in the minds of employers which undoubtedly has accounted to a large extent for existing occupational schemes—namely, the desire to retain the services of the men to whom they apply—I fear you might impose a fatal barrier to the preservation and, still more, to the extension of such schemes.
  Why do I say that I think it is greatly desirable that we should not incur that danger to occupational schemes? Though I do not propose to discuss, as the noble Lord, Lord Brand, did, the actual Labour Party proposal, I think it is important that we should discuss the question before us with a clear picture in our minds of the background of national State pensions for old age, for which occupational pensions are in some measure a substitute. We have just had a dramatic illustration of the extreme difficulty that is presented, even with the present cost of the social services, to the essential tasks of countering inflation and of maintaining both the purchasing power and the exchange value of the pound. But what is really alarming is this. Without any new legislation at all, and as an automatic development under existing legislation, the burden falling upon the Budget will increase immensely in future. If my figures are not quite correct they will be corrected by the Minister who will follow me. Is it not the case that within a period of about twenty years there will be an increase in deficit on the Insurance Fund from something over £100 million to nearly £500 million?

  55
  With that in mind, and having regard to all the burdens on the Budget of the social welfare system, it seems to me that it is scarcely possible to contemplate an increase, other than the automatic increase that follows under existing legislation, in the burden falling on the State Budget, except upon one or two conditions, and I would be inclined to say on the satisfaction of both conditions: namely, first that there should be economy within the Acts which now constitute our social welfare system, and secondly, that there should be a great increase in the total national production and total national income. In the absence of either of these it seems to me we are facing a bleak future indeed.
  To some extent, as I say, the case for extending a national old age pension system will be increased if the occupational pension schemes do not extend or should even diminish, or if they should prove in their character a hopeless barrier to desirable mobility. We are faced with the possibility, in these circumstances, that there will be a kind of competition between the two great rival Parties as to the additional benefits to be provided by a new old age pension scheme. That seems to me, in the context which I have ventured to try to describe to your Lordships, a terrifying prospect.
  I wonder whether, even at this moment, it is impracticable, whether it is too late, to make a great attempt to de-politicise this problem of old age pensions. Of course, legislation would be required to reform occupational pensions schemes, and some consideration will in any case be needed as to what should be the new conditions of approval. I wonder whether that could be either combined with or followed by a wider authoritative inquiry by people with the requisite technical qualifications—which should include financial qualifications—and so far as possible conducted by people who are not closely or prominently associated with the political struggle, to look at the whole of this problem of the weight, present and prospective, on the Budget of this country, of superannuation schemes. I do not know whether that is possible or not, but if in its absence we are going to have—especially with a not-distant prospect of an electoral contest—a competition between rival Parties as to what
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  may be thought to be most attractive to the electors at the next Election, then against the background, which I have tried to picture, and in the context I have tried to suggest, it seems to me that our future is bleak indeed.
  5.40 p.m.
  THE MINISTER OF STATE, SCOTTISH OFFICE (LORD STRATHCLYDE): My Lords, on behalf of Her Majesty's Government I should like to thank the noble Lord, Lord Beveridge, for having raised this subject in your Lordships' House, and for putting his case so persuasively and with such charm. It is a subject on which I am sure your Lordships will have observed there appears to be plenty of room for considerable differences of opinion. It is also a technical subject of some complexity, bound up as it is with the scheme of National Insurance, and there is no one more able to expound it to us than the noble Lord, who has studied this whole field so intensively and over such a long period of years. One aspect of the noble Lord's original study of social insurance was the devising of a scheme which would safeguard our people against want in old age and in times of unemployment, and a considerable measure of that has been achieved. The noble Lord's thoughts are now turning to schemes which he feels will further benefit the nation. I am sure that we are all most grateful to him.
  During the course of the debate we have had the pleasure of listening to a notable and informative maiden speech from the noble Lord, Lord Sinclair of Cleeve, and I should like to join with other noble Lords in congratulating him on the able and lucid manner in which he placed his views before us. Coming from one who has spent by far the greater part of his life in industry, and whose reputation as a model employer stands high, your Lordships will perhaps be inclined to feel, with me, that what he has said calls not only for attention but for serious study. I am sure that all of us hope that he may find frequent opportunities to take part in our debates. The noble Lord, Lord Salter, asked me a specific question, or rather he asked me to confirm figures which he gave to your Lordships. As a matter of fact, I have to tell the noble Lord that the National Insurance Fund is not in deficit at present, but a deficit is expected in the year 1958–59; that, it is estimated, will amount

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  to about £14 million. In twenty-five years' time the deficit will rise to over £400 million.
