HL Deb 08 July 1964 vol 259 cc1015-37

2.50 p.m.


rose to call attention to the rates of pension and benefits payable under the National Insurance schemes, with particular reference to the widows', retirement and graduated pension benefits; and to move for Papers. The noble Baroness said: My Lords, I think we shall all agree that debates on pensions and National Insurance do not stimulate much interest or philosophical discussion in your Lordships' House, but I venture to predict that in a few months' time—I will not put a date to it—there will be a universal desire to learn more about the economics of the home. I think the question which will be put all over the country will be: "What will be the family income if the main wage-earner joins the incapacitated, through unemployment, sickness or old age?"

I am afraid that the Government policy over the last few years has brought little comfort to that defenceless minority. In a so-called affluent society the well-off can be seen and heard everywhere; but there are shabby millions who are inconspicuous because they find that the cheapest way of life is to stay at home. This is not an exaggeration. I ask your Lordships simply to go to the Printed Paper Office and read last week's Report of the National Assistance Board. The evidence of this hidden and widespread poverty is to be found in that Report. It shows that in 1963 grants rose by £30 million to a total of £211 million. More than two-thirds of this amount was given to old people in need: the rest went mainly to widows, the sick and disabled and the unemployed. The total number, far from decreasing since 1951, has increased by half a million; yet this does not include the 750,000 pensioners who are eligible but, I presume, too timid to ask for help.

My Lords, I am not here only to put Labour's case—which I intend to do—but I would remind the House that the principles on which this scheme was founded have been grossly undermined. One important principle of the original national scheme was that pensions should be by themselves capable of maintaining the recipient and his dependants at subsistence level. The figures from the National Assistance Board show that pensions, far from now being at subsistence level, are so low that the pensioners are compelled to apply for assistance. In 1954 the Government abandoned this principle and adopted a policy of keeping benefits well below the National Assistance scale. My case is that this is deliberate policy; that the figures in the National Assistance Report yesterday were not those which might have arisen in special circumstances but that this has been a deliberate policy of the Government.

The further principle that has been deliberately jettisoned is that of fair shares and contributions as between the employer, the employee and the Government. I would remind noble Lords who take an interest in this matter that in 1948 employers and employees met 69 per cent. of the total cost, the rest coming out of general taxation. Under the recently-increased rates contributors will pay 81 per cent. of the total income of the scheme. Furthermore, by introducing its own so-called graded pension scheme the Government have created another device for making the contributor pay an even larger share of the cost of social security for inadequate benefits. While these benefits remain inadequate, employers have been deliberately encouraged—the fiscal policy of the Government has been such that they have been encouraged—to develop private insurance schemes. We have no objection to these: I want to say that immediately. But we disapprove of private schemes being regarded as a substitute for adequate State pensions. I see on the Order Paper that the noble Lord, Lord McCorquodale of Newton, has a Motion down on this subject. But it seems to me to be redundant, for we have no intention of nationalising private insurance companies; and I think that the noble Lord has been misinformed.

I would remind the House that in 1946, when the Labour Government created the National Insurance scheme, Britain was in the forefront of social security provision throughout the world. What is the position to-day? After twelve years of Conservative rule, our scheme no longer claims universal admiration, for since 1951 we have been lagging behind other European countries. I am sorry to have to weary your Lordships with further figures, but these should be put on record to make clear that every statement I make, though it may sound dogmatic, is nevertheless amply supported. The German unemployed worker receives on average 55 per cent. of his previous earnings; in Holland, the figure is 80 per cent. of wages for a married man, and 70 per cent. for a single man; in Belgium a single pension is 60 per cent. of the lifetime average earnings.

I am quite sure that when the noble Lord comes to reply he will tell the House that the National Insurance benefits have gone up. Of course, I do not deny this; but the fact is that, in comparison with the rest of the nation, the income of those in receipt of sickness and unemployment benefits lags far behind the figure of the national average wage. May I bring one figure to the attention of your Lordships to support this? A single worker on average earnings in drawing National Insurance benefit suffers a fall from £16 a week, which we are told by the statisticians is the average wage of the worker to-day, to £3 7s. 6d. when he is unemployed. This is a reduction of four-fifths in his income. The married couple will experience a drop of nearly two-thirds in their income. These injustices surely must be remedied.

