§ 1. The deceased was a qualifying contributor."
§ I have endlessly pointed out in the House that the deceased in such cases, if a person who was of pensionable age before 5th July 1948 was not permitted by law to contribute. If he were not able to contribute, how can this rule apply to him?
§ On 24th July the hon. Member for Rotherham moved an amendment to the National Insurance Bill to increase the amount of the death grant. On that occasion I supported the Government because I was concerned much more with the point about those totally excluded because they had not contributed. In principle the increasing cost of funerals 278 makes it necessary to insist that this death grant is improved. I hope that hon. Members will support that in future.
§ The hon. Member for Bedwellty (Mr. Kinnock) referred to the Supplementary Benefits Commission in an important Adjournment debate on 2nd November concerning funeral expenses. The point to which I return is that of the very old who receive nothing for their funeral expenses and who many doctors say are affected by what is a cruel anomaly in the last weeks of their lives. I know that the Under-Secretary is listening sympathetically to what I am saying. In the debate on 24th July he said that the Government were looking at this matter.
§ I was particularly shocked by the story concerning an old gentleman of 89 in my constituency, at Wantage, who inquired about this at the local office of my right hon. Friend's Department the other day. I think my hon. Friend knows of this case. The official line is that the death grant was a new benefit in 1948. I know that, but 1948 was a long time ago and that is no longer an argument now. Now that the Government have brought the very old into the scheme, even on a non-contributory basis, I do not think that these people should any longer be denied this benefit. In many cases they feel that their relatives have made financial sacrifices for them, and they belong to a generation which believes in a decent funeral. This subject has been discussed many times in the House and I hope that this time the Government will pay heed to it. They can expect an amendment in Committee which I hope hon. Members will support.
§ It is preposterous that if a person were born before 5th July 1883 no death grant is payable except in terms of an antiquated system which has already been abandoned in the Bill. Clause 30(3) ought to be amended.
§ Further amendments will be required to abolish another rule relating to the death grant. This is an extraordinary rule which says that upon the death of a man born between 5th July 1883 and 5th July 1888 who has contributed for less than 10 years, £15 is payable instead of £30. It is extraordinary to have a half rate for the funeral of a person over 80. Since the number of people involved is diminishing all the while, it is time that my 279 hon. Friend gave way on this point. This is to elevate the contributory principle to the status of Holy Writ and in such a way as to provoke a good deal of indignation among relatives of such people. It is also a very unreal principle to say that death grants began only in 1948. I know that, but we have brought these people into National Insurance for the first time and they should be entitled to this benefit. That rule should be abolished and the full death grant paid.
§ In the debate on 24th July the hon. Member for Rotherham moved to increase the rate from £30 to £70. Since July I have looked further into this matter, and I should like to thank the organisations, especially Age Concern, which have helped me. They have had a lot of correspondence with and have interviewed many old people about the anxiety which is caused by having to meet funeral expenses.
§ The so-called minimum price for a funeral is said to be £69.75. That covers only the coffin and does not cover transport, churchyard fees and so on. The actual bill which the relatives are likely to receive is much nearer £80, £90 or £100—perhaps even higher. That is the kind of figure that should be borne in mind in urging the Government to increase the rate. In many quarters it is thought that the Government have this in mind, but if they have I hope that they will be realistic.
§ The Government say that funeral expenses should be paid out of the estate, and so they should in some cases, but many people do not have an estate large enough to bear this expense, or relatives who are able to afford to do so. My hon. Friend knows this, and he said on 24th July that the Government realised the desire on both sides of the House for an improvement and that it would be considered carefully during next year's up-rating. I accepted that and supported the Government on that occasion. I am well aware of the priorities, but the Government should give a much firmer undertaking that they intend to improve the grant at next year's up-rating. The grant at present is less than half the minimum actual cost to the relatives.280
§ I disagree with the hon. Member for Rotherham. Apart from the omissions to which I have referred, the Bill is a great advance and a great achievement. He may not like the principle of the Bill and he may say that he would have done it in a different way, but he should not have been so abusive to my right hon. Friend. The Bill is a great move forward in our efforts to prevent poverty in old age for the next generation.
§ 5.22 p.m.
§ Mr. Edmund Dell (Birkenhead)
The hon. Member for Abingdon (Mr. Neave) will find during the debate that the Opposition will seek firmer undertakings on several aspects, not just on those which he has mentioned. Unlike my hon. and right hon. Friends on the Front Bench, I had no responsibility in Government for our pension system and played no part in the abortive committee on the national superannuation scheme. I have been drawn into the debate for the reason indicated by the hon. Member for Kensington, South (Sir B. Rhys Williams) in his intervention. He said that it was possible to make criticisms about the adequacy of the provision, but was not the structure right? That is a relevant question. If the structure is right, we can manage the inputs and change the contributions. We can say that there shall be a Government contribution where there is not one and that contributions from employees and employers shall be changed to produce a better output. If the structure is right, those questions can be dealt with on that basis.
My worry about the Bill is that its structure is not right. The structure of its proposed provision for pensions is not right. There are principles behind any such provision which are generally accepted. The first is that there should be adequate provision for old age, "adequate" meaning in this context primarily better provision for old age. One cannot say that the Bill gives old people the guaranteed share in the increased standards of living that we should like to see. This may be taken account of in reviews, but there is no guarantee of it, and, far from any such guarantee, the figures before us show a depressing future.
Another principle which is generally accepted is that we should try to reduce 281 significantly the use of means-testing. The Bill explicitly does not provide for that. The explanatory memorandum states that the Bill does not provide for it. The Government claim that the tax credit scheme, if it comes into operation, will have that effect, but in discussing the Bill we cannot rely on a tax credit scheme, the cost of which will be enormous—no explanation having been given of how it will be paid for—a scheme to which the Government are not committed, which has not been through a Select Committee, and which is not contained in any Bill before us. We cannot rely on such a scheme to fulfil this important principle of reducing significantly the use of means-testing.
The principle that divides us is this. If the State provides, no one should be excluded from that provision; in other words, full contracting out of a State provision should not be permitted. There may be partial contracting-out, as in the national superannuation scheme, but not full contracting out. I say that for two reasons. First, no one should be deprived, by the fact that they have not contributed, from what the State may in future decide to do by way of improving its provision. Secondly, pensions should not be segregated as they are segregated here so that many of the better-off people have little interest in the basic pension scheme and no interest at all in the pension scheme on which large numbers of people will depend—the State reserve scheme. The view that there should not be segregation and that contracting-out should not be permitted was taken by leading firms at the time of the introduction of the graduated pensions scheme. The firm for which I then worked took the view at that time that it should not contract its employees out although it could have done so.
It may be said that the principle that where the State provides everyone should participate is not breached by the Bill because it is questionable that the State reserve scheme is a State provision. After all, the State is not providing any finance for it; there is a contribution from the employee and a contribution from the employer. But that will not suffice as an answer because in one essential respect it is a State scheme, not merely in name but because it is covered by State guarantees. Although the wording is careful, 282 and although the Actuary in paragraph 41 of his report says that there is no guarantee, there is, in fact, a political guarantee behind the scheme on which no future Government could easily default. So I say that it is a State scheme, and as such should be governed by the principle I have enunciated.
The Government's principles in certain respects are different. For example, several times in the explanatory memorandum it is said that it would be wrong, in order significantly to cut the amount of means-testing, to impose on future contributors a bigger burden of State pensions than present contributors are prepared to support. It was a criticism of the national superannuation scheme that it did that. That is not so weighty a principle as to deprive us of the opportunity we have now of taking people more rapidly out of supplementary pensions. That could be done, and the Government's point here could be met, by accepting a heavier burden of contributions. I am sure that people would be prepared to pay heavier contributions to achieve that object more rapidly. I do not think very much of this principle as a reason for depriving people of the fulfilment of that objective.
The second Government principle is that to occupational pensions must be allocated the leading rôle in the provision of pensions for old people. There has never been any question of doing away with occupational pension schemes. The question has always been whether they should be a supplement to a State scheme or a separate provision. Why do the Government place special emphasis on the occupational pension scheme in a way which leads them to make it not just a supplement but a segregated section of pension provision?
We know that one of the economic reasons put forward for occupational pension schemes is the savings which they provide. Savings are a very important part of the economy, but as a reason that factor is probably less significant relatively now that we have a reserve scheme with the enormous savings which will be built up.
Another reason was given in The Times editorial this morning, namely, that this is a way to avoid concentrating in the hands of the State the enormous savings which would accrue if there is an even 283 greater extension of State provision. We could avoid that problem in the same way that the national superannuation scheme avoided it, because surpluses were built up under that scheme by a system of spreading rather than funding. In any case, occupational pension schemes are a means to an end and the end is the individual. We must consider the effect of these schemes on people, and we should not because of grand economic or political reasons deprive ourselves of making the best possible provision for old people. The question to be considered is the effect on individuals.
It is said in favour of occupational pension schemes that their particular merit is that within them one can provide flexibly for the special requirements of people working in different occupations. They may have that merit to some degree, but in considering the structure of the scheme the House should not ignore the fact that occupational pension schemes have defects as well as merits.
Many of the defects have been indicated in the recent report of the Actuary on occupational pension schemes. The 1971 report underlines the fact that occupational pension schemes are still providing many people with grossly inadequate pensions. Secondly, there is no guarantee in such schemes of the maintenance of the real value of pensions after retirement, and the sort of minimum conditions provided do not give much confidence that such schemes can provide such a guarantee.
I intervened in the Secretary of State's speech to ask how long it would be before the Occupational Pensions Board could bring schemes up even to the low minimum standards which apparently are to be provided, but the right hon. Gentleman said that I should not be impatient. I suspect that other people also harbour this suspicion. It would take a long time to bring them up to this standard. Is the right hon. Gentleman saying that during the long period in which they will be raised to the minimum standards they will not be recognised and, therefore, the contributions will not be paid to them?
§ Mr. Dell
I am grateful to the hon. Gentleman for that information since it clarifies the matter. I take it that all these schemes will have had to be recognised by the Occupational Pension Board by April 1975 to secure recognition, otherwise those currently contributing to those schemes will contribute to the State reserve scheme.
§ Mr. Dean indicated assent.
§ Mr. Dell
The fact remains that the minimum conditions in terms of any guarantee of maintenance of value are very limited conditions indeed.
We must also remember the well-known effect of occupational pension schemes on the mobility of labour. This is a time of fast technological change, and there is emphasis on the need for people to retrain and to train for new occupations rather than to think about a life's career in one employment. These schemes undoubtedly have a limiting effect. I know from personal experience that many able managers in some large firms feel tied to their job by reason of their membership of an occupational pension scheme, and this applies particularly when they grow older.
The Government have done something about the situation. They have reacted to some extent to the problem of immobility created by such schemes and have said "We shall provide possibly for transferability, certainly for preservation as a minimum." Undoubtedly, from certain points of view that is an improvement, but the basis on which preservation is provided is far from being adequate, particularly for a young man who decided perhaps after 10 years' employment to move to a new employment.
Preservation on the basis of uniform accrual, which I understand to be the basis under the legislation, is quite inadequate and does not sufficiently meet the problem. On the other hand, there is one fact in these provisions which will have an adverse effect on mobility, and this is the fact that the Bill will put an end to the repayment of contributions to people who leave their employment. For a young person this can be of considerable 285 importance. Under the National Superannuation Scheme it was possible to allow such a practice, but under the proposed scheme this will not happen. Surely this is a matter which the individual should be permitted to decide in his own circumstances. I do not think it should be ruled out by the structure of the scheme, and it is the structure of the Government scheme which leads to this ban.
§ Mr. Dean
I wonder whether the right hon. Gentleman appreciates that in many cases now where employees take a return of contributions it relates to their own contributions only and they often lose the employers' contributions. Therefore, in this sense locking in the contributions will represent an advance.
§ Mr. Dell
I appreciate that. In fact, I know exactly what happens because I have changed my job on more than one occasion and have experienced these things. Nevertheless, this should be a choice which the individual should be permitted to make for himself. After all, the Government are all in favour of choice, and why should people be denied the choice in this instance because the Government propose a pension structure of this kind?
There is an additional disadvantage in occupational pensions schemes. There is disagreement among the authorities on the State reserve scheme. Everybody agrees that the scheme gives appalling cover for an older person. There is disagreement about whether it is a had return on money for a young person entering the scheme at age 22. Clearly, my hon. Friends the Members for Oldham, West (Mr. Meacher) and Rotherham (Mr. O'Malley) take the view that it is a bad return on one's money. I notice that in the columns of The Times Sir John Walley, who is a considerable authority on social security matters, has said that the scheme will offer a good return on contributions for a very young person who enters it. He is relying on the political guarantee to which I have referred. But he himself accepts that for older people the provision is grossly inadequate. If it is a good provision for the young person, here again it may be a better provision than can be provided by many occupational pension schemes, but, again, at the option of the employer, people are 286 to be barred from participating in those benefits. No doubt we shall have an opportunity in Committee to discuss the character of the State reserve scheme and how beneficial it is.
The main advantage of occupational pension schemes is that they are a means whereby young contributors and possibly also less successful ones and usually firms, by making supplementary payments into the schemes from time to time on actuarial revaluations, subsidise pensions for top management. That is their real advantage, to people who in the last five or 10 years of their careers get very high salaries and as a return under their occupational pension schemes get very high pensions. For these people in higher management the occupational pension scheme is a means of reversing in old age some of the redistributive effect of progressive taxation during their working lives. These are some of the reasons why I believe that the right role for occupational pension schemes is in combination with a State scheme and not in substitution for it.
The Government say that so great are the advantages of occupational pension schemes that they will provide a State reserve scheme. But the State scheme is in many respects different from an occupational pension scheme and has so many serious disadvantages that we are justified on this ground alone in voting against the Bill.
The first is the very poor return for older people, contrary to what occupational pension schemes provide. In other words, there is in the State reserve scheme no social content. It is a pure matter of actuarial arithmetic. Older people coming into it will find themselves ending up with a pension which may not even cover the gap between the basic pension and supplementary pension and, therefore, they will feel themselves deprived of the benefit that they expect from their contributions.
It is dependent on bonuses, and no calculation can be made in advance, though here there is the political guarantee which I do not think that the Government can escape. There is no tax relief. There is this enormous fund that the Government are setting up. I do not think that that is a matter to which we on this side of the House need necessarily object 287 in principle. The fund may more reasonably cause anxiety on the Government benches. But here we have a fund on which bonuses will be dependent and on which the real value of people's eventual pensions will be dependent. Yet the Government put political limitations on the way that the fund can be invested by saying that not more than 10 per cent. can be invested in the equity of any one firm. Perhaps that is a minor point, but if one is to be so dependent there should be complete freedom of investment.
The real danger in the fund is that there will not be complete freedom of investment and that the way that it should be invested may become the subject of political discussion.
§ Mr. Tam Dalyell (West Lothian)
Those of us who have an interest in these matters feel that it is strange that we have not heard more precisely from the Government how the reserve fund will be administered and on what basis.
§ Mr. Dell
I quite agree. I have noticed with this Government that often they are highly successful in avoiding the discussion of embarrassing aspects of their proposals. For them this must be a very embarrassing aspect of this proposal.
Above all the structure of the scheme is to be opposed on the grounds that it is socially divisive, that there are segregated pensions in old age and that there will not be a common interest in the State provision of pensions. Returning again to the point made by the hon. Member for Kensington, South in his intervention, this is the reason why I reject the structure of the scheme. The input into the scheme could be changed as public opinion became more ready to do so, but the structure is wrong. It is because of that that the Government will not by this Bill take the structure of pensions out of political debate.
§ 5.46 p.m.
§ Mr. William Clark (Surrey, East)
Despite the speech of the right hon. Member for Birkenhead (Mr. Dell), I am sure that in general the House welcomes the Bill. Without making a party point, it is fair to say that the Bill is an improvement on what the Labour Party tried 288 to do when it was in office. Here we have a two-tier system, with a basic pension and an earnings-related pension.
We ought not to forget one point. It is that the basic pension will be reviewed annually for the first time in history. This must be of great benefit to anyone of pensionable age, now and in the future.
Like my hon. Friend the Member for Abingdon (Mr. Neave), I regret the carping criticism of the hon. Member for Rotherham (Mr. O'Malley). In making his criticisms, the hon. Gentleman is either whistling in the dark or speaking with tongue in cheek. He spoke about the Government's lack of compassion. Bearing in mind that the hon. Gentleman voted against the proposal to provide pensions to the over-80s it is hypocritical of him to criticise anyone for a lack of compassion.
When we discuss old-age pensions there are always many who criticise the Government for not doing enough. However, it must be accepted that any Government, irrespective of political persuasion, can pay out to pensioners, to housing, to schools and so on only whatever wealth i9 generated by the general working population.
My hon. Friend the Member for Abingdon referred to disablement. The right hon. Member for Birkenhead spoke of the tax credit scheme. I do not agree with the right hon. Gentleman, though there is no doubt that something will be done in that scheme in this catchment where more unfortunate citizens will be held. It is right that we have this in the background. It is in the pipeline for Government policy.
When 1975 comes we shall have a position where we have a State system of earnings-related pensions and, in the private system, occupational pension schemes.
I am a little concerned about the Occupational Pensions Board. I hope that my hon. Friend the Under-Secretary will look at this, though it may be a point that we shall be able to return to in Committee. It appears from the Bill that the Occupational Pensions Board is all-powerful and that there is no right of appeal from it. I believe that that is basically wrong from the constitutional point of view.
289 In paragraph 126 of its report the Franks Committee on Administrative Tribunals and Inquiries said:To reiterate, we have concluded that in general the appropriate appeal structure is a general appeal from a tribunal of first instance to an appellate tribunal, followed by an appeal to the courts on points of law.That is not contained in the Bill, and it is a grave omission from the constitutional point of view. If the Occupational Pensions Board does not recognise an occupational scheme there is no right of appeal.
Presumably the Occupational Pensions Board will be under the indirect control of the Government of the day. At any time the Government may change the rules for the Occupational Pensions Board, with the result that many schemes under the occupational umbrella can be put out of gear in that they will no longer be recognised.
§ Mr. Dalyell
It will be within the recollection of the hon. Gentleman, as a fellow Finance Bill addict, that the same could be said of a number of the measures that we discussed in Committee Room 10 last summer. Let us be fair to both Governments. Does not the hon. Gentleman think that there is an increasing tendency in financial matters not to allow rights of appeal and to ride somewhat roughshod over our legal traditions in such matters?
§ Mr. Clark
I am not so sure that I share the same addiction as the hon. Gentleman. There is a basic difference between the right of appeal in taxation or financial matters and the right of appeal in pension matters. Taxation is in a slightly different category in that it is revenue. We are speaking here of something far more fundamental. The working population which is paying into a scheme, whether private or public, should have a right of appeal. The reserve pension Board should not have the right to bring any pressure to bear to make people join the reserve scheme.
My hon. Friend the Under-Secretary will doubtless say that this is a Comittee point, but there is an anomaly in the Bill in that controlling directors of close companies—there are between 300,000 and 400,000 of these—must go into the reserve scheme if they become class 1 contributors. As they are controlling directors they are not entitled under the 290 Finance Acts to join their firm's occupational pension scheme. This anomaly has not yet been settled. I do not know whether my hon. Friend will give me an undertaking that it will now be settled.
§ Mr. Clark
I am grateful to my hon. Friend. Surely the satisfactory conclusion would be that controlling directors must have a little more freedom. This point has been raised in Standing Committee on two successive Finance Bills. The Government have said that they are looking into this anomaly and that they will give it sympathetic consideration. I hope that they finally make up their minds in the Bill.
On a question of principle, I agree that the earnings-related part of the pension should be refunded. The right hon. Member for Birkenhead said that on his side of the House the funding of the earnings-related part would not cause much concern but that it might cause concern on this side.
