§ 4.0 p.m.
§ Debate resumed.
§ LORD PEDDIE
My Lords, we have listened to a speech by the noble Viscount, Lord Blakenham, which was characterised by a sense of complete satisfaction. On the one hand he indicated the Government's contentment with the present rate of pensions, and on the other hand he condemned the proposals of the Labour Party for a substantial increase. We, on our side, believe that a retirement pension of £3 7s. 6d., particularly in the light of modern economic conditions, is utterly and completely inadequate. Failure to raise it demonstrates the complete incapacity of the Government and the nation to accept its responsibilities.
The noble Viscount said that we should take pride in the pensions record of the Tory Government over past years. Well, it depends entirely upon where they find the source of pride. If it is to be found in the substantial reduction in the exchequer contributions to pensions then that pride is justified, because in the period since the Conservatives took office there has been a substantial fall in Exchequer contribution in this respect. The noble Viscount complained that on our part there had been a denigration of National Assistance —I almost inadvertently used the term "public assistance". That is an indication of the mind of a majority of people to-day; the general attitude of people to-day is to associate National Assistance with public relief. From our standpoint, we believe that any nation which can claim to be progressive in an economic sense should be capable of carrying what we recognise as a considerable economic burden; it should be capable of accepting the responsibility and the burden of meeting the obligations demanded by those who have reached retirement age and who have given a lifetime of service to the community.
My noble friend, in introducing the debate, referred to the claims about the affluence that is enjoyed to-day—what one might describe as the great illusion. While there is no doubt that there has been a great increase in capacity in terms of production, as the noble Viscount 1042 opposite indicated, true national affluence is not measured in terms of peaks of income but by the general standard of human welfare. If we examine the relative position of the needy, the sick, the aged, and the unemployed, there is no doubt that the general relative position is bad and calls for substantial improvement. To talk of an affluent society today is an offensive mockery to the unemployed, the retired, the sick, and the needy.
My noble friend made reference to the National Insurance Act, 1946, which was brought in by the Labour Government and was indeed a great social measure. On the admission, by inference, of the noble Viscount opposite, we have seen a deterioration in relation to standards. The basic principles of that Act were that it should be capable of maintaining the recipients and their dependants—in other words, capable of maintaining a subsistence level; that National Assistance should be available for those who did not qualify for National Insurance or who had special needs; and, lastly, that there should be a fair distribution of the cost between employer and employee and the State. That basis has been abandoned and I challenge the noble Viscount opposite to deny it. In 1954 the Government accepted the principle of the Phillips' Committee that the subsistence principle incorporated in National Insurance was an "extravagant use of community resources". Do the Government accept that principle to-day? It would appear so, because National Assistance has indeed become the instrument employed by the Government to give minimum aid where a desperate situation becomes apparent.
I have pointed out that Exchequer contributions to National Insurance have been substantially reduced. The noble Viscount opposite expressed criticisms of Labour Party proposals and indicated the impossibility of applying them. At least he cannot deny that if the rate of contribution that obtained 18 years ago had been maintained to-day, there could at least he a substantial improvement in the present rate of pensions. Exchequer contribution to the National Insurance Fund for the year ended March 31, 1963, as compared with 1951, fell from 26 per cent. to 16 per cent. My source for this information is Volume 686 of the OFFICIAL REPORT, Commons, 1043 1963. In 1948 employers and employees made a contribution of 69 per cent. of total cost, and the rest came out of taxation. Therefore, in reply to the inference that there could not be substantial improvement under the Labour Party proposals, I would point out that to-day the share borne by the Government is the lowest of any period since National Insurance began. There lies an indication of a substantial improvement which could be achieved.
Is it then likely that the Government to-day will make a public pronouncement as to the impossibility of effecting substantial improvement? I wonder whether the Prime Minister, in his tours, will dare to address a meeting of widows and pensioners and speak, as he so often does, of prosperity and plenty in this land. From the recent Report we see that at the end of 1963 there were 6 million retirement pensioners, and that the number of those pensioners receiving National Assistance grants amounted to 1,100,000. Those grants frequently went to households where there was more than one pensioner. Therefore, it can quite legitimately be assumed that one in four of retired pensioners in this land are forced to rely on National Assistance, and one in five unemployed have to do the same. Therefore it is obvious that it has become the avowed policy of the Government to use National Assistance as the permanent instrument to provide bare subsistence when pensions and unemployment benefit are inadequate to maintain it.
The noble Viscount said that he thought there was a great difference in this matter between the philosophy of the Labour Party and that of the Tories. That is one part of the speech I would heartily endorse and accept as accurate for I believe that the Government are utterly incapable of understanding the true basis of national responsibility for pensioners. Quite seriously, my Lords, I think that this Government believe the pension scheme to be a social salvage service, to give minimum aid to those who they think had neither the wit nor the prudence to provide for themselves. We on our side recognise that pensions at the end of a working life come as a right, and are achieved by the worker's contribution to the economy of the nation during his working period.
1044 One does not need to be an economist to recognise that the individual and collective wages that are paid during a worker's life are not, nor can they be expected to be, absorbed by what labour produces during a lifetime. If there were no surplus there would be no national accretion of wealth. Therefore wealth to-day represents the accumulated skill and effort on the part of those who are probably now at retiring age over the years when they were working. I know that noble Lords opposite will make reference to the fact—and I will accept it—that capital, too, has played its part in creating the wealth of the community to-day. But there is a little difference; the reward to capital is continuous. It goes beyond retiring age and, indeed, even goes beyond the grave, as some of the noble Lords opposite may appreciate. It may be argued that capital takes risks and is sometimes lost. There I would agree; but labour, too, can lose its life, and all too frequently in these progressive days can lose its vocation.
The point I am making is that the risks are equal but the rewards are not. So maintenance after retirement, the paying of retirement pensions, is not merely a social gesture; it is an economic right on the part of those who have made their contribution during their lifetime of work. As a matter of fact, I have often thought that death duties should go in part to swell a pension pool, because all fortunes have been dependent to some extent upon social factors that have made their contribution to the building of those fortunes. So part of the money should go back to compensate those who have made their contribution to national wealth.
My Lords, these things are said not merely from this side of the House; even the majority of the newspapers of the land over the past months and years have branded the pension scheme of this country as mean, heartless, illogical and riddled with anomalies. These are not my words; they are the words that have been used by almost every national newspaper in this land. But I believe that all this confusion in the operation of the pension scheme has been part of a deliberate policy. There has been little or no attempt to create a rational structure; and, as my noble friend indicated in opening the debate, these anomalies are particularly apparent in the case of 1045 widows. There are six or seven categories of widows, all receiving different benefits, some subject to earnings rules, some not. Here again the Government rely on National Assistance to provide immediate aid, simply because it is cheaper. I am told that there are 85,000 widows in this country who get 10s. a week, and there are 505,000 who are forced by regulations to ensure that they never earn more than £7 a week. The State has a responsibility, and I do not think anyone could deny the fact that at this present moment of time the State does not accept its full responsibility in this regard.
As has already been indicated, the Labour Party are certainly not opposed to private pension schemes; they welcome them. They are, indeed, a useful addition and are doing a job which, in many cases, the Government ought to have done. But we could not allow private pension schemes to be the only adequate protection offered to the workers of this country. At the present moment only half the male working population is covered, and those who are covered are in large measure the white-collar type of worker, rather than the manual worker. We also recognise the fact that to a very large extent, unfortunately, private schemes—which I applaud and welcome—do tend to reduce labour mobility, which is so important in the development of our economy. I do not believe that it is possible for the Government to transfer their responsibility to the private employer, as they are trying to do.
As I have indicated, I agree with the development and encouragement of private schemes. In the organisation with which I am associated, the Co-operative Movement, practically all co-operatives have their pension schemes, covering a quarter of a million employees and pensioners. There are private pension funds of more than £100 million, and these are increasing by £5 million a year. Therefore we need the effort of those who are making their contribution to private schemes, but we demand from this side that the Government should recognise their responsibility, particularly in that field which is at present not covered by private pension schemes.
This problem, my Lords, is not getting less. The number of pensioners will increase by 50 per cent. in the next 20 1046 years. I think we all recognise that we cannot ignore the economic truth, that the cost of goods and services required by pensioners must be provided out of current earning. But current earning is influenced by the contribution that has been made by pensioners during their working lifetime. The noble Viscount attempted to indicate that the Labour Party have no recognition of the tremendous problem involved in the extension of the pension facilities. Of course it is a problem, a terrific problem; but it is one that, in a developing economy, must of necessity be accepted. We reject completely the idea that to provide adequate subsidies for those who are at retiring age would inevitably create inflation. I myself rather think that inflation and inflationary factors are created by too much money on the part of individuals who do not know what to do with it, and who become indiscriminate spenders. In my view, there is little likelihood of bringing about inflation simply because we are accepting our normal and proper responsibilities.
