§ 2.47 p.m.
§ BARONESS PHILLIPS rose to call attention to the White Paper A Strategy for Pensions; and to move for Papers. The noble Baroness said: My Lords, I beg to move the Motion standing in my name on the Order Paper. I feel that I should perhaps apologise for the fact that I seem to have spoken rather frequently lately; so if any noble Lord is suffering from mental indigestion I shall understand if he wishes to leave the Chamber. The Paper that we are to discuss this afternoon, Strategy for Pensions, is a consultative document and is published by the Government as such for comment and suggestions. This is the spirit in which I approach this debate. Since it also provides us with an opportunity to look at the philosophies of retirement and the place of the pensioner in the community, I hope that some noble Lords who take part in the debate will let us have their thoughts on this point. All I will say now is that a situation in which one million citizens live off the State because they cannot find work and 8½ million citizens are obliged to cease work and to receive State pensions may well prove to be one that needs investigation—particularly when we ally this to the various unsatisfied needs of the community, such as lack of housing, lack of schools, lack of hospitals and lack even of social amenities such as hot water or bathrooms. Professor Hall, a professor of geriatric medicine, has described pension schemes and fixed retirement ages as having institutionalised retirement. He said that there is a need to think of new work roles, of flexible retirement studies, of leave with pay, of easier working conditions and of better use of skills. Retirement, he said, is an invention of our industrialised society. So I hope that the Government will look not merely at pensions but at the human beings who will be collecting them.
Strategy for Pensions sets out the Government proposals under eight heads. Since the document is 40 pages long and quite complicated, your Lordships will be relieved to know that I shall not go into it in detail; but it appears to me that it divides naturally into three sections: the basic State scheme, the occupational
pension scheme, and contributions. The State scheme, my Lords, is
the medium through which resources are transferred from people in work to those who have retired or are otherwise unable to work.
§ That is what Strategy for Pensions tells us. For a long time the State scheme will be the major source of income for the majority of people and they are entitled to an adequate standard of living and to live with dignity. The basic pension is now to be reviewed annually, which is good, and the Government are to be commended for that. But if, as is suggested in the document, the pension remains linked to the cost of living index and not to increases in national earnings, the pensioner will always he at a disadvantage.
§ Here I come to a very important point. There is no evidence to support the logic of a different retirement age for men and women. All kinds of anomalies flow from it. For example, the age of eligibility for exemption from prescription charges is 65 for men and women—though women retire at 60. Age exemption relief from tax is at the age of 65 for men and women—though women retire at 60. I see from the document that widows' benefits remain payable in the same circumstances as at present, with modified rates of pension for women widowed between the ages of 40 and 50. Why, my Lords? When an age minimum is written into any legislation it can always be changed. Subsequent Governments could always raise the age again and the benefit which a woman gets will be determined by the year in which her husband very conveniently died.
§ It is not to be wondered at that women exercise the right to opt out of paying full National Insurance contributions. At present if the woman is a widow—and nothing different is suggested in the document—and she is paying the full stamp, and if she becomes unemployed, she cannot draw unemployment benefit because she already gets a widow's pension. This is on the ground that one may not draw two benefits from the State. My Lords, she is no less unemployed because she is a widow, and she is no less a widow because she is unemployed. May I here put in a plea for a fresh look at the earnings rule, whose continuance, I see, is perpetrated in this document? Yesterday the Minister gave us a figure 1381 for abolishing the earnings rule of £110 million. May I ask what that estimate is based upon? It seems to me a very large sum indeed. May we know what is the cost of operating the present scheme of claw-back? The self-employed, too, merit much more consideration than I think any Government—including the last Government of which I was a member—have given them, and the White Paper does not appear to offer any change. Could not the self-employed collect unemployment benefit, for example? A small shopkeeper or a free-lance writer must suffer hardship when unable to work.
My Lords, I now turn to the occupational pension schemes. The occupational pension movement has progressed in recent years but its coverage is far from complete. In the main, those covered by such a scheme will be white collar rather than manual workers. If the scheme is allied to the last few working years it will always be particularly unsuitable for a manual worker, who will reach the peak of his earnings much earlier and then experience some measure of decline. The Government have wisely decided to set standards for the benefits provided by occupational pension schemes. An employer with a scheme which is recognised as satisfying certain minimum requirements will be able to obtain complete exemption from the State reserve scheme. But let us look at the minimum requirements:
… in order to get recognition, a scheme must provide both a personal pension for men at an annual rate not less than 1 per cent. of P.A.Y.E. earnings,…
£1 for every £100 earned. My Lords, a worker who earned £1,500 a year would be expected to live on £150. Even though there is a suggestion that the pension could be linked to the cost of living index the starting point is far too low.
Here again we see one of the several anomalies in the position of the woman worker:
The minimum rate of pension required for women in recognised schemes will be lower than for men to take account of the fact that the pension must be available to them from the age of 60 … and their greater longevity, with an offset to allow for the absence of mandatory dependency provision.
My Lords, in the words of the poet—that we women should live so long! Why do the Government want to perpetuate this? More and more women workers
work for a substantial part of their working lives. They no longer opt out and they must be able to look forward to an occupational pension scheme which, when linked with the basic pension, will give them an adequate living. If it is necessary to have higher contributions for a common retirement age, then let us have them.
Then we see the sections dealing with the preservation of rights under the occupational pension scheme. I would agree that one of the flaws in existing schemes is
the substantial loss of pension rights each year by people who leave their employment before pension age.
Indeed, my Lords, many able people do not change their occupation in middle life because of this; and in a sophisticated industrial society it is wrong not to have mobility of workers. What is not spelt out—and this, I hope, will be looked at—is the requirement of five years' pensionable service with one employer. I should like to know whether a worker can aggregate with various employers. Then there is the problem of those who die before reaching pensionable age. Again the position is not spelled out. A widow might find herself with no benefit, or a very small one, although her husband had built up pension rights with several employers. Again, in respect of the State reserve scheme we read:
The widow's pension will be paid at half the rate of the late husband's pension.
§ I will not rehearse the argument again, but I will leave the thought with the Minister that there are distinct disadvantages to women contained in this document. At first glance, the State reserve scheme appears to suggest that the level of pensions is far too low and not in fact, if my arithmetic is right, as good as the graduated pension scheme at present operating. I think that my figures are correct when I say that a full-term pension will represent 20 per cent. of final earnings in the case of men and—here we go again!—14 per cent. in the case of women.
My Lords, finally, I come to the section which the Yorkshire people call the "come from", the contribution. While at some stage in his life everyone is liable to collect State aid, very few citizens want to contribute to the State pool and every Government is up against an
apparently insoluble problem. My heart rejoiced at the heading, "A simplified system of collection". For indeed, "the dual system of assessment and collection"—as at present operated—"is cumbersome and inefficient". The suggestion that stamp cards be abolished and collection made through P.A.Y.E. is good. We have been in need of a reconstruction of this for years and I hope that it will work well. My Lords, Strategy for Pensions is for the future. I ask: what does it do for the existing pensioner, and will it reduce the need for supplementary benefits continuing to be paid to them? This group remains the most vulnerable in our society and it is equally the group to whom we owe the greatest debt. May I hope that the Government will link with Strategy for Pensions a plan which will confirm that
Age is opportunity no less than youth but in another dress.
My Lords, I beg to move for Papers.
§ 3.0 p.m.
§ BARONESS SEEAR
My Lords, we on these Benches find much with which we would agree and which indeed echoes points that we have been putting forward for a long time in relation to pensions. We are very glad that there are to be income-related contributions in the way proposed in this White Paper, and that Her Majesty's Government, unlike their predecessors, are suggesting the continuation of an improved basis of a basic pension plus the encouragement of occupational pension schemes; and, together with this, the necessary corollary of a separate fund for those people who are not covered by occupational pension schemes. So far so good, my Lords. But a good deal is omitted and there are problems which are not adequately tackled, with regard both to the short-term and to the long-term problem of, in the broadest sense, the provision, care and wellbeing of the old. Of course, pensions are not the whole answer to that question of provision and care for the old, but they are a very important part of the total provision that needs to be made.
In the immediate present we feel that while the Government's provisions improve the position of the old—and the gladly received provision that every year 1384 there should be a review of pensions indeed will help—they do not face the fact that to-day real poverty in this country is more concentrated among the old than among any other section of the community, with the possible exception of the single parent families. And the provisions in this document do not do enough at present for the large, and increasing number who are in that group. We would like to have seen more done straight away and a more ambitious idea of the way in which a country—with all its economic difficulties, still a rich country—is able to provide for its old. We not merely consider that the cost of living should be taken into account but, as the noble Baroness, Lady Phillips has already said, we believe that the basic pension should be related annually to rises in average earnings so that the growing prosperity of the country is in fact shared among the old as well as among those who are in employment. And we do not see sufficient provision in these proposals for ensuring that that increasing prosperity, as well as additions to meet increased expenses, are embodied in the basic pension. So, we should like to see more done in that direction both immediately and in relation to future plans.
Then, my Lords, there is the question of the occupational pension. We welcome the support given by the Government to the occupational pension, and I personally do not share Lady Phillip's pessimism that many manual workers will not benefit from schemes of this kind. It is true that at the moment a considerable number are not covered by occupational pension schemes but the great development of the past ten years has been a quite dramatic extension of occupational pensions to manual workers. There is no reason at all why this extension should not be speeded up and encouragement given to it. Indeed, if the trade unions in negotiating pay increases would pay more attention to negotiating pension improvements in occupational schemes this could not only be of the very greatest benefit to their members, but also be a very good way of getting benefits for their supporters which would be much less inflationary than trying to get all the additional advantages in the form of the pay packet. In other countries, notably in America, the unions have paid very great attention 1385 to the negotiation of improved pension rights in occupational schemes. Surely that is something to which at the present moment the unions might especially direct their attention. If that were done, it is my belief that a great many employers in negotiating new pay settlements would gladly transfer a proportion of the increase to the pension rather than to immediate pay, which would be to the advantage of all of us. Thus, so far from taking the line that the manual worker is not likely to benefit from this encouragement of occupational pension schemes, I believe that, rightly handled, it could be to his very great advantage.
With the noble Baroness, Lady Phillips, I find it difficult to understand—your Lordships' will not be surprised when I say this—why there should be a different retirement age for women and for men. After all, over 80, for better or worse, there are two women to one man—however one views that prospect. That being so, the logic of the situation, once we get equal pay, if there if there is to be any discrimination—although I am not urging this—it should be the other way round. However, it is surely time that this matter was looked at again because the perpetuation of the idea that, for some strange reason, women have to be retired five years earlier than men seems to be somewhat of an anachronism at the present time.