  There can surely be little doubt that pension schemes established by employers, which at present cover, as the noble Lord, Lord Sinclair of Cleeve, told us, about one-third of the working population, confer very considerable benefits on those whom they embrace, and accordingly it would be desirable that the area which they cover should be extended. If that is so, they should be encouraged, or, to put it at its lowest, we should take very considerable care not to take any action which might be an obstacle to their extension. That. I think, was a point on which both the noble Lord, Lord Sinclair of Cleeve, and the noble Lord, Lord McCorquodale of Newton, were in agreement. It seems to me that the Motion envisages the use of coercion, and it may appear to some to imply that, as a last resort, compulsion might be used. If that is so, we must surely consider what effect that might have on the introduction of new schemes to cover a wider field than at present. It may well be that we have to balance the benefits which would accrue from the wider application of such schemes against the possible increase in production that might result from employees being free to take their pension rights with them when they move from one firm or from one occupation to another.
  As a result of the advances that have been made in science it is natural to assume that same industries will wither, some will decay, while others may prosper increasingly, and also that new industries will appear. In these circumstances it would be advantageous, both to the nation and to the individual, that transfer from a contracting industry to a growing one should be made as easy as possible and that there should be no deterrent to making the change. If the man carried his pension rights with him one possible deterrent would be removed. But undoubtedly cases would arise when, on a mere whim, an employee might decide to move from one firm to another, both firms being in the same industry. In any such cases I would suggest that it is at least doubtful whether any advantage accrues to the nation, though, of course, the individual may benefit. It is arguable whether such movements would or would not result in
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  increased production and whether or not they should be encouraged by Government policy.
  There are those, like the noble Lord, Lord McCorquodale of Newton, who would hold that such changes might tend rather to reduce than to increase production; that men who are used to working together as a team are more efficient if they continue together and that the withdrawal of even one member may, though perhaps only temporarily, upset the rhythm and retard production. I think that this fact must have been in the minds of those who have introduced these pension schemes. Surely, as the noble Lord, Lord Sinclair of Cleeve, implied, their object must be to induce employees to stay with the firm, and not to leave it. Of course the schemes are introduced for the benefit of both the employee and the employer, and it may well be arguable whether, if a hole were knocked in them, benefit would accrue to either the employer or the nation.
  Here I would remind your Lordships, as you have already been reminded by two noble Lords who have spoken, that many of the existing schemes are noncontributory, and any scheme for promoting the transfer of pension rights would have to take that fact into account. Should it be considered that, on balance, advantage would accrue to the nation by arranging that accrued rights to pensions should go with the employee on change of firm or occupation, then, of course, consideration must be given to the best means of effecting this. The universal application of such a right might, I suggest to your Lordships, be effected by persuasion, as has been suggested, or it might be imposed by altering the law relating to taxation or by imposing a duty on employers to alter existing schemes and to prohibit schemes which do not provide for the transfer of pension rights on change of job. The noble Lord, Lord Beveridge, suggests that the second of these possibilities is the most promising; that is, the use of the taxation system to penalise schemes which do not provide for the transfer of pension rights. Before I discuss that, however, I should like to say a word or two about the present taxation system.
  At present, if a pension scheme is approved by the Board of Inland Revenue the employee's contribution is given a measure of tax relief. In the

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  case of approved funds the investment income also is relieved of tax. The treatment of the employer's contribution is not affected by Inland Revenue approval, since his contribution is normally allowed as an expense for tax purposes in computing his profits. There is nothing in the law or in the practice relating to the approval of pension schemes which prevents an employer from giving his employee the accrued pension rights when he leaves to take up another job. The employee may in all cases be given a "cold storage" pension; that is, the right to receive pension appropriate to the number of years' service with the firm when he reaches retiring age. He may also be given transfer rights, so long as that does not result in the use of money for the payment of a lump sum, instead of for its original purpose, the payment of a pension.