I am happy to tell the right hon. Gentleman that I share that concern. The Government Actuary has put the total value of the funding at today's prices at about £7,000 million. He started by saying that it would be £5,000 million, but it has risen to £7,000 million. My guess is that by the end of the century at today's prices the reserve fund for the earnings-related part of the pension scheme will total about £10,000 million.
This money is to be in the hands of what is known as an investment board under the Government's direction, by which I mean that all the members of that investment board will be appointed by the Government.
It is important to remember that the money that is being funded is not the Government's money. It belongs to the working population who have contributed to a reserve scheme. Therefore, the Government have no right to determine what happens to that money.
§ Mr. J. T. Price (Westhoughton)
I am surprised that the hon. Gentleman, with his great financial wisdom and expertise, should present such an illogical argument to the House. If the Government become the controllers of this very large fund, 291 what is the difference in principle between the Government as custodian of the money of the contributors who have built up the fund investing the money in accordance with their wisdom or lack of it and, for instance, the Prudential or any other great corporation which collects the weekly 5p or 10p from its contributors on the doorstep? Such a corporation is not in any way inhibited as to the way in which it should invest the money. Why should the Government be in any less favourable position than such a corporation?
§ Mr. Clark
I am grateful to the hon. Gentleman for the first part of his remarks. I cannot agree with the second part of his intervention. I was going on to say that I suppose that there are about 100 main pension funds in the private sector and that the total funding in 1971 was about £10,000 million. The Prudential, for example, has funded pensions of £2,350 million, the Legal and General has funded pensions of £1,180 million, and Standard has funded pensions of about £1,000 million. There are eight offices running pension funds with a capital funding of over £500 million.
If there is competition and these funds for investment are in different hands, it can be said that there cannot be any manipulation, political or otherwise. I do not mind which Government are in power; I believe that it is a mistake for any Government to have under their indirect control over £10,000 million of pensioners' money to do what they like with.
I have no intention of making a party point when I say that in 1945 what was known as the unemployment insurance fund was used by the then Labour Government—I am sure that the right hon. Member for Sowerby (Mr. Houghton) will remember this—in pursuance of their cheap money policy to support the gilt-edged market. I am not arguing the merits or demerits of the cheap money policy. I am arguing that it is wrong to put £10,000 million under the indirect control of any Government. I hope that my hon. Friend the Under-Secretary will be able to indicate that the Government will change their minds on this aspect.
The right hon. Member for Birkenhead pointed out that the investment board will not have freedom of choice in that it 292 will be able to take up not more than 10 per cent. of the share capital of any company. The right hon. Gentleman, with his City experience, knows as well as I do that anyone who could acquire a 10 per cent. equity holding in any of the household name companies would probably be the largest shareholder and would have a certain amount of control over the company's destinies.
I now make a party point. It is the Labour Party's avowed intention to nationalise more and more when it next forms a Government. I do not want the Conservative Government put into the hands of a future Labour Government, or, indeed, of any Government who want to nationalise, sufficient money belonging to future pensioners to enable such a Government to nationalise by stealth.
It is all very well to criticise the Government. Generally, I welcome the Bill, but no Government should have the right to handle or manipulate or do what they like with £10,000 million of pensioners' money.
How is this weakness to be overcome? Many people know quite a lot about pensions—for instance, the friendly societies. We have used them in the past. It should not have been beyond the Government's wish to formulate rules and regulations to govern companies which could handle the earnings-related pension part so that franchises could be given to a certain number of such companies, whether they be life offices or friendly societies. Let them pay the same earnings-related pensions with the profits inherent in the State reserve scheme. I think that this would take out of the political arena for all time any manipulation by any Government because no one body would have the monopoly of the investment of £10,000 million. It would be in the hands of 10, 20 or 30 companies.
§ Mr. J. T. Price
The hon. Gentleman is now being a little more controversial. I make no objection to that. I take his general point. However, would he be so cruel in this situation as to place on this Government, of all Governments, with all their pledges still to redeem, the duty of selecting the people who should take the franchises for all these extremely profitable operations? There is a great range of financial institutions in this 293 country which would be glad to get their hands on wide batches of this kind of Government business. To ask the Government to select which they should be would indeed be asking for Tammany Hall in a big way.
§ Mr. Clark
I am sure that the hon. Member for Westhoughton (Mr. J. T. Price), for whom I have great respect, really does not mean what he says. It is easy for any Government to make rules respecting anybody taking a franchise for this money, whether it be a friendly society or what. For example, we have regulations for unit trusts. We also have certain regulations for insurance companies. It is certainly not beyond the wit of this Government to formulate other rules. We do not want to give franchises in cases where we are likely to lose the money.
The hon. Gentleman said that I was being controversial. He will not mind my saying that his intervention was to delay matters and prevent some of my hon. Friends taking part in the debate.
I should like to draw my hon. Friend's attention to the constitutional question. There is no right of appeal relating to the Occupational Pensions Board. Even more important, it is incumbent upon the Government to think again concerning the investment board because it is wrong from a democratic point of view. It is certainly the exact opposite of Conservative philosophy that moneys of this magnitude—£10,000 million—should be placed under the indirect control of any Government. I hope that in Committee this proposal will be altered.
§ 6.3 p.m.
§ Mr. John Pardoe (Cornwall, North)
I want to deal only with the pension provision part of the Bill because of the time factor and as many hon. Members wish to speak.
I welcome some of the changes which the new scheme is introducing. However, I want to test these pension proposals against those which I have argued on behalf of the Liberal Party in many pension debates in this House over the last six years.
First, I want to test it against the basic requirement which I have always maintained is absolutely essential to any pension scheme, namely: does it provide 294 a basic State pension as of right, sufficient to live on without supplementary benefit? I maintain that the standard for the basic State pension for a married couple must be not only raised over a period of years to at least half the average industrial earnings, but maintained at that level. The scheme falls far short of that. I will come to that matter later.
I welcome the Government's decision to create, maintain and strengthen a partnership between public and private provision. However, they may have their line between these two sectors in the wrong place.
I certainly welcome the idea of a State basic flat-rate benefit coupled with earnings-related occupational pensions. The target here should be that the ocupational pension should raise the basic State pension to at least two-thirds of previous income with a top target of at least 80 per cent.
The second test of any Government pension scheme relates to contributions. The Secretary of State has indicated that to a limited extent contributions will be changed, but not scrapped. I have always argued that they should be replaced by a social security tax. Unfortunately, we have nothing like that. Indeed, we are to keep individual contribution records, which I believe was a fatal flaw in the Labour Government's scheme.
Comparing the Government's scheme with these standards, I will first consider the flat-rate benefit. There are no real proposals for increasing the thoroughly inadequate basic State pension for those who are pensioned as of now or will be pensioned in the near future. I have already indicated that the target should be half the average industrial earnings as a pension for a married couple. As we all know, this would give a pension today of about £16 a week.
The Liberal Party first made this proposal in 1962, recognising that it would have to be paid for by a payroll or social security tax and would take at least seven to 10 years to raise it to that level. I noticed that when the TUC, at its rally on pensions a week or so ago, called for a basic State pension of £16 a week for a married couple, the Government hastily put out a statement saying that it would cost £2 per person per week in increased contributions. Obviously no 295 one will argue for an immediate increase in contributions of £2 a week. That is why I have always argued that it should be done over a period. The Government's provision for the basic flat-rate pension, set out in the tables at the back of the memorandum, indicates that the pension for a married couple under the new scheme will be about £10.90 in normal circumstances. That is only about a third of average earnings, so it is far too low, and the Government have not indicated that they have any higher target.
There is no proposal to abolish the earnings rule. I understand that it is to be maintained in its present form. So there is no doubt that under the scheme both today's and tomorrow's pensioners will not benefit in the way which a civilised, humane and compassionate society has a right to expect. Will the Under-Secretary indicate what percentage of old-age pensioners will still have a pension below the supplementary benefit level by, say, 1975? The Government's 1971 White Paper estimated that the pension would have to be increased by a third to put it above the supplementary benefit level.
We have had the usual sort of Tweedledum-Tweedledee politics between the two major parties. We have had accusations from the Opposition Front Bench that a large number of pensioners will still have pensions below the supplementary benefit level. Indeed, on 4th December 1969 a noble Lord, speaking for the then Conservative Opposition on the Labour Government's White Paper, attacked Labour's plans because they would do nothing for the 7½ million pensioners in 1972, when the scheme would come into existence. The attack goes backwards and forwards. It always stays with the Opposition, and it is basically the same speech. Indeed, I recall only too well quoting from a document called "The Twelve Wasted Years", published before 1964 by the Labour Party, which said:Now in 1963, after 12 years of Toryism, nearly one in four retirement pensioners are forced to rely on national assistance because the pension by itself is inadequate to live on.I pointed out—indeed, the figures have been confirmed in the Fabian publication, "Labour and Equality", which might be headed "The Six Wasted 296 Years"—that the figure at the end of the Labour Government's six years was 2 million out of 7 million, which is rather worse than 1 million out of 4 million. I think I am justified in using the example of Tweedledum and Tweedledee to indicate the nature of our pensions debates.
What is the Government's target for basic pensions? Do they have a target as a percentage of average industrial earnings below which they believe old-age pensions should not be allowed to fall? I do not think that they should be allowed to fall below half average national earnings. It is all very well for the Government to say that they will link pensions to the cost of living, or even to say that they will raise them in accordance with the cost of living on an annual basis, but the only way in which pensioners can be guaranteed a share of the rising prosperity of the nation—that is if we get any rising prosperity—is by being linked to average earnings.
So much for the benefits; I now come to the question of contributions. Here the Government, as the Labour Government did, have made a classic mistake. The explanatory memorandum says, on page 8:Each year there will be a review of the contribution provisions of the Bill by reference to general levels of earnings prevailing at the time and to any other matters that appear relevant.It also indicates that contributions are to be maintained on an individual basis. I am not sure how that will be done, and I hope that the hon. Gentleman will spend a little time explaining the whole nature of the individual contributions.
The memorandum says, in paragraph 12:Title to particular benefits will continue to depend on particular classes of contribution …".I remember criticising the Labour Government's scheme because I envisaged that in 1992 constituents would come to hon. Members with their computer slips and say, "I find that my contributions in 1975 were slightly below the figure which I thought they were" and also because of the difficulty of checking on the individual's contribution record. I see no reason why we have to maintain any individual contribution record. The answer is to have a straightforward social 297 security tax as a percentage of a firm's payroll, with one-third collected from the employee and two-thirds being paid by the employer. That would be administratively simple, and there would not be the worry of all this nonsense about individual contribution records.
In an intervention the hon. Member for Westhoughton (Mr. J. T. Price), who is not here at the moment, raised a question which I think it is a mistake to raise in these debates. He asked whether this is an insurance scheme. Clearly it is not, and, as I have said before in these debates, it is time that we got rid of the pretence that a State national insurance fund exists. Paragraph 2 of the Financial and Explanatory Memorandum talks of a national insurance fund, but there is no fund, and it may be a piece of political kidology to try to convince people that the contribution is not a tax. But it is a tax. It is a compulsory contribution, and one cannot get out of it. It is a tax, and this is in no sense a funded scheme.
On the question of the balance between employer and employee contributions, I calculate that about 43 per cent. of the contribution will come from the employee and 57 per cent. from the employer. Can the hon. Gentleman justify that balance? I have never discovered a Government who were prepared to justify whatever line they drew in this matter. Perhaps this will be the first Government to do so. The hon. Gentleman may start by contesting the figures, but if he works out the percentages he will find that they come out right. They did on my slide rule. But why 43–57? Why not 66⅔–33⅓?
What about the Treasury contribution of 18 per cent.? This is a hoary old subject, which many of us have raised in these debates, and I raise it on this occasion—as I did on the Labour Government's scheme—not because I necessarily think that the Treasury contribution ought to be higher. If we are to finance the scheme from earnings-related contributions surely there is no need for a Treasury contribution, still less one of 18 per cent.? This is inherited. It was not inherited from Beveridge, where the figure was slightly different. It became 18 per cent. under a Tory Government, and we have been stuck with it ever since.
If the scheme is to be paid for out of earnings-linked contributions, and there- 298 fore progressive taxation, why have an 18 per cent. contribution from the Treasury, which, to a large extent, is financed by regressive taxation? It does not seem to make any sense at all. I agree that there might be reasons for financing the whole 18 per cent. out of progressive income tax, because that would be redistributive, but a large part of this will be financed out of poll tax and VAT—two things which are not linked to the ability to pay.
To turn to the Opposition's case against flat-rate benefits paid for by earnings-related contributions, I accept the Government's case, and I am glad that they have come into line on this. The hon. Member for Westhoughton said that it was dishonest to think in terms of paying flat-rate benefits for earnings-related contributions. I cannot see anything at all dishonest about it. If that is dishonest, then the whole basis of what I thought was socialism, namely, from each according to his means and to each according to his needs, is dishonest, because that is precisely what the whole idea of flat-rate benefits from earnings-related contributions is all about.
§ Mr. Douglas Houghton (Sowerby)
What the hon. Gentleman has overlooked is that the Government propose to take from each according to his means, but not to give to others according to their needs. The Government's proposed contributions for flat-rate benefits do not fit that definition.
§ Mr. Pardoe
The right hon. Gentleman and I have clashed on this point in the past. I remember clashing with him in, I believe, 1969, when he spoke from the Government benches. I do not agree with the right hon. Gentleman. I think that if we were to get the contribution right this could be a much more distributive scheme than the linking of contributions and benefits to earnings.
Is this a distributive scheme? In the middle of his speech the hon. Member for Rotherham (Mr. O'Malley) threw out a figure of £500 million which he said was the distribution factor contained in the Crossman scheme. I cannot think what that means. It is a totally meaningless phrase. The hon. Gentleman gave a figure of £500 million, but from whom, and to whom? I am an unashamed distributivist in pension policy, and I should like to know from the Government how 299 far their scheme will redistribute wealth and income.
I have one question to raise about administration—not so much to get information from the hon. Gentleman but simply because the Government are offering appalling hostages to fortune. Paragraphs 15 and 16 of the Financial and Explanatory Memorandum refer to the effects of the Bill on public service manpower. Having argued their way through various computations the Government end with the prognostication:In the short term there will be a temporary increase in public service manpower but this will be converted into a small saving by 1980.Want to bet? I shall still be around in the 1980s, and I hope that the hon. Gentleman will, too. I do not know how much he is prepared to put down on this, but I have no doubt that there will be no savings of public service manpower as a result of the Bill by this or by any other date.
I propose, finally, to ask the hon. Gentleman about disability pensions. There is virtually no provision in the Government's pensions thinking for a disability pension. Is it right to give old people who are not disabled a higher priority than people below pension age who are? The reason for paying a pension to people who are above a certain age is the general assumption that they are less able to work than those below it. But people who are disabled are disabled not necessarily because of their age but because of their medical condition. We must now think seriously about giving higher priority to the disabled below Pension age than to those who are perfectly fit and able above it.
I accept that the Bill goes some way towards some of the things which Liberals have been saying for many years, but it does not measure up to the standards that we have laid down, primarily that the minimum pension which should be given to a married couple should be one half of average earnings. Because the Government have not set such a target the Liberal Party will vote against the Bill.
§ 6.21 p.m.
§ Mr. Norman Lamont (Kingston upon Thames)
I welcome the Bill which, I believe, heralds a major move forward 300 in our system of social security. The hon. Member for Rotherham (Mr. O'Malley) suggested that the Bill should not be compared with the 1946 Act, which was passed by a Labour Government. I entirely agree with him. I am hopeful that the Bill will be more successful in dealing with the problems of poverty and old age than the 1946 Act has been.
At a time when we are moving more and more towards the harmonisation of our financial policy, transport policy, immigration policy and other policies with those of our partners in the Common Market, we are with the Bill striking out on an entirely different direction from that pursued by the countries of the EEC. The Government have been right to make that decision. Most of the Common Market countries have pay-as-you-go State-financed schemes, and some of them are beginning to feel the financial burden of their schemes. I believe that the Bill will be the model which the European countries will come to follow.
A grandiose pay-as-you-go earnings related scheme on the French and Italian models could be set up, but it is another thing to keep and develop it. There is no doubt that the benefits which would have been provided under the Crossman pension scheme were generous. But that is all the more reason to be sceptical about them and to want to examine them carefully. I believe that it was that Bill, to which the hon. Member for Rotherham referred, that was the real "Tory swindle mark II." For all the talk about units, contributions, bonuses, rights, a surplus which would be built up artificially through an Exchequer subsidy, the creation of phoney phantom equity participation, it was a commitment for future generations to tax themselves more heavily to provide for us in our old age than we are prepared to tax ourselves now to provide for our parents and the existing elderly. That is an undertaking which it is extremely difficult for any Government to give.
How can any Government make such forecasts with any precision over a 50-year period, bearing in mind economic circumstances, financial crises, and even wars, which may severely inhibit the freedom of any Government to levy taxes at a particular moment? It is no use 301 thinking that the Crossman pension scheme provided an easy way out of that problem. It did not. Had that scheme been introduced in 1948 the pension available in 1968 would have been £6.12. That is more than the £4.50 pension then provided. It is not, however, above the amount provided, taking into account supplementary benefits and rent allowance. It is an illusion to think that any funded scheme is the quick and easy way of reducing the number of people who are on supplementary benefits. That is the major problem against which we must judge any social security system.
We must face the situation that many people experience a sharp drop on retirement. It is sometimes so sharp a drop that the fall in living standards is drastic. Many retirement pensioners have to resort to supplementary benefits—about 28 per cent. do so now. But the White Paper emphasises that there is no single, quick and easy answer. If we are to find a way out of the problem we shall have to deal with it by a number of measures. The tax credit scheme is obviously one of them. Also when the new scheme begins to mature and the first batch of pensioners receive pensions under the Bill, the basic flat rate can be adjusted to provide for different amounts for pensioners of different ages, so that those who first receive pensions under the scheme and who have the smallest pensions may be able to have a bigger pension from the basic State scheme. That is a suggestion which I hope the Government will take into account.
There is no doubt that over a longer period the Bill will contribute to laying the basis and the foundations for a system where the need to fall back on supplementary benefits will be less. The length of that period before that system can be achieved has been much exaggerated.
I am glad to see that the hon. Member for Oldham, West (Mr. Meacher) has returned. I believe that he exaggerated the problem. He did so in his intervention in the speech of my right hon. Friend the Secretary of State for Social Services, when he implied that it would take 30 years to create the situation where people would be getting off supplementary benefit. The hon. Member also exaggerated the situation in his article, published in April in the Sunday Times, in which he 302 produced a series of statistics to show the sort of pensions that different people entering the scheme at different ages would receive. He suggested that a man entering the scheme in 1975 aged 55 years, who would draw his pension after 10 years in 1985, would receive a pension of only £8.8—that is, a combined flat-rate pension and the State reserve scheme. He suggested that a man 10 years younger, retiring in 1995, would receive a pension, a combined flat rate and the reserve scheme, of only £13.
We can argue about how long the period will be, but I think that the assumptions that must have been made to arrive at these figures—I appreciate that they are expressed in today's prices—must have been extremely mean. I suspect that if the flat-rate pension scheme were projected forward, bearing in mind the sort of increases that have taken place in the flat-rate scheme recently, we would find that the sort of figures that the hon. Member was talking about would almost be achieved alone by the flat-rate scheme.
The hon. Gentleman's figures for a 55-year-old man entering the scheme in 1975 postulated a real increase per annum of only 1.5 per cent. in the flat-rate scheme. That is an extraordinarily pressimistic assumption when we consider that since June 1970, in real terms, the retirement pension has been increased by 12 per cent. I know that in the six years before that, under a Labour Government, it increased in real terms by only 14 per cent., but I cannot believe that the hon. Gentleman is basing his pessimistic calculations on the assumption that we shall have a Labour Government all that time.