If we had a few months before us I would ask the Government to reconsider their policy. I have said many times that I think the whole of the scheme needs revising. The piecemeal legislation that we have seen during the last twelve years does not effect those changes which we should like to see made, more than twenty years after the scheme was introduced. However, it is too late to ask the Government to do these things. Therefore I must say at this stage what the Labour Government will do when it assumes office—as I believe it will—in a few months' time.

In the first place we will assure that the average wage earner has not merely half-pay on retirement, but half-pay in sickness and unemployment as well. Is that extravagant? I have read to the House the figures of the European countries; and they are even larger than those I am now suggesting. This is the least we could do for the workers who have served this country so well. We propose to provide assistance benefits as of right without recourse to the National Assistance Board; and, on this foundation, to provide graduated pensions related to individual earnings and needs. I believe that, provided the burden is fairly shared between the employer, the employee and the State, this advance can be achieved without any increase in the present contribution. I can assure your Lordships that I do not pretend to be an economist or a statistician, and that in no circumstances would I stand here and repeat these figures unless I had been assured by the men and women who spend their lives making these calculations that this is the position.

Of course, we must ensure that pensioners and those who retire in a very few years will receive fair play under the scheme. We must always realise that when there is a fundamental change of this kind in the National Insurance Scheme, there are those who will suffer until the change becomes operative. We intend to deal with it by introducing an income guarantee. Those who are on pensions and those who are retiring in a few years will be entitled to this income without recourse to the National Assistance Board.

When the National Insurance scheme was first introduced, we did everything in our power to remind the people of the country that they had a right to go to the National Assistance Board, that they must not regard it as charity or equate it with the old Poor Law. Many of them listened and have done as we told them, but I would remind your Lordships that there are 750,000 pensioners eligible for assistance who are too timid to go to the N.A.B. This is a psychological barrier to many old people, and therefore we propose to remove it. They will be given a guaranteed income without recourse to the Board.

Now I wish to say something about widows, whose pleas the Government have consistently ignored. To-day, as the result of piecemeal legislation, there are seven main types of widows' pensions, depending upon the manner in which the husband met his death. On the face of it, this is surely inconsistent. We propose to sweep away all these anomalies and injustices.

For the first six months of widowhood a widow will get, under our scheme a flat rate of pension, plus a graded element so that it is equal to half the husband's normal earnings. After that, we propose to pay the widow a pension which will not be allowed to fall below the income guarantee, with additional allowances for dependent children. The older widow without dependent children will also receive a permanent pension similar to the widowed mother's. I have had many letters on this subject. I have been asked, for example, why it should be that, if a woman is below 50 when her husband dies, she gets nothing, while if she is a month or so older she will receive a pension. I think most of us would agree that this position is unfair. After all, a woman just over 49 may be older in spirit and attitude than a woman of 55. Therefore, in order to ensure fairness, we propose to establish a sliding scale accord- ing to the age of the widow at her husband's death.

I come now to the "ten shilling widow". I am sure that noble Lords, and certainly honourable Members of another place, have received many letters about this over the years. The "ten shilling widow" has asked in vain for some assistance. I think that she felt that, if only some gesture were made to show that it was realised she was badly off, she would be happy. We propose to restore her pension to its original purchasing value by increasing it to £1 10s. a week.

The iniquitous earnings rule for widows will be abolished forthwith. This rule represents an anomaly which to-day cannot be justified. The other day, when a Question was put down on this matter, the noble Lord opposite was put in a very difficult position in trying to justify it. I was sorry for him. But it is no good referring to the old scheme of 1946. Circumstances were different then. Then, we were afraid of unemployment. Just after the war we realised that a scheme had to be formulated in such a way that it would take into account unemployment , if it came, and that was why the earnings rule was introduced—so that a pension would not become a supplement to wages. But now the time has come to remove it, and we propose to remove it forthwith. I would remind those who feel that the earnings rule should still be kept that there are two kinds of widows—widows of Servicemen and widows on industrial injuries pensions —who do not have to observe an earnings rule. On the other hand, widows who have an independent income are also not subject to an earnings rule. These cases illustrate how anomalous the position is.

I now come to the question which will be asked by everybody. Can we afford it? I think that the answer is this. The employee with less than average pay—that is, £16 a week—will pay a smaller contribution than he does at present. Those earning above the average will pay more than at present, since benefit is related to earnings. This will still be below the level of many Continental countries. The other question is whether employers, who will pay more than at present, will make their export prices higher and price themselves out of overseas markets. I cannot believe that any employer will be so short-sighted as to descend to these methods. Under our scheme, they will still be paying far less than their competitors in other European markets, and they surely must realise that this is a good investment.