But, my Lords, it is not only in the immediate short term that some of these proposals are somewhat lacking. Elderly persons in this country have a much wider problem than merely what we pay them, although, as Professor Joad said long ago, there is not the slightest doubt that if money does not make for happiness it does ease the pain. But we do not know how to cope with the problem of older people. Your Lordships' House should be better placed for considering this matter than many other institutions, but surely one of the basic mistakes that we have made is in thinking of what we call the "old" as a race apart and treating them at the best with kindly tolerance—to ease our consciences probably more than anything else—rather than accepting that there is absolutely no difference between people who are 65 and those who are 64 except that the former happen to have had their 65th birthday. If we 1386 could stop talking about the "old" we should begin to make some progress.
One thing which is surely crystal clear is that the great majority of people like to continue to be useful, like to continue to feel that they are needed. That surely, if I may venture to say so, is one of the great charms and attractions of membership of your Lordships' House. The idea that people can continue to be wanted and to play a part, and not that they are fully employed until the moment when their 60th or 65th birthday comes and then they are no longer wanted by the community, is the bigger issue that we need to tackle. It is almost self-evident that what is required is the opportunity for gradual retirement, the opportunity to continue not full-time but on a part-time basis ("part-time" being interpreted in a variety of different ways) so that people go on being needed, being used, feeling they are wanted and not feeling that they have moved into a totally different class.
It is here that the earnings rule operates so ridiculously by encouraging the absolute cessation of work rather than encouraging gradual retirement. In a debate last autumn I asked whether if we have to have an earnings rule, it was really impossible to aggregrate the earnings of people above a certain age in assessing their entitlement to pension and to aggregate them over a period of 12 months rather than on a weekly basis. I was told then that that course was not practicable that it had been looked into before and that it was not accepted. If that is not the way in which to encourage gradual retirement, rather than the sudden sharp and permanent break, then let us give our minds to finding some other way in which this can be done. A prime purpose of pension policy should be to enable people, as long as they are able and wish to do so, to continue to earn and to contribute in work and in taking part in the life of the community as a whole. To me one of the major disappointments in these proposals is that they do nothing to look at the long-term problem of making life meaningful and enjoyable, as well as just providing the possibility to survive, after a certain age has been reached.
§ 3.11 p.m.
§ LORD ABERDARE
My Lords, I am grateful to the noble Baroness, Lady Phillips, for having introduced this debate 1387 in, if I may say so, a characteristically short and interesting speech, and for having given us the opportunity to debate the White Paper, Strategy for Pensions, which undoubtedly deals with one of the most important social issues that face us all. There are at present in this country about 7½ million retirement pensioners, and by 1980 there will be about 8¼ million. Moreover, as the numbers of people in retirement increase, the working population on whom they depend is getting proportionately smaller. That is the importance of the problem, and it is that we have to face. The noble Baroness used, I thought, to the full the freedom that comes from speaking from the Box opposite in calling for more and more and better and better provision for pensioners; but she spoke rather more swiftly when it came to the last part of her speech dealing with the contributions from which these pensions have to be found. I do not blame her for that.
I should like at the very beginning of what I have to say to make the point (I hope that I am not teaching your Lordships "to suck eggs") of how fundamental to any consideration of State pensions it is that, unlike a normal private insurance scheme, the National Insurance scheme works on the principle that at any one time the contributions of those in work pay for the pensions of those who have retired as well as for all the other social security benefits. It was this inescapable fact of pensions life that led to one of the chief weaknesses of the Crossman pension plan. That plan was certainly ambitious in seeking to put the whole of the State provision for retirement on an earnings-related basis. But this would have entailed laying a greater contribution burden on the working population of the future as the new pensions matured than we are at present prepared to shoulder.
By contrast, the proposals in the White Paper are realistic in respect both of contributions and of benefits. Our objectives are set out very clearly at the beginning of the first chapter of the White Paper. In brief, they amount to better pensions, financed on a fairer basis and firmly guaranteed, with the State doing what it can do best and occupational schemes doing what they can do best. Under our 1388 proposals, contributions by employees and employers will be fully earnings-related, which will mean lower contributions for the lower-paid. Occupational pension schemes will be given every encouragement to improve and expand, and a change of job will not involve the loss of occupational pension rights.
In these three respects we are building on progress that has already been made. Reliance on earnings-related contributions for financing State benefits has been increasing in recent years. In two successive uprating bills the employees' flat-rate National Insurance contribution has been left unchanged. Two-thirds of male employees are now in pensionable jobs, and occupational pensions are unquestionably a growth area. And with the expansion of coverage and the improvement in occupational pensions, preservation and transferability of pensions have come to assume greater importance. In so far as the White Paper signposts a road that we are already following, this is an important point in its favour. The logic of events and popular trends are not infallible guides, but they are useful ones. It is not just a matter of what happens in 1975, but of continuing improvements from 1970 onwards. The criticism was made of the Crossman Plan that preoccupation with a brighter future had led to neglect of existing pensioners as well as of future contributors. By its very nature a contributory earnings-related scheme takes time to make its impact felt. But we live in the present, and for those who are no longer earning and contributing, such a scheme does nothing. In contrast, the advances in the State basic scheme envisaged in our strategy can be brought into operation as soon as staff and resources allow, without, as the White Paper puts it, "having to wait for new rights to mature".
We have already started to implement our plan. Invalidity benefits, pensions for the over-80s, pensions for younger widows, attendance allowance (now to be significantly extended)—these are all changes which have already taken place or will soon be in operation, and which bring help at once to people who need help at once. I am happy to acknowledge the kind words the noble Baroness used in praising us for having undertaken to make an annual review of pensions and 1389 other social security benefits in future. This of course is a guarantee that inflation will not be allowed to erode the basic pension. And I would say to the noble Baroness, Lady Seear, that of course we hope to do still better than this, as we have done in the two upratings that we have achieved so far. Within the resources that are available to us, we should very much sooner see the basic pension rising with the rise in earnings than simply keeping pace with price increases.
Reactions to the White Paper have been generally favourable. Detailed objections have been mainly that we are trying to achieve too much; general objections that we are not trying to achieve enough. But I readily acknowledge at once that the criticism we have received has been constructive. The T.U.C., for example, while critical of various aspects of the scheme, have acknowledged the flexibility that can be provided by occupational pension schemes and have recognised the need to extend their coverage.
My Lords, I hope that, with your Lordships' permission, I may be able to intervene again at the end of the debate to try to answer some of the detailed points that are made. I listened with great interest to some of the points made by the noble Baronesses, Lady Phillips and Lady Seear, and particularly their call for the same retirement age for men and women. I am not sure how many of your Lordships will agree what the age should be. I think the noble Baroness, Lady Seear, wanted the retirement age of women to go up to 65 to equate with the age of men.
§ LORD ABERDARE
I think there is a difficulty here. I do not think everybody would agree that the retirement age of women should go up to 65; and if we were to contemplate bringing the age of male retirement down to 60, we should face a very heavy cost indeed. The noble Baroness also made the point which is frequently made to me about prescription charges. The choice of 65 as the age at which people are relieved of paying prescription charges is not in any way related to the age of retirement: it is simply the age at which it is thought people may 1390 begin to require more prescriptions, and therefore should receive them free.
§ BARONESS PHILLIPS
My Lords, would not the noble Lord agree that it is slightly curious, when you stand in a chemist's, to notice that a poor old gentleman who come in gets his prescription charge free, but is told that he must pay for his wife? That seems to me quite anomalous. It must be related to something.
§ LORD ABERDARE
I do not think that is really an anomaly. The noble Baroness also asked me again about the earnings rule which we were discussing yesterday. Of course, the earnings rule has been a difficult one for all Governments to tackle. Her own Government was not able to abolish it, but now, using the freedom of the Box opposite, the noble Baroness calls for its abolition. The fact is that if we were to abolish the earnings rule it would mean the end of the retirement condition, and some 175,000 men, 75,000 women on their own insurance and 125.000 dependent wives would qualify for retirement pension. That is where we get the figure of £110 million a year. The noble Baroness also asked me about the five years' qualifying service with an employer. I think she will find in the White Paper that if a person leaves employment before having completed a five-year period the employer has to put up the same amount as he would have had to put up for the reserve scheme. In fact he buys that person back into the reserve scheme, so that he gets his pension eventually under the reserve scheme provisions. I hope I have answered some of the detailed points which have been brought up, both by the noble Baroness, Lady Phillips, and by the noble Baroness, Lady Seear.
May I now go on to some of the rather broader lines of criticism that have been directed at us? In the first place, we are told that we have set the standards of recognition of occupational schemes too low. My Lords, this is a matter of finding the right balance. Standards of recognition of occupational 1391 schemes must be high enough to ensure that only schemes which are going to make a real contribution to retirement income can qualify, but setting the standards too high would deter employers from attempting to meet them. As things stand at present, it is clear that although the main public service schemes already substantially match up to the proposed recognition conditions there are relatively few employees in private sector schemes which would do so. We believe, for example, that more than two-thirds of occupational scheme members in the private sector are not at present covered for widow's benefit at the required level and about half do not enjoy any provision for post-retirement pension increases. Moreover, the benefit for about a third of private-scheme members falls short of the proposed minimum test of 1 per cent. of average salary per year of service. The requirements for recognition are of course only minimum requirements, and we very much hope, as the noble Baroness, Lady Seear, said, that between them the good employer and the conscientious trade union will develop schemes that improve considerably on this minimum.
§ LORD SLATER
My Lords, I should like to ask whether the Minister could inform the House how the private schemes compare with the State schemes in regard to a State industry. For example, in the mining industry a man retires and receives 30 shillings per week pension, and if he happens to pass on his widow receives 15 shillings per week. Yet that particular fund has many millions of pounds invested in various forms of industry in this country. Is it not the Minister who has the power to say what the rate of pension ought to be and to give consent to the applications made from both sides (that is, the National Coal Board and the N.U.M.) for an increase of the basic pension of those within the industry?
§ LORD ABERDARE
My Lords, I am interested in what the noble Lord, Lord Slater, says, but I am afraid I cannot give him an answer off the cuff to the very complicated question he has put to me. I will have a look at it, certainly, to see whether I can help him.
1392 Secondly, we are told that the reserve scheme is too modest. The reserve scheme is a fall-back scheme for those currently without a reasonable occupational pension scheme. Its level must inevitably, therefore, be related to the minimum set by the conditions for recognised occupational schemes. The benefits it can pay will be determined by the level of the contributions paid to it; and for those with modest earnings the combined 4 per cent. contribution seems as much as could reasonably be charged. The point which I would emphasise is that it is the level of the contributions which sets the level of the benefits, for the reserve scheme will give all those who belong to it, for however short a period, a fair return for their contributions.