The whole question demands a rational approach. The present hand-to-mouth method of the Government is completely wrong. We speak of an Insurance Fund, but in my opinion there is no element of insurance in the Government's scheme; and there is certainly no fund. I think we are entitled to ask: Is it the policy of the Government to recognise pensions as part of our system of social security, or is it their policy—and I ask this as a specific question—to continue to employ means test National Assistance, rather than insurance benefits paid as of right? They are capable of making a definite declaration in that regard.
We, on our part, would agree that the flat rate of contribution is inequitable and inadequate, because this imposes its greatest burden upon the poorest section of the community. We believe that we should have income-related contributions and wage-related pensions, and therefore on that particular aspect we welcome the graduated pension scheme. But we go beyond that point, because the graduated pension scheme introduced by the Government is a further indication of their attempt to evade responsibility. Indeed, although the language may be harsh, I would say that the graduated 1047 pension scheme was merely a sleight of hand, with the skill and purpose of a "three-card trick". It has been a hoax, because the purpose of those graduated contributions was not to improve the benefits, but merely to transfer to the contributors a large part of the burden of raising the flat rate pensions which was done in April, 1961, and May, 1963. That was the sole purpose. Yet at the same time the Government made a declaration that their intention in introducing graduated pensions, was to find a means of improving the level of pensions at a later date. If that was not misleading the public, I do not know what is. They tried to sell this scheme as benefits for the future, but it has been only a method of causing the employer and the employee to pay more for the present pensions.
To give proof of it, I would point out that the expenditure of the National Insurance Fund for 1961–62 was to be 14 per cent. more than previously estimated, because of improvements in the pension rates. To pay for that, the contributions were increased by 33 per cent.; but the Exchequer liability, I would remind the noble Viscount opposite, fell by 28 per cent. on what it would have been if the Tories had not introduced the new scheme. If anyone wants any further information about this wonderful graduated pensions scheme, I would point out that it is estimated—these are not my figures—that in 1971 the graduated contributions will be £344 million, and that the cost of the graduated pensions paid out that year will be £15 million—and there is no indication of the funding of those amounts that are collected under the graduated pensions scheme; no funding at all. The whole of that income is paid out, year by year, by pay-as-you-go, in order to meet what should be paid by the Exchequer itself for a flat rate pension.
My Lords, how does it work? There was an interesting article written not long ago by Mr. Harvey Cole, a well-known economist, in Statist. He also made clear—they should be clear to anybody who really studies it—the facts of this wonderful graduated pensions scheme. A man earning £18 a week as a youngster will pay 7s. 8d. a week in graduated contribution on top of his 1048 ordinary contribution. After 47 years of his working life, his graduated contributions, together with his employer's contributions and the Exchequer's share, will be £45 a year. Allowing for only 3 per cent. interest, this would produce a capital sum of £4,300, which, on an average term of life, would yield a pension of £435 a year until death. The Government scheme offers £156 a year. If that same amount was invested in an insurance company, to be received at the end of his working life in the form of an annuity, the man would receive an amount seven times greater than the amount which is offered in this wonderful scheme put forward by the Conservative Government.
Therefore, let the Government come clean on this matter. There may be justification for increasing the contribution; it may be there is also justification for increasing the Exchequer contribution: but at least do not adopt these back-door methods to try to confuse the public. At least make a clear declaration of what it is all about, and that it is being used as a device to bring about graduated contributions, which is a principle I would accept, because the greater the personal income the greater should be that person's responsibility to contribute to the pensions of those who are deserving of them. Therefore, I would say that what is actually happening is that the Government are using these new graduated contributions to pay for benefits which should be met out of general taxation.
My Lords, I must come to the end of my speech. I believe the time has come —indeed, the time has long past—when there should be a clean sweep of the present complicated pattern of the pensions structure. Personally, I should like to see pensions taken out of the arena of Party politics; but that will never be possible until we get a Government that can recognise the basic rights of the aged and unfortunate to their just share of the nation's wealth—and, from my experience of the Government over past years, they certainly have given no indication of their recognition of that principle.
§ 4.25 p.m.
§ LORD ILFORD
My Lords, the Motion which the noble Baroness has moved this afternoon, with all the felicity of language which we associate 1049 with the noble Baroness's interventions in our debates, has afforded your Lordships a valuable opportunity to survey our system of social security, as we do from time to time, and to express our inclinations upon its present aspects, prompted by our experience of its workings and sometimes by our Party affiliations.
For all practical purposes the system of social security which we have to-day is the system devised and recommended by the late Lord Beveridge, 21 years ago. That system was put into operation in 1946 and 1948 by the then Labour Government, with, I think, the general approval of everybody. With the single exception of the addition of the graduated pension, which the noble Lord who has just concluded his speech referred to as a "three-card trick"—and I must say that I found it a little difficult to reconcile that comment with his desire that this question of pensions should he removed from Party politics —the scheme that we have to-day is Lord Beveridge's scheme.
Noble Lords on the opposite side of the Chamber who are disposed to be critical of the scheme should recall that it is, in the main, their own handiwork; and if it is right to say, as the noble Lord who has just spoken said, that it is "heartless" and that it is "riddled with anomalies", it should be recalled that it is a scheme which was devised by the Labour Government and for which they took—and I think rightly took—considerable credit at the time it was introduced. To-day, I am by no means a critic of the Labour Government of those years for the introduction of the National Insurance and National Assistance Acts.
My Lords, it is astonishing, when one looks back over the history of the last 20 years, to realise that among the assumptions which Lord Beveridge made, and which he claimed to be essential for the success of his plan, he never included the assumption of a stable currency. Inflation is the enemy of all schemes of social security; and if Lord Beveridge's plans have failed to work out as he and the Labour Government anticipated 20 years ago that they would work out, it is due, and due almost solely, to the inflation of the early post-war years. Happily, in more recent years that inflation has been checked, although not wholly eliminated.
§ THE EARL OF LONGFORD
My Lords, may I interrupt on one point? I think the noble Lord was a Member of this House during the period when Lord Beveridge used to attack all Governments quite impartially for failure to control inflation. I had the honour, in a humble way, of assisting Lord Beveridge when he was drawing up his Report; and the last thing he would have done would have been to give special credit to the Conservative Government, as compared with the Labour Government.
§ LORD ILFORD
My Lords, the opportunity did not present itself to the late Lord Beveridge of giving credit to the Conservative Government for carrying his proposals in effect for a period of over 20 years.
The results of inflation have been repeated increases in insurance benefit and pension rates. National Insurance benefits have been increased five times since 1946. Pension benefits have been increased six times. The rates, both of benefit and of pensions, have, in fact, increased more rapidly than the advance in the Retail Prices Index. In terms of currency, the pension is to-day something like 40s. ahead of the increase in the Retail Prices Index. During the same period National Assistance scales have also been increased. They have been increased ten times, and with brief exceptions the National Assistance scale rates have always been kept abreast of the Retail Prices Index figure. It is really no good pointing to the numbers of persons in receipt of National Assistance as a criticism of the insurance scheme. The number has increased because the scale rates have increased. indeed, it would have been an easy matter to keep the numbers down by refraining from making any increases in the Assistance scale rates.
It has been suggested that benefit and pensions rates might be adjusted to the Retail Prices Index figure by some sort of annual bonus added to them as compensation for changes in the price level which take place during the year. I do not myself like this proposal. What would have happened, for example, in recent years when the increase in the cost of living had been relatively small? The addition which would have been made to a person's pension or benefit 1051 at the end of the year would have been a matter of a few pence. Noble Lords opposite may be ready to face the old-age pensioners with an increase of that sort; but from what I know of pensioners and persons in receipt of benefit I think that they would not be slow to say that the cost of living had increased a great deal more than the supplementary addition to their pension.
It may be possible, as the noble Lord who was speaking a few moments ago suggested, to link benefits in some way to average earnings and assume that earnings will reflect increases in the cost of living—as indeed they probably will. That, I think, would be a more effective way of re-adjusting benefit already in payment to changes in the cost of living.
Now, my Lords, I come to another aspect of the present Welfare State which has its origin in Lord Beveridge's Report. Lord Beveridge recommended that a flat rate of benefit and a flat rate contribution were fundamental principles of social security. I have always thought that Lord Beveridge, and others since him, entirely underestimated the immense difference which exists between the needs of one individual and the needs of another. There are, for example, immense differences in the levels of rent which are paid by different persons and in different parts of the country. Last year, strange as it may seem, 14,000 persons in receipt of National Assistance benefit were paying rent, met by the Board, of 5s. a week or less. At the other end of the scale, 129,000 persons in receipt of National Assistance benefit were paying rents of between 40s. and 49s. 6d.; and 78,000 persons were paying rents of 50s. or more.
§ LORD TAYLOR
My Lords, could the noble Lord repeat the figures he gave us of the number who were paying 5s. or less?
§ LORD ILFORD
My Lords, the number was 14,000.
