§ Mr. Speaker
Before the debate opens, may I say that I have not selected the Liberal Amendment to the Motion, in line 1, leave out from 'House' to end and add:'rejects the White Paper on Proposals for Earnings-Related Social Security, Command Paper No. 3883, on the grounds that it seeks to extend the role of Government into a sphere where it is neither helpful nor necessary'.but I have selected the official Opposition Amendment standing in the name of the right hon. Member for Bexley (Mr. Heath), who all of us hope will soon be well again.
§ 4.0 p.m.
§ The Secretary of State for Social Services (Mr. Richard Crossman)
I beg to move,That this House approves the White Paper on Proposals for Earnings-Related Social Security, Command Paper No. 3883, as a basis for legislation; and invites Her Majesty's Government to continue consultation with a view to preparing legislation.Before I introduce this White Paper, I hope that the House will permit me one personal observation. It is not true, as some of its detractors try to pretend, that this scheme is in any sense a personal production of mine. It is true that many years ago I chaired the working party which produced our election blue-print "National Superannuation" when we were still in opposition, but serious work really started when we took over in 1964.
My right hon. Friend the Member for Lanarkshire, North (Miss Herbison) set to work, with the help of my right hon. Friend the Member for Sowerby (Mr. Houghton), to turn what had been an election blue-print into a practicable and workable scheme for legislation. When I rejoined the team, some time later, I was delighted to find that, though a vast amount of important detail had been added, particularly in the new women's charter, the main structure of the idea that we developed in opposition had stood the test of the severest scrutiny by a whole army of Whitehall experts, particularly in the Treasury and the Government Actuary's Department.
Nor were they our only critical helpers. I have been deeply appreciative, particularly during the last 12 months, when the 689 practicability of the scheme was ready for pre-testing outside Whitehall, by the number of people who have informally and without obligation on either side, given us help—outstanding pension experts from the C.B.I., from the Social Services Committee of the T.U.C. and, not least, from the Life Offices Association and the National Association of Pension Funds.
When we launched the idea in 1957, it was easy for the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) to dismiss us an an amateur skiffle group. Fair enough. But the scheme now presented, including the economic analysis and the elaborate statistical background, is the work not of political amateurs, like myself, but of the best experts in and outside Whitehall.
Perhaps the best way to present the challenge of old age, which this scheme is designed to meet, is to go back 20 years and observe the contrast between the confident expectations of 1948 and the sombre reality of 1968.
By 1948, the Beveridge Plan was on the Statute Book—a cradle to grave system of national insurance from which it had been confidently expected that, at long last, justice would be done to the claims of the retired working population—that every person who duly contributed through working life would thereby earn a decent old-age pension.
Presumably that is an objective which still unites us today. I gather from the terms of the Opposition's reasoned Amendment, that they, too, recognise the rôle of the State in providing, to quote their words,… a firm guarantee of security in old age …But if they agree about the objective, I hope that they will also agree that since 1945 successive Governments have abysmally failed to achieve it.
The first failure—and I admit it freely—was due to our uncritical acceptance from Beveridge of a flat-rate insurance system. This meant that the contributions had to be geared to what the lowest wage earner could afford, so the benefit also had to be geared to the living standards of the poorest section of the community. So, from the start, means-tested national 690 assistance, which had been planned as the safety net to catch the few who fell through the floor of national insurance, became the normal method by which a great army of pensioners were compelled to supplement an inadequate National Insurance pension after a means test.
During the 1950s, the extent of the failure became even more clear as a result of a new factor: the rapid growth of occupational pension schemes. We were presented ever more starkly with the contrasts between two nations in old age—the privileged nation which, through no merit of its own, but as a condition of employment, became members of good occupational pension schemes; and the underprivileged nation, the unlucky nation, which, through no fault of its own, was working in a job, in industry or commerce, where no superannuation, or quite inadequate superannuation, was provided, and so was compelled, in due course, to apply to the National Assistance Board.
It was this shameful contrast to which we called attention in our party policy document "National Superannuation". Faced with the contrast between the condition of the two nations, we proposed not to level down, but to level up—to create, alongside the private pension sector, a new public sector of earnings-related pensions, an all embracing scheme of national superannuation. That was 1957—a long time ago.
The response of the Government of the time was characteristic. They conceded the need for reform, but then came out with a scheme of their own which added a small graded element to the flat rate scheme. In return for the promise of very modest benefits, the Chancellor scooped up a new source of contribution income and for a time solved his financial problems.
§ Mr. Crossman
That is how it has been known by certain people in the past.
I was going on to say that I would not indulge in a long diatribe on it, for the 691 very simple reason that the Conservatives have admitted the failure of that scheme in the most graphic way open to a political party—by announcing that if they were to get into office next time they would wind it up as quickly as possible. It is true that the funeral obsequies were scarcely audible as they popped the corpse overboard at Kingston upon Thames. Nevertheless, a few of us on this side did just notice the splash that it made.
So we had better face it. Our Beveridge type flat-rate plan failed, and so, much more dramatically, did the Tory successor—the 1961 combination of a little earnings relation and a lot of flat rate.
The extent of that failure is demonstrated in the figures we give at the beginning of the White Paper: about 2 million pensioners—nearly 30 per cent. of the total of 7 million—dependent upon supplementary benefits; above the actual poverty line, about 3 million with incomes not more than £2 above the supplementary benefit level; and the poorest group of all are the widowed pensioners. Nearly half of them are already on supplementary benefit. If we raise the rate of benefit by £1, only one widow out of five would be above the supplementary benefit level.
So I do not think that I was exaggerating when I talked of the two nations in old age. They existed when the Labour Government fell in 1951. Thirteen years later, when we took power once again, the contrast was even sharper. I will illustrate it by one figure. The old today comprise 14 per cent. of the nation. They have 9 per cent. of the nation's income, and 2 million of them have an income below the minimum guaranteed by the Supplementary Benefits Commission. That is the social problem that we have to face. In my view, it is the greatest challenge to the nation's conscience in our generation.
We can tackle it only if we divide it into two parts and deal with those two parts separately. The first priority is to do justice to existing pensioners. The second priority is to prevent repetition in the next 20 years of what happened in the last 20 years from 1948 to 1968.
I make this point early on in my speech, because one of the main criticisms of the White Paper so far has been the 692 complaint that it does not do anything for existing pensioners. My answer is quite simple. This White Paper is not the first priority. Our first priority, ever since we took office in 1964, has been to make sure that, whatever the economic difficulties may be, we give a fair deal to the existing pensioners. We started, despite all the perils of that first winter, with the biggest increase in the history of the old-age pension.
Stage 2 was what I can call the Herbison reforms of 1966, which laid the foundations for our promised income guarantee by abolishing the National Assistance Board and establishing a Supplementary Benefits Commission so completely reorganised and effectively purged of the old stigma of the Poor Law that no less than nearly 600,000 new people have claimed entitlement from it. That is one of the greatest achievements, and I think that my right hon. Friend the Member for Lanarkshire, North has a great deal of which to be proud. The more I think of the work of that Commission and the change that my right hon. Friend created, the more I think that we can say to existing pensioners that we did not start a long-term plan for the future; we started by doing the job that we promised of looking after them.
I claim that we have done more for the existing pensioner, and done it in greater economic difficulties, than any other Government. It is because we are already fulfilling the first priority pledge to them that we have the right to come forward with concrete proposals for ensuring that the next generation of pensioners during the next 20 years is not subjected to the injustices which the last generation suffered, and which we have to remedy by makeshift methods as best we can. It is not a case of excluding existing pensioners from our new scheme of earnings-related contributions, because by definition one cannot be a member of an earnings-related scheme if one has not paid an earnings-related contribution. What existing pensioners need now is not a brand new scheme for the future, but value for money straight away.
There is one thing which they get out of the new scheme, and that is the guarantee that all pensions, including theirs, will be reviewed regularly every 24 months, and as a minimum proofed 693 against inflation. In the past, each increase of pension has involved the cumbersome machinery of getting legislation through both Houses, and the average gap between each increase has been 30 months. We shall reduce the gap from 30 to 24 months, and we shall make the reviews a statutory requirement which will not require a new Bill on each occasion. That should help quite a lot.
There is a second general criticism of the White Paper which I must deal with before I come to discuss some of its distinctive features, and it is to be found in the terms of the Opposition Amendment, which saysthat the widespread desire to provide additional pensions related to earnings and individual needs can best be achieved through private and occupational pension schemes.When I first read that I thought that right hon. and hon. Gentlemen opposite had fallen into the same error as The Times which, in a leading article the day after we published the White Paper, solemnly urged a system of compulsory fully transferable private pensions as The Times alternative to national superannuation.
I need hardly tell the House that that is a totally futile idea. The idea of making a collection of what are now 65,000 private schemes, with every possible variety of condition, fully transferable is impracticable, as the report of the Ministry of Labour's National Joint Advisory Council showed the editor of The Times eight months ago. As for the project of compelling every employer, large and small, to insure all his employees in a private scheme, that would require the creation of a huge army of State inspectors to police what would have grown to about 1 million private schemes to ensure that they were all guaranteeing their members a decent pension, and that they were all transferable. If the schemes were not policed, there would be no assurance that they were giving the kind of security that we require.
Long before The Times put forward its futile project it had been ruled out as impracticable by every serious pension authority, and I think that I observed the other day, outside the House, that the Opposition spokesman also believed 694 that the compulsory occupational pension scheme was an impracticable concept. I was grateful that on that occasion we saw eye to eye. If the hon. Gentleman agrees with that, I think he has to admit that if we forgo compulsory private schemes there will always be about one-quarter of the employed population who cannot be covered by private schemes, and I suggest that those who framed the Amendment know this very well, if only because they tried for 13 long years to make these schemes a genuine substitute for national superannuation, and their failure demonstrated the impossibility of the project.
I put it to the House that the only alternative to our proposal for national superannuation is a tacit acceptance of the permanent existence of the two nations in old age, an acceptance that when everybody is covered by private pension schemes who possibly can be there will always be at least one in four of the employed population without private cover and compelled by poverty to accept supplementary benefit.
There is one thing which has always impressed me about the Conservative establishment, and that is its ability to accept as an inevitable social tragedy something which in due course the next Labour Government renders unnecessary. Year in, year out, during the 1930s, for example, they preached the inevitability, in a healthy free economy, of mass unemployment. I remember a speech of Neville Chamberlain's, when he expressed his gratitude to the permanent unemployed for accepting so quietly and patriotically the rôle inevitably allotted to them by the normal working of a free enterprise economy. After the war, under a Labour Government, this mass unemployment was shown to be completely unnecessary, so its inevitability was quickly forgotten by Conservative spokesmen who had begun to believe in full employment.
§ Mr. David Lane (Cambridge)
Before the right hon. Gentleman leaves the inter-war history, may I ask whether he agrees that the highest level of unemployment was reached during the term of office of a Labour Government?
§ Mr. Crossman
No. I think that it was about nine months after the Labour 695 Government fell. I do not think that we should go into the details of pre-war history.
I was coming to a new inevitability which has become fashionable. When we complained, in the 1950s, about the social injustice of condemning millions of retired workers to national assistance, we were told that provision for old age was best left to private insurance companies and to private occupational pension schemes, and if this means that about 2 million people get left out, well that is the price that we must pay for relying on the private sector to do the job. That is not a price which we on this side of the House are prepared to pay, and I do not believe that the people of the country are prepared to pay it, either.
§ Sir Harmar Nicholls (Peterborough)
The right hon. Gentleman was making a party point about the Tories and about the inevitability of unemployment. Can he say what Lord Beveridge thought was the position in those inter-war years?
§ Mr. Crossman
I think that he thought that we ought to insure against the 3 per cent. level, but that is not the 7 and 8 per cent. that we were having, or the mass unemployment in certain districts which we had during the war.
I want to turn, now, to the last sentence of the Amendment, in which the Opposition object to our scheme on the ground that itadds yet further to the burden of taxation on individuals and industry.On these words, I have two comments to make. First, as the hon. Member for Hertford (Lord Balniel) knows, under our scheme the burden on the taxpayer remains the 18 per cent. of the total contribution that it is today. Because of the needs of other social services on the taxpayer—for obvious reasons I think of the Health Service—we have been careful to limit the size of the Exchequer contribution.
What does the Amendment mean by talking about an increased tax burden? Does it imply, without daring to state it openly, that Opposition leaders have abandoned altogether the idea of contributory insurance and now lump contributions and taxes together as compulsory deductions from the pay packet? I do not deny that this is the reaction of many 696 people today to the present flat-rate system. I agree that contributions are increasingly regarded as tax, as an unjust tax, as a poll tax on the poor. It is precisely this feeling which wrecked the Beveridge Plan by undermining faith in the contributory principle.
But are hon. Gentlemen opposite saying that because the flat-rate contribution is widely regarded as a mere tax we should now treat the whole idea of national insurance as hypocrisy, that we should assume that sickness benefit and old-age pensions are paid for out of taxation, just like health and education?
§ Lord Balniel (Hertford)
The right hon. Gentleman will remember that his description of the contribution was that it was an evil poll tax. In the past the flat-rate contribution has been a poll tax and he is transforming it into progressive direct taxation.
§ Mr. Crossman
I am glad to have got the hon. Gentleman to his feet so quickly to state the Opposition's view that there is not, and cannot be, any difference between a tax and a contribution.
§ Lord Balniel
I stated absolutely nothing of the kind. I stated that the right hon. Gentleman himself described it as a tax and that this is a levy, or whatever phrase one may use—a contribution or a tax on incomes.
§ Mr. Crossman
Certainly, and, therefore, we both agree that the present system of flat-rate contribution is widely regarded as a tax and is felt to be a tax. It is because people feel it to be a tax that we are determined to transform the system, to reinvigorate the contributory principle and make it work, so that everyone knows what is taken each week as his or her real contribution, to the pension—and not a tax—and knows that it really does contribute to his or her personal earnings-related old age pension.
I am grateful to the hon. Gentleman, because this is one of the points of the central debate between us this afternoon, whether or not this is a practical proposition. I am glad to hear what he has to say on the subject. If we can do it—and I am sure that we can—we are giving the best possible incentive to savings, because one of the things that has been wrong in this country over the last 20 years has been the growing feeling among 697 working people that the man who contributes from his wages all his life and saves what he can is often no better off that the man who just looks forward to supplementary benefit.
This undermining of the contributory principle has helped to undermine the belief in savings. All who are concerned with occupational pension schemes and national savings are paying serious attention to our proposals. They at least realise that the only sound foundation for private insurance and national savings is a really sound comprehensive earnings-related Government pension plan, a really sound plan.
We come next to finance and economics. How will national superannuation be financed and what burden will it impose on the economy. Let me start with the contribution. A contribution of 6¾ per cent. on both sides should be sufficient for 10 years at least—but that depends on the extent of contracting out—to finance the improved rates we propose for existing and future pensioners. Some people have pounced on the fact the employer pays on his whole payroll and not merely up to the employees' earnings ceiling, and have accused us of putting an unfair burden on industry. In fact, we have been over-scrupulous in avoiding overloading industry.
I have often been reminded by my hon. Friends that in almost every country in Western Europe the employer pays a far higher proportion of social security costs than we are proposing for British employers. We resisted the temptation to bring Britain in this respect into line with the Common Market largely because we realised the importance of exports in achieving a surplus in our balance of trade. Instead, we decided on a precise 50–50 division of responsibility; and the fact that the employer pays on his whole payroll without a ceiling—which has great administrative advantages for him as well as for us—is set off by making his national superannuation contribution one quarter per cent. lower than the employee's.
Before Opposition spokesmen tell me that we have added £600 million to the cost of social security, I suggest they calculate how much the contribution would have had to go up anyway over 698 the next 15 years if, instead of our new scheme, we simply continued uprating the old scheme at the pace we are used to. The Bill is there. The question is how to raise and distribute the money.
I turn now to employees. How will their 6¾ per cent. be divided? We have decided to establish two separate funds. The social insurance fund will cover short-term benefits, unemployment, sickness, industrial disability etc.; and 2 per cent. of the combined contribution has been allowed for this, including something for the National Health Service. The remaining 4¾ per cent. will be allocated exclusively to pensions so that a surplus on national superannuation will not be available to finance, for example, extra sickness benefits caused by an influenza epidemic. Contributors must be able to know for certain that the 4¾ per cent. paid each week towards pensions really goes to pensions.
It is all more important that they should be certain of this because we have decided in one important respect to diverge from the policy we preached in opposition. Instead of a properly funded scheme we have adopted the modern method of financing first developed by the Germans before the war. When the Americans first evolved their social security system they thought, like us, that the accumulation of a fund was needed. But the current burden on the worker as well as the employer pressed overwhelmingly. The contributions became high and they moved on to a system of finance such as we are proposing, where outgoings are strictly covered by contributions. This has received the nickname "pay-as-you-go".
When we evolved our blue-print, when we were in opposition 11 years ago, this technique had not been fully developed and I freely admit that its acceptance by the right hon. Member for Kingston-upon-Thames in 1959 was a decision whose virtuous nature I failed to appreciate at that time. "Pay-as-you-go" has run satisfactorily since then and we do not propose to change this aspect of national insurance. Indeed, I am convinced that in the foreseeable future the proper relationship between the public and the private sector in the field of pensions is for the public sector to provide a "pay-as-you-go" scheme as a 699 sound foundation for saving and the occupational schemes to do the actual saving through their funds. This is one aspect of the partnership about which I shall have more to say a little later.
Though our scheme will not be funded at all, we have fixed the contribution levels for the first ten years so that we can anticipate a modest working surplus. One reason we made this somewhat larger than normal was to cover the cost of contracting out which is not included in the calculated cost of the scheme, at the end of the White Paper. The surplus is considerable. The correct investment policy for a Government scheme's working surplus is, of course, very different from the correct investment policy for a private pension fund. Nevertheless, I have been asked whether this working surplus, like that of the present National Insurance Fund, will be invested solely in gilt-edged securities. Indeed, the assumption that we shall do so has provoked fairly widespread criticism not only from my hon. Friends behind me but, paradoxically enough, from such impeccable establishment pundits as the Economist.
Let me reply to these critics. From the pensioner's point of view there would be no advantage in equity investment because pension rates will be fixed by our 60 per cent./25 per cent. formula and will not depend on the yield or the market value of securities held in surplus; and there would certainly be difficulties for government financing, too. But I am glad to be able to add that we are willing to reflect on any arguments presented in this debate and elsewhere in favour of investing part of the working surplus in equities and having a broadly based portfolio.
§ Mr. J. T. Price (Westhoughton)
I am obliged to my right hon. Friend for giving way at this point. Surely, all these assumptions are based on the proposition or idea that the total of 5¼ million people presently contracting out of the Health Scheme of 1960—the graduated scheme—will not increase very much. Many people, including myself, have the impression that the numbers might be far greater than that and the surplus would then disappear completely.
§ Mr. Crossman
That is a possibility, but it depends entirely on the negotiation 700 of the terms. That is all I have to say on finance and I turn now to the scheme itself.
To save the time of the House I will concentrate on only four features of the scheme which markedly differentiate it from——
§ Mr. James Dickens (Lewisham, West)
Before my right hon. Friend leaves the question of the Exchequer contribution, are we to take it that the figure of 18 per cent., which is a very low figure, is immutable, and that over the years, even if the tax structure changes, we cannot increase the Exchequer contribution and thus make a scheme much more redistributive in terms of the distribution of wealth in the country?
§ Mr. Crossman
We can do nothing to bind a future Government in respect of the Exchequer contribution. We have based our White Paper on the basis of an 18 per cent. Exchequer contribution for the first 20 years, to be modified as rates can be modified elsewhere.
I turn now to the elements which differentiate our scheme. First, on the earnings relation, in retrospect the most surprising defect of the Beveridge Plan, in which we all shared—we were blind—was the static concept of subsistence, its failure to realise that what we mean be an adequate pension is not so many pounds, shillings and pence, or so many calories, or such and such items of expenditure, but a standard of living for old people comparable with that which they had when at work, and that this standard of living in our modern technological age must be not a fixed thing but constantly rising.
A few years ago, a radio set first became part of a pensioner's essential living standards. Now, almost everyone feels that a television set is essential, and, in the next 10 years, for those who feel the cold, like myself, in unheated houses, another essential will be double-glazing and central heating. To ensure to old people a fixed living standard in a period when the working population is forging ahead year by year is to condemn them to permanent second-class status. In our party policy statements we formulated this in the phrase:The old must share fully in rising national prosperity.701 And there is something else. The old are not a faceless conglomerate of statistics. They are individuals, each of whom has achieved at work his own living standard and for each of whom social security means maintaining as far as possible the standard he earned, during working life, in the years of retirement. That is another reason why flat-rate pensions, even with a small earnings-related increment, are intolerable in a civilised community. Each of us requires an old-age pension not imposed on us as a piece of rigid equalitarianism but carved by our weekly contribution and, therefore, a reflection of our achievements in working life.
Our second requirement, which we did not get either from the Beveridge scheme or the Boyd-Carpenter scheme, is a pension entitlement responsive to changes in the level of wages during the years in which we were building up our pension rights. The trouble about the 1961 scheme is that the 6d. "bricks" that we earn with each £7 10s. of contributions will still be worth precisely 6d. 30 years later, when the equivalent money value may be 1s. 6d. or 2s. and standards of living have also advanced. One of the most important features of our new scheme is the arrangement under which a contributor's cash earnings in each year will be revalued to bring them into line with changes in average male earnings. This will continue year by year until he reaches pension age.
We all know that a life insurance policy which promises £1,000 after 30 years is not much good unless it is a cum-profits policy. In our scheme, we have arranged the national equivalent of a commercial profits policy. Each contributor will receive, every second year, a slip giving him the amount of his entitlement, from which he will be able to see not only how much pension right he has acquired to date, but also how his contributions in previous years have gone up in value to keep pace with the increase in average wages.
Let me say straight away that, for white collar workers, particularly for executives and public servants, this calculation, based on life earnings, which is a very elaborate system, will make very little difference. We should not have introduced it if all our pensioners were white collar workers. 702 Their pensions are related to their final salary, which is advantageous, because they reach their highest earnings towards the end of their life. But an industrial worker with a pension based on final salary is frequently cheated of his rights because his peak earning period was 15 years before. He needs not a pension calculated in terms of 6d. "bricks" but a pension entitlement revalued throughout his working life.
A number of people interviewed by N.O.P. in the Daily Mail were afraid that the value of their contributions will decline before a pension is received. That merely shows that they have not read a copy of "Pensions—The Way Forward", the pamphlet in which, if I may praise my collaborators, our White Paper has been brilliantly condensed for one shilling.
What about the fall in the value of money after the pension has been awarded? That is something about which members of most occupational pension schemes complain most bitterly and most employers find it impossible to deal with the complaint. But it is dealt with in our scheme by the biennial review.
I turn to the third important difference between our scheme and present methods. National superannuation—I emphasise this particularly—is not merely a private occupational pension scheme rewritten in national terms. Indeed, it is based on a redistributive principle which distinguishes it sharply from any kind of life insurance or private scheme. The private scheme, in return for a single percentage contribution, pays a single percentage benefit, the same for everyone. Our national scheme—in this, we follow a number of democratic countries, including the U.S.A. and Sweden—introduces a redistributive element which weights the benefit in favour of the lower-paid worker.
The contributor will get 60 per cent. on earnings up to half average national wages and 25 per cent. on earnings above that point. This banding deliberately ensures that, whereas the below-average worker gets more than half pay on retirement, the above-average worker gets less, and sometimes considerably less. The other day, one of the Daily Mail's most distinguished financial pundits, Miss Margot Naylor, made a sensational discovery. She discovered this redistributive element and called it the secret that we were trying to 703 conceal. I was a little disappointed, because, so far from hiding it, we put it in Chapter 2 of the White Paper as one of our eight basic principles, and we illustrated it in our examples.
Our prime aim is in 20 years to enable virtually everyone to earn a pension above the supplementary level, and this can only be done by a banded pension formula such as we have produced. Whether we have the weighting exactly right is something on which we are prepared to take into account the views not only of the C.B.I. and the T.U.C., but of others, including the opposition parties—always remembering that the less we weight the formula the more lower-paid workers will remain below the supplementary level.
The fourth innovation is our new deal for women. It is clearly laid out in the White Paper and I will make a brief reference to it later.
Having announced these four big innovations, I now turn to one or two of the misconceptions about the scheme which have grown up. I am thinking on one in particular, because of a campaign mounted by the Daily Express and its provincial ancillaries to create the impression that nearly everybody will pay more from the start and no one will get anything much until 1992. In fact, the first earnings-related benefits will be paid exactly 12 months after the first earnings-related contributions are paid in. Anyone who is 64 when the scheme starts, and who pays 12 months of contributions, will qualify for a pension made up of 19/20ths of the old scheme and 1/20th of the new scheme.
Anyone who retires after two years will get 2/20ths, and so on, until a contributor with 20 years' new scheme contributions will get the full earnings-related pension in 1992. But the scheme will start paying out 12 months after the first contributions.
Another misconception to which Daily Express readers have been subjected is that the pension rates printed in our White Paper, which are said to be miserable value for money, refer to what will actually be paid in 1992. In fact, the tables relate not to the next 20 years, but to the last 20 years. Because we were determined not to promise pie in the sky—or to try to guess how the 704 economy would move in the next 20 years, or try to predict in a White Paper the rate of industrial growth and the rate of interest over 20 years, which are the estimates which must be made—we preferred to take facts, what we knew had actually happened over the last 20 years, and what pensions people actually got. We assumed that our scheme had come into operation in 1948, so that the first full pensions were payable in 1968.
We know that, for instance, an employee with an average wage of £6 14s. in 1948, when he retired in 1968, received £4 10s. If our scheme had been in operation for those 20 years, his entitlement would have been not £4 10s., but £9 7s., or, for a married couple, not £7 6s., but £12 3s. This is the difference between the prospects which will face the average wage earner in the 20 years after the appointed day of our new scheme and what has actually happened to the wage earner between 1948 and 1968.
The last important objection which I frequently hear is that the higher-paid contributor will get far worse value for money by paying his increased contribution than he would if he invested the same amount in a private insurance policy. I met an accountant the other day who keenly resented the fact that, being self-employed, he was not able to pay both sides into the scheme. He knew what he was talking about and appreciated the value of the scheme.
The cash benefit to the single higher-paid worker when he retires may be less than the cash return of an insurance policy. But to say this does not by any means complete the comparison because in our scheme the contributor gets a number of additional important benefits which are not available under a private insurance policy. I will list five of them.
First, if he is married and his wife does not go out to work, she will draw a dependent wife's allowance. This, I believe, is unheard of in private insurance. In 1968 values it provides the family with an extra £2 16s. a week. Secondly, he knows that his full earnings-related pension will be paid for life to his widow, and that is something which virtually no private insurance policy gives. Thirdly, he can look forward to a statutory review every 24 months which provides a 100 per cent. guarantee against inflation for him and for his widow. What 705 private pension scheme does that? Fourthly, if he is 45 he can qualify for his full pension in only 20 years. I have heard of few private schemes which provide such early maturity.
