HL Deb 16 July 1969 vol 304 cc353-70

7.15 p.m.


My Lords, I beg to move that this Bill be now read a second time. It may be helpful to your Lordships if I begin by outlining the changes in the rates of benefit that are proposed in this Bill. This is, of course, its main purpose, and as your Lordships will already know, it provides for increasing the standard weekly rates of the flat-rate national insurance benefits, currently £4 10s. for a single person and £7 6s. a week for a married couple, by 10s. and 16s. respectively, to £5 and £8 2s. It is proposed that the increased rate should be payable from the beginning of November. The Government's objective is to restore fully to these benefits the real value, the purchasing power, of the rates of benefit introduced two years ago, in October, 1967. I think it important to remind your Lordships that the values achieved by these increases in October, 1967, were 2d per cent. above the levels of the benefits which the Government found in payment when they took office in 1964. If I may put it another way, the benefits were then given a value of 4s. in the pound above those of October, 1964, and it is this considerable margin that the new rates of £5 and £8 2s. are designed to restore.

It may be suggested that the proposed increases are inadequate, and that the Government should provide, as a means of helping retirement pensioners, in particular, an amount which would not only compensate them for price changes since October, 1967, but also enable pensioners to share in rising living standards. Indeed, it is the Government's long-term policy, set out in the White Paper, National Superannuation and Social Insurance, that inflation-proofing is only a minimum objective. But, as the White Paper makes clear, a responsible Government must take into account the general economic situation in determining the levels of social security benefits.

Against that background, the Government have decided that they can do no more than restore the value of benefits to their October, 1967, level. But your Lordships can be assured that, as in the past, the Government are determined to maintain the value of contributory benefits, the staple source of income on which so many pensioners with limited resources rely. This is an obligation that we owe all the retired members of our community.

Turning to the proposed increases in the levels of benefits paid under the industrial injuries scheme, the Bill provides an increase in disablement pension from £7 12s. to £8 8s. for a person with a disability assessed at 100 per cent. Injury benefit, which is paid with earnings-related supplement, is to be increased by 10s. from £7 5s. to £7 15s. This will preserve, at £2 15s. a week, the differential advantage this benefit has over national insurance sickness benefit. Increases are also proposed for other industrial injury benefits.

With your Lordships' permission it may be convenient at this point if I make a brief reference to the Government's proposals for increases in supplementary benefit rates. The supplementary benefit scheme embodies great improvements introduced in 1966 to make better provision for the most vulnerable members of the community. There scheme of supplementary benefits ensures that no one need have an income below the minimum guaranteed by Parliament. Amending supplementary benefit regulations, which will be put before your Lordships later this week, will provide new rates that are an improvement of between 23 and 24 per cent. in real purchasing power since 1964, and this takes no account of the 10s. long-term addition introduced in 1966.

It may be helpful if I explain to your Lordships the reason why the increase in supplementary benefits in November is smaller than the increase in contributory benefits. It is that these increases are a second instalment, additional to those which have been in payment to persons in receipt of supplementary benefits since October, 1968. The increases now proposed will, therefore, bring the supplementary benefit increases up to the same total amount as is proposed for the contributory benefits; namely, 10s. for a single householder and 16s. for a married couple, over the period since October 1967. But those in receipt of supplementary benefits have had the advantage of receiving the first instalment of this increase since October, 1968.

The benefit improvements brought about by the Bill now before your Lordships will at one time or another affect a large proportion of the adult population. In all, about 9¾ million people will be better off as a result of the increases in National Insurance benefits and about 320, 000 will benefit from the increases in Industrial Injury benefits, Among these people are some 7 million retirement pensioners and about 530, 000 widows, including 140, 000 widowed mothers. About 1 million people will receive the increased flat-rate sickness benefit, and unemployment benefit is paid to roughly 300, 000 beneficiaries. This is the measure of the proposed changes in benefits. The people whom the Bill sets out to help are those who are not fit or earning; they are the elderly, the sick, the widowed, the unemployed; essentially the groups for whom our society has the obligation to provide protection and succour.