Moreover, rents vary widely in different parts of the country. In London and in the counties in the South-East last year the average rent paid by persons in receipt of National Assistance was 32s. 2d. a week; in Wales it was 21s. 6d.; and in Scotland 1052 19s. 8d. Then there are great differences in individual needs now met by discretionary additions paid by the National Assistance Board. Last year more than half the persons receiving National Assistance allowances were receiving discretionary additions. The average amount of the addition was 8s. 10d., but some additions of as much as £2 a week were made. To-day, of course, all these variations in individual needs can be effectively met by the National Assistance Board's supplement. But how can a flat rate of benefit or a flat rate of pension meet such variations as these? Some form of supplementary addition, adjusted to the needs of individuals, must be added to the flat rate scale, as it is added to-day.
I believe that the need for supplementation is now more generally recognised and accepted than it was a short time ago. In 1957, when the Labour Party introduced their first policy statement entitled National Superannuation, it was, I think, still believed that a flat rate scheme could meet equitably all individual needs. But in their recent statement of policy, New Frontiers of Social Security, it appears to be recognised that some form of supplementation will be necessary. As I understand the scheme that is proposed now by the Labour Party, there will be a basic rate which will be related to average earnings, and in addition to the basic rate there will be what is called a guaranteed national minimum. Persons whose resources, after including the basic rate, fall short of the national guaranteed minimum will be supplemented up to the level fixed by the guaranteed minimum.
We do not know, of course, what the national guaranteed minimum, in terms of money, is going to be. I had hoped that in her speech the noble Baroness would tell us what figure they have in mind. So far, we have been dealing with this proposal very much in the dark. One thing, I think, is fairly clear, and that is that the needs of the individual cannot be matched by the guaranteed minimum, as the needs of an individual are matched to-day by the National Assistance Board's allowance. There will still be thousands of persons less well off on the national guaranteed minimum than they are to-day. For these persons transitional arrangements will be needed 1053 and the ultimate result may well be that there will be a large number of persons who still will require something in the nature of National Assistance.
Moreover, if it is conceded—as I think it is now conceded—That supplementation of the basic rate will be necessary, then a means test will be necessary, too. We cannot have supplementation without some form of means test. The Labour Party can alter the form of the means test, if they like. They can substitute the filling in of a form for the personal interview that is used to-day. But noble Lords opposite really ought not to claim that this particular frontier for social security abolishes the means test. It may alter its form, but a means test there is, and a means test there will continue to be.
I understand that it is proposed that everybody should be. required to fill up a form disclosing his resources. Whether that includes capital resources, I do not know; but capital resources among this class of persons are quite substantial. The National Assistance Board disregards under its rules many millions of pounds of small savings. Whether that has to be disclosed or not, I do not know. But it is apparently proposed that a form disclosing resources should be filled up by everybody. That looks to me very like a means test. And I must say that I think the Labour Party are in danger of giving the impression that in the end they intend to put everybody on a means test, not only those who apply for National Assistance.
§ LORD TAYLOR
My Lords, I am sure that the noble Lord is not deliberately misleading the House. The scheme to which he is referring is a transitional one, proposed for the first seven years only, to get over the problem of existing pensioners who will not have paid in at the graduated rates, and it would end when the seven-year period is ended.
§ LORD ILFORD
My Lords, that I understand; but, after all, the existing pensioners will be a formidable body of persons.
§ LORD ILFORD
My Lords, the success or failure of any scheme must 1054 depend on the manner in which it deals with those who are in receipt of pension at the time the scheme is introduced. The noble Lord will recall that earlier in my observations I referred to the need for some form of transitional benefit to carry these people over from the old system to the new. Transitional benefits ought not to last for seven years. That is a very long time. How this proposed return will seek to collect information about needs I do not know. Will it collect information, for example, about rents? I understand that it is also to be used for taxation purposes. If so, if is likely to give rise to confusion in the minds of many people, who would be left with the impression that they were going to pay taxes on their rents. But there it is. The information will have to be obtained from somewhere.
Before I come to my final point, may I say a few words about the National Assistance Board? I do not desire to be drawn into a discussion about a service for which I was so recently responsible. My noble friend has paid a most undeserved tribute to me, but I would remind your Lordships that the staff of the National Assistance Board have worked most industriously for eighteen years to build up a reputation of good will and to obtain the confidence of the public whom they serve. I believe that they have gone a long way in achieving their purpose. I should not like the service which these men and women have given, often in difficult circumstances, to be overlooked this afternoon and I bitterly resent hearing them spoken of, not in your your Lordships' House but sometimes elsewhere, as a service which tyrannises, or abuses, or degrades, or humiliates those persons whom it is intended to serve.
My Lords, I come to my final point. I believe that there has been a great change in the public attitude to what is still called "subsistence level." Lord Beveridge aimed at a scheme which would provide what he called,the minimum income needed for subsistence in all normal cases".I doubt whether that would be acceptable to-day. People to-day do not want elderly persons to live in a state of incipient poverty. They want them to he assured of a life of modest comfort, in which every lump of coal will not have to be counted, and with possibly 1055 an occasional visit to friends or to the seaside. But, at the same time, the public are insistent that public funds should not be used to assist those who are really not in need; and so long as that happens, it is my belief that it will never really be possible to make the provision for those who are genuinely in need which we should like and which I think we should all consider that we ought to make.
§ 4.50 p.m.
§ LORD HOBSON
My Lords, we have listened with great interest to the noble Lord, Lord Ilford, as we always do when he speaks on National Assistance and on matters of social security. Indeed, he follows in the line of good administrators in the Department. I am thinking particularly of the late George Buchanan the Clydesdale pattern maker; and, of course, we must remember the real founder of this form of social legislation, the late Arthur Greenwood. It was he, after all, who instructed Lord Beveridge to produce the scheme which subsequently was turned into an Act of Parliament and became the law of the land, this being one of the first measures that my noble friend Lord Morrison of Lambeth placed before the first Labour Government of 1945 to implement. But, having said that, I think we must remember that, whatever may be the points in favour of the Beveridge Scheme, it was brought forward in conditions which now no longer exist.
My main theme in the contribution I wish to make to this debate is that the 1951 £1 is now worth 13s. 6d. I think we must have that at the back of our minds when we are considering what are adequate pensions under any social security scheme. I was interested to see that the noble Viscount, Lord Blakenham, was put in to bat first on behalf of the Government. He is a good batsman on a wicket of this character. He is very pleasant, with plenty of bonhomie, and he always knows his brief. Unfortunately, I disagree with a lot of the conclusions in that brief. But at the outset of his remarks the noble Viscount made a statement in a rather critical and political vein. I do not mind that. He said that the Labour Party had produced four statements on pensions in seven years. That seemed to indicate that we did not 1056 know our own minds. I think that in this matter we must have a sense of fair play and understanding.
Of course there have been four statements in that period, because we are dealing with changing conditions. We are dealing with continual depreciation in the value of money, and the Labour Party or any other political Party would be foolish if they did not reconsider their pension schemes in that light. Of course there is a statement when a General Election is in the offing. What are politics about, anyway? Surely, the question of pensions is one that affects a very large section of the community, and the Labour Party would indeed be failing in their duty to the electorate of the country if on a matter of this character they did not produce a policy.
What are the problems that any political Party will be faced with when dealing with pensions or National Assistance? First, assuming that all political Parties have accepted social security, there is the question of inflation. Secondly—and not much has been said about this this afternoon, except by my noble friend Lord Peddie—we have the question of private schemes. Thirdly, there is the question of anomalies—and little has been said on that subject, so far.
On the question of inflation, I do not want to get involved in an economic argument (this is hardly the occasion for it), but I feel constrained to say that one thing this Government have not done is to tackle inflation. Their broad policy has been one of no unemployment with inflation; whereas the policy of the Labour Party, the policy that we should pursue, would be to maintain full employment with a controlled inflation, because there are certain factors in the form of prices which we cannot control. The real trouble is due to the tremendous increase that has taken place in rents. The noble Lord, Lord Ilford, mentioned rents of 5s. a week, and he gave a figure of 14,000. I do not know off-hand the number of hereditaments in this country, but in relation to the total number that figure of 14,000 must be very small. However, there is no question that, as a result of the operation of the Rent Act, particularly in the large cities, the effect on the incomes of the old-age pensioners and the unemployed 1057 has been pretty considerable and has led to a great increase in out-payments by the National Assistance Board.
It was interesting to note that when the noble Viscount, Lord Blakenham, was speaking he referred to retail prices. I wonder to what retail price index he was referring. Is it one that includes rents? If it is not, then his figures might be correct; but if it includes rents, his figures must be wrong. The fact of the matter is that if we had not been faced with this inflationary system, which has been continuing (and it is not a result of "the wicked Socialists"; it has just gone on and on), the original scheme, with occasional revision, would probably have been quite adequate. But we have had to increase pensions, and at the present moment they are still inadequate.
What is going to be the position with the tremendous number of private schemes? More and more people are coming under private schemes dealing with old-age pensions. It used to be only local authority and Government workers who were covered by pension schemes. Now many large firms have quite satisfactory pension schemes in operation. The position of the worker to-day (my noble friend Lord Peddie referred to this matter, but I want to elaborate it) is that he is faced with having to find not only the contribution he has to make to his own scheme, but also the contribution he has to pay to the Government. He may opt out of their graduated scheme; but he has a social imurance payment to make which is quite considerable. So by the end of the week his pay, to put it in the language of the workshop, is countersunk, and he comes out with far less than he thinks he ought to. The result is that we get the cycle of demands for increased pay. Whatever Party is in office, the question must be faced: who is going to contribute to the old-age pensions, and who is going to draw it?—because there comes a limit to the amount the worker can pay if he is going into both schemes. This is a serious matter: it is one that affects both political Parties, and it will certainly have to be considered very carefully.