Fifthly, transferability. In our scheme, however often he changes his job, he—that is, everyone—carries his pension rights with him and they are completely revalued year by year. This is a right which, apart from the Civil Service and the nationalised industries, virtually no employer can offer to members of his occupational scheme. Today, the best one can normally hope for when one changes one's job is to lose all one's employer's contributions and cash one's own for a lump sum. Only about 10 per cent. of private schemes today provide some degree of preservation of their employees' rights.
Frankly, we regard this position as intolerable. It is intolerable economically, because an economy where no one after middle age dares to move for fear of losing his pension rights is a frozen, immobilised economy. It is intolerable morally, because it keeps the middle-aged employee tied to his job and so denies him ambition and promotion. National superannuation in itself will do a great deal to improve this position by providing to everyone an adequate earnings-related pension which can be carried from job to job.
§ Mr. Woodrow Wyatt (Bosmorth)
Is my right hon. Friend aware that for at least four-and-a-half of the five points which he has listed the scheme which I operate in my printing works meets every one of his objections? Would it not seem that he is totally misinformed about private schemes?
§ Mr. Crossman
I am sure that all hon. Members look forward to my hon. Friend's speech. I hope that what he says is true, but I have based my remarks on the advice I have received. I have had a good deal of contact with the life offices and occupational pension schemes. I would be surprised if my hon. Friend is a statistically relevant employer.
We have also been concerned to help the higher-paid worker who will normally combine a public and private entitlement. We should have liked to 706 make all private pensions fully transferable. We have decided in the first instance to include in the Bill a part which gives to the employee the right when he leaves his job to choose between cashing his own contribution or going to his new employer carrying with him his full pension rights preserved.
There are people who urge that preservation should have been made compulsory—that it should have been declared a crime to get a lump sum at the cost of forfeiting half of one's entitlement. I feel very strongly that our national superannuation should render this compulsion unnecessary.
§ Mr. J. T. Price
My right hon. Friend is making a powerful speech, but before leaving the question of entitlement to pension, and considering that all these arrangements are spread over a lifetime, would he explain how this will affect some manual workers? Will there be any adverse effect on the final pension for those manual workers who, for considerable periods, have broken employment? Since they will have been unemployed for periods during their lives, will this scheme act to their disadvantage?
§ Mr. Crossman
This problem of credits for periods of unemployment—we must consider sickness in this problem, too—has been carefully examined. My hon. Friend will find in the document which has been published what we propose to do. A credit will be given for a period of sickness or unemployment at half the average male wages. This is the best we can afford right now, and this modest credit should overcome much of the difficulty.
My last major topic is the relationship between national superannuation, on the one hand, and the 65,000 occupational pension schemes, on the other. I have already explained why we cannot rely on the continued growth of these schemes to eliminate the division between two nations in old age which produces a great mass social injustice. I have also shown how our national superannuation differs from private superannuation and summarised the five benefits which national superannuation can give to its members and which private schemes cannot, of their nature, provide.
707 Nevertheless, private schemes also have their advantages. In particular, they can be tailor-made to suit the needs of individual firms in a way that no comprehensive national scheme can hope to achieve. And there is something else; the funded private schemes are a most valuable form of group savings and many hundreds of thousands of workers in industry, business and the public service regard them as a guarantee of their security in old age. I doubt whether many school teachers, many policemen, many workers in Esso or I.C.I. would throw their hats in the air if I announced that we had decided to wind up all private schemes and substitute a single State system.
§ Mr. Crossman
Nevertheless, I have not heard of a teacher who would prefer his scheme to be wound up. He might like it varied by 1 per cent. or 2 per cent., but teachers appreciate the value of their pension scheme and do not want it to be wound up.
Whatever some of my hon. Friends may say about this being a mark of a really Socialist Government, in the sphere of social security, as in housing, I believe that partnership between the public and the private sector is essential to satisfy a variety of demands. The nation would be very much the worse if we arranged things in such a way that we must either all be council house tenants or owner-occupiers. What the community needs is the right balance between these two kinds of housing and in just the same way what we need in social security is a partnership between the public and the private sector. That was our view in 1957 when we published "National Superannuation", and nothing has happened since to change it.
We have decided to construct the State scheme in such a way that private schemes which are willing and also strong enough to do so can partially contract out. As I have said, we were able to rely in the latter stages on the technical advice of pension experts from the life offices and the National Association of Pension Funds and it is thanks to their assistance that I am able to assure the House that 708 the form which we propose this arrangement should take is technically feasible.
Firms which contract out will continue to pay the 2 per cent. into the Social Insurance Fund and they will also continue to pay a substantial part of the 4¾ per cent. for national superannuation. But a small part of that 4¾ per cent. will be remitted for the employee and a similar proportion for the employer in return for a firm guarantee of an equivalent pension paid by the firm. Both we in the Ministry and those who represent the private insurance sector are agreed, as I say, that this system of abatement is not only the most desirable but also the most practicable method of cementing a partnership between the two sectors.
I observe that the Opposition have alluded to contracting out in the latter part of their reasoned Amendment. They decline… at this stage to approve a plan which leaves unresolved the crucial question of contracting out….I hesitate to imagine how they would have phrased their Amendment if we had resolved this crucial question before consulting the House of Commons. Nevertheless, I appreciate their difficulties. They have an uneasy feeling that the negotiations which have already begun may well result in a firm agreement between the private schemes and ourselves. How wise, therefore, to avoid either approving or condemning the plan and to prefer the cautious policy of refusing support until they are sure what is to happen.
§ Lord Balniel
Would the right hon. Gentleman now answer the question which he refused to answer when I put it to him earlier in the week? Why will he not write the terms of contracting-out in the Bill before presenting it to Parliament?
§ Mr. Crossman
Naturally, any public agreement will be written into the Bill or the Order in Council in some form or other. I will not say whether it will be in the Bill or in the Order in Council. The question of what figures will be written in is a highly specialised one which I shall not answer today. [HON. MEMBERS: "Cautious!"] Yes, it is cautious. The caution of hon. Members opposite is a stance which might seem to an ordinary man ambiguous. It is an ambiguity we have learned to know and 709 appreciate as the Opposition's inveterate ambiguity on a score of such subjects as prices and incomes and race relations.
§ Mr. Paul Dean (Somerset, North)
Can the right hon. Gentleman give an assurance that if the surplus which he expects to build up in the early year is, in the event, not as great as he expects, he will not then alter the terms of abatement to the disadvantage of the previous arrangement?
§ Mr. Crossman
I think that, off the cuff, the calculation that would affect the contributions to the scheme, not the terms of the agreement with those who contracted out, would be something we have to consider now. For instance, we have now a demand from those inside the scheme that the present graded element should be dynamised. [Interruption.] I said that hon. Members opposite are cautious about approving or disapproving the scheme. It is nice of them to be so kind.
I turn, finally, to our Motion and to say precisely what we mean when we ask the House to approve the White Paper as a basis of legislation and invite the Government to continue consultations. In answer to a question, I have described the White Paper as a White Paper "with green edges". What I mean is that the Government are firmly committed to the main structure of the scheme, but there are a whole number of secondary features in it and a whole set of related figures which are open to suggestion in the sense that they can still be revised and modified in detail before we finalise the Bill.
I will give a few examples. First, the retirement condition and the earnings rule. If I were to express a personal view I would say, if I were a completely free agent, which I am not, that I would rather have a scheme with no retirement rule at all and no earnings condition. There are, however, two difficulties. In the first place, this would cost about £115 million a year extra—not £150 million as the White Paper says, which is the only misprint I have found. In the second place, there are serious anxieties in the trade union movement about the danger of using pensioned workers to undermine wage rates. Nevertheless, this is an area where we would welcome discussion and where modifications are still possible.
710 My second example of a passage with "green edges" is the treatment of women and widows. The proposed abolition of the married women's option, while it would be welcomed in general by women's organisations, will be disliked by many married women. On the other hand, we have left the women's retirement age at 60 despite the admission by most women's organisations that this is an anachronistic concession to what is no longer the weaker sex. This is an interesting question on which we are prepared to listen carefully to public opinion.
On other areas of the scheme we would like to hear an informed and vigorous public discussion in order to ensure that we have got the balance right. For example, we propose a 20-year maturity period which, to put it brutally, means that the young will pay substantially more so that those over 45 can get the full pension more quickly. Have we tipped the balance too far in favour of the older generation?
There is one issue which I have not yet mentioned, the question of the earnings ceiling beyond which contributions will not be paid and benefits earned. We have put it at one and one-half times the national average of male earnings. Here again, we had to strike a balance between the scheme's need to include a substantial number of better-off contributors and our desire to leave the private pension schemes to cater for the highly-paid workers, their traditional customers. We think that £33, in 1968 terms, is about right, but on this issue we shall certainly listen with attention not only to the C.B.I. and T.U.C., but also to everything said in this debate.
I saw it suggested in one Sunday newspaper that this White Paper would be an ideal subject for a pre-legislation Committee. Personally, I could not conceive of anything more worthy of Specialist Committee investigation than the plan outlined in this White Paper. But that, of course, is a matter for the House. Meanwhile, I would hope that the debate which we are starting this afternoon in this Chamber will be continued throughout the spring and summer not only at Westminster, but up and down the country so that public opinion can be not only alerted but also informed about our plans. For one thing seems to me clear. 711 A radical reconstruction of national insurance such as we are putting before the House today can only be successfully carried through in the climate of an alert and a constructively critical public opinion.
§ 4.56 p.m.
§ Lord Balniel (Hertford)
I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:recognises the rôle of the State in providing a firm guarantee of security in old age, but believes that the widespread desire to provide additional pensions related to earnings and individual needs can best be achieved through private and occupational pension schemes; and declines at this stage to approve a plan which leaves unresolved the crucial question of the contracting out arrangements for occupational schemes and which adds yet further to the burden of taxation on individuals and industry".The House has been greatly indebted to the right hon. Gentleman the Secretary of State for a speech, parts of which were thoughtful and parts of which were interesting, but which, I think he will take it as a tribute to his debating prowess, contributed to enlightening us on certain aspects of the White Paper yet hardly touched on the heart of the major debate and left in total obscurity the future of private and occupational pensions schemes.
Before embarking on discussion, we ought also to congratulate the draftsmen of the White Paper. Anyone who is not an actuary or insurance expert has to undertake a very conscious mental effort to understand the complexities of any pension scheme. I suspect that most laymen adopt the jargon of the insurance experts and are inclined to "opt out" of understanding it at all.
The right hon. Gentleman looks very snug indeed in the mantle he has inherited from my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter). It is certainly true that he has unstitched what was called the Boyd-Carpenter Scheme. It is more voluminous. It covers more people, not only those who earn up to £18 a week but those who earn up to £33 a week. But he has incorporated precisely the same principle whereby the graduated payments used to secure earnings-related benefits are used overwhelmingly to pay for the existing pensions.
712 The difference lies primarily in the scale—in the fact that the Government are now moving into a field which is well covered by occupational schemes. The difference lies also in the fact that in the previous scheme each persons' individual contribution bought the same value of pension at the end. Under the Government's scheme the harder one works and the more one earns, the less is the value of one's contribution—a theme of redistribution which I should have thought more suitable to the medium of taxation than insurance contributions. It is also a theme of redistribution incorporated into insurance which I suspect does not conform with the mood of the country.
I agree with the right hon. Gentleman straight away that the greatest challenge which this country has to face, the greatest challenge to the social conscience of this nation, is the care we devote to our old people. The Government, with self-congratulation, claim in their White Paper that they are making a fundamental change in the scheme. It is quite true that they are shaking it up. It is like those glass toys which are filled with artificial snow. It has been given a tremendous shake. There is an absolute blizzard of financial movements and adjustments. It is almost impossible for the layman to see what is happening but, as the snow gradually settles down, many of the old familiar landmarks with which we are so well acquainted from the past gradually re-emerge.
There are three elements which make up the Government scheme. Three elements which are, unhappily, fairly difficult for laymen to disentangle. The first is the contributory element, under which each member acquires an asset by virtue of his or his employer's contribution. This part of the scheme corresponds to the scheme of my right hon. Friend, the 1961 scheme. It also corresponds to the principle underlying private occupational schemes, although in their schemes there is an element of genuine saving for the future. In this scheme there are no real savings at all.
The second element is the redistributive element which is in the nature—let us put it quite bluntly—of charity. This element is designed to transfer the purchasing power from the better paid in the 713 community to the lower paid without regard to their contributions but with regard to their needs. This is the new element in the contributions. In the past there has always been an element of redistribution, but this has been incorporated in the tax contribution—not the personal contribution.
There is the third element, the variable element, by which the whole scale of benefits is adjusted upwards to take account of the rise in prices every two years. This is putting into statutory form what has been the regular practice of previous Governments.
The subject is immensely complex.
§ Mr. Ted Leadbitter (The Hartlepools)
The right hon. Gentleman must make it clear that the graduated pension scheme, known as the Boyd-Carpenter Scheme, had two basic differences. That scheme did not take growth into account nor could it be controlled in an area of inflation.
§ Lord Balniel
I will deal with those two points in my speech. Perhaps I might be allowed to do so in the way I had planned.
As I was saying, this is a subject of such immense complexity that I shall try to set out at the very beginning the broad objectives of financial social policy for the elderly which I believe this country should follow. The broad objective of social policy for the elderly is to secure for them a decent standard of life. For far too many people today the disparity in the standard of life before retirement and the standard of life after retirement is too great. To diminish this disparity pensions must clearly be made to correspond more closely to earnings. The question is whether this task of providing a pension in the future above basic levels and related to earnings is primarily a task for the State to meet out of taxation—because that is what contributions are and that was the point I was making in interrupting the right hon. Gentleman—and out of current production, or is it primarily a task for the private, personal and occupational pension schemes to provide out of real savings for old age?
The Conservative Party stands for the belief that it is in the best interests of 714 the country and of the pensioners that the State should concentrate on providing a firm background of security in old age. This should be the prime task of National Insurance—to guarantee a basic security for old people, for the sick, for the disabled, for the unfortunate, for the widowed. When I speak of a basic security I speak not only of avoiding absolute poverty but in terms of avoiding a sudden drop in living standards when one retires.
Additional provision over and above basic security can best be met more effectively, more flexibly by private and occupational schemes.
§ Mr. Crossman
I am following closely. It was clear that the hon. Gentleman said "basic security", but did he say that the basic security is related to one's earnings or to the standards one achieves in life? If so, basic security is not something which is the same for everybody. Is not that what we are doing? Once he relates the basic security to earnings the hon. Gentleman is adopting our position.
§ Lord Balniel
I was not adopting the righ hon. Gentleman's position. I said I accepted it was not only the responsibility of the State to provide against absolute poverty; it was to provide against the sudden drop in living standards when one retires. I accept that there are arguments which lead to a relationship between contributions, benefits and earnings. In a free society our aim should be to encourage everybody to supplement their pension through their own thrift and forethought, by means of occupational pensions schemes. We question whether it is wise for the State to bulge over into the business of raising extra taxation and contributions to provide benefits for the better-off members of the community, over and above basic needs.
§ Mr. John Pardoe (Cornwall, North)
I am trying to follow this complicated matter. What the hon. Gentleman is saying is crucial to the Conservative policy. Is he saying that any part of the State scheme should provide a pension that is linked to the individual's previous earnings or only to the overall level of earnings of the community?
§ Lord Balniel
If I understood the hon. Gentleman's question aright, my answer 715 would be that I am saying that there should be a relationship between the pension and a man's earnings in his working life. I am going to refer to the question of redistribution during the course of my speech.
§ Mr. Crossman
I answered 10 or 11 questions. It is most important that we should clarify each other's thoughts. The hon. Gentleman said, first of all, that the State's job was to deal with basic need. It is now clear this does not mean a flat-rate standard of living; it is a need related to one's earnings in life. Then he says that we should not bulge into the provision for higher-paid workers. Does he mean that there should be a level drawn and that the State should provide for workers below a certain level related to their earnings but not above a certain level? All the hon. Gentleman is saying is that there should be a ceiling to national superannuation, which we have already. Where does this differ in principle from what we are doing?
§ Lord Balniel
I am saying the State should only provide a basic level of security, a firm background of security, but I accept the argument that the State can be enabled to provide against a sudden drop in earnings when one retires. I equally accept the argument of the 1961 scheme, that one should be able to contract out from that element of it and obtain better terms under the private and occupational schemes. If the State bulges outwards, if it balloons out, it harms the prospects of the 12 million people in private and occupational schemes, many of which give a much better bargain than the State scheme. I am not saying that all private schemes are perfect and immaculate. However, if one asks any employee whether he would prefer to invest his savings in a State scheme or in an occupational scheme, they would choose overwhelmingly to invest their savings in occupational pension schemes. How right he would be when he remembers how the investment in War Loans and in Daltons has gone. How right he would be when he sees that the market value of the National Insurance Reserve Fund has dropped from £188 million in December, 1964 to £88 million in December, 1968.
716 The State must provide for existing pensioners; for those who are not properly covered by private and occupational pension schemes; and for those who will not be provided for in the immediate future. So, like the right hon. Gentleman, I agreed that there must be a partnership between the State scheme and private and occupational schemes.
Private schemes can provide against pre-retirement inflation but, although many of them provide against post-retirement inflation—this is the ideal to which most of them are moving—they cannot provide a contractual right to do so. As it is possible for a firm to go out of business, it is essential in the private field that there should be a contractual right to provide the pension. Nor, for that matter, can the State provide a contractual right to a pension in the future.
It is misleading of the White Paper to say that occupational pensions do not provide post-retirement increases. The Government Actuary's Report of December 1968 showed that more than half of the schemes in the United Kingdom do provide post-retirement increases. The main obstacle to full post-retirement increases in the private sector is the Inland Revenue restriction to 2½ per cent. for contractual increases. As 3½ per cent. has been the average rate of inflation for the past 30 years, and as last year inflation rose to a level of 7 per cent., I ask the Government whether they are going to instruct the Inland Revenue to remove this inhibiting restriction on the private sector which, if I remember rightly, dates back to the Cripps Budget immediately after the war?
§ Mr. Crossman
The question is whether the restriction on people paying out more than 2½ per cent. will be removed. There is no restriction. There is only a statement that tax concessions will be paid below that level. A man is free to pay it out. The hon. Gentleman is arguing that he will not pay it out unless the State gives it to him to Pay.
§ Lord Balniel
The right hon. Gentleman has not answered the question which I have put to him. I would like to ask whether he will remove this tax restriction.
717 The White Paper pays considerable lipservice to the principle of partnership. I thought that the Secretary of State towards the end of his speech genuflected rather gracefully in the direction of occupational schemes. But the White Paper gives absolutely no indication as to the degree to which private and occupational schemes will be allowed to contract out of the State scheme. Contracting out meaning allowing private schemes to get on with their own business. Unless the House is provided with this crucial information, it is absurd to approve the White Paper.
For instance, Table 7 on page 63 of the White Paper shows a surplus of income over outgo in the National Superannuation Fund of £398 million in the first year, £283 million in the fifth year, and £176 million in the 10th year. These figures are virtually meaningless, because they take no account of contracting out by occupational schemes. If the Government really are going to allow occupational schemes to flourish, the figure of £398 million could be cut very dramatically indeed.
In fact, the House is given no idea in the White Paper of what scale of surplus the Government are aiming at or, indeed, whether there will be any surplus at all if generous contracting out arrangements are agreed on. No hon. Member in his private business capacity would make up his mind on the basis of such inadequate information. We are the trustees of the taxpayers' money, something which is too often forgotten nowadays. We would be failing in our duty if we approved a scheme where the financial arrangements are not properly spelled out.
The importance of occupational pension schemes is of such significance to the future, to the people, and to our belief in encouraging individual responsibility, that I hope that the House will forgive me if I elaborate on them a little. The development of private and occupational pension schemes whereby people are encouraged to take a larger share of responsibility on their own shoulders for their own future lies at the very heart of the Conservative philosophy. We believe that the interests of the country are better served if the emphasis of pensions policy 718 is shifted towards developing such pension schemes.
The savings of the 12 million people in these schemes form two-fifths of the total personal savings in the country. They bring in an extra £800 million of savings every year. These savings are invested in industry and go to create the wealth from which we pay for the wellbeing of our elderly people. They are invested and they go to create the wealth by which we pay for the hospitals, the schools, the roads and, indeed, the whole social services.
Contributions to private schemes are real, genuine savings for old age. They are quite different from contributions to the State scheme, which are really taxation on current production and are paid out during the current year to pay for existing pensions.
Every economic and social argument should lead the right hon. Gentleman to be really generous in the arrangements he negotiates for contracting out. Equally, every economic and social argument should lead the pensions funds to represent the interests of their 12 million members strongly and to demand reasonable terms; because I do not think that they will get reasonable terms unless they stand up and demand them. They will have to stiffen their backs, because the Secretary of State has a long tradition of hostility towards private enterprise. Smooth words in his speeches will not make any difference when it comes to the negotiations.
Of course it is tempting to the private enterprise schemes to drink the Government's syrup, especially when the right hon. Gentleman is putting on an air of great sweet reasonableness. However, I would advise them to taste it very cautiously indeed before they agree with the right hon. Gentleman.
From the public point of view, if there is any cutback in the savings of the occupational schemes it must be met by an increase in taxation.
Conservative policy is to encourage all the main channels of savings—building societies, unit trusts, life assurance, contractual savings. There is no channel of savings more open for rapid expansion than the occupational pension schemes. If the Government were to go 719 flat out to encourage occupational pension schemes to grow and to improve, Britain could generate a force of savings which, more than any other single economic measure, would counteract inflation.
Yet the future of occupational schemes is left entirely unresolved in the White Paper. People cannot be expected to pay a heavy increase in contributions to a new State scheme and at the same time pay into an occupational scheme. We want to know how big a reduction will be allowed for employed people and their employers. This key question is precisely the question that is evaded in the White Paper.
§ Mr. Crossman
The hon. Gentleman has said three times that we have evaded answering a question. Is he saying that if we had completed our negotiations with the occupational pensions schemes in secret and told the House, "Here is the agreement, fixed and sealed", he would have said, "What a splendid thing to do"? If he does not say that we should have done that, does he really think that I could now tell him how the negotiations are to take place? We have started the negotiations. I should have thought it reasonable to expect that while they are on he would be patient and listen, and would not complain that we have not told him the result of the negotions on how much will be deducted from the contributions. That is what the negotiations are about.
§ Lord Balniel
Of course, I am not asking the right hon. Gentleman that. What I am asking him to do is not to ask the House, on a Whipped vote, to approve of a White Paper before we know the contractual arrangements. This is absolutely crucial. No business person in his senses would dream of approving a financial arrangement of this kind.
Another important point about the contributions to occupational schemes and the State scheme is that contributions to a State scheme give people no contractual right to a pension. One would see this in practice if one tried to use one's contribution to the State scheme to secure a mortgage on a house. It would be quite impossible.
The table of benefits is really no more than a pious hope that our children in 720 10, 20 or 30 years' time will implement the promises which the right hon. Gentleman is making. They are really a kind of post-retirement credit, no more likely to be honoured than post-war credits; no more likely to be fulfilled than the Beveridge promise to abolish want in old age. As the right hon. Gentleman has pointed out, 30 per cent. of our elderly persons are on supplementary benefit.
§ Lord Balniel
I have a great deal to say.
I believe that the public are rightly cynical about such promises. The table of benefits takes us way out on a trip into the future. It is a kind of political arithmetic that I distrust, and most newspapers also seem to distrust it. The Daily Mail described it as "Barren fruit trees". "Fools' gold" was the phrase used by the Daily Telegraph. "A bad bargain was the expression of the Daily Express."Better if private" was the leader in The Times. "The poor remain poor" was the leader in the Economist. It is true that some newspapers gave it a moderated welcome. The Guardian gave it two cheers, which seems a fairly accurate reflection of the strength of the voice of the Liberal Party today.
§ Mr. Pardoe
Since the hon. Gentleman is so fond of quoting Conservative newspapers, may I remind him that in 1963 the Daily Mail said of the Liberal plan:It is probably the most ambitious programme of help for the old and needy yet planned by any party.If the hon. Gentleman would like to remain in his seat, I will read out several more such comments.
§ Lord Balniel
Plans introduced by the Liberal Party are always ambitious, in the sure knowledge that they will never be implemented.
This is no reflection on the right hon. Gentleman—the problem is inherent in any pay-as-you-go scheme, but the only promise the Government are making is surely, in simple terms, "I promise that the pledge I make today of better benefits in 10, 20 or 30 years' time in return for higher contributions, which will be paid immediately after the election, will be 721 honoured by our children". Who knows? The Beveridge promise was not honoured; the Beveridge promised land is still not here. Why should we believe these promises? The public are bound to be sceptical of long-term promises by a Government which has broken so many short-term promises, including promises on pensions made only four years ago.
§ Mr. Crossman
We have a very difficult situation here. I remember when the 1959 scheme came out. Everything is fair in party warfare, but I do not think that any of us in the Opposition then said, when the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said that his bricks would be worth sixpence, that those were mere idle words. On the whole, there is no evidence that when British Governments put forward serious pension schemes they are merely pipe dreams, as the hon. Gentleman says. We shall undermine the chance of any Government doing anything about pensions if that is to be said of Government schemes. The hon. Gentleman says that he wants an earnings-related Government scheme. How can it be done without giving people a table of what is wanted?
§ Lord Balniel
I was saying that the public are rightly cynical, because they remember the promises made only four years ago. They remember that the minimum guaranteed income scheme was—[Interruption.] The right hon. Gentleman says that it is coming, but, of course, it is not. Perhaps I might quote the words of the Chairman of the Parliamentary Labour Party in his pamphlet, "Paying for Social Services":This Supplementary Benefits Scheme was salvaged from the wreck of the Income Guarantee, one of the firmest of all pledges given by the Labour Manifesto 1964, which went on the rocks in the economic gales of July, 1965. The Income Guarantee, was conceived as the answer to all means tests.Do hon. Members understand why there is scepticism, or would the right hon. Gentleman like me to quote from his own election address?
§ Lord Balniel
The right hon. Gentleman stated:One of the first jobs of the next Labour Government will be to introduce a new 'income guarantee' which will apply to everyone over 65 and to every widow. Under this 722 system, within a few years the overwhelming majority of our old people will be raised above the National Assistance level, and have their pension supplemented as of right without a means test.Supplementary benefit is based on a means test.
We are told in the White Paper that the scheme is… based upon broad principles formulated in 'National Superannuation', published by the Labour Party in 1957.The principles must have been very broad, because that was a funded scheme. This one is not. Under that scheme the money was to be invested in equities. Under this one it is not. I cannot help remembering the story of the senator who ended one of his speeches by saying, "Well, those are my principles, and if you do not like them I have plenty more where they come from."
I have emphasised the growth of the occupational schemes partly because for most people they give a better bargain than the State scheme will ever do, partly because they implement our belief that men and women want to take their own responsibility for providing for their future, and partly because of their economic importance.
We must look at the Government's proposals in this context as well—the economic implications—the likely effect on industrial costs and prices and taxes. In short we have to examine their effect on our ability to pay our way in the world. Before we start producing bigger and better pension plans, we must be absolutely sure that they can be paid for. The increase in the contributions is for most people an increase in direct, progressive taxation. The contribution for a person on average earnings will be five shillings a week over and above existing rates. A person on less than £16 10s. a week will pay less; a person earning more than £16 10s. a week, which is well below the average earnings, will pay more. People on higher levels of income will be paying 19s. 2d. extra a week.
