NATIONAL INSURANCE (AMENDMENT) BILL (Hansard, 16 May 1972)

§ LORD REIGATE
My Lords, I beg to move that this Bill be now read a second time. This small Bill represents a minor amendment to the National Insurance Acts. It passed through all its stages in another place in one day with good will on both sides of the House and I hope that it will commend itself in the same fashion to your Lordships to-day. It relates to one particular feature of the National Insurance scheme; that is, the earnings rule. Almost any noble Lord who has ever sat in another place will be more than familiar with that particular expression because I suppose he will have had many complaints from aggrieved pensioner constituents who felt that they were cheated by the incidence of the earnings rule. It is a fact that the Beveridge Report, when first published, embodied an entirely revolutionary principle, which is that instead of pensions as of right for old age, a pension should be payable only on retirement, and only on total retirement at that. The earnings rule therefore was the inevitable corollary. This is where the shoe has pinched so many pensioners among one's former constituents.
There was great merit in Lord Beveridge's proposals. but one must remember that it was conceived against a background of pre-war unemployment. I do not propose to-day to embark on any discussion of its merits. I think we must accept it as a fact which remains embodied in our present legislation but, alas! at the time it was introduced there was a total failure to educate or persuade the public or the pensioners to accept this new principle, and I think that even to-day there are many who feel aggrieved by the effect of the earnings rule. Moreover, in the original Act the principle of total retirement was breached in two ways. First, there was, quite rightly, a concession made exempting the first £1 of casual earnings by retirement pensioners. Secondly, there was a major breach made by exempting those aged 70 (or in the case of women. 65) from the earnings rule altogether—which means that the rule therefore applies only to a band of five years. The position remained unchanged from the National Insurance Act 1946 until 1951 when the 1285 noble Baroness, Lady Summerskill, altered the sum to £2 in the National Insurance Bill 1951. This was a great step forward. Nothing further happened until 1956 which, if I may say so, is where I came in.
Successive Governments were unwilling to abandon the earnings rule, and understandably, on account of the very high cost. That is still the official answer. But I found myself by 1956 increasingly unwilling to give the stock answer to my complainants and I thought of the idea—or, to be more exact, I found it tucked away in the original Beveridge Report—that above the £1 exemption there might be a band of partial exemption which would be in slight mitigation of the rigidity of the earnings rule. In 1955. I drew a low place in the ballot for Private Members' Bills. Noble Lords will know that a Private Member's Bill cannot embody a charge on Exchequer funds; but by a happy inspiration I realised that the cost of amending the earnings rule would fall in effect on the National Insurance fund and not on the Exchequer. This brought it within the scope of a Private Member's Bill. It is no secret to say that I was extremely unpopular with the Ministry and with the Minister of the day as a result. My old friend Sir Edwin Leather happened to have a higher place in the ballot and volunteered to sponsor my Bill and help to get it on the Statute Book. The Minister then changed his mind, and with the concurrence of the National Insurance Advisory Committee accepted our proposal and was able to raise the exemption limit to 50s. and to have a £1 band subject to partial deduction. Successive Governments have built on the foundations of the 1956 Bill in relaxations of the earnings rule, and to-day the exemption limit stands at £9.50 which represents 30 per cent. of average earnings. In 1967, the band of partial deduction was raised from £1 to £2 on a proposal of the National Insurance Advisory Council and this was advocated on the grounds, rightly and wisely, that pension rates had doubled and that average earnings had risen by 70 per cent.
My Lords, the simple proposition of the Bill before the House is to raise the £2 band of partial deduction to £4, for exactly the same reasons as was recommended 1286 in 1967 by the National Insurance Advisory Committee. I would say that the Bill will affect in total only some 14,000 pensioners and it will burden the National Insurance fund only in the sum of about a quarter of a million pounds. But I think your Lordships will agree that the proposal, if modest, is also just, logical and consistent. I may say, as the ultimate of magnanimity, that it leaves the Secretary of State to appoint the day on which it will come into force. My hope (which is that of Mr. Coombes) is that this will take place at the annual review in the autumn of this year. This is a slightly technical Bill but I commend it to your Lordships and beg to move that it be now read a second time.