§ Mr. Meacher
The basis on which the figures to which the hon. Gentleman refers was extremely generous. It was based on the tables at page 22 of the White Paper, plus the assumption that the flat-rate basic pension would be maintained in line with the growth of earnings. The White Paper indicates that the Government is bound only to increase basic pensions by amounts sufficient at least to maintain their purchasing power. I was much more generous than that.
§ Mr. Lamont
It is true that the White Paper says that, but we all know that in recent years much more than that has been achieved. The hon. Gentleman says 303 that he made the additional extra generous assumption that the retirement pension was to be linked to average earnings. I checked his calculations on that as well. The percentage relationship of the retirement pension to average earnings which he assumes in his table projected forward over the next 20 years, is substantially less than the ratio of these two things at present. He cannot get round his tables simply by saying that.
Apart from the assumptions which the hon. Gentleman makes about the State basic scheme, there are other assumptions which he has built in about the State reserve scheme. His figures assume that bonuses in the State scheme will no more than keep pace with inflation. The whole point of creating the State reserve scheme and handing it over to commercial management is that it should earn a commercial return. Hon. Members opposite are always complaining about the small minority of people who can avoid inflation through equity investments. Here we are selling it to the masses, and all hon. Members opposite can do is to decry, detract from and belittle what its effects are likely to be.
The other assumption which the hon. Gentleman makes is that people in the State reserve scheme will live all their lives in it. But some people will move from the State reserve scheme into occupational schemes. There are pensions consultants who, because they consider the terms for young men in the State reserve scheme are exceedingly generous, are advising their clients that people should develop occupational schemes only for the 30-plus executive, and that the younger man at work should be put into the State reserve scheme.
The final assumption on the State reserve scheme which makes the hon. Gentleman's tables unrealistic is that all these schemes are going to remain totally unchanged. I know of no occupational pension scheme which has remained unchanged over a 40-year period. I do not believe that there ever will be one.
For these reasons, I believe that the hon. Gentleman's statistics, which point to the conclusion that it would take a £30-a week man 30 years to buy himself a pension above the supplementary benefit level, are a gross exaggeration. One can see where his logic leads. He says 304 that in 50 years' time there will still be three or four million pensioners living in poverty, on supplementary benefit rates. He is saying that in 50 years' time—when, I am informed, the Government Actuary expects that there will be 10 million pensioners—the proportion of people on supplementary benefit is not going to remain the same but will actually increase. He may think that Conservatives pursue mean policies and will do so in future in relation to the State basic pension, but the idea that the Government could put forward a scheme which will add another pension on top of the State basic pension and yet actually result in a situation where the proportion of people on supplementary benefit increases in the long term seems to me a nonsense, and quite clearly a nonsense.
§ Mr. Lamont
It must inevitably be a matter of judgment precisely where one pitches the standards of the State reserve scheme and the minimum standards on which the occupational pension schemes will be allowed to develop. We can all make individual criticisms of the standards laid down both in the White Paper and in the Bill. I hope that it may be possible to look again at the possibility of preserving pensions in real terms because I agree with the right hon. Member for Birkenhead (Mr. Dell) that this can be a real inhibition to the mobility of labour. Indeed, the preservation of pensions in real terms is one of the few bright spots of the public sector, and if it is one of the few bright spots already in the public sector there is no reason why the private sector should not try to live up to it.
The reasons for laying emphasis on private schemes are impressive. They meet the economic needs of the country for a long-term shift from consumption to capital formation and investment. There could have been nothing more irrelevant to the economic needs of the country than the Crossman scheme, putting forward plans for a gigantic increase in consumer spending over a long period, an increase subsidised by an Exchequer supplement as well.
Bad pensions are bad whether they come from the private sector or the public sector and ultimately this Bill must 305 be judged by the type and size of the pensions it will produce. I believe that private pension schemes are more likely to be more efficiently managed than those of a State bureaucracy. By giving people a pension based on real savings and which they actually own, one will be in the position to increase contributions and funding much more easily than one could have increased taxation under the Crossman scheme. Under the Government's type of scheme, the proceeds can be invested in real assets which can keep pace with inflation.
The Bill opens up the possibility of a genuine advance in pension provisions, and that will depend on the responses of those involved, partly upon the response of the pensions world in providing adequate pensions and rising to the challenge of the terms being laid down. Above all, it will also depend upon the attitude of employees—in particular, of the trade unions. I hope that increasingly we shall see the trade unions interested not just in pay claims but also in fringe benefits and in retirement benefits and pensions. 1f we can get this response now we have the possibility of a real break-through in pension provisions.
§ 6.38 p.m.
§ Mr. Kenneth Marks (Manchester, Gorton)
Who will benefit from this Bill, with its 96 clauses and 25 schedules? Certainly not the existing pensioners. They will continue on the same lines they are on now—thankful for odd donations from the Government and grateful for thinks like the annual review. There is nothing in the Bill for them. Those whose national insurance pension is their only source of income will continue to have to rely on means-tested supplementary benefits for the rest of their life. What about those who will become pensionable during the next 25 to 50 years? They will get the same kind of basic pension that exists today. The £6.75 mentioned in the Bill is the existing pension. If they are not in private schemes they will join the Government's reserve scheme.
At present prices, a man will get a basic pension of £6.75, and if he pays into the new reserve fund for 20 years he will get 8 per cent. of his pay on retirement as an additional pension. But he will still be on the supplementary benefit 306 level. For the persons already in an occupational scheme there will be hardly any change under the Bill. Some will pay a little less for their basic pension and some will pay a little more. Most women will pay more and most men. apparently, will pay less.
Who, then, are the beneficiaries of the Bill? I suggest that they will largely be the insurance companies, including some which gave contributions in 1969 and 1970 to organisations like British United Industrialists and the Economic League and which campaigned against the Crossman scheme and will campaign against any national superannuation scheme. For example, Legal and General gave £5,000 to the BUI for two years before the last election and £1,000 each year to the Economic League. Its campaign was successful. It got a Conservative Government, who have now produced this Bill. It will not be a comprehensive national superannuation scheme. It will leave private schemes as they are. It will produce a very poor State reserve scheme, and it will give the insurance people wide scope for profit making.
Legal and General, having paid its "subs" and made it contributions, now looks for its benefits. In its advertisements, we read,From Legal and General: The answer to the new Pensions Bill—In 1975 your works employees will end up in the State Reserve Scheme"—a fate worse than death. I suppose—unless you find something better now.Legal and General says that it has something better to offer, of course. It is not too difficult to find it.
There is nothing in the Bill for most people. It is not the great Bill of which we have been told. For those on pension now it is not. For those who are not in any superannuation scheme it is not, and it will make no difference for those who are.
Annual reviews have now been introduced. I have yet to learn quite why they were introduced. Having tried to convince both Governments that it would be a good idea, I suddenly heard the Government announce, at the end of 1971, that they would do it. Perhaps the high unemployment figures caused the change of mind—the thought that, if we give money to pensioners. they will 307 spend it and that will help to solve the unemployment problem. Nevertheless, now that we have annual reviews, we are grateful.
Now, a word about the 1961 graduated pension scheme—the Boyd-Carpenter scheme. I shall not use the word which everyone else seems to use about it, though I am certain that anyone who has been paying into that scheme for the past 10 years and retires in about 20 years will use that very word, because it will by then certainly be a swindle. The pension for which such people will have qualified will be frozen. There will be no inflation proofing about it. If someone qualified for a 90p pension, it will still be 90p whenever he retires. I ask the Government to consider that again, and even take on the idea of notionally funding the scheme so that at least if there is a rise in living standards and the cost of living, this will be taken into account.
Second, why is there a contributions cut-off at £48 a week under the graduated scheme? I know that the answer understood between the Front Benches is that it adds up to one-and-a-half times average earnings. But if the £40-a-week man will pay twice as much as the £20-a-week man pays, why should not the £80 man pay twice as much as the £40 man? He can afford it much more readily than the £40-a-week man, and I see no justification for the cut-off at £48.
Now, occupational schemes. Will the Under-Secretary of State tell us how many existing schemes come up to the standards required by the Bill? I understand that there are about 60.000 schemes, and we should like to know how many are now below the standard.
What is more, many of the occupational schemes are undemocratic. There was an interchange between my hon. Friend the Member for Westhoughton (Mr. J. T. Price) and the hon. Member for Surrey, East (Mr. William Clark) about the Government controlling vast sums on behalf of pensioners as compared with the Prudential and its undemocratic control.
§ Mr. Marks
It is certainly not controlled by the policy holders. Why 308 should there not be provision for democratic control? Why should we not provide in the Bill that occupational pension funds should have trustees, with employees representing their fellow workers in making decisions about pension funds? The bigger firms do it. ICI does it. Why can it not be written into the Bill?
The reserve scheme is quite inadequate. It will not give a reasonable pension at the end of a person's working life. What will happen to people who move in and out of the reserve scheme? This can well happen a number of times among building workers, for example. May a man choose to say to a firm to which he goes to work, "I am not coming in your scheme; I want to stay in the State reserve scheme."? I agree that, at the level proposed for this scheme, he is not likely to say that, but many might want to do so if we had a reasonable scheme. Why should they not have a right to say to an employer, "I shall not come in your scheme"?
The Secretary of State suggested that the reserve scheme will apply mainly to the lower-paid, and I admit that I thought that until I looked into it. In fact, however, many of our lowest paid workers are in superannuation schemes. Those who work for the Government, or a large number of them, are covered, yet many are collecting family income supplement. A great many manual workers employed by local authorities are by no means highly paid, yet they have their pension schemes. Railway workers, post office workers, all low-paid, have good public service pension schemes.
I see no reason why all manual workers should not have a national scheme at standards similar to those of the public service pension schemes. If we can do it for postmen, for local government workers and so on, we can do it for everyone.
Basically, the Bill fails because it accepts a basic pension of £6.75. I do not. We have our priorities wrong, and 5.25 per cent. contribution is not enough. An Exchequer contribution of 18 per cent. is not enough. We ought to think in terms of a much higher proportion of our national wealth going to pensioners in the form of a much higher basic pension.
§ 6.47 p.m.
§ Mrs. Elaine Kellett-Bowman (Lancaster)
I warmly welcome the great bulk of the Bill's provisions. Together with the tax credit system, on which the Government have just issued a Green Paper, the proposals in the Bill will go a long way along the road towards abolishing poverty. Like some of my hon. Friends, I was surprised, therefore, at the jaundiced comments of the hon. Member for Rotherham (Mr. O'Malley).
It is important to look at the Government's social and pension measures as a whole when considering the attack on poverty. The hon. Member for Rotherham failed to do that, although his right hon. Friend the Member for Birkenhead (Mr. Dell) paid a slight tribute to the tax credit system, while damning it somewhat by saying that the cost would be so enormous that it might almost never come into operation. In fact, it is envisaged that it will cost about £1,300 million, only as much as the last Budget, and that at a time when gross national income is rising rapidly. I think that we need have no fears on that score.
The main objective of the Bill is to foster the development of State and occupational schemes side by side so that everyone may enjoy the benefit of occupational schemes in addition to their State pension in retirement, as only a few have been able to do in the past. it is important to keep the two schemes separate, however, and here I agree with the hon. Member for Cornwall, North (Mr. Pardoe); the basic pension, although contributory, is not insurance at all. The contributions bear no actuarial relationship to the benefits. There is no contractual right to a specific benefit, and the scheme is not funded—though "funding", apparently, seems to be something of a dirty word on the Opposition benches now.
In short, the basic pension is social security, and not insurance. It is a way of transferring money from the earning to the retired. In my view, it is a perfectly proper way of proceeding, since it is on the efforts of the retired that our present prosperity has been based and they are entitled to expect that we shall see that they are fairly treated, as, indeed, we hope that our children will do for us.
In this connection, the new arrangements for securing the financial basis of 310 the basic pension are very important. Earnings-related contributions as planned will give buoyancy to the scheme and ensure not only that pensions can be reviewed annually—as is now provided for by statute—but that the money will actually be available. The Secretary of State must take into account—this point seems to have been overlooked by many hon. Members—not only the cost of living but the rate of current earnings, the national economic situation and any other things that he thinks might be relevant. So this gives the scheme a springiness that it might otherwise lack.
But the occupational pension is a very different matter. Here, the benefits will be related to actual payments, whether in an ordinary occupational scheme or in a State fall-back scheme. In order to qualify, the occupational scheme must meet certain minimum requirements. I am glad that the Secretary of State has included among those requirements most of the things—not quite all—which my hon. Friends and I have been urging on him over the years.
In future, an occupational pension scheme will contribute in some degree to the mobility of labour by preserving pension rights on changing a job and a man will be able to better himself without jeopardising his family's security. As several hon. Members have said, it will contribute much more to mobility if the preserved pension is itself dynamic.
It will greatly improve the situation of widows by providing earnings-related pensions for them, and will ensure that the pensions keep pace not merely with the cost of living but with rising living standards. For those in fragmented industries—particularly such as farming, in which I am interested—the Government's fallback scheme will for the first time provide a pension at a reasonable standard.
§ Mr. Bidwell
Does the hon. Lady support the idea that the present national insurance basic retirement pension should go up not only in terms of increases in the cost of living but also in terms of increases in national average earnings? If she is advocating that, it cuts across this Government's activities.
§ Mrs. Kellett-Bowman
Not in the least. That is in fact provided for in the Bill—there is no question about it—in the clause 311 to which I referred and which several hon. Members opposite have apparently overlooked.
It is very important that responsibility for running the reserve scheme will be in the hands of an independent board, because it is important that the pension fund is not available for Government use. One of my hon. Friends was wrong in supposing that it will be. We all know the fate of the road fund. We want to ensure that this pension fund is out of the reach of the Government of the day. The safeguards provided would set alarm bells ringing all over the country if they were to try to get their fingers into this pie.
The Pensions Board will be under a statutory duty to secure the best possible pensions for its members and will have wide powers of investment to maximise the fund and pay bonus additions to its members, depending on the pension performance of the fund—as is now the case with all life-insurance-with-profits schemes. I see no reason to cavil at the slight restriction of its investment freedom in limiting its investment in any one firm to 10 per cent. This is a fairly substantial holding by any account.
But, with respect to the Secretary of State, no scheme is without its defects. For an occupational pension scheme to be recognised it must provide for minimum death benefits to a widow, but there is no corresponding provision, where the breadwinner is a woman, for the payment of a pension to her husband if she dies first—no matter how long she may have contributed and how ill or incapacitated he may be.
Nor is there any provision that I can see for widowhood where the marriage takes place after the man became pensionable, although an increasing number of both first and second marriages are taking place in retirement as the lifespan increases. Again, we all know that it is hard for a woman to be left alone to bring up a family, but is it not also hard for a man? He must give up his job and probably have to rely at least for some time on social security, he must put his children into care, breaking up the family and causing considerable public expense, or he must carry on working and pay someone to care for his children.
312 A widower with young children to bring up should receive a widower's allowance on the same basis as a widow. I am not sure how far this point can be covered under Clause 34(3) and I should be grateful for guidance.
The Government should also include the disabled in this scheme—in this, I am at one with hon. Members on both sides—if not at the outset, at least on a definite future date, perhaps 1977 or 1978. It is important that they should be able to have something to which they can cling. Perhaps an alternative suggestion is the Dutch system of a completely separate disability pension.
To me it is unfortunate that a worker severely disabled before retirement age and unable to work again is not included among those who receive earnings-related benefit until he is 65. I see no reason why such people should not be included in the present scheme, even if a full disabled scheme must wait until later.
On both industrial and social grounds it is anomalous to have a five-year gap between the retirement ages for men and women. I am not anxious to lower substantially the age of retirement for men, because so many men begin to crack up when they cease work. I should therefore like to see the retirement age for women raised in line with implementation of equal pay, or possibly a compromise by raising the women's retirement age and lowering the men's to 62½. After all, in teaching and local government, men and women retire at the same age, as is the case in most European countries—for example, Holland.
Turning to the conditions for attendance allowances under Clause 15(1)(a) and (b), I regarded the introduction of this allowance as a major step forward in welfare provision, but the more I consider it the more firmly I believe that the emphasis in the decision to grant an attendance allowance should be shifted from complete concentration on the person receiving the allowance to some consideration of the circumstances of those responsible for caring for the incapacitated person.
I make no apology for returning to the plight of the single woman caring for elderly relatives. Very often her devoted care puts off the age when her relative deteriorates to the point of becoming 313 eligible for an attendance allowance. I should therefore like the attendance allowance board's criteria to be widened to include the question of how long a patient has needed care and whether a relative has had to give up a job in order to care for the invalid. If the latter is the case, that relative should also be credited with contributions under Clause 36(1) and (2).
I am also slightly disturbed by the provision in Clause 38 that the annual review of basic pensions and social security benefits must take place early enough in the year to allow the Secretary of State to lay an order before Parliament not later than 30th June each year. I was firmly under the impression that improved computerisation would enable much quicker reviews of pensions than in the past. Although I appreciate that three months is better than the six months that it used to take—hence the 13-week pension book—this provision is unnecessarily restrictive, particularly so long as we have such an energetic Secretary of State. However, I welcome the reference to earnings as well as prices in Clause 38(2)(b).
I have no doubt that these and many other points can be thoroughly discussed in Committee. I congratulate the Secretary of State and his colleagues on their energy and enthusiasm in bringing forward such a first-class scheme.
§ 7.0 p.m.
§ Mr. George Cunningham (Islington, South-West)
If I understood her correctly, the hon. Member for Lancaster (Mrs. Kellett-Bowman) at one point in her speech suggested that the annual reviews of the pension level would very likely ensure that the pension kept pace not only with falling purchasing power but also with the level of earnings in the country. Let us be clear that although the Minister can provide for that under the Bill—as he can provide for it now without the Bill—nothing in the Bill compels him to do that. What the Explanatory Memorandum, Command 5142, says—and the Bill reflects this—is that contributions will keep pace with earnings. Referring to the Secretary of State, it says,An Order may increase benefits by more than is necessary to maintain their purchasing power if he considers this appropriate having regard to … the national economic situation.Chancellors of the Exchequer have always found something in the national 314 economic situation to deter them from doing what they might otherwise have done. So there is no great millstone here to ensure that a Government will do what the hon. Lady is suggesting they might do.
People sometimes wonder whether in this country it is still appropriate to talk in terms of "two nations". When we come to the subject of pensions—subject to whatever legislation we introduce in the next year or two—there is no doubt that it is still appropriate to talk in terms of "two nations".
On the one hand, most professional people who come to retirement enjoy an income which allows them to continue the standard of living to which they were accustomed, if not at the point of retirement then in middle life, at the age of about 50. By that time, most of them have paid off any debt they had on their house, the children have left, and they can look forward to retirement, not only for peace but for prosperity.
On the other hand, the wage earner who comes to retirement is immediately faced with what is often a catastrophic drop in income. In many cases, he is forced to rely on the State pension plus a derisory little pension, which is often up to 50p or about that sum, from a small occupational pension scheme. If that is all that he has, he, or his widow when he has gone, is often obliged to rely on supplementary benefit which, despite what we have said about supplementary benefit being not charity but an entitlement, many people resent having to rely upon and many refuse to take. Many of those who refuse to take it have an attitude of mind which is the most enviable and admirable of all retired people.
That is the present situation. The success or otherwise of this Bill and any other Bill to achieve the same thing can only be measured according to whether it removes this condition—not whether it ameliorates it. The Bill does nothing of the kind.
Of the 22 million or so people earning through employment roughly half are not covered by any occupational scheme. A large number of those covered by occupational schemes are covered by fairly bad schemes. It will be interesting to see to what extent those schemes are improved at the discretion of the board when the Bill becomes law.