In paragraph 52 of the White Paper it is stated categorically that, after some years, the contribution rates to the Superannuation Fund will need to be somewhat increased. No estimates are given for the Social Insurance Fund, which is left in a state of astonishing vagueness. But these increases in contribution rates follow on the present Government having 723 increased contributions during their four years of office by 40 per cent.—for the employed man, from l1s. 8d. to 16s. 8d.
Surely, the probable reaction of most people, and it would be mine, is that if they have their take home pay sharply and compulsorily reduced, they will put pressure on their employers for higher wages and salaries—rises which would be unrelated to increases in productivity. Technically, higher taxation is deflationary, but this is not how human beings respond. People are not pawns on the Government's chessboard. They like to make their own moves. The sooner we realise this and welcome it in society the better.
Married women are to have their right to opt out of the scheme removed. I would prefer to keep their present freedom of choice because this is apparently what the majority of them wish to do Today only 1,100,000 of the 4,600,000 women in employment pay the full contribution. The others only pay the industrial injury contribution of 7d. a week. The Government intend that they should now compulsorily pay the full contribution.
For a married woman earning £8 a week, this will mean a contribution not of 7d. per week, but of 10s. 10d. a week. A married woman working in a profession, for instance, who has opted out of the State scheme and is earning, say, £22 a week, will pay 29s. 8d. a week—an increase of over £1. This will surely discourage women from going to work, but in purely economic terms, which I am talking about at the moment, it is going to result in increased pressure for higher wages and salaries, especially in the service industries, where large numbers of women are employed. Again, the contributions of the self-employed are to be increased—by an extra 6s. a week for men and an extra 10s. a week for women and by an extra £1 7s. a week for those self-employed married women paying the present scheme contributions.
The impact on industry will be equally significant. It will have to pay 6¾ per cent. of the total pay roll, and for industry there is no ceiling at all. This will be a substantial additional burden when set alongside S.E.T., of which the White Paper makes no mention. The total effect of all these increases in contributions from employers and employees is difficult to 724 judge, especially as we do not know the contracting-out arrangements. The Government expect in the White Paper that it will result in a rise in the general level of prices. We are told:There may thus be a small adverse impact on the balance of payments when the new scheme begins.The expected rise in labour costs is ½ per cent., which would not be much over £100 million. However, I simply do not believe that figure. The economic editor of the Sunday Times wrote on 2nd February:It is hard to see how it could be much under £300 million or 1½ per cent. of employment costs. This could worsen our balance of trade by something over £100 million a year.The Confederation of British Industry is conducting an inquiry, but its preliminary view, according to the Financial Times of 13th February, is that the Government plan will cost industry £400 million a year.
I have spoken only of the increased costs which are visible in the White Paper, but, of course, it was only recently that the Government proposed that industry should take over the responsibility of the first four weeks of sickness benefit. There are strong arguments for doing this in the context of reducing taxation, but in the context of today, of soaring taxation and proposed additional burdens on industry, one has to reckon how these additional costs will bear on industry. The gross cost of the Government's proposal relating to sickness benefit was £400 million and the net cost is likely to be at least £100 million. Does that still remain the Government's proposal so far as the Social Insurance Fund is concerned?
It is surely a mistake to muddle a pay-as-you-go scheme with funding for the future. Quite apart from any other reason, it is desirable that there should be a clear public understanding as to what is being raised to meet existing benefits and what is being set aside as compulsory self-help for the future. The Government have stirred these two things together so that it is almost impossible for a layman to disentangle which part of the contributions is being used for today's pensions and what is being set aside for the future. It would be fairer to disentangle these two things absolutely.
725 Paragraph 167 of the White Paper shows how this confusion is being caused. It says:In principle "—but not in practice—the new scheme, like the present one, will be financed on a 'pay-as-you-go' basis—that is, with current income designed to meet current expenditure. Most people must expect, however, to pay more for their higher benefit prospects.I emphasise the word "prospects" and not "rights".
The paragraph goes on:Furthermore, frequent changes in the percentage contribution rates ought to be avoided, especially in the early years when the scheme is settling down. The initial"—I emphasise "initial"—national superannuation contribution rates proposed … leave room, therefore, for the growth of expenditure for some years ahead.The right hon. Gentleman is therefore, raking in more money than he needs in the immediate future. It is not only to avoid frequent changes in contribution.
There is another reason, and a more subtle reason, which we find in paragraph 178. This says:The resulting surplus in the scheme's early years will have a restraining effect on the pressure of demand, and thereby enable any given level of public expenditure to be financed with a somewhat smaller recourse to general taxation.So the insurance contributions which people believe are going to be used to finance their future pensions will be used to restrain public demand. But the restraining of public demand is more suitably undertaken not by the insurance contribution but by the Chancellor of the Exchequer in his budgetary provisions. By raking in more than is needed, the contributions are being used as taxation to finance other public expenditure which otherwise would be met out of general taxation.
§ Mr. Crossman
It is not quite as the hon. Gentleman thinks. If we withdrew from circulation a certain amount of consumption power, into a savings scheme or a pension scheme, we would thereby reduce the pressure. This is exactly the same effect whether it is done by us, through our powers, or by a private scheme and its methods.
§ Lord Balniel
It depends exactly upon what one does with the money. If it is 726 to be used to finance public expenditure, and results in a somewhat smaller recourse to general taxation, then it is being used to finance public expenditure.
§ Mr. Crossman
I have given a perfectly specific assurance on that earlier, namely that any surplus in the national superannuation fund will only be used for pension purposes. I made that clear in an earlier part of the statement.
§ Lord Balniel
I accept that what the right hon. Gentleman says is a firm assurance. I must remind the House that in the early years of the present scheme, when there was a surplus, as the result of excessive unemployment contributions, in the monies available in the fund, £225 million was taken away and used for the national superannuation fund. I hope that this assurance——
§ Mr. Crossman
Perhaps we can have the quotation, from paragraph 52, which says:Separate funds will reflect the different nature of the benefits concerned … contributions paid into one fund will not be diverted for use by the other. Contributors can therefore know what proportion of their contributions is for national superannuation and what proportion for other purposes, and can be sure that the money paid for one purpose will not be used for another.I said that we would invest the surplus. That is an absolutely clear statement.
§ Lord Balniel
It is an absolutely clear statement that money will not be transferred from one fund to another. What it could well be used for is to finance general public expenditure. We will study this, and I know that the right hon. Gentleman is trying to make an absolutely clear statement to the House.
There is another way in which the right hon. Gentleman is doing what I regard as the Chancellor's job. Contributions are being used to redistribute incomes. The harder one works, the more one earns and the less is the value of one's contribution. How this can continue to be called an insurance scheme I cannot think. Of course, it is necessary to have an element of redistribution to help the less fortunate in our community, but this should be the task of the State, through the tax element in the insurance scheme, and not through the personal contributions. The development of a State fund in a pay-as-you-go system has its dangers. Table 7 on page 63 shows that there will 727 be a fund of £1,756 million by 1977 and £3,439 million by 1987, subject to the contracting-out arrangements. In theory, this is compulsory saving for future benefits.
In some ways it is the answer to any Chancellor's dream. Honestly, I do not want to be the answer to any Chancellor's dream, even to a Chancellor from my side of the House. The pressure on Governments to raid these funds will be almost overwhelming. There will be pressure to meet worthy causes and perhaps to help them through an election by the distribution of benefits. One has to be very naïve in politics to believe that so long as the fund is under the control of the Government it will survive for very long.
We particularly and very warmly welcome the improved arrangements for widows in the White Paper. We are however struck by omissions. Groups of people whom I would have regarded as being in the highest category of need are not mentioned at all. When dealing with this question of people in need we are always faced with the understandable cry, "Why did you not do it between 1951 and 1964?" This cry is used to halt all social progress. Reform is an evolutionary process, and there were many stepping stones of advance in that period, advances which benefited the existing generation, and which were not only promises referring to the distant future.
One of the major omissions is a group of people for whom the public are not only prepared to pay but are also deeply anxious to help. We find it wrong that the Government have set their face against helping the over-80's—the non-pensioners. I have heard ad nauseam the arguments against helping them, and I remain completely unconvinced. We have also heard how the arguments have changed. First of all we were awaiting the minimum income guarantee scheme; then we were awaiting the earnings related scheme, which was to be published in the White Paper. Now that the White Paper is published we find that these people are excluded from the scheme.
They are a diminishing number of people in need of help. They are a group of people who have been proved, who are known and who are seen, to be in need of help, and they should be helped. The cost of doing so is dwindling every 728 day. It is tiny—£17,500,000 compared with the tremendous surplus on income over expenditure for which the Government are budgeting in the first year of the scheme. Like everyone else they pay taxes, and £3,500 million worth of taxation has been put in the national insurance scheme.
The way to help them is to provide for a non-contributory pension, as of right. There will be very few of them still alive when this scheme comes into operation. I will not weary the House with the intricacies of the argument. I will just say quite simply that the House ought to set this matter aright as a belated act of social justice. I hope that this can be incorporated in the Bill when it is produced.
The other group for whom I would like to see a much greater emphasis of priority are the disabled. Here again, I welcome the constant attendance allowance for the severely disabled. Surely, if one stands back and looks at society, and at the groups in need of support, the disabled—some of whom of have been crippled from birth; others who have been struck down by illness or disease; who cannot earn their own living—stand out beyond all others as being in need of support. People who have been injured in an industrial accident or those disabled in war receive some kind of pension, but there is nothing in the insurance scheme for the civilian disabled.
This is the big gap of the 1948 scheme. I find it deeply disappointing that the Government continue to differentiate between those who are disabled at work and those who are disabled by disease or accident. All the existing anomalies will continue. No attempt is being made to end them. Surely it would be the wiser, simpler and more humane to treat all forms of disability alike for benefit purposes?
We welcome the new attendance allowance for the very severely disabled, although there are no details of its levels and we do not know who will qualify. The allowance is valuable but it totally excludes the disabled housewife until she becomes a helpless invalid needing nursing attention. The social survey of the chronic sick will be available this spring, and I would like to ask that this part of the White Paper be taken back, reexamined and reconstructed, so that the 729 criterion of benefit is the degree of disability, not the historic causes of disability. There is no reason, if this part of the White Paper is taken back, reexamined and reconstructed along these lines, why it should not be introduced before 1972.
§ Mr. Crossman
The answer to that is that this is not part of the White Paper. Short-term sicknes benefits and unemployment benefits and the question of disability will be dealt with in length in a later statement in the spring. The subject is not excluded from this White Paper; there is a paragraph about it, but there will be a full statement.
§ Lord Balniel
And it will, perhaps, be possible for the right hon. Gentleman to introduce, in the proposed legislation, proposals for the civilian disabled?
§ Mr. Crossman
The statement dealing with sickness and unemployment, which will include any further details of disability, is expected in the spring, say, April or May. It will include full proposals for legislation to bring the short-term sickness and unemployments into line with the new scheme. We already have a scheme working which will be incorporated in the Bill.
§ Lord Balniel
If I understood the right hon. Gentleman aright, it applies to the short-term sickness benefit—it cannot apply to a long-term civilian disabled pension, for which I was asking.
§ Mr. Crossman
It will apply to long-term sickness and long-term unemployment, as is stated briefly here. It is in that context that we are prepared to consider the problems of disability.
§ Lord Balniel
Yes, but the right hon. Gentleman is well aware that long-term sickness benefit applies only to people in the insurance scheme, and the civilian disabled housewife who has never been in work is not in the insurance scheme.
My greatest dread when speaking about the elderly, the sick or the disabled is that inadvertently I might fall into the error of hon. Gentlemen opposite and make expensive promises which we might not be able to fulfil. This would be 730 quite inexcusable for any Opposition. We do not know the economic conditions which will prevail when we return to office. We do know that as a country we now owe £1 for every man, woman and child on the face of the globe. We do know that the economy has been grievously weakened. It would be wrong for me to promise this or that benefit to this or that group of the community, however deserving their cause.
What I can say is that amongst the disabled there is a social need which is crying out aloud to be set right. I accept that there should be a higher emphasis of priority on the disabled, even within the context of the social services. If one looks at social care in its full comprehensive context—which was the very point of our advocating the integration of the Ministry of Health and the Ministry of Social Security—one sees that there would be savings as well as increased expenditure in providing for the civilian disabled.
A disabled mother could live at home with her children, whereas otherwise she would be in a hospital bed costing £1,000 a year. Children could be kept at home when otherwise they might have to be placed in residential homes at a cost of £650 a year. Tangible savings of this kind can be made, but intangible savings in terms of human unhappiness can also be achieved.
The Government make no proposals for existing pensioners, except for the two-yearly statutory review. There is no easing of the earnings rule. There is no emphasis on help for the most elderly. The two-yearly statutory review will compensate for the rise in price levels. I concede that it might well be a valuable psychological comfort, but of course the adjustment of benefit levels will be substantially less than has been achieved in practice by all Governments except in the immediate post-war years.
During the last four years of Conservative Government the real purchasing power of the pension was increased by 19 per cent. This was, incidentally, simultaneous with a reduction in taxation. Now, the value of the pension is falling fast, and by this October two years will have passed since the last increase. The rise in prices in 1968 has been the worst for 17 years. The value of a single pension, £4 10s., has dropped 731 by 6s. 2d. since October, 1967. The value of a couple's pension has dropped by 10s.
The Government intend to tie successor Governments to a two-yearly uplift in pensions. May I ask for information? Is it the intention of the Government themselves to implement this principle and restore the purchasing power of the pension this autumn?
I would like to have made many other points, but many hon. Members want to take part in the debate.
I conclude by saying that I am opposed to creating a State monopoly in pensions. Yet there is such total imprecision in the White Paper, in that we do not know the arrangements for the private enterprise sector, the occupational schemes, that this is certainly possible within the context of the White Paper. It is, apparently, the Government's intention to build up surpluses. This may be attractive to the Socialist Party, because it gives a wonderful scope for spending other people's money. It is all very well for hon. Gentlemen to laugh. May I read what Professor Titmuss says in this week's issue of New Society:What politician of the Left worth his salt will be able to ignore the balance of the National Superannuation Fund which will (assuming no contracting out) rise within five years to £1,756 million?If, on the other hand, there is a genuine reality in the Government's desire to encourage the growth of occupation schemes, then that surplus will be short lived. The Government Actuary, at page 63 of the White Paper, says this:… for those at present contracted out (i.e. some 4½ million men and ¾ million women), each ¼ per cent. a side reduction in the contributions would reduce the period of growth of the fund by about 1½ years, and the maximum size of the fund would be correspondingly reduced.The article in the March edition of Planned Savings, which is a commentary on unit trusts, life assurance and savings, has put that phrase into ordinary everyday English, and it reads like this:The Government Actuary has made some estimates of the effect of contracting out. If this is done on the same scale as at present, the scheme will run at a loss from its second year. It seems unlikely that the Government will be prepared to allow this. Most comment has ignored the fact that the scheme will not finance itself on the proposed contribution rates, but they will have to be raised after 732 about 20 years and yet again before the end of the century. If contracting out is popular the contribution rate will have to be raised within two or three years of the scheme's inception.The right hon. Gentleman the Secretary of State should take back his White Paper and make up his mind what he is aiming at; whether he is aiming to establish a large surplus through taxation for a bigger State scheme, or whether he is aiming to encourage self-help through savings. He should tell us the terms of contracting out. He should disentangle the deliberate confusion which he is creating between what is being paid for existing pensions and what is being paid for future benefits. Only when such elementary information is available can we judge whether a structure is being created to meet the social needs of the future.
Until then, the scheme is no more realistic than earlier attempts by the Labour Party to produce a new pensions plan. It is an unhappy compromise between promises and pious hopes. It places little emphasis on personal responsibility and, in its present form, I cannot advise my hon. Friends to approve it.
§ 5.59 p.m.
§ Miss Margaret Herbison (Lanarkshire, North)
May I, first, congratulate my right hon. Friend the Secretary of State on his brilliant speech and for the lucid way in which he explained to the House exactly what was contained in the White Paper. I have seen on the Order Paper today the Government Motion, the Amendment headed by the Leader of the Opposition and the Amendment put down by the Liberals, and I have come to the conclusion that the Conservatives were, as usual, showing that they were doctrinaire in the matter of pension provision, but not nearly so doctrinaire as the Liberals.
I have listened carefully to the speech of the hon. Member for Hertford (Lord Balniel), but I have no idea what the Conservatives would put in place of the Government's proposals. This debate ought to have given the Conservatives a wonderful chance to outline alternative proposals if they did not believe in what they found in the White Paper. We have not had anything of that today.
The noble Lord said that their aim would be that the State would provide basic security. When he was pressed, 733 he said that this security would be linked with the previous standard of living. Before the debate ends, I hope that we shall be told what the Conservatives mean by "basic security". If it is linked to the standard of living previously enjoyed, how is it to be financed? We have a right to have those questions answered.
I want to take up one or two other points in the noble Lord's speech, and then I will leave the remainder to be dealt with by others of my right hon. and hon. Friends, because I hope to make a number of comments on my own behalf.
First, I take up the question of the minimum income guarantee. I do not know where the noble Lord and his hon. Friends have been living during the past few years. He says that we have done nothing for the over-80s. Never have I heard such nonsense. It is true that nothing was done for the vast majority of these non-pensioners, as they are called, until 1964. I will also concede that we did not bring in the exact scheme that we outlined in our 1964 Election manifesto which we called a guaranteed minimum income. However, we brought in a scheme which was very different from anything that had obtained before. The result is that there are over 600,000 more old people in receipt of a supplementary pension today.
Having visited a number of these old people, I believe that they now accept a supplementary pension as a matter of right and, in the majority of cases, do not consider that any stigma attaches to it. I know a number of non-pensioners who are over 80 and who are very thankful that the new scheme was brought in. It is nonsense for the noble Lord to say that we have done nothing for these people. They have now a guaranteed minimum income.
Next, I wish to deal with the provisions for women, and to take up a point which was stressed by the noble Lord. I must say that I found his speech a very great disappointment.
I approach this subject not as a feud between private occupational interests and State pension interests. I approach it to find out how we can best meet the needs of our people in retirement, in sickness, in disability and in unemployment. 734 If it is approached in that way without any doctrinaire ideas, one can come to only one conclusion. It is that there must be a partnership of the private occupational pension schemes and the State scheme. My right hon. Friend has made it clear that that is what the Government wish to have, and I know, too, that many of the millions of people who have occupational schemes—some of them not very adequate—feel that they want at least not to lose the benefits of the occupational scheme that they have.
In our search for adequate provision, particularly for our retirement pensioners, we have to use every means, State and private, to get the best all round. I accept that the occupational interests have played a very important part in various ways in the country. They have encouraged saving, albeit saving as forced as those in the State scheme will be. In many ways, they have helped our economy. The Government would be foolish to try and cut out completely those private occupational interests. If the noble Lord were not so prejudiced in wanting to leave everything to the private occupational interests, he would realise that what we are attempting is the only sensible course.
My right hon. Friend has heard a lot from the noble Lord about what he should do in carrying out his negotiations with the private occupational interests. I am sure that these will be amicable discussions. But there are those of us on this side of the House who warn my right hon. Friend that he has to safeguard the interests of the pensioners in the State scheme who will not have any part of their pension provision contracted out. If he can get something which will be equitable both to those who will be in the State scheme only and to those who will be partly contracted out, the vast majority of our people will be very satisfied.
The noble Lord seemed to suggest that we did not need to worry about ensuring that private occupational pensions, after award, increase from time to time to meet even the rise in the cost of living. However, he cannot pretend that the vast majority of occupational schemes do that at the present time. It just does not happen. The weak excuse that he gave linking it with taxation is quite unacceptable. If one were to accept it, 735 it would mean, in effect, that he was asking all other taxpayers who are not in occupational schemes to meet the cost of guarding against inflation. With the best will in the world, I do not think that the private occupational schemes can give the inflation-proofing that the State scheme can. That is one of the reasons why I feel that there is much to be said for the State scheme.
What about widows? Some of the saddest cases in my constituency are widows of men who had a fairly good occupational pension. They were all right while their husbands were living. However, even then, because of the lack of adequate increases after award, many couples found themselves in financial difficulties. Then, when the husbands died, in the majority of cases their occupational pensions died with them.
I have been to the homes of some of these old ladies. In most cases, everything in them is as shabby as can be. Having been used to a fairly comfortable standard of living for most of their lives, in the last years of their lives, because these widows were dependent on what the noble Lord would like most of our people to be dependent on—occupational pensions—they found that they had little or no income on which to live. The benefits that can come to widows from a State scheme could not be matched by occupational schemes.
It is already clear that I warmly welcome the White Paper. Its provisions will ensure something that I feel all of us want to ensure: that when the scheme reaches maturity the vast majority of our people who have a life-time of work behind them will have a pension on which they can live adequately without any recourse to a means-tested benefit. That is the acid test of any scheme. The scheme is redistributive. The noble Lord did not seem to like the redistribution within the scheme. Frankly, I back it to the hilt.
My right hon. Friend says that the figures of 60 per cent. and 25 per cent. are not sacrosanct. I accept that, but I would be very opposed to a lowering of the 60 per cent. I have been asked by one of my hon. Friends from a Scottish constituency, who knew that he would have no chance of speaking in the debate, to say to my right hon. Friend that he felt that the 60 per cent. should be increased, 736 because we would still have lower wage-earners getting less than the present pension plus the supplementary pension that covers rent, and so on. I leave that thought with my right hon. Friend. I thought that the 60 per cent. and the 25 per cent. figures were about right.
I am pleased that there will be a constant attendance allowance. I do not want to say too much about this, because I think that it is wrong to raise hopes too high. The right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) will know, from his experience in dealing with industrial injuries and war pensioners, that it is only the very severely disabled, those who need constant attention, who get this constant attendance allowance. It is important that people should realise that so that there will not be many thousands disappointed. I congratulate my right hon. Friend, because it seems that this is the beginning of fairer treatment for such people.
A small matter, but one of human significance, is the decision to pay the death grant for people either mentally or physically disabled—those who have never been able to work and have no insurance rights of their own. The decision has now been taken that the death grant will be paid on the insurance of the person responsible for the disabled person. As I say, that is a small matter, but it is one of human significance.
I want now to say something about women. I was highly amused by the noble Lord when he was dealing with women—perhaps I should say when he was dealing with the provisions for women. He said that he welcomed wholeheartedly the arrangements for widows. Does he not realise that if we were to have the kind of scheme that he has been trying to plug in articles in the Press, but has not made very clear today, the widows could not have these very provisions, outlined in the White Paper, that he welcomes wholeheartedly? When the noble Lord was reading all those cuttings from the Press, I began to wish that he had given as much study to the provisions in the White Paper as he had given to every bit of Press coverage on the pension scheme. Had he done so, perhaps he would have realised that he cannot welcome something if 737 what he intended to do makes it impossible to honour what he has been welcoming.
I welcome the provisions for women. I consider that they are infinitely better than those which obtain today. I again stress that no private occupational scheme could ever match the provisions for the widows. At long last, the decision has been taken to give widows, who either have no pension or a 30s. pension, a pension on a flat rate sliding scale.
I should like to make a proposition to my right hon. Friend on this matter. The decision has now been taken. But must these widows who have waited year after year wait until 1972 or 1973 to get this little piece of justice? I understand that the cost will not be very great. I think that it would be a good thing to contain it in the up-rating Bill so that the widows can have a pension from October this year. I hope that my right hon. Friend will give consideration to that proposition.
The noble Lord was also against taking away the option for married women. I am completely in favour of married women paying the full stamp. But there is a quid pro quo. At present, if a married woman pays the full stamp, and becomes sick or unemployed, she gets a reduced benefit. She does not get the £4 10s. that the spinster gets. But under the proposals of this scheme, she will get the full benefit. That seems to be a good thing.
It is important to remember that many women now work. The pattern is that they work until they get married, or perhaps for a few years afterwards, are at home while there are young children, but then go out to work again. Homes often have two incomes going into them. If we want to link the standard of living of a couple after retirement with their standard of living before retirement, one way of achieving it is by taking away this option and having the married woman pay the full stamp, so that she will also have a pension in her own right.
I have spoken about many of the matters which please me in the White Paper. Finally, I wish to deal with one part about which I have grave reservations. What is to happen to the present pensioners and to those who become pensioners 738 under the new scheme? We are told that there is to be a review of pensions every two years and that there will be a biennial increase. I welcome this as far as it goes, and I shall have something more to say about it. There is a specific promise that the increase will compensate for any rise in price levels since the previous increase. This is the only specific pledge about increases, that they will cover rises in prices.
We are also told that the amount of the increase beyond that will be decided by the Government of the day in the light of the general situation. This causes me great concern. We are told that before each increase the Government will take acount of movements in earnings levels, changes in the standard of living of the community as a whole, and the general economic situation. From previous experience my right hon. Friend will not be surprised to learn that this is where I part company with the Government's proposals.
In 1965, when I was the Minister in charge, a survey was carried out of the financial and other circumstances of retirement pensioners. The survey provided us with valuable information about the living standards of pensioners. Indeed, it corroborated what many of us believed to be the case. It showed that the majority of pensioners had incomes of about, or just slightly above, the supplementary benefits level. Indeed, we are told in the White Paper itself that the average income of pensioners is about two-thirds of that of the rest of the population and that thegeneral standard of living of pensioners is therefore substantially below that of the working population.To the 7 million retirement pensioners we have to add the chronic sick, who are in a similar financial position. I believe that today the gap between the standard of living of our old people and the chronic sick, and that of the working population, is already too great.
We are told in paragraph 34 of the White Paper:Those at work are in a position to use their bargaining strength to increase their amount of their share of the nation's income. Pensioners do not have the power to protect their interests in this way.Of course, they do not have the power that the workers have—no one would 739 disagree with that statement—and as that is the case their interests must be protected for them. The only people who can do that are those who represent them in this House.
If we do not get a specific pledge that pensions will be raised in line with average earnings—and that was the pledge that we gave in our 1964 Election manifesto—the gap between the living standards of pensioners and those of the working population could be widened still further. In asking for this pledge, I am asking, not for the moon, but merely for justice for our old people.
When the Tories were in power we criticised them for their treatment of old people, and rightly so. We did this particularly on two occasions when the time lag between increases was far too great. On one occasion it was two years and nine months, and on the other it was three years and one month. I always like to give credit where credit is due, and I must, therefore, remind the House that of the five increases which the Tories granted during their 13 years of office, only one was less than that which was needed to keep the increase in line with average earnings.
I have always believed that all of us, and particularly those who are Socialists, have a moral obligation to care adequately for the old and for the chronic sick. We shall not fulfil that obligation if we allow the gap between the standard of living of the most deprived and that of the rest of our population to widen.
I wanted to make many more points, but other hon. Members wish to take part in the debate. There are other places where I might be able to press these matters. All I say to my right hon. Friend is that if a Tory Government, which we rightly criticised very often, could give increases, sometimes beyond what was needed, to meet the rise in average earnings, then this Government, pledged as they are to care for old people, as we have always been, cannot do less than pledge to tie increases to the rise in average earnings, and that is the minimum. We are not even getting that as a minimum at the moment.