§ BARONESS PHILLIPS
My Lords, I should like first to congratulate the noble Lord, Lord Reigate, on his ingenuity in finding a way by which to introduce a Private Member's Bill and get round the Money Rule. It seems to me something upon which we should commend him. During the last discussion we had in this House on the question of National Insurance I entered a plea for the complete abolition of the earnings rule. As the noble Lord has said, conditions have changed vastly since we originally included this provision in National Insurance legislation. I had hoped that the noble Lord, Lord Reigate, would go a little further than he has done, but I appreciate that we are happy to have any modification which will make life a little easier for this group of people.
It must surely be very costly to operate an earnings rule when, as at present, on earnings between £9.50 and £11.50 5p is deducted for each 10p earned, and, when earnings are over £11.50, £1 is deducted on account of the first £2 earned over the £9.50; and 5p is deducted for each 5p over £11.50, I made a calculation and found that actually things do not tie up there, but that it would be possible to have a deduction which would bring the figure below £11.50, but I will not bother the Minister with that point now because my mathematics may well have been wrong. It must be a time-wasting and expensive operation when the rule is applied to quite a number of 1287 people and it is necessary to do this calculation in order to take away money from those who have the energy and enthusiasm to earn after reaching a certain age.
To-morrow we shall be discussing the question of pensions, but I would say to your Lordships that a woman of 60 or a man of 65 still has a contribution to make to the community. Indeed, after seeing the way in which some of your Lordships operate one might say that a man or woman of 70, 80 or possibly even 90 still has a contribution to make, if he or she is able to work. We must remember that people in this group who work do so mainly in trades and professions in which other people do not want to work. I think that the catering trade would come to a halt were it not for people over the retirement age who continue to work. I remember that the Minister gave us figures during our previous debate and said that it would be possible for a husband and wife to earn £9.50 each, collect their pension and have a total income of £30 a week. That may be so. but by the time the tax regulator has dealt with them. I suggest that a substantial part of anything they may earn will come back to the State. I am wholly behind the noble Lord's plea that this Bill should go on to the Statute Book as quickly as possible. It will provide a small benefit in respect of the only group in the whole community which has to pay back something it has received from the State; and that "something", I suggest to your Lordships, these people have earned over and over again.

§ BARONESS SUMMERSKILL
My Lords, I support what my noble friend Lady Phillips has said. It was fascinating to listen to the noble Lord, Lord Reigate, and to the details which he gave to the House of the various changes in this legislation. He will recall that years ago it was difficult to effect any change because there was a fear that the labour of the old people might be exploited. I think that my noble friend Lord Douglass of Cleveland, one of the most generous of trade unionists, will agree that there was some fear among the trade unions that that exploitation of the old might interfere with wage negotiations. But time goes on, and now I 1288 believe that there is a completely different climate of opinion among the trade unions with regard to this matter. I am sure that all those who have served so well in many unions will agree that the time has come when if it is not possible to abolish the earnings rule altogether we should support what the noble Lord, Lord Reigate, has said.

§ LORD ABERDARE
My Lords, my noble friend Lord Reigate has given a clear explanation of this Bill, and also he has been good enough to paint a bit of the background to the earnings rule, for which I am grateful. It is a rule which he himself has played a distinguished part in trying to amend; indeed, this is his latest effort. Like the noble Lord, I do not think that it would be appropriate to discuss the earnings rule itself at this time although I listened with interest to what was said by the noble Baronesses opposite. Perhaps I may add the fact that the cost of abolishing the earnings rule as a whole would be something in the region of £110 million.
My Lords, the Government are lukewarm about this Bill, not because of its undoubted merits, which have been described by my noble friend, but simply for reasons of timing. As he said, it is a modest measure; in our calculation it would cost about £200,000 a year. It benefits working pensioners for whom we all have respect and sympathy. But, with the limited resources, the Government have to choose their priorities, and for this year's up-rating an easement of the earnings rule was not included. Of course we gave it careful consideration, but other benefits were thought to be of greater importance this year. We had already increased the earnings rule limit last year by £2, from £7.50 to £9.50 a week, and we have to face the fact that the proposal in this Bill will benefit only pensioners earning more than £11.50 a week. Certainly such people are fully worthy of our sympathy and support, but they are not those who are in the greatest need; and this year we put first other improvements, such as the maximum addition to the standard rate of pension and an extension in the scope of the attendance allowance. This, therefore, is not a proposal which the Government would have brought before your Lordships' House this year.
1289 We felt that we had made a significant change in the earnings rule last year and that it would be better to leave further changes for consideration next year. But this is a Private Member's Bill; it has been accepted in another place and the cost falling on the National Insurance Fund is relatively small. We should not, therefore, wish to oppose it. If your Lordships see fit to give the Bill a Second Reading we shall have two Amendments to put forward on Committee stage. One would he to include Northern Ireland in the Bill, and the second would be to remedy a minor technical deficiency in the Long Title. As my noble friend said. the Bill leaves it to my right honourable friend to appoint the day to bring it into operation; and should the Bill in its present form, with those two Amendments, be approved by both Houses and receive the Royal Assent, it would be the intention of my right honourable friend the Secretary of State to make the necessary commencing Order so that the change would become operative at the same time as the proposed increases in pensions; that is, in the week beginning October 2 next.

§ LORD REIGATE
My Lords, I am grateful to the noble Baronesses opposite who gave me such wholehearted support, and also to my noble friend the Minister who, after praising the Bill with a few faint damns, has given it his blessing—and also something we really wanted, the day on which it will come into operation in the autumn. I am grateful for the support it has been given and I commend the Bill to the House.