Thirdly, we are told that this strategy will not result in a reduction in the number of people depending on supplementary benefits. My Lords, we must be realistic and acknowledge, as the White Paper does, that there are no short cuts. On the other hand, annual upratings, group selectivity in the State basic scheme, the growth and improvement of occupational pension schemes and in due course, I hope, the advent of tax credits, will together make a substantial impact on the extent of dependence on supplementary benefit.
The scheme of tax credits outlined by the Chancellor in his Budget speech will be the subject of a Green Paper and will obviously be considered and debated in its own right in due course. But I think it right, in this debate on the Government's proposals for a major reconstruction of National Insurance, to draw attention to this important development, because tax credits hold out the possibility not only of reforming the whole income tax structure but also of performing some of the social functions of a negative income tax. They may give us a new and very valuable way of directing help to the low-earning family. They may also enable us to increase the help available to existing pensioners, widows and others receiving benefit under the National Insurance scheme. If our plans on this front mature, as we hope they will, we shall have devised an instrument of considerable potential for reducing the numbers dependent on supplementary benefit—and for eliminating a number of means tests.
1393 Finally, we continue to be criticised about the level of the State basic pension. We recognise that we cannot do all that we should like to do for retirement pensioners. The amount of money involved is very great, and the increases in contributions which a large number of the working population has to pay whenever pensions are increased are considerable. But in last year's and this year's upratings we shall be raising the level of the basic pension by over one-third, in money terms, and we are steadily increasing its value in real terms. Annual up-ratings, while now accepted as a matter of course, were an innovation for which this Government was responsible and were announced only last December. They represent a major step forward, and so do the substantial selective improvements (for example, invalidity and attendance allowance) which we are providing for those who really need them.
I readily admit that we should aim to do still more for pensioners, but we believe that the scheme we have proposed in Strategy for Pensions will not only improve their position but will lay the foundations for sound and steady progress in the future. No one expects a miracle overnight, but we believe we have presented a plan for pensions which takes full account of the needs of the retired. the means of those who contribute, the special position of priority groups and the well-being of the nation as a whole.
§ LORD RAGLAN
My Lords, before the noble Lord sits down, I should like to ask whether the Government would consider this point. The noble Lord said that 65 was the age at which people began to need more medical help. Would he bear in mind something which I believe to be true: that one reason why people need more medical attention over 65 years of age is that they are discouraged from going on working? Therefore they turn to the state of their health, and very often ill health is psychosomatic.
§ LORD ABERDARE
My Lords, I am well aware of the noble Lord's interest in this matter and take his point to heart.
§ 3.30 p.m.
§ LORD BROCKWAY
My Lords, may I begin by declaring quite emphatically a personal interest in this subject. I am an old-age pensioner: I draw my pension 1394 on Monday morning and it usually lasts me until Thursday. Quite clearly if, as a result of this debate or Government consideration, my pension was to be increased I would be affected and would be grateful to the Government.
I am a little surprised to find myself appearing so early in the list of speakers this afternoon and to be following the Minister in the important speech that he has made. Over the years I have been taught that if one was to have any political effect it was desirable to specialise, and I have specialised in foreign affairs and the affairs of Colonial territories. But that did not mean that in any sense I was less interested in social and domestic affairs in this country. I am a Socialist and not only an internationalist; and as a Socialist I am deeply concerned with the problems of poverty and class relations.
The conditions of poverty in which so many old-age pensioners exist to-day are absolutely intolerable in a civilised society. I have so many friends in that position that I find it difficult to give the image of any one. I will give the instance of a single man living in rather exceptional conditions in a council bungalow for old-age people; he is so much better off than the majority of old-age pensioners. The bungalow has a bath, a toilet, a place for him to wash his hands, a little living room and a cup board for his bedroom. He gets £6 a week to live on. His rent and rates are met under the supplementary benefit system, but, with the cost of living as it is to-day, he gets only £6 a week. I go to see him and dare not take what he offers me over tea because I know that for him it will mean under-nourishment. I have illustrated my view of poverty by referring to the old-age pensioner that I know best among my friends. We are not a civilised community if we allow many who went through the terrible years of unemployment in the 'thirties and have given so much to our society to end their days in such conditions.
I am one of the dwindling number of these who remember the beginning of old-age pensions. In the 1906 Election I was a sub-Liberal agent in a Kent constituency—the only time that constituency has not returned a Conservative. I came to London and lived in a settlement and saw the poverty there. There were no 1395 old-age pensions; no social benefits; no feeding of hungry school children. The shocking poverty of those engaged in homework, such as cardboard box-making, artificial flower-making, even tooth brush making, under appalling, unhygienic conditions in their verminous rooms made me a Socialist. In 1906, the Liberal Government were returned and they refused to do anything about these conditions of poverty. Lloyd George demanded action, but because the Liberal Government refused, the Labour Party became increasingly stronger at by-election after by-election. Lloyd George at last convinced Asquith, and we had the beginning of old-age pensions.
§ BARONESS SEEAR
My Lords, if the noble Lord will allow me to interrupt, I think he has forgotten that the 1906–11 Liberal Government was, by the general assent of all Parties, one of the greatest, if not the greatest, reforming Governments of this century.
§ LORD BROCKWAY
My Lords, I hope that the active memory of the noble Baroness is not as long as my own. I was saying—and this is undeniable—that the series of Labour by-election victories, because the Liberal Government in its early days did nothing, encouraged Lloyd George to begin introducing the social Welfare State: old-age pensions, unemployment benefit, the feeding of hungry schoolchildren. The pension was then 5s. a week—very much larger in our present terms. It has since been increased and was made the stable basis of our society by the Labour Government of 1945–50.
I want to indicate in conditions of statutory fact what I have said about the poverty of old-age pensioners. Thirty per cent. of those who are receiving the old-age pension find their conditions so inadequate compared with the standard of living that they have to receive supplementary benefit. In addition to that 30 per cent., 10.15 per cent. apply for the rent and rate rebates. That is because on their pension old-age pensioners are below a level where they can live in human subsistence. Perhaps the greatest tragedy of all—and this is so among the friends I meet—is that some old-age pensioners are so independent, so proud, that they are unwilling to ask for the supplementary benefit to meet their needs; they 1396 regard the supplementary benefit as charity. The first thing that Her Majesty's Government should be doing is to raise the standard of the old-age pensioners.
In theory I am against the whole contributory system. I remember my political hero in this country, Aneurin Bevan, once saying to a Labour Party conference: "All of us contribute to old-age pensions, every family with a working member, by paying the weekly contribution. How much better it would be if we all contributed through income tax where those with higher incomes would have to bear the proportionately greater cost". It is not merely that every worker makes a contribution to meet the cost. Every employer who makes his contribution to old-age pensions passes that contribution on to the community by adding it to the cost of his industry, and therefore to the price of the goods he distributes. The contributory payments of old-age pensions to-day are borne first by the workers who pay the contribution, and then by the community as a whole who have to bear the cost of the employers' contribution in the increased prices of the goods they produce. Therefore, theoretically I am against the contributory scheme altogether.
I have to recognise that probably it is politically unacceptable because we human beings are strange in this respect. We would prefer to pay a larger amount in weekly contributions than pay one sum in income tax when it is imposed upon us annually. That human idiosyncrasy is the only ground whatsoever for a contributory system so far as pensions are concerned. I would urge only in that respect that the contributions should be steeply graduated according to the wages and salaries which are paid and that no one under income tax exemption level should be required to pay that contribution at all. The pension which results should be above the level which is laid down for subsistence benefits and should be attached to the cost of living.
I hardly ever find myself speaking in this House with a difference not only with the Government on the opposite Benches but with my own Front Bench. Therefore, I go on to say this. I am not in principle opposed to occupational pensions which can provide benefits above State pensions. I am, however, against the present system of occupational pensions. 1397 The noble Baroness, Lady Phillips, was absolutely right when she said that the present system acts against manual workers. The present system determines the rate of pension on what has been earned in the later years. The staff member, the manager—their salary goes up in the later years and they receive a higher pension. The manual labourer's pay goes down in the later years. His peak occurs during earlier years when he can earn bonus; when he can work overtime; when he can get increased piece rates. The present occupational pension system acts against the manual worker in favour of the non-manual worker. There is no doubt about that. The noble Baroness was completely right.
Secondly, it operates against women workers. There is not merely the fact that women workers receive lower rates of pay. At this point I want to apologise to the Minister. He wrote to me and asked whether I had any special questions to raise, and I said, No, I was going to deal with the broader aspect. But this is one special question, and I do not ask him to answer to-day; I ask him to consider it. Women in these occupational schemes are under an additional disadvantage. They go into employment and they marry; they then have children and are absent from work for a number of years looking after their children. Then they return to work. Does the Minister know that, in the public services of this country, when the occupational pensions are decided the period which the woman serves before she marries and has children is not counted at all? Even in our public services, under the present occupational system it is only the period when she returns to work after her children have reached a certain age that is accepted in deciding the pension rate. I do not ask the Minister to reply to that point at once, but I beg him to consider it very carefully.
§ LORD ABERDARE
My Lords, I should not like to reply at once "off the cuff", but under the new scheme if a woman's pension was not preserved by the firm she works for, the firm would have to buy her back into the reserve scheme.
§ LORD BROCKWAY
My Lords, like the Minister, I shall have to consider 1398 the point before making a comment on it, as I hope he will consider my criticism before he makes a reply.
I am not against occupational pensions, because as a democratic Socialist I do not believe in Socialism from above; I do not believe that Socialism is just the State; I do not believe that Socialism is just nationalised industries. Socialism is democracy from underneath, and it may well be that in industries with self-government there can be occupational systems which are democratic. All I would ask in that respect is that, in addition to the national Occupational Pensions Board, which is suggested in the Government's White Paper, there should be industrial pensions boards for the separate industries. Indeed, there ought to be some instrument of co-operation even in separate factories, with not only the trade unions but also the shop stewards represented. And on the national Occupational Pensions Board there should be trade union representation and representation of the separate industry hoards which I have proposed in which the shop floor would have representation.
Lastly, on this matter, I wish to make a suggestion. One of the criticisms of the present occupational scheme is that it is the private profit-making insurance companies which largely benefit. I hope that when the early day comes when we have another Labour Government we may nationalise the insurance industry. Whether or not we do that, I hope we shall have, for the purpose of occupational pensions, a national insurance board which will co-ordinate their activities and act without the profit-making motives of private interests.