  Now may I turn to the suggestion that the tax system should be used to promote or enforce transferable pension schemes? Admittedly, if employers were to be compelled to provide for the preservation of pension rights it would be possible to use the tax machinery to do this. Both Lord Beveridge and Lord Sinclair of Cleeve have made this suggestion, though the methods they propose are not the same. The tax sanctions could take the form of the withholding of Inland Revenue approval of a pensions scheme, or the disallowance of the employer's contribution to such a scheme in calculating his tax. That is to say, one or both of these sanctions could be imposed on pension schemes which did not provide for the preservation of the employee's pension rights.
  The purpose of the system of Inland Revenue approval of pension schemes, however, is to safeguard the Revenue by ensuring that the pension scheme is a bona fide scheme which does not divert an undue proportion of an employee's reward for his services from wages or salary, which would be taxable, to pension, which would be taxable later on but possibly at a lower rate, or to a lump sum, which would not be taxable at all. It would be quite a different matter if we decided to use this system of approval as a means of enforcing conditions which are of no fiscal consequence but are desirable purely on grounds of social policy.
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  My Lords, the first of the suggested sanctions, the withdrawal of Inland Revenue approval—which I understand to be the proposal of the noble Lord, Lord Sinclair of Cleeve—would have the effect of penalising the employee rather than the employer, because, as I said a few moments ago, the main effect of Inland Revenue approval is to allow tax relief for the employee's contribution. The employer's contribution is in any case allowable as a trading expense in computing profits.
  If I correctly understood the noble Lord, Lord Beveridge, he appears to favour both the possible tax sanctions, the withdrawal of Inland Revenue approval and the disallowance of the employer's contribution. The latter proposal means that expenditure by a trader, which by all the accepted taxation rules is a legitimate deduction from profits, should no longer be allowed as a trading expense if it fails to satisfy certain tests prescribed on grounds of social policy. That would be a novel departure and would clearly require very careful consideration.
  I have already said that one result of the enforcement of transferable pension rights might be to discourage occupational pension schemes. If tax relief were refused on the employer's contribution we should certainly have to face the risk that employers might abandon the funding of pension schemes and merely pay pensions at their own discretion as and when their employees retired. If, as suggested by the noble Lord, Lord Sinclair of Cleeve, compulsion were restricted to new funds, compulsory preservation of pension rights would have a limited impact on the problem, since over one-third of the working population, covered by existing schemes, would be unaffected. Even if steps were taken to extend compulsion to existing schemes, the effect would still be limited if non-contributory schemes were exempted, as a very high proportion of existing schemes are provided wholly at the cost of the employer. Moreover, as I indicated, there are acute problems involved in extending the compulsory preservation of pension rights to noncontributory schemes.
  My Lords, if I may now try to sum up the position as I see it, the question of preservation of pension rights is of importance not only because of the importance for the national economy of mobility

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  of labour but also because it affects men's and women's happiness and security in their old age. It is primarily a matter for employers and employees; and there is nothing in the existing taxation rules which prevents pension rights from being retained when an employee changes his job. The Government as an employer have gone a long way in allowing the preservation of such rights in the wide field of the public services, though they have not up to now gone as far as the noble Lord would like.
  But although it is possible to argue that this question can be considered as a self-contained issue, preservation of pension rights in occupational pensions is closely bound up with the broader question of the future pattern of provision for old age in this country. The rôle of the State in regard to the provision for old age raises important and difficult issues. As was indicated in the gracious Speech on November 5, the Government are giving very close attention to these wider problems, and it is not possible to pronounce on the one limited aspect raised in the Motion which we are discussing to-day in isolation. Final decisions must await the formulation of policy on the major issue of the future provision to be made for old age, but I can assure your Lordships (this was a matter to which the noble Viscount, Lord Hall, referred) that the Government will take into account everything that has been said in the debate to-day, a debate which has been of the greatest service in revealing the main issues and the different points of view. In those circumstances, and in view of the assurance which I have given, I would express the hope that the noble Lord may see his way to withdraw his Motion.
  5.57 p.m.
  LORD BEVERIDGE: My Lords, there are enough things to say to occupy me until I miss my next train. I do not propose to do so, but may I be allowed to say just three things before withdrawing my Motion? First, may I join all other noble Lords who have congratulated the noble Lord, Lord Sinclair of Cleeve, on his maiden speech. I want to say that because it was a maiden speech I did not interrupt him, as I shall next time, on one point on which I was not clear as to his meaning—the admirable scheme in four clauses
  62
  for practically getting some kind of pension rights handed over when a man left. Did the noble Lord mean that to apply only to new schemes, and not to old schemes as well? I do not know whether he wants to answer me now; he can write to me.
