NATIONAL INSURANCE BILL (Hansard, 6 December 1960)

§ THE EARL OF DUNDEE
My Lords, the statement of my right honourable friend the Minister of Pensions that I read to your Lordships on November 2 covered a wide range of services, including war pensions. This Bill gives effect to those parts of my right honourable friend's statement concerning retirement pensions, widows' pensions and children's allowances, unemployment benefit, sickness benefit and industrial injuries. The Bill follows the National Insurance Act, 1959, which your Lordships discussed in June of that year. Before that, we had had a much wider and fuller debate on a Motion moved by the noble Lord, Lord Pethick-Lawrence, about the White Paper on which the Bill was based. I doubt whether there is a great deal more to be said, either in explanation or in criticism of this present Bill, than has already been said on these occasions.
The noble Lord, Lord Pethick-Lawrence, on the Second Reading of the Bill expressed, if I may say so, with great fairness and moderation, the reasons why he and his Party did not like what was being proposed. The noble Lord then went on to say that since the measure was almost entirely of a financial character, he did not think it should be divided upon or discussed in any great detail by your Lordships' House. The main reason which the 26 noble Lord gave for not being pleased with last year's Bill was that he thought the amount of retirement pensions provided for and the general scale of the whole scheme was much too small, and that it was not at all in keeping with modern times. I expect that probably he will not regard the proposals in this Bill as anything more than a very short step, and perhaps, in his view, not quite in the right direction. The noble Lord assumed last year that insured wage-earners, as a whole, would be willing to pay substantially higher sums in insurance contribution in order that they might be assured, as a matter of right, of a substantial pension in their old age.
I think we should all like to find out, if we could, what is the maximum amount that we could raise in compulsory contributions under a pensions scheme without causing a large number of contributors to feel that we were interfering unduly with their right to spend their own money in their own way. In Germany there has lately been introduced a new State pensions scheme which provides for retirement pensions consisting of 60 per cent. of the average wages which the insured contributor has been earning. So that if we take our dividing line of a £9 wage, a contributor whose average wage had been £9 would become entitled to 60 per cent. of that —that is to say, between £5 and £6 as his retirement pension. The contributions paid by the worker alone under the German scheme—the employer pays a slightly larger amount, I think, and the Exchequer a proportionate contribution —is 7 per cent. of his wages in respect, of the retirement pension alone, and over 12 per cent. when you bring in other benefits, such as unemployment, widows' provision and so on.

§ LORD PETHICK-LAWRENCE
My Lords, I am not clear whether the noble Earl has gone from the German scheme or whether he is still talking about that scheme.

§ THE EARL OF DUNDEE
I have just begun to speak about the German scheme. What I was going to do, quite briefly, if it would interest the noble Lord, was to contrast the German scheme, its contributions and its benefits, with our own. I do not think it will take very long.

§ LORD PETHICK-LAWRENCE
That is quite all right.