We have sought to devise a service —this must be called a service—in keeping with the needs and aspirations of our contemporary society. Perhaps in another twenty years the time will have come to revise again this great scheme. We believe that this will make for contentment in old age. Surely this is of primary importance. Furthermore, we believe that it will establish a new confidence among workers who are subject to the hazards of sickness and unemployment. This scheme will invest them with a dignity and an assurance which is the birthright of all men and women. I beg to move for Papers.

Moved, That there be laid before the House Papers relating to the rates of pension and benefits payable under the National Insurance schemes, with particular reference to the widows', retirement and graduated pension benefits.—(Baroness Summerskill.)

3.8 p.m.


My Lords, I am very pleased to be able to say a word on this Motion and particularly to follow the noble Baroness, Lady Summerskill, because there was so much in what she said with which I agree. In thinking of the whole question of pensions, I should like to go back to 1942 when Lord Beveridge (then Sir William Beveridge) brought in his plan to ensure, as the noble Baroness said, that people who retire or who are unemployed or sick receive pension or payment enough to keep them—in other words, a subsistence plan—and under which the National Assistance Board, or whatever it was called then, was going to assist people who were suffering from an emergency, some kind of trouble or sickness, and wanted a little extra.

As the noble Baroness has said, more than 1 million retirement pensioners need to be supported by National Assistance, because they cannot live on their pensions alone. I find that quite a lot of elderly people do not receive National Assistance, not necessarily because they are too proud, but because they do not know about it; because they are ignorant or perhaps rather stupid and do not apply for National Assistance and therefore live in conditions of great difficulty and discomfort. What it comes down to is that the National Assistance Board are at present subsidising the pensions, which I do not think was ever intended when the Board were first set up. One may say, conversely, that the Assistance Board are in the same way subsidising a certain amount of worthy charitable institutions, in the sense that they will assist people to pay rents when they are living in almshouses and the like, so that more money can be charged. But that does not seem to me to be a very good exchange or something that one wants to encourage.

One of the things I am interested in, to which the noble Lady referred, is the development of private pension schemes. The numbers insured or taken care of under the private schemes has gone up enormously, from about 1½ million people before the war to about 8½ million now. This means that, together with the persons who get their pensions from the public service, about half of the male working force of the country is covered by some form of additional pension scheme. It is becoming increasingly common for people at work to expect when they retire to get at least 50 per cent. of their earnings; and one would like to think that some might get more. It seems to me that encouraging the private pension schemes will make that available to many more people. But, as I have said before, a large number of people who retire now are still dependent on their retirement pension, supplemented or not by the National Assistance Board.

I do not for a moment want to say anything against the work of the National Assistance Board. The officers I have come across have been kind, generous, humane and understanding. But that is not quite the same thing. I do not think the Board should be there, except to assist in a minor way in emergencies. Surely, the purpose of social security is to enable people to maintain during periods of sickness or unemployment, and when they are put to some extra expense in bringing up their children, the same standard of living which they acquired by their work. I think it is partly because the State pension was not enough for this that so many private firms and private individuals started their own pension schemes to supplement the money received from the State.

One wonders, therefore, when looking at the future of social security, whether one wants it to become entirely a State monopoly. I was glad to hear the noble Lady say that she thought there was no objection to private schemes; because it has been said—and one has seen it sometimes stated—that they should be discouraged, and the State monopoly should take account of all social security. With that view I do not agree.

One thing about these private schemes that one should encourage is that they should be transferable. if a young man (or, of course, a young woman) goes into employment for the first time and embarks upon one of these private insurance schemes, it should be possible, if he changes his job, for his rights under the scheme to be transferred to the new post. One is told that there are certain administrative difficulties in this; and that I am quite prepared to believe. But one has worked in Government Departments, and one knows that often the words "administrative difficulties" are used to cover up something which is difficult, but not impossible. I feel that these are words to be got round and got rid of. Surely the minimum retirement pension for all people is, as I said before, one of at least 50 per cent. of what they earn. And, as a corollary to that, the pension must be capable of moving upwards as the wages in the industry in which the person is employed go up. In other words, the pension should be a dynamic and not a static thing.