  LORD SINCLAIR OF CLEEVE: My Lords, that was the suggestion: that it was to apply to new schemes, as a condition of approval of new funds. That is what I am suggesting at this moment.
  LORD BEVERIDGE: I regret that to me that makes that admirably practical suggestion of little importance. It sets up a vested interest in the existing schemes, which are entitled to tie the men to the employer.
  LORD SINCLAIR OF CLEEVE: I was making a suggestion that it be applied as a condition for approval of new funds. There would be no objection to existing funds applying those same conditions.
  LORD BEVERIDGE: No, but the existing funds are approved. At any rate, that is the answer. To come to the other matter, I would ask whether the purpose of the employers in starting these occupational schemes is to make more honourable provision for old age, or to limit human freedom in the choice of occupation. That is the fundamental question. I believe that they wish to provide decently for old age and that this lack of transferability has come in very largely by the way. I am very happy that employers should encourage people to stay with them all their lives; but there is all the difference between encouraging and compelling by saying, "If you go, then you lose everything that we have set by for your old age." I believe that employers are proud of their schemes and would not want to see them swamped by a national scheme of superannuation, which otherwise, I believe, they would be; and that if employers are approached seriously by Her Majesty's Government they would be converted.
  My third and last point is that I believe every single word in the Phillips Report is against non-transferability. It emphasises in many more ways than I could possibly give—and I could give your Lordships three or four wonderful instances—how the existing tax provisions

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  and the existing form of employers' schemes interfere with human freedom and diminish the possibility that men will go to the best possible occupation for them. Obviously the Phillips Report disliked the tie exceedingly. They thought only that the climate of opinion (which means the climate of employers' opinion) had not yet moved sufficiently. I beg noble Lords on the other side of the House, including Her Majesty's Government, to try to persuade people that the purpose of these schemes is not to limit human freedom but to make retirement honourable and decent. Let Her Majesty's Government get the Chancellor of the Exchequer to point out that the employers' contribution—and if it is a wholly noncontributory scheme that still applies—counts as working expenses, which reduces taxation. Are those working expenses and that reduction being allowed to the employer for a social or an anti-social purpose? I urge that the tie is an antisocial purpose. With words of entreaty that Her Majesty's Government will go very much more thoroughly into this question than it has been possible for them to go to-day, I beg leave to withdraw my Motion and I apologise for my second speech.
  Motion, by leave, withdrawn.

  HANDLING OF NAVAL MATÉRIEL
  6.4 p.m.
  VISCOUNT ALEXANDER OF HILLSBOROUGH VISCOUNT ALEXANDER OF HILLSBOROUGH rose to move, That Part I of the Report of Sir Barclay Nihill's Committee on the Organisation for handling the Admiralty's requirements in matériel, be laid on the Table. The noble Viscount said: My Lords, I am moving this Motion in my name formally, but I will say at once that I do not intend to be long and I do not intend to press it, because during the Recess I have had conversations with the noble Earl, the First Lord of the Admiralty; but in view of the importance of the announcement which he made on December 19 I felt it essential to ask him one or two questions. First of all, it seems to me that we ought to know whether all matériel, including those things now to be handed to the immediate superintendence of the Fourth Sea Lord, are to remain subject to
  64
  the Controller. I see that the Fourth Sea Lord is to get the additional title of "Vice Controller" added to his existing title.
  In view of the great discussions that go on and the concern in the public mind in Dockyard areas as to the future of the Dockyards, especially in view of the economies which are being effected in the size and cost of the Fleet, and bearing in mind that our Dockyard towns are perhaps among the best permanent recruiting centres for the Regular service of the Royal Navy, I should like to know whether any change of policy is contemplated by this new method. I notice that the Controller is apparently to remain responsible for the provision of new construction only and it seems to follow that the new superintendent of this work, the Fourth Sea Lord, will have charge of all repairs. Will he be in charge of repairs which are contracted out as well as repairs done in Dockyards? What will his work cover? It is rather important to know.
  Thirdly, because of the anxiety which many of us have about the future of Dockyards, can the First Lord tell us whether, in regard to the control still in the hands of the Controller over new construction, he will have a full say, in the new circumstances, as to what new construction is done in Dockyards as well as by private contract? Of late years I have noticed a tendency to revert very largely from new construction in Dockyards to new construction by contract. I do not necessarily want to know tonight, but perhaps the noble Earl will tell us at some time what proportion of the work of Dockyards is in relation to new construction as compared with refitting and repair. I believe that that is a fundamental matter.