My Lords, I very much regret that the noble Baroness, Lady Seear, is not in the Chamber because in my last remarks I want to reply to what she said. She will forgive me if I say that those of us who are trade unionists regarded what she said as being patronising towards us. It was said as though she was someone outside us, telling us what we do, telling us that we should be more concerned with old age pensions than with our wages. Who is it to-day leading the campaign about old-age pensions? It is Jack Jones, the General Secretary of the Transport and General Workers Union—the largest union in the country—and he 1399 has said openly that he is more concerned to get justice for the old people than an increase in wages. The suggestion—typical of the Liberal Benches —that we who are trade unionists have no concern for the old-age pensioners and are selfishly thinking only of our own wages, is absolutely untrue. Tribute should be paid to the trade union movement, and particularly to Jack Jones for the leadership which he has given in this direction.
§ 3.54 p.m.
§ LORD GAINFORD
My Lords, my contribution to this very interesting debate is to put forward a suggestion for the consideration of your Lordships. But first, I would say that I find myself rather echoing some of the arguments put forward by the noble Baroness, Lady Seear.
The matter of retirement with a pension is viewed according to a person's interests, desires and, unfortunately, fears. To some it is a period to be dreaded. They will, so they think, be forced into idleness, to become an eventual burden to their families. To some, it can mean a time to do what they had not been able to do and to pursue new interests and hobbies. To others, it is a fascinating challenge. It would be a sign of great success if in the next few years the Government, regardless of what political Party are in power, could encourage more people to join the ranks of those in the last category that I have mentioned. An example of this type of person was given in a short story in a London evening newspaper. Unfortunately I cannot remember the name of the author, but it was about a year or so ago. The main character was a senior member of a firm who was retiring with a pension. Numerous colleagues advised him of what he could do with his leisure. After his retirement he was seen working in a neighbouring block of offices, and when asked what he was doing he replied. "I am the new office boy."
My Lords, medical science has given the average man and woman a much longer span of life. Retirement can be quite a long period. No one who enjoys his work and desires to go on living a useful life should be automatically cut off from some form of occupation just 1400 because he has reached a certain age group. I know that many private companies and branches of the Civil Service and local government have schemes by which they invite their staff to prepare for retirement even as long as five years before the day it is due: they give financial advice and help to create new interests. Naturally, how a person wishes to spend his time on a pension is a private affair, but there must be many who are fit enough to learn and to take up some new work. This can be linked with the present unemployment problem. We are told that there are about one million unemployed, yet how often do we hear these words in shops and offices: "We are understaffed" or, "Sorry, we cannot get the staff." How many clerical or administrative posts could be filled by men or women who have retired on a pension and who would be glad to earn something extra?
At the end of the White Paper Strategy for Pensions we read:Social security is not the exclusive responsibility of the Government.No, my Lords, not exclusively. Private firms and the Government could work together on this matter. A person on reaching retirement age should, if he or she has a genuine desire for it and is physically fit, be encouraged and helped to find some other work. The pension under the occupational pensions scheme and the new salary could make quite a useful income as well as a welcome one. In the meantime, while engaged in this extra employment he or she continues to make weekly contributions, so that finally, when the decision is made to live a leisurely life, the pension from the earlier employment can be augmented by a State pension at a higher rate than would have been payable if it had been drawn from the time of leaving the job from which that person was originally pensioned off.
To sum up, a person leaving regular employment with a pension and wanting to go on working should be encouraged to take some other work, and when he finally draws the State pension it should be of higher value. Thus there may he more possibility of a really happy comfortable retirement to a life of leisure after honourable service. It may seem that what I have been saying relates mainly to white collar workers, but I do 1401 not see why something similar should not be suggested for manual workers. My Lords, I leave this suggestion with you.
§ 3.59 p.m.
§ BARONESS SUMMERSKILL
My Lords, in one sense I shall be following the noble Lord who has just sat down, because we are both dealing with the attitude of workers towards pension and to retirement, but perhaps in another sense I may come to different conclusions. I find this White Paper a disappointing document, though not for all the reasons that my noble friend Lady Phillips has given. And I may say, in parenthesis, that I heartily agree with her when she denounces the anti-discrimination proposals (and I am of course referring to women) in this document. I am particularly disappointed that in 1972 we are still dealing simply with the manipulation of figures, figures which are solely calculated to produce a pension big enough to purchase the necessities of life for the short period of time—and I want to emphasise that—between retirement and death. I think the House will agree with me that similar calculations have preoccupied civil servants and politicians in some modern countries for a century.
I was Minister of National Insurance after the last war, and we were compelled, I am afraid, then (and perhaps we had not yet moved far enough to think in different terms) to deal simply with the amount of money that could be collected, the amount of money we had in hand, and how it could be distributed as fairly as possible. But that was a long time ago. There is now a different climate of thought, and it was particularly interesting to hear the noble Lord who has just spoken and the noble Lord, Lord Brockway, and others dealing with the strictly humane side of pensions. I know that vital statistics are still very limited. There are large fields that still remain untilled. I believe that statistics should include not only the health hazards of industry but the consequent expectation of life of the worker, and of course the figure has to be approximate. But only those statistics, I believe, properly implemented, can ensure justice for the worker in his retirement.
I suppose that there are broadly seven great industries, the mines, the quarries, the railways, the factories, the docks, constructional work and shipping. I have 1402 no intention of relating the symptoms of some of the occupational diseases, except to remind the House, so that we can in this debate become completely realistic, of for instance, the chronic pulmonary diseases of the miners, including pneumoconiosis and the chest diseases of other industries; of atomic energy as an industrial hazard and the environmental problems of the iron foundries. Things are improving in the potteries, but still they are associated with lead poisoning and silicosis, while the high incidence of factory accidents—and I am glad that we have periodic debates on this tragic problem—are a constant reminder of the risks in industry. This is the background to the question we are discussing to-day.
Many of these industrial diseases, of course, are prescribed. I only wish that more were; but, as many noble Lords know, before we can get a disease prescribed a long protracted discussion goes on with the doctors and insurance experts, and so on. And, of course, those diseases which are prescribed carry a pension. But this picture only goes to emphasise the risks and health hazards imposed on the manual worker, whose arduous conditions of work should be taken fully into account when considering the pensionable age. I have heard from people here—people who have never done manual work in their lives (I have not, but in my working life as a doctor I have been close to many of them, and in an industrial constituency for many years)—pleas to the worker, longing to be eased out of his job, not to do it too suddenly. My Lords, the man who gets up at seven o'clock in the morning and goes off on a manual job which leaves him at the end of the day utterly exhausted and worn out, from a routine job in a dark and dirty factory, is not asking for that job to be eased off; he often wants early retirement. On the subject of whether women should retire before men, my feeling on the matter is that there is no question of raising women up to 65; we want to bring men in these heavy manual jobs down from 65 to 60.
I think we need a fresh and more humane approach to pensions than the one in this White Paper, which concentrates only on the monetary aspect and ignores the broader considerations of the future of the older industrial workers, It seems to me, from my very practical 1403 experience of this subject, that a great many of these workers are suffering from varying degrees of physical degeneration very shortly before they are about to retire. If we are to judge from the fact that the average expectation of life among men is about three years after the statutory retirement age, then surely we should look at the whole question of retirement and pensions in a new light. Surely, the least which a grateful nation should give these men at the end of a hard working life—and we are all grateful; we express our gratitude to the workers of this country who produce the real wealth of the country—is an adequate period of rest and relaxation. And surely, rest and relaxation is what retirement should provide. It seems to me that, while to-day people are living longer, nevertheless there are well-defined categories who are condemned to premature death because they are compelled by their pension rights to work beyond that age when medical science would deem retirement desirable. I do not think this view is refuted in the world of medicine.
I am not concerned only with those engaged in heavy manual work or in the processes carrying obvious health hazards. Among the sedentary workers in the world of the professions, the latest figures available reveal that up to 1951 the reduction in the mortality rate in professional men was proportionately similar to that for all men. But during the following 10 years the mortality rates for middle-aged lawyers, teachers and clergymen fell more sharply than for all men. However, the changes for doctors are much the same as those for all men. In other words, in the professional field, the clergy—and I am giving the statistics—fair best. It seems to me that if longevity is one's early ambition one should opt for the Church. I am glad to note that the right reverend Prelates approve: it is so rare that I get approval from that Bench. It is, I am sure the right reverend Prelates will agree, medically significant that the Church is the calling devoid of all the pressures to which other professions are subject, and this is reflected in its low incidence of certain fatal diseases compared with other professions. I am pursuing this argument, and the right reverend Prelate will be sorry he approved when he hears what I have to say. This 1404 argument illustrates the value of a sheltered life. A house is provided, adequate income is assured; there are no difficult decisions which provoke agitation with possible organic reaction, such as coronary. And, If I may say so to the right reverend Prelate, the final arbiter is the Almighty, to whom problems are referred, and the clergy is absolved. This really is a serious illustration.
I ask noble Lords to look at the obituary list in the British Medical Journal any week. The doctor, with all the physical and mental pressures associated with his calling, is condemned to death at a much earlier age. The lawyers and teachers, who live much longer, have one thing in common; they enjoy longer holidays and the consequent relaxation. But, to come back to the noble Lord, Lord Raglan, who suggested that there are certain people (and I am thinking particularly of sedentary workers) who should continue to work, I agree with him to this extent: that undoubtedly there are thousands of dedicated teachers, for example, who would improve the quality of teaching if their services could be retained long after the statutory age of retirement. I agree with him, too, that there are dedicated individuals in professions, callings, trades, if you like, who are longing to go on. Well and good! I am only too happy that they should be retired out gradually. But my plea is for those who have to go on until their strength is exhausted and then within two or three years—and the statistics prove it—die. I feel that we fail to do justice to the contributors to the Pension Fund unless we accept a new approach and introduce a differential pensions policy; and I believe that that is what is called for. The cynics will say, of course, that a differential scheme is bad for the Exchequer, for people will live longer to enjoy their pensions. My Lords, that is so; but do we, as responsible individuals, seek to produce a pensions scheme which will ensure that the unfortunate pensioner will die as soon as possible?
The noble Lord, Lord Slater, said quite rightly just now—and I recall this as a Minister—that the Pensions Fund is a colossal fund, and it seems to me that it is not fairly distributed. It goes on growing, and still we have these unfortunate individuals who could benefit if only 1405 they had a little more money. Undoubtedly the balance sheet of the economy benefits when an individual dies within a short time of retirement, which is the position to-day. The expectation of life of a man to-day is 68 or 69; of a woman much higher, probably because of the reasons I have stated: that she has not the physical pressures brought to bear on her in her work, as is the case in some of the arduous jobs that the manual labourer has to do. I would sum up by saying that when we are thinking about a strategy for pensions, a civilised community should concern itself with the quality of life throughout the various ages of man, and do justice to those whose toil and service have added to the wealth of the country and the comfort and happiness of the rest of the community.