It has been said that all pensions schemes are costly; and no doubt that is true. But this seems to me to be no reason why we should keep on retirement pension employment conditions. At present, I think it is possible for a pensioner in the first five years of his or her pension to earn as much as £5 a week without the pension being cut. But if they can earn £5, why not let them earn £6, £7, £8 or £9? It always seems to me that, for a short period of time and not a great sum of money, this is one of the meanest administrative actions that has ever been taken. I trust that every effort will be done to remove this limit, because it is neither humane nor economic to discourage people who have retired and who wish to work from doing so, if they can. I do not think one should force them to do it, but if they wish to work, why should they not; and why should we make it difficult for them?

I should like to finish on a rather different note. One has seen in the Press accounts of the pension schemes of the Conservative Party, Socialist Party and the Liberal Party, all, so far as I can see, involving the creation of huge bureaucratic machines which go chugging along in their own way, quite immovable and somewhat inflexible, as a bureaucratic machine is bound to be. One wonders whether it would not be possible to do more to help people when they grow old by encouraging the payment of higher wages and by lowering taxation so that people can save money. Therefore I think the encouragement of private pension schemes, coupled with the transferability of the rights of the person involved, is a good thing. I am sure that there are no administrative difficulties which cannot be overcome by a certain amount of good will, with our economic advisers and our administrators working together. There will be a small number of people who will need taking care of; and there will always be emergencies occurring and problem people who have not saved money and must be taken care of when they grow old and retire. I do not think it will be possible to remove, as I should like 'to do one day, the complete machine of State pensions, but I think it might begin to die away. Then one might see what (I think it was) Karl Marx looked forward with pleasure to seeing—namely, that this part of the State might" begin to wither away" and not be such a burden, present with us all the time.

3.20 p.m.


My Lords, I think the whole House will be most grateful to the noble Baroness, Lady Summerskill, for putting this Motion down, and they will have listened with great interest to the sincere and informed way in which she put forward her case. I think the House will also be grateful to the noble Lord who has just spoken, for giving the Liberal point of view.

I should like to say straight away that, so far as the Government are concerned, we can certainly accept the terms of the Motion, and we are only too pleased to call attention to the rates of pension; because, as I think I shall show, the Government's record on National Insurance benefit increases is excellent and, whatever the noble Lady says, represents a solid achievement in which we take just pride. Of course, the noble Lady criticised the rates of benefit and, indeed, many who speak from her side in the House, in another place and on platforms in the country, have for a number of years criticised our pension arrangements. They have over the years put forward a number of schemes—I think, rather ill-considered schemes—and the noble Lady will remember that the first one of these was a document, National Superannuation, which was produced by the Labour Party in 1958. This document was an attempt to spell out the details of what was involved, but on critical examination it was shown to have serious defects.

Now, with another Election pending, the Labour Party have produced their latest scheme in this document New Frontiers for Social Security. I think I am right in saying that this is the fourth attempt in seven years. Even from what the noble Lady said—and I hoped that she would give us some more details—this Labour policy document is seriously lacking in what I believe to be essential information. Conspicuously absent is any attempt—and the noble Lady could not really help in this—to set out the cost to the contributor or to the taxpayer. She said that she was not a statistician. Nor am I, and I sympathise with her. But she attempted to be a magician by somehow arguing that, by adjusting the share of contribution, the existing rates of contribution would not be raised, and that somehow these greatly increased benefits about which she spoke would be made available. I think that the reason for the vagueness with which the Labour Party cloak the details of their new policy is that the figures would be too damaging, because I cannot believe that the authors of the previous document would not be able to do the sums they have done in the past.

I should like to devote a short time to examining this latest scheme which the noble Lady touched upon in her speech. Of course, its vagueness makes proper examination and assessment difficult. But I think one thing is clear, and that is that the cost would be heavy and, whatever the noble Lady may say, the effect would almost certainly be inflationary. As the noble Lady pointed out, the core of the proposals the Party opposite advocate is a wage-related system of benefits. There is nothing wrong with the principle of graduated benefits according to earnings. Indeed, as the Motion which the noble Lady has put down recognises, the Government have already established a measure of earnings-related pension and introduced graduation into the National Insurance structure.