  Fourthly, I wish to say, with regard to this Motion, that I looked up the precedents, and I understand that even the Clerk of the Parliaments thinks I might be on a rather thin course of action in having such a Motion on the Paper. Nevertheless, when one considers the importance of this matter in connection with the defence of the Realm, one feels that the Report must, though internally produced, be considered a State Paper; and that, after all, is coming back to the original declaration of Mr. Speaker in the nineties, quoted by the present Speaker

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  on December 11 last. A great deal depends on whether the Minister regards the contents of such a Report as confidential; and if the contents of a Report such as this, of a Committee under the chairmanship of Sir Barclay Robert Nihill, is absolutely confidential, I should be rather surprised. Whilst I do not want to interfere unduly with Ministerial right (I will not say privilege) to decide on what is best to be published and what is perhaps inconvenient or not right to be published, I feel that where we are dealing with such a grave matter as the future of the Dockyards as a whole, as well as the efficiency of the Fleet, then, unless the contents of a Re-part are confidential, they ought to be supplied to Parliament. I beg to move.
  Moved, That Part I of the Report of Sir Barclay Nihill's Committee on the Organisation for handling the Admiralty's requirements in matériel, be laid on the Table.—(Viscount Alexander of Hillsborough.)
  6.9 p.m.
  THE EARL OF SELKIRK: My Lords, the noble Viscount, Lord Alexander of Hillsborough, has had a very considerable experience of the Admiralty. I believe it is his proud boast that he has been First Lord of the Admiralty longer than any man in history. Is that not correct?
  VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I have been First Lord of the Admiralty longer than any commoner. In the days when they could make something out of it the Peers were often there.
  THE EARL OF SELKIRK: Perhaps the noble Viscount will learn how to do that now. It is, I think, quite natural that he should be interested in the work of the Nihill Committee, to which I made reference last month. But perhaps I might just take up his last point first: that is, the necessity of laying a document to which reference is made in debate. I think it is quite clear that there is no obligation to lay a Report, under the accepted Rules of either House, just because reference is made to that Report; indeed, there are quite clear precedents to the contrary. But, if I may say so, I think even on grounds of common sense it would not be desirable to make that an obligation, because all that would happen would be that
  66
  Ministers would not refer to the Reports at all. I feel that it would be rather foolish to try to impose a rule of that character. May I, to clear up this position, refer to what the Speaker said only on December 11 last [OFFICIAL REPORT, Commons, Vol. 579 (No. 27), col. 1274] in reference, not to this but to another subject and I understand that the Rules of this House are exactly the same, or are regarded as the same, on this subject:
  "For the House to be able to demand that documents should be laid upon the Table, three conditions must be fulfilled.
  "In the first place, the Minister must have quoted from the document it is not sufficient that he should have referred to it or even to have summarised or paraphrased it in part or in whole."
  I have not done that. It is not really necessary for me to refer to the other points to which reference was made.
  But, in the second place, there are quite a number of precedents—and I will take one obvious one, the Eastham Report. That was a confidential document intended for the eyes of the Board of Admiralty, and no part of that Report was made public at all. I think that that position was fully accepted by the Opposition at that time. I could also mention the Middleton Report on the Naval Electrical Branch, and the Mansergh Report on the Naval Officer Structure. The reason why should be reluctant to do this is that this is information which has been given confidentially about internal organisation of the Admiralty, and for that reason is not the sort of document that is suitable for public discussion. If the noble Viscount, Lord Alexander of Hillsborough, is prepared to accept that, I am very happy to give him as much information as I can in regard to what is proposed. I recognise his interest in this matter, and certainly it is important. Again, I ask him, however, to appreciate that I merely reported decisions as made. This process is going on, and in the course of the next month I shall probably be informing the House on other parts of the field covered by the Nihill Committee. I am merely starting with a slight elaboration on points on which we have reached decision to take action.
  I should like to take this opportunity of thanking the Committee for the work they have done. The Committee were

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  appointed by my predecessor, Lord Cilcennin, to examine the production organisation at headquarters and in the Royal Dockyards, and I should like to thank the chairman. Sir Barclay Nihill, Colonel Eustace Smith and Mr. W. W. Watt, who were the non-Admiralty members on the Committee, for the trouble they have taken in examining very complex problems.