THE LORD BISHOP OF HEREFORD
My Lords, I wonder whether I may be allowed to interject for a moment. I did not mean to make any reference to the remarks about the clergy, but I would just begin by saying that I am always delighted to listen to the noble Baroness on matters on which she has first-hand experience. When it comes to the life of a clergyman, she is not so well informed. I rose really to say that she purported to give a list of the main industries of our land, and I was sorry to find that she missed out agriculture, which I think comes either at the top or very close to the top of the league. Coming from an agricultural part of the world, I did not want to let it be thought that agriculture was not one of our absolutely main industries.
§ BARONESS SUMMERSKILL
My Lords, I agree. Perhaps we might include it in "constructional work"—after all, they are all constructive. When the right reverend Prelate says that I do not know anything about his life, may I say that there is nothing I have quoted to-day which he will not find confirmed in the Printed Paper Office if he asks for the copy of the Registrar General's statistics on occupations.
§ LORD PLATT
My Lords, I should just like to intervene on some matters before the noble Baroness finally sits down. I am not going to contribute anything to the general debate. I think 1406 there is some misunderstanding on the facts, and this was also reflected in the speech of the noble Lord, Lord Gainford. May I also say to the right reverend Prelate who has just sat down that I think that the most dangerous occupations shown in the Registrar's Annual Report are still those of inn-keeper and innkeeper's servant; but we will say no more about that. What medical science has done, above all, is that it has prevented tuberculosis and most of the infective disorders which killed people of pneumonia, meningitis, tuberculosis, et cetera, in their comparatively early years. The result is that the average expectation of life of a male baby is much greater than it was before; but the expectation of life of a man of seventy is little changed. The noble Baroness, Lady Summerskill, told us that the average expectation of the male was only three years over retiring age. I have not checked that figure recently, and it may be that the average expectation of life of a male at birth is now sixty-eight. If so I would not quarrel with that figure; but I happened only a week ago to look up—
§ LORD PLATT
My Lords, I would just finish by saying that I happened to look up the expectation of life of a male at sixty-five, and it is nearly twelve years.
§ BARONESS SUMMERSKILL
My Lords, the noble Lord knows that we do not take the expectation of life from sixty-five; we take the expectation of life from birth. That is the correct approach, and if he will look at the Report he will see that that is the Registrar's approach. But I think we are being rather discourteous to the next speaker, because the noble Lord has made a speech and not asked a question.
§ 4.17 p.m.
§ LORD WYNNE-JONES
My Lords, after this very interesting discussion I hope to be brief. My noble friends Lady Summerskill and Lord Brockway have 1407 both called attention to the extreme importance of pensions for the manual worker. I think that it is important to realise what is to-day the main cause of poverty. At the beginning of this century a famous inquiry was conducted by Rowntree; the findings were published in a book on poverty, and it was made perfectly clear that the cause of poverty at the beginning of this century was simply low wages. Wages were so low that even a man in full employment could not attain a decent standard of living. In the 1930s a similar inquiry was made, also by the Rowntree Committee, and the findings were published as a second book. I think that was in the late 1930s. At that time it was found that the main cause of poverty in this country had become unemployment. I think that if we look at the position to-day, we should find that effectively the main cause of poverty is old age, and the very low payments that are made to, and the low incomes received by, old people. So we have had a shift in the whole cause of poverty.
Therefore, it is no longer possible for us to treat retirement and pensions as being just a little gratuity made by the State. On the contrary, it becomes absolutely vital to realise that unless our pensions are high enough we are condemning several millions of people to a state of poverty. This poverty applies first, of course, to ordinary living standards; to the amount of food that they can get, and the sort of houses that they can live in. But for the old people there is something which is also extremely important, and that is the amount of heat which they can get in their houses. A large number of people die every year simply because of lack of heat. It is therefore essential that the country should realise that pensions are not gratuities. Pensions are what people have earned throughout the whole of their working life. They have earned the right to have these pensions and they should not be regarded as something which the rest of us kindly give to the old people. On the contrary, pensions are an essential part of what they have paid for by their toil throughout their life.
It is therefore quite essential that the old people should be properly paid; that we should ask not, "What is the mini 1408 mum that we can get away with?" but rather "What is required for old people to live decently and maintain a proper standard?" My noble friend Lady Summerskill has quite rightly called attention to the problem of the manual worker in really hard physical work. This is a totally different position from that of people like most of us, who have been lucky enough to be in positions where we were not subjected to such extreme stresses. It is therefore vital that they should be treated in a special way.
But then the second point which arises —and I come to what the noble Baroness, Lady Seear, and the noble Lord, Lord Gainford, referred to—is the question of continued employment after retiring age. I find the present situation, and indeed the proposal in the White Paper, not at all satisfactory. Paragraph 32 on page 11 of the White Paper states:The pensions of those who retire—will still he subject to an earnings rule until age 70 (men) and 65 (women)".This really is a most unsatisfactory position. The noble Baroness pointed out, as did the noble Lord, Lord Gainford, that many people benefit by being able to continue in employment, at least to a certain extent, and I think it essential that we should realise this. We ought really to have the possibility of a fading out from active work, rather than a sudden cutting off. It is commonly supposed that elderly people are incapable of doing anything fresh or anything new. This is of course a complete myth. It is absolutely untrue.
I remember about 15 years ago at the university at Newcastle, a man who had reached the retiring age of 65 and he decided to do what he had wanted to do all his life, which was to take a university degree. So at the age of 65—he had left school, I think, at the age of 14 and had no preliminary training at all, except what he had gained during his trade union and political work—he registered as a mature student in the university, and in three years he took an honours degree in economics. I may say that during that period he was also extremely active in all student assemblies. He was known as a first-class debater and the younger students enjoyed his participation in debates. When he had completed his initial degree he decided that he was 1409 really getting on rather well, so he worked for the degree of M.A. and he took it. In universities other than the ancient ones and those in Scotland the degree of M.A. has to be earned; it is not given either as an initial degree or merely on payment. So he submitted a thesis after two years' work and got the degree of M.A. That shows what a person can do. It gave him a tremendous fillip after his retirement. For a number of years he was able to play a useful and active part.
If I may give another illustration of the sort of thing that can happen, a contemporary of mine took a job as a schoolmaster. He was a science master and he did very well. He became head of a science department and in his early forties he became headmaster of a good school. At the age of 55 he decided that the stresses of being a headmaster were rather too much for him, so he stepped down from being a headmaster again to being head of a science department. At the age of 60, he decided that being head of a science department was also too much for him, so he dropped down to being an assistant master in science. That is the sort of gradual fading out from the most active type of work which it is very good and sensible for a person to do. But if we put in these rules about earnings, we make it extremely difficult for that to happen.
I would suggest to the noble Lord, Lord Aberdare, that the Government might consider a graded scheme. I give this only as an illustration, and something better could no doubt be worked out. If a person steps down from full earnings to half earnings, then I suggest that his pension should not be affected if he has reached retiring age. I suggest that only if he continues to get his full earnings might his pension be reduced otherwise, it should not be reduced. After all, the pension is something which he has earned during his working life. I think that this principle could be very generally applied. Naturally, it appears much easier to do it in what we call the "white collar" jobs, but I have no doubt that if one looked into the matter carefully one would find that it could be generally applied. But I think that the idea of removing a pension altogether if a person earns more than a certain amount a 1410 week is utterly wrong and is good neither for the individual nor for society.
§ 4.27 p.m.
§ LORD REIGATE
My Lords, I hope that the noble Lord, Lord Wynne-Jones, will forgive me if I do not follow him in the ordinary course, because I agree with so much of what he said, particularly about the earnings rule; and in respect of the earnings rule I think that even the noble Baroness, Lady Phillips, would say that I have quite a good record. I was very interested in the noble Lord's remarks about the changing nature of poverty. This is of course a subject in itself and is really worthy of a full debate. But I always think one ought to remember something else, which is that the definition of "poverty" changes with the generations. The fact is that a rising standard of living means—if I may put it in a slightly Irish fashion—a rising standard of poverty, and some of the things which are now considered poverty would not have been so considered, let us say, 100 or 200 years ago. But I agree with so much of what the noble Lord said, particularly about the possibility of switching employment making for a happier old age and a happier retirement, that I hope my noble friend will have some comments to make on that part of his speech.
I should like to express my gratitude to the noble Baroness, Lady Phillips, for introducing this Motion. I am doubly grateful to her, because when it appeared on the Order Paper it was a timely reminder to me that I had not read the White Paper, and as I have had an interest in this subject for twenty years she proved to me how remiss I was. I would begin by saying that I commend the White Paper. Despite its complexity, I think it is lucid and well written, which one cannot always say of White Papers, though in passing I must say that I note with regret that on page 17 my old friend the Secretary of State is unable to spell the word "analogous". I find that deeply regrettable in one who is a Fellow of All Souls.
As I said, I commend the strategy of the White Paper, and most of my remarks are therefore addressed to the matter of tactics. Some of the figures given in the White Paper are extremely significant. In all the years that I have been, like 1411 other noble Lords, debating the matter of pensions, we have found ourselves faced with the fact that the percentage of the population of pensionable age was steadily rising in relation to the population of working age, that the ratio was getting higher and higher, with all the consequential burden on the economy and the population which that involves. I therefore note with interest the figures given in the White Paper, showing that in fact the percentage is going to decline. There is going to be what I might call a bulge, which will dwindle after 1981. I regard this with slightly mixed feelings, since I appear to be a part of the bulge; but it means that in the years to come we shall, as the White Paper says, be able to find more resources to deploy to meet the needs of those of pensionable age.
I felt that the first thing the White Paper taught me was the complexity and the astonishing variety of benefits which we now provide. May I say that I think it is time we stopped using the words "National Insurance"; it really has become a misnomer. The National Insurance Fund is a myth, and its name should be changed. I am quite certain that if my noble friend searches back into my speeches of twenty years ago, which would be a very boring exercise, he would find me defending the insurance principle as such; but we have to remember that those speeches were made shortly after the National Insurance Act 1946, when, quite frankly, even the proponents of the Bill expected a far greater stability than has actually proved to be the case. I should like to see the word "insurance" go out of the language used as regards this part of the scheme and the words "social security" substituted, because times have changed and, rightly, we now pay more attention to specific need.