Before moving on to the Government's proposals for financing the improved levels of benefits, there are two minor, but nevertheless important, benefit changes to which I must refer. The first of these is the proposal to increase the limit beyond which the earnings of a retirement pensioner during the first five years after minimum pension age start to reduce pension entitlement. It is proposed that the limit be raised from £6 10s. to £7 10s. for a married couple. This means that from November they will be able to count on £8 2s. a week by way of pension, and £7 10s. by way of earnings, a total of £15 12s. a week before the earnings rule begins to take effect.

The other change is one which I am sure will commend itself to your Lordships as a worthwhile and humane improvement. The Bill provides an extension of cover for death grant in respect of handicapped people who have never themselves been able to work and contribute to insurance. By this change, death grant in respect of a handicapped person may be payable on the insurance of a close relative. The absence of death grant on the death of such people has in the past often caused distress to relatives who have devotedly cared for someone disabled throughout their youth. This change will affect some 3, 000 cases each year, and is one the Government are pleased to be able to bring forward at this time.

The noble Lord, Lord Drumablyn, said in his comments on the Statement on the Bill, reported to your Lordships on June 10 by my noble friend Lady Serota, that the salient and outstanding point about it was the need to raise £430 million. I should like to say a word in genera] about that comment. As your Lordships are aware, the National Insurance and Industrial Injuries schemes operate on a "pay-as-you-go" basis. This means that money paid into the Funds, either by way of contributions or Exchequer support, is used to pay current benefits. It is therefore inevitable that when benefits are increased additional money must be raised. Of the £430 million a year which has now to be found, about £250 million is necessary to pay for the increased benefits for which the Bill provides. The remainder, of the order of £180 million, is needed to put the National Insurance Fund back into a reasonable balance. Over the last two years a number of factors have combined in a way which has involved payments out of the Fund in excess of the payments into it. To support the current benefits, therefore, and to raise them to the new levels this grand total of £430 million has to be raised. Quite simply the sum is needed to pay for the scheme of insurance benefits we now have.

Given the need to raise this substantial sum of £430 million, the Government had to choose between a number of courses. One possibility would have been to raise the money in two stages, the first in November and the second at the time of the quinquennial review due next April. But the Government believe that the interests of all concerned, both insured people and employers, are best served by having the increases rolled into one instead of two in quick succession, with all the uncertainty and inconvenience which that would entail. Had the customary method of raising the amount required been followed, an increase in flat-rate contributions amounting to 3s. 4d. a week would have been needed from both employees and employers. This would clearly have been excessive in relation to the lower-paid; and a disproportionate increase on the employer's side would have been quite unjustified in the present circumstances, as also would have been any move to distort the National Insurance scheme by disproportionate reliance on Exchequer support.

In these circumstances the Government decided on a tripartite solution. First, the weekly flat-rate contribution should be increased by 1s. for a man and 11d. for a woman. Second, the 3¼ per cent. graduated contribution paid on earnings between £18 and £30 a week should be increased to 3¼ per cent. And third, there should a special additional Exchequer payment to compensate for the fact that the present graduated contributions do not attract Exchequer support The additional graduated contributions paid by all employees and their employers—whether contracted out of the state scheme or not—will of course earn additional graduated pension. And the Government now propose that the graduated element of retirement pensions, that already earned as well as that 10 be earned in the future, should be included in the biennial reviews of pension and other benefit rates which are to be an integral part of the new scheme planned to start in 1972. By this means, contributors can be assured that all pension earned by the payment of graduated contributions under the 1961 scheme will be guaranteed against erosion by inflation.