I think the attitude of the Government is, briefly, that, "You can have any pension you like, provided you pay for it". As my noble friend Lord Peddie 1058 has said, the amount which is contributed from the overall national Exchequer gets less, and in proportion it is considerably less than it was when the old-age pension was only 10s. per week. This, of course, is a question of redistributing the national income. This is really what is involved here; and, of course, it conflicts with the normal Conservative dogma—because, after all, redistribution of income is what politics is all about.
I should like to ask one or two questions about the anomalies which exist. What is the Government's attitude with regard to the "10s. widow"? Surely it is about time something was done for her. She is in a very unfortunate position. I know that there have to be datum lines when schemes start, and that when the datum line is fixed there is always somebody just outside it, with the result that hardships and anomalies follow. But I think this is a matter that needs to be looked at. There has been much talk this afternoon about Public Assistance—
§ LORD ILFORD
My Lords, I regret to hear the noble Lord speak of "Public Assistance". "Public Assistance" came to an end a very long time ago.
§ LORD ILFORD
I would not have interrupted except that in this matter there is something of importance in names.
§ LORD HOBSON
I am glad of that second interjection, because it brings me to something that I was going to say. From my experience in a working-class constituency for many years, I know that there are thousands of people who could qualify for National Assistance but who, for reasons of pride, do not take advantage of it. They are often the people who are most in need. I do not like publicity campaigns saying, "Come and get what you are entitled to", but I know that the Department have considered this matter and that there have been one or two very tactful leaflets, which are available in the Post Office, dealing with this specific problem. In my experience I have been really appalled by dire cases of poverty where, because of pride and the old-fashioned ideas of thrift—and all which is best in our lives, really—they have not felt like claiming 1059 National Assistance. If anything can be done to improve that situation, so much the better.
Now we come to another anomaly. Are we satisfied (I think this is the proper way to put it) that the self-employed person should never draw unemployment pay except after a gap of, I think it is, 26 or more weeks? I can visualise bankruptcies arising of small shopkeepers and people in small businesses. I think there should be a rather more generous approach to their problem. The assumption is that if you are self-employed, you will never be unemployed. We know that in life that just is not true, and I think there is a case for looking into this.
I was going to say quite a lot on the graduated pensions, but I should be wasting my time and should be guilty of the most tedious repetition if I were to do so, because I endorse entirely what my noble friend Lord Peddie has said on this matter. If any insurance company produced a list of subscriptions for benefits on these lines, they would immediately be arrested on the grounds that they had produced a fraudulent prospectus. I do not think that is an abuse of words—I believe it to be an absolute fact. Therefore, I believe that something more realistic ought to be forthcoming, and there ought obviously to be more generosity from the Exchequer in dealing with this complicated problem.
I suggest, with humility, that your Lordships' House must have the whole question of pensions continuously under review and have frequent debates on this matter, because of the changing circumstances. I should like to see the basic principles of a scheme produced which would be acceptable to both Parties. I think that would be an advantage.
§ LORD HOBSON
I beg the noble Lord's pardon. I always feel very sorry for the old Liberals. It should be acceptable to all Parties. There are two I would not mention, but I am quite sure that, whatever Party is in power, the broad principles should be acceptable. We say that the Government have handled this business badly, and that they have been mean. We of the Labour 1060 Party have produced a scheme which is quite realistic in the light of the proven needs of the people who are normally the beneficiaries of social insurance.
§ 5.7 p.m.
§ LORD SOMERS
My Lords, I did not mean to intervene in this debate, but I should be most grateful to my noble friend if, when he came to reply, he would make my mind a little clearer about two points which have worried me for a long time. One is the question of the joining of incomes. Take the case, for instance, of a single woman who has been earning perhaps for some time, and comparatively late in life she decides to get married. In a case like that I think her income would be joined to her husband's, and though they would still both go on contributing she would have to wait until he was 65 rather than until she was 60 before getting her old age pension. If they were both of the same age, for instance, that would mean an extra five years' wait. I should have thought that a more just system would be for them to have the choice whether or not they kept their incomes separate.
The other point is about the balance of the contributions. Are they really justly balanced? As things are at the moment, the person who pays the smallest amount is the man who sometimes is earning quite a considerable income. Those who are unemployed pay very heavily, and although I admit that some persons who are technically unemployed are perfectly capable of doing so, there are some who are definitely unemployed and needing employment and who find this contribution very hard to cope with. The self-employed man, of course, pays even more, and if he is a small businessman with, say, two assistants, he has to pay a very heavy contribution for himself, and also half for each of his two assistants. I wonder whether this is an altogether fair balance.
§ 5.10 p.m.
§ LORD TAYLOR
My Lords, I do not propose to try to answer the conundrums of the noble Lord, Lord Somers. I think those fall to the unhappy lot of the noble Lord, Lord Drumalbyn, to cope with. It is only fair to say that, whatever system of National Insurance one has. inevitably there will be anomalies and 1061 difficulties. Anybody who has tried to design one must realise that this happens. Certainly in any proposals which the Labour Party put forward you may be sure there will be anomalies and difficulties, and the noble Viscount, Lord Blakenham, was not backward in pointing out one or two. But this is a feature of every scheme, and you cannot avoid it when you are trying to work out a good and valid national insurance scheme, or social insurance scheme as I should prefer to call it.
My Lords, I have been thinking about £3 7s. 6d., which is the sum of money which is his or hers by right per week, if he or she is a single person old age pensioner; and which is the sum which gives the noble Viscount, Lord Blakenham, great satisfaction. I do not blame him; he has a fair point there. He has advanced the level of benefit roughly in step with the cost of living. He is a very good debater and I am sure he would not mislead us with his figures, at least not deliberately. But £3 7s. 6d. a week! I wonder how many of us have ever thought about living on it. Each time we attend your Lordships' House we get three guineas expenses, and I reckon that this works out, at 100 days' attendance a year, to about £300 a year, which is precisely twice what an old age pensioner gets if he is single. How on earth can anybody live on £3 7s. 6d. in any condition other than what the noble Lord, Lord Ilford, calls "incipient poverty "? It really is incipient poverty.
The noble Lord, Lord Ilford, helped us a great deal in this debate. He spoke rather gloomily but he certainly gave us some very valuable social information; and I have never known him not to do so. He told us that the average rent of people in receipt of National Assistance in the London area was 32s. 6d. a week. Most old age pensioners are not claiming National Assistance; they are living on their old age pension and are paying out this 32s. 6d. a week in rent.
My Lords, could I ask the noble Lord a question? I do not know whether statistics have been produced during the debate, but is he correct in saying that most old age pensioners are living on £3 7s. 6d. a week? I thought the vast majority of them had pensions from other sources as well.
§ LORD TAYLOR
I was referring to the fact that they were not in receipt of National Assistance. Most old age pensioners are not in receipt of National Assistance. The £3 7s. 6d. is their old age pension. I do not know, and I should not like to give a figure, for any other sources of income which they are receiving. Indeed, I do not know whether such a figure is available. If it were, I think it would be a very valuable thing to have. But most occupational pension schemes in this country for working class people yield only something like £1 or 30s. a week.
§ LORD TAYLOR
My noble friend Lord Lindgren says less than that, and he knows the thing backwards. Add £3 7s. 6d. and 30s. and you have £4 17s. 6d.; and you are still a long way behind what we regard as our expenses; and I say that it is a miserable thing. This is not a way for old people to live. There is something wrong here; there is something wrong in an affluent society, where the average wages are £15 or £16 a week, for our old people to be getting pensions on that level. It is a perfectly fair thing to say that this is a projection through from what the Labour Party did in 1945; if you project the line it comes out to something like this. But I could have hoped that it would have jumped just as we made it jump from what it was before. We ought to make it jump; it can jump again, and I hope we are going to do it. That is one of the things that this Election is going to be about. That is why it is very important that we should be having this debate to-day.
My noble friend Lord Hobson said that this discussion is about the redistribution of income, and I think he is absolutely right. If there is one gross, horrible injustice of income which we all take for granted and do not make a row about as we ought to be making a row about, it is unequal pay for men and women. I remember my wife telling me how she went to visit one of her discharged prisoners from Holloway. She went to a laundry. She saw the woman working in the pressing department of the laundry. This lady was earning about £7 10s. a week and it was very hard work indeed. There was a man on the gate smoking a 1063 cigarette. My wife had asked him the way, and he pointed with his cigarette. She had followed it up and asked the supervisor what he got. He got £14 a week. There is the woman doing one of the hardest jobs in the laundry for £7 10s., and this chap getting £14 a week for doing almost nothing.