315 I want to dwell on the condition of the other 11 million who will have to rely on what the hon. Lady very aptly called the fall-back scheme, that is, the reserve scheme. "Fall-back" will be a very good term for it when people start receiving the so-called benefits from it. It is absolutely right that we should compel people to save, to contribute during their working lives in order to provide for their years after retirement. It is worth noting that this runs contrary to what has often been held up as the Conservative principle of not compelling people to do this but letting them do it and encouraging them to do it, and then, if they do not, picking them up with social security. We are now to compel them to provide for their old age, and that is right. But one cannot take that line without having a view about whether the present distribution of income in the country is equitable. One cannot take a view about pensions without taking into account the distribution of incomes as it exists before people pay for their pension and pay their taxes. At present we have a grossly inequitable distribution of not only wealth but income for work done. Until we face that fact we shall not secure justice in our society.
The State reserve scheme can be looked at in two different ways. First, will the man who contributes to it receive a pension which will allow him to stand on his own after retirement? Secondly, irrespective of how much he gets out of it in the way of pension after retirement, is he getting good value for money?
Surely the first thing is that until the year 2025, or whatever it is, no one will be living properly off the State reserve scheme. Until the year 2000 the pension of people who have contributed between the beginning of the scheme and the end of the century will be utterly derisory. The pensions might be about 10 per cent. on average, of retirement earnings. For a man who spends his whole working life in the scheme and, therefore, draws his pension in the year 2025—starting from now—there will be a guaranteed pension of about 20 per cent. of his earnings on retirement plus profits.
An enormous doubt must apply to what those profits must be. For a person who has been in the scheme for the whole of his life, if the profits have the effect of 316 doubling the guaranteed element in his pension he will still be doing rather badly in comparison with the best of the occupational pension schemes.
§ Mr. O'Malley
My hon. Friend has referred, for example, to a man who had paid into the scheme during the whole of his working life. My hon. Friend said that he would then have a reserve pension of about 20 per cent. The Explanatory Memorandum, Command 5142, gives a figure of 19 per cent. My hon. Friend said that profits would be added. But is not that position reserved and somewhat amended by Note 2 on page 25 of the Explanatory Memorandum, which says:Table 2 shows the pensions which would be secured in accordance with the scales in the Bill if earnings were to rise at 3 per cent. per annum but may also be interpreted as showing the pensions, expressed in terms of today's money values, which would result if real earnings were to increase at 3 per cent. per annum and bonuses were in line with the rate of increase in prices."?Are not assumptions made about prices in reaching that estimate of 19 or 20 per cent.?
§ Mr. Cunningham
I think that my hon. Friend is implying that he does not understand Note 2. I am in a like position. No one trying to work out what he might be likely to get would be very much enlightened by the language of Note 2. I do not think that it means that any degree of bonus has been built into the figures in the table appearing there. I hope that the Minister can tell us, because the language used in the document is hardly designed to make it clear. I shall have something to say shortly about what seems likely to be the level of bonuses that will apply on top of the fixed element. What we can be sure of, assuming fairly generous bonuses, is that this pension will not be comparable with a good occupational pension scheme.
If it is right to say to everyone—and it is right—"Whether or not you are in an occupational pension scheme, we shall require you to provide adequately for your retirement", surely we should require them to provide fully for their retirement and not give them a pension which will still mean a very significant drop in their wealth at the time of retirement.
317 The second way of looking at the reserve scheme is simply to ask whether it provides value for money as between the benefits and contributions. I have compared the guaranteed pension provided by the reserve scheme with the guaranteed pensions which are offered by a number of insurance companies to those who take out private pension policies under the 1956 Finance Act tax arrangements. The figures vary enormously because one company will assume higher profits than another and, therefore, put more into the guaranteed segment, leaving less to be covered by the bonuses. Taking that fact into account and also that the State reserve scheme provides a half-pension for a widow whereas most private schemes which consider the widow at all will provide for a full pension at the same level as for both together, it looks as if the private insurance company could offer better value than the reserve scheme. I hope that the Minister will say something about that in replying to the debate.
Any individual at the moment is free to take out a private pension scheme under the 1956 Act if he is not covered by an occupational scheme. Am I correct in thinking that the Bill will kill that freedom totally?
§ Mr. Dean indicated dissent.
§ Mr. Cunningham
I am assuming that in future people who are in an occupational pension scheme will not be able to take out a scheme under the 1956 Act in respect of income which is pensionable under the scheme. I am assuming that in future no one who is a member of the State reserve scheme and is paying contributions under it will be able to take out a 1956 Act scheme in respect of income on which he is paying into the State re-service scheme. If he has extra income he will perhaps be able to take out a 1956 Act scheme, but in future, as I see it, on a normal income the 1956 Act scheme will not be permitted. The Government are, therefore, taking away that valuable facility which is now given under the law to anyone who is not pensionable. Instead, they are saying that they are now providing a scheme and once that is provided the recipient cannot have the scheme that he was permitted in the past. I hope that in winding up the Minister will make that clear.
318 The major crime within the State scheme is that contributions to it will not be tax deductible. This leads me to the point about bonuses to be paid under the State reserve scheme. If we assume that those who run the State reserve pension have as much competence as those who run the private funds, in logic the return £ for £ from the reserve scheme should be as good as any private fund. But there is only one way to ensure that that does not happen. If for every £1 that a man contributes to the State reserve scheme all that is put into the reserve fund is £1, a very different situation will exist to the one which exists in the occupational pension. For every £7 that the occupational pensioner puts into the pension scheme, £10 goes into the pension fund. Because of the tax allowance he derives profits based on a £10 investment.
There is only one way by which the Government could have ensured—I do not say it is intentional—that the return from the State reserve scheme is not comparable with that from a private scheme, and that is by ensuring that employees' contributions are not tax deductible. That tax advantage is so considerable—it amounts to 30 per cent.—that it might well have the effect of transforming what would otherwise be a perfectly tolerable and generous scheme into something which is nothing of the sort. The Government will have about £5 billion by the end of the century according to the actuary's report and, let us say, £1 billion by 1980. They say that they will keep their hands off it, but I wonder whether any Government are acting responsibly if, with that sort of money available, they do not use it in some way, without its being used to the detriment of those who will enjoy pensions financed by it.
The two predominant social problems in this country are the distribution of wealth and housing. They are the two problems on which both parties have failed manifestly since the war. Surely it would make sense to take the funds that the workers are contributing and use them to acquire land and buy or build houses so that those same workers could have much better housing than they now enjoy. It would not be difficult, if it was felt, contrary to most evidence, that this was likely to produce lower profits than putting the £5 billion on the Stock Exchange generally, to find 319 a means of covering that by ensuring that if the return seemed to have been lower than would have been derived from the Stock Exchange there could be an Exchequer contribution.
I would be sorry to see the opportunity pass of combining the taking of money from people for provision for old age and the using of it to ameliorate that other great social problem, housing.
§ 7.18 p.m.
§ Mr. Marcus Worsley (Chelsea)
In his introductory remarks the hon. Member for Islington, South-West (Mr. George Cunningham) referred to the sudden drop in income that so many families find on retirement. In making that point he would have the support of everyone in the House. I am sure everyone wants to see a pension scheme which would end that sudden fall in income. We want to see people in retirement with an assured and adequate income, theirs of right. We are now all agreed, too—where once we were not—that that income should be related to earnings when in work. But this evening we are really discussing whether the scheme put forward by the Secretary of State is more likely than other schemes put forward over the years to achieve that. This is not an up-rating Bill and it makes nonsense to attack it on the grounds that it does not increase pensions, as some Labour Members have done.
In spite of what the hon. Member for Rotherham (Mr. O'Malley) said, this is a new structure for pensions and I can understand why he pretended that it was not. It did not seem to strengthen his case in any way to say so. Surely tonight we are considering whether this is the best structure for the development of pensions in the future or whether some other scheme would be better.
When the Opposition were in office they had a scheme, and the right hon. Member for Sowerby (Mr. Houghton) and others presided genially over its hatching. My word! It took a long time to hatch that egg, in spite of the right hon. Gentleman's enthusiasm and knowledge. At the end of Labour's six years in office the scheme was still not in operation. Nothing has been more striking tonight than the lack of reference to that scheme or any other by Opposition speakers. 320 There has been plenty of criticism—fair enough—of our scheme. But what has been totally lacking, and what we should have expected from a responsible Opposition after 2½ years in Opposition—time to think of some of their plans for the future—was a really constructive alternative. The scheme before us is the favourite at present, and it is not enough just to attack it. I say to the Opposition, "You must produce a better alternative".
I have devoted a great deal of thought to the matter over the years. It was not very fair of the hon. Member for Rotherham to say that in opposition my hon. Friend the Under-Secretary and others had a great deal of thinking aloud to do on the way in which such schemes should be developed. The point is that we did the thinking, and here is the Bill.
I believe that the basic concept is right. I have a number of reasons for saying that, but I want to concentrate on one, because we cannot talk about everything. The essence of the scheme, as opposed to the Crossman proposals, is the separation of the basic scheme on a pay-as-you-go basis, which must be a State responsibility, and the provision for earnings-relation, which can be provided privately or through State provision.
In the 1970 measure those two activities were muddled together quite deliberately. Opposition speakers have again advocated that they should be. We then deliberately confused the two functions that this Bill separates. We thus promised that our children would pay us in retirement much more than we were prepared to pay our fathers.
The pay-as-you-go structure of the Crossman plan was a whole series of promises going away into the future, with no provision for finding that additional income. That was widely seen to be one of its great weaknesses. One of the strengths of the Bill is that the provision for earnings-relation is funded, whether through occupational schemes or through the reserve scheme. That is a much more logical and straightforward way of tackling the problem.
§ Mr. O'Malley
I do not think that it is a question of either hostility to funding or favouring funding. The difficulty in the Government's proposals results from the intention to fund 1.5 per cent. of the 321 employee's contribution and 2.5 per cent. of the employer's contribution. To that extent there is a smaller amount of money currently available to solve the problems and assist the present generation of retirement pensioners. That is the difficulty when there is the difference between the 5.25 per cent. proposed for the basic scheme in the Bill and the 6.75 per cent. earnings-related contributions proposed in the Crossman scheme.
§ Mr. Worsley
But both schemes visualise the earnings-related element being brought in over a long period. In the scheme before us the additions are funded; they are based on real wealth, and real provision is being made for this new financing.
My point is that taking out of the basic scheme the proposals for earnings-relation simplifies that scheme and makes it much more flexible. I do not see the scheme as presented today as the final answer. In future we shall be able to develop it the more easily, because we have separated the earnings-relation for old age from the rest of the scheme.
I want to give two examples to make clear what I am trying to say. The present Government have done many important things for the disabled, as is widely acknowledged, but I doubt whether anyone takes the view that cash provision for the disabled is yet adequate. We all feel that we are moving towards more adequate cash provision in a difficult area, where definitions are difficult. There will be no difficulty in adapting the basic scheme for such a change. It will be simpler because the earnings-related element and the basic scheme are separate.
Secondly, the Government have done several important things to help the older pensioner, which are continued in the Bill, particularly the pensions for the over-80s and the age addition. Here I differ in emphasis from what my right hon. Friend the Secretary of State said in introducing the Bill. He said that he thought that only a marginal element could be brought in. I hope, on the contrary, that the age addition is just the beginning of a new road. I want to get away altogether from the concept of sudden retirement—the extraordinary concept, which is so alien to common sense and our observa- 322 tion of older people, that the right thing in life is to do a full-time job right up to a certain day and from the next day onwards to do no work at all; to move in a single day from full-time work to full-time leisure. We have all seen people for whom that sudden traumatic change in their way of life has been disastrous—people who have broken up physically and often mentally, under the quite unnecessary strain.
Therefore, I want to see people encouraged to retire by stages, moving gradually from their main job in life, through less arduous or part-time work, to full retirement when age and physical condition demand it. I should like to see a retirement pension graduated rather as the widow's pension is graduated, with increments at, say, 70, 75 and 80, getting rid of the earnings rule as a by-product. My hon. Friend the Under-Secretary will no doubt comment that that is fairly radical and expensive stuff, but although it cannot be achieved today we may well begin to think more along the lines of such graduation as the years go by, and to think less of a basic retirement pension, which has been the concept ever since Beveridge reported.
If we want to move in that sort of direction this basic scheme will be quite readily adaptable. It is the more flexible and adaptable because it has been separated from the earnings-related scheme. That is the fundamental reason why I am an enthusiastic supporter of the Bill. It is not because it is the end of the road for pensions and benefits, but because it has the seeds of growth within it.
§ 7.30 p.m.
§ Mr. Tam Dalyell (West Lothian)
I find myself very sympathetic to what the hon. Member for Chelsea (Mr. Worsley) had to say about sudden retirement. To many people on the Labour side of the House, too, the idea that a man is working to the limit of his capacity on a Friday and on a Monday morning does not go to work is very sad. All of us know those who have lost their spirit when this happens to them. In this respect we politicians are peculiarly lucky because it does not happen to us. We tend to go on and choose the moment of our retirement rather differently from others. It may happen to some of us 323 at a very young age while some of us may go on for much longer. We are unique in this, but for most people there is a sudden retirement. I cannot believe that it is good for health or for the soul—to put it in those terms.
The hon. Gentleman lamented that little had been said about the Crossman scheme. It is a great pity that my right hon. Friend the Member for Coventry, East (Mr. Crossman) is this week in Canada, no doubt improving the political acumen of the young men of the University of New Brunswick in a series of lectures, and is, therefore, because of this long-standing engagement unable to take part in this debate. As my hon. Friend the Member for Rotherham (Mr. O'Malley) knows, all of us who worked for him in different capacities would have welcomed his contribution.
All of those who were in my right hon. Friend's entourage—I was his PPS—have a certain vested interest of the mind. I am certainly conscious, mentally, of being very tied to the so-called Cross-man scheme. Not that there were no faults in it. I know it is evident to many who worked with him in Parliament and in the Civil Service that perhaps a major mistake was made in trying, for reasons that were good and fair, to make this difficult calculation over a working lifetime. Perhaps with hindsight the calculation should not have been attempted. If we had not attempted to do the calculation over a working life the scheme would have been easier and the Act would have been on the Statute Book. All I say to the hon. Member for Chelsea is that there are some of us who deeply regret that our then Prime Minister went to the country in June of 1970 rather than October. Had he waited until then, in all candour this scheme would have become an Act, and I very much doubt whether an incoming Conservative Government would then have seen fit to alter it. There have been various speeches, and we would have been interested to hear the eloquent language of the Secretary of State deployed in persuading some of his hon. Friends, including perhaps the hon. Member for Kensington. South (Sir B. Rhys Williams) why, now that the Act was on the Statute Book, the scheme should not be changed.
§ Mr. O'Malley
My hon. Friend is absolutely right in his assumption that had the Crossman plan become an Act and a Conservative Government returned at the last election they would have been very reluctant to scrap it.
§ Mr. O'Malley
The Under-Secretary is beginning to shout at me. That was confirmed by the Under-Secretary at a meeting of the Life Offices Association when he was asked precisely this question before the Conservatives came into Government. He admitted that if the Conservatives came into power they would be examining the scheme closely to decide whether it could serve as an acceptable basis. The scheme simply could not have been scrapped without further action because of the imminent pressure of a deficit in the existing State scheme. The hon. Gentleman went on to confirm that it would most likely be a scheme which the Conservative Government would find themselves having to accept.
§ Mr. Dalyell
Which goes to prove that the Under-Secretary is a cautious and careful man. I would have enjoyed all of those speeches of his explaining to some of his more militant hon. Friends on the Right precisely why it was not worth changing the scheme. We would have had the right hon. Member for Penrith and The Border (Mr. Whitelaw) and subsequent Leaders of the House shaking their heads and saying it was unfortunate that there was not the parliamentary time in which to change it. Alas, this did not happen.
I know how difficult things are. I sat through the earlier part of the afternoon in the uncomfortable posture of knowing how difficult are the Department's problems. I do not ask these questions out of malice. Is it not true that the scheme which has been produced is a somewhat untidy one because it combines both the earnings-related element and the flat-rate element? Will it not create all sorts of administrative problems in future? Does the hon. Gentleman accept the charge of untidiness, and if so, what can he do to improve things? I see the Secretary of State entering the Chamber; for his benefit I will say that I was dwelling on the eloquent speeches that he would have made—
§ Mr. Dalyell
Wise man! He must have come in by mistake. I have read that in the opinion of reputable pensions experts if we look at the small print of this scheme it will be seen that it is a remarkably distributive one for a Conservative Government. I see that the Under-Secretary is shaking his head; this is a private opinion from the back benches. I am asking a very artless question. How redistributive is it? I see the Under-Secretary is longing to give some information, and I will, of course, give way. But lie does not rise. I thought he was a braver man than that.
§ Mr. Dalyell
I am just gently searching after truth. Am I right in suggesting that the scheme has considerable redistributive elements? If we could be told precisely what those redistributive elements are it would be helpful. Looking through it I suspect that there is a good deal more redistribution than many of the pension fund supporters of the Government have tumbled to.
I agree that the calculation for life in my right hon. Friend's scheme, although good in intention, was perhaps misconceived because of the difficulty of the calculation. There is the problem of steel workers, miners and a number of others in heavy industry whose peak earning power is at around the age 35–45 and who in the last three years before retirement are earning nothing like their peak. Before my right hon. Friend's scheme is condemmed as being stupid and complicated it should be understood that it was being fair to manual workers in heavy industry. My right hon. Friend the Member for Sowerby (Mr. Houghton) was in charge of the Cabinet Committee dealing with this. Easy comment is not very apt.
During the speech of my right hon. Friend the Member for Birkenhead (Mr. Dell) the Under-Secretary of State intervened to say that by April 1975 there would be recognition of the occupational pension schemes, and any occupational 326 pension scheme that was not up to standard would not be recognised. Am I right?
§ Mr. Dean Yes. To put it in another way—I know the point the hon. Gentle. man is on—every employed person from April 1975 onwards must be either in a recognised occupational scheme or, in default of that, in a reserve scheme.
§ Mr. Dalyell
That will have consider. able consequences for private companies. To enforce this requirement at a respectable standard will be extremely costly either to the private companies or to the State. I ask, without malice, what calculations have been made by the Department of the effect of this requirement on the private companies? Perhaps the Under-Secretary of State will deal with it now?
§ Mr. Dalyell
My recollection of what happened between 1968 and 1970 is that it is an exceedingly expensive operation to the private companies, perhaps involving thousands of millions of pounds. It depends on the standards that are required. I hope, therefore, that in his summing up the Under-Secretary of State will tell us about the level of the requirement.
§ Mr. Dell
I was interested in the Under-Secretary of State's intervention. I had understood that this would be a time-consuming and expensive operation. Perhaps in his summing up he will make clear, as he implied, that there is no question of interim recognition and that recognition will be on the basis of minimum conditions?
§ Mr. Dean
I do not know whether I am allowed to intervene in an intervention, but, in answer to the question asked by the right hon. Member for Birkenhead (Mr. Dell), the precise details of what is recognition and what may be a firm intention to go for recognition with the main conditions being fulfilled are matters which will be considered by the Occupational Pensions Board. The broad principle I have mentioned still holds good.
§ Mr. Dalyell
It is easy to talk in terms of broad principles; it is often the details that count. With as much friendliness as I can muster, I say to the Under-Secretary of State that the cost of this proposal is likely to be extremely high. Granted the rate of inflation, we are considering what is far from being a detail. For the benefit of the Secretary of State, who is now with us, the issue raised by my right hon. Friend the Member for Birkenhead is the cost of recognition at a suitable standard of the occupational pension schemes. I will leave it at that, because the Under-Secretary of State has undertaken to reply, and I hope that he will do so in detail.
Another subject which interests some of us greatly is the operation of the Reserve Pension Board. The Secretary of State, who is a candid man, will agree that paragraphs 72, 73 and 74 of the Explanatory Memorandum are not precise. I think he will agree that the hon. Member for Surrey, East (Mr. William Clark)—whom I called a fellow addict when we were both on the Finance Bill—knows what he is talking about in these matters. I wish that the Secretary of State had heard what his hon. Friend said about the operation of the Reserve Pension Fund. Although the subject is difficult. for a Socialist like me it presents no problems. Socialists have clear ideas how they want to operate the fund for growth within the rules of safety. I had perhaps better speak for myself, as I see a warning light from my right hon. Friend the Member for Sowerby. I have a clear idea about how the board should operate this fund and protect pensioners' rights. Doctrinally it is far more difficult for hon. Gentlemen on the Government benches. I hope that the Under-Secretary of State will answer the questions raised by the hon. Member for Surrey, East.