A number of objectives are achieved by raising the necessary amount in this way. It will ensure—and I believe that this will find favour with your Lordships—that for some 6 million workers who are earning less than £18 a week, the increase in contributions will be no more than 1s a week. And the planned restructuring of the present graduated scheme will pave the way for an easier transition to the new scheme of earnings-related benefits planned for 1972. For the higher paid worker, the proposals mean that he will pay the largest increase. But it is most important to see this in perspective. The extra 7s. 7d. which a man earning £30 a week or more will pay represents an additional 1-3 per cent. of his earnings. That does not seem too much to ask the more highly paid to contribute to the welfare of non-earners. The additional contributions to be levied on men earning intermediate amounts will range from an increase of less than 0-5 per cent. for the man earning £12 a week, through an increase of 08 per cent. for the man earning £23 to the 1-3 per cert. I have mentioned for the man on the £30 a week mark.

Suggestions have been made in other places that the National Insurance scheme should be financed through the tax system, and of course such a proposal needs serious and informed discussion. Experience suggests that the contribution-pension relationship is well understood by the public and in its proposed earnings related scheme the Government intend to strengthen this fundamental link. My Lords, the proposals in this Bill keep faith with the very many people who, because of age, widowhood, sickness or unemployment, have to rely on the National Insurance and Industrial Injury schemes for the income on which to maintain their standard of living. The Bill seeks to fulfil the Government's responsibility to meet that obligation by fair and just contributions to the cost of providing that support. I commend the Bill to your Lordships and hope it may be given a Second Reading. I beg to move.

Moved, That the Bill be now read 2a.—(Baroness Philips.)

7.29 p.m.


My Lords, I should like to thank the noble Lady for her very brisk and clear exposition of this Bill. I think there is a substantial amount of agreement between us. There are certain things I should like to welcome right away. I would welcome the increase in the earnings limit and also welcome the increase in the death grant. That is something which is not increased at every rate review. I should like to ask a question about the close relatives. I can speak from personal experience on this aspect of the matter. I had among my own close relatives the experience of a young boy who was never able to look after himself at all, and who, because his parents were abroad, was left with an aunt and an uncle by marriage. I do not see why the aunt and uncle should be left out of the list of close relatives. I should like to give notice to the noble Baroness of my desire to move an Amendment on that point. It is a small point, but this kind of circumstance must often exist with people who are on foreign postings, for instance, where the boy or girl cannot be said to be living with their parents, grandparents or brother or sister. I commend this particular point to the notice of the noble Baroness. We also agree entirely that when there is to be a review it is right to roll it all into one, rather than make two bites at the cherry. This is obviously good sense.

There are a good many comments that I should like to make on this subject, and perhaps the noble Baroness will bear with me while I make them. As she has said, the memorandum has said that the main object of the Bill is to restore to flat-rate retirement pensions and other insurance benefits the values lost because of the rise in prices in the two years since the last increase in October, 1967. So we have an increase of 10s.—about 7 per cent.—for a single person and 15s. for a married couple. Whether the Bill will fully achieve its main objective is, of course, open to doubt. I am informed that by April of this year the value of the single pension and other benefits had already been reduced, as a result of the rising cost of living, by 9s. If that is so, it seems unlikely that 10s. will suffice by November (which is the time at which the increase is due to come into effect) to restore the value of the pension to the October, 1967, level. By contrast, on every one of the occasions when pensions were raised by the Conservative Government, their value was increased to a level higher than their previous value, as indeed the present Government have done on the previous two occasions. Until now there has been a steady improvement in real value, and it is perhaps worth commenting that this is the first occasion for some time when there has not been an increase in real value but only a restoration of value.