When looking at the Government's record for the last thirteen years this is certainly, I think she would agree, one of the substantial changes that we have made. I know that noble Lords opposite say that the substantial changes we have made in this direction are, nevertheless, too little. The noble Lady made this point herself. But I think we are up against a fundamental difference of philosophy between the Labour Party and ourselves. The Government scheme is specifically designed to allow full freedom for additional private and occupational provision which it is our policy to encourage. I maintain—and the noble Lady was, I think, somewhat hesitant about this—that the Labour Party proposals leave very little room for private provision or for occupational schemes.

The noble Lady said she was not going to nationalise the insurance companies. But I do not think we should be misled for a moment by statements that contracting out would be permitted for adequate private schemes. Although the noble Lady may have said that to-day, others have offered a rather different background to their attitude on this. I think the one thing which is clear is that, under the Labour Party plan, contracting out simply could not be allowed without undermining the finances of the whole scheme—or, if it was allowed in form, it would be on penal terms which private schemes would not be able to accept. I say that because Mr. Richard Crossman has been very clear and frank on this. As long ago as 1962, in Coventry, he used these words: Labour's scheme will be one which will be very expensive to contract out of: we will insist upon a great many conditions. As I think the House knows, in another place Mr. Crossman has more recently made other references of the same kind. I think the real trouble is that the logic of the Labour Party's position is that the whole provision for old age should be by the State, and if they try to escape that logic—which for a moment or two I thought the noble Lady was doing— they are really deceiving themselves.

The question is: Is this what people really want? The noble Lord, Lord Amulree, paid tribute to the fact that these private schemes were of great importance. He was saying how he hoped that higher wages would encourage them by encouraging higher rates of saving. Also, is this what the trade unions really want? I would say this to the noble Lady. The present popularity of the present occupational schemes hardly suggests that this is so. There has been a long tradition of occupational provision in this country, and some 10 million workers in this country are now covered by occupational schemes—and this cover, as the noble Lady knows, is being rapidly extended. These schemes have the great merit that they can be tailored to fit the circumstances of individual firms and industries and, more particularly, of individual employees, in a way which is not possible under a universal system. I think their growing popularity is witness to the success of the policy of the Government to have a State graduated scheme, but to keep it within reasonable compass to allow room for a diversity of private provision.

New Frontiers for Social Security, unlike the Labour Party's earlier policy documents, does not commit the Labour Party to an immediate increase in the rates of retirement pension. And their scheme for half pay on retirement would —I think this is right— apparently take seven years to mature, and even then it would be operating only for those who retired subsequently. So again I think it is fair to say that, even after the early 'seventies, only a small proportion of pensioners would start to qualify. Of course, I must emphasise that no one retiring before the early 'seventies under this plan would get a pensions increase.


My Lords, I am sorry to interrupt the noble Viscount, but there is also a minimum income guarantee.


I was going to say that the Labour Party have another plan for existing pensioners and others who do not qualify for half pay. Thai is, as the noble Lady has said, the minimum income guarantee. The cost of their proposals under this scheme would obviously entail an increase, although once again it is difficult to say by exactly how much, because once more the Labour Party are reluctant—perhaps understandably reluctant—to divulge any real detailed figures of cost. We do not know—and I am not sure that the Party opposite know—the exact figure for this minimum income guarantee. In fact, all efforts by the Government, or by pensioners themselves, to obtain figures have met either with a refusal or with a vague reply of, "Wait and see". But I think we can all be quite certain that the cost would not be small.

Let us look at this idea of a minimum income guarantee which is being put forward by the Opposition as something quite new. I personally think that the first point to make is that, whatever the Labour Party may choose to call it, the income guarantee, or "receive as you need", is simply another way of applying a means test. It is National Assistance under another name, and it stands or falls therefore on whether, taken all round, it would be more effective than the present system of National Assistance as a method or provision outside National Insurance. But when it is looked at in this way I should have thought that their idea of an income guarantee breaks down at once. First, it is a concept of payments based on means without reference to need. National Assistance is closely adjusted to people's needs and a system based on income could not begin to provide as readily as National Assistance for individual needs such as rents and special requirements; I am thinking of special diets, extra fuel and so on. People with the same incomes but differing needs would get the same amounts, and this does not seem to me to be an improvement. I think that a system based on annual returns of income is hardly a flexible one. It judges present needs by last year's income, but, in fact, as we know, circumstances can change quickly and there would be no easy way of meeting them. Another curious aspect is that the income guarantee apparently is to ignore capital and take account only of income. I think I am right in saying this. Again, I find it difficult to believe that, if account is to be taken of income derived from capital, capital from which no income is derived could be disregarded completely. I think the question should certainly be asked whether it was right under the income guarantee proposals to make a substantial payment from State funds to people whose income was small but who happened to have a large amount of capital which did not produce any income; premium bonds are an obvious example of what I have in mind.