§ LORD TAYLOR
Well, thank goodness this is one of the things this Election is going to be about! Because let me remind noble Lords that at the 1963 Labour Party Conference we pledged ourselves that we would ratify the Geneva Convention No. 100 to get this matter put right; and we shall be one of the last of the NATO and European countries to do so. Let me remind noble Lords that in the Common Market countries, for every pound of a man's earnings, a woman, for the equivalent work, takes home 17s. in France; 12s. 6d. in Western Germany; but it is only 10s. here in Britain. This is one of the things this Election will be about, too. Incidentally, that, of course, would have its bearing on pension contributions and pensions benefits.
My Lords, I have always been very interested in the range of incomes between rich and poor people; and by rich people I do not mean people getting big incomes in business or enormous incomes as a result of speculation, but just salaries. If you take salaries, it is very interesting to find how things work out. Take the earnings of a crossings sweeper or a municipal street sweeper and compare them with those of the heads of the Civil Service or a member of the Cabinet. In Sweden a crossings sweeper gets so much, the heads of the Civil Service get five times as much, and a member of the Cabinet gets six times as much. In Switzerland the ratio is 1:3:7. Notice that in Switzerland Ministers get two-and-a-half times as much as Civil Service heads. It is rather a different situation from the one here, where the heads of the Civil Service receive considerably more than Ministers; a very strange anomaly. In this country, the best figures I have been able to work out for the moment are: the lowest municipal employee 1; head of the Civil Service 16 times as much; a member of the Cabinet 10 times as much. I think that these are unhealthily large 1064 gradients. I am not suggesting that we should reduce anybody's pay; but I am suggesting that all our efforts should be to increase the pay of those who are getting least.
My Lords, are the noble Lord's figures before, or after, tax, which makes a very great deal of difference?
§ LORD TAYLOR
My figures are before tax. It is perfectly true that our tax corrects to some extent the discrepancy; but, equally, there is a fairly heavy income tax, both in Sweden and in Switzerland. I have not attempted to make these corrections, as perhaps I should have done, solely because of lack of time, but the principle is a clear one: I think all the time we must be aiming to narrow the gap. Let me give the Government this credit at least; the gap between the two over the last twenty years has very slightly narrowed in this country. It used to be a ratio of 1:20 and it is now 1:16, and that has been achieved largely by the upgrading of the lower paid, but it is a pretty slow process.
When it comes to what we ought to do about social security, that is really rather a sad story. I remember so well reading the whole of the Beveridge Report and I, like so many of your Lordships, was very interested in it, because my noble friend Lord Longford was at the time personal assistant to Lord Beveridge. I remember giving evidence to Lord Beveridge on the subject of a national health service. The first point that he made was that any decent social security scheme must have these three sources: a worker's contribution, an employer's contribution and the State's contribution, and they must be, roughly, equal. The reason why they must be roughly equal, he said, was that the first two are in effect a wages tax and in effect a poll tax, and the only way to redress this is by having a generous State contribution of equal size so that we bring in an element where we all pay according to our capacity to pay. That, I think, we always thought right, and we still think it is fundamentally right as a basic plan for the main contribution.
The only tragedy of it is that things have changed under the Conservatives. 1065 We have now been taught that benefits ought not to be subsistence benefits; they ought to be the minimum benefits, almost, that one can get away with; and that subsistence must come through National Assistance. I do not think that is a good plan; I do not think that is something the people of this country want. They are prepared to pay proper, good contributions to have proper, good benefits in return.
The thing that has shaken all of us on this side, and everybody throughout the country who has studied it, has been this extraordinary graduated pension scheme. My noble friend Lord Peddie has dealt pretty faithfully with this scheme. He described it as (I think he used these words) a fraud or swindle.
§ LORD TAYLOR
I certainly agree you cannot spot the winner on this particular scheme, unless if be the upper income earner. He is the winner, the fellow who can contract out of it; he is the fellow who scores. And of course anybody who looks at the scheme realises it is a swindle, and if he possibly can contract out he does, because it pays you hands down to contract out. You get a far better scheme, outside the Government scheme, from any insurance company, and the reason is this extraordinary transfer of an enormous amount of the takings of the scheme—something like nine-tenths of the takings of the scheme, at any rate after about five years—into the general National Insurance pool, so as to let the Government and us again, the higher taxpayers, off our taxation contribution to the general scheme. It is a most extraordinary system.
The noble Viscount, Lord Blakenham, criticised my honourable friend Mr. Crossman for saying it ought to be hard to contract out. Of course, it ought to be hard to contract out, because any State scheme is bound to carry the bad risks. Any private scheme invariably, or almost invariably, pushes out the bad risks. In the private schemes I know that one of the routines is to have a health examination at the start, which excludes the bad risks. But the nation as a whole has got to carry the bad risks, so we must have it as comprehen- 1066 sive as we can, and we must indeed have it as non-opting-out as we can.
Then there is this question of transferability. Most private schemes are not transferable, and they are not transferable because of course one of the objects in having a private scheme is to tie you to your job; that you are going to get your benefit after x years, at 65, is an added incentive to you to stay in your job. If you leave before then you usually get back only your own contributions or something slightly less. That is the present situation. Although with the Government scheme you have to buy in, to people at this sort of level buying in is quite a small financial item. So the disadvantage of existing private schemes is their non-transferability. There are some transferable schemes—for example, the universities superannuation scheme, which is fully transferable. There is one to which I belong called the Nurses and Hospital Officers Federated Superannuation Scheme, which is for those doctors and nurses who work outside the National Health Service, and our scheme is pretty transferable. Most people do not have a chance to belong to a transferable scheme. But, of course, financially it pays them hands down to contract out and get good terms outside from private insurance schemes, rather than to contract into the Government scheme.
My noble friend Lady Summerskill raised the question of whether we could afford a decent scheme. Of course, we can afford a decent scheme. This is money we spend, as it were, annually out of income. If we support x million old-age pensioners we do it during the current year; it is their purchasing power during the current year that matters. One must always think of it in terms of the current year's national earnings. They will not be saving anything out of their old-age pensions; they will be spending the lot. It is therefore simply a matter of making an annual social budget. Again to compare what our friends in Western Europe spend, the proportion of national income spent on pensions, family allowances, and sickness and unemployment benefit, we spend 12.11 per cent., Sweden 12.9 per cent., Italy 15.2 per cent., Belgium 16.3 per cent., France 18.9 per cent., and West Germany 20.8 per cent.
§ LORD TAYLOR
I shall have to look it up, but I think I can find it. I was, in fact, referring to 1957, and I may be wrong; it may have altered since then. Perhaps the noble Lord can correct me if I am wrong.
There are two features of the Labour Party plan that I want to refer to. It was very clearly explained by the noble Viscount, Lord Blakenham; he made a very good exposé of many aspects of it. But he did not mention the question of having a National Pensions Fund. First of all, we of course believe in graduated contributions. We think the time has come when we must have graduated contributions, not just a National Insurance contribution plus a graduated contribution as at the moment, but graduated contributions all the way through. I must say that I should like to see it as part of one's income tax payments, for simplicity's sake, and I do not see why we should not include it in income tax if it is a graduated contribution. Under a graduated contribution scheme those less well-off would pay less than at present, but most of us would pay more than at present. There is no question about that. Most of us would pay more than we do at present. But I hope we should get decent value for it, because we should get an income-based pension and an income-based benefit when we were sick or when we were in need; and one ventures to think that for most people that would be worth while.
It may well be that the future of private insurance firms would suffer; that perhaps they would not be doing quite so well if the Government gave a good service in this respect. I am prepared to admit that. But for those who want to continue with their private schemes, they are splendid things, and nobody is proposing to take them away. But we are proposing that the State pension scheme should benefit, in the same way as the private pension schemes do, from national prosperity; and that we should be allowed to invest with trustees our money that has been collected in a National Pensions Fund. In that way, as the value of investments grew, so would the value of our money grow; and the State pensioner, the pensioner on a basic income, would get the same 1068 benefits as the private pensioner gets, and as I get from my U.K.P.I. Provident Fund, which gives me a "with profits" policy. I am delighted to get that. But why on earth should not everybody get it?
§ LORD TAYLOR
As my noble friend says, it would offset inflation. This is something that the noble Viscount, Lord Blakenham, did not mention. But it is certainly something that we are determined shall happen.
Then we talk about benefits. We say that it is a good thing to have a flat rate benefit, adjusted annually in relation to the national level of earnings, and not requiring an Act of Parliament every time it needs alteration, and then a graded element related to previous earnings and previous contributions. We want to see family allowances graded with age, because the expenses of a family increase with the age of children. Anybody who has seen young boys and girls of thirteen or fourteen eating, and compares the actual volume of food they eat with that eaten by the two-year-olds and three-year-olds, knows that the difference is gigantic. So here a fixed flat rate family allowance is quite unrealistic.
My noble friends have dealt with the question of the income guarantee. One or other of them has dealt with all the aspects of our policy, and I think dealt with them clearly. I hope it has now become clear to your Lordships, and that in the months immediately ahead it will become clear to the country, what this coming Election will be all about. One of the things it is going to be all about is whether we should have our kind of social insurance or the Government's kind of social insurance. If the matter is properly, clearly and honestly explained, I do not think there will be much doubt which the public will choose; and, for our part, we will do all we can to see that the issues are fairly and clearly stated.