How is control to be operated? How will the appointments to the board be made? I notice that one of the board members will be a representative of the employers and another a representative of the employees. The central question is: what is to be the relationship of the board with the Treasury? Is the Treasury to have a say in the investment, or not? Is the board to be completely independent? Has the Secretary of State 328 any sympathy with the suggestion made by some of his hon. Friends that the management of the fund should be transferred to friendly societies, private companies and so on? To say that all this can be worked out later is to dodge the issue. This is not a Committee point; it is not a detail; it is central to the whole issue. I hope, therefore, that we shall hear more about the management of the Reserve Pension Fund. This matter belongs to the Second Reading and not to the Committee stage.
I agree with what the hon. Member for Abingdon (Mr. Neave) said about the death grant. By modern standards it is totally inadequate. I congratulate the Secretary of State on the symposium which, according to the Press, is to be held tomorrow in his Department on the subject of the care of the dying. Hospital doctors, clinicians, medical workers and other are to be represented. It is high time that such a symposium was held, because real problems arise on how society should treat the long-term patient and the dying patient. I hope that at the symposium there will be discussion on the level of the death grant. I have today put down a Question asking the Secretary of State to make a statement on his symposium in a fortnight's time. I hope that the death grant is one of the issues to which he will turn his mind.
I turn to something that is absent from the Bill. I do not know whether it is strictly relevant, or whether it should be brought into the Bill, but it is high time that the House gave attention to the problem of alimony—or aliment as we call it in Scotland. Our surgeries are flooded with women who have been given alimony by court order and complaining that payment has lapsed. Usually for three months, six months or a year the alimony is paid in full. Then, perhaps because other relationships are formed, the man becomes ill or loses his job, the family become even further apart or for a multitude of different reasons the payments begin to dwindle and there are lapses. Even if many of the women are able to obtain supplementary benefit, they often do not want to claim it for reasons of personal pride. Hon. Members on both sides of the House have more and more such cases of this nature brought before them from day to day. 329 Certainly the present system is not satisfactory. When the men concerned receive requests from small-town lawyers to pay up on behalf of their client most men do not react very seriously to such an application.
It is easy to state this problem but perhaps a different matter to do something about it, but in this instance I believe there is a solution. I believe that the demand for money should come either from the Department of Health and Social Security or, better still, from the Inland Revenue. I give notice that on Thursday morning I shall be in the queue at a very early hour seeking an opportunity to introduce a Ten-Minute Rule Bill to place responsibility for the demand for the payment of alimony on the Inland Revenue and on the right hon. Gentleman's Department. The nub of the matter is that, psychologically, many who would resist a request for payment from a small-town lawyer would not resist such a demand if made by the Inland Revenue since we in Britain tend to pay Revenue demands.
I hope that some thought will be given to this widespread problem. The Government were right to try to do something about maintenance orders, and I give the Home Office full credit for taking some small steps in the right direction. But those steps are not adequate and something more must be done. I had hoped that something would be done in this Bill, but this has not happened. I will leave the matter there because there are other hon. Members who wish to take part in the debate.
§ 7.50 p.m.
§ Mr. R. A. McCrindle (Billericay)
The hon. Member for West Lothian (Mr. Dalyell), not surprisingly, revealed a certain filial devotion to the Crossman plan. In an interesting speech he said that if the General Election had been delayed until October, 1970, the Crossman proposals would have been enacted, and he went on to predict that if a Conservative Government had been returned they would still not have reneged on those proposals. I would not wish to look into the crystal ball any more than the hon. Gentleman attempted to do, but he went on to deal with the position in which this country stands in "pensioneering" terms from this moment on.
330 We have before us a measure of considerable dimension. I hope that later contributors to the debate—perhaps the right hon. Member for Sowerby (Mr. Houghton) who is to wind up for the Opposition—will say whether the opposition to the Bill which has been revealed on the part of certain Labour Members is of such a root and branch nature that in future we can expect to continue the to-ing and fro-ing on pensions legislation which has done nobody in this House any good, and which certainly has done little good to potential beneficiaries.
I begin by giving a warm welcome to the Bill, which bids fair to be the most important measure that we shall have before us this Session. It is a breakthrough in terms of the variety of its provisions, not least in the provision of two pensions for every working person. It was surely somewhat churlish of some Labour Members to say that the only area of benefit would be to the insurance companies, and to suggest that this was the pay-off for contributions to Conservative Party funds made in the period leading up to the General Election. I cannot believe that a Bill which introduces pensions—no matter how meagre they may be in the initial stages—to 11 million people who are not in receipt of a second occupational pension can be said to be of no value to anybody but the insurance companies.
Since publication of the proposals much play has been made of the length of time that people will have to wait before the second pension is paid. Much has been made of the fact that even when the scheme comes into operation it will be a long time before the maximum second pension is paid. I accept that in introducing this new idea we must move propressively forward, and that it would be misleading if we were to suggest that there is likely to be a vast increase in retirement income immediately this legislation becomes law. Those who say that there will be no return from the Bill to anybody in the present generation of retirement pensioners overlook the fact that the Bill consolidates certain steps which have been taken by the Government since June, 1970.
I remind the House that there have been two pension increases since the Conservative Government came into power, which have succeeded in increasing the 331 pension by 33 per cent. at a time when prices have increased by 22 per cent. These are facts which the Bill does not mention but which are a follow-on from these provisions. The Bill consolidates the move towards an annual pensions review—a review which surely must be of advantage to the present generation of retirement pensioners.
The Bill goes further, and in respect of the national insurance scheme gives a better chance that the financing of the fund will be placed on a firmer footing in future. I suggest that this will lead to the retired person receiving a larger and growing share of the national resources, and that, secondly, it will create a system of earnings-related contributions for flat-rate benefits. I mention the second point particularly in view of the remarks of the hon. Member for Rotherham (Mr. O'Malley) who referred to this substantial change of emphasis and appeared to bemoan the fact that there was this change in the system. I believe that this change amounts to a redistribution of national income which is precisely what the Opposition have been asking for for many years, and that it is a redistribution of income which most wage-earners will support. Therefore, in the immediate term the Bill has relevance, although I do not deny that its real impact will be in the longer term.
Superficially, we could be forgiven for thinking that the Bill is simply a device for ensuring a second pension for all. I hope that I have said enough to convince the House that it goes much further. I shall concentrate on the provision of the new second pension arrangements.
There were three choices open to the Government in deciding how to proceed, given the acceptance of a second pension as a desirable objective. First, we could have built on to the existing national insurance scheme and produced a non-funded State scheme. Secondly, we could have introduced a funded scheme largely or wholly through the State. Thirdly, we could have gone forward wholly on the basis of a funded scheme through private enterprise.
The Government have chosen a dual scheme, partly funded by the State and partly funded by private enterprise. My right hon. Friend the Secretary of State and others have made no secret of the 332 fact that we place the greatest emphasis of our policy on the development of the second pension through the occupational pensions movement. There is no doubt that that movement should be, if it takes the opportunity presented by the Bill, at the very heart of this development—
§ Mr. McCrindle
The hon. Member for Mansfield (Mr. Concannon) refers to it as "the pay-off". I suggest to him that there are some very compelling reasons why the occupational pensions movement should be favoured in this way. The first is the undeniable growth which has attended the investment of occupational pensions in recent years. By any standards it is impressive. Secondly, and perhaps even more important, there is the fact that when a worker puts away money for his retirement in an occupational pension scheme that money is invested and provides real savings to the country. It could be said to provide the investment which helps industry to continue and—dare I say?—it provides jobs for the hon. Gentleman's constituents and my own. It is good for the country that there should be a flourishing and developing occupational pensions movement.
I am sorry to see that the right hon. Member for Birkenhead (Mr. Dell) has left the Chamber, because I want to touch on what I thought was perhaps the most interesting speech to come from the Opposition benches. Discussing the occupational pensions movement, the right hon. Gentleman made the point that no guarantee was attached to an occupational pension scheme. If that is the case it is surprising that there is such pressure upon employers to move all employees and not just one section of them into cover by an occupational pension scheme. Although there is no guarantee, past performance is such that the average employee recognises that by the careful investment of his money through an occupational pension scheme he is likely to get a better return than he would through a national pension scheme. That is why the pressure has built up.
Unfortunately, as my right hon. Friend the Secretary of State said earlier, it is not possible for all employees to go into private occupational pension schemes. 333 One reason is that there are many small employers and many floating workers. I cannot envisage a situation in which everyone has the opportunity of becoming a member of a private scheme. That is why the Government have a duty to introduce a nationally funded scheme. It is to be done in the shape of a reserve scheme.
A national reserve scheme of this kind has the advantage of providing further competition to occupational pension schemes. That is no bad thing. I believe that occupational pension schemes have proved their worth in the past. However, there is every reason why they should go on having to prove their worth against the Government's reserve scheme.
I agree with those hon. Members who have pointed out that if the reserve scheme is to get off the ground successfully considerable freedom must be given to it in terms of investment. Those hon. Members who have complained about the possible, likely or guaranteed return under the Government reserve scheme have skated over the fact that it is to be given similar opportunities to invest the pensioners' money to the best advantage. I should have thought that it was far too early to assume that the return on the Government reserve scheme would necessarily be worse than that on a private occupational pension scheme. The fact that there is to be competition between the two is to be welcomed.
Certain minimum conditions are to be laid down. As one who has had quite a lot to do with the occupational pensions movement over a long period, I am the first to concede that a great many schemes are very much below standard. The Government are right to impose conditions to which a private scheme must conform if it is to be recognised. A by-product of the Bill is that it will give some incentive to improve the situation of these substandard pension schemes.
The Government could have stopped there and simply provided for a second pension fund, laying down minimum standards for the fund. Instead, there are to be three further vitally important developments. Widows, too, are to be covered under the new scheme. There can be no doubt in the minds of most hon. Members that in the past widows as a class have been neglected to a con- 334 siderable extent by all Governments and all schemes. I welcome the fact that there is to be a recognition that the provision of widows' benefits is at least as important as giving workers the opportunity to enter a scheme. The fact is that feminine poverty, especially among elderly women, causes many of us great concern.
I accept at once that what I am about to say is outside the ambit of the Bill. but I suggest that if there were an opportunity to build upon my right hon. Friend's successful introduction of the over-80s pension supplement by introducing, perhaps, an over-75s female pension supplement, at one stroke that would relieve a large area of poverty.
The second requirement, which is not strictly required in simply introducing a Bill of this kind, is the preservation of pensions on transfer. I have no doubt that in an ideal world we should be building straight transferability into the Bill. However, I ask the House to accept that enormous problems are attached to full transferability. Preservation is much more than a halfway house. It introduces an element long overdue, and I welcome it. It ensures that there will be no loss on a change of job.
Perhaps I might explain that a little further. I have changed jobs several times. On one or two occasions I have been told by my employer, "You may have your own contributions back, but not ours". I have thought for a long time that that is quite unfair. Now we shall make sure that the pension purchased by both contributions is carried from job to job.
What happens today is that when one's own contributions are returned the temptation is either to "blue" it on a new motor car, or on a holiday on the Costa Brava. If it happens time after time, that leads to a situation where when one reaches the age of 65 one has no alternative but to fall back on supplementary benefit. My hon. Friend the Member for Kensington, South (Sir B. Rhys Williams) feels that it is against the best interests of the pensioner to force him not to take his contributions back. I disagree, and my disagreement is based on my own knowledge of cases where people have been forced to draw supplementary benefit because of a degree of fecklessness in their working careers.
§ Mr. Michael McGuire (Ince)
If a man merely preserves his pension entitlement when he goes to another job, at the end of his working life his lump sum payment is often calculated on the basis of his total number of years' pensionable service. If a person has left behind a considerable part of his working life, either once or twice, he loses in the end. If there was a system of full transferability, a man changing his job could not "blue" his past contributions on a week on the Costa Brava. His pension would be preserved and added to his lump sum entitlement.
§ Mr. McCrindle
The hon. Gentleman is quite right. I began this section of my speech by conceding that in an ideal world there ought to be full transferability. But until we reach a situation where the introduction of full transferability is administratively possible, some form of preservation will produce a situation which is infinitely better than that prevailing today.
The third introduction, which is not strictly necessary within the ambit of the Bill, is that there is to be protection against the erosion, by inflation, of the value of the pension on retirement. This is such a new dimension that it is to be welcomed warmly. So not only do we provide a second pension; we take care of the widow, we introduce a measure of preservation, and we introduce a measure of inflation proofing.
Are there any objections to the scheme? It has been said that people will be compelled to contribute. The hon. Member for West Lothian said that the element of compulsion should offend Conservatives rather more than it would offend him. I believe that it would be wrong not to introduce an element of compulsion, in view of the results of efforts to encourage voluntary provision. That is very different from saying that voluntary provision has no place in the future. On the contrary, I hope that the great majority of people will go on providing for their retirement in addition to anything that is introduced under the Bill; but I believe that an element of compulsion is necessary.
The Bill should be welcomed warmly in all parts of the House because it moves forward on so many aspects of 336 social security about which all of us have been speaking for a long time. I welcome the Bill. I do not think that it is perfect, but it lays down the structure on which this Government can build, and I hope to hear that future Labour Governments, if any, can build on it.
§ 8.11 p.m.
§ Mr. Michael Meacher (Oldham, West)
Contrary to the remarks of the hon. Member for Billericay (Mr. McCrindle), who is a well-known proponent—and, I think, also a former employee—of the life assurance industry, I think that the fundamental point of the Bill is certainly not to provide decent and adequate pensions for all. Contrary to the hon. Gentleman's view, I believe, as was stated by my hon. Friend the Member for Rotherham (Mr. O'Malley), that the fundamental aim of the Bill is to promote the interests of occupational pension schemes and to enhance the profits of the private pensions industry. It is clear, for several reasons, that this is the key to the structure of the Bill. To that extent it is yet another instance of this Government's deliberate assertion of market inequalities at the expense of the poor; or, to put it another way, it is yet another instance of this Government's creeping de-nationalisation, and the sacrifice of the wider public interest.
The mechanics of this exercise are to keep the benefits of the State reserve scheme at a sufficiently low level for employees to have a strong incentive to push their employers into providing a private scheme for them. Employers are notoriously lethargic about this, and just how much pressure is needed to get them to do this is demonstrated by the fact that the most recent official surveys have shown a marked decline in the coverage of these schemes.
It is to get over this lethargy that the exemption conditions for private schemes have been deliberately pitched at an extremely modest level. The formula states that a private pension can be provided at a rate as low as 1 per cent. of PAYE earnings during working life on which the State reserve scheme contributions are payable. How miserably low is this 1 per cent. of average earnings over 40 years is shown by the fact that many reasonable private pension schemes today provide a 337 benefit of 1¼ per cent. to 1⅔ per cent. of final salary.
To make it feasible for this very ungenerous level of benefit to be payable in the private sector, the Secretary of State is proposing to hamstring the State reserve scheme in a manner so drastic as to be explicable only in terms of his ulterior motives.
First, the Secretary of State is gratuitously ending the Exchequer contribution, which is today fixed at about £400 million a year and which previous Governments—Tory and Labour—have always preserved. I can only conclude that to this Government even the last vestiges of redistribution are so much anathema that they must all be eradicated before we enter this brave new world of maximum inequality, which is what the Bill will provide.
Secondly, the Secretary of State has decided, as other hon. Members have noted, that no tax relief is to be provided on members' contributions in the State reserve scheme. This is merely to weaken the scheme.
§ Sir K. Joseph
I must have missed a point. Did I hear the hon. Gentleman aright? Did he allege that the Government are withdrawing the Treasury contribution to the basic scheme? Surely he did not suggest that. I must have misunderstood him.
§ Mr. Meacher
I am saying that the Exchequer contribution, or any Exchequer contribution, is not being made available for the State reserve scheme. I appreciate that it is still provided to maintain the value of the basic pension, but there is no reason why it should not also be provided to give assistance to the State reserve scheme. That decision is open to the Secretary of State, but the decision has been made that it should not be provided.
I appreciate that the reason for not providing tax relief for members' contributions in the State reserve scheme is given in paragraph 74 of the White Paper as "additional administrative complications". There is no reason why the Treasury could not give the fund direct lump sum relief, calculated on an average rate of tax. Can the Secretary of State deny that that is so? This matters, because the withdrawal of tax relief has a 338 disproportionate effect on the level of benefit. If the employee's contributions were relieved of tax and increased, as they would be, to 2½ per cent. of earnings so that the net contribution was 1½ per cent., the level of benefit would rise by 16 per cent., which is a major increase.
The third way in which I suggest that the Secretary of State has impaired the State reserve scheme is by ensuring that benefits are low because both the rates of contribution and the band of income on which contributions and benefits are payable have been restricted. Not only has the employee's contribution of 1½ per cent. of pay been fixed at a level that is low by the standards of most modern contribution schemes; more importantly, the employer's contribution at 2½ per cent. must surely be almost without precedent in the private sector. The 1966 survey of occupational pensions schemes by the Government Actuary found that employees contributed about 3½ per cent., on average, while employers contributed about 4½ per cent. to manual workers' schemes and about 10 per cent. to non-manual workers' schemes. That demonstrates just how poor is the State reserve scheme.
The overall effect of these limitations is that the State reserve scheme does not itself even meet the condiitons of contracting out or exemption, for the level of benefits guaranteed will not reach the required percentage of relevant earnings.
Worse still, pension increases in line with the cost of living are not guaranteed, because the level of bonuses is not assured.
A further serious defect is that bonuses will not be acquired, as might be expected, in strict proportion to the extent that compulsory contributions have yielded a profit. Bonuses are apparently to be used to protect against price rises or to offset deficits, according, again, to paragraph 75 of the White Paper, which in the private market would, on any ground, surely be considered a pretty poor buy.
I will now assess the effects of these limitations by five main criteria which I believe are the crucial yardsticks for judging any pension scheme. The first and most important is the extent to which the State reserve scheme will, as of right, 339 take persons in retirement out of poverty, as measured by the supplementary benefit line on the basis of our experience over the last 20 years, projected forward.
I pass over the fact that the scheme will not come fully into operation for 44 years, which is more than twice as long as the run-in period for the last Government's national superannuation scheme, although I cannot help adding, further to what my hon. Friends have said, that neither of the two main Conservative criticisms of that scheme, namely, a long run-in period and nothing for the existing pensioners, has been met in the slightest by the Bill.
By the time the Bill is fully operational—in the meantime its inadequacies will be all the greater, and I do not believe that the criticisms by the hon. Member for Kingston-upon-Thames (Mr. Norman Lamont) have in any way impugned the accuracy of the figures that I have produced—it will take the £30-a-week man about 30 years to qualify for a pension up to the supplementary benefit line, and it will take the £20-a-week man about 40 years. If a man earns less than £20 a week he will never, in the State reserve scheme, qualify for a pension up to the supplementary benefit line.
For a woman the prospect is worse. Even at the same earnings level as a man it will take her between seven and 10 years longer to acquire what I should regard as the still hopelessly inadequate pension rights of a man.
The effect of all this is summed up in the Government's admission in the White Paper, that theirproposals do not provide a short cut to a substantial reduction in the number of those who will qualify for supplementary benefits.A less mealy-mouthed way of putting it would be to say that 20 years into the next century 2 million or 3 million elderly people are to be forced into means-tested subsistence on public funds.