I wish my right hon. Friend the greatest success in the consultations that he is to have with the C.B.I., the T.U.C., and the private occupational pension interests. I 740 think that the aim of most of those people will be to ensure that we finally produce a scheme which will end the two nations among our old people, which will end the need for means-tested benefits, and which will give to those who work all their lives the dignity of knowing that in retirement they have an adequate pension on which to live.
§ 6.27 p.m.
§ Mr. John Boyd-Carpenter (Kingston-upon-Thames)
I am glad to have the opportunity of following the right hon. Lady the Member for Lanarkshire, North (Miss Herbison) because, as I think she knows, I have always very much admired the humanity and sensitivity with which she carried out her duties as Minister of Pensions and National Insurance.
I am glad, indeed, that the right hon. Lady stressed the work which she did in seeking further to break down the resistance of people who were entitled to supplementary benefit to apply for it. I think that the humanising of the administration of that, the last and perhaps most vital of social services, was a proper approach, for which the House is indebted to her.
Despite the excellence of the speeches today—and, if I may say so, I think that my noble Friend the Member for Hertford (Lord Balniel) made a remarkable contribution—the debate and, indeed, the White Paper has an atmosphere of un-reality. No doubt if this Parliament goes on there may be a Bill next Session, but everybody knows that when the time laid down in the White Paper for the operation of the Measure comes about, April 1972, it will not be the right hon. Gentleman who will be responsible for operating this, if it is to be operated. The House knows, as the country knows, that it will be my right hon. Friends who will have the responsibility for dealing with these matters.
§ Mr. Boyd-Carpenter
The hon. Gentleman, who is occupying the position which traditionally has become known as windy corner, must not introduce a note of calculated frivolity into a serious debate.
There is an unreality about the right hon. Gentleman's undertakings. If this had been intended seriously, there have been four and a half years in which it could have been introduced. We had the 741 broodings of the right hon. Member for Sowerby (Mr. Houghton) and before that the broodings of the right hon. Member for Leyton (Mr. Gordon Walker); and we have had the Secretary of State. Had this been really intended, it would have been possible to carry it into operation. As it is, the whole thing is clouded with unreality and uncertainty. The one certain thing is that whatever else comes into operation it will not be this.
The right hon. Gentleman, in a deliberate reference to his own efforts in pensioneering many years ago, has entitled this White Paper "National Superannuation". That recalls the days when, as all who took part in the debates at the time will recall, the right hon. Gentleman put forward all kinds of other schemes which clearly, as he knew, would never come into effect. Days when a scheme appeared very attractive financially until it appeared, for instance, that credit was taken on the contribution side for contributions made in Northern Ireland with no counterbalancing entry in respect of outlay for benefits paid in that province. There was a similar unreality there, but despite the use of the title there is a very great change in the substance.
We heard a great deal at one time—indeed, it was the slogan of the 1959 election—of half pay on retirement. We do not hear that now. This is not half pay on retirement or anything like it for the great majority of people concerned. At the most, it is half pay on retirement for the man or woman who never gets much above half average earnings throughout life and is not, at the moment, over the age of 42 or 43—a comparatively limited section of the population. As my hon. Friend has pointed out, the whole scheme is at the moment little more than a skeleton.
As the right hon. Gentleman admitted, there is in it nothing about proposals for sick benefit and disablement; and, an even bigger omission, there is nothing at all about industrial injuries. We are not told whether, in the context of wage-related benefits, industrial injuries are to move from a loss of faculty to a loss of earnings basis, which is a matter of the very greatest importance.
We are not told what share of contributions levied under these proposals 742 is to go to industrial injuries benefit, which is lumped in with contributions to the National Health Service and redundancy payments. There are huge gaps. The biggest gap of all is as to the financial viability of the scheme. Unless we know two things—the anticipated number of people who will be contracted out and the degree of remission of pension contribution which will be granted to the contracted out, then all the figures in this document are wholly useless. We are given precise calculations of the surplus at the end of the first or second year. We are given calculations as to when it will be necessary to raise the contribution. But all these things are subject to this enormous gap.
Perhaps the right hon. Gentleman can tell us today—he refused to do so on Monday—whether he has even a working hypothesis as to the number of people likely to be contracted-out. He will recall that when the 1959 Act was before Parliament an assumed figure was given on which calculations were based. Will the right hon. Gentleman do the same? That would introduce at any rate a touch of reality into these calculations. But until we know what is the assumed level of contracting out, the whole financial basis of the scheme is not worth the paper it is written on; and the right hon. Gentleman knows it perfectly well.
I suggest that when the national economy is in the state in which it is at present it is an extremely serious thing to bring forward a proposal which contains very heavy long-term liabilities for the people without setting forth how it will be financed and what the financial basis will be. This is a very considerable defect in the White Paper. I was interested to note that in the financing of the scheme the right hon. Gentleman has adopted, as he admitted, the practice from the 1961 Act of applying to the payment of current flat-rate benefits revenue raised by way of contributions to a wage-related scheme. He will recall that one of his hon. Friends, with singular lack of tact, mentioned today that in his unregenerate days he referred to that method of financing as a swindle.
That was argued at the time and can be argued again, but if those who were responsible for that scheme at that time were responsible for a swindle it was a very small peccadillo compared with 743 the scale of swindling operations for which;he right hon. Gentleman is responsible. The operations of Savundra or Whittaker White appear as that of mere amateurs compared with the right hon. Gentleman if there ever were any validity in the charge which, with remarkable frequency, he used to make in those days.
There is, however, a dodge in this scheme which, were I one of the kind of persons who use a Wykehamist vocabulary, I might need to adopt the right hon. Gentleman's own expression in this context. It is the redistributative element to which my noble Friend referred. The 1961 Act was, of course, weighted in favour of the poorest. But that was done openly and fairly by the use of the Exchequer contribution. The right hon. Gentleman himself used the correct phrase. Each brick, each unit, of contribution brought and bought the same benefit no matter what point in the scale of earnings it related to. It had that element of an insurance scheme. But that is not so with this scheme.
The person on half average earnings gets 60 per cent. pension related to those earnings. Contributions above that bring in only 25 per cent., with the result that a man on average earnings, although he contributes the same proportion of his earnings as does his less successful brother, will get about 42 per cent.; and a man at the top of the scale will get about 36 per cent. How can the right hon. Gentleman describe that as a pension contribution?
The right hon. Gentleman laid great weight—and rightly—on the preservation of the concept of insurance, and paragraph 25 of the White Paper does it most eloquently. I join with him in paying tribute to those who drafted it. I think that I can recognise the hand. None the less, this is a real blow to the insurance concept if the same contributions bring less and less in pensions benefits merely because one man's earnings happen to be larger than another's. As my noble Friend said, this is not insurance. The right hon. Gentleman admitted that it was somewhat different from life insurance, and indeed, it is. This is redistributive taxation.
I refer the right hon. Gentleman, as criticism of doing this, to the very words of paragraph 25 of his own White Paper. 744 It is, of course, redistributive taxation on top of that administered by the Inland Revenue, which already administers the most progressive system of direct personal taxation in the world.
This is a serious defect in the scheme, and it has a direct bearing on the other issue which I wish to put to the House. That is, the possibility of a fair contracting-out system being adopted in the case of a pension scheme of this sort. Of course, as the right hon. Gentleman pointed out, this is the wrong phrase. "Contracting-out" is abandoned. There is no provision for it in this scheme. The most that is offered is the much smaller benefit of abatement. But how possible is a scheme, even of abatement, in connection with proposals of this sort?
In a so-called pension scheme, which is really taxation, and in which one category of persons subsidises another category and the other category is subsidised by that category, if one is to allow contracting-out or abatement, one must face overwhelming pressure for the subsidisers to contract out and the subsidised to contract in. If the right hon. Gentleman really proposes to allow that, let me tell him at once that the Treasury will not let him, because his scheme will be bust. The essence of it, the subsidising of those at the bottom of the scale, will be destroyed if the subsidisers contract out.
Therefore, I have the gravest doubts whether any scheme of contracting out or abatement which is worth having and which is likely to be acceptable to the occupational pension schemes is possible in respect of these proposals. I would not presume to give a warning to those distinguished people in the insurance world with whom the Secretary of State is negotiating, but I would advise them to use a long spoon, and to look very closely at this scheme. Although they may be offered something which can be presented as a scheme of abatement, I am very doubtful whether it will be the sort of scheme which any sensible pension fund manager would be prepared to adopt.
If it is merely knocking off ¼ or ½ per cent. of the contribution, leaving those running occupational schemes with the obligation of administering their part of the State scheme and their own scheme at the same time, with a double administrative burden; if they are to be left, 745 as the White Paper says they are to be, still with a liability to pay the employers' contribution in full in respect of figures above the employees' ceiling, the £33 a week level, I doubt whether more than a handful of those who operate these schemes would feel it worthwhile to continue.
As the right hon. Gentleman properly pointed out, the economic importance of these schemes, particularly in view of the shortage of savings today, is major. It is the essence of this scheme and part of its evil that it will be extremely difficult to find means of providing a proper abatement system for it so that those schemes shall live. The House must face the fact that if employers are to pay 6¾ per cent. of their total wage bill and employees 6¾ per cent. up to £33 a week, there will be no money left over to provide an occupational pension scheme.
The right hon. Gentleman referred to the large employer contributions—higher than our own, I agree—in certain European countries. But that is not the complete picture. Those high social security liabilities on employers in Western Europe are matched, on the whole, by much lower levels of company taxation, and it is the total of the two which alone constitutes a valid comparison. Therefore, the right hon. Gentleman need not delude himself on the basis of Continental experience into believing that it will be easy for employers to operate other schemes which will operate on top of a State scheme of this kind without abatement.
The right hon. Gentleman has also created a further difficulty in this respect by his proposal for inflation-proofing and revaluation of pensions. A funded private scheme cannot properly calculate its liabilities on an actuarial basis if it does not know what those liabilities will be. It is easy for the Secretary of State, with the power of the State and taxation behind him, to take these liabilities, but a funded private scheme will be in the greatest difficulties in competing.
For those three reasons, because these proposals go—I agree with the Liberal Amendment on this—far too high up the scale, because of the redistributative element and because of the inflation-proofing, I believe that, if this scheme 746 were ever to become law, we should be very near the end of the private schemes, and that would be an economic and social tragedy.
A number of other aspects should be probed, and I hope that they will be in this far too short debate. There is, for example, the very sinister reference in a later paragraph to the impact on public service pensions, and to the fact that this scheme may involve some "partial realignment" of public service schemes. What does that mean? Does it mean that the members of the Civil Service or Armed Forces, who, at the moment, receive non-contributory pensions as a condition of their employment, will see those pensions scaled down because they will have to contribute for other pensions? If not, what does it mean?
There is the extraordinary reference to the use of this scheme as a means of curtailing demand, and thereby easing the burden of taxation. Will the Government never learn? One does not curtail effective demand by piling on additional taxation. All one does is kill savings, because people refuse to save, or start dissaving, rather than cut their standard of life. If the right hon. Gentleman is trying to persuade himself and the House that, in an oblique way, he will get an economic benefit in return for the heavy financial liabilities of the scheme, he is deceiving himself—and on the same lines that the Chancellor of the Exchequer has been doing for the last two years.
This scheme is not a real scheme which will ever operate. It is blue-print for an election manifesto. It is to be the central jewel of the Labour Party's election manifesto when the time comes. The timing of the operation makes this clear. This Session—the White Paper and this debate and a blare of television interviews. Next Session—the Bill, with wide publicity and the public warm and cosy with the feeling that they will have a comfortable and pleasant old age.
But the sharp shock of the swingeing increase in contributions comes only after the electorate has voted. Before the election, there is the debauch; only after it, the hangover. This, of course, to those of us who are connoisseurs of the right hon. Gentleman's exercises in pensioneering, is a very fine and delicate example of his style.
747 But it is not the right way to deal with this problem, the greatest social problem of all and one of the greatest of our economic problems. It is 25 years since Lord Beveridge's famous Report was accepted by the then Government, and most people accept that the scheme which emerged from it has served the country well. Lord Beveridge was a great public servant. It is equally generally accepted that, with changing circumstances, that scheme is now outdated.
Is not the right way of dealing with this matter not to think in terms of controversial election-orientated proposals, but the appointment of a new Beveridge Committee to look at the matter in the circumstances of our community today and to produce objectively, for the House and the Government, proposals which can be considered on the basis of being the work of independent people who have investigated the matter objectively?
This would be the right way to handle a complete recasting of our social security system. Indeed, it would be the only way to do it. If Sir Winston Churchill, at the height of the greatest war in history, could organise that committee and accept its recommendations, cannot the present Government imitate his levels of high statesmanship just a little? I put these proposals to the Government. I regard this matter as an acid test of the sincerity of their concern for the old and for the strength and justice of our society.
§ 6.52 p.m.
§ Mr. J. T. Price (Westhoughton)
I will try to refrain from following the highly polemical note struck by the noble Lord the Member for Hertford (Lord Balniel) and the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter). We are discussing a matter of high national policy which has not been sprung on the House suddenly in the form of a Bill. It has been brought before us constitutionally and properly in a White Paper which is really a declaration of intent.
On another occasion I would be happy to debate the party political inferences with the right hon. Member for Kingston-upon-Thames who, in a previous incarnation, held the office of Minister of National Insurance and carried out that task with efficiency in many respects. He will recollect the great debates we had in 1959 and 19(50, in which he played a leading 748 part as Minister and in which I was privileged to take part, particularly in Committee upstairs. He is well aware of the arguments which characterised those debates. Tonight, we are discussing an entirely different state of affairs. We are considering a forward policy which will put on to a proper basis a reasonable reward for those for whom no other provision has been made.
At this stage, I should declare a special interest, though by no means a financial one. I have taken a lifetime interest in occupational pension schemes from a practical point of view, both as a promoter of them, as an administrator, and for many years as an active executive member of the National Association of Pension Funds. That Association conducted a full study into this question and its views, as set out in "The Relationship of the State in Occupational Pensions", which was published in September, 1968, have been circulated to all hon. Members.
When hon. Gentlemen opposite try to make polemical party capital out of this, I am entitled to remind them of the findings of qualified experts who have addressed their minds, without whimsicalities but in an attempt to ascertain the truth, to this matter. They do not share the critical opinions of hon. Gentlemen opposite. For example, on the question of a basic pension they say in their summary of conclusions supplied to the National Association of Pension Funds:There should be an obligation on the working population and on their employers to make provision for their old age and for the risk of disability and death at least up to a basic minimum which should be fixed somewhere above the bare subsistence level This provision for basic needs can best be met through the State system. We do not advocate the extension of occupational schemes on a compulsory basis. The necessary improvements in the State system should be made when the economic situation permits. It must, however, be recognised that the best guarantee of adequate protection for the dependent sections of the community lies in a healthy growing economy.That is a far more rational approach to this question than the meretricious attempts of hon. Gentlemen opposite to make party capital out of it. I would be equally critical of any of my hon. Friends who thought that they could make party capital out of it.
Having a strong personal interest in these matters, for the reasons I have stated 749 and because of my previous interest in trade union schemes—I helped to negotiate many of them and a great number of them have stood the test of time—I wish to do nothing which might damage the constructive work which has been done in the occupational pension sphere. I am prepared to accept the assurances of the Secretary of State that it is not his intention so to do.
The speeches of the noble Lord and the right hon. Member for Kingston-upon-Thames sought to create in the mind of the public the impression that, for a pernicious reason, my right hon. Friend and his advisers are embarking on a course of folly. That is not true. It is obvious that we are not dealing with a small matter. This is a major financial operation of State provision for the future.
I listened with interest and attention to my right hon. Friend's remarks. He spoke in his usual vigorous way, although I would not go along with the charge that he adopted a Wykehamist manner. That would be a difficult proposition for me to swallow, never having been to Winchester. I would not try to make party politics out of this, and I do not believe that politics comes into it in a big way. I doubt whether it could be regarded as an election winner for the Labour Party.
We are being charged with lack of foresight, wisdom, sincerity and honesty, but it is strange that during the 13 years of Tory rule nothing was done to break out of the stranglehold of the old scheme. Only in 1948 did the first breakthrough occur, following the Beveridge Report, although on that point the Secretary of State made a serious blunder.
§ Mr. Price
I will not give way at this stage, mainly because I am dealing with my right hon. Friend. A famous politician who was engaged in an attack on Sir Winston Churchill once said in the House, when a back bencher tried to intervene, "I will not give way. Why should I bother with a little fish when I have a great big cod on my hook? "I say that without disrespect to the hon. Member for 750 St. Ives (Mr. Nott), to whom I shall give way in a moment. [An HON. MEMBER: "No codding."] When Beveridge published his famous Report in 1942 it was the starting point of a great many things, including a great push forward in occupational schemes. He advised the Government of the day to anticipate an unemployment rate of 8 per cent. My right hon. Friend spoke of 3 per cent., but it was 8 per cent. If Beveridge's anticipation had been correct, and there had been 8 per cent. unemployment, which providentially there was not, the National Insurance Fund would have "gone bust" long ago.
My right hon. Friend has given an indication of good will towards the occupational schemes. There are 65,000 of them. They cover between 12 million and 13 million people, they cater for more than half the adult workers and have assets valued at £8,000 or £9,000 million. [An HON. MEMBER: "A billion."] I must get my noughts right even though Government Departments are not particular about noughts. We have been reminded already that occupational schemes represent a surplus each year on their present basis of £800 million to £900 million of savings channelled into industrial investment which is essential to the future prosperity of the country. They are a major source of investment. Something like 40 per cent. of all investment going into industry stems from occupational pension funds. It is, therefore, a matter of great concern to me, with the experience I have had, to see that nothing should be done prejudicial to the economic interests of the country by translating taxed savings of this sort into some other form of taxation which is not savings at all. I do not regard contributions paid to a State scheme as savings. This is a matter of judgment, but I do not accept that they are. They cannot be savings unless there is a contractual liability to have the money there at a given time to pay a given amount of pension.
In a go-as-you-please, or go-as-you-pay, scheme one does not have savings but merely money from current revenue to cover current liabilities. The only safeguard for a State scheme is the power to levy additional taxation on the citizens if circumstances so require.
751 In a previous incarnation I was an official operating in a very efficient trade union at national level. The feeling in the trade union world as I understand it is that, having spent the last 20 or 30 years building up occupational schemes for the future benefit and security of the members of the trade unions, they are anxious about anything which might adversely affect them.
§ Mr. Price
I would not dissent from that altogether. The fundamental consideration in all future legislation based on the declaration of intent in the White Paper is related directly to the number who contract out, with all the delicate balance of arguments on these matters. I hope that the Secretary of State will find it possible to adopt a very liberal attitude towards this question.
I do not make idle prophecies, because so often when we do so we are proved wrong and have our speeches thrown back in our faces years afterwards. During the last five or six years there has been a very widespread break in the front of many of the contributory schemes because, as National Insurance contributions have been going up to meet increasing liabilities, it has been found necessary to give additional benefits to old-age pensioners.
We have had to pay more revenue, but, at the same time, many private schemes have made adjustment downward to minimise the amount of contributions required in the private schemes to compensate for additional contributions required for the State scheme. This is not a myth, but a fact. I could give much more detailed information on this aspect if I were called upon to do so.
I hope that in further consideration of legislation to follow the Secretary of State will look more liberally on contracting out than his present deliberations appear to suggest. There will be an intensification of contracting out of private schemes, if no arrangement is made for a mitigation of contributions to the national scheme. Hundreds, probably thousands, of schemes have had an 752 arrangement in recent years between the employees and their employers to disregard for contribution purposes for superannuation £2 to £4 a week to mitigate the additional State contribution. There is much evidence of this which I hope my right hon. Friend will consider.
It is obviously too late for anyone to make a technical speech tonight about the relative advantages of non-funding against funding. This is a highly technical field in which people have views which may not square with mine. There is a serious danger that if we do not strike the balance right this time the Government will be charged with exposing people to over-insurance, particularly those in lower paid occupations.
In many thousands of employments where wages do not reach the national average there may be contracting out—this applies to the great Co-operative movement, with all its distributive outlets and not particularly high wages in many cases—and where the funds already provide 50 per cent. of wages on retirement based on average earnings in the last three years. We shall be getting a situation in which people will insure themselves for something in excess of average weekly earnings. That is not desirable. I hope that this will be considered when negotiations take place.
We do not appear in any kind of white sheet tonight as Government supporters. We are putting this forward for discussion and careful analysis by those who are interested in a scheme which is calculated to raise the standard of life of future generations to a higher level than anything previous generations have had secured for them. I am anxious this should be done on a basis of sound finance. I do not want to be a party to any bucket-shop finance or broken promises, because the economy will not sustain what I am committed to. This is very easy for politicians because their rate of mortality is high, both for electoral reasons and because of the ordinary exigencies of life. The mistakes of this generation could very well concertina on to future generations if we do not have it right.
I hope, having had this debate and split our differences, we might go away with this thought in mind: this is clearly a long-term project and the "green edges" which the Secretary of State has 753 spoken of will have to be somewhat diluted, or perhaps changed to some other colour. A good deal of further time will be needed particularly on the aspect of contracting out which is the nub of this question. This will take some years. It will be, according to the prophecies of the White Paper, 1972 before the Bill is put into operation.
What is to happen in the meantime? I emphasise to my right hon. Friend that many of the 6 to 7 million existing pensioners are having a very hard struggle. I hope that nothing in the White Paper will inhibit the Government from making the earliest review—this year—of the state of affairs as they affect the old-age pensioners who are looking to us for further assistance.
Having been privileged to take part in this debate, I hope that we may continue to discuss it, both in this House and in the country, without the narrow party considerations which so often disfigure our debates. Intelligent people outside the House understand all too clearly that the State already bears very heavy liabilities for raising the standard of life, the social services, the educational services and all the other things we are being pressed for today.
If we go forward tonight in the spirit that this is another step forward, carefully thought out, then we may carry with us all the people of good will in the land.
§ 7.12 p.m.
§ Mr. R. H. Turton (Thirsk and Malton)
The understatement in this debate has been the remark of the hon. Gentleman the Member for West-houghton (Mr. J. T. Price) that this White Paper is not an election winner. We should not look at this matter purely on a party basis. After all, we are examining the effects of the Beveridge scheme, which was adopted by all parties and for which all parties are responsible.
I have been disappointed in the White Paper, just as I have been disappointed with some of the effects of the Beveridge scheme. The Beveridge scheme was described as a "scheme of social insurance … designed of itself to guarantee the income needed for subsistence in all normal cases". It has never fulfilled that object.
I am disappointed, in looking at the White Paper, that the Government proposals do not attempt to deal with the 754 defects of the Beveridge scheme and our present scheme of insurance. Perhaps I might put this under three headings. First of all, there is the position that of the 7 million present pensioners a very high proportion of the older pensioners are so poor that they have to apply for supplementary benefit. The second disadvantage of our present position is that the elderly are deterred from continuing to work by an earnings rule and, as a result, the nation's economy and productivity is weakened. The third effect is that there are, as my noble Friend the Member for Hertford (Lord Balniel) said earlier, about 125,000 very old people who have no pension as a right and are living in very poor circumstances.
How far does the White Paper attack these problems? I share the anxiety of the right hon. Lady the Member for Lanarkshire, North (Miss Herbison)—this White Paper does nothing for the 7 million existing pensioners. The Secretary of State, in his disarming way, said that this White Paper is not his first priority. Surely our first priority should be somehow to right the position of the existing pensioners. It is not only the existing pensioners who will get no help at all from this; nor will the 600,000 who become pensioners in 1972 to 1973.
We have not, under this scheme, removed the necessity for pensioners having to supplement their pensions, before 1980 at the earliest. In other words, nothing is to be done to tackle the real problem of the very old living below subsistence standards for another 11 years, and probably it will take longer than that.
It is said by the right hon. Gentleman that he has provided for a biennial review. The exception which I think the right hon. Lady was alluding to was the year 1951, when there was a gap of three years and three months before the pension was reviewed. It was then only inadequately reviewed and pensioners were not even given an equivalent to the rise in prices. With the exception of the 1951 illustration—which is one of the many reasons why the Labour Government lost office in 1951—succeeding Governments had tried to recoup pensioners for the rise in prices and have tried to bring their standards up to something like the present earning level. The White Paper fails to give that kind of review and the "green edge" ought to be corrected.
755 It is a tragedy that the White Paper accepts the retirement condition and the earnings rule. This should be changed. It is a very great temptation to the able-bodied old people to add to their pensions by more than £6 10s. a week and so have an income of above £11 a week. This involves them in committing a crime. It is very harsh when they see that their neighbours are earning £20 a week and are subject to no penalty. It is this disparity between the earnings level of the man who has retired and who can work and the rest of the community which I hope will be corrected in any Bill which is introduced.
Finally, we come to the third effect of the White Paper. Not only does it do nothing for the 85-year-olds who have no pension, but it is creating a new class of those who will not qualify for pension and who will be in a similar position in the future, should this scheme come into operation.
I hope that the Minister will deal with two points which have not been raised so far. The first is the position of the self-employed who earns less than the average earnings and who will not be brought into the scheme. Just as before those earning over £420 were excluded from the pre-1948 scheme and, therefore, were never brought in when they were of pensionable age, so there will be a new class now, both of the self-employed with low earnings and of the non-employed.
It is wrong to talk about the non-employed as not being a class of person. The right hon. Gentleman has alluded to these people as those who are normally employed and who fall out of employment for a short time. The statistics show that there are a considerable number of men and women who are in a non-employed class and who will be excluded from qualification for pension under this scheme.
I ask the Minister to address himself to this and also to explain how we shall determine which of the self-employed will be contributing to the scheme and which will not be contributing. How will the £11 a week figure apply to a self-employed man, who probably does not know until after his Income Tax year has ended what his rate of earnings throughout the year were? It will be difficult for the scheme to be enforced then to bring him in or exclude him.
756 I believe those to be the three main weaknesses of the scheme. The answer is that which was suggested by my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter). Just as the Beveridge scheme was created by a committee that examined the whole question of the need for provision against old age, so now—we probably should have done this a long time ago—a new committee should be set up to re-think the problem that Beveridge examined, to look at the weaknesses of the Beveridge scheme, and put forward a scheme which could be accepted by all parties.
I have thought for some time that we must review the whole basis of the Beveridge scheme. Three great changes have occurred since Beveridge made his review. First, there has been the change from a period of high unemployment to one of full employment. This is not likely to alter in the next decade or so. Secondly, there is the growth of private occupational schemes. Thirdly, there is the most important fact of the ageing nature of the population.
To meet these changed conditions we should recognise that it is a State responsibility to make more generous provision for the very old than for those who are just reaching the threshold of old age. When, a month ago, I raised this matter in the debate on the Second Reading of the National Insurance Bill, the Secretary of State said this:'… there is no real evidence that need in old age is precisely related to the particular period of old age."—[OFFICIAL REPORT, 7th February. 1969; Vol. 777. c. 833.]The right hon. Gentleman has overlooked his own reports. For some time I have been following the incidence of age on application for supplementary benefit. Nineteen per cent. of men between 65 and 69 apply for supplementary benefit. The figure rises to 22 per cent. between 70 and 79 and to 26.7 per cent. for the over-80s.