At the same time, I would suggest that, whatever may be the determination of the Government to retain the value of the contributory benefits which the noble Baroness has declared, it would be folly to promise at any time that the real value will always be restored every two years, even though there is the biennial review. The value of insurance benefits cannot be isolated from the general state of prosperity, or otherwise, of the country as a whole. We all hope that the standard of living in this country will continue to rise with reasonable steadiness, but no Government can guarantee that it will not suffer a setback in any particular two-year period. Dietitians, sociologists—and even some politicians—sometimes talk as if there were some absolute standard laid up in Heaven which can be established as holding good for the whole population at all times and in all places and in all circumstances. But I think we all recognise that these things are relative, and I believe that it would be unwise to seek to guarantee that at biennial reviews there will always be a restoration—let alone an increase—of the value of the pension to what it was at the last review. It should be for consideration at each review what extra burden, if any, it is sensible to place on the working population in order to help those who, temporarily or permanently, have ceased to work.

At least this must be said—and I have to say one or two disagreeable things, as well as agreeable ones. The question of how to pay for any increase must always be considered at the same time as the increase itself. I hope it will never again be allowed to happen that the increases are announced at one time, and the Government's proposals as to how they are to be paid for at a much later date. On this occasion, some two months elapsed between the Chancellor's announcement of the increase in the Budget and the laying of the Bill providing for increases in contributions, accompanied, of course by the explanatory White Paper and the Government Actuary's report.

Considering that the increase is not to take place until next November I submit that the Chancellor's announcement was, to say the least, precipitate. The Government Actuary, in paragraph 11 of his Report (Cmnd. 4074) says that in the financial year 1968-69 the outgo of the National Insurance Fund exceeded income by about £80 million, and it is estimated that if no action were taken the deficit in the current year would be about £125 million and would continue to increase. If one looks at Table 3 of his Report one sees that even taking into account changes in contribution there will be a deficit in the National Insurance Fund in the current financial year of £100 million. No wonder the Government had to transfer £200 million from the National Insurance Reserve Fund last December! And it seems that the £200 million will have been well nigh exhausted by next April, and there is little prospect of the Fund being replenished.

Over the next two years the operational surplus of income over outgo is estimated as only £12 million; and that is on the assumption that unemployment will fall to 2-2 per cent. in those two years. So the Labour Government will have dissipated, I think it is, about a fifth or so of the reserves by the end of this year, and do not intend to replace them. I wonder if the noble Baroness will tell us whether the Government regard these reserves as being available to meet deficits as they occur until the reserves are ex- hausted? It would obviously be unwise to allow them to be exhausted altogether, because one must keep certain reserves in hand to meet fluctuations in demand for benefits.

No doubt the Government regard the adverse experience of the National Insurance Fund as being just bad luck. But it is possible to take a different view. Certainly some of the factors have been well known. As the Government Actuary puts it: changes in experience have been large and persistent". As he says, there is clearly an underlying upward trend in sickness claims"— And he goes on: The trend to earlier retirement"— referred to in an earlier report of his— has continued". So these are two big factors which have been going for some time. Indeed, this trend to earlier retirement has been encouraged—and I do not complain of that. It is inherent in redundancy schemes that those who have reached retirement age should be the first to be laid off. But, my Lords, it was anything but prudent—it was hardly even consistent with the Government's own economic policy—to instruct the Government Actuary to assume a rate of unemployment of 2 per cent. in the current financial year. And this is not just hindsight: the Government were warned at the time of the las; review that they were being somewhat over-optimistic.

There are also fewer in employment: there are over 200, 000 fewer than in June, 1964, and some 640, 000 fewer than in June, 1966, according to the latest estimate in the Digest of Statistics—an adjusted estimate, I understand. To the extent that this reflects the tendency for full-time education to be continued, and for better use to be made of those in employment, it is of course to be welcomed. But it is idle to pretend that it was not at least in part predictable in 1967.

I come now to the way in which the Government propose to find the money to pay for the increases which, as the noble Baroness said, amount to £250 million in respect of national insurance and industrial insurance benefits themselves, with a sum of £180 million to put the National Insurance Fund back on to a reasonably sound footing. The noble Baroness called this a "grand" total—it is at any rate a formidable one. The big question is this: what differences in contributions is it reasonable to expect people with different earnings to pay for the same basic benefits? To some extent, of course, there are already differences in benefits. There are the additional pension benefits accruing from the graduated contributions introduced in 1961 for those not contracted out of the scheme, which covers earnings between £9 and £18—the 1959 scheme—and there are the graduated sickness and unemployment benefits earned by the ½ per cent. contribution on earnings between £9 and £30 introduced under the 1966 Act.