§ THE EARL OF DUNDEE
The all-in contribution paid here in Great Britain under the National Insurance scheme is at present 9s. 11d. If you deduct the ls. 10d. worker's contribution for the National Health Service, and the 8d. he is now paying to the Industrial Injuries Fund, which is a separate fund, that leaves an amount of 7s. 4d. That is not divided up by the Government actuary between retirement pensions, widows' pensions and unemployment benefit, so we cannot give the exact proportions perhaps the retirement pension might be about two-thirds, but that is not actuarially worked out. Anyhow, it is much less than the 12s. 7d. which the contributor earning £9 a week would be paying on the basis of the German scheme for retirement pension alone, and the 21s. 6d. which he would be paying for all the comparable benefits—retirement, widow's and unemployment.
If you take the top-grade wage under our graduated scheme of £15, the contribution in Germany for these benefits would amount to 36s. a week. I would certainly not consider that a sum of 21s. 6d. on a £9 wage or of 36s. on a £15 wage was too much to spend on savings and social insurance combined. But it does not leave an awful lot for other kinds of saving on which the insured person might prefer to spend his money. When I say "other kinds of saving", I am not thinking of the private occupation insurance schemes—although from the way it is going at the moment it looks as if about 3 million members of such schemes are likely to contract out of the State graduated scheme—and I am not thinking only of National Savings: I am thinking of private insurance companies whose benefits are more flexible, and to some people perhaps more desirable, than would be possible under a State scheme; I am thinking also of provision for the purpose of buying a house, which a great many workers nowadays want to do, and of investment by weekly wage-earners in industry in equity shares, which I know many of your Lordships are particularly anxious to encourage.
We have to bear in mind the need for not taking away from the wage-earner money which he would prefer to spend 28 on something which he thinks will suit him better. It is true, of course, that in all income groups there are some people who are improvident—I am sure that many of us are; and sometimes we find it difficult even to live within our incomes, let alone save anything—and it may well be argued that by compelling an improvident man to pay a substantial part of his income in insurance contributions in order that he may have a substantial pension in his old age you are acting, in the long run, for his own good, provided that he lives long enough to receive the pension. But it is undoubtedly true that you have to balance that against the freedom which you take away from provident people who want to spend their money on other things. It may perhaps be that the German wage-earners are possibly a little more accustomed than the British wage-earners to be told by a paternal Government what is good for them.
Many of the most eminent social reformers in this country, including the noble Lord, Lord Beveridge, in his Report, have sometimes sought to establish same agreed relationship between the actual amount of retirement pension and some notional standard of subsistence. It is, of course, difficult to define or to agree about any figure which constitutes a standard of subsistence. The figure of 24s., mentioned in the Beveridge Report was, of course, not intended to be permanent for all time.
The Trades Union Congress this year were told by the General Council that they were putting forward to the Government a proposal for a new standard of retirement pensions which would be based on what was now being received by elderly people from National Assistance. The scale put forward as the basis of discussion was, for a single person, 68s. 6d., and for a married couple 103s. 6d. I think the basis of calculation was this: that the T.U.C. members who had gone into this matter took the 85s. which is payable at present to a married couple as a basic National Assistance rate, plus a figure of 18s. 6d. which they took as the average rent paid by an aged married couple receiving National Assistance, giving a total of 103s. 6d. I do not think they allowed for the discretionary extra payments, averaging 7s. 6d. which I think, in many 29 cases, are given by the National Assistance Board to people in these circumstances. That would have brought the total to over 110s. But even that would now be a little out of date, because next Monday your Lordships will be asked to approve the new National Assistance Regulations which raise the basic rate for a married couple to 90s.; so that the new rate with the extras and rent might be put at 115s.
If you are to fix a statutory retirement pension on that basis, you are coining pretty near to your figure of £6. I have not tried to work out what the contributions would be, but I imagine they would be little short of the figure of 21s. which is paid by the £9 German worker. I have no doubt at all that, in all future reviews of our pension structure in this country, people will have some regard to what is considerecl to be at the time a reasonable subsistance standard. Our ideas on that subject keep on changing, and I suppose that the amounts actually paid by the National Assistance Board are the best rough-and-ready guide we can get.