§ 5.34 p.m.
§ THE MINISTER OF STATE, BOARD OF TRADE (LORD DRUMALBYN)
My Lords, I am grateful to the noble Lord for the way in which, in the course of three hours, he has brought the Election 1069 a good deal closer. He has invited us to explain properly, clearly and honestly our policy. All I can promise to do is to do it honestly, and it will be for your Lordships to say whether I have done it properly and clearly. Before I start, perhaps I might be allowed to pick up one point that the noble Lord made, because it may help as a background. He asked about the number of pensioners. There are 6 million pensioners. Those are, of course, people who receive individual pensions. Of those, 1½ million retirement pensioners have supplemented basic pensions with an average supplement of 8s. a week resulting from their increments, their working on after 65 or 60, as the case may be. Then, 1½ million, over half of whom are retirement pensioners, also have occupational pensions. Of course, some of these may be households and some of them may be individuals—it is difficult to sort out. Then, again, as my noble friend Lord Ilford said, 1.1 million of the retirement pension households receive National Assistance supplements. These again are households, as National Assistance is paid to the house.
This has been a most interesting debate. There have been a great many criticisms, as one would have expected. Some have been general, some have been detailed. I think that what is important, and not least when an Election is approaching, is that we should all have fairly clearly in mind the kind of scheme we want. It is not a question of the level of benefits, it is the kind of scheme that is involved. What kind of benefits do we want, and for whom? What will they cost? How is the money to be raised? Should the scheme be funded or on a pay-as-you-go basis? Those are some of the fundamental questions that we all ought to answer for ourselves.
I would agree with the noble Lord, Lord Taylor, that it is impossible to devise a national scheme which will meet need in every conceivable circumstance without anomalies. That is why it has been regarded as essential to have a supplementary scheme, the National Assistance scheme, which will meet particular needs. May I just dwell for a moment on the different kinds of schemes that one can have, so that one can see how the suggestions of the Party opposite and of the Liberal Party would fit in. 1070 First of all, one can have a noncontributory scheme, financed from taxation, such as the Liberal Party introduced originally, in which benefits are paid subject to a means test. May say, before passing from that, that some countries have that sort of scheme, among them some in the Commonwealth.
Secondly, one can have a contributory scheme under which benefits are related to contributions. This can take several forms. First of all, you can have equal benefits and equal contributions. Secondly, you can have contributions that are in proportion to earnings, and benefits in proportion to contributions. Thirdly, you can have contributions that are in proportion to earnings but benefits are redistributive—that is to say, that the lower-paid contributor will get higher benefits in relation to his contributions than the higher-paid contributor. That, as I understand it, is the purpose of the Labour Party scheme.
There is a third kind of scheme which lies, in a way, between the two. That is a scheme to which the contributor pays nothing and which is financed by the employer. This, as I understand it, is the type of scheme put forward by the Liberal Party. Such a scheme could either give flat rate benefits or benefits related to earnings. Any scheme which is not financed from taxation could be funded. Our own experience with funding, to which I shall come back later, except for industrial injuries, has not been happy. Other countries which have funded schemes have tended to avoid one single national scheme because of the inherent difficulty of putting all your eggs in one basket.
The problem really is to ensure that liabilities and expectations can be met. If a Government commits itself, for example, to pensions equal to half-pay, how is it going to ensure that the fund will retain its value in real terms so as to meet its obligation, let alone its value in proportion to increasing standards of living? This uncertainty is so great that one cannot help looking for another motive in any such scheme. I may be wrong, but can it be that a Labour Government wants to obtain control of vast funds so that it can gradually and progressively take over a controlling interest in more and more of the country's industries? If it does so, how 1071 can it ensure that those industries will prosper sufficiently to enable it to meet its pensions obligations?
There is another general consideration. Should there be one single National Insurance scheme, or should there be separate schemes for pensions for sickness and for unemployment, as there used to be in this country and as there are in many other countries? Perhaps I might say a word about schemes in other countries. 1t is difficult to make comparisons of this kind, but the noble Baroness, Lady Summerskill, mentioned the German scheme, and I thought that it would be worth while saying something about this because of her suggestion that Britain is lagging behind other European countries in social security provisions. In regard to pension schemes in European countries, the key word is "eventually".
For example, in West Germany the average pension now in payment to retired persons under the manual workers scheme, which covers people other than salaried employees and miners, is about £3 16s. a week; and as there is no separate pension for a dependent wife, the current British rates of £3 7s. 6d. single and £5 9s. married will certainly stand comparison. he Belgian pension, to which the noble Lady made reference, of 65 per cent. of average earnings for a single person and 75 per cent. for a married couple is payable only after 45 years of insured life. The unemployment benefit level of £6 5s. a week in West Germany, on average, stands comparison with the British rate of £6 9s. a week for a married man with one child, and the higher rates payable to men with larger families. I thought it right to say what is, so to speak, the state of play at present as between ourselves and other countries, and at the same time to draw attention to the great danger of making direct comparisons, partly because of differences in cost of living and partly because of differences in the times and the conditions under which one becomes entitled to benefits, and so forth.
I was asking, should there be one single National Insurance scheme? If there is a single comprehensive scheme, surely it must be based on a single intelligible principle. The principle on which the National Insurance Scheme is based is that of benefit in the absence of earn- 1072 ings, and hence the earning rules to which my noble friend referred and over which I need not go again. In the course of time any scheme is rightly adjusted to meet particular needs. There was a problem that some contributors had occupational schemes to which to look forward in addition to their National Insurance pension; others had not. For that reason the graduated supplement was introduced together with the right for those employers who ran occupational pension schemes for their employees to contract out of it, always provided (and this is important and is a point which the noble Lord, Lord Peddie, did not mention) that their occupational schemes gave as good results as the best that could be obtained under the State scheme, and that at least that amount was preserved for the employee if he should leave his employment. So to that extent again the point made by the noble Lord, Lord Taylor, has been met, in that the graduated scheme has to some extent encouraged transferability.
In determining social security policy it seems to me that there are three broad considerations to be borne in mind. First, the needs of those receiving benefit in relation to the general standard of living of the community; second, how the benefits are to be paid for and the effect on the economy of the country; and third—and this is a point which, rather surprisingly, I do not think has been mentioned at all in this debate—the encouragement to be given to effort and thrift and, in general, to people to provide for themselves.
§ LORD AMULREE
My Lords, I think I did say that. I thought it was a good thing if people could be paid a bigger wage and be encouraged to save more by reducing taxation. If one encouraged a bigger wage, one might be able to do away with pensions altogether.
§ LORD DRUMALBYN
I apologise to the noble Lord; I overlooked what he said. It seems to me that one of the great merits of the Beveridge scheme was that everyone was called upon to make an equal contribution which would entitle him or her to basic benefits, and that that contribution would be such as in most cases to allow the contributor, if he so wished, to make further provision for himself either through a private 1073 occupational pension scheme or in some other way.
The noble Lord, Lord Hobson, called in doubt the possibility of some people contributing both to the State scheme and to the private occupational schemes. I am aware that in certain brackets, particularly those earning between £9 and £15, there are difficulties—the noble Lord will know very well what they are. But, speaking generally, it is true that the rates are so fixed that it is possible for people to make provision for themselves in addition to the pension. The present National Insurance scheme makes it possible for additions to be earned to retirement pension; this again has not been much stressed in making a comparison of figures. The contributor can go on working after retirement age and earn increments. The latest report shows that nearly 41 per cent. of men who retired last year had earned increments of an average value of 10s. 4d., and 28 per cent. of women earned increments on their own insurance of lls. 9d. Secondly, the graduated pension scheme provides a supplement for those earning over, £9 per week which will grow with the years and thereby helps those who are not included in an occupational pension scheme. It also ensures for the 4½ million people who are contracted out that their occupational pension is preserved for them at the maximum graduated benefit provided under the State scheme. Lastly—this is another point that has not been much stressed—it has enabled benefits for the lowest paid workers to be increased without increasing their contribution. This is what happened in 1961.
There has been a good deal of tendency in the debate to-day to discourage the graduated scheme. It is important to remember that this is not something which is separate of itself. People are apt to write to the papers and compare what one will get from contribution to the graduated scheme with what one would get if one invested the same money outside. But it is not something on its own but is part of the full scheme. It is clearly an integral part of the retired pension, and at present contributors get a very good bargain indeed for their contributions. If one takes the case of a man retiring from employment at the age of 65, having been insured since 1074 contributing pensions started in 1926, and having earned the maximum reckonable earnings since the graduated scheme started, the most that he and his employers can have paid in contributions is about £540. If he is married and his wife is five years younger than himself the capital value of the pension of himself and his wife at the time of retirement is £3,500. I challenge anybody to say that that is a bad bargain. Noble Lords may well say, "Well, that is the capital value of £3,500, but the income is not enough".