Again, their proposals merely refer to a simple income return on the lines of the simplified tax returns now in use. The Labour Party speak as if everybody already completes such a return every year, but a considerable number—it has been estimated, probably more than 3 million pensioners—do not at present complete income tax returns. So inevitably, tinder the Labour Party plan, these people would be compelled to complete a form from which they might derive little or no benefit in return. A good many elderly people—and I think this applies to many younger people too —do not find form-filling easy. The National Assistance Board officers will always visit people who seek their help and any form-filling can be dealt with by interview, and this obviously makes the business very much easier. It also has other advantages in ensuring the welfare of old people, and this would, of course, be lost under the Labour Party's latest plan.

One thing which I deplore most in New Frontiers for Social Security is the denigration of National Assistance. I think this is very unwelcome and it is, in fact, a new feature of the propaganda of the Labour Party. In the past they have—and I will be quite fair to them —joined with us in recognising the very valuable work the National Assistance Board does, and in encouraging people to look upon the help which the Board can give as help given as a right as an appropriate part of our social security provisions. But even under the Labour Party's plans some people would continue to receive National Assistance, including the sick and those of the old for whom income guarantee would not be enough. I think the Labour Party are really doing a great disservice by stigmatising the work of the Board in this way.

I suggest to your Lordships that we should all be better employed in doing everything we can to encourage people to seek the Board's help, rather than in lending support to the view that there is some stigma attached to relying upon the Board's services. The Board has done a great deal in recent years to make it easier for people who need it to obtain supplementation of their pensions, and we should all try to help them and not hinder them in their endeavours.

I see that my noble friend Lord Ilford is in his seat and I, and I am sure the House, would not want to let this occasion pass without paying a tribute to the excellent work he did throughout the whole ten years, from January, 1954, to March, 1964, when he was Chairman of the National Assistance Board.


Hear, hear!


During this long period he laboured unceasingly to bring a better and more effective service to those in need. I would say to the House that his record is indeed a distinguished one and we are very grateful to him.

My Lords, having examined the Opposition's proposals, which I have described as vague and costly, I should now like to turn to the Government's record, and here we have a story of substantial progress. The pension rates mentioned in the Motion have been criticised by the noble Lady, but I do not think that this criticism is justified if one compares the pension increases over the past thirteen years with the changes in prices and earnings. The noble Lady was good enough to admit that pensions had gone up, but, of course, she did not relate these to the changes in prices and earnings. If you do this it indicates the Government's achievement in terms of what the increases in the pension rates have really meant for a retirement pensioner or a widow.

Opposition speakers are nowadays accustomed to decry such comparisons with the past, but the reason for this may well be that the comparisons do not show to their advantage. I suspect that if they did show to their advantage they would in fact be less shy in using them. But I should like to give your Lordships the facts. Since 1951 the retirement pension has gone up from 30s. to 67s. 6d. on the single rate, and from 50s. to 109s. on the married rate; that is to say, it has more than doubled in money terms. But money terms are not what mean most to a pensioner. It is the comparison with what the pension will buy and with average earnings that concerns him. On both these tests the Government's record is a good one. Since 1951 the latest figures show that prices have risen by 50 per cent., earnings by 102 per cent., and pensions by more than either of these, by about 120 per cent. In other words, the pension has more than kept pace, in proportion, with the rise in average earnings over the last thirteen years, and in terms of what it will buy is worth more than half as much again as in 1951.

I know that as we have this Party political system the Opposition inevitably tend to dismiss these comparisons in rather a cavalier way as if they represented an easy achievement by the Government. But it was not an easy achievement, and I think that is shown by the fact that, at the same time as the pension has gone up in real value by half as much again, and by more, proportionately, than average earnings, the number of pensioners has risen by 2 million (from 4 million to about 6 million) and the total cost of pensions has gone up by about 3½ times. So, by any test which can be applied, the real value of the pension to-day is much higher than at any time in the past. This is a massive achievement and one which any fair assessment of pension provision cannot fail to recognise.