The White Paper, I think, expresses it extremely well in saying:…benefits are a social obligation that can be recognised more clearly and accepted more readily if it is not confused with the principles of insurance".One noble Lord was very critical of contributions, and I was not certain whether the noble Lord, Lord Brockway, was for them or against them; but contributions are now the means of establishing the right of the beneficiary to benefit. Incidentally, may I say how splendid it is to 1412 learn from the White Paper that the end is in sight for the card and the stamps —those awful stamps, which must have wasted more man-hours than almost anything else in our whole society. I know they were necessary and I am not criticising them, but it is nice to think that someone has now found a way to avoid them.
There is one other minor point. Could we not now eliminate the trivial contribution of (and I must call it this) National Insurance to the National Health Service? The Exchequer supplement is 18 per cent. of the contribution income, and the National Health service is mostly paid out of Exchequer funds. What would it cost to eliminate the National Insurance contribution to the National Health Service and make the consequential adjustment to the Exchequer contribution? Why not reduce the Exchequer contribution pro rata? It is a complicated piece of book-keeping which the public do not understand: indeed, I do not think they know about it. Just for the sake of mere tidiness, if I may say so, do make this change. Here, I should stand in a shroud of repentance, because although it was the 1946 Act which introduced the contribution from the National Insurance Fund to the National Health Service, as a Minister I had to increase that contribution, and although my speech was a very impassioned one in which I believed, I think my views are now out of date, and I hope this very small change can he made.
Now I should like to turn to the subject of the occupational pension schemes proposed, of which I can claim a little knowledge—I would not say more than but a very little knowledge. I hope very much that the new authorities will see to it that those who operate schemes will take care to see that members, in both the State scheme and the existing and new private schemes, understand what they are paying for and what their rights are, and to ensure that, through the Ministry, any contributor can get independent advice from the new Occupational Pensions Board if he feels that in any way he is being deprived or cheated of any rights that he has. I also welcome very much the State reserve scheme. I think this has been a gap for a very long time; and I note with very great pleasure in paragraph 67 of the White Paper thatThe Government have…decided not to allow the refund of contributions as an alternative to a deferred pension.…1413 I think this is most important. It really means that commutation of pensions will not be allowed. I personally should like to see that extended to the private schemes as well. We all know of personal tragedies of people who have chosen to retire a little early and have taken a commuted pension because they thought they could start a small business, or something like that, and have ended up by perhaps not being as worldly wise as they thought and losing their investment and their pension as well. I see the membership of the State Scheme is to start from the age of 21. Why 21? Why not 18? After all, 18 is now the age of majority. Many young people are earning as much at 18 as at 21. What better than to start at 18? Perhaps someone in the Department has not yet discovered that the age of majority has been reduced, whether one thinks it was wise or not. But why not 18? Perhaps I could have an answer to that point.
Now I turn to the earnings rule. Noble Lords who heard me on a previous occasion must forgive me if I repeat myself to some extent. I must say to the noble Baroness, Lady Phillips, and indeed to the noble Lord, Lord Wynne-Jones, that if I wished to, and if I were a good barrister, I could put up the most impassioned defence of the earnings rule, although I agree it would be rather an academic one. But I think, looking back at Beveridge, we all realise that it was a gross error. I think I get my metaphors a little mixed when I say that it has been a millstone round the neck of the system since it began. No Minister, no Administration, has known how to get rid of it altogether. But the Beveridge case was a very good one; and Beveridge was wiser than the Government of the day, because he intended there to be some relaxation of the earnings rule. It was in 1946 when the two concessions were made: first, the modest relaxation of £1; and, secondly, the really contradictory matter that the earnings rule ceased to apply after the age of 70 for men and 65 for women. This, really, with respect, as I said yesterday, made nonsense of the whole scheme. But we have to be fair and remember that the Government of the day were influenced by the trade unions' opinion that anything but a retirement pension could mean cheap labour by the employment of elderly people. But I think the time is coming when we can ask the 1414 Administration to put it on their list of priorities for abolition. We are told that the cost of abolition is the stumbling block, I think that my noble friend said that it was £120 million or thereabouts. If my memory serves me aright, it was £120 million about 16 years ago. For some unknown reason it seems to stick at somewhere around £100 million or £120 million. At that figure, understandably, the Government say what my noble friend says: that they have other priorities. But the point is that that figure of £100 million to £120 million as a proportion of our total social security expenditure is getting smaller and smaller. It was a valid answer twenty years ago because it would have meant an enormous change. Now it is quite small in comparison with the total bill. Therefore the question of priorities is of dwindling importance.
Furthermore, no political Party now defends the earnings rule. When the noble Baroness, Lady Summerskill, increased the amount from 20 shillings to 40 shillings, she had some trouble with her own Back Benches. I can remember it well. I can remember a remarkable debate when a dear friend of us both, Mr. Tom Brown, was very critical of her. She ended the debate by saying, "Now, Tom, we can still go to the movies together!"—which I thought was a startling digression in a discussion of the earnings rule. But times have changed; and from every pensioner there is a demand for the ending of the earnings rule.
Now my noble friend will be glad to know that I am going to put to him some suggestions for getting rid of it. Again I noted with pleasure that in the White Paper the State reserve scheme is to have no earnings rule. I could not put it better than it is stated in paragraph 73, which says:Personal pensions will be paid at the age of 65 for a man, and 60 for a woman, irrespective of retirement. An earnings rule would not be appropriate in a scheme of this sort run on the lines of an occupational scheme, and a retirement condition needs to be supported by an earnings rule to be effective.So, if I may say so, the Government are contradicting themselves. Also the statement here seems to be coming to the defence of the earnings rule. It is true that many occupation schemes do have an earnings rule. Many local authority schemes, for example, do not allow a 1415 retired local government officer to be reemployed by the same authority and so on. Many industrial schemes postulate full retirement—not that I am defending it. But I wish to say how much I welcome the fact that the Government have now seen something of the light of day.
I welcome the change of heart on that matter. Therefore I suggest that in the annual review which the Government are going to hold, and which I think is long overdue, they should consider various suggestions for its ultimate disappearance. The first, which has been carried out already, is that there should be a continued relaxation of the £9.50 a week exemption. Secondly, the free zone has always been kept at approximately 30 per cent. of average earnings. I think that in the various reviews the Government could consider raising that to a higher percentage of average earnings. Lastly, although the ages arc now 70 and 65, they could contemplate, over a period if necessary of a decade or two, that the age at which the earnings rule lapses should be reduced by a year at a time. For example, they could give notice that in 1976 the earnings rule would operate at 69 and, I almost said, "at 64 for women"; but perhaps I should not say that lest I find myself in trouble with women over retirement age. In any case, the age could be reduced by a year at a time, and I believe that this could be done without any breach of faith to those who have contributed in the past. These things cannot be done all at once but could be done over a period; and the present Government could commit themselves to the abolition of this rule. If they did that, they would have one very firm supporter on the Benches behind them.
§ 4.45 p.m.
§ LORD CHAMPION
My Lords, I begin by thanking my noble friend Lady Phillips for giving such a good start to What has been a fascinating debate in which every speech contributed something worth while on a topic of vital importance. It is true that the debate has not attracted many speakers. If it had been about, let us say, hare-coursing, we could have counted on something like 30 or 35 speakers on the list; but on a subject of vital interest to old people, a subject 1416 that has an actual contribution to make towards relieving the problem of poverty and old age, we have not had many speakers. But those that we have had have been well worthwhile. Every speech merits a full reply, but that is not my function; that is for the noble Lord, Lord Aberdare. Every speech merits study by the Government before they come finally to make a decision on the Bill that they propose to introduce. If they give that study, I am sure they will find many points worthy of consideration before finally framing the Bill.
I was particularly struck by the speeches of the two ex-Ministers of the Crown, my noble friend Lady Summerskill, who had experience in the Department which deals with these matters, and the noble Lord, Lord Reigate, who later had a Ministerial responsibility in connection with old age pensions. I am bound to agree with all who have spoken that the existing situation in relation to poverty and retirement is that neither the flat rate pension scheme, even when it is supplemented on a means test basis, nor the graduated pensions addition scheme, grafted on to the flat rate scheme in 1961, has satisfactorily lifted retired people out of the miserable consequences of the loss of earnings on retirement. That is now common ground between the Government and the Opposition; otherwise we should not have had Strategy for Pensions before us for consideration. Nor should we have had during the period of the last Government's administration the proposal called the "Crossman Plan ". It does not seem to me to be practical politics to hope to set up a scheme in the foreseeable future which would guarantee to a person in retirement as large an income as he received when in employment, but what is clear is that the Government ought to try to bring him as near that happy state as the country's economic situation will permit.
I know that this is not just a matter of "printing money". I know that it is mainly a matter of the extent to which you can reasonably take from the product of those in employment to give to the ever-increasing proportion of people who are not yet productive or who have ceased to produce. That is the job of the Government of the day, no matter what Government that happens to be. We are, thank goodness! a long way from 1417 the yawning chasm which, said David Lloyd George, opened up when a working man lost his employment, but there are still people who put up with extreme poverty by to-day's standards rather than apply for supplementary benefit because they are—again to use a phrase of Lloyd George—"too proud to wear the badge of pauperism" by applying for supplementary benefit. That is surely a mistaken concept of supplementary benefit and I hope that somehow we can persuade people of the nonsense of that attitude. Despite the fact that certain pensions exist and supplementary pensions are available, in some cases supplemented by occupational pensions, there are still many people entering into retirement whose loss of income catastrophically destroys the standard to which they have become used. In relation to superannuation it is to that group that we have to turn our minds, and ask whether what is proposed in Strategy for Pensions is likely to provide for people in retirement an income as near to that which they have lost as is practicable.
It seems to me, my Lords, that the scheme before us does not match up to that requirement in a number of particulars. The first of these is that in the first 20 years of the reserve scheme the provision is quite inadequate for a large proportion of those in employment to-day. I am not sure what the figures are at the moment, but I think that the employed people between the ages of 45 and 65 outnumber by about three to two those who are under 30 and are the ones who may expect to get something worth while out of the reserve scheme, which is a safety net designed to catch the fall-out from the occupational schemes. I think that the minimum standards to be laid down for the occupational schemes will not be very different from those on the reserve scheme.
If a £20-a-week man entered that scheme at the age of 55 he would on retirement get £1 on top of his flat-rate pension, which it seems to me would not lift him above the supplementary means test level. Surely that is quite wrong. If his wage amounted to £30, he would get £1.50. Clearly, this is not good enough for the people in employment to-day at the sort of ages I have been talking about. Any considerable benefit at all is much too long delayed, as the table 1418 produced on page 23 of this White Paper makes clear. My Lords, the Labour Government's scheme for blanketing-in was very much to be preferred, certainly by those in the middle and older groups of employees.