I have nevertheless been fairly generous in what I have said about the levels of benefit because, as I said in an intervention earlier, I have assumed that the flat-rate basic pension keeps up with the growth of earnings. But paragraph 340 33 of the White Paper states that the Government are committed onlyto increase basic pensions by amounts sufficient at least to maintain their purchasing power.That is an absolutely essential quotation, regarding the Government's intentions.
If the basic pension keeps up only with prices, on the calculations that I used before it will take the £42-a-week man his whole working life to qualify for a pension up to the supplementary benefit level. Of course, nobody below that earnings level—which is one-third above the national average—will be able to qualify even for a poverty line pension. I am not saying that that will happen; I am saying that the Government have not been prepared to commit themselves definitely to anything better than that, which is a different matter. If we assume that the basic pension keeps up with earnings, it is still true that the man earning below £20 a week or the woman earning below £25 a week at the time the scheme comes into operation will not be able to qualify for a poverty line pension.
The Government's new earnings survey reveals that at an age between 21 and 24, when these people will come into the scheme, the earnings of 31 per cent. of men and 96 per cent. of women are below these levels. These percentages will decline somewhat by 1975. But, even if that is true to a degree, it must surely mean that after 45 years at least a third of the members of the State reserve scheme—over 2 million old people—will end up with a pension beneath the poverty line. That, by itself, is a standing indictment of the Bill.
§ Mr. Norman Lamont
A few moments ago the hon. Gentleman said that he was not suggesting that these things would definitely happen. Yet he is now using the word "will" whenever he makes his predictions. Will he please not use the word "will"? Will he use the words "could possibly", if that is what he means? Will he also explain by what arithmetic he arrives at the conclusion that the pension, which is now £6.75 for a single person, could, in 10 years—taking into account the reserve scheme pension—arrive at only £8.80? Is not that presupposing an absolutely 341 miniscule increase each year, of something just over 1 per cent.?
§ Mr. Meacher
I explained honestly and straightforwardly to the hon. Gentleman earlier that that was based on the table on page 22 of the White Paper, in conjunction with a raising of the basic pension in line with national average earnings. I cannot be fairer than that. It is not reasonable to suggest that one should offer more than that. As to whether this will necessarily be the case, surely the least we can do is to rely on the minimum commitment of Governments. After all, Governments are not any more generous than that to which they are prepared to commit themselves. Therefore, it is not unreasonable to err on the modest side in assuming what this Government are likely to do.
§ Sir K. Joseph
I have been restraining myself from correcting many of the hon. Gentleman's misstatements, but I must point out that in the last two up-ratings we have done respectively 3 per cent. and 4 per cent. better, in real terms, than the pledge to which he refers. The pledge was to protect against price increases. We have done, in 1971 and 1972, respectively 3 per cent. and 4 per cent. better than that, in real terms.
§ Mr. Meacher
The 3 per cent. and 4 per cent. better in real terms is in terms of prices; we are talking about the relationship with national average earnings and the point immediately after the increase. The value of that increase after four or five months is likely to be below par, and at the end of 12 months substantially below par. I projected forward the level of pension on the basis of the basic pension keeping up with the level of average earnings and not merely prices.
§ Sir B. Rhys Williams
In criticising what my right hon. Friend said, the hon. Gentleman ought to recall that the National Insurance Fund is financed largely by flat-rate contributions which are not buoyant and do not change with the value of money. The principal object of the Bill is to change the basis of contribution so that in future it will be possible for the Government to keep pace with money changes and to do better.
§ Mr. Meacher
The hon. Gentleman knows that I have no objection to changing over to a full graduated system of 342 contributions. The only dispute is about the way that the scheme is structured. There is no tax relief on contributions, there is no Exchequer contribution, and the relationship between contributions provided in that way and the level of benefit is remarkably low. I should have thought that, given his record in this sphere, the hon. Gentleman would admit that that is true.
Nor do private pension schemes at minimum benefit necessarily provide very much better levels of benefit than the State reserve scheme. If wage inflation is kept down realistically to 3 per cent., which is what the White Paper assumes—I ask the hon. Member for Kensington, South (Sir B. Rhys Williams) to listen, because I am talking about the minimum benefit provided by private pension schemes—the pension for a man will be 24 per cent. of final salary. If wage inflation rose to 6 per cent. it would fall to a mere 15 per cent. I do not believe that, however contributions are arranged, the hon. Gentleman can regard those levels of benefit as more than derisory at the end of the twentieth century. For a woman, even with 3 per cent. inflation the retirement benefit will amount to only 16 per cent. of final salary.
Altogether, these poor levels of benefit are likely to apply to up to 4 million people in the private sector. If to that number we add 7 million in the State Reserve Scheme we see that about half the population will end with what can only be described in twentieth and twenty-first century terms as a pension sell-out.
I turn briefly to the other criteria for judging the Bill. The first of these is the impact on income distribution—how far the Bill will reduce inequalities in retirement. It is a remarkable comment on the anti-working class ethos of the Bill that the 20-to-1 post-tax ratio between rich and poor earners in Britain today is likely to be widened in retirement. This is evident from comparing the distribution of income among all employees with that among private pensioners according to the 1966 Occupational Pensions Scheme survey. For those for whom the existing inequalities are far too great, to widen them deliberately and gratuitously is an affront to all that is reasonable and just.
343 Another criterion on which the hon. Member for Billericay touched—though I shall draw a different conclusion—is the treatment of widows. It is laid down in the Bill that recognised private schemes must provide a widow's pension of half the pension accrued by her husband up to the time of his death. But since his pension would be inadequate, half that amount would surely be rather pathetic. Furthermore, many good modern pension schemes in the private sector fix the widow's pension on the basis of an assumed accrual up to age 65, even where the husband dies in service. Again, it is significant that the State reserve scheme does not do so.
Another crucial criterion is inflation-proofing. The Life Offices Association, in its booklet, "Progress by Partnership"—issued at the time of the Crossman scheme—had to admit thatit is impossible for employers to undertake in all circumstances to maintain the purchasing power of the benefits provided by their schemes.The Bill proposes an escape mechanism whereby, for minimum private pension schemes, as long as benefits are provided at 1.3 per cent. of average lifetime earnings instead of 1.0 per cent.—a very small extra amount—no further inflation-proofing is required.
Let me point out what that means. The 1.3 per cent. formula will provide effective inflation-proofing for only about three to five years after retirement, and yet the latest evidence from the census indicates that by the end of the century life expectancy for men will be about 72 years and for women about 78 years. It is clear, therefore, that the inflation-proofing in the Bill, though an improvement on the previous swindle—or however one may refer to the previous scheme if that term is no longer acceptable—is little more than a sop. It will leave millions of old people in their last years with a pension which, in real terms, is dwindling annually.
The last criterion is transferability, and here two alternatives are offered. One is preservation, which will suffer all the disadvantages of the ravages of inflation by being frozen in terms of wage levels at the time of the member's withdrawal. The other alternative is transfer, but this will suffer from the drawback that only 344 the long-service employee will get the full benefit from the private employer's scheme.
It is clear that on every one of those grounds the Bill is grossly inferior to the Labour Government's national superannuation scheme. The Bill will provide substantially poorer benefits relative to equivalent contributions as compared with national superannuation. Under national superannuation, the man on average earnings entering the scheme at age 21 would have received a pension at 42½ per cent. of final salary. Under the State reserve scheme it will be 37 per cent., assuming that the pension keeps in line with earnings, or 23 per cent. if it matches only price rises. For a man on average earnings who enters the scheme at age 45 the comparison is even more unfavourable. Under national superannuation he would have received a pension at 42½ per cent. of his final earnings. Under the State reserve scheme he will get only 26 per cent. if the basic pension keeps up with earnings, and only 17 per cent. if it matches only price rises.
National superannuation would at least have reduced inequalities in retirement and would have removed all but 13 per cent. of supplementary pensioners from poverty within 20 years. In 45 years this Bill will remove hardly any pensioners from poverty. [Interruption.] It will remove very few. I hope that the Minister will say just how many he thinks will be removed from poverty. The Bill is certainly likely to widen inequalities in retirement.
National superannuation would have given widows 100 per cent. of their husband's entitlement. This Bill will provide only 50 per cent. national superannuation fully dynamised pensions against the ravages of inflation. The Bill will provide probably less than half of the inflation-proofing required. National superannuation, as a single, comprehensive scheme, entirely avoided all the problems of transferability. The Bill, by relying partly on preservation, will keep a section of the pension frozen in a form which is irreversibly whittled down year by year.
If the Opposition do not have the power to prevent the passage of the Bill—the scheme is unlikely to be implemented before the next General Election—the good sense of the British people will 345 supervene in rejecting decisively a Bill which is strongly against the interests of the majority of them and will sell a sizeable minority of them into poverty throughout the next century.
§ 8.35 p.m.
§ Sir Brandon Rhys Williams (Kensington, South)
The Bill goes to the heart of the relationship between capitalism and social needs. In the opinion of serious students of the subject, it can be seen to have been founded on a bedrock of principle which the public will come increasingly to accept.
It is advisable to try to clarify our minds as to the essential difference between the proposals in this Bill and those in the National Superannuation and Social Insurance Bill, known as the Cross-man scheme. Many hon. Members seem to have missed the point that the Cross-man scheme attempted to roll redistribution of income into the same scheme as a straightforward savings or career-earnings scheme, with the result that it was neither arithmetically sound nor effective as a system for redistribution of income. This Bill, by keeping redistribution separate from the arithmetic of the build-up of personal entitlement, leaves both schemes free to be improved without destroying their basic structure.
I believe that the Bill is a turning point in the history of the Welfare State. We must know what we believe to be the nature of entitlement to benefit in old age. Is it need? Is it contributions? Or is it citizenship? Then we must have a clear idea of the relationship which we wish to establish between the old and the young, between the retired and those who are still creating wealth. We must also have a clear idea of the relationship between capital and income. When we have clarified our ideas on all these subjects, we find that the only possible scheme is one on the lines of that which my right hon. Friend the Secretary of State is introducing in the Bill.
As I said earlier in an intervention, it is perfectly easy to improve the figures with the passage of time without destroying the integrity of the scheme. But at this stage it is essential to introduce a structure, which the Bill does, which corresponds with social needs. It is impossible to devise one scheme for redistribution of income which can be recon- 346 ciled at the same time with the build-up of personal entitlement. The earnings-related scheme which, in our present dispensation, is known as the Boyd-Carpenter scheme remains separate from the redistribution of income, which is the basis of national insurance.
The Bill keeps the contributions related retirement income based on career savings entirely separate from citizenship income based on redistribution or, as the technicians call it, repartition. In other words, it forces a man to differentiate between what he can refer to as his own and what is "ours" as members of a civilised society.
First, I will turn to the provisions for the redistribution of income. I am amazed to hear the hon. Member for Oldham, West (Mr. Meacher) saying that the Bill is not redistributive. In so far as it deals with the redistribution of income, it goes further than the Crossman scheme. Earnings-related contributions, as the hon. Gentleman agreed, had to come because we cannot continue with the farce of financing national insurance out of a flat-rate contribution. I do not think that is really a matter of serious controversy in the House. But I was surprised when the hon. Member for Rotherham (Mr. O'Malley) said that the concept of flat-rate benefits was not acceptable to the Labour Party. It seems that the Labour Party must have changed its nature altogether if it does not believe in equality of benefits. We have to clarify our ideas on this subject so that we know precisely where the parties stand. I want to say exactly where I stand.
I think flat-rate benefits are appropriate where citizenship benefits are concerned because the State should not treat one citizen differently from another in the same category. It should treat everyone the same within the same group—as it might be, widows, the old, the handicapped. There can well be what my right hon. Friend called "group selectivity" in the basic scheme, as, for instance, one can pick out everyone over 80 or certain other categories for special treatment. But one must not differentiate between people within a group because of their means, as I am sure the Opposition would agree, or because of their contributions, which are another matter.
Contributions are built up over a lifetime of employment, and each person 347 should benefit strictly on his personal record. Any attempt to tamper with the figures in order to achieve some sort of redistribution between one person and another is immoral and inappropriate. I am used to hearing that conception of the Opposition "From each according to his capacity—to each according to his need." If, under pressure from middle-class trade unions, the Labour Party is changing its stand on that, I hope that we shall know by the end of the Committee stage exactly where the Labour Party does stand. To object to the principle is to require the State to favour the better-off—that is to say, if we reverted to the Crossman scheme we would be back to the situation where the State gives the most money to the people with the least need. As I said about the National Superannuation and Social Insurance Bill at the time—no one contradicted me—it did not even give the better-off a fair deal.
§ Mr. Bidwell
The hon. Gentleman is making heavy weather of trying to understand where the Labour Party stands on this. If I catch Mr. Speaker's eye, I will try to explain. But where does the hon. Gentleman stand in relation to the negative income tax idea which is supposed to be coming in in 1975? That idea vies with the principles that he is enunciating in the sense that it seeks out people who are in need but will add to their need on the basis of old-age pensions, which is a contradiction.
§ Sir B. Rhys-Williams
I hope that the tax credit scheme will be introduced before 1975; that is where I stand on that issue. For the rest, I must hand the hon. Gentleman a pamphlet I wrote some years ago called "The New Social Contract", in which I have tried to be explicit.
It is the contributions which determine the level of benefit—or, rather one should say, the levels of benefit—in a scheme which has a complex structure of benefits. I have already welcomed the idea of group selectivity in the State basic scheme. I would like to see special discrimination in favour of the disabled. That has already started, but it has not yet gone far enough. It would be appropriate, too, to give further benefit to the over-70s. My hon. Friend the Member for Billericay (Mr. McCrindle) said that we should pick out women over 75. That 348 would be a step forward, because so many elderly single women make up the hundreds of thousands of old people who have to apply for supplementary benefits.
Moreover, if we were to proceed on the basis of expanding group selectivity, we should add to what, indeed, this Government have already done in giving benefit to the over-80s, in introducing the attendance allowance entirely without means test, and in the family allowances, which are the outstanding example of group selective benefit not based on a means test. I should like to see special family allowances for handicapped children, even if only initially perhaps at the level of £1 a week, where there was serious and readily identifiable handicap.
As to the 18 per cent. contribution from the Exchequer, we must all agree that the hon. Member for Cornwall, North (Mr. Pardoe) raised some well justified questions. Why is this anomaly left in the Bill? Since we have moved on to earnings-related contributions, it would be more appropriate to get rid of this ridiculous 18 per cent. survival and produce something nearer to a self-balancing scheme based on contributions which actually cover the outgoings.
In my view, the maintenance of the illusion of the national insurance contribution after we have adopted a wholly earnings-related contribution is a farcical pretence, and it should be ended forthwith. The contribution of the employee will be collected, like the income tax, through the PAYE mechanism, and what we are left with is a contribution on the one hand and income tax on the other, both of them earnings-related and collected through the same mechanism. These two drops of mercury side by side must be merged in one. I should like to see a single welfare budget which could be seen to be self-balancing and subject to a reasonable audit.
In considering the question of redistribution of income, the House must be in no doubt about the rising burden of old age. We shall deceive ourselves and we shall deceive our pensioners if we make them cheap promises about quick increases in their standard of living without realising what we are committing ourselves to. If we are to increase benefits on the scale for which hon. Members opposite are campaigning until, say, they are 349 adequate to bring the great majority of pensioners out of the range where they have to apply for supplementary benefit, the cost will be very substantial. It will not be paid for by reversing income tax concessions to small classes of surtax payers or in any of the other ways which lion. Members opposite tend to suggest.
We must recognise also what is brought out in the admirably clear summary of the finances of the scheme prepared by the Government Actuary, that we are coping with rising numbers, at least until 1985, and probably until 1990, so that for at least 15 years we shall be on a fairly steep upward slope. Working people will have an increasingly heavy burden to bear during the next 15 years even if they do no more than maintain the existing level of pensioners' incomes.
In addition, we must start the build-up of personal savings funds for the career-earnings entitlement. Whether hon. Members opposite agree with the Bill or not, they must recognise that it is intolerable that so many of our people come to the end of their careers without any effective savings at all and have to go on to supplementary benefit the day they retire. Through one means or another, we must build a real property-owning democracy which takes in everybody. This is part of the consequences of universal suffrage, But we must recognise that it will put a heavy burden on our economy because it will take so much in the way of savings away from immediate consumption which could have been transferred to pensioners through the repartition system. There is no escaping the conclusion that better pensions mean more sacrifice.
I turn now to the capital side; that is, the private and State reserve career savings scheme. I give a warm welcome to the setting up of the Occupational Pensions Board. For many years it has not been satisfactory that the Inland Revenue should be the only Department effectively supervising occupational pension schemes. There are various criteria for approval set out in the Bill, which, I am sure, will call for serious examination in Committee, but the point to note is that a direct link with the cost of living is not to be made obligatory on the occupational schemes. Is that right? My own view is that it is emphatically right, because the occupational pension schemes are founded on 350 capital assets and have nothing to do with transfer of income. Being capital assets, they must move with capital and not with income. The cost of living is an index which relates to current spending. and the proper way to regulate occupational schemes, which are in effect savings schemes, is to tie them in some appropriate way to changes in the value of capital.
Then the question arises: will capital be able to defend itself over the passage of time against changes in the value of money? Will the profitability of British industry continue to decline, so that, with the best will in the world, both the State reserve scheme and the private occupational schemes will find it increasingly difficult to keep pace with changes in the value of money?
I am determined that the decline in the effectiveness and efficiency and profitability of British industry must be reversed. This Bill will introduce a special incentive to everyone to ensure that British industry is profitable and that the accumulation of capital continues at least to keep pace with changes in the value of money, and preferably much more. Inflation is a form of theft, by which the young and well-organised rob the helpless and the old.
I am bound to come now to some critical remarks about the Bill. My right hon. Friend twice said that protection of rights in occupational schemes is essential. Immediately we find ourselves back in the old dilemma: transferability or preservation? It is increasingly recognised by experts that transferability is the only satisfactory solution, if only because, in final salary schemes, it is the only really effective way of solving the problem of the earnings trajectory to the time of retirement.
Preservation is acceptable as an alternative only if the employee's asset is guaranteed after he has changed his job. It would be wrong to allow the trustees of the fund of a former employee to enjoy the use of the employee's asset, to get capital gains on it free of tax, to get income on it free of tax and at the end of the day to be obliged to pay him out only in money which has lost its value.
To give the Bill credit, it seeks to overcome this problem but not with sufficient vigour. I hope that in Committee this 351 problem of the preservation of accrued rights left behind in former schemes will attract particular attention and that my right hon. and lion. Friends will see their way to improving the conditions with regard to preservation. The withdrawal of the right to a return of an employee's own contributions is intolerable in the absence of a thorough-going assurance on protection.
Knowing that another hon. Member wishes to speak, I will not launch into another attack on the mixed benefits rule except to point out that the Civil Service has given itself transferability and that it will be held to account by public opinion if it cannot find a way to give transferability to the private schemes as well. These, however, are committee points.
In conclusion, I give the warmest possible welcome to the Bill, which, as I said, is undoubtedly a turning point in the history of the Welfare State. It is fundamentally honest, and that is why it will last.
§ 8.50 p.m.
§ Mrs. Doris Fisher (Birmingham, Ladywood)
The Bill retains the present age limit of 65 for men and 60 for women for receipt of a State retirement pension. Such a distinction on the ground of sex alone is arbitrary. I should have thought that if a distinction is to be made, it should be between men engaged in heavy industry and men in sedentary occupations. Therefore, I would support investigations undertaken by the Government to see whether it would be practical to reduce the age limit for men, progressively, to the same as that for women.
I see that in the Bill the second-class status of women is continued in the majority of proposals. Pensions are distinctly lower for women than for men. I can never understand the logic that women, because they are retiring earlier and living longer, have to live on less money during that period. No doubt some male decided to frame that argument.