Your Lordships will remember that in paragraph 34 of the 1958 White Paper it is stated that pensions will be reviewed from time to time. Your Lordships have often pressed me to confirm that it was the Government's intention to do this, which of course I was able to do, although I do not know whether any of us thought at that time that the pensions would actually be reviewed before the date at which the 1959 Act takes effect—that is to say, in four months from now. I have no doubt that that will always be one consideration. But I think it is likely that an even stronger consideration will be the amount which we think the normal British wage-earner is willing to pay in contributions without feeling that he is being unduly impeded from using his savings to acquire property or to invest in any kind of project which he thinks will be more advantageous to him than paying more contributions in order to get a larger pension at the end of his life. I think you must always try to balance the one thing against the other as well as you can.
At present, as your Lordships know, the all-in contribution is 9s. 11d., of which about 7s. 4d. applies to those 30 matters contained in this Bill, excluding Industrial Injury, which has a separate fund. Under the 1959 Act, the wage-earner's basic contribution would have been reduced from 9s. 11d. to 8s. 4d. next April. Under this Bill, in order to provide for the rise in basic flat-rate pensions, the contribution is being increased on each side—from the employer and from the worker—and this will put back the contribution to 9s. 1ld., exactly where it was before. But there are some small adjustments which have been made, partly owing to the strong financial position of the Industrial Injuries Fund, with the result that the flat-rate contribution under this Bill will be only 9s. 9d. instead of 9s. 11d. That will come into effect at the beginning of next April.
The graduated contributions over and above that are left exactly as they were—that is to say, 4 ¼per cent. from each side on the excess of wages over the figure of £9 a week, rising to a maximum, as it will be now under this Bill, of 14s. 10d. from the insured person on a wage of £15. The flat-rate contribution for those who have contracted out, which was 1s. 7d. higher than the ordinary flat-rate contribution, under the 1959 Act would have been 9s. 11d. It will now, as a result of the flat-rate element being raised, be at a figure of 11s. 4d. That again will be exactly equal to the amount of flat-rate plus graduated contribution paid by an insured person who is earning a wage of £11 a week. So the situation is that in all these respects the relationship between contracted-in and contracted-out contributions will be exactly the same as it was before, and this Bill will not affect the calculations of anybody who is now considering whether or not it would be advantageous to contract out of the State graduated scheme.
As for the benefits, I read those out to your Lordships from my right honourable friend's statement a month ago. The retirement pension is being raised by 7s. 6d. for a single person and 12s. 6d. for a married couple, so that the single rate will now be 57s. 6d. and the rate for a married couple will now be 92s. 6d. Similar increases are being made in other benefits which are paid at the same rate as the retirement pension—that is, unemployment and sickness benefit; and corresponding increases are 31 being made in other kinds of pensions. The widowed mother, for example, will receive, first, her own increase of 7s. 6d., making her own pension in her own right 57s. 6d. In respect of her children she receives substantial increases. She is now getting 20s. for the first two and 22s. for the others, including family allowances. Under the Bill she will receive 25s. for the first two and 27s. for all the others.
I have forgotten for the moment whether it is four or five increases which have been made before this since the National Insurance came in—I rather think it is five up to 1958. The last one was in January, 1958. And most of those increases were taken up by rises in the cost of living. From the beginning of the scheme until 1958 the single person's benefit had gone up from 26s. to 50s.; it will now go up to 57s. 6d. The married couple's benefit had gone up from 42s. to 80s. and will now go up to 92s. 6d. But, of course, up to 1958 the real value of those pensions went up only by a much more moderate amount
I think that if you start in 1951 the increase in real value would be only 10s. in respect of a single person and 15s. in respect of a married couple. Since the last increase in 1958 the increase in the cost of living has only been three points, and a great deal of that took place in the first three months, between January and April, 1958. From April, 1958, the increase has been very small indeed. So that only a small part of this increase is represented by the leeway which one might wish to make up on account of the increased cost of living. Far the greater part of it, at least 6s. out of the 7s. 6d., is a real increase in value, and whatever your Lordships may think of the adequacy or inadequacy of the whole structure of the scheme in general, that is at least an achievement which ought to give us some satisfaction: that we have been able to make an increase which is a real increase and not merely an attempt to catch up with inflation.
There is only one other thing which this Bill does which I will mention, because it has not any direct connection with contributions and benefits; and that is in Clause 3 of the Bill which in relation to the retirement condition contains a 32 modification centred on the so-called "twelve-hours rule." I think your Lordships will all agree there has been an inconsistency for some time, because the amount which can now be earned under the earnings rule has gone up to 70s. and it is very unlikely indeed that any retired pensioner would be able to earn as much as that in only twelve hours in one week. I hope that this abolition of the restrictive effect of the twelve-hours rule is at least one measure which will meet with the universal approval of your Lordships in all parts of the House. I beg to move.