For women, the position is even more sharply distinguished. In the first five years of pension age the proportion is only 11.8 per cent. It rises in the 65–69 age group to 17.6 per cent., in the 70–74 age group to 27 per cent., and in the 75–79 age group to 33 per cent., and above that age group the figure rises to 36.7 per cent.
757 The disgrace of our present social security system is that we accept the fact that the older the pensioner becomes the more he must have recourse to supplementary benefit. I congratulate the right hon. Lady the Member for Lanarkshire, North on what she has done to make it easier for more people to accept supplementary benefit. But we must recognise that this is the defect of the whole of our pension plan.
It should be a pension that is below subsistence in the early days of old age and which rises when the retired person is older and cannot do other work. When he reaches extreme old age and his needs are much greater, the pension should be well above subsistence level. I say that it should be below subsistence level in the early stages because there should be a provision in the insurance scheme for invalidity which is on the subsistence level. Those old people who can work should be encouraged to work at the threshold of old age. If they are not able to work, they should be able to draw the benefit for invalidity.
We must weigh our priorities. The first responsibility of the House of Commons should be to relieve existing pensioners and the 125,000 non-pensioners. However pleasant these great plans are to give everybody an occupational pension in the future, that must be our second priority. It is a responsibility which can be discharged far better by private occupational schemes than by a State pension scheme. The question of the age of retirement should be what private enterprise decides, and will no doubt vary from employment to employment. In some cases employers will be retiring their employees at 60, as the banks do. In other cases it will be at 65. The State has a responsibility for providing subsistence provision for old age.
For that reason, the Government have their priorities wrong. They should take back this White Paper with the green edges and think it out again. The right course is to accept the suggestion of my right hon. Friend and appoint a new committee to look again at the whole matter and report to the House.
§ 7.30 p.m.
§ Mr. Kenneth Marks (Manchester, Gorton)
I very much appreciate what the right hon. Member for Thirsk and 758 Malton (Mr. Turton) said about the very old. But I cannot agree with him about pensioners having a pension below subsistence level immediately on reaching retirement age. People of that age should have the choice of carrying on, and I agree very much with what he said about earnings.
§ Mr. Turton
May I correct one point. I did not say "retirement age". I said "At the threshold of old age."
§ Mr. Marks
I am still not with the right hon. Gentleman.
On these occasions, those of us who have been described as rank and file back-benchers sometimes fret about the priority given to members of the Privy Council. But today I looked forward to hearing such members on both sides who have had vast experience in this matter, such as my right hon. Friend the Secretary of State himself and my right hon. Friend the Member for Lanarkshire, North (Miss Herbison). I still look forward to hearing my right hon. Friend the Member for Sowerby (Mr. Houghton). My right hon. Friend the Member for Llanelly (Mr. James Griffiths) has listened to most of the debate but, with his usual courtesy to others, has decided not to speak so as to make time available for the rest of us. The speeches of the right hon. Members have all contained a great deal of wisdom, experience and humanity.
What do I want from any new scheme? I want to see a scheme which does not give those who retire too sharp a drop in their standard of living. The noble Lord the hon. Member for Hertford (Lord Balniel) also wanted that. I want to see a scheme that will ensure that every man and woman has a reasonable pension related to his or her lifetime earnings, but with some tipping of the balance in favour of lower-paid workers. A pension that keeps in line with prices is suggested, but I would go further than that—a scheme that as far as possible did away with the need for the supplementary benefit and the means test that goes with it.
Are the aims and the means of achieving them suggested in the White Paper neither helpful nor necessary, as the Liberals suggest? Can the aims be better achieved, as the Opposition suggest, by private and occupational schemes? I listened very carefully to the noble Lord, but still do not know what he means by 759 "giving basic security". I do not know how the Opposition will achieve that. At present 30 per cent. of our old-age pensioners receive supplementary benefit. But there are also a great many people who hover around the supplementary benefit level, and who have contributed to private schemes throughout their lives. I know people who receive a pension through private scheme of £1, 30s. and £3 a week, and as a result they do not qualify for supplementary benefit.
The hon. Member for Kenisington, South (Sir B. Rhys Williams) referred to such cases in the debate on 4th February. He spoke of the two old ladies who were very angry with each others, because they both had the same income, although one had saved up and could not draw a supplementary benefit and the other one had not saved up. There are many such cases, and we all know them. I am sure that those old ladies would prefer a scheme in which they both contributed and both received things as of right.
Do both Opposition parties wish to perpetuate the present system? Do they consider that it gives a firm guarantee of security in old age? Much has been said about minimum income levels. Do they feel that the present level of supplementary benefit is too high or too low?
There are about 65,000 private and occupational pension schemes, and the Opposition feel that the extension of pensions shoud be left to them. But there are about 1 million employers, and it would be virtually impossible to tackle the problems of transferability on change of job on a private basis if all firms came in. The range of contributions and benefits is so great that I do not believe that it would be possible. Even the freezing of rights, which is suggested in the White Paper for some occupational schemes, will be very difficult to achieve.
The proposed scheme is extremely sophisticated. It will need a great deal of explanation, which is one of the problems of such schemes. It will also suffer a great deal of misrepresentation, It was significant that the noble Lord mentioned the Daily Express, the Daily Mail, the Daily Telegraph and the Economist. A look at the; headlines on the day after publication of the White Paper would give an indication of such misrepresentation.
760 I want briefly to mention three points on which I have criticism to make. I do not think that the tying of future pension increases to price levels is good enough. Poverty is very much a relative thing. If our old-age pensioners compare their lot with that of their parents, they will feel that they are well off. But they do not do that. They rightly compare their standard of living with that of their children and neighbours. If their neighbours who are still working are to enjoy an increased standard of living, as they have done every year, whatever the Government, the pensions should be tied to that. That may help to dispel the myth that goes around year in and year out that wages are frozen while prices rise. Tying pensions to wage increases as a minimum rather than price increases would make the pensioners better off than they are. This should apply to all pensioners, and should apply in the biennial increase due this year.
Is the two-year review enough? Is it too much to expect of administration to have annual review of pensions and the other facets of the scheme? To a great extent, there is now an annual review in some cases, and it causes a great mix-up. Pensioners who are also on supplementary benefit received an increase last October. All the supplementary benefit books, leaflets and posters in the post offices were altered, and I am sure that a considerable amount of work was involved.
We hope, trust and believe that there will be a pension increase this year. But some pensioners who had some of theirs in advance as a supplementary benefit will feel robbed to some extent. It will be very hard to explain to people who have had a rise in advance that they are not really getting less than other people. But all these supplementary books are again to be altered. If possible, we should have an annual review of all benefits of this kind.
There is another factor which the man in the street will be worried about. If he pays to an occupational pension scheme, he gets tax relief. Many people will say, "Why do I not get tax relief on my 6¾ per cent. as well?" I appreciate the difficulties. The fact that there will be no tax relief will be a help to the lower-paid workers in a way, but this should be examined again because 761 it is one of those things which will be difficult to put over to people.
As a result of the scheme, people will want somewhere to go for advice and help, and there are not enough places or opportunities for people to get advice in our society. The offices of the Department are tending to become further apart and bigger, and the Government should look at the whole question of advice centres as they are doing under the Local Government (Social Needs) Act.
It has been said that many people will have a fall in their contributions but that more will have an increase. Are there not likely to be increases in the present contributions before 1972? If we are to have increases in old-age pensions and benefits, it is probable that the flat-rate contributions will have to be increased before 1972, in which case even more people will have a reduction when the new scheme comes in.
Despite my misgivings and individual criticisms, I congratulate my right hon. Friend and his advisers on the work that has been done on this. I believe that it is a workable scheme that people will welcome.
§ 7.42 p.m.
§ Mr. John Pardoe (Cornwall, North)
I say at once that I disagree fundamentally with the Conservative Party's views on this matter and, indeed, with the Government's White Paper. The Liberal Amendment has not been selected. It sets out a very different kind of case. I must start by saying what I, as a Liberal, think is wrong with the Beveridge scheme. Perhaps this is appropriate, because Lord Beveridge was one of the most illustrious Liberals of the century.
The White Paper, in paragraph 17, says:The basic reason for this failure was undoubtedly the acceptance—which was almost unanimous—of Beveridge's recommendation that the scheme should be based on a system of flat-rate contributions and benefits.That analysis is half right and half wrong. It is right to say that the scheme has fallen down because it was based on flat-rate contributions. It is entirely wrong to say that it has fallen down because it was based on flat-rate benefits. That is the issue I take with the Conservative attitude to future pensions 762 policy and with the Government's White Paper. I believe that what we have to have are flat-rate benefits paid for by earnings-related contributions, and I will spell this out.
Why do I oppose the Government's scheme? First, for the basic reasons set out in the Liberal Amendment, because I believe that the scheme means that the Government are entering into a field where they are neither helpful nor necessary. Many hon. Member on both sides have said that what they want in pensions is a partnership between private and State provisional. I, too, want a partnership, but the question is where one draws the line, and I believe that both the Labour and Conservative Parties have drawn it in the wrong place.
The Government should get out of graduated pensions. It is far too complicated a matter for Whitehall to deal with. This is not the scene for the heavy tread of Westminster boots. The graduated pensions scheme of the Conservative Government has been attacked as as swindle and fraud. I notice that the Spectator recently headed its leader on the new White Paper, "The Tory Swindle Mark II". It is as ridiculous for a Government to enter the field of bespoke pensions as it would be to enter into bespoke tailoring.
I also oppose the scheme because it offers nothing to existing pensioners. It offers a biennial review, but that is not a great improvement in the present situation. I remind the Government that paragraph 5 of the White Paper states that existing pensioners… will continue to share in the nation's rising living standards.However, in paragraph 12 it is implied that the standard of living of pensioners is far too low. I want to know whether the standard of living which the Government say is far too low is the share in the nation's rising living standards which they wish to continue, because I do not wish that share to continue. I want it to rise.
What has happened to existing pensioners during the last few years? In 1964, a single pensioner was receiving £3 7s. 6d. and now gets £4 10s. I know that some people will say that I am making a cheap comparison, but the Government are committed—and I accept 763 that they are sincerely committed—to a high priority for old-age pensioners. Let us, therefore, examine what would have happened to the old-age pension for the single person if it had been increased by the same percentage as Ministerial salaries. The pension would now be £5 17s. 6d. That is just one example If one compared it with executive salaries, one would find the same sort of increase. It may be a most unhappy comparison for the Government to accept, but it is an unhappy comparison for old-age pensioners to accept too.
I also take issue with the Government in their strange acceptance that my children should apparently pay for my pension, but that the Government will not have the guts to call on me to pay for my mother's pension. This is an odd style of morality.
What will the Government do with the £3,000 million surplus that they will get in the first 10 years? Some of this could be used for existing pensions. Will it be used to bolster up the market in Government securities? I believe that, whatever the right hon. Gentleman has said about using it in equities, it will be necessary for any Government of whatever political party in the foreseeable future to use it to bolster the Government security market and that it will not be invested in the growth investments, which is what a private occupational fund would do.
There is in the White Paper nothing for the disabled. I welcome the Secretary of State's remark that he hopes to introduce something on this in due course this spring.
§ Mr. Pardoe
The right hon. Gentleman gave some indication that he would.
There is also nothing for the single parent family and the White Paper maintains the earnings rule, to which I am completely opposed because I believe it wrong that we should deter pensioners from seeking work.
The Secretary of State made a great song and dance about the ability to contract out, and the hon. Member for Hertford (Lord Balniel) also made a meal of it. But I must tell the Secretary of State that, no matter what negotiations 764 he conducts with occupational schemes about this, it will be impossible. His next trick is impossible. One cannot invent or devise a way of doing it. I do not believe that it can be done. I believe that the Government will run into severe trouble on this.
Here, I would warn the private schemes, because the Life Offices' Association has been pretty wet about this If the State is in direct competition with private enterprise, the State will rig the rules to their own purpose, as they have done with the private airlines. The Secretary of State made great play over the fact that he had 65,000 schemes to contend with, and that it was impossible to ensure that all of these gave a satisfactory standard. He talked about an army of inspectors. I would ask him: how is he to ensure that the 65,000 pension schemes can possibly contract out of this scheme?
The administrative problems are immense. Let me bring it down to one specific question. I would like to know whether the scheme to which I now contribute is one which will be allowed to contract out. Is the House of Commons Pension Scheme to be allowed to contract out if hon. Members wish? If contracting out is so uncertain, as I believe it is, then this is a case for a pre-legislation Select Committee. The Minister said that he would not oppose this, and it is something that should be taken further. We are being asked to approve a White Paper which is incomplete on a crucial issue. He did not say that he would bring in a Bill which would be complete; he rather implied that we would, in due course, be asked to approve a Bill which would be incomplete on this crucial issue.
When all the process of democracy is gone through in this House the whole thing will be tidied up in a neat little Order. There is a fundamental principle of Parliamentary democracy in volved here. It is quite wrong that we should discuss this Bill and the whole of the pension scheme without being able to discuss the major issue of contracting out.
May I now turn my attention to the Conservative Party. I have great sympathy with the hon. Member for Hertford—I always have when he is speaking on this subject. He is, for instance, speaking 765 to a remarkably vague Amendment. The right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) could hardly restrain himself from saying that he preferred my Amendment to that which the Conservative Party had tabled. He did not say it, but he implied it, or at least I detected that implication, but that may be my false optimism.
The Conservative Party has no alternative to the Government scheme. I do not know how much Thompson newspapers paid the right hon. Gentleman to write his article in the Sunday Times recently. It would have done much better to have paid the money to me, because it would have got far better value. It got a very vague and waffly article—very well-written, in a very good style, but It said nothing because it had nothing to say. He has no alternative scheme at all.
The Tories are saddled with their own graduated pension scheme. As I said, the Spectator has declared that this one which the Government are introducing is the "Tory Swindle Mark II". The Tories, having first dipped their toes in this nonsense of State graduated pension schemes, can hardly blame the Government for jumping in head-first after them, and that is what has happened. The hon. Gentleman said, with the tremendous depth of sincerity of which only his oratory is capable, that he wanted to ensure a decent standard of life for old people—do not we all? He was careful not to define what that decent standard of life was. No figures entered into it, no relative concepts, with such things as average national wages or anything like that.
Then, what was the most fascinating passage of the whole of his speech, which I interrupted, in company with the Secretary of State, was when he went on to say that he did not really object to the State being involved in earnings-related pensions. As I understand, he does not object to what I call "bespoke" pension policies. He believes that the State can be involved on this side of the line that I have drawn. Here again, he separates himself quite clearly from the basic principle which I am laying down in my attitude to pensions. If he is prepared to go on that side of the line he, too, is attacking the occupational schemes in just the same way, if not to as great a degree, as the Government.
766 The hon. Gentleman said that no sane individual would invest in a State scheme because of the various examples of what has happened to Government securities over the years. Let me hasten to say that the main reason why I would not put my money in a State scheme is because of the Tory swindle with graduated pensions. If ever there was an example of how a Government could waste an individual's money, that was it.
§ Mr. Pardoe
I cannot contract out. An employer can, but I have had numerous complaints from constituents because they, as individuals, could not do so. This presumably is the corporate State which the Conservative Party is ushering in—the admass can work together but the individual must never work as one. After four years in opposition, the Tories have been caught by this White Paper with their pants around their ankles, trying to cover up their immodesty with a committee.
It is not the first time that where the Liberals have a policy the Tories have a committee. I am aware that the noble Lord has his excuse. He will not repeat it here, because he might find that his audience in this House would not accept it as easily as his previous audience. Speaking to the conference organised by the National Association of Pension Funds on 17th February, 1969, and I am sorry that I was not invited, too, he said:It was quite beyond the competence of Her Majesty's Opposition to work out a scheme of this kind. The Government have spent four years with computers.I do not believe this. It is the job of the official Opposition to come here with a worked-out scheme. It is not good enough to say that they do not have access to computers. What do they do with the £2,600,000 they have just raised? Why do they not buy a computer? Give one to us, we could make much better use of it.
Now I come to the Liberal scheme, and I take up what the right hon. Member for Lanarkshire, North (Miss Herbison) said. As to her point about the Liberal Amendment being doctrinaire, I accept this in one sense, because it states where we draw the line between what is the State's rôle in pensions and what is the 767 rôle of the private sector. The Amendment does not rule out the State's rôle. We believe that the State has an important rôle to play. No party that follows in the footsteps of Beveridge would dream of supposing otherwise.
The hon. Member for Hertford said that we can always make promises. Unfortunately, so can other politicians, as this country has seen to its detriment for so long. Let me quote from what New Society said about our scheme. It does not say anything about it being the most ambitious scheme, but it says some interesting things. This is the issue of 20th August, 1963, which said:Undoubtedly the most interesting feature of the new scheme is its handling of the division between the State and occupation schemes, perhaps the most imaginative solution so far to a problem which has concerned policy-makers of all parties."Imaginative solutions" do not just come to parties who do not hope to form a Government within the next 18 months or so.
The article continued:The Liberals neatly get round all these difficulties by providing the basic pension through the State (officially above subsistence level) and virtually compelling occupational schemes to take the level of benefits further.We believe in a partnership between State and private provision, but we believe that the line should be drawn here: that the State's rôle is to provide a basic flat-rate pension, large enough to live on without supplement. What is that level? That is the crucial question which the noble Lord did not answer. The level, which I have stated often enough, is for a married couple half the national average wage. That is to say, since the average national wage at present is £23, a married couple under our scheme would get £11 10s. We are not proposing that this should happen immediately, but over a period of seven years.
The great advantage is that once the pension is tied to this proportion of the average national wage, the living standards of the old-age pensioners are tied to the rising prosperity of the community generally. I would be very happy to go forward to my retirement with that as a basic element in my total insurance provision. In mathematical terms, under the Government scheme, for a person earning £23 a week the pension would 768 amount to £9 15s. 6d., whereas under our scheme it would be £11 10s. That is my calculation and I am open to correction on the mathematics.
Over and above this level we would ensure that there was a supplement which was related to the individual's earnings before he retired, and that supplement would be made up by private occupational scheme. We have said that we would accept a total level of two-thirds of previous earnings as the minimum acceptable target. In other words, the State would provide a basic pension, and the occupational scheme would have to top that up to a level which was two-thirds of the previous earnings.
The great advantage of allowing occupational schemes to do much of the work, apart from the difficulties of administration in the State doing it, which I have already spelt out, is that it is possible by occupational and private insurance to bring into the social security scheme funds which cannot be obtained through taxation. There is no possibility of raising taxation or State contributions to the level which will attract those funds which can be obtained through a private occupational scheme.
I have said that we would compel occupational schemes, but the right hon. Gentleman the Secretary of State said that this would require an army of inspectors. I do not believe that for one moment. If some employers were unable to provide this level of occupational scheme, and I accept that there would be some, we have stated that the State would have to provide a fallback scheme. I go a step further here. I believe that this would be best administered by insurance companies, if necessary paid by the State to do so—a service fee or a subsidy. I am attracted by the example of Switzerland, where a great deal of insurance is done in this way; the State pays insurance companies to administer schemes on its behalf. Since we are trying to keep as much out of the jaws of Whitehall as we can, this would be a better way of doing it.
The total scheme would be paid for by means of a social security tax, and this would be entirely separate from any other taxation fund. It would not be raided for east of Suez follies, or for going back to Malaya, or any of the other things which the Conservative Party 769 wishes to do; it could not even be raided for building roads. It would be a social security tax and, in a sense, a social security fund. One-third would be paid by the employee and two-thirds by the employer.
I accept straight away that there is a greater degree of redistribution in our scheme than in the Government White Paper. I do not find this any criticism; I accept it as desirable. One thing which worries me about the Government's scheme is that I am not at all sure that I want the State to be involved in preserving the inequalities of working life in old age. I accept that those inequalities exist and that in any kind of society we can devise they will be preserved in old age, but I am not sure that I want the State to do it for me, which is what will be involved in the Government scheme.
The Government and the Conservative Party have got their pensions policies wrong. I do not make a forecast about the result of the next election, but one of them will be implementing the next pension scheme for this country, and. unless they change their minds very soon, the country will be saddled with a disaster for a long time to come.
§ 8.4 p.m.
§ Mr. Douglas Houghton (Sowerby)
I apologise to the House and to my right hon. Friend the Member for Lanarkshire, North (Miss Herbison) for having been away from the Chamber for about an hour. I did not hear the concluding part of the speech of the hon. Member for Hertford (Lord Balniel) and I also missed part of my right hon. Friend's speech. My right hon. Friend the Member for Lanarkshire, North and I collaborated for more than two years on the preparations for the Government's scheme, so we have lived with all its excitements, disappointments and problems. The White Paper represents the sort of framework of the new scheme which I envisaged when I was working on it.
I will deal first with the revelation of the new scheme from the Liberal Party. The quarrel between the Liberal and Conservative Parties which we have just witnessed was highly diverting; may it long go on. If the Liberals can keep their attention on that side of the House it will suit us.
770 A scheme of graduated contributions for flat-rate benefits would be an unacceptable form of social taxation. It was turned down flat by the trade union movement when the idea was put to them some years ago. It goes wholly against the trend of social security schemes throughout the world. The Liberal Party must bear in mind that once the contribution is dissociated from the benefit, the contribution becomes a form of taxation in the mind of the payer. The payer will then look at whether the contribution is equitable by reference to his ability to pay and by reference to the benefit which he will derive from it. As we all know, proportionate taxation fails when it gets so high that reliefs and abatements must be introduced to make it equitable; one then enters the realm af progressive taxation.
One of the great merits of the contributory scheme is that either a flate rate form of taxation or a proportionate form of taxation can be retained beyond the point at which it would be acceptable if levied for general purposes. The fact that it is related to social benefit makes it acceptable. I am, therefore, astonished that the Liberal Party should think it possible to finance a high level of flat-rate benefits by a still higher level of graduated contributions.
Our scheme has already departed from the flat-rate concept in unemployment and sickness benefit. The point of departure from the flat-rate concept was in 1966, except for the rather miserable sleight of hand called the Boyd-Carpenter scheme, which was a financial operation and not a measure of social improvement. This scheme is the logical extension of the introduction of earnings-related benefits, albeit in 1966 for short-term benefits, but at the same time breaking into the new area of widows' allowances. Our present scheme, with its flat-rate benefit and flat-rate contributions, is one of the rare species of social security schemes throughout the world.
Nearly every country has gone towards earnings-related benefits, for the obvious reason that it is impossible to provide the financial support needed when earnings cease solely by a flate-rate benefit. There must be some relationship between the social benefit and earnings if the standard of living is to be maintained 771 reasonably during a period when earnings have ceased.
The Liberal idea is a non-starter, and I do not think that it is worth spending more time on it except to criticise at one and the same time the point put forward by both the hon. Member for Hertford and the hon. Member for Cornwall, North (Mr. Pardoe) about the rôle of the private contributory scheme. I am the last person to criticise the provision of the occupational scheme. I happen to enjoy the benefits of one. But, if we are frank, we know that it cannot do the job envisaged for it by the noble Lord and the hon. Member for Cornwall, North. There are some very good schemes and there are a great many of them, but it is not feasible for supplementation of a flat-rate benefit to be provided by occupational schemes on a universal basis if it is to be done adequately.
Moreover, we know now what are the problems of transferability. I doubt whether we shall get transferability in the occupational schemes to anything like the extent hoped for at one time. This will be a great pity. It will be a social and an economic drawback. The spectacle of workers drawing the accumulated contributions in their occupational pension schemes when they leave their jobs to spend on current needs and thereby destroy what should be the support for their retirement is a pitiful one. I would like to stop that but, as long as these schemes are free and independent and are not to be transferable, it is difficult to know how people are to retain the benefits for which they have contributed when they leave their jobs. That line of thought on the part of both the Liberals and the Conservatives is not the answer to our present problem.
However, we all agree that we cannot go on as we are. We have seen the breakdown of the flat-rate scheme. We have seen the drawbacks of the existing graduated scheme. It is one which it is impossible to top up to take account of the fall in the value of money, because to top up the benefits in the graduated scheme would be unfair to those who have been contracted out and who have paid a higher contribution for their flat-rate benefit because of it. This has made it impossible to do anything with the graduated scheme that we have now, so we must go on from here and think of a different and more adequate scheme.
772 It must be obvious to hon. Members on both sides of the House that some of the major decisions on the White Paper had to be taken very early on in order that work could be done on them. The alternative would have been to waste a great deal of time. One of the first decisions that had to be taken was whether this should be a pay-as-you-go scheme or whether it should have any element of funding. This was not easy to decide, in view of what had been part of Labour Party policy up to 1963 when we said in the booklet entitled "New Frontiers on Social Security" that we envisaged some degree of funding of the new scheme, with a national superannuation fund and the investment of the considerable resources accumulated in the fund in the hands of trustees.
The decision on funding had to take account of the fact, first of all, that there was no need for it in the interests of beneficiaries. Being a State scheme, their security was assured, so we had not to fund for security. The private occupational scheme has to fund for security. There was no need to fund for capital appreciation as a hedge against inflation, because the State is able to take its own steps to hedge against inflation in that it has the power to increase compulsorily the levy made for the scheme and so improve the benefits to take account of any fall in the value of money.
It was not necessary or desirable to fund as a form of compulsory saving. We badly need more savings, both institutional and personal, but I would be against using a State superannuation scheme as a form of compulsory saving. We have to get our inducements to save other than by compulsory levies under the guise of an insurance scheme.
When we came to look at it from that point of view, there was no need for funding. There was another very big difficulty, namely, that if there are funds in the hands of national superannuation trustees which are so vast in relation to the amount of money available for investment generally, the relationship between those trustees and the Government on the one hand and the Stock Market on the other may be extremely delicate and possibly full of danger at times. Anyhow, without going further into that, the decision was taken that it should be a pay-as-you-go scheme.
773 There are certain implications which flow from that decision about which we must be clear in looking at the White Paper. For the purpose of what I shall say about this, it is desirable for me to strip the scheme of some of the mythology of insurance. I do not do it in any unfriendly spirit. We have to be realists here about what we are doing, and we know that this is not insurance. We know that it is a redistribution of income by compulsory levy between the younger and the older generations, between those who are at work at any time and those who, for good reasons, are no longer working. The largest groups of those are pensioners and widows.
For identification of contributions and benefits, the word "insurance" certainly captivates the imagination and good will of the great mass of the people. But there is a danger that, in making contributors more willing to pay because of the concept of insurance, at the same time we build up strong claims to entitlement for future benefits as of right which are no more than a moral obligation. We also bring into the scheme the whole apparatus of contribution qualifications, many of which have no financial significance, which are irksome and even unjust, but which maintain the prestige of the word "insurance".
The truth of the matter was given the other day in reply to a Question. We were told:The maximum contributions for pension that could have been paid by a man and his employer is about £685 and the maximum that could have been paid by a woman and her employer is about £655. Such a man now retiring at age 65 and his wife age 60 could expect to receive about £7,000 by way of retirement pension and the single woman now retiring at age 60 could expect to receive about £5,100. A similar calculation for the single man shows that he could expect to receive about £3,200."—[OFFICIAL REPORT, 3rd March, 1969; Vol. 779, c. 10.]That is the truth about insurance. We see that the current contributors are paying out to those on benefit far more than their own contributions would entitle them or even give them claim for. This is what I mean by the discharge of a moral obligation.