My Lords, while we have these facts in our minds I should like to deal with one statement which appears in New Frontiers for Social Security. This document says: Year after year, rising prices have eaten away the real value of National Insurance benefits. That certainly was true while the Labour Party were in power between 1946 and 1951– this is absolutely true, because costs and prices rose higher than the pension —but when applied to the years when the present Government have been in office, from the facts that I have just given the statement in this document should be shown as the falsity which it most certainly is.


My Lords, I should have thought this was a little doubtful. It will want very careful examination. I do not want to cross-examine the noble Viscount; but if you take the whole cost of living, of housing and everything, which applies to people on retirement, and everyone in general, I do not accept his figure of increase of prices. But I should like to say that we shall look at this very carefully.


The noble Earl is welcome to look at them. have checked these figures very carefully. I would not wish in any way to deceive your Lordships' House. As I was saying, the sort of statement I have just quoted from New Frontiers for Social Security does rather shatter one's confidence in declarations of policy from members of the Opposition.

My Lords, I think that an important feature of the Government's policy in steadily improving benefits, especially in recent years, has been to concentrate the largest increases and improvements on those categories of beneficiaries who have the greatest claim on our attention; for example, the marked preferential treatment given to the widowed mother and her children. We all recognise—and the noble Lady made clear in her speech that her feelings are the same—that a widow with young children is particularly deserving of help and sympathy because of her special responsibility in maintaining the home.

A few figures illustrate the preference which the Government have given to benefits for widowed mothers. In 1951 the actual expenditure on widowed mothers was £9 million; if the 1951 benefit rates and conditions were in operation now, the expenditure on widowed mothers in 1964 would be £3 million. In actual fact, the estimated expenditure for 1964 is £40 million, for the same number of widowed mothers, This represents an increase of over 200 per cent. In fact the number of widows receiving National Insurance benefits has increased since 1951, and the expenditure on all benefits for them has risen from £106 million in 1951 to an estimated £332 million in 1964.

The Government have also over the years made a number of progressive improvements in the conditions for benefits paid to widowed mothers. The earnings rule has been relaxed on five occasions since 1951, most recently in March this year, until it now stands at £7 a week net, compared with the £5 net for widow and retirement pensioners. The widowed mother also receives higher allowances for her children than are paid for the children of other beneficiaries. A preference of 5s. for each child was introduced in 1956, and after further increases in 1961, 1963 and 1964 the figure now stands at 17s. 6d. for the first two children and 15s. 6d. for other children. As a result of this process the amount now payable for each child of a widow is 37s. 6d. a week including family allowances. Furthermore, 26s. of the widowed mother's personal allowance, like the whole of her children's allowances. is exempt from the earnings rule. For example a widow with three children can retain £6 18s. 6d. however much she earns. And the Family Allowances and National Insurance Act, 1964, extended the definition of a child to cover those at school up to age 19, instead of 18 as formerly, so that again was a help.

I would say something about the earnings rules, as the noble Lady said something about this and so did the noble Lord, Lord Amulree. It arouses a great deal of public interest and I think perhaps it is the most misunderstood feature of the National Insurance Scheme. The rules do not, as is sometimes alleged, break any contract to provide benefits unconditionally in return for contributions paid. They were built into the contract in the 1946 Act, and contributions would have to be higher if there were no earnings rule. Nor in fact do the rules stop people from working. They are themselves one of the instances of selectivity in the National Insurance Scheme, because their purpose is to ensure that benefits are not paid to those who continue to work full time and are manifestly therefore not in the greatest need. The blunt fact is that abolition of the rules and the retirement condition which goes with them would cost about £100 million a year immediately, and the great bulk of this sum would have to be raised to pay pensions to people earning regular wages in full-time work who were of pension age but had decided not to retire.

We have preferred not to abolish the rules but steadily to relax them as circumstances have permitted. At the start of the scheme a person who retired and took his pension could do only a very small amount of work without loss of pension. The person coming up to pension age was faced with very much of an "all or nothing" choice between staying in full-time work or going into complete retirement. To-day, as the earnings limit has been increased since 1951 from £2 to £5, it is possible for a pensioner to do an appreciable amount of work and still keep his pension, and the break with full-time work need not be so sharp. This does seem to me to be a valuable development of the original retirement condition and earnings rule.