§ LORD TAYLOR
My Lords, I am a bit lost on the figure the noble Lord has just given us. Is the noble Lord including the ordinary pension of the person?
§ LORD DRUMALBYN
I started by saying that the graduated pension has to be looked at as an integrated part with the general National Insurance pension. This is the way it is designed.
§ LORD TAYLOR
Am I not right in thinking that one has to consider the contribution of the State, the contribution of the employer, and the contribution of the employee to the Fund? One should not just take the employee's contribution, then add his graduated contribution and say that that is what comes out at the end. Surely, the noble Lord is being disingenuous.
§ LORD DRUMALBYN
With respect, I do not think I am being disingenuous. What I have been taking is the total of the combined contribution of the employer and the employee—all that they in combination can have contributed to the scheme over this period of time. I have not put in the contribution of the State, but I shall be coming in a few minutes to the question of the State contribution which was raised by a number of noble Lords.
My Lords, I think it is only fair to say that at any rate the present pension is a good deal more in real terms of purchasing power than the 26s. single and the 42s. married pension of October, 1946. The equivalents at present values 1075 —and I think noble Lords might like to make this comparison—of the 26s. and the 42s. are 50s. 2d. and 81s., as compared with the present rates of 67s. 6d. and 109s. I think one must make quite clear that it is not intended that anybody should necessarily try to live on that amount. Again, our social security system is an integrated system. If they have no other resources, or little else besides, they can have all but 4s. of their rent and rates paid by the National Assistance Board; and if they have special needs those, also, can be be met by the National Assistance Board.
The noble Lord, Lord Peddie, drew attention to the number of pensioners drawing National Assistance supplements. He quoted the figure of 1,100,000, and that, if he will look—I think it is in Appendix V of the National Assistance Report—is said to be 22.5 per cent. of pensioner households. But if he likes to compare that with the position in December, 1951, he will find that the number of retirement pensioners then drawing National Assistance was 22.7 per cent. of pensioner households. So he will see that his strictures in this regard were not justified, and the position is very much as it was then.
§ LORD PEDDIE
My Lords, surely the stricture is completely justified when it is indicated that one in four persons drawing retirement pension find it so inadequate that they have to secure assistance from the National Assistance Board. Surely, that is deserving of stricture.
§ LORD DRUMALBYN
My Lords, I said before that one has to regard the social security provision as an integrated provision in this country. If there is the very wide disparity of rents that has been quoted by the noble Lord, Lord Ilford, in the debate to-day, ranging from under 5s. to over 50s., it would not he sensible to give a pension which would cover the highest rent and distribute that to everybody. You would thereby be making some people very much better off than others through a straight State subvention, and I suggest that that would simply not be sensible.
My Lords, may I deal with some of the criticisms that have been made; first 1076 of all, the criticism that the Exchequer is not paying enough. It is paying £218 million plus £52 million in interest; that is, £270 million in all, compared with about £1,170 million paid by contributors and their employers. Noble Lords will know that the State contributions are fixed by law at one-quarter of the joint flat rate contributions of employed persons and one-third of the self-employed contributions. The noble Lady, if I understood her correctly, said that the principle of State contributions to the fund had been jettisoned. I think those were her words. But who jettisoned them? The Labour Government's National Insurance Act reduced drastically the Exchequer support to the main National Insurance scheme. It was as a result of that—and I shall deal with the reason in a minute —that, in the years immediately following, the Exchequer payments reached the lowest point of £65 million in 1952–53. It was the result of an Act passed in the time of the Labour Government.
§ LORD PEDDIE
My Lords, I must apologise for this intervention. Perhaps not deliberately, the noble Lord is certainly misleading this House with regard to these figures. He is quoting figures which seem to indicate in round terms that the Exchequer is making a greater contribution than it did in the past. That is just not so. I make the challenge, which I ask him to refute, that the percentage of contribution by the Exchequer is lower to-day than it has ever been. Therefore, the mere quoting of figures, as he is doing now, is not giving the true picture. The noble Lord made mention of the basic amounts. The very purpose of the introduction of the graduated contributions was to create a device which was to add to the contributions made by the employer and the employee, and so reduce the Exchequer contribution.
§ LORD DRUMALBYN
My Lords, once one starts talking about true pictures one introdoces a subjective element, and I do not think the noble Lord's strictures upon me in this are entirely justified. I quite see his point of view on this matter. What I am saying, and this simply cannot be controverted, is that what reduced the amount of the Exchequer contribution was the 1951 Act, at a time when I think the noble Lady was actually a Minister of Pensions, although I agree that the Treasury had something to do with this.
§ BARONESS SUMMERSKILL
My Lords, the noble Lord has put this in a very curious way, and I am sure he does not mean to present it in this way. Disingenuous is a mild term. Is it not a fact that, at the end of that period, the contributions from the Revenue were one-third of the total, and the contributions from the Revenue now are one-sixth of the total? Would the noble Lord keep to those two figures?
§ LORD DRUMALBYN
My Lords, here one comes very much up against the question of what is a true picture.
§ BARONESS SUMMERSKILL
My Lords, all I ask is that the noble Lord keeps to those two figures. Is that true or not?
§ LORD DRUMALBYN
At the present time the noble Lady is really asking a question similar to, "When did you stop beating your mother?"
§ LORD DRUMALBYN
Yes, the noble Lady really is. I have twice been interrupted while I have been trying to explain this matter. I stated the facts, first of all; now let me explain the matter. The fact of the matter was that in the early stages the Exchequer contributions were considerably greater, and because they were not being spent and because they were simply accumulating the Government of the day had to make the decision whether they were going to reduce the Exchequer contribution, or whether, presumably, they were going to reduce the other contributions. What they did by their legislation in 1951, which of course did not operate in the year with which the noble Lady is making the comparison, was to reduce the Exchequer contribution, with the effect that I have mentioned: that the Exchequer contribution fell. My Lords, this is just—
§ BARONESS SUMMERSKILL
My Lords, would the noble Lord answer my question about the third and the sixth?
§ LORD DRUMALBYN
My Lords, I do not have the figures before me, but the figures are not relevant because this is the situation which the noble Lady herself changed. Would she admit that?
§ BARONESS SUMMERSKILL
My Lords, I am asking the noble Lord to say whether it was a third in my time and a sixth in his? Would the noble Lord answer that simple question?
§ LORD DRUMALBYN
My Lords, my answer is that, whether or not that is so, the noble Lady made the change as the result of which the change came about. So that she cannot now complain that the present Government are reducing the State contribution. It is perfectly true, as the noble Lord, Lord Peddie, said, that there is no State contribution tied to the graduated pension, nor in my view should there be. There is no real reason why a State contribution should make one person better off than another.
I come to another criticism that has been made, and that is that the benefits are too small in relation to current earnings. I would first of all observe that the relationship between average earnings and the basic benefits—unemployment, sickness and retirement—is practically the same as it was in 1946, and much better than it was in 1951. Secondly, the comparison is often made between benefits and gross pay, whereas, of course, it should be made with net pay after deduction of National Insurance contributions and taxation. On that basis, a married man's basic benefit is 40 per cent. of his net earnings if his gross pay is £16. But if his gross pay is only £12, his basic benefit would be 51 per cent. of his net earnings; and if he had four children—and these, after all, are the people that have to be helped most of all—his benefit, including family allowance, would he 76 per cent. of his net earnings. I mention that point merely to show that if benefits were increased very sharply—for example, to the level suggested in the Liberal pamphlet—a family man with a relatively small wage might well be better off if he were unemployed than if he were working.
I appreciate that the noble Lady would like to see pensions and other benefits related to earnings. Of course, to an increasing but modest extent the present scheme is related to earnings through the graduated element. The noble Lady, as we know, wants something much more drastic than that. But what about the cost? Noble Lords on 1079 this side of the House have pressed this question all the time, and there has not been any satisfactory answer to it. There are clearly limits to the amount by which we can increase the burden which employers can absorb without increasing prices, however beneficial higher benefits might be. The noble Lady might say they are benefits, and therefore ought to be absorbed. All I would say is that there are clearly limits to the extent to which they can be absorbed. Also, if employees' contributions are not, on average, to be increased, the increase in employers' contributions and taxation is likely to be heavy.
Then, as I have said, what guarantee is there that the accumulated funds will preserve their value in real terms, or even in terms of pounds, shillings and pence? As is known, we run the National Insurance Scheme on a pay-as-you-go basis at such a level of contributions that people can save for themselves as well. At present, over 5 per cent. of the national income goes on National Insurance benefits, as compared with 3.7 per cent. of the national income which went on insurance benefits in 1949. How much more do the Labour Party think it would be wise and right to raise by compulsory levies? We have not been told. There is a better case, of course, for short-term benefits related to earnings, since they are paid on the occurrence of events which could not be predicted and so provided for—unemployment or sickness, for example. That case, as my noble friend said, is being considered at present by my right honourable friend in conjunction with the two sides of industry.