In the White Paper we are committing ourselves to make the moral obligation statutory by having a biennial review. We promise that as a minimum the lost 774 purchasing power of the pension since the previous review shall be restored. Hopes are being built on this pledge of a minimum increase that there will be something on top the represent a share of increasing prosperity and the grant of an increase in the real value of the pension. That is an obligation that we are putting on the next generation of contributors as well as upon ourselves.
We are being asked to write into the law firm promises of future benefits to ourselves. These promises will not be fulfilled out of any contributions that we will make. A true insurance system would accumulate a reserve fund sufficiently large, as we all know, to meet the future financial obligations. Private insurance in most cases has to do this. But we are providing for ourselves by placing obligations upon others who will have to pay us the money out of effort and resources that we have not handed down to them.
Nevertheless, it can be argued that the social contract, if not the insurance contract, is valid and fair. That is what I believe it to be. The social contract says in so many words, "We will support the aged, the widows and others who are in need of benefit out of our production and earnings now, in return for a similar obligation being put upon those who come after to do the same for us". That is the social contract. That is the principle of the pay-as-you-go scheme. But this is not the principle of an insurance scheme.
I think that the principle of reciprocity as between one generation and the next is fair and acceptable under one condition. This is really the gravamen of what I am trying to say. We must not impose on the next generation of contributors burdens greater than we are prepared to bear. This I regard as fundamental. This is what I fear the White Paper proposals may well do. The last page of the White Paper foreshadows this very happening.
I think that we should fix the contribution now that we firmly believe will meet the obligations of the scheme at least until the turn of the century—30 years from now. If we do that we shall be playing fair with the younger generation which will come on. We must not demand from them any higher proportion of their earnings in contributions than we are prepared to pay.
775 I grant that the White Paper carries this principle up to a point, because on the last page it envisages that the contribution fixed at the outset would stay put for about 20 years. After that it might have to be increased, and increased again at the turn of the century. I think that we ought to be more certain of an enduring level of contribution for a longer period than 20 years. We ought to do our best to estimate our own obligations and fulfil our part in the matter at the same time that we place this statutory duty upon those who follow us.
This might mean that the contribution would have to be somewhat higher at the outset than is now proposed. That would also mean that larger surpluses would be earned in the earlier years. That raises the question of what we are to do with the surpluses: either the higher ones under what I think is the right line, or the smaller ones in the White Paper.
We must bear in mind in both connections that we still have to take account of the loss of revenue by whatever arrangements there may be for contracting out. We all realise that the loss of revenue will hit the Fund much sooner than the Fund will gain from the reduced benefits paid as a result of any bargain struck on contracting out. So, to begin with, we must bear in mind that the Fund will suffer losses.
Subject to that, the aim should be to hand over to the next generation of contributors some savings from the surpluses which we could accumulate to provide a financial cushion against seen and unforeseen extra burdens which may arise in the next generation.
For example, we are bequeathing to our successors some demographic problems, the full measure of which we have not yet taken. We see from the White Paper that the proportion of those over retirement age will increase. At the same time, it is expected that the proportion of dependent children will increase, too. Between now and the turn of the century we may have a much higher ratio of dependency in relation to the working population than we have had for a very long time.
I think that we must do our best to forecast the burden which it will be adequate for our successors to bear, but at the same time reinforce that forecast by handing down to them accumulated 776 reserves which have been prudently and profitably invested.
This means that we must make a serious challenge to the idea that funds from the State superannuation scheme can be invested only in Government securities. We already have a National Insurance Fund of a nominal value of over £200 million, we already have a National Insurance Reserve Fund of a nominal value of £1,170 million, and we already have an Industrial Injuries Fund of over £300 million. They are all losing their value. They are all yielding a low rate of interest, and none of them is of any more value to the Fund than the scrip on which the money is written. I think, therefore, that the investment of these surpluses on the lines of prudent, free investment is desirable.
My right hon. Friend said that the Government were prepared to reflect on that. I certainly hope that they will, otherwise the surpluses will go into the mists and join these financial apparitions that are called the National Insurance Reserve Fund. One can never call on it. One can never use it. What folly it is to invest in oneself. One can never get the money back. If one wants to draw on reserve fund investments only with the Government, the Government have to replace the money. They must either borrow more, or tax more, or let one go haywire on the gilt-edged market. It is therefore desirable to have these investments spread in the way that the occupational pension funds spread theirs.
I come, now, to another point which I think exposes the scheme to considerable danger, and that is the 20-year transitional period. This really is a point of extreme political weakness, and we have to guard against it. I think that we have to erect strong defences against the pressures that will come during this period. Let us be candid. The fact of the matter is that the new scheme could stand the additional benefits from the first year. There is no need to spread them over 20 years for financial reasons. The higher contribution will come in from the appointed day. That is how the surpluses are to be built up. The surpluses will flow from more revenue than there will be outgoings, so it would be financially possible to grant the full maturity of the scheme from the first year.
777 Why, then, is it not proposed to do that? The 20-year transitional period is the way in which we damp down the demands for the existing pensioners. That is really how it is done. If the new benefits came into operation in one go, the discontent amongst the existing pensioners would be very great indeed, so this 20-year period is really a phasing into the new scheme, accompanied perhaps by a period of attrition on those who might grumble about it.
Will we be able to maintain this 20-year period? Is it too long? I rather think it is. Certainly if this period is to be maintained it will be abundantly necessary to commit ourselves to the investment of the surpluses and put them beyond the reach of political pressure, otherwise I am sure there will be a temptation to use them to fulfil political demands by those who will feel that they are entitled to share in the prosperity of the National Insurance Fund.
That completes my two main points on the White Paper. My only disappointment about the proposals with regard to the benefits relates to women. The House has heard me on this subject so often that I shall not repeat the speeches that I have made before. I was hoping for a better charter for the women in this scheme. I fully support the removal of the married woman option. My right hon. Friend the Member for Lanarkshire, North and I are united about that.
I fully support the additional benefits being given in cases of breakdown of marriage, but there is much more to be done there. Do I have to emphasise the wretched conditions of many women in Britain today whose marriages have ended for reasons other than widowhood? When one looks at the figures of the Supplementary Benefits Commission, one realises that the real poverty in Britain today is amongst women. It is to be found among women who are alone, and women with children. That is why I think a scheme of this kind, to be applicable to the twentieth century, has to take into account the additional hazards which, for conventional or other reasons, Beveridge did not take account of, and which we are so slow to take account of. We have to regard the divorced, the separated, and the deserted wife as having a claim on social security 778 equal to that of the widow. After all, her marriage has ended, and very often with less financial support than many widows have.
That side of the matter disappoints me, and I am glad that there is to be a further investigation into the conditions of families in that plight, but I think we have to be bold about this when the time comes to review the White Paper in the light of further investigations.
My conclusion is that this represents the scheme for the future. Wisely and prudently framed now, with due regard to the obligations we are placing on the next generation, it will surely give them support in retirement, sickness, unemployment, widowhood and any other hardships of life, and will give them a reinforcement of their economic and family life which those who come after will thank us for having designed between 1969 and 1970.
§ 8.36 p.m.
§ Mr. Paul Dean (Somerset, North)
The right hon. Gentleman the Member for Sowerby (Mr. Houghton) has broadly praised the White Paper for the advances which he feels it will bring about in our social security arangements; but with the very considerable knowledge he has on these matters he has also asked some very pointed questions about the financial viability of the scheme. In my view, the main weakness—I believe a fatal weakness—in the thinking behind the scheme is that it fails to distinguish clearly between the financing of pensions today and savings for pensions tomorrow.
When my noble Friend the Member for Hertford (Lord Balniel) made that point in his speech I was very struck by what appeared to be the look of surprise on the face of the Secretary of State. He almost gave the impression that this particular point had not really occurred to him, that he had not given very much attention to it. I believe that there is the real danger, as a result of mixing up these two concepts, that we shall fail in the first place to provide adequately for pensions today and we shall equally fail to create the right conditions for savings for the pensions of tomorrow.
Leading from that broad strategic mistake, as I regard it, there are, in my view, three particular aspects to be mentioned. There is, first, the point mentioned by the 779 right hon. Gentleman the Member for Sowerby, the 20 years' maturity. The idea is that the scheme will not mature fully until 1992. We are to have a long period of maturity. I would have much preferred that the Government had set themselves more modest objectives which could be achieved more quickly, because I do not believe for a moment that they will be able to hold this 20 years' maturity. We all know what happened to the Beveridge Scheme. There was in that scheme the idea of a 20 years' maturity period and we know what happened in practice—the inevitable pressures under which these arrangements had to operate and the scheme coming into operation with the full level of benefit right from the start
Just as that idea of a long period of maturity failed in those days, because it came up against harsh political realities, so this concept will fail in the present conditions as well. Just look at what the position will be. We shall have the pre-1972 pensioners on the old flat-rate pension, plus any additions which are given so that we shall then have the very odd phenomenon of the one-twentieth pensioner in the first year of the scheme, the two-twentieths pensioner in the second year of the scheme and so on. The effect, when one looks at pensioners as a whole, will be that the younger pensioners will be getting a bigger pension than the older ones. This may look financially right, but it will certainly not appear to be social justice to pensioners or to the country as a whole.
What we want in a State scheme is the opposite. One can argue strongly that need increases with age and that, far from younger pensioners having a higher pension, the basic scheme should be the other way around. No Government could hold this 20-year maturity period with the anomalies and strong feeling of social injustice which it would create. That period will be a myth.
The second myth is the so-called surplus, which we are told will be £400 million in the first year, building up to about £3,400 million by 1988. But what will present pensioners, the disabled or the widows think about that surplus? They will say that it should be used to help them now rather than saved to give fat pensions to those retiring in 1992 and 780 after. No Minister will be able to resist those justified pressures. That, too, will be a myth.
If these things happen, what will be the position for contracting out? The White Paper and the Secretary of State have said that it will depend on the surplus in the early years. The right hon. Gentleman said that, the adequacy of 6¾ per cent. aside, it would depend very much on the extent of contracting out. If, as I think, the surplus is a myth, the Secretary of State at the time will have to say, "The surplus has gone. I am very sorry, but I cannot allow contracting out, because I desperately need more contributions to meet the commitments for pensions and other benefits."
What else could he do but clamp down on contracting out? He could ask for a bigger Exchequer contribution but, in present economic circumstances or any circumstances which are likely for some years ahead, the Chancellor would refuse. He could also put up contributions even more than is envisaged already, but this would be unpopular and impracticable. He will inevitably take the easy way out. Contracting out will be the casualty.
I asked the right hon. Gentleman during his speech for an assurance that, whatever the position of the fund, he would not alter the terms of contracting out through the abatement arrangements, if the expected surplus did not come about. He said that that was a very delicate question which he would have to consider and that he could not answer at that moment.
That was a revealing remark which justifies the Amendment, because it means that we are being asked to approve a scheme which exists in no more than the vaguest outline, with little indication of answers to the critical questions we have asked about its viability.
§ Mr. Peter Mahon (Preston, South)
Does the hon. Gentleman really believe that contracting out would make such a difference to a scheme if it was actuarily sound? It is incumbent on the Government to arrange matters so that the scheme is sound. On humanitarian grounds it must allow for a certain degree of contracting out because of the contingencies which occur during the lifetime of every employee. These contingencies——
§ Mr. Deputy Speaker (Mr. Sydney Irving)
Order. The hon. Gentleman is making a rather long intervention.
§ Mr. Dean
I think I know at what the hon. Gentleman is getting and I wish that I could agree with him. The trouble is that if the scheme gets into financial difficulties, as I expect it will, the easy way out will be to clamp down on contracting out. The Government Actuary's report, which is part of the White Paper, proves this because, dealing with contracting out, it points out that an immediate reduction in contribution income would result in a significant reduction in benefits.
I fear that, if they are not careful, occupational pension schemes will find themselves being led up the garden path by fair words but that their future will be built on shifting sands. I do not believe that such a Government scheme can provide a firm foundation for contracting out, or that the partnership between the State scheme and occupational schemes, which the right hon. Gentleman says he wants to see, can be possible.
If the development of occupational schemes is held up or, worse still, contracts under the pressures of the State scheme as a result of the conditions laid down for contracting out, that would be extremely bad, not only socially, but economically.
The Secretary of State said that there were gaps in occupational pension schemes and that some people could not, almost by definition, be covered. I would not claim that these schemes are perfect and I regret that we have not reached the stage when better cover can be provided for widows. The right hon. Member for Sowerby referred to transferability. There are ways to improve occupational pension schemes and it is no argument against encouraging them to fulfil a larger rôle to say that there is a small percentage of the community who cannot be covered. Many of them could be covered by, for example, federated schemes. In any event, if there is a small nucleus of people who cannot be covered because they are changing their jobs rapidly, or for a variety of other reasons, there is no reason why public trustees should not run a genuine 782 insurance scheme in competition with the market to cover these people. Then they could have the choice of getting the cover which the vast majority of the population get through occupational schemes.
If it is necessary to have a fall-back scheme of this kind I would be prepared to support it so long as it is a genuine insurance scheme operating on exactly the same principles as a normal occupational pension scheme. It would be extremely bad socially if we got into the position in which the State scheme became larger and more expensive and doubly wrong because in such a situation the higher the earnings of a person the worse would be the bargain. That is one of the fundamental differences between this scheme and the scheme of my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter).
Figures have been given about the amount of savings generated. This encourages the concept of a property-owning democracy, on which I believe both sides of the House now agree, and provides the future seed corn for prosperity. Equally, it gives to the Chancellor of the Exchequer of the day an important weapon when dealing with a high level of consumer demand. The present Chancellor has virtually admitted that however high he puts taxation—and he has done that a great deal in recent years—he cannot succeed in checking consumer demand. The only way to do it is by encouraging voluntary saving. One of the best ways to do that is to ensure that the occupational pensions scheme movement grows and that whatever arrangement is made through the State scheme a firm basis can be provided on which occupational pension schemes can develop.
It seems extraordinary that in these days when we have become far more prosperous as a country than in the days of the Beveridge scheme the Government are still producing ideas which involve an ever-increasing extension of the activity of the State in this field. Surely the more prosperous we become the more we should be able to concentrate on those sections of the community who are in genuine need and the more we should encourage the growing number who are 783 able and willing to provide for themselves to do so through occupational schemes of their own choice.
I hope that when he replies the Minister of State will deal with the very valid points and criticisms that have been put forward from both sides of the House. I beg him, above all, when the debate is over, to think again about the White Paper and to take into account the substantial criticisms made from both sides of the House.
§ 8.58 p.m.
§ Mr. Ted Leadbitter (The Hartle-pools)
At this late hour I think that I can put my notes aside. I believe that I am the only hon. Member who has been present since 2.30. I shall be brief and speak for not more than about eight minutes.
The right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) unfortunately let himself down when he suggested that this was not a pension scheme but a blueprint for a General Election. Up to that point his speech was interesting, constructive and highly useful. His considerable experience in this matter was, unfortunately, spoilt by that reference. I think it was the only reference today which the House could not accept, for the tone of the debate has been one expressing sincere concern from both sides for the position of the retired person.
In considering the retired person, we must think in terms of priorities and of how best to deal with that important citizen. Our priorities are wrong. The purpose of the White Paper is to produce consultations based upon the principles within it, in order that legislation can be drawn up to be implemented in 1972. That is a long way off. I would have been happier if we had been discussing solving the problem that faces the old-age pensioner now.
It is a pity that in the White Paper there is provision for a transitional period of 20 years. This, added to the date before us for implementation, puts right out of court the kinds of hopes and aspirations that old-age pensioners have at present. This also applies to those who are approaching retirement age and are, therefore, anxiously noting the discussion of the proposals in the White Paper.
784 The right hon. Member for Sowerby (Mr. Houghton) pinpointed this basic weakness in the White Paper. There seems no sense in introducing a transitional period of such length—the first time in the history of legislation of this kind. Britain is planning for economic prosperity and growth. If we have not the capacity in the first year fully to introduce the scheme, which is based upon the new principle of earnings-related contributions, there is something wrong with the ingenuity of those in Whitehall and in the three parties.
I trust my right hon. Friend the Secretary of State takes note that the poverty among old-age pensioners today, and the gap between the increasing standards of living of those at work and those who are retiring, or who will be retired in 1972, is such that we cannot afford blindly to pursue the concept of a transitional period. This militates against the best interests of those who seek a larger slice of our increasing growth and prosperity.
We have not gone far enough in this White Paper to bring relief to women. There has been considerable study of the problems of women, particularly the discriminations against women in taxation and social security. Since 1964 the Government have introduced a considerable amount of legislation to help the separated, the divorced, and the widows, but there is a need for a comprehensive piece of social security, such as that before us now, to extend the concept of equality.
When we study the White Paper further as a basis of legislation, I hope that we will be able to pursue firmer lines of a kind which will give comprehensive support to women in the social security field.
The relationship between the State scheme and occupational schemes has been discussed. Some hon. Members have not been honest in discussing this relationship, nor in describing the facts of occupational schemes. Even today the benefits arising from occupational superannuation schemes range from a small sum of under £1 to over £4. Twenty per cent. of those in occupational schemes receive under £1; 20 per cent. receive between £1 and £2; 10 per cent. receive between £2 and £3; 10 per cent. receive between £3 and £4, and 40 per cent. receive just over £4. Therefore, by no 785 stretch of the imagination, despite the claims about the growth of occupational schemes, can those who benefit from such schemes claim to have the type of cover which is designed to abolish the subsistence or poverty levels in retirement. This excludes a large number of people who, because they are manual workers, are not allowed to join such schemes.
There is great need for a partnership between a State scheme and occupational superannuation schemes. The hon. Member for Cornwall, North (Mr. Pardoe) retreated from the concept of State responsibility as We on this side see it. The Conservative Party has been Machiavellian—it has criticised but produced no alternatives. The flat-rate contribution scheme has been found to be outdated. Consequently it has not carried on that rôle of partnership with the growing number of occupational schemes which can bring to the vast majority a condition of retirement which is above the subsistence level.
§ The Motion asks the House to invite the Government to pursue consultation and makes it clear that the White Paper is a basis for legislation. It is in that spirit, without any rigid commitment to the details of the White Paper, but accepting the general principle of earnings-related contribution, that the House should approve the Motion. The Liberal Party has contributed nothing and the Conservative Party has dodged everything in this debate.
§ 9.5 p.m.
§ Mr. Marcus Worsley (Chelsea)
The Secretary of State and his right hon. Friends have tabled a Motion not just to take note of the White Paper, not just to approve it in general terms, but to approve it as a basis for legislation. They must have known when they put it down in those terms that we could not accept it, for we have not yet been given the information on which we could make a decision.
My right hon. Friends have long made clear—because it has not been a short time in the gestation—how we should judge the White Paper when it came out. Yet when the right hon. Gentleman produces his scheme he does it in such a way as to leave unanswered the questions he knew we would ask. In other 786 words, he has taken the decision to force a vote tonight.
But at least I will give the right hon. Gentleman this, since he is a controversialist and enjoys controversy: the result at least has been a debate in which we have sought to set out the differences between us. Because there are differences; I do not agree with those hon. Members who say that in this sort of debate we should not talk about party differences. Of course, there are huge areas in common, but it is as well that the country should understand both the areas in common and the differences.
When the hon. Member for Manchester, Gorton (Mr. Marks) tried to define our common objectives I found little to disagree with; I believe that our final objective is the same. We all want to see all our people enjoying in retirement a dignified old age, an adequate income as of right, and I think that we all accept that the income in question must have some relationship to the income earned in working life.
We were delighted to see the right hon. Member for Lanarkshire, North (Miss Herbison) back in our midst for what I think was her first speech on the subject since she was Minister. She asked what our objectives were. That is a fair enough question, and I do not think that anybody in the House would disagree about the one I have described. The difference comes in the means of achieving it.
We passionately believe that it is better for both the individual and society if the individual provides as much as possible for himself. We believe that people want to do this, and they increasingly want to do it. There is a sort of worldwide revulsion against over-government. Perhaps some of the exponents of it do not seem to be our natural allies, but the trend is strongly away from over-government and towards self-reliance. Yet on these issues the White Paper is silent or inconclusive; above all, on the critical issue of contracting out.
The right hon. Lady appeared to think, and I want to disillusion her if she did, that my noble Friend the Member for Hertford (Lord Balniel) had advocated leaving everything to private and occupational schemes. The hon. Member for Westhoughton (Mr. J. T. Price) seemed to think the same. This is not our 787 view. We do not believe that everything should be left to the private schemes, but we say they must have the conditions in which they can flourish. We believe that there is a very important rôle for the State in this sector. The growth of private and occupational schemes was one of the happiest results of Conservative government.
Figures have been given. The hon. Member for Westhoughton gave many, which I shall not repeat, showing how half of the employed persons and two-thirds of employed men are in occupational schemes. My right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) made an outstanding speech, as the House will agree. One of the main objectives of his Act was to provide for the encouragement of these occupational schemes, but what a difference when the Secretary of State presents his White Paper! This is not a principal part of his plan. He has left out the very issue we are talking about. He speaks only in general terms about the principle of contracting out.
The right hon. Gentleman is laughing at the statement that he has left out of the White: Paper detail on which we can judge whether or not it is possible for private and occupational schemes to contract out. Why does he think that funny?
§ Mr. Crossman
Funny or not, what we left out was a detailed agreement which we could have achieved only by secret negotiation before coming to the House. I repeat the question which I asked of the hon. Member for Hertford (Lord Balniel). Does the hon. Gentleman say that we should have reached this agreement in detail before we came to the House? If not, do we not need the White Paper, which gives the basis of the case and a framework for the negotiations?
§ Mr. Worsley
But the right hon. Gentleman is not just asking the House to take note of the White Paper. He is proposing it as a basis for legislation.
§ Mr. Crossman
On the basis of further consultation by the Government with representative interests. Surely that is perfectly reasonable.
§ Mr. Worsley
The right hon. Gentleman cannot get away with this. He must realise that this is critical to us. Perhaps it is not critical to him. But if that is so 788 we have established a difference between us.
§ Mr. Worsley
This is a critical matter to us and we agree now that the light hon. Gentleman does not regard it as critical. There at least is some clarification from the debate. But not all his hon. Friends take his view. The hon. Member for Westhoughton called it the nub of the issue.
It is not only the question of contracting out that we are concerned with. One does not only provide for old age only by taking part in pension schemes either in the State or in private schemes. Every purchase of a house, every purchase of a share, every piece of saving is provision for old age. So the second reason why we cannot at this stage support a White Paper of this nature is that already our tax structure discourages saving. Already our system is more sharply progressive than in any other comparable country. Yet this plan will immensely increase the burden.
As the hon. Member for Gorton pointed out, national insurance contributions are no longer chargeable against Income Tax. Thus, the progressive characteristics of the graduated contribution in the right hon. Gentleman's plan will be added to the progressive characteristics of our existing system of Income Tax. It makes no difference to argue that the contribution is not taxation. What we are concerned with is not words, but the actual impact on the individual and the country. The fact is that the right hon. Gentleman will add, by this scheme, to the progressive rate of taxation in the most dramatic way.
Therefore, one is not only reducing incentive, which is already desperately lacking in the economy, but one is also frustrating the growth of the sort of savings, outside the pension sphere as well as inside, which we want to provide for the future. The right hon. Gentleman's predecessor beat us with rods; he will beat up with serpents. He cannot expect the Conservative Party to support him in that.
There has been much talk about the contributory and the insurance principles. The contributory principle has a value primarily for the psychological reasons. 789 The right hon. Gentleman is right to maintain that. When we use the phrase "the insurance principle" in a national insurance sphere we are using it in a very special way. Private and occupational pensions are true savings, true increases in national wealth. This scheme, like the current scheme is "pay-as-you-go". It has no element of true savings in it, as the hon. Member for Westhoughton said. This scheme is redistributative taxation, as my right hon. Friend the Member for Kingston-upon-Thames brought out very clearly.
It is the redistributative taxation primarily between generations and, secondly, between income groups. As far as there is a surplus as a result of this operation, it is an excess of taxation. Again, I quote from the White Paper:The … surplus in the scheme's early years will have a restraining effect on the pressure of demand, and thereby enable any given level of public expenditure to be financed with a somewhat smaller recourse to general taxation.The House has to decide whether it is right to use a contributory scheme as a budgetary device, because this is what this proposition involves. We believe that it is not right. What is more, we believe that nothing would do more harm to weaken belief in the scheme's "soundness", to quote the right hon. Gentleman, than this sort of tactic. If we have a "pay-as-you-go" scheme it should be a "pay-as-you-go" scheme and should not be used as a budgetary device.
I very much regret that I was not here to hear all of the speech of the right hon. Member for Sowerby (Mr. Houghton), because he always contributes a great deal, with his experience of this subject. I must say that I found I could not agree with the part I heard. He was envisaging the build-up of a very large surplus over the years. First, I do not believe that this is feasible. I do not believe that any Minister would succeed in holding it and, secondly, that it is a right principle. We must keep our principles clear. If we have a "pay-as-you-go" scheme then the right way of treating it is "pay-as-you-go" and not building up over the years large accumulations of funds.
I come to the financing of the scheme. As the House has been frequently reminded, at the end of the White Paper there are figures which suggest that no 790 less than £3,400 million will be built up in the scheme by 1987–88, but on the basis of no contracting out. The point I want to make is that even the right hon. Gentleman wants to have some contracting out—we do not know how much, he does not know and he does not apparently even regard it as of the very highest importance.
The more contracting out, the less the surpluses that will be built up, so that from the beginning of the scheme there will be a conflict in the desire to build up surpluses and the desire, such as it is, and it seems to be a weakling child, to arrange for generous contracting out. The right hon. Gentleman must surely realise that the more contracting out, the less the surplus in the scheme in the early years.
To come to the House with a scheme the financial background of which is missing—and the key factor of contracting out is missing—is an astonishing performance for even as reckless a Government in financial matters as this one. I am not surprised that my right hon. Friend the Member for Kingston-upon-Thames spoke of an air of unreality. The right hon. Gentleman must forgive the House if a great part of it, and certainly my hon. Friends, are suspicious of his motives towards occupational pensions. They remember a phrase he used in 1962, when he said:Labour's scheme would be one which will be very expensive to contract out of.If this is added to the budgetary reasons which he will find to keep contracting out difficult, can he blame us if we refuse to follow him into the Lobby to sign a blank cheque? He cannot expect us to take him on trust in this matter.
The scheme is very different from the promises made by the right hon. Gentleman's party in the past. In "New Frontiers for Social Security" in 1963, a man with average earnings would get half pay on retirement in seven years. In this scheme he gets 42 per cent. after 20 years. The reason is very simple, as the hon. Member for The Hartlepools (Mr. Leadbitter) must appreciate, that we cannot afford higher pensions at this time. The Government have reduced our capacity to pay now and in the future by bad management of the economy and by mounting debt, yet this scheme assumes an increase in national wealth 791 sufficient to pay out of that increase better pensions over 20 years.
If we are to get the increase, we need, above all, more savings. More occupational pensions, more private pensions, are needed to provide those savings. The State sector does not provide savings; the private sector does. So it is necessary to have an increase in private provision even for the State scheme to fulfil its promises.