The Labour Party wish to keep the earnings rule, so far as I understand, for retirement pensioners but to abolish it, as the noble Lady said, for widows. I was not in your Lordships' House at the time, but I think that in the speech she made on the 1964 Bill she urged the abolition of the earnings rule as a whole. This time she has confined it to widows, and thus, if I may say so, she has become orthodox in that she is following the lines of the Labour Party official document. But it is not at all clear how the Labour Party intend to solve the problem—which is a very real problem, as I am sure the noble Lady understands —of having one rule for retirement pensioners and another rule for widows. I think they recognise the problem but rather hope that if they ignore it it will sink to the bottom of the sea. But it will not.

The fact is that in the natural order of things widows reach retirement age. It will not be easy then to subject them to an earnings rule for the first time. Other women have already reached retirement age when they are widowed. It would not be easy to have one group of retirement pensioners with an earnings rule and another without one, because National Insurance is a closely interlocking system. It seems to me that if you start abolishing the earnings rule for widows you finish in fact by abolishing earnings rules for everybody. I think this would be an example of unselective expenditure on people who, in the main, are better off in these groups, because they have earnings over the present limits of £7 a week for widowed mothers and £5 for pensioners and widows. Almost all this money would be added to full time earnings and none would go to help sick pensioners who cannot work or older pensioners. I think the Government's policy of concentrating future improvements selectively on those less able to earn their own living, evidenced in the increased expenditure on widowed mothers to which I have referred, has been a better way of deploying the country's available resources.

It is said—it was said to-day—that, despite the considerable benefit increases, to which I have referred, the rates are still much too low and the Government should therefore—this was not said today, but it has been said elsewhere—announce an increase in benefits before the Election. The British are a pragmatic people, and I believe that when faced with extravagant promises they look to the past record of a Party as the best evidence of its real future intentions and performance. We as a Government are not given to making rash promises which we cannot keep.

We pledged ourselves at the time of the 1959 Election to give pensioners an increasing share in the country's prosperity, and, as I have shown, we have amply redeemed that pledge. After a rise in the cost of living of less than 8 per cent., the substantial increases of over 17 per cent. in benefit rates made only a year ago, and the raising of the earnings limits and of the age limits for children's benefits, are but the latest in an impressive series of improvements. Since these latest increases the cost of living, as measured by the Retail Prices Index, has risen by only 3 per cent. I think we should give credit to my noble friend Lord Drumalbyn, who will be speaking later in the debate. As Minister of Pensions and National Insurance he was in fact responsible for the introduc- tion of the recent improved rates of benefit to which I have just referred.

However, we are not intending to rest content on our achievement, good as I have shown it is. We intend to develop and improve the scheme. But we shall not indulge in vague ideas and promises. That is not our way. We have a surer method of progress; first, making a careful study of the complex and difficult issues involved, and then introducing new and well-thought-out measures. One example of this policy is the successful graduated pension scheme to which the Motion draws attention. This is now well established, and it represents a major step forward in the field of the preservation of occupational pension rights. Another example of great current interest is the examination of the possibility of introducing earnings-related unemployment benefit. I myself have had something to do with this, and no doubt your Lordships will have noted that the Minister of Pensions and National Insurance and his officials have been having talks with the T.U.C. and the British Employers' Confederation about the problems involved. This is a complicated subject with far-reaching implications for National Insurance in this country—and, indeed, beyond National Insurance. A full and careful examination is necessary before any decision can be made, and this is being pressed on with at the present time.

In earnest of our future intentions, we have, as was explained in the Command Paper on Public Expenditure issued last December, allowed—or, if you like, budgeted (I was "ticked off "for this the other day)—for further increases in benefit expenditure. This was, of course, an exercise based on constant prices. But it was assumed that benefits would increase broadly in line with the increase in real earnings per head. The outline given of the kind of level at which benefits would be in 1967–68 if prices remain constant is a measure, after taking into account the increase in the number of pensioners, of the substantial improvement in benefit rates in real terms which the Government foresee.

The last thirteen years have seen great advances in this country's investment, production and prosperity. I think I have shown that the Government policy for National Insurance schemes has been an active one of ensuring that beneficiaries have shared in this achievement. We choose to stand on our record. We believe that this is the best test of our future intentions, and I am therefore grateful to the noble Lady for having given me the chance in this debate to make these points to-day.