The financial position of widows is little altered. I cannot see any serious extension of benefits for widows. On reading Schedule 8, one wonders what kind of game one has to play in the method of treating a deceased husband's contributions as those of his widow so 352 as to entitle her to a Category A retirement pension. One takes the number of years from the year in which the woman attained the age of 16, multiplies by the number of the husband's reckonable contribution years, divides by the number of years of his working life, and then, if the quotient is not a round one, one adds something else and divides by something else. It is like a game. Ultimately one returns to the number one first thought of.
That is the way that the Government are saying that they have extended the benefits to widows. I see a number of widows at my advice bureau, and all their questions arise from this kind of case because, perhaps, they were 18 when they got married, instead of 16, or their husband died a year before he should have done, and but for that they could have got another shilling a week. One would have hoped that the Government would have got rid of that sort of anomaly.
As the White Paper says, elderly widows form a considerable proportion of those receiving supplementary benefit. Therefore, to extend that number when we all know of the existing anomalies seems a strange thing for the Government to be doing when they are supposed to be a compassionate Government.
The observations applying to widows at present will be extended and will apply to a large section of single women who will not be covered by occupational pension schemes but will be contributing to the State reserve scheme for too short a time. That means that they will qualify for only a derisory sum, in the same way as many widows.
I ask the Secretary of State to consider seriously, when collections are being made through "pay-as-you-earn", that any arrears of contributions are quickly and easily made known to males and, perhaps, to females. This applies particularly to husbands, because any period that is not covered very often has a decisive effect upon the widow when she makes a claim on widowhood. Many widows come to see me having been upset because, unfortunately, at some stage of their husband's life he had not got an annual 50 contributions on his insurance card. If we are to change from a stamped card system to the PAYE system I hope that the Secretary of State 353 will take into consideration that it is important that the husband is aware of the fact if he is in arrears with his contributions at any time, so that there is no difficulty at the end of his working life over a shortage of stamps on his card.
Finally, I make a plea for women. When the Secretary of State is considering those who will sit on the Occupational Pensions Board, will he consider not only the woman who is to sit on the board statutorily but also women in their qualified status who will sit on the board? There are qualified women now in the City who should be making their contribution as qualified people, not as the statutory woman.
§ 9.0 p.m.
§ Mr. Douglas Houghton (Sowerby)
I am obliged to my hon. Friend the Member for Birmingham, Ladywood (Mrs. Doris Fisher) for speaking up for women. We have heard far too little about women under the scheme, and I hope to say something pungent on the subject before I finish. I should explain to the House that I am only a temporary "Shadow" again or, in the jargon of the Bill, a "reserve Shadow". As soon as the Leader of the Opposition decides on the dispositions of our Front Bench I shall willingly withdraw to the greater obscurity and comfort of the chairmanship of the Parliamentary Labour Party, from which, if the House only knew, do many blessings flow. I shall do my best, however, with my temporary brief. After listening to this familiar subject for so long I shall not say that this is where I came in, because the truth is that it is where I went out. I do not want to dwell on the mortification that I suffered personally on having to comment on a Conservative Government's scheme eight years after I began a major review, under the Labour Government, of the social insurance arrangements of that time.
All I can say to the hon. Member for Chelsea (Mr. Worsley), who made some good-natured inquiries on the subject, is that something must have gone amiss somewhere. But that is the only lament that I shall make. My right hon. Friend the Member for Birkenhead (Mr. Dell), in a most interesting and penetrating 354 speech, referred to the structure of the scheme—and it is the structure that we are discussing. The difficulty whenever we discuss structure is that the justifiable claims of existing pensioners obtrude into the discussion on structure. There is a fairly simple answer why our pensions are too low. Structure has never stood in the way of increasing pensions to an adequate level. Pensions are too low because no Government in recent times have braced themselves to confront the country with the need for a positive sacrifice on a widespread scale in order to lift the pensions of the millions of people who need them.
That involves a mass distribution of the national income, as my hon. Friend the Member for Manchester, Gorton (Mr. Marks) pointed out. I wish that the TUC would face the issue a little more frankly in making its own quite laudable claims for an improvement in the position of pensioners and other social beneficiaries. The Bill is the second substantial change in the social security and national insurance system introduced by a Conservative Government. I congratulate the Secretary of State on having got the Bill before the House in the time that he has, and on the enormous industry and work that lay behind it. I wish we in the Labour Government had done the same. We would not be discussing the Bill tonight if we had—I must be careful or I shall be lamenting again.
The Department of Health and Social Security must have gone through a period of great pressure in the last few years in view of what it had to do first for one Government and then for another. Whatever we think of the Bill, we thank the Department very warmly for the work that it has done. In my experience, no Minister could be supported by a more dedicated and competent Civil Service.
The 1959 scheme, which has lasted until now, is to be wound up under the Bill. It is interesting to look back to see what the Government said about the 1959 scheme at the time, so that we may have a clue to their present philosophy. They said last time, in paragraph 23 of Cmnd. 538, "Provision for Old Age", issued in October, 1958:The earlier analysis of the present position brings out strikingly the limitations of a flat-rate system.355 Paragraph 27 said:The difficulties set out in the preceding paragraphs make it clear that social and financial considerations alike point to the need for a new and bold step away from the universal flat-rate system. It is evident that a sound system which takes account of varying standards and capacity to pay requires that contributions and pensions should vary according to earnings.That was the Government's philosophy of 1959.
As my hon. Friend the Member for Oldham, West (Mr. Meacher) said, the truth is that the underlying purpose of the scheme has been to promote the occupational pensions industry. I think that was in the Government's mind all the time. But, of course, the pressure behind the Government in 1959 was about how to finance the flat-rate scheme without raising flat-rate contributions to unbearable levels. They decided that it could not be done without introducing graduated pensions, and that that could not be done without at the same time introducing graduated benefits. By introducing a modest scheme of earnings-related benefits with considerable contributions on an earnings-related basis, the Government found the answer to the financial difficulties of the flat-rate scheme. They rescued it from collapse by that device.
The report and accounts for 1970–71 give some idea of the financial magic of the graduated contributions system. There we see the high proportion of the financing of the flat-rate scheme that comes from graduated contributions. I calculate it to be almost 40 per cent. Last year over £780 millions was paid in graduated contributions and only £13 million in graduated pensions benefits. Much more than that was paid out in graduated additions for sickness and unemployment, but even the grand total of graduated benefits, across the board, reached only £105 million as against the £789 million collected in graduated contributions. Why go digging for gold in the Klondike when it is showered upon one from every payroll throughout the the land? The Government soon discovered that that was the situation.
The Secretary of State challenged my hon. Friend the Member for Rotherham (Mr. O'Malley) when he used the word "swindle". The right hon. Gentleman 356 said, "Will the hon. Gentleman ask his right hon. Friend the Member for Sowerby whether he has ever called the scheme a swindle?" I shall give him the answer. In 1959 I accused the Minister of the day of turning the Ministry of Pensions and National Insurance into a bucket shop. I told him that men in the City of London had been sent to prison for less. But I have never called the scheme a swindle.
When the Conservatives had quite a long time to think of the benefits of their scheme after 1959, we wondered, when we came to the Labour national superannuation scheme, whether we should see a glimpse of fresh thinking on the Conservative benches. We were disappointed. There was none. Hon. and right hon. Gentlemen opposite tabled a reasoned amendment and then voted against the Bill. But of an indication of Conservative thinking or policy there was none. We had to put up with that. We did not get the benefit of their alternative scheme. They at least can see our alternative scheme because it has been before the country for a long time.
For some reason that I have not been able to understand hon. and right hon. Gentlemen opposite appear to dislike the partnership between the State scheme on an earnings-related basis and the occupational scheme embodied in the national superannuation scheme. It was a partnership, and we freely acknowledged that. It was mostly a matter of the terms upon which that partnership could be established. I thought that at the end of the day we had reached a very amicable and fruitful understanding of the part to be played respectively by the occupational pension scheme and the new concept of a State superannuation scheme.
Now we see a little more clearly what the Government are up to in this Bill. They have come out firmly on the side of the occupational scheme which is not only to be given the opportunity but is to be under the duty of providing benefits which will be at a level to be recognised under the scheme. This is a promotional exercise. With a reserve scheme we may find that the private pension funds will be relieved of the unprofitable areas of occupational insurance. It will take the low-paid worker, the women and those who are employed by small firms which 357 cannot afford to give them proper conditions of service.
Another point concerns the size of the reserve scheme. If the numbers given in the White Paper are likely to be fulfilled almost one third of the people gainfully employed will end up in the reserve scheme. That is an enormous number of people to go into such a scheme. It is called a fall-back, a long-stop, but it cannot be called that when it occupies such a mammoth part in the whole of this scheme.
The Government are now breaking with the 1959 scheme. Graduated pensions under that scheme are to be put into the freezer and handed out eventually at 1972 values. I wonder what sort of pressure will built up for dynamising frozen graduated benefits, particularly when we remember the pressures that went behind the 10 shilling widow. The 10 shilling widow managed eventually to persuade this House to recognise her claim for some improvement in the real value of a residual pension paid under the old scheme. I am sure that the same will happen with those who have graduated benefits accrued and frozen under the old scheme.
In this Bill the Government have abandoned all pretence that this is national insurance. They call it a Social Security Bill. They have abandoned the insurance concept and imposed a social security tax. Surely an earnings-related contribution for flat-rate benefit is a social security tax. I have not heard any reference yet to this remarkable book recently published, written by Sir John Walley, who was Deputy Secretary to the Department until his retirement—"Social Security: Another British Failure?" If I may say so without indulging in a commercial, any hon. Member who goes on to the Committee ought to read this book. From that book he will get insight into the thinking on social insurance and the identification of weaknesses in schemes put forward in recent years, including that of the Labour Government. On page 170 the author says that he cannot see a long political life for this kind of earnings taxation. Neither can I. There are bound to be pressures for improvement in a scheme which imposes a graduated social security tax for flat-rate benefits, especially when the flat-rate benefit will 358 never be enough to live on without supplementation either from the Supplementary Benefits Commission or from the second pension, whether from a private scheme or from the reserve scheme.
In the early years the Supplementary Benefits Commission will have to do its stuff on a big scale because of the length of time that it will take for the reserve scheme and the private schemes to provide an adequate occupational pension. So long as the occupational pension, whether from a private scheme or from the reserve scheme, is too low to provide adequate means to live on, there will be pressure for improvement in the amount of the disregard for the private or public occupational pension. That is where political pressure will mount for a higher yield from supplementary benefit.
Many dangers lie ahead in the operation of the State reserve scheme. The hon. Member for Surrey, East (Mr. William Clark), my hon. Friend the Member for Islington, South-West (Mr. George Cunningham), my right hon. Friend the Member for Birkenhead and others have dwelt upon the danger of this huge concentration of money in the hands of Reserve Pension Board. The investment manager in this outfit will be a powerful man in the land, alongside the investment managers of the large institutions.
§ Mr. Houghton
He will be very much bigger if the hon. Gentleman's figures turn out to be accurate. What pressures will he be under? What responsibilities to the Chancellor of the Exchequer of the day will the board have? When we were discussing the national superannuation scheme we felt that it was undesirable to have large accumulations in the hands of national insurance commissioners or similar bodies, who might thereby be diverted from their main duty of using the money entrusted to them in the interests of the contributors.
The Secretary of State will have to think again about the tax position of contributors to the reserve scheme. I know that there are administrative difficulties—there are in almost everything—but contributors to occupational schemes get tax relief and there are administrative difficulties there. It is essential to put contributors to the reserve fund in the 359 same tax position as contributors to occupational schemes. Why should the people who are not adequately provided for by their employers have to go into this residual reserve scheme and then be penalised by receiving no tax relief on their contributions?
I have been hurrying on in order that I can have my say about women. Do we have to keep on saying that social security is mostly about women? Well, perhaps not quite as vehemently as in the past, because the Under-Secretary of State, according to a report in yesterday's Times, now understands this problem. The hon. Gentleman was addressing a conference on women and pensions organised by Age Concern in London on Saturday. He saidThe essential fact is that poverty in old age largely means poverty among women.I have been saying that for 15 years, and the hon. Gentleman apparently has just got on the beam.
§ Mr. Houghton
That means another apology is due! I am grateful to the hon. Gentleman, and I will not chide him further.
Our present social security scheme is, we must all agree, now socially out of date. In some respects it is little better than Beveridge thought of 30 years ago. This is a man's scheme based on conventional attitude which the younger generation now strongly question and many reject. Women are at risk all the time because society puts them at risk. So far it has done little to take them out of risk.
I have often said—this is another truth the Under-Secretary of State should bear in mind when he is addressing his next women's conference—that social security for the married woman largely depends on a faithful husband or the Supplementary Benefits Commission. If we think about this for a few moments we realise how true it is. The sad thing, however, is how apathetic women are about these issues—issues which affect women and their security and their social welfare. 360 They do not think that some of these things can happen to them—and, what is more, they do not always approve of the people to whom they do happen. There is a moral judgment in the background in many cases.
Widowhood is a respectable condition, even if the woman has driven her husband to the grave. Society feels very deep compassion for her. We mourn with her, there is great sympathy, and we all want to do our best, because widowhood is undoubtedly one of the saddest conditions in a woman's life. But there are others to be considered. There are the separated wives, the deserted wives and the divorced wives. There are the common law wives; there are the unmarried mothers. These women deserve our compassion, too. But both our social security system and our tax system regard these women as not perhaps quite desirable people. No scheme is good enough for the future which fails to deal with the hazards of a women's life as adequately as it deals with the hazards of a man's life. Women should have benefits in their own right, and this is one of the things that we sought to do in the national superannuation scheme. We want to have benefits in their own right for their own contributions, and their own credits given in certain circumstances, particularly in matters involving young children.
In this respect the scheme certainly is not good enough, quite apart from all the other respects which have been the subject of criticism today. We thought it desirable in the fulfilment of our desire to have equality for women in the social insurance scheme to remove the married woman's option, however distasteful and however politically difficult it might be. It was essential to do that as a condition of getting for women what we wanted to obtain for them in the social security scheme. But, of course, the Bill provides no basis upon which the married woman's option can be removed, and it does not surprise me that it is being retained because this scheme is not giving women the benefits that they would wish to have in return for contributions.
I ask the House to look at the report that some of us have produced recently on discrimination against women. In our approach both to social security and 361 to taxation we confer separate rights and benefits on each spouse and so remove the need to make provision for a dependent wife. We take the dependent wife out of taxation and social security. This can be done only with an adequate level of earnings-related benefits, and that is what we provided in our scheme for national superannuation.
Without being hard liners in the interest of Women's Lib—and I confess that I am rather a hard liner—we can at least in principle get away from the sort of pansy stuff that we had from the benches opposite called "A Fair Deal for the Fair Sex". Really, Tory men are hopeless about women. I prefer to echo the words of my hon. Friend the Member for West Lothian (Mr. Dalyell). No greater humiliation can be heaped upon a woman in the quality of the British way of life than to see her trying to get her maintenance money out of a man or out of a court or her subsistence from the Supplementary Benefits Commission when her money does not come. It is heart-rending to see a woman with a family having to get someone to look after the kids on a Friday while she takes a bus to the supplementary benefit office to get some money because her maintenance money has not arrived and she cannot shop for the weekend. Surely we can do better than that. When shall we clean up this situation and give all women in all circumstances a minimum degree of social security in their own human right? That is the message which I give the House on that subject.
It is clear that the two main political parties have quite different attitudes towards the place of occupational pensions within the concept of superannuation for all. That is what there is between us. We on our side believed that experience had shown the inability of occupational pensions schemes, especially in the private sector, to meet the rising expectations of the scope and level of social security in Britain during the next half century. Moreover, the problems of preservation and transferability in the private sector appeared insurmountable. No aspect of pension rights has been so much talked about with so little achieved as transferability.
Another quite fundamental condition of Labour thought was that the State scheme should be universal with no complete 362 contracting out. That is another point that my right hon. Friend the Member for Birkenhead made. Mutual adjustment by abatement, yes; total exclusion, no. The reason was that we considered that it was undesirable that the only interest that large sections of mostly white-collar workers would have in the national superannuation scheme would be the terms upon which they were left out of it. That is what is undesirable about complete exclusion.
The present Government's approach is based on the contrary view that the occupational schemes should be brought up to certain minimum standards to exempt their members from having to become members of a safety net scheme put there to get all workers not provided for elsewhere. That is the philosophy behind the Bill.
I do not believe in attributing ulterior motives to anyone, not even to anyone on the Government benches. I do not think that it is the aim of the Bill to make it difficult or impossible for another Labour Government to introduce their own national superannuation scheme at some time in the future. I do not think that that is the underlying purpose: it may be the effect, or it may provide many difficulties for the development of social security along lines that we regard as progressive.
As the hon. Member for Billericay (Mr. McCrindle) said, the country cannot wait indefinitely for this pensions problem to be solved on some sort of basis which offers security and confidence for the future. However, that will be left to a future Labour Government. We must vote against this scheme to mark our disapproval of it and to reserve our position for the future. That is the basis on which we shall vote tonight.
§ 9.30 p.m.
§ The Under-Secretary for Health and Social Security (Mr. Paul Dean)
Those who have spoken in the debate have welcomed the scheme. Some have welcomed many aspects of it, and all have welcomed some aspects. Even the hon. Member for Rotherham (Mr. O'Malley), who opened for the Opposition in what one of my hon. Friends described as a rather carping speech, welcomed many of the important features, namely, the annual review, the earnings-related contributions, 363 the preservation provisions, and the fact that good occupational pension schemes exist.
The right hon. Member for Sowerby (Mr. Houghton), who described himself as a temporary "Shadow"—
§ Mr. Dean
Indeed. We greatly appreciate the warm tribute that the right hon. Gentleman paid to the Civil Service, when he said how speedily we had produced our scheme. Civil servants serve both Governments with great loyalty. I know perhaps as well as anybody the tremendous amount of work that they have done in recent years in helping with this scheme.
I warmly thank the large number of people, including those hon. Members, who have responded to the White Paper and to the consultative documents which were produced following the White Paper. The Bill is the wiser as the result of the consultations that we have had. We shall also consider carefully what has been said in the debate and what will be said at later stages of the Bill.
This is the most radical reform of pension arrangements since Beveridge. It recognises that the existing national insurance sturcture can no longer bear the weight of the growing cost of pensions. Stronger foundations must be built to protect today's pensioners, to fulfil the Government's commitment to guarantee the pension against price rises in annual reviews, and to improve the position of hitherto neglected groups such as the over-80s, the chronic sick and the severely disabled.
The figures speak for themselves. The number of pensioners has almost doubled—to nearly 7¾ million—over the last 20 years. Today there is one pensioner for every three workers. In that period the 364 cost has risen from under £5 million a week to £40 million a week.
The first aim of the Bill is to assure existing pensioners that we have the means to honour our commitments—to match words with money. That is what one part of the Bill does. That is the answer to the hon. Members for Rotherham and for Manchester, Gorton (Mr. Marks). My hon. Friend the Member for Chelsea (Mr. Worsley) made this point in a slightly different way when he said that apart from putting the finances of the basic scheme on to a firm footing this Bill deals with structure and not with up-rating matters as such.
The Bill also recognises the great revolution in self-help that has taken place over the last 20 years or so. We are sometimes told that we are a spendthrift lot—that we spend up to the hilt and do not save anything for tomorrow. The other side of that argument is the enormous growth in occupational pension schemes which has taken place over this period.
Here again, the figures speak for themselves. Twenty years ago the number of members in schemes was 7 million; now, there are over 11 million. Twenty years ago fewer than 1 million were in receipt of occupational pensions; today the figure is 3 million. Twenty years ago the average occupational pension was £3 a week; today it is over £6 a week.
From these developments in the last 20 years flows the clear and simple principle, running through the Bill, that the basic pension and the earnings-related pension have different functions and should be separate and distinct. They need different organisation and methods of finance. My hon. Friends the Members for Lancaster (Mrs. Kellett-Bowman) and Chelsea made this point in their speeches.