Several hon. Members have mentioned the attendance allowance for the severely disabled, and this is one of the very few immediate advances proposed in the White Paper. As the right hon. Member for Lanarkshire, North said, no one should over-estimate the extent of the change. It is an advance that a disabled wife should be able to draw on the benefit of her husband's insurance, but there still remain outside the scheme many who are disabled from birth, or who have a deficient contributions record. Such people are not provided for in the scheme unless they are included in the small section that refers to supplementary benefits.
May I now turn to that part of the White Paper to which little reference has been made, the section called "The new deal for women". It has been called the women's charter by the right hon. Gentleman. I cannot say that it has been greeted with rapturous applause by the House or even by his hon. Friends. He said in his introductory remarks that he would not go into the details of it. The fact is that there is very little to say about it. I cannot help feeling that the phrase about a new deal for women dates from the earlier or Utopian years of the Government's policy making. It is a leftover from the period of the income guarantee, their hundred dynamic days, and the rest of it.
The improvements for women are very small, and the disadvantages for them are relatively great. If I may echo what my noble Friend said, I, too, greatly welcome the provision for widows. It has been done in the right way and should be supported. There is a very small improvement to which the right hon. Member for Sowerby referred for divorced women. However, it is quite different from the sort of improvement talked about when he was presiding over the social services.
The real change for women is the abolition of the married woman's right to opt 792 out of the flat-rate part of the scheme This is the big change. As my hon. Friend said, of every four married women in employment at present, three choose to opt out. They can opt out or opt in at the moment. Why does the right hon. Gentleman wish to take away that choice? We are not seeking to prevent married women insuring themselves in their own right. What we are critical about is taking away from them the choice to decide for themselves whether their situations or modes of employment are such as to make it suitable for them to opt in or out. The Secretary of State made no attempt to explain why it was necessary, yet again, to choose to close an option which exists at present.
The right hon. Gentleman asks us to approve this scheme as a basis for legislation. Our answer is clear and unequivocal, and I think that it has been well expressed by my right hon. and hon. Friends. We have not yet the facts on which to base such a decision. It is extraordinary that, after four years in office and a greater period of promises, these key facts should still be missing. The White Paper does not provide the guarantees which we seek, first, for a continuing increase in private provision and, therefore, in savings, and, secondly, for an increase in incentives.
If the right hon. Gentleman insists on pressing his Motion, we shall vote against it. But even at this stage, after all these years, we say to him that he should withdraw his Motion and try again.
§ 9.29 p.m.
§ The Minister of State, Department of Health and Social Security (Mr. David Ennals)
This has been a debate on an issue of tremendous importance. Not only Parliament but the country has to decide to what extent we should accept a responsibility not only for the aged of today and those who are infirm, but for the future of our own generation when we retire.
We have listened to some very powerful speeches, especially from my right hon. Friend the Member for Lanarkshire, North (Miss Herbison) and from my right hon. Friend the Member for Sowerby (Mr. Houghton). I am sorry that I did not hear all of his speech, though I wish that I could say that the general standard 793 of debate matched the dimension of the problem which we face.
I start by considering briefly the positions of the two Opposition parties on the issues so challengingly presented by my right hon. Friend. I start with the Liberal benches. Frankly, I could hardly believe my eyes when I saw the Amendment on the Order Paper tabled by the hon. Member for Cornwall, North (Mr. Pardoe) and his hon. Friends. I am certain that David Lloyd-George and William Beveridge would turn in their graves if they could see the text and the concept put forward in that Amendment. For the Liberals there was no equivocation such as we have had from the Tory benches. There was no question of "declines; at this stage". They reject the plan out of hand on the extraordinary argument… that it seeks to extend the rôle of Government into a sphere where it is neither helpful nor necessary.On the contrary, it is essential that we should prepare now for this bold step forward to provide a system of social security which our people need and deserve.
Let there be no doubt about it. This Government have made great advances in raising the levels of pensions and benefits and in providing, by the Supplementary Benefits Commission, a system of meeting human need which is humane. I am glad that many hon. Members have paid tribute to the contribution made by my right hon. Friend the Member for Lanarkshire, North when she was Minister of Social Security.
Nevertheless, the present system has failed—and this was recognised by the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter)—to fulfil Beveridge's great objective—adequate pensions and other benefits by right of contribution. The flat-rate system, even with the modest graduated system which was added by the right hon. Member for Kingston-upon-Thames, is no longer adequate. Every year that goes by proves this to be true.
In the absence of a wage-related scheme such as we now propose, there are only two real alternatives: first, to continue to push up flat-rate pensions with an intolerably large contributory 794 burden on the low earner, or, secondly, to rely increasingly on a massive dependence on supplementary benefit.
We have already been reminded that there are 2 million National Insurance pensioners who are dependent in some degree on supplementary benefit. I believe that the Supplementary Benefits Commission does a magnificent job. Apart from paying tribute to my right hon. Friend, I pay tribute to those in the field who are administering the supplementary benefits with great discretion and humanity. The Commission has lifted the burden of misery and hardship from millions, and I am proud that we have made our contribution to it.
But this is not basically what people want. I believe that they want a fair pension, which they have earned by their own efforts and their own contributions. All right, say right hon. and hon. Gentlemen opposite. This widespread desire should be achieved through private and occupational pension schemes.
Let me make it clear beyond question that occupational schemes are fulfilling, and I believe will continue to fulfil, a very important social purpose. There has been an impressive growth in the membership of occupational pension schemes. The membership was 8 million in 1956, 11 million in 1963, and it had gone up to 12 million in 1967. They provide a degree of additional security for their members, and, as the hon. Member for Chelsea (Mr. Worsley) said, a very valued source of savings. That is why we speak of a partnership between the State and occupational pension schemes. We believe in partnership, and we must, and intend to, achieve it.
But it would be quite unrealistic to suggest that occupational pension schemes can of themselves take over the State's responsibilities. It is clearly recognised by the Life Offices' Association in the recent booklet "Progress by Partnership", from which I think that many hon. Members might learn something.
Let us look briefly at the facts. As has been said, there are about 12 million members of occupational pension schemes. About 50 per cent. of manual workers and 75 per cent. of women workers are not members of such schemes.
795 There is also the problem of the small employer. There are 1 million employers, and 65,000 active schemes. This is no criticism of the pension funds themselves. The industry fully recognises that casual workers and small employers have no immediate prospect of forming occupational schemes. It is estimated that, even on the present rate of expansion, by the turn of the century about one-third of the workers in this country will be without membership of an occupational scheme.
Moreover—and I believe that this is of great importance, but it is not recognised by some hon. Gentlemen opposite who have spoken today—two-thirds of occupational pensions at present being paid to men will die with those men, with no permanent widowhood cover. This is an essential weakness which we have to fill by means of our earnings-related system, and we have to recognise, too, that few occupational pension schemes guarantee that the value of their benefits will not be eroded by inflation.
Right hon. Gentleman opposite seem to have ignored the fact that our proposals have been very favourably received by spokesmen of pension funds. It was not recognised in anything that was said from the benches opposite during the debate today. At their Press conference on the White Paper, the Life Offices' Association and Associated Scottish Life Offices said:The White Paper has steered a pretty good path through the jungle. The level of benefits seems reasonable and leaves scope for expansion in occupational schemes.A spokesman for the N.A.P.F. State Pensions Committee said at a Press conference that the Committee was in broad agreement with the main objectives of the White Paper. The Committee welcomed in particular the move away from means tested benefits which constitutea disincentive to lower-paid employees to save or to join occupatinal pension schemes.Sir William Watson, the Chairman of the Standard Life Assurance Company, at the company's annual conference on Tuesday of this week welcomed the Government's acceptance of the principle that the provision of adequate pensions for all is a task to be shared by the State and the private sector in partnership. He said he was confident that the discussions which had already started wouldlead to terms which will ensure a continuation of a substantial share of pension provision in the private sector.796 He added that the White Paper wasa serious and responsible attempt to secure adequate pensions for everyone.I know that right hon. Gentlemen opposite are tremendous experts, or they think they are, but none of them has reflected on the responsible judgments of those involved in the field.
§ Lord Balniel
I am not an actuary, so I cannot work out the scheme in detail, but the publication "Planned Savings—A Commentary on Unit Trusts, Life Assurance and Savings" saidThe Government Actuary has made some estimates of the effect of contracting out. If this is done on the same scale as at present, the scheme will run at a loss from its second year.Is that correct?
§ Mr. Ennals
Of course it is not correct. Planned Savings is not a representative body of pension associations. The noble Lord has done a great deal of reading. During his speech he quoted ad lib from the Tory Press, as if somehow or other he had not already briefed it himself on the attitude it was to take.
The noble Lord referred to pious hopes and election gimmicks, and this was picked up by the right hon. Member for Kingston-upon-Thames. The right hon. Gentleman warned the leaders of pension funds to use a long spoon in the negotiations. Maybe this was very clever, but I believe that it was a very irresponsible approach to be taken by the right hon. Gentleman. A moment before that he had been boldly counting his chickens before they were hatched, and assuming that he would be on these benches in 1972. If he thinks that he will be here, then it is in his interests, in the interests of what he thinks would be his Government and in the interests of the country and the pensioners that the negotiations which have now started between my right hon. Friend and the representatives of the pension companies should achieve success.
The Conservative Party has put itself in an absurd position with its Amendment, which it thinks that we have obliged it to table. The Opposition keep complaining that the contracting-out arrangements have not been fully resolved, that everything has not been signed and sealed before my right hon. Friend came to the House. But the noble 797 Lord knows that if, behind his back and that of the House, we had conducted all these detailed negotiations and then said. "Here it is, signed and sealed with the insurance companies, not open to further consideration by the House," they would have criticised us for going behind their backs. Their Amendment is designed to conceal with a smoke screen their own complacency and inadequacy. They have put themselves in an absurd position.
The noble Lord said that it is the rôle of the State to provide a firm guarantee of security for old age. Right. He has recognised that the present system does not do so. Right. He has agreed that, on retirement, people should be protected against a sudden drop in their living standards. Right. Further, he has agreed that pensions should be linked to earnings. If all that is Conservative policy, how do they propose that such a scheme should be financed?
It is perfectly true that we have, throughout the hours of this debate, heard critical comments on my right hon. Friend's scheme, but there has not been one positive proposal from that side of the House. We have not had a glimmer of their own thinking except a suggestion from the right hon. Member for Kingston-upon-Thames that we should now set up another committee to study this question. Let me assure the right hon. Gentleman and his right hon. Friends that this document is not just a product of a great deal of thought and negotiation by political leaders. This has been produced by the Government within the Civil Service with a tremendous amount of detail. It is not just a rough outline: it is a detailed scheme.
The point of the noble Lord and several of his hon. Friends was that, somehow or other, the contributory system is a system of taxation. This is just not so. There is a sharp difference between a tax-financed and a contributory pension scheme. Benefit in the former do not depend in any way on what people have paid in, whereas benefits in the latter are directly related to contributions paid. The more one pays, the more one gets.
It is wrong to claim that workers' contributions to the new scheme are no different from taxation. They will represent 798 a genuine provision for retirement, since each earnings-related contribution will build up the right of the worker to his own personal earnings-related scheme—[Interruption.] When the noble Lord has asked me questions, he might have the courtesy to listen to my answers. The noble Lord made another statement. [Interruption.] He said that—[Interruption.]
§ Mr. Ennals
The noble Lord said that contributors would have no contractual rights to pensions. This is also untrue. Under the "pay-as-you-go" system, current contributions go to finance current benefits, but each contributor will, at the same time, be building up rights to his or her personal pension related to the amount of earnings on which he or she pays contributions.
These pension rights will not just be a matter of a record in a computer. They will be written into the law of the land and the money to meet them will be available from the earnings-related contributions paid by the working population at the time. The State has a contract with its citizens under which the working population has an obligation to existing pensioners in the full expectation that future generations of contributors will in turn finance their pensions when they retire.
Many other points have been raised in the debate. One concerned the redistributive effects of the scheme and it was suggested that, somehow or other, this element had been slipped in unnoticed by my right hon. Friend. It is, in fact, a vital part of the scheme. The main redistributive effect of the new scheme at any given time is the redistribution between generations; the contributions of the working population going to pay the pensions of the retired population.
Over the years, as more and more people qualify for benefit, the new scheme will increase the average income of pensioners in relation to that of the rest of the population. Allowing for income from other sources, the scheme is expected to bring the average income of pensioners up to about four-fifths of that of the working population, compared with two-thirds at present. This could mean that the pensioners' share of the 799 nation's consumption will increase to about 12 per cent. at the turn of the century, compared with about 10 per cent. now, with a corresponding reduction in the share available to the rest of the population.
The other aspect of redistribution is the redistribution between low and high earners. Our 60 per cent.-25 per cent. banding system seems to us to be a fair basis on which to ensure that those who are poor, small earners get a reasonably substantial pension, in part paid for by those who are higher earners. If there is dispute about whether this 60–25 proportion is right, we are perfectly prepared to consider the matter.
My hon. Friend the Member for The Hartlepools (Mr. Leadbitter) regretted that there was a 20-year maturing period. He seemed to give the impression that one had to wait 20 years before one received benefit. In fact, one need not wait for more than one year, because after the very first year one will get part of the earnings-related benefit; although it will take 20 years to receive full benefit. [HON. MEMBERS: "Ah!"] Naturally this must be the case. How can one get benefit unless one pays for it? The idea that the retired population can receive benefit in this way without paying for it shows how little hon. Gentlemen opposite understand the situation.
Rererence was made to the age at which women should receive retirement pension. I have received letters, as a constituency hon. Member, from a number of people who seem to think that the Government have decided that they will not get their pensions until they are 65. This is not so, and if one reads the White Paper one sees that the issue is weighed up carefully, with the conclusion that the position should remain as it is.
My right hon. Friend rightly said that the scheme is being put forward on the basis of consultation. If there are other views, we are very prepared to take them into consideration. My right hon. Friend the Member for Lanarkshire, North and others have expressed some concern that the review which will be conducted by law every two years guarantees only against rises in prices. I can well understand the feeling that it would be an attractive proposition by law to say that not only should there be protection 800 against rising costs but that it should be written in as a guarantee that rising earnings would also be part of the revaluation. That would be attractive, but for a Government to give that as a guarantee by law would mean they were committing themselves to something very dangerous. I believe that any Government would weigh up these decisions at the time they were taken, but they must also take into consideration the economic circumstances of the day.
A point was made by the right hon. Member for Kingston-upon-Thames concerning half-pay on retirement. This point was also made by the hon. Member for Chelsea. He suggested that under our scheme the great majority of workers will not get half pay. If the scheme had matured at April, 1968, levels, every single man earning up to about £15 a week would get half pay. When the wives' flat-rate pension of £2 16s. is included, this would rise to about £27 a week. These figures, of course, relate to gross earnings. A given pension is a greater percentage of the take-home pay.
§ Mr. Boyd-Carpenter
That, of course, applies to those who throughout life have been only just up to over half average earnings and who today are under 43.
§ Mr. Ennals
That is so, but I reiterate some of the principal advantages of the new scheme for the people of Britain. First, retirement pensions will be at a substantially higher level than they are now or have ever been. For example, if we had had the present scheme since 1948, instead of the present scheme at current prices, an employee would receive a pension today of £9 7s. from the State compared with £4 10s. and a married couple would receive, not £7 6s., but £123s.
Next, there is a new deal for women and especially benefits for widows. I am glad that there has been a welcome from the Opposition for some of the improvements in the conditions for women, because there is no doubt that the element in our society who perhaps face the greatest poverty today are widows. All widows' benefits, the widowed mother's allowance, the widow's pension if she is under 60 and retirement pensions over 60, will become earnings-related. For those over 60 they will be related to the 801 husband s average earnings with credits given for the years since his death on the pension if he died before that. Widows will get a pension on their own or on their husband's record, whichever is the more favourable.
The noble Lord expressed considerable concern for the sick and disabled. This is an area in which all sections of the House feel that much more needs to be done. There of course will be earnings-related short-term sickness benefit, but in addition there will be a long-term sickness benefit. For those unable to return to work this will continue as a form of invalidity pension. We are especially conscious that many of those who have been ill or disabled for some time are very severely handicapped. Some would much prefer to live at home than to be in a hospital or institution, but we have to recognise that if they are at home there is often a considerable burden on those who have to look after them. For this reason we have decided to introduce the constant attendance allowance for those very severely disabled.
The next advantage of our scheme is that pensions and benefits will be inflation-proof. The Government will be bound by law to review the main rates of pensions and other payments every two years. The resulting benefit increases will, at a minimum, compensate for any rises in prices during the preceding two years. The Government will also bear in mind the rising standard of life in the country. These reviews will also cover present scheme pensioners as well as new scheme pensioners. Allowances for war pensioners will be increased and the supplementary benefit level will be dealt with at the same time.
§ Miss Herbison
Is it not the case that contributions will rise with earnings? Why should a Labour Government have to say that it would be dangerous to give a pledge that the old people would
§ not have the gap widened between them and workers?
§ Mr. Ennals
As far as the Labour Government are concerned we already have the record of what has been done since we came to power, as my right hon. Friend well knows. I have the figures here. The standard rate of pension for a single person has been increased by 33⅓ per cent. since 1964, for a married couple it is 33.9 per cent., and the average earnings increase since 1964 is 27 per cent. We have stood by our pledge.
For the 7 million existing National Insurance pensioners, I can announce on behalf of the Government that there will be a further increase this autumn, the third since we came to power. Legislation will be introduced later this session.
In conclusion, it will be a proud moment for the Labour Party when this new, bold reform becomes the law of the land. This will be a practical expression of the social conscience which has always motivated our Labour movement. For us it will be a day for which we have strived and worked for long years. Alongside the National Health Service which was created by Aneurin Bevan, this new pension scheme, when it is on the Statute Book, will be a tribute to Labour Government, but, more important, it will not merely be a great day for our party; it will be a great day for the people of this country.