The problem which faced the Government in 1959 was not dissimilar from that facing the present Government, and almost inevitably the solutions are not dissimilar, unless of course one had chosen to go over to a tax-based form of payment. The problem is how to avoid placing too heavy a burden on the contributor with low earnings. In the circumstances of post-war high employment and high demand, differentials in earnings in different kinds of employment have widened very considerably, for reasons that are well enough understood.

At the present time a married man earning £12 a week pays 19s. 4d. in national insurance, industrial injuries and National Health Service contributions, or 19s. 1d. if he is contracted out, which is over 8 per cent. of his earnings, and he will pay an extra 1s. under this Bill; so he takes home about £11. In return for this he will be entitled to a retirement pension of £8 2s., plus rent if his capital resources fall before a certain level. His pension, plus the 1961 graduated pension earned, and supplementary allowances will thus very nearly equal his net earnings: so he is certainly getting a very good bargain.

But plainly, all the same, there is a limit to the proportion of earnings that can be taken from him to qualify for his pension. In 1964, he was paying 5s. less than he is paying now, or 6s. less than under the Bill, and at that time he was earning a lesser pension, a joint pension of £5 9s. 0d. It is equally plain that there is a limit to the differences that contributors with higher earnings can be expected to pay for much the same benefits. So one has got to find somehow a middle way between these two. In 1959 the Government's solution was to hold the weekly contribution, not increase it at all but hold it, for people earning less than £9, at the existing level, and place a charge on all earnings between £9 and £15, the upper limit being increased to £18 in 1964. That charge is now 4¼ per cent.

In this Bill the Government are proposing to increase the basic weekly contribution by 1s. for men and 11d. for women, and at the same time to extend the bracket of earnings on which the charge is placed from £18 to £30 a week to bring it in line with the range of earnings on which the half per cent. charge is made for graduated sickness and unemployment benefits. The difference between the steps that were taken on those two occasions are, in the first place, that the charge on that part of earnings between £18 and £30 is to be 2¾ per cent. in addition to the half per cent. for graduated sickness and unemployment benefit; secondly, that whereas it was, and still is, possible for an employer to contract out of the 1959 graduated contributions scheme if his pensions scheme for his employees provides at least equivalent benefits as under that scheme, it will not be possible to contract out of the extended graduated contributions in this Bill. I think I am right in saying that. Thirdly, that the additional retirement pension earned by graduated contributions under the 1959 scheme was not affected by subsequent pension reviews, whereas the Secretary of State for Social Security has stated that it is the Government's intention that all the pension "bricks", as they are called, the blocks of £7 10s. 0d. of graduated contribution which earn, I think, 9d. each in additional weekly pension, will be revalued every two years in accordance with any rise, but not apparently any fall, in some index.

I should like to ask the noble Baroness what is the index. The pledge, after all, is specific, and so the index should also be specified. I cannot find any reference in the Bill giving statutory form to that intention. It may be there, and, if so, I have missed it. I do not know if the noble Baroness could tell me whether this pledge is in the Bill or not. The Secretary of State, it seems to me, has been wise not to lay a statutory duty on future Governments, Conservative, or Labour, if there are any, in view of the Government's manifest intention in the Redistribution of Seats Bill not to be bound by any such statutory duty. It would have lacked credibility, as indeed does his statement of intention. I do not cast aspersions on his statement of intention; it may well be his intention and perhaps it is the intention of the present members of the Cabinet, but it is only their intention.