The basic pension must clearly be provided through the State, but the earnings-related pension is better earned with the job. The basic scheme means the transfer of resources from those who are working to those who are retired, whereas the occupational pension is personal insurance—real saving—for people's retirement.
My hon. Friend the Member for Kingston-upon-Thames (Mr. Norman Lamont), in an interesting contribution, contrasted the schemes in Europe which, in many cases, are on a pay-as-you-go basis. He 365 said that it is easy to set up these schemes but difficult to maintain them, and that although the ways we do things now and the ways the Europeans do them are very different it could easily happen that they will come to us and follow our example in going for the funding approach rather than the pay-as-you-go approach.
Some have the concept of two-pension retirement, which we believe is right in principle, because the State should not and cannot do everything. I think that hon. Members on both sides of the House are agreed about that. We do not want people to be entirely dependent on a vast monolithic State scheme which, because it is vast, must be unresponsive to the varying needs of individuals. We need a State scheme which concentrates on basic needs and, over and above that, encourages people to build a second pension for themselves in a way that best suits their personal circumstances. Therefore, we believe that this scheme is right in principle. Equally, we believe that it is right in practice, because through this approach we are far more likely to create better security in retirement for the next generation.
Another advantage of this approach is that it can be tailor-made to fit the circumstances of each firm, or each group of workers in each firm. Furthermore, it is more personal to them. People believe that their pension scheme belongs to them and that they have a direct say in the running of it.
The hon. Member for Rotherham accused the Government of putting the interests of the pension industry before the pensioners. That is unworthy of him. He knows as well as anyone in this House that whatever differences there may be between the two sides we are all united in our desire and intention to try to do better for pensioners.
§ Mr. O'Malley
What other conclusion can my hon. Friends and I reach when we see a scheme presented by the Government which condemns millions of pensioners now and in future to permanent means-testing?
§ Mr. Dean
The hon. Gentleman is quite wrong in the conclusion that he has reached. He seems to forget that a large proportion of the working population are now members of pension schemes and 366 value the rights that they are building up for themselves and their families in these schemes. I am sorry that the hon. Gentleman should have descended to that kind of remark.
I now turn to some of the questions that I was asked about the financing of the basic scheme. The hon. Member for Rotherham said that he accepted the idea of earnings-related contributions but did not like the idea of flat-rate benefits. One of his hon. Friends asked the hon. Gentleman whether he believed in redistribution. That is a relevant question. We believe that the existing hybrid system of flat-rate contribution with a bit of earnings-related contribution on top has outlived its usefulness. What we now require is a fully earnings-related contribution scheme which has the advantage, in the first place, of buoyancy. As earnings rise, so do the contributions going into the scheme. But above all it will be fairer to the working population. It will mean that those on average earnings or below will by paying less than they are paying now, while those on higher earnings will have the cut-off point at 1½ times average earnings.
The hon. Member for Cornwall, North (Mr. Pardoe) suggested that we should get rid of the whole thing, have a social security tax, get rid of individual contribution records, and so on. I put it to the hon. Gentleman that there is a real reassurance for people in the concept of contributions paid creating a right to benefit as a result. This is a valuable thing, which many people feel we should retain, and that is one reason why we propose to do just that.
I accept what the hon. Gentleman said about this not being an insurance scheme. It is not an insurance scheme in the accepted sense of the word, and the hon. Gentleman will find that that word has almost gone from the Bill. It is a contributory scheme, which creates the right to a benefit. There is an important distinction.
The hon. Member for Gorton, in an interesting speech, and the hon. Member for West Lothian (Mr. Dalyell) questioned how re-distributive the scheme was, particularly with regard to the ceiling of 1½ times average earnings. It is necessary to get a correct picture. We should look 367 not only at the national insurance contribution but at the direct taxation which the people concerned are paying. If we do that, we see that the progression continues upwards with earnings. If we take the £48-a-week man, whose wages form the present ceiling of 1½ times average earnings, we find that the percentage of his earnings which goes into the basic scheme contribution, plus taxation—I am quoting the case of a married man with two children—is 22.48. For the £60-a-week man, who is above the ceiling, the percentage rises to 24.02, while for a £100-a-week man it rises to 27.13. If we take into account, as we surely must, contributions plus direct taxation, we find that although there is a contributions ceiling of 1½ times average earnings the progression none-the-less continues to go upwards.
The right hon. Member for Sowerby, the hon. Member for Birmingham, Lady-wood (Mrs. Doris Fisher) and a number of other hon. Members referred to the position of women in the scheme. Pensions matter to women more than they do to men, because women live longer. On average their life expectancy on retirement is nearly 20 years, compared with 12 years for men. Consequently, the problems of retirement concern many more women than men.
Many women have pensions which have been helped by the improvements that we have introduced: the annual review of pensions, special pensions for the over-80s—80 per cent. or more of whom are women—the new age addition for retirement pension at 80—70 per cent. of these are women—the new age allowance for war widows at 65, the new attendance allowance for the severely disabled—30,000 women over 60 receive it—and so on.
The Bill provides the framework for a further advance in pension rights for women. In the basic scheme married women will retain their present option to rely, if they wish, on their husband's contributions. The earnings-related contribution means that many working women will pay less than now. I think it was the hon. Member for Gorton who said that they would pay more, but the fact is that many of them, because their earnings are lower, will be paying less 368 under the earnings-related contributions system.
Recognised occupational schemes will have to provide cover for the widows of their members and, in addition, working women, whether married or not, will be able to earn an earnings-related pension in their own right. There are big gaps in both of these areas at present. Once the scheme becomes established, people who leave their jobs will not lose their pension rights. That will help women whose careers are interrupted while they bring up their families.
§ Mr. Meacher
If the hon. Gentleman is so concerned about women, will he explain why the Bill provides a pension at only 50 per cent. of the level which goes to the husband, compared with the National Superannuation and Social Insurance Bill, which would have provided 100 per cent?
§ Mr. Dean
The provision of 50 per cent. is a major advance on much current practice. We are laying down minimum standards for the first time. There is no doubt that when schemes look at their arrangements and put in provision for the first time, they will do more than the required minimum.
Invalidity has been mentioned by many hon. Members. I hope that it will not be long before breakdown pensions are general. They are already provided in a growing number of schemes. The Government Actuary's recent survey shows that in the public sector it is normal to provide a pension on ill-health retirement which is not only based on service to date but incorporates a degree of enhancement to take account of the additional service which might have been given but for breakdown.
The figures are also encouraging in the private sector. They show an increasing number of schemes including special provision for ill-health retirement. In nearly all schemes there is some such provision, although the basis varies greatly.
I was asked by my hon. Friend the Member for Banbury (Mr. Marten) about the help which will be given to civilian disabled who hitherto have not been helped. Although we have been very slow in this country we have at long last done something. The basic scheme will continue for some time to offer the best 369 prospect of doing something further for the groups for which the Disablement Income Group and others are campaigning. The advantage of making progress in the basic scheme is that it provides for immediate maturity. Two of the groups which the Disablement Income Group is most concerned about, the disabled housewife and those who are disabled either from birth or in youth, are those who almost by definition have no work record and, therefore, cannot be helped by increases through an occupational pension scheme.
My hon. Friend the Member for Abingdon (Mr. Neave) also asked me about death grants. We all know that his name will always be associated with the pension for the over-80s. He mentioned in particular elderly people who are getting no grant or half a grant under the present arrangement. We will consider sympathetically the points which he has made. I am sure that he will recognise—he made the point in his own speech—that there are a series of other competing claims which the Government must assess in deciding what should be done.
My hon. Friend the Member for Lancaster made the point that there should be a widower's allowance on the same basis as for a widow where there are dependent children. I think that my hon. Friend would agree that in most cases in circumstances of that kind, although not in all, the husband's earnings normally continue. Therefore, the widower is perhaps in not such great need of help as the widow.
My hon. Friend also mentioned the retirement age for women, suggesting that perhaps it would be advisable to increase it to 62½ and bring the retirement age for men down. But the effect of increasing the retirement age for women would be felt by those women who are most in need of the pension—namely, single women and widows without widows' benefit because of course, the large majority of married women get the pension on their husbands' contributions when they themselves are retired. My hon. Friend spoke about helping single women looking after elderly relatives, and I do not think that she would wish to see the pension age for them being raised. I hope she feels that there are some genuine difficulties in the proposition she has put.
370 I turn now to the various questions I was asked about the standards which we are laying down for occupational pension schemes and also the arrangements for the reserve scheme.
§ Mr. O'Malley
A very important question was raised early in the debate which the Secretary of State was not able to answer firmly. It relates to the State basic scheme—whether under the scheme as envisaged lower-paid workers would be required to work for a longer period of weeks in order to ensure basic benefits than the higher-paid would have to work. Will the hon. Gentleman answer that now?
§ Mr. Dean
The contribution conditions are based on earnings, as they must be in any earnings-related contribution system. Most people will find the conditions of qualification somewhat easier under the new arrangements than under the present arrangements.
The right hon. Member for Birkenhead (Mr. Dell) said that the minimum standards we were laying down were too low. He made a very helpful speech which contained a number of points which I want to look at. The minimum standards should be regarded not as a pillow on which occupational pension schemes are to rest but as a springboard from which they are going to do more. Every occupational pension scheme will now have to look at its arrangements in the next two years. There are 65,000 of them. Each one of them will have to decide whether it is to make the necessary changes to go for recognition or, if not, whether it is to disband and its members go into the reserve scheme.
Opportunities are created here for every one of these schemes to go for improvements, and the alternative tests which we have provided for money purchase schemes and final salary schemes will make it easier for many of the existing schemes to go for recognition. Every single one of them will have the opportunity to do so in the next two years, and one hopes, in close co-operation with their members and the trade unions involved, to decide what improvements they can make. I should be surprised if, when the spotlight is turned on these schemes, many of them do not decide that improvements can be made at relatively modest cost.
371 The hon. Member for West Lothian asked what the cost would be. It will clearly depend on what the level of the scheme is at present. Some schemes will be well above the arrangements at the present time—they may lack widowhood cover or something of that kind—but the amount going into the scheme will be substantially above the 1 per cent. standard test which is laid down or the alternative tests. Broadly speaking, however, the level of contributions which will be required to qualify will be somewhat higher than 4 per cent. overall.
The Occupational Pensions Board is the chosen mechanism to ensure that within the framework laid down in the Bill we have the maximum flexibility, and, above all, an arrangement which will be able to respond quickly to developments which we are confident will be taking place in occupational pension provisions.
My hon. Friend the Member for Surrey, East (Mr. William Clark) asked about rights of appeal from the Occupational Pensions Board. On questions of law there will be an appeal to the High Court. On questions of fact there will be a comprehensive system of review decisions by the board. We feel that with a board which is widely representative, as this one will be, it is better to have a system of review built into the arrangements rather than try to set up an appeal body above it. I can tell my hon. Friend, however, that the procedures governing the review process will be under the supervision of the Council on Tribunals.
The minimum standards which we are laying down will be a big advance for some schemes. For the first time, every scheme which qualifies for recognition will have to provide a minimum personal pension, cover for widows, cover for working women, and some arrangements for increases after the award of a pension. I notice that in a favourable comment on the scheme in general this morning, The Times criticised the proposal. in the tests laid down for post-award increases, that if a scheme was providing a pension 25 per cent. above the minimum there would not have to be a specific provision for post-award increases. We have laid this down in order to give the maximum flexibility to 372 suit the varying needs of the schemes involved.
My hon. Friends the Members for Kensington, South (Sir B. Rhys Williams) and for Kingston-upon-Thames and the right hon. Member for Birkenhead asked several questions about the preservation of pension rights. Here again, the standards which we are laying down are a major advance on current practice. There is no doubt that, when it is realised that they will have to make provision for preservation, schemes will do a great deal more than the minimum. My hon. Friend the Member for Abingdon asked whether the same conditions would apply to the public service as to other schemes. Yes, they will, and the public service will be introducing preservation, or transferability where appropriate, before the compulsory date of April 1975.
§ Mr. Dean
I come now to the arrangements for the reserve scheme. The board of management will be entirely independent of the Government. The Government will have no power to control the investment, and the Bill puts a specific requirement on the board to have paramount regard to the interests of existing and future pensioners. In other words, I do not think that the fears he expressed could come into operation without an alteration in the Bill itself.
§ Mr. Dean
I very much regret that the Opposition have decided to vote against the Bill, especially as they have welcomed many of its features. It is important to end the uncertainty for the future, to reform the finances of the basic scheme, and to see that occupational pension schemes for the future can go ahead. The log-jam of uncertainty and 373 doubt which has persisted for far too long is now breaking up.
§ ment of what occupational pension scheme can provide for a growing number of members on top of the basic scheme.
§ Question put, That the Bill be now read a Second time:—
§ The House divided: Ayes 224, Noes 205.375
|Division No. 26.]||AYES||[10 p.m.|
|Adley, Robert||Gilmour, Sir John (Fife, E.)||Mitchell, David (Basingstoke)|
|Allason, James (Hemel Hempstead)||Goodhart, Philip||Moate, Roger|
|Amery, Rt. Hn. Julian||Goodhew, Victor||Money, Ernie|
|Archer, Jeffrey (Louth)||Gower, Raymond||Monks, Mrs. Connie|
|Astor, John||Grant, Anthony (Harrow, C.)||Monro, Hector|
|Atkins, Humphrey||Green, Alan||Montgomery, Fergus|
|Awdry, Daniel||Grieve, Percy||More, Jasper|
|Baker, W. H. K. (Ban'f)||Griffiths, Eldon (Bury St. Edmunds)||Morgan, Geraint (Denbigh)|
|Balniel, Rt. Hn. Lord||Grylls, Michael||Morgan-Giles, Rear-Adm.|
|Batsford, Brian||Gummer, J. Selwyn||Mudd, David|
|Bell, Ronald||Gurden, Harold||Nabarro, Sir Gerald|
|Benyon, W.||Hall, John (Wycombe)||Neave, Airey|
|Berry, Hn. Anthony||Hall-Davis, A. G. F.||Noble, Rt. Hn. Michael|
|Biffen, John||Hamilton, Michael (Salisbury)||Nott, John|
|Biggs-Davison, John||Hannam, John (Exeter)||Onslow, Cranley|
|Blaker, Peter||Haselhurst, Alan||Osborn, John|
|Body, Richard||Hastings, 6tephen||Owen, Idris (Stockport, N.)|
|Boscawen, Hn. Robert||Hawkins, Paul||Page, Rt. Hn. Graham (Crosby)|
|Bossom, Sir Clive||Hayhoe, Barney||Page, John (Harrow, W.)|
|Bowden, Andrew||Hicks, Robert||Parkinson, Cecil|
|Bray, Ronald||Higgins, Terence L.||Peel, John|
|Brewis, John||Hiley, Joseph||Peyton, Rt. Hn. John|
|Brinton, Sir Tatton||Hill, John E. B. (Norfolk, S.)||Pike, Miss Mervyn|
|Brocklebank-Fowler, Christopher||Hill, James (Southampton, Test)||Pink, R. Bonner|
|Brown, Sir Edward (Bath)||Holt, Miss Mary||Powell, Rt. Hn. J. Enoch|
|Bruce-Gardyne, J.||Hornsby-Smith, Rt. Hn. Dame Patricia||Price, David (Eastleigh)|
|Buchanan-Smith, Alick (Angus, N&M)||Howell, Ralph (Norfolk, N.)||Proudfoot, Wilfred|
|Buck, Antony||Hunt, John||Pym, Rt. Hn. Francis|
|Burden, F. A.||Hutchison, Michael Clark||Quennell, Miss J. M.|
|Butler, Adam (Bosworth)||James, David||Raison, Timothy|
|Campbell, Rt. Hn. G.(Moray & Nairn)||Jenkin, Patrick (Woodford)||Rawlinson, Rt. Hn. Sir Peter|
|Carlisle, Mark||Jennings, J. C. (Burton)||Redmond, Robert|
|Channon, Paul||Jopling, Michael||Reed, Laurance (Bolton, E.)|
|Chapman, Sydney||Joseph, Rt. Hn. Sir Keith||Rees, Peter (Dover)|
|Churchill, W. S.||Kaberry, Sir Donald||Rhys Williams, Sir Brandon|
|Clark, William (Surrey, E.)||Kellett-Bowman, Mrs. Elaine||Ridley, Hn. Nicholas|
|Clarke, Kenneth (Rushcliffe)||King, Evelyn (Dorset, S.)||Roberts, Michael (Cardiff, N.)|
|Clegg, Walter||King, Tom (Bridgwater)||Roberts, Wyn (Conway)|
|Cockeram, Eric||Kinsey, J. R.||Rodgers, Sir John (Sevenoaks)|
|Cooke, Robert||Knight, Mrs. Jill||Rossi, Hugh (Hornsey)|
|Coombs, Derek||Knox, David||Rost, Peter|
|Cooper, A. E.||Lamont, Norman||Russell, Sir Ronald|
|Cormack, Patrick||Lane, David||St. John Stevas, Norman|
|Crouch, David||Le Merchant, Spencer||Scott-Hopkins, James|
|Crowder, F. P.||Lewis, Kenneth (Rutland)||Shaw, Michael (Sc'b'gh & Whitby)|
|Dean, Paul||Lloyd, Ian (P'tsm'th, Langstone)||Shelton, William (Clapham)|
|Deedes, Rt. Hn. W. F.||Longden, Sir Gilbert||Simeons, Charles|
|Digby, Simon Wingfield||Loveridge, John||Smith, Dudley (W'wick & L'mington)|
|Dodds-Parker, Douglas||Luce, R. N.||Soref, Harold|
|McAdden, Sir Stephen||Speed, Keith|
|Drayson, G. B.||MacArthur, Ian||Spence, John|
|du Cann, Rt. Hn. Edward||McCrindle, R. A.||Sproat, Iain|
|Edwards, Nicholas (Pembroke)||McLaren, Martin||Stainton, Keith|
|Emery, Peter||Maclean, Sir Fitzroy||Stanbrook, Ivor|
|Eyre, Reginald||McMaster, Stanley||Stewart-Smith, Geoffrey (Belper)|
|Farr, John||McNair-Wilson, Michael||Stoddart-Scott, Col. Sir M.|
|Fell, Anthony||Madel, David||Stokes, John|
|Fenner, Mrs. Peggy||Marten, Neil||Stuttaford, Dr. Tom|
|Fidler, Michael||Mather, Carol|
|Fisher, Nigel (Surbiton)||Maude, Angus||Sutcliffe, John|
|Fletcher-Cooke, Charles||Mawby, Ray||Tapsell, Peter|
|Fookes, Miss Janet||Maxwell-Hyslop, R. J.||Taylor, Sir Charles (Eastbourne)|
|Fortescue, Tim||Meyer, Sir Anthony||Taylor, Edward M.(G'gow, Cathcart)|
|Fowler, Norman||Mills, Peter (Torrington)||Taylor, Frank (Moss Side)|
|Fox, Marcus||Mills, Stratton (Belfast, N.)||Tebbit, Norman|
|Fry, Peter||Miscampbell, Norman||Thomas, John Stradling (Monmouth)|
|Galbraith, Hn. T. G. D.||Mitchell, Lt.-Col.C. (Aberdeenshire, W)||Thomas, Rt. Hn. Peter (Hendon, S.)|
|Thompson, Sir Richard (Croydon, S.)||Ward, Dame Irene||Woodnutt, Mark|
|Trafford, Dr. Anthony||Warren, Kenneth||Worsley, Marcus|
|Trew, Peter||Weatherill, Bernard||Wylie, Rt. Hn. N. R.|
|Tugendhat, Christopher||Wells, John (Maidstone)||Younger, Hn. George|
|Turton, Rt. Hn. Sir Robin||Wiggin, Jerry|
|Vickers, Dame Joan||Wilkinson, John||TELLERS FOR THE AYES|
|Waddington, David||Winterton, Nicholas||Mr. Oscar Murton and|
|Walder, David (Clitheroe)||Wolrige-Gordon, Patrick