Secondly, the scheme is still far from being adequate as a long-term investment against the catastrophic drop in standards on retirement, even for the young man who enters the scheme at 20 years of age. If he was earning £20 a week and his pension was calculated to rise by the postulated rate of 3 per cent. per annum he would on retirement get a pension of £4 out of the reserve scheme, that being some 20 per cent. of his earnings on retirement. That amount, when added to his flat-rate pension, would still leave him, if my rough calculations are correct, below the 50 per cent. of earnings mark.
Thirdly, my Lords, the scheme represents a very poor deal for women; but I will not attempt to add to what has been so well said by my noble friend Lady Phillips, and by the noble Baroness, Lady Seear. Fourthly, despite what the noble Lord, Lord Aberdare, said in defence of the standards laid down for the occupational scheme, I assert that they are not high enough by a very long chalk. The requirement that the scheme must provide for a personal pension of not less than an annual rate of 1 per cent. of P.A.Y.E. earnings is much too low when it is remembered that to-day most of the schemes of good employers range between 1¼ and 1¾ per cent. of the final pay. And this point regarding final pay, which was so well made by my noble friend Lord Brockway, is an important factor.
The noble Lord, Lord Aberdare, challenged us on the point of contributions payable to get something like a really worthwhile pension. My Lords, I do not shy away from increasing contributions necessary for the sort of pension that I favour. I know that there would be an outcry from contributors for whom retirement is a long way off. That has always been the case. The young man thinks that he will never reach retirement age. But he does, and eventually finds himself up against problems perhaps caused by the outcry made at a time 1419 when there was a suggestion that contributions might be raised. I am old enough to remember, as is my noble friend Lord Brockway, that there was a great outcry when the Lloyd George scheme was introduced, in the years when, as the noble Baroness, Lady Seear, rightly said, the Liberal Government of the day were doing something about introducing Welfare State conditions in this country. It is the job of Governments to take unpopular decisions in the interests of the people that they represent—the long-term interests, and not the immediate advantages to be gained. As I say, I do not shy away from the fact that we might have the increased contributions and, as a political Party, get some of the difficulties consequent upon that.
I welcome what is said in paragraph 57 about protecting the value of a pension for the pensioner and for the widow:The scheme will be required, subject to the alternative test outlined below, to protect the value of the pension after award, for both pensioner and widow, on one of three bases: by linking the pension to the cost of living index; by providing for a prescribed rate of increase after award; or by satisfying the Occupational Pensions Board that reasonable financial provision is being made to ensure increases after award, though without commitment to a specific rate.But while welcoming the attempt to protect the value of a pension. I still have to say that linking the pension to the cost of living will have the defect of permitting the award to fall behind any rises in the general standard of living. This is a fault of any payment based on that principle in a community where incomes are rising faster than the cost of living.
Both the noble Lord, Lord Reigate, and the noble Baroness, Lady Seear, have rightly told us that we can expect the general amount of goods and services that will be available for distribution to increase with the technological improvements and ideas that are being used by industry. We may expect that the living standards of the community will continue to rise, and I say that pensioners must share in the conditions which are brought about as a result of these technological changes. My Lords, much the same fault as I have just mentioned might be found in a scheme providing for a prescribed rate of increase after award; for if it is fixed too low at the outset, it might decrease the value of the award if living 1420 standards rose swiftly; or indeed it might be fixed too high if living standards generally failed to rise at the expected rate. These parts of the White Paper proposals certainly need looking at again.
Fifthly, there will be no Exchequer contribution to the Reserve Scheme Fund. That might be thought to be all right as there will be no direct Exchequer contribution to occupational pension fund. But, as I understand it, there will be a hidden subvention in the form of relief from income tax. I hope that the noble Lord, Lord Aberdare, may be able to reply to this point. When considering this White Paper, Strategy for Pensions, the Economist said this:The State reserve scheme, with no subsidy from the State, will produce whatever pensions can be accumulated by a 4 per cent. contribution, with 1½ per cent. coming from the employee (no tax relief). But to gain exemption from the reserve scheme the employer …must give pensions that would probably require a contribution of 5 per cent. or more; if half of this came from the employee, he would be paying 2½ per cent. less tax relief, or virtually the same as under the reserve scheme.What all this means, my Lords, is that for those pushed out of the State reserve scheme into occupational pension schemes the Government will be making a straight gift of nearly 1 per cent. of gross pay in tax relief, most of which will go not to provide extra pension benefit but to pay for the extra overheads and profits for the insurance companies. This is the charge which is levelled. The last part was my own comment on this. The first part was, of course, the comment of the paper the Economist.
I ask the noble Lord: is that a fair criticism, or have the critics missed what is said in paragraph 72 of the White Paper? There is a sentence there dealing with that matter, but I do not think that that completely answers the point that I have just made. There is also a flaw in the proposals in that there appears to be no protection proposed against losses of the value in cost of living terms for the pension rights earned already under the 1961 graduated pension scheme. They do not appear to be included in paragraph 32. All that is said on this aspect is in paragraph 29 which reads:The new arrangements for earnings-related provision will supersede the present graduated pension scheme which will therefore be wound up. The benefits rights earned under it will be preserved.1421 That seems to me to be a guarantee in fixed money terms, and only in fixed money terms.
On the general question of the preservation of the value of an award, I welcome what is said in paragraph 32:Those who defer retirement after pension age will continue to earn extra pension: these increments will not remain fixed in money terms as they are now but will be brought within the arrangements for two-yearly increases along with the basic pension"—and, as the noble Lord has told us this afternoon, following the statement of the Chancellor of the Exchequer in his Budget, this review will take place annually and not two-yearly. Is that intended to apply solely to increments earned by those who defer retirement until after the promised Bill becomes an Act? The reason why I ask that question is because, as I understand it, from the date of the operation of the 1948 Act until August, 1959, a contributor to the scheme could earn an addition of 1s. 6d. for himself and 1s. for his wife for every twenty-five contributions; that is, contributions paid after he had reached the age of sixty-five. For the full period of five years a man could secure for himself and for his wife a total increment of 25s. a week. That sum expressed in percentage terms of the 54s.—then the benefit rate for a married couple—was some 46 per cent. of that pension (a very valuable addition to his pension) and he had earned it by continuing to work, by paying five years' additional contributions, and by forgoing five years' pension. If that couple are still alive—there are many of them, of course—the 25s. earned by him has dropped in value to well under 10s. 6d. Indeed, that 25s. would have to be increased to £2.85 to-day to restore it to its original value. In percentage terms it has fallen to 12 per cent. of the £9.70 of to-day.
My Lords, after 1959 there was a slight increase in the value of the contributions which caused a man to be able to earn 31s. 6d. That 31s. 6d. still remains the amount that he gets to-day and the value of that has fallen to about £1. It has fallen from 34 per cent. of the pension as it then was to 16 per cent. of the pension as it is now. Since then the value of the contributions has been raised twice, but the point I am making 1422 remains valid. What I am saying is that not only must increments earned by deferred retirement be kept in step with the alteration in the cost of living, but if they are to maintain their true value they must be kept at the same percentage of the standard rate, otherwise successive Governments must not boast of having increased the real value of the pension, for the truth of the matter would be that only a part of it had increased in value and a large part of it had not.
I am bound to add that the failure of successive Governments to at least preserve the value of those increments earned in the past has been a source of considerable injustice to pensioners. Governments have a little knack of telling the country how much they have increased the value of the pension in real terms. I know that the last Labour Government did. I know that the political Party of which I am a member issued a pamphlet which said that we had done precisely that. This Government say the same thing. The noble Lord has said it this afternoon. But, my Lords, what you have done is this: you have only preserved the value of some of the pension, because clearly if you have not adjusted what was 46 per cent. of a total pension you have failed miserably to do completely what in fact you have tended to boast that you have done. So I say that the past awards need review as well as the future, as promised in paragraph 32.
My Lords, my general conclusions on this White Paper are that it seems to me to be doubtful if there can ever be anything approaching a satisfactory solution of the problem of reasonable retirement pensions under the system of a State scheme for flat-rate pensions, occupational schemes, with preservation conditions for some occupations, and a State reserve scheme for occupations whose circumstances make the establishment of superannuation schemes very difficult if not indeed impossible.
We are promised in the White Paper a three-tier structure with the bottom tier being the flat-rate State scheme with a pension so adjusted as to maintain benefit at a level at which there will always be an average gap of £2 on the lowest side between the basic pension and the level of the supplementary benefit. The top tier will be the superannuation 1423 schemes of various occupations, with the Occupational Pensions Board vetting the schemes to ensure that they reach certain minimum standards—minimum standards which do not appear to me to be adequate even if we are to end the personal disaster of a catastrophic fall in living standards with retirement. The middle tier is an unsatisfactory fall-back reserve scheme for the drop-out occupations—chiefly those which tend to provide no stable employment, with a scale of benefit fixed far too low. That looks to me like a wholly unsatisfactory hotch-potch of a plan, and the sooner we grasp the nettle of establishing one all-embracing State superannuation scheme with earnings-related contributions, with earnings-related benefits maintained in value in real terms, and with ease of preserving rights of job changing within a single scheme, the better it will be. I am bound to say that the Crossman scheme went a long way towards meeting those requirements, and it is a pity that the Government have not adopted it instead of this Strategy for Pensions scheme, even though that is better than the ill-conceived graduated pensions scheme of 1961.
Finally, again with the noble Lord, Lord Reigate, and the noble Baroness, Lady Seear, I think that schemes devised to-day must be devised in such a way that we shall be able to meet and use the greater resources that we can expect to be available as a result of increased technological advance. I am sure that this has been a well worthwhile debate and that the noble Lord, Lord Aberdare, will at any rate attempt to reply to the various points that have been made. I end with the plea that I made at the outset: that the Government should give careful consideration to the points that have been made in the debate before they finally present to Parliament a Bill on this extremely important matter of retirement pensions.
§ 5.12 p.m.
§ LORD ABERDARE
My Lords, if I have your Lordships' permission to speak again, I will take up the offer of the noble Lord, Lord Champion, and do my best to try to answer some of the points that have been raised in the course of the debate. I was happy to hear the 1424 noble Lord, Lord Champion, say at the beginning of his remarks that he was hoping for a full reply from me, but that he would at least expect a full study of the debate. I can give him an assurance on the latter point, even though I may not be able to satisfy him that I have given a very full reply. I listened to the noble Lord with great interest. I found myself very much in agreement with some of his opening words, when he said that the job of all Governments was to find the right balance between pensions and the contributions that went to finance them. This, indeed, is the basis of the problem that we all have to face.