I think this has to be borne in mind, because the foundation of the National Insurance scheme—and this is tremendously important—is public confidence in the determination of successive Governments to meet the obligations which they have undertaken under the scheme. To have any credibility they should be written into the Bill if they are really intended to last. We are not just talking of the next biennial review; we are talking, after all, of a long period ahead. The actual continuation of the accumulation of the "bricks" may not go on very long, but the revaluation, as I understand it, is intended to go on for a long time.

There is one thing which I have not seen discussed at all so far, and the noble Baroness did not mention it, and that is the effect of these arrangements on the self-employed and the non-employed. The total combined contribution for a self-employed man over 18 is to be raised by 2s. 8d. to 24s. 10d. and for the non-employed by 2s. 2d. to 16s. 5d. Perhaps the noble Baroness will tell me whether I am right in thinking that they will not be affected in any way by the graduated contributions scheme. The fact that the increase is more than double the increase in the basic flat-rate contribution for employed persons would indicate that this is so.

It is well that we should be aware of the proportions of the £430 million which are to be borne respectively by the flatrate increases, the new graduated contributions and the Exchequer. As I look at the Government Actuary's Report it seems to me, if my arithmetic is correct, that in the year 1970-71 they will be 21 per cent. for the flat-rate increases, 62½ per cent. for the new graduated con- tributions and 16½ per cent. for the Exchequer. This means a very big switch to graduated contributions. The revenue of the Fund in 1971-72 will consist of only 55 per cent. from flat-rate contributions, 28 per cent. Torn graduated contributions, 15 per cent. from the Exchequer and 2 per cent. from interest.

I draw the attention of noble lords to the diminishing proportion of the Fund's income to come from the Exchequer. This is very much at variance with the criticism of the 1959 arrangements that came from the other side of the House, although it is not necessarily wrong for that reason. There is no principle involved here. Exchequer contributions can be adjusted from time to time, so there is no principle involved. But I think it right to draw attention to this point, particularly as I think it was indicated in the Government's White Paper that it was proposed to hold the Exchequer contribution at about 18 per cent. This does not seem to be borne out by the Government Actuary's figures.

What is of far greater important in the long run is the principle of revaluing graduated contributions. In themselves, they are perhaps not going to amount to all that; the amounts involved in revaluing graduated contributions over the next 2½ years are really comparatively unimportant, although the liability for the future is by no means negligible. Perhaps the noble Baroness will confirm my calculation that some 200 million "bricks" will accumulate over that period, each entitling the contributor to an extra £1 19s. 0d. I think I have over simplified that because I have not taken into account the women's side of it; but it is an extra £1 19s. a year in pension. So the total cost of revaluation might easily add quite substantially to the liability over the years, and it seems to me quite irresponsible for the Secretary of State to yield so lightheartedly to the special, pleading of some large companies and extend the revaluation to "bricks" accumulated under the 1959 Act.

When we come to discuss the Government's long-term proposals—if we ever do—we shall have to consider most carefully the arguments both ways. It may well be necessary to revalue graduated contributions from time to time, though whether it should be done in proportion to the up-rating of the basic pension I should doubt. There is a great difference between assuring everyone of a basic amount which will keep pace roughly with the cost of living and may be expected to increase as living standards rise and the wealth of the nation grows on the one hand, and automatically readjusting values of a pension directly related to individual graduated contributions on the other.

The point I wish to make is that our acquiescence in the present proposals must not be taken as committing us to the principle involved. That is a matter for the future when we have all the considerations before us. Side by side with the need for everyone who is able and willing to work to be assured of a basic minimum on which to live when he retires or ceases to be able to work, we must always have regard to the necessity, if we are to survive in freedom as a great industrial nation for people to be encouraged not only to save through contributions to a pay-as-you-go State insurance fund, which spends all its revenue from year to year, but also to save through occupational schemes and to save for themselves—to invest their savings and so increase the wealth of the nation. These two objectives have to be reconciled. The great advantage of the 1959 scheme was that it did not adversely affect individual saving or occupational pensions schemes to any great extent; indeed, occupational pensions schemes have continued to grow and to go from strength to strength. We must ensure that both collective savings and individual savings continue to be available for investment.