My Lords, I do not think that I need deal again with the question of the income guarantee, with which my noble friend has already dealt. There are only three points that I should like to make about it. First of all, I question very much whether the noble Lord, Lord Taylor, is right in saying that this would be a transitional period of only seven years. Certainly it would affect those who were within seven years of retirement; but surely it would be bound to continue as long as those persons lived, and as long as anyone else who was not entitled to receive the new pension lived—that is 1080 to say, those who are at present on retirement pension, and the like. So I question very much whether it would be possible to terminate the income guarantee in a short period, and whether it would be just a transitional measure.
Secondly, I think one must also face the fact that there would be a very strong disincentive to save, and a strong incentive to spend, in the years before people came up to pension age if they were going to have an income guarantee of this kind.
§ LORD TAYLOR
Would the noble Lord explain why, in fact, that would be so, as contrasted with the present National Assistance arrangements?
§ LORD DRUMALBYN
Certainly. It is because in the one case you are dealing purely with means, whereas in the other case you are dealing with need. Where you have a means test, then, of course, you take into account purely the means that are there, and there would be a strong tendency to spend the money so that it could not be taken into account.
§ LORD TAYLOR
Surely that is precisely what is happening now. Many a person is, in fact, faced with precisely that situation.
§ LORD DRUMALBYN
My Lords, I think there is some disincentive. People like to be independent in this way. The more you remove the need to take special measures by applying for assistance the greater the incentive to the individual to spend money before he retires. This is a real point that I would commend to the Party opposite. I am sure they have not thought about it sufficiently.
My Lords, if I might, in conclusion, deal with one or two of the separate points that have been raised, I should like to question the figure which the noble Lady announced as if it were absolutely certain: that is, that there are 750,000 persons entitled to assistance and not getting it. I believe that it is based on a report produced by Mrs. Cole, which has been variously interpreted as giving rise to anything from, I think, 500,000 to a million as the number of those who are not at the present time applying. I think I should make it quite clear that we do not 1081 believe that the evidence on which she based her conclusions is convincing, for this reason. When the investigators went round, there were application forms that were left with those who said they would be willing to apply for National Assistance. But although 58 application forms were left, in point of fact only 21 applications were made to the National Assistance Board; and, of these 21, 18—that is, 2 per cent. of the entire sample—were successful.
This means that 37 did not send in their application forms, despite their professed willingness to apply. I may say that the forms were keyed, so it was possible to trace them. The difficulties here, of course, are inherent in the small size of the sample and the fact that people are not very keen to disclose their personal circumstances to investigators. This is going to be the subject of a debate in another place later on this evening, but I thought I ought to say that the Government could not accept the figure of 750,000—I am sure my noble friend would not, either—as the number of those who are entitled to pension but are not getting it.
I think the noble Lady, the noble Lord, Lord Peddie, and others very much exaggerated the anomalies in widows' benefits. The noble Lady mentioned nine anomalies last time: it has come down to seven this time. I take it she is now excluding the industrial insurance and war pensions. Of course one could make any number of different cases out of the application of the single principle that exists to-day. For example, if different levels of benefit were to be paid for children of different ages, that again would be creating differences in different kinds of widows. Really, one can exaggerate this difference very much indeed.
What we have sought to do is to select groups that are most in need of special assistance, and to do that on a clear and understandable basis. I believe that we have done that. I do not think there is anybody who would deny that there is a special case for widowed mothers, but the noble Baroness did not make it plain at what age we should draw the line between those who are entitled to widow's pension and those who are not. I am certain that we shall agree that a woman widowed, without children, under 25 years of age should not be 1082 entitled to a pension for the rest of her life. Somewhere the line must be drawn.
I was invited to say a word or two about the "10s. widow." I do not think it is generally understood that there are two main classes of widow now receiving the 10s. pension: those already receiving pensions before July 5, 1948, and who did not then qualify for the new benefit; and secondly, those widowed after July 5, 1948, who had before that date married men insured under the old scheme and who are not entitled to National Insurance widow's benefit at the present time. The vast majority of this 81,000—not 85,000, incidentally—of the "10s. widows" are in the second class; that is to say, those widowed after July 5, 1948, and who benefit from a reserve right to the 10s. pension.
This 10s. pension is purely a reserve right from the old scheme, and the contribution rate for men is the same whether or not the rights exist. It is for that reason that the Government have considered that an increase in the 10s. rate could not be justified. One needs only to consider the position of a widow married in say 1947, a childless widow, of the same age as a widow who married in 1949. The one gets a 10s. pension and the other does not. Can there be any justification at the present time for increasing the disparity between the two? The contributions are the same, and so forth. I do not believe it is right to add to the 10s. pension and, as the House will know, the Government have resisted this strenuously throughout.
My noble friend Lord Somers raised the point about a woman who had a good record of contributions—as I understood it, as a single woman. He thought she would lose all chance of benefiting from this record if she married, and would qualify only on her husband's insurance for a pension. I think he said that, whereas she could have qualified as a single woman at the age of 60, she would have to wait five years longer as a married woman, presuming here that her age is the same as her husband's, until her husband reached the age of 65. The answer is that she does not have to rely on her husband's insurance record only; she can still benefit from her own record if it is better than her husband's and if it 1083 is to her advantage to do so, provided that she satisfies the condition known as the half-test condition, which is a somewhat difficult condition to explain. If I may, I will write to the noble Lord and explain it to him rather than take up the time of the House.
As my noble friend said, we welcome this Motion, we are glad that the noble Lady has drawn attention to the rates of pensions and other benefits under the National Insurance scheme, for it has enabled us to show the splendid record of the present Government—benefits which, despite nearly a 50 per cent. increase in the number of retirement pensioners, have risen in real value. Unemployment and sickness benefits also have risen by no less than 73 per cent. in real terms and by more than earnings. At the same time we have helped those who most need help—particularly the widowed mother and children—and our policy has encouraged a vast expansion in savings through occupational pension schemes and otherwise. There is always a risk that, in defending its record, a Government may appear complacent and unwilling to make the changes that are needed to keep pace with changing circumstances.
The Government's record shows that they are willing to make such changes, including such far-reaching changes as the graduated pension scheme, provided that those changes will not only meet needs that should be met and can best be met through a State scheme, but also reinforce and not undermine the morale of the nation. We shall continue to make such changes while satisfying the legitimate expectations of those who are contributing towards their own security in the future. In particular, we shall keep the National Insurance rates under literally constant review, and we shall not hesitate to make further improvements when the time is ripe.
§ 6.16 p.m.
§ BARONESS SUMMERSKILL
My Lords, I shall make one or two brief comments. After listening to most of the speakers to-day, noble Lords on both sides of the House will agree that it has been a very useful debate. Whether we have agreed with each other or not, 1084 we have been able to analyse this very intricate scheme. I was sorry for the noble Lord just now. I have been in the same position myself, but I must confess that on looking back I felt had a stronger case than he had to-day. He sought by devious means to present a good case, with very poor material. I might, just as an example, refer to his dismissal of the argument that Europe was doing a little better than we are. He must admit that the only valid comparison with the benefits is the percentage of earnings. That is the only valid comparison in all these countries where conditions are different, where the cost of living differs; and where there may be all kinds of supplementary help that we know nothing about but which we should take into account. He sought by devious means to present a good case, and that, in itself, must be denounced as not proper matter to be presented in a responsible way.
The noble Viscount who followed me stressed one or two points. He spent his time in telling us how much benefits had gone up; but we must ask the Government to remember that they may have gone up, but contributions have trebled. The noble Viscount said that the income guarantee was the same as that of the National Assistance Board. We are not leaving the initiative to the old person. The weakness of the National Assistance Board is that the initiative is left to the old people and, whether the number of 750,000 is right or not, we know that there are large numbers who feel that they cannot take the initiative. There are those who recall the old Public Assistance days.
Again, may I say to the noble Lord who spoke on the National Assistance Board that we have not condemned it. If he looks at my speeches he will see that I asked people up and down the country to regard the National Assistance Board as their friends, and in my opinion it has been conducted very well. Our criticism is that it should have been used as a safety net only, and the Government to-day are using it as their central pillar. That is the whole difference in our approach. On the question of insurance schemes, I want to say again that we have no intention of interfering with them. I was asked by the noble Lord what are 1085 the conditions that we are laying down. I would tell him that two of the conditions are provisions for widows and deferred retirement. Nobody can say that that is ungenerous.
Finally, my Lords, I would say that the most significant thing about this debate is that the Government did not have support for their policy from any Conservative Back-Bencher except the noble Lord who was the Chairman of the National Assistance Board and who would be expected to take part; and he was non-Party. If he had not made a contribution we should have considered it rather curious. There are two outstanding facts about this debate: the Government had no support from a single Back-Bencher; and there was no contribution from the Bishops on one of the most important services in the country which has been designed to help the most helpless in their community. Not a Bishop had a word to say, and nobody is sitting there now. I do not feel that the noble Lord, Lord McCorquodale of Newton, is a good substitute. Finally, I want to thank every noble Lord who has taken part in this interesting debate, particularly my noble friends behind me. As the noble Lord, Lord Drumalbyn, has accepted the Motion, there is no need for me to withdraw it.
§ On Question, Motion agreed to.