The noble Lord went on in broad terms to speak, first, of the deficiencies of the reserve scheme, which I think I tried to cover in my opening speech. I pointed out that it is of course a contributory scheme, and a fall-back scheme, and we have had to find a level for it which would encourage employers to fund their own occupational schemes. I ought also perhaps to comment on one matter the noble Lord raised, which was also raised by the noble Baroness, Lady Phillips, and others, on the fact that under the reserve scheme women get a lesser rate of pension. This of course is entirely due to the fact that it is a contributory scheme. Women receive their pension earlier, at the age of 60, and, as the noble Baroness, Lady Seear, reminded us, they live longer; and so, for the equivalent amount of money they contribute to the scheme, their pension is less, although it lasts for longer, and in total I believe would come actuarially to the same amount.
The noble Lord, Lord Champion, spoke of the standard that we were setting for occupational schemes. I can only say that these are minimum standards, and we very much hope that they will be improved upon. He was somewhat critical of the figure of 1 per cent. of P.A.Y.E. earnings as the basis. There is one point on that which is significant, and I think answers a point made by the noble Lord, Lord Brockway; namely, that it will be a steady 1 per cent. of earnings over a man's life, and will not therefore attract the criticism which the noble Lord, Lord Brockway, had to make of occupational schemes: that they were based on the final salary, and therefore the working man who may earn more in the middle of 1425 his life would be at a disadvantage. If this is set throughout his working life, it will not be so.
The noble Lord went on to hurl some detailed thunderbolts at me from the Economist which, frankly, I could not quite grasp. I will have to study carefully what he said and let him have an answer. I think he realises (he quoted from paragraph 72 of the White Paper) that there will be no tax relief on an employee's contribution to the reserve scheme. This is because of difficulties of administration if it were to be so. But it is for that very reason that the employee's contribution is that much less than the employer's: it is 1½ per cent., whereas the employer pays 2½ per cent. That gives the employee some compensation for not getting the income tax relief.
The noble Lord raised the question of deferred retirement and the extra increments that are earned from it. These increments will be increased in line with the basic pension, with effect from the start of the new arrangement, which we hope will be April, 1975. This will apply to all increments payable after that date, whether they were earned before or after it.
§ LORD ABERDARE
It means that the present situation of those who are now earning increments will remain as it is. The noble Lord, Lord Brockway, to whose speech I listened with great interest, began by declaring an interest in the matter. We all fully appreciate and congratulate the noble Lord upon that fact. I can tell him that he will be receiving an increase on October 2 if he helps us to pass the uprating Bill which will be coming to your Lordships' House very shortly. He also asked for a number of other improvements in the scheme. Many of these will be included in the uprating Bill, which not only raises the basic pension, but also includes selected improvements at a total cost of £480 million in a full year. The noble Lord reminded us of the poverty that existed in this country in the past: it is certainly worthwhile remembering what it was like, and thereby appreciating that we have gone some way to improving the situation. That is not to say that any of us are content, and 1426 one of the reasons for this debate and the White Paper is that we are anxious to improve the situation still further.
I can assure the noble Lord that the contributions to the scheme will be graduated. If he turns to paragraph 40 of the White Paper he will find it is made quite clear:… and the below average earner will tend to pay less than before, and the above average earner will pay more.Although I know the noble Lord would prefer to have it on the income tax, perhaps it will be some comfort to him that it is a steeply graduated scheme.
My noble friend Lord Gainford is clearly one of Lord Raglan's supporters, as indeed is the noble Lord, Lord Wynne-Jones. I listened with great interest to what my noble friend had to say. I am indeed well aware of what goes on. I was recently at the Birmingham Retirement Council, who run a special "Fircone" scheme which I heard of with interest. I am sure that training for retirement is a worthy movement to support. My noble friend also spoke about deferred pensions. One can of course add increments to one's pension for five years after the statutory retirement age. All this information is contained in paragraph 32, which was referred to by the noble Lord, Lord Champion.
I listened with interest to the noble Baroness, Lady Summerskill. I had some sympathy with her when she spoke of our still dealing with the manipulation of figures in 1972; but I have the feeling that we shall go on dealing with the manipulation of figures for very many years to come. I listened with deep interest (because she knows that I live part of my life in a mining valley) to some of the things she said about industrial workers. I sympathise; and it is true to say that through our Strategy for Pensions we are trying to help the industrial worker in every way. We are trying to raise the State pension and to get employers to introduce better occupational schemes. At the same time we are, in our basic scheme, keeping the flexibility to make special payments to those who are most deserving—payments such as the invalidity allowance and the attendance allowance. It is open to us in the future to use these selective allowances to help any specially hard and deserving cases.
1427 The noble Lord, Lord Wynne-Jones, made one suggestion which I will certainly see is considered. This concerned the man who was earning well and then allowed his earnings to lessen as he got older by taking less responsible jobs. The earning, rule sliding scale, in one direction, and the increments for postponed retirement, in the other, provide some flexibility. Using simply the proportion of previous earnings as a test is not so easy, because one man's half earnings may be higher than another man's full earnings, and one may ask if it is fair that the latter should contribute to give a pension to the former whilst he is working on half his salary. However, I will certainly see that the noble Lord's suggestion is gone into with care. I listened with very great interest to what was said by my noble friend Lord Reigate, who has such a deep knowledge of this subject and who has made such a great contribution to our pension schemes.
§ LORD ABERDARE
And he has been particularly effective in making amendments to the earnings rule which we were discussing in this House yesterday. I was grateful for his general welcome to the White Paper. He was a little critical of my right honourable friend's spelling at one moment, but I can assure him that this is only a typist's error, because if he had read as far as page 30 (he was then on page 17) he would have seen that the same word "analogous" is correctly spelt there. He asked me about the National Health Service contribution within the stamp. In the financial year ended March 31, 1970, which is the last year for which I have figures, the National Health contribution provided £152 million, which was 9¼ per cent. of the total cost of the Service in that year. So this is a very considerable sum to try to find from the Exchequer. The noble Lord related it to the amount paid by the Exchequer into the National Insurance Fund, which was an even larger figure of £353 million. He also asked me why we had chosen the age of 21 rather than 18 for entry to the reserve scheme. We had to reconcile two opposing factors: first, we wanted to set the age of entry at least as high as the 1428 minimum age of entry to most occupational schemes (and only 15 per cent. of the private sector schemes and no public sector schemes have an age of entry for men of more than 21), so as to minimise the number of young people who would have to go into the reserve scheme whilst waiting to join their occupational scheme. Secondly, since the pension return in the reserve scheme is highest at the youngest ages, we did not want to exclude people from the scheme in the years when their contributions would buy the best pensions. It was for those two reasons that we chose the age of 21.
I believe that I have replied to all in your Lordships' House who have spoken in the debate. I listened with interest to the point made by the noble Lord, Lord Slater, on the mineworkers' scheme. Proposals for changes in this scheme are essentially a matter for the National Coal Board and the National Union of Mineworkers, working through the scheme's management committee. The noble Lord referred to Ministerial approval being needed, but I am advised that, following changes in the law last year, such approval is no longer necessary. I understand that one of the periodic actuarial valuations of the scheme is now being made and the management committee will no doubt be looking again at the benefits provided in the light of this valuation. But the noble Lord will recognise that large sums need to be built up to provide for the pensions of existing contributors, so that the existence of a large fund does not in itself mean that benefits can be improved.
Taking up the first point which was made by the noble Baroness, Lady Summerskill, I should like to emphasise that although in these matters one is talking necessarily about financial contributions and financial results in pensions, none of us approaches this problem with other than very human feelings about the personal nature of the problem. As the noble Lord, Lord Champion, said, it is up to the Government to make a judgment between the level of pensions and the level of contributions which pay for them. We believe we have the balance right in our Strategy for Pensions; but I certainly assure your Lordships that what has been said this afternoon will be carefully studied. I am most grateful to all 1429 Members of this House who have spoken in the debate.
§ 5.27 p.m.
§ BARONESS PHILLIPS
My Lords, when I was doing my homework on this debate I had some fears that, while it would certainly be useful and factual, it might be dull because we should be concerned almost entirely with figures. It is very rewarding to be able to say that those fears have not been realised. I said at the beginning that I hoped we would discuss the philosophies of retirement, and there is no doubt that we have done just that.
I should like to tell the noble Lord, Lord Gainford, a little story of a lady in one of the large London theatres, who was a dresser for some fifty years. She constantly told us that the impresario—whose name I had better not give—would give her a pension when she retired. We never knew her age. Finally came the day when she retired, after working six days a week with no holidays for many, many years. We gave her a party backstage to which all kinds of important people came—and an hour afterwards she dropped dead. She was nearly 90. So the impresario was relieved of the responsibility of giving her a pension, and he probably felt quite pleased. The moral here illustrated the point made by the noble Lord, Lord Gainford. While human beings feel that they are useful, wanted and needed, they can go on working and live very happy lives. The fact which has come out very clearly in this debate—it is a fact which I am sure the noble Lord the Minister will have taken note of—is that there is a need for flexibility in approach. This is a century in which we divide not on sex or age but on our personalities, abilities and also largely on the kinds of trades that we follow. It seems to me that a definite plea has come out of our debate to-day for a differential retirement age—not necessarily tied to whether you are a man or woman, but more related to whether you have been a heavy manual worker or, shall I say, one whose work has lain in the Church.
I was rather relieved to know that teachers live a long time; although I must say that in some of the classes I controlled I was certainly under some pressure at that particular time. We have made an appeal to the Government for 1430 simplicity of operation, for flexibility, for humanity of operation. I should like to thank the Minister of State. He is one of the most hard-working Members of the Government Front Bench; he is here every day and he approaches all his tasks with great humanity. I do not think we could have had anybody better to speak on this subject. I feel sure that the noble Lord will appreciate that the earnings rule is definitely under fire from all sides of the House. I can remember when arguments were advanced to retain this for widows; but the matter was suddenly dropped—much to the relief of the widows—and the country did not, strangely enough, collapse.
My Lords, this debate has been a useful one. I commend the Government on the White Paper—I hope I have made that clear—rather on the principle of good news/bad news: we first told them what we liked and then what we did not like. Basically the debate will have given the Department a great deal to think about; and also, I hope, a great deal to act upon—because this is a consultative document. My Lords, I beg leave to withdraw my Motion for Papers.
§ Motion for Papers, by leave, withdrawn.