My Lords, what we have in this Bill, if I can sum it up, is a very belated and far from apologetic recognition that the means adopted in 1959 of raising money to pay for an acceptable level of basic pension in a time of continuing erosion of the real value of that pension were not only unavoidable but entirely proper. The 1946 Act assumed, first of all, that everyone should pay the same price for the same benefits; secondly, that the value of money would remain more or less constant as it had done in the period between 1925 and 1939; and thirdly, that over the years each individual's contri- butions would pay for pensions and other benefits, of course allowing for those who came late into the scheme.

By the late 1950's it had become abundantly apparent that each individual's contributions would not pay for an acceptable level of basic benefits. The Boyd-Carpenter measure, therefore, added a system of graduated contributions. Unfortunately, the public, and even some of the insurance experts who ought to have known better, persisted in comparing the graduated contributions with the ultimate pension that those contributions alone would earn. They said it was a bad bargain. But the whole point was that even those who were paying the graduated contribution or the contracted out payment were getting a very good bargain, those even at the maximum were getting a very good bargain; taking pension and other benefits as a whole—the basic and the "bricks" and all the rest of it—while those who were paying only the basic contribution would receive far and away more in benefits than their contribution alone would strictly have entitled them to receive.

We have now come to the point where even the graduated pensions taken with the flat-rate contributions at their present level do not suffice to keep the Fund solvent. On the last occasion that the increases were made, I warned the Government that this would happen unless they introduced their long-awaited and long-promised earnings-related scheme very soon. I said that unless it was to be introduced in the near future they ought to increase the upper limit of £18 for graduated contributions, in spite of the difficulties that such increases make for those contracted out. Now they are raising the level in a different way, so as to avoid the difficulties for those contracted out, and I am sure that the Life Offices are duly relieved. But difficulties on contracting out are inherent in any State scheme which provides for periodic adjustment of benefits. The Government have said that they want occupational schemes and the State scheme to coexist. It is not enough just to express that as a pious hope. It is an absolute "must" that they should co-exist, in the interests of the economy and of the prosperity of the country and in the interests of our free way of life.

7.57 p.m.


My Lords, I am quite sure that the noble Lord, Lord Drumalbyn, would not expect me to reply in detail to the many factual points which he has raised with his usual skill. I well recall seeing him in action as a Minister, and he always displayed this great skill when dealing with Bills of this character. I would merely say, in relation to graduated pensions, that increased graduated pensions will be earned by increased graduated contributions. Admittedly, it is not a large amount, but the present graduated measures are a stage towards the Government's new scheme which is to be introduced next Session, when not only the noble Lord, Lord Drumalbyn, but all of your Lordships will have ample opportunity to debate the basic issues on which the noble Lord has touched to-night. On the question of the National Insurance Fund, I may say that the deficit in the current year was, and of course will be, due to the adverse experience troughs which the Fund is going through and which the higher contributions are designed to correct. Next year, the first full year in which the new contributions and benefits will operate, will show a surplus of £57 million over expenditure, even with the forecast deficit of £25 million in 1971-72—


It is £37 million.


Yes, I beg your Lordships' pardon; £37 million—what is £20 million when we are dealing with it only on paper? Even with the forecast deficit of £25 million in 1971-72, the income will still exceed the expenditure of the first two full years. That is consistent with the pay-as-you-go basis by which the scheme is financed. I take the point that the noble Lord has made about the death grant, and I look forward to discussing this subject with him when he raises the question in an Amendment. The National Insurance Fund is subject to the changes which the noble Lord has outlined and to which I made some reference—the fact that there are more retirement pensioners and that we may expect more retirement pensioners. From his opening words I take it that the noble Lord at any rate welcomes the major introduction of the increases in the benefits, and I hope that as the Bill progresses we shall be able to debate in more detail some of the points which he has raised this evening.

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

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