  Basically, the headquarters problem can, I think, be stated in this way. Over a number of years the Admiralty had shown its interest in new technical and scientific problems by setting up new departments manned by personnel with specialised knowledge to deal with a particular subject, and in this way new departments had introduced new techniques while the older departments have remained. This gave rise to two problems. First, departments were specialising in certain subjects and techniques rather than dealing objectively with broad functions; and secondly, a large number of departments were reporting directly to the Controller, who, almost alone, had to draw all these specialised interests together to make a workable end-product. It was, of course, the old problem of, on the one hand, the specialists, and. on the other, a well-run ship with all its specialised equipment trying to work together happily and smoothly.
  The first part of the Report deals only with the question of organisation. The second part deals with the question of manning, and that part has not yet been completed. The Dockyard organisation has also been brought under review, and as soon as decisions are reached on this aspect I will endeavour to let the House know—probably at about the time of the Navy Estimates debate in this House or the other.
  On the organisational side at headquarters, some eighteen different departments, which have previously reported direct to the Controller, have been drawn together in four main groups, each under a Director General. The first is the Director General of Naval Construction. He will have under him divisions responsible for design and production of ships, propelling machinery and electrical installations. The second will be the Director General of Weapons and Radio. His department will comprise divisions
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  responsible for design and production and weapons, radar and communications equipment. Thirdly, there is the department of the Director General of Air Matériel, which will include responsibility for weapons and equipment of aircraft, including their maintenance and repair. Finally, there will be a Director General of Dockyards and Fleet Maintenance, who will be responsible for the Dockyard division and Fleet Maintenance division. Each of these two divisions will, of course, have its own Director.
  The first three of these Directors General will come directly under the Controller; the Director General of Dockyard and Fleet Maintenance will come under the Fourth Sea Lord, who will assume responsibility for the superintendence of the Dockyards and the maintenance of the Fleet on behalf of the Controller. The noble Viscount wanted me to be quite clear on this point. This leaves the Controller responsible for design and production of the ships and their equipment, including, of course, their weapons and aircraft. But the Fourth Sea Lord will be responsible for operating the Dockyards as such. It will be, of course, for the Controller to decide, for instance, if a ship is to be built in one of the Royal Dockyards. When that decision has been made and designs fed into it, it will be for the Fourth Sea Lord to see that that work is carried out. In the same way, he will be responsible for fleet maintenance as a whole.
  The noble Viscount asked about contract work. It is very unusual for normal maintenance work to be carried out by contract; most of the contract work is new construction, and this would come under the Controller. The purpose of this change is to relieve the Controller of the very heavy burden which falls on him at the present time and enable him to concentrate on the really important task of design and development. That is the central task which the Controller has to do, and he will be given enormous relief by these changes. It is very largely with this object in view that the Director Generals have been appointed, who will accept responsibility and be able to relieve the Controller. This system has the advantage of improving co-ordination of the specialised divisions, and will also enable a decision to be made without particular reference to the Controller at all points. One of the

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  results which will flow in due course will be to abolish the Deputy Controller and Vice-Controller, who is now in charge at Bath. I should like also to emphasise that these changes which I am announcing now are concerned with Headquarters and not the Dockyards. So far as the future of the Dockyards is concerned, what I am saying now has no bearing whatever.
  I am aware that these changes will take a little time to put fully into operation, but am sure that reforms of this nature are long overdue. It should enable work to be conducted more quickly, should define responsibility more clearly and should enable specialists to work more easily with other branches so that the end product is better suited for the purposes for which it is intended. I very much hope that by the time the Navy Estimates came to be discussed I shall be able to give a fuller picture of further decisions on these lines. I have sought to answer the noble Viscount's question and I hope I have met the major points in so far as decisions have been reached at the present time.
  VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I am much obliged for the answer which the noble Earl, the First Lord, has made on what I have said to-day. There is only one other point. When the noble Earl comes to deal with the Navy Estimates, it would be useful if he could give the House information about whether comparisons have been made by the Nihill Committee between the methods and results in the Dockyards and those in outside industry. If there are any main contentions on that point one way or the other, the House might be informed.
  THE EARL OF SELKIRK: My Lords, I can assure the noble Viscount that the Nihill Committee have taken into account such comparisons.
  VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I beg leave to withdraw my Motion.
  Motion, by leave, withdrawn.