§ Mr. Charles Grey (Treasurer of Her Majesty's Household) rose in his place and claimed to move. That the Question be now put.
§ Question, That the Question be now put, put and agreed to.
§ Question put accordingly, That the Amendment be made:—
§ The House divided: Ayes 232, Noes 289.803
|Division No. 111.]||AYES||[10.0 p.m.|
|Alison, Michael (Barkston Ash)||Beamish, Col. Sir Tufton||Blaker, Peter|
|Astor, John||Bennett, Sir Frederic (Torquay)||Boardman, Tom (Leicester, S.W.)|
|Atkins, Humphrey (M't'n & M'd'n)||Bennett, Dr. Reginald (Gos. & Fhm)||Body, Richard|
|Awdry, Daniel||Berry, Hn. Anthony||Bossom, Sir Clive|
|Baker, Kenneth (Acton)||Bessell, Peter||Boyd-Carpenter, Rt. Hn. John|
|Baker, W. H. K. (Banff)||Biffen, John||Boyle, Rt. Hn. Sir Edward|
|Balniel, Lord||Biggs-Davison, John||Braine, Bernard|
|Barber, Rt. Hn. Anthony||Birch, Rt. Hn. Nigel||Brewis, John|
|Batsford, Brian||Black, Sir Cyril||Brinton, Sir Tatton|
|Bromley-Davenport, Lt. Col. Sir Walter||Hogg, Rt. Hn. Quintin||Pardoe, John|
|Brown, Sir Edward (Bath)||Holland, Philip||Pearson, Sir Frank (Glitheroe)|
|Bruce-Gardyne, J.||Hordern, Peter||Peel, John|
|Bryan, Paul||Hornby, Richard||Percival, Ian|
|Buchanan-Smith, Alick (Angus, N & M)||Howell, David (Guildford)||Peyton, John|
|Buck, Anthony (Colchester)||Hunt, John||Pink, R. Bonner|
|Bullus, Sir Eric||Hutchison, Michael Clark||Pounder, Rafton|
|Burden, F, A.||Iremonger, T. L.||Powell, Rt, Hn. J. Enoch|
|Campbell, B. (Oldham, W.)||Irvine, Bryant Godman (Rye)||Price, David (Eastleigh)|
|Campbell, Gordon (Moray & Nairn)||Jenkin, Patrick (Woodford)||Prior, J. M. L.|
|Carr, Rt. Hn. Robert||Jennings, J. C. (Burton)||Pym, Francis|
|Channon, H. P. G.||Johnston, Russell (Inverness)||Quennell, Miss J. M.|
|Chichester-Clark, R.||Jones, Arthur (Northants, S.)||Ramsden, Rt. Hn. James|
|Clark, Henry||Jopling, Michael||Rawlinson, Rt. Hn. Sir Peter|
|Clegg, Walter||Joseph, Rt. Hn. Sir Keith||Rees-Davies, W. R.|
|Cooke, Robert||Kaberry, Sir Donald||Renton, Rt. Hn. Sir David|
|Cooper-Key, Sir Neill||Kerby, Capt. Henry||Rhys Williams, Sir Brandon|
|Corfield, F. V.||Kershaw, Anthony||Ridley, Hn. Nicholas|
|Costain, A, P.||Kimball, Marcus||Ridsdale, Julian|
|Crouch, David||King, Evelyn (Dorset, S.)||Rippon, Rt. Hn. Geoffrey|
|Crowder, F. P.||Kitson, Timothy||Robson Brown, Sir William|
|Cunningham, Sir Knox||Knight, Mrs. Jill||Rodgers, Sir John (Sevenoaks)|
|Currie, G. B. H.||Lancaster, Col. C. G.||Royle, Anthony|
|Dalkeith, Earl of||Lane, David||Russell, Sir Ronald|
|Dance, James||Langford-Holt, Sir John||St. John-Stevas, Norman|
|d'Avigdor-Goldsmid, Sir Henry||Legge-Bourke, Sir Harry||Sandys, Rt. Hn. D.|
|Dean, Paul||Lewis, Kenneth (Rutland)||Scott, Nicholas|
|Deedes, Rt. Hn. W. F. (Ashford)||Lloyd, Ian (P'tsm'th, Langstone)||Scott-Hopkins, James|
|Digby, Simon Wingfield||Lloyd, Rt. Hn. Selwyn (Wirral)||Shaw, Michael (Sc'b'gh & Whitby)|
|Dodds-Parker, Douglas||Longden, Gilbert||Silvester, Frederick|
|Doughty, Charles||Loveys, W. H.||Sinclair, Sir George|
|du Cann, Rt. Hn. Edward||Lubbock, Eric|
|Eden, Sir John||McAdden, Sir Stephen||Smith, Dudley (W'wick & L'mington)|
|Elliot, Capt. Walter (Carshalton)||MacArthur, Ian||Smith, John (London & W'minster)|
|Emery, Peter||Maclean, Sir Fitzroy||Speed, Keith|
|Eyre, Reginald||Macleod, Rt. Hn. Iain||Stainton, Keith|
|Farr, John||McMaster, Stanley||Stoddart-Scott, Col. Sir M.|
|Fisher, Nigel||Macmillan, Maurice (Farnham)||Summers, Sir Spencer|
|Fortescue, Tim||McNair-Wilson. Patrick||Tapsell, Peter|
|Foster, Sir John||Maddan, Martin||Taylor, Sir Charles (Eastbourne)|
|Fraser, Rt. Hn. Hugh (St'fford & Stone)||Marples, Rt. Hn. Ernest||Taylor, Edward M. (G'gow, Cathcart|
|Galbraith, Hn. T. G.||Marten, Neil||Taylor, Frank (Moss Side)|
|Gibson-Watt, David||Maude, Angus||Thorpe, Rt. Hn. Jeremy|
|Gilmour, Ian (Norfolk, C.)||Maudling, Rt. Hn. Reginald||Tilney, John|
|Gilmour, Sir John (Fife, E.)||Mawby, Ray||Turton, Rt. Hn. R. H.|
|Glover, Sir Douglas||Maxwell-Hyslop, R. J.||van Straubenzee, W. R.|
|Glyn, Sir Richard||Maydon, Lt.-Cmdr. S. L. C.||Vaughan-Morgan, Rt. Hn. Sir John|
|Godber, Rt. Hn. J. B.||Mills, Peter (Torrington)||Vickers, Dame Joan|
|Goodhart, Philip||Mills, Stratton (Belfast, N.)||Waddington, David|
|Goodhew, Victor||Miscampbell, Norman||Walker-Smith, Rt. Hn. Sir Derek|
|Gower, Raymond||Mitchell, David (Basingstoke)||Walters, Dennis|
|Grant, Anthony||Monro, Hector||Ward, Dame Irene|
|Gresham Cocke, R.||Montgomery, Fergus||Weatherill, Bernard|
|Grieve, Percy||Morgan, Geraint (Denbigh)||Wells, John (Maidstone)|
|Gurden, Harold||Morrison, Charles (Devizes)||Whitelaw, Rt. Hn. William|
|Hall, John (Wycombe)||Mott-Radclyffe, Sir Charles||Williams, Donald (Dudley)|
|Hall-Davis, A. G. F.||Munro-Lucas-Tooth, Sir Hugh||Wilson, Geoffrey (Truro)|
|Hamilton, Lord (Fermanagh)||Murton, Oscar||Winstanley, Dr. M. P.|
|Hamilton, Michael (Salisbury)||Nabarro, Sir Gerald||Wolrige-Gordon, Patrick|
|Harris, Frederic (Croydon, N.W.)||Nicholls, Sir Harmar||Wood, Rt. Hn. Richard|
|Harris, Reader (Heston)||Noble, Rt. Hn. Michael||Woodnutt, Mark|
|Harvey, Sir Arthur Vere||Nott, John||Worsley, Marcus|
|Hastings, Stephen||Onslow, Cranley||Wright, Esmond|
|Hawkins, Paul||Orr, Capt. L. P. S.||Wylie, N. R.|
|Hay, John||Orr-Ewing, Sir Ian||Younger, Hn, George|
|Heald, Rt. Hn. Sir Lionel||Osborn, John (Hallam,)|
|Heseltine, Michael||Osborne, Sir Cyril (Louth)||TELLERS FOR THE AYES:|
|Higgins, Terence L.||Page, Graham (Crosby)||Mr. R. W. Elliott and|
|Hill, J. E. B.||Page, John (Harrow, W.)||Mr. Jasper More.|
|Albu, Austen||Beaney, Alan||Bray, Dr. Jeremy|
|Alldritt, Walter||Bidwell, Sydney||Brooks, Edwin|
|Anderson, Donald||Binns, John||Broughton, Dr. A. D. D.|
|Archer, Peter||Bishop, E. S.||Brown, Rt. Hn. George (Belper)|
|Ashton, Joe (Bassetlaw)||Blackburn, F.||Brown, Hugh D. (G'gow, Provan)|
|Atkins, Ronald (Preston, N.)||Blenkinsop, Arthur||Brown, Bob (N 'c'tle-upon-Tyne, W.)|
|Atkinson, Norman (Tottenham)||Boardman, H. (Leigh)||Brown, R. W. (Shoreditch & F'bury)|
|Bacon, Rt. Hn. Alice||Booth, Albert||Buchan, Norman|
|Bagier, Gordon A. T.||Boston, Terence||Buchanan, Richard (G'gow, Sp'burn)|
|Barnes, Michael||Bottomley, Rt. Hn. Arthur||Butler, Herbert (Hackney, C.)|
|Barnett, Joel||Boyden, James||Butler, Mrs. Joyce (Wood Green)|
|Callaghan, Rt. Hn. James||Hooley, Frank||Moyle, Roland|
|Carmichael, Neil||Horner, John||Mulley, Rt. Hn. Frederick|
|Carter-Jones, Lewis||Houghton, Rt. Hn. Douglas||Murray, Albert|
|Castle, Rt. Hn. Barbara||Howarth, Harry (Wellingborough)||Neal, Harold|
|Chapman, Donald||Howarth, Robert (Bolton, E.)||Newens, Stan|
|Coe, Denis||Howell, Denis (Small Heath)||Noel-Baker, Rt. Hn. Philip (Derby, S.)|
|Coleman, Donald||Howie, W.||Oakes, Gordon|
|Conlan, Bernard||Hoy, James||Ogden, Eric|
|Corbet, Mrs. Freda||Huckfield, Leslie||O'Malley, Brian|
|Crawshaw, Richard||Hughes, Rt. Hn. Gledwyn (Anglesey)||Oram, Albert E.|
|Cronin, John||Hughes, Emrys (Ayrshire, S.)||Orbach, Maurice|
|Crossman, Rt. Hn. Richard||Hughes, Hector (Aberdeen, N.)||Orme, Stanley|
|Cullen, Mrs. Alice||Hughes, Roy (Newport)||Oswald, Thomas|
|Dalyell, Tam||Hunter, Adam||Owen, Dr. David (Plymouth, S'tn)|
|Darling, Rt. Hn. George||Hynd, John||Owen, Will (Morpeth)|
|Davidson, Arthur (Accrington)||Irvine, Sir Arthur (Edge Hill)||Pauley, Walter|
|Davies, Ednyfed Hudson (Conway)||Jackson, Colin (B'h'se & Spenb'gh)||Palmer, Arthur|
|Davies, G. Elfed (Rhondda, E.)||Jay, Rt. Hn. Douglas||Pannell, Rt. Hn. Arthur|
|Davies, Dr. Ernest (Stretford)||Jeger, George (Goole)||Park, Trevor|
|Davies, Rt. Hn. Harold (Leek)||Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)||Parker, John (Dagenham)|
|Davies, Ifor (Gower)||Jenkins, Hugh (Putney)||Parkin, Ben (Paddington, N.)|
|de Freitas, Rt. Hn. Sir Geoffrey||Johnson, Carol (Lewisham, S.)||Parkyn, Brian (Bedford)|
|Delargy, Hugh||Johnson, James (K'ston-on-Hull, W.)||Pavitt, Laurence|
|Dell, Edmund||Jones, Dan (Burnley)||Pearson, Arthur (Pontypridd)|
|Dempsey, James||Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)||Peart, Rt. Hn. Fred|
|Dewar, Donald||Jones, T. Alec (Rhondda, West)||Pentland, Norman|
|Diamond, Rt. Hn. John||Judd, Frank||Perry, Ernest G. (Battersea, S.)|
|Dickens, James||Kelley, Richard||Prentice, Rt. Hn. R. E.|
|Dobson, Ray||Kenyon, Clifford||Price, Christopher (Perry Barr)|
|Doig, Peter||Kerr, Mrs. Anne (R'ter & Chatham)||Price, Thomas (Westhoughton)|
|Driberg, Tom||Kerr, Dr. David (W'worth, Central)||Price, William (Rughy)|
|Dunn, James A.||Kerr, Russell (Feltham)||Pursey, Cmdr. Harry|
|Dunnett, Jack||Lawson, George||Randall, Harry|
|Dunwoody, Mrs. Gwyneth (Exeter)||Leadbitter, Ted||Rankin, John|
|Dunwoody, Dr. John (F'th & C'b'e)||Ledger, Ron||Rees, Merlyn|
|Eadie, Alex||Lee, Rt. Hn. Frederick (Newton)||Reynolds, Rt. Hn. G. W.|
|Edelman, Maurice||Lee, Rt. Hn. Jennie (Cannock)||Richard, Ivor|
|Edwards, Robert (Bilston)||Lee, John (Reading)||Roberts, Albert (Normanton)|
|Ellis, John||Lestor, Miss Joan||Roberts, Rt. Hn. Goronwy|
|English, Michael||Lever, Harold (Cheetham)||Roberts, Gwilym (Bedfordshire, S.)|
|Enals, David||Lever, L. M. (Ardwick)||Robertson, John (Paislye)|
|Evans, Fred (Caerphilly)||Lewis, Arthur (W. Ham, N.)||Robinson, Rt. Hn. Kenneth (St. P'c'as)|
|Faulds, Andrew||Lewis, Ron (Carlisle)||Roebuck, Roy|
|Fernyhough, E.||Lipton, Marcus||Rogers, George (Kensington, N.)|
|Finch, Harold||Luard, Evan||Rose, Paul|
|Fitch, Alan (Wigan)||Lyon, Alexander W. (York)||Ross, Rt. Hn. William|
|Fletcher, Rt. Hn. Sir Eric (Islington, E.)||Lyons, Edward (Bradford, E.)||Rowlands, E.|
|Fletcher, Raymond (Ilkeston)||Mabon, Dr. J. Dickson||Ryan, John|
|Fletcher, Ted (Darlington)||McBride, Neil||Shaw, Arnold (llford, S.)|
|Foley, Maurice||McCann, John||Sheldon, Robert|
|Foot, Rt. Hn. Sir Dingle (Ipswich)||MacColl, James||Shinwell, Rt. Hn. E.|
|Foot, Michael (Ebbw Vale)||MacDermot, Niall||Shore, Rt. Hn. Peter (Stepney)|
|Ford, Ben||Macdonald, A. H.||Short, Mrs. Renée (W'hampton, N.E.)|
|Fowler, Gerry||McKay, Mrs. Margaret||Silkin, Rt. Hn. John (Deptford)|
|Fraser, John (Norwood)||Mackenzie, Gregor (Rutherglen)||Silkin, Hn. S. C. (Dulwich)|
|Freeson, Reginald||Mackie, John||Silverman, Julius|
|Galpern, Sir Myer||Mackintosh, John P.||Skeffington, Arthur|
|Gardner, Tony||Maclennan, Robert||Small, William|
|Garrett, W. E.||MacMillan, Malcolm (Wetern Isles)||Spriggs, Leslie|
|Ginsburg, David||McMillan, Tom (Glasgow, C.)||Steele, Thomas (Dunbartonshire, W.)|
|Gordon Walker, Rt. Hn. P. C.||McNamara, J. Kevin||Stewart, Rt. Hn. Michael|
|Gray, Dr. Hugh (Yarmouth)||MacPherson, Malcolm||Stonehouse, Rt. Hn. John|
|Gregory, Arnold||Mahon, Peter (Preston, S.)||Strauss, Rt. Hn. G. R.|
|Grey, Charles (Durham)||Mahon, Simon (Bootle)||Summerskill, Hn. Dr. Shirley|
|Griffiths, David (Rother Valley)||Mallalieu, J.P.W. (Huddersfield, E.)||Taverne, Dick|
|Griffiths, Eddie (Brightside)||Manuel, Archie|
|Griffiths, Rt. Hn. James (Llanelly)||Mapp, Charles||Thomas, Rt. Hn. George|
|Griffiths, Will (Exchange)||Marks, Kenneth||Thomson, Rt. Hn. George|
|Hamilton, James (Bothwell)||Marquand, David||Thornton, Ernest|
|Hamilton, William (Fife, W.)||Marsh, Rt. Hn. Richard||Tinn, James|
|Hamling, William||Mason, Rt. Hn. Roy||Tuck, Raphael|
|Hannan, William||Mayhew, Christopher||Urwin, T. W.|
|Harper, Joseph||Mellish, Rt. Hn. Robert||Varley, Eric G.|
|Harrison, Walter (Wakefield)||Mendelson, John||Wainwright, Edwin (Dearne Valley)|
|Hart, Rt. Hn. Judith||Millan, Bruce||Wallace, George|
|Haseldine, Norman||Miller, Dr. M. S.||Watkins. David (Consett)|
|Hattersley, Roy||Mitchell, R. C. (S'th'pton, Test)||Weitzman, David|
|Hazell, Bert||Molloy, William||Wellbeloved, James|
|Healey, Rt. Hn. Denis||Moonman, Eric||Whitaker, Ben|
|Heffer, Eric S.||Morgan, Elystan (Cardiganshire)||Wilkins, W. A.|
|Henig, Stanley||Morris, Alfred (Wythenshawe)||Willey, Rt. Hn. Frederick|
|Herbison, Rt. Hn. Margaret||Morris, Charles R. (Openshaw)||Williams, Alan (Swansea, W.)|
|Hilton, W. S.||Morris, John (Aberavon)||Williams, Alan Lee (Hornchurch)|
|Williams, Clifford (Abertillery)||Wilson, Rt. Hn. Harold (Huyton)||TELLERS FOR THE NOES:|
|Williams, Mrs. Shirley (Hitchin)||Wilson, William (Coventry, S.)||Mr. Ioan L. Evans and|
|Williams, W. T. (Warrington)||Winnick, David||Mr. J. D. Concannon.|
|Willis, Rt. Hn. George||Woof, Robert|
§ Main Question put accordingly:—808
§ The House divided: Ayes 283, Noes 234.811
|Division No. 112.]||AYES||[10.12 p.m.|
|Albu, Austen||Ennals, David||Kerr, Mrs. Anne (R'ter & Chatham)|
|Alldritt, Walter||Evans, Fred (Caerphilly)||Kerr, Dr. David (W'worth, Central)|
|Anderson, Donald||Faulds, Andrew||Kerr, Russell (Feltham)|
|Archer, Peter||Fernyhough, E.||Lawson, George|
|Ashton, Joe (Bassetlaw)||Finch, Harold||Leadbitter, Ted|
|Atkins, Ronald (Preston, N.)||Fitch, Alan (Wigan)||Ledger, Ron|
|Atkinson, Norman (Tottenham)||Fletcher, Rt. Hn. Sir Eric (Islington, E.)||Lee, Rt. Hn. Frederick (Newton)|
|Bacon, Rt. Hn. Alice||Fletcher, Raymond (Ilkeston)||Lee, Rt. Hn. Jennie (Cannock)|
|Bagier, Gordon A. T.||Fletcher, Ted (Darlington)||Lee, John (Reading)|
|Barnes, Michael||Foley, Maurice||Lestor, Miss Joan|
|Barnett, Joel||Foot, Rt. Hn. Sir Dingle (Ipswich)||Lever, Harold (Cheetham)|
|Bidwell, Sydney||Foot, Michael (Ebbw Vale)||Lever, L. M. (Ardwick)|
|Binns, John||Ford, Ben||Lewis, Arthur (W. Ham, N.)|
|Bishop, E. S.||Fowler, Gerry||Lewis, Ron (Carlisle)|
|Blackburn, F.||Fraser, John (Norwood)||Lipton, Marcus|
|Blenkinsop, Arthur||Freeson, Reginald||Luard, Evan|
|Boardman, H. (Leigh)||Galpern, Sir Myer||Lyon, Alexander W. (York)|
|Booth, Albert||Gardner, Tony||Lyons, Edward (Bradford, E.)|
|Boston, Terence||Garrett, W. E.||Mabon, Dr. J. Dickson|
|Bottomley, Rt. Hn. Arthur||Ginsburg, David||McBride, Neil|
|Boyden, James||Gordon Walker, Rt. Hn. P. C.||McCann, John|
|Bray, Dr. Jeremy||Gray, Dr. Hush (Yarmouth)||MacColl, James|
|Brooks, Edwin||Gregory, Arnold||MacDermot, Niall|
|Broughton, Dr. A. D. D.||Grey, Charles (Durham)||Macdonald, A. H.|
|Brown, Rt. Hn. George (Belper)||Griffiths, Eddie (Brightside)||McKay, Mrs. Margaret|
|Brown, Hugh D. (G'gow, Provan)||Griffiths, Rt. Hn. James (Llanelly)||Mackenzie, Gregor (Rutherglen)|
|Brown, Bob (N'ctle-upon-Tyne, W.)||Griffiths, Will (Exchange)||Mackie, John|
|Brown, R. W. (Shoreditch & F'bury)||Hamilton, James (Bothwell)||Maclennan, Robert|
|Buchan, Norman||Hamilton, William (Fife, W.)||MacMillan, Malcolm (Western Isles)|
|Buchanan, Richard (G'gow, Sp'burn)||Hamling, William||McMillan, Tom (Glasgow, C.)|
|Butler, Herbert (Hackney, C.)||Hannan, William||McNamara, J. Kevin|
|Butler, Mrs. Joyce (Wood Green)||Harper, Joseph||MacPherson, Malcolm|
|Callaghan, Rt. Hn. James||Harrison, Walter (Wakefield)||Mahon, Peter (Preston, S.)|
|Carter-Jones, Lewis||Hart, Rt. Hn. Judith||Mahon, Simon (Bootle)|
|Castle, Rt. Hn. Barbara||Haseldine, Norman||Mallalieu, J.P.W. (Huddersfield, E.)|
|Chapman, Donald||Hattersley, Roy||Manuel, Archie|
|Coe, Denis||Hazell, Bert||Mapp, Charles|
|Coleman, Donald||Healey, Rt. Hn. Denis||Marks, Kenneth|
|Conlan, Bernard||Heffer, Eric S.||Marquand, David|
|Corbet, Mrs. Freda||Henig, Stanley||Marsh, Rt. Hn. Richard|
|Crawshaw, Richard||Herbison, Rt. Hn. Margaret||Mason, Rt. Hn. Roy|
|Cronin, John||Hilton, W. S.||Mayhew, Christopher|
|Crossman, Rt. Hn. Richard||Hooley, Frank||Mellish, Rt. Hn. Robert|
|Cullen, Mrs. Alice||Horner, John||Mendelson, John|
|Dalyell, Tam||Houghton, Rt. Hn. Douglas||Millan, Bruce|
|Darling, Rt. Hn, George||Howarth, Harry (Wellingborough)||Miller, Dr. M. S.|
|Davidson, Arthur (Accrington)||Howarth, Robert (Bolton, E.)||Mitchell, R. C. (S'th'pton, Test)|
|Davies, Ednyfed Hudson (Conway)||Howell, Denis (Small Heath)||Molloy, William|
|Davies, G. Elfed (Rhondda, E.)||Howie, W.||Moonman, Eric|
|Davies, Dr. Ernest (Stretford)||Hoy, James||Morgan, Elystan (Cardiganshire)|
|Davies, Rt. Hn. Harold (Leek)||Huckfield, Leslie||Morris, Alfred (Wythenshawe)|
|Davies, Ifor (Gower)||Hughes, Rt. Hn. Cledwyn (Anglesey)||Morris, Charles R. (Openshaw)|
|de Freiras, Rt. Hn. Sir Geoffrey||Hughes, Emrys (Ayrshire, S.)||Morris, John (Aberavon)|
|Delargy, Hugh||Hughes, Hector (Aberdeen, N.)||Moyle, Roland|
|Dell, Edmund||Hughes, Roy (Newport)||Mulley, Rt. Hn. Frederick|
|Dempsey, James||Hunter, Adam||Murray, Albert|
|Dewar, Donald||Hynd, John||Neal, Harold|
|Diamond, Rt. Hn. John||Irvine, Sir Arthur (Edge Hill)||Newens, Stan|
|Noel-Baker, Rt. Hn. Philip (Derby, S.)|
|Dickens, James||Jackson, Colin (B'h'se & Spenb'gh)||Oakes, Gordon|
|Dobson, Ray||Jay, Rt. Hn. Douglas||Ogden, Eric|
|Doig, Peter||Jeger, George (Goole)||O'Malley, Brian|
|Driberg, Tom||Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)||Oram, Albert E.|
|Dunn, James A.||Jenkins, Hugh (Putney)||Orbach, Maurice|
|Dunnett, Jack||Johnson, Carol (Lewisham, S.)||Orme, Stanley|
|Dunwoody, Mrs. Gwyneth (Exeter)||Johnson, James (K'ston-on-Hull, W.)||Oswald, Thomas|
|Dunwoody, Dr. John (F'th & C'b'e)||Jones, Dan (Burnley)||Owen, Dr. David (Plymouth, S'tn)|
|Eadie, Alex||Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)||Owen, Will (Morpeth)|
|Edelman, Maurice||Jones, T. Alec (Rhondda, West)||Padley, Walter|
|Edwards, Robert (Bilston)||Judd, Frank||Palmer, Arthur|
|Ellis, John||Kelley, Richard||Pannell, Rt. Hn. Charles|
|English, Michael||Kenyon, Clifford||Park, Trevor|
|Parker, John (Dagenham)||Rogers, George (Kensington, N.)||Urwin, T. W.|
|Parkin, Ben (Paddington, N.)||Rose, Paul||Varley, Eric G.|
|Parkyn, Brian (Bedford)||Ross, Rt. Hn. William||Wainwright, Edwin (Dearne Valley)|
|Pavitt, Laurence||Rowlands, E.||Wallace, George|
|Pearson, Arthur (Pontypridd)||Shaw, Arnold (llford, S.)||Watkins, David (Consett)|
|Peart, Rt. Hn. Fred||Sheldon, Robert||Weitzman, David|
|Pentland, Norman||Shore, Rt. Hn. Peter (Stepney)||Wellbeloved, James|
|Perry, Ernest G. (Battersea, S.)||Short, Mrs. Renée (W'hampton, N.E.)||Whitaker, Ben|
|Prentice, Rt. Hn. R. E.||Silkin, Rt. Hn. John (Deptford)||Wilkins, W. A.|
|Price, Christopher (Perry Barr)||Silkin, Hn. S. C. (Dulwich)||Willey, Rt. Hn. Frederick|
|Price, Thomas (Westhoughton)||Silverman, Julius||Williams, Alan (Swansea, W.)|
|Price, William (Rugby)||Skeffington, Arthur||Williams, Alan Lee (Hornchurch)|
|Pursey, Cmdr. Harry||Small, William||Williams Clifford (Abertillery)|
|Randall, Harry||Spriggs, Leslie||Williams, Mrs. Shirley (Hitchin)|
|Rankin, John||Stewart, Rt. Hn. Michael||Williams, W. T. (Warrington)|
|Rees, Merlyn||Stonehouse, Rt. Hn. John||Willis, Rt. Hn. George|
|Reynolds, Rt. Hn. G. W.||Strauss, Rt. Hn. G. R.||Wilson, Rt. Hn. Harold (Huyton)|
|Richard, Ivor||Summerskill, Hn. Dr. Shirley||Wilson, William (Coventry, S.)|
|Roberts, Albert (Normanton)||Taverne, Dick||Winnick, David|
|Roberts, Rt. Hn. Goromy||Thomas, Rt. Hn. George||Woof, Robert|
|Roberts, Gwilym (Bedfordshire, S.)||Thomson, Rt. Hn. George|
|Robertson, John (Paisley)||Thornton, Ernest||TELLERS FOR THE AYES:|
|Robinson, Rt. Hn. Kenneth (St. P'c'as)||Tinn, James||Mr. J. D. Concannon and|
|Roebuck, Roy||Tuck, Raphael||Mr. Ioan L. Evans.|
|Alison, Michael (Barkston Ash)||Doughty, Charles||Kaberry, Sir Donald|
|Astor, John||du Cann, Rt. Hn. Edward||Kerby, Capt. Henry|
|Atkins, Humphrey (M't'n & M'd'n)||Eden, Sir John||Kershaw, Anthony|
|Awdry, Daniel||Elliot, Capt. Walter (Carshalton)||Kimball, Marcus|
|Baker, Kenneth (Acton)||Emery, Peter||King, Evelyn (Dorset, S.)|
|Baker, W. H. K. (Banff)||Eyre, Reginald||Kitson, Timothy|
|Balniel, Lord||Farr, John||Knight, Mrs. Jill|
|Barber, Rt. Hn. Anthony||Fisher, Nigel||Lambton, Viscount|
|Batsford, Brian||Fortescue, Tim||Lancaster, Col. C. G.|
|Beamish, Col. Sir Tufton||Foster, Sir John||Lane, David|
|Bennett, Sir Frederic (Torquay)||Fraser, Rt. Hn. Hugh (St'fford & Stone)||Langford-Holt, Sir John|
|Bennett, Dr. Reginald (Gos. & Fhm)||Galbraith, Hn. T. C.||Legge-Bourke, Sir Harry|
|Berry, Hn. Anthony||Gibson-Watt, David||Lewis, Kenneth (Rutland)|
|Bessell, Peter||Giles, Rear-Adm. Morgan||Lloyd, Ian (P'tsm'th, Langstone)|
|Biffen, John||Gilmour, Ian (Norfolk, C.)||Lloyd, Rt. Hn. Selwyn (Wirral)|
|Biggs-Davison, John||Gilmour, Sir John (Fife, E.)||Longden, Gilbert|
|Birch, Rt. Hn. Nigel||Glover, Sir Douglas||Loveys, W. H.|
|Black, Sir Cyril||Glyn, Sir Richard||Lubbock, Eric|
|Blaker, Peter||Godber, Rt. Hn. J. B.||McAdden, Sir Stephen|
|Boardman, Tom (Leicester, S.W.)||Goodhart, Philip||MacArthur, Ian|
|Body, Richard||Goodhew, Victor||Maclean, Sir Fitzroy|
|Bossom, Sir Clive||Gower, Raymond||Macleod, Rt. Hn. Iain|
|Boyd-Carpenter, Rt. Hn. John||Grant, Anthony||McMaster, Stanley|
|Boyle, Rt. Hn. Sir Edward||Grant-Ferris, R.||Macmillan, Maurice (Farnham)|
|Braine, Bernard||Gresham Cooke, R.||McNair-Wilson. Patrick|
|Brewis, John||Grieve, Percy||Maddan, Martin|
|Brinton, Sir Tatton||Gurden, Harold||Maginnis, John E.|
|Bromley-Davenport, Lt.-Col. Sir Walter||Hall, John (Wycombe)||Marples, Rt. Hn. Ernest|
|Brown, Sir Edward (Bath)||Hall-Davis, A. G. F.||Marten, Neil|
|Bruce-Gardyne, J.||Hamilton, Lord (Fermanagh)||Maude, Angus|
|Bryan, Paul||Hamilton, Michael (Salisbury)||Maudling, Rt. Hn. Reginald|
|Buchanan-Smith, Alick (Angus, N & M)||Harris, Frederic (Croydon, N.W.)||Mawby, Ray|
|Buck, Antony (Colchester)||Harris, Reader (Heston)||Maxwell-Hyslop, R. J.|
|Bullus, Sir Eric||Harvey, Sir Arthur Vere||Maydon, Lt.-Cmdr. S. L. C.|
|Burden, F. A.||Hastings, Stephen||Mills, Peter (Torrington)|
|Campbell, B. (Oldham, W,)||Hawkins, Paul||Mills, Stratton (Belfast, N.)|
|Campbell, Gordon (Moray & Nairn)||Hay, John||Miscampbell, Norman|
|Carr, Rt. Hn. Robert||Heald, Rt. Hn. Sir Lionel||Mitchell, David (Basingstoke)|
|Channon, H. P. G.||Heseltine, Michael||Monro, Hector|
|Chichester-Clark, R.||Higgins, Terence L.||Montgomery, Fergus|
|Clark, Henry||Hill, J. E. B.||Morgan, Geraint (Denbigh)|
|Clegg, Walter||Hirst, Geoffrey||Morrison, Charles (Devizes)|
|Cooke, Robert||Hogg, Rt. Hn. Quintin||Mott-Radclyffe, Sir Charles|
|Cooper-Key, Sir Neill||Holland, Philip||Munro-Lucas-Tooth, Sir Hugh|
|Corfield, F. W.||Hordern, Peter||Murton, Oscar|
|Costain, A. P.||Hornby, Richard||Nabarro, Sir Gerald|
|Crouch, David||Howell, David (Guildford)||Nicholls, Sir Harmar|
|Crowder, F. P.||Hunt, John||Noble, Rt. Hn. Michael|
|Cunningham, Sir Knox||Hutchison, Michael Clark||Nott, John|
|Currie, G. B. H.||Iremonger, T. L.||Onslow, Cranley|
|Dalkeith, Earl of||Irvine, Bryant Godman (Rye)||Orr, Capt. L. P. S.|
|Dance, James||Jenkin, Patrick (Woodford)||Orr-Ewing, Sir Ian|
|d'Avigdor-Goldsmid, Sir Henry||Jennings, J. C. (Burton)||Osborn, John (Hallam)|
|Dean, Paul||Johnston, Russell (Inverness)||Osborne, Sir Cyril (Louth)|
|Deedes, Rt. Hn. W. F. (Ashford)||Jones, Arthur (Northants, S.)||Page, Graham (Crosby)|
|Digby, Simon Wingfield||Jopling, Michael||Page, John (Harrow, W.)|
|Dodds-Parker, Douglas||Joseph, Rt. Hn. Sir Keith||Pardoe, John|
|Pearson, Sir Frank (Clitheroe)|
|Peel, John||St. John-Stevas, Norman||Vickers, Dame Joan|
|Percival, Ian||Sandys, Rt. Hn. D.||Waddington, David|
|Peyton, John||Scott, Nicholas||Walker-Smith, Rt. Hn. Sir Derek|
|Pink, R. Bonner||Scott-Hopkins, James||Walters, Dennis|
|Pounder, Rafton||Shaw, Michael (Sc'b'gh & Whitby)||Ward, Dame Irene|
|Powell, Rt. Hn. J. Enoch||Silvester, Frederick||Weatherill, Bernard|
|Price, David (Eastleigh)||Sinclair, Sir George||Wells, John (Maidstone)|
|Prior, J. M. L.||Smith, Dudley (W'wick & L'mington)||Whitelaw, Rt. Hn. William|
|Pym, Francis||Smith, John (London & W 'minster)||Williams, Donald (Dudley)|
|Quennell, Miss J. M.||Speed, Keith||Wilson, Geoffrey (Truro)|
|Ramsden, Rt. Hn. James||Stainton, Keith||Winstanley, Dr. M. P.|
|Rawlinson, Rt. Hn. Sir Peter||Stoddart-Scott, Col. Sir M.||Wolrige-Gordon, Patrick|
|Rees-Davies, W. R.||Summers, Sir Spencer||Wood, Rt. Hn. Richard|
|Renton, Rt. Hn. Sir David||Tapsell, Peter||Woodnutt, Mark|
|Rhys Williams, Sir Brandon||Taylor, Sir Charles (Eastbourne)||Worsley, Marcus|
|Ridley, Hn. Nicholas||Taylor, Edward M. (G'gow, Cathcart)||Wright, Esmond|
|Ridsdale, Julian||Taylor, Frank (Moss Side)||Wylie, N. R.|
|Rippon, Rt. Hn. Geoffrey||Thorpe, Rt. Hn. Jeremy||Younger, Hn. George|
|Robson Brown, Sir William||Tilney, John|
|Rodgers, Sir John (Sevenoaks)||Turton, Rt. Hn. R. H.||TELLERS FOR THE NOES:|
|Royle, Anthony||van Straubenzee, W. R.||Mr. R. W. Elliott and|
|Russell. Sir Ronald||Vaughan-Morgan, Rt. Hn. Sir John||Mr. Jasper More.|
|That this House approves the White Paper on Proposals for Earnings-Related Social Security, Command Paper No. 3883, as a basis for legislation; and invites Her Majesty's Government to continue consultation with a view to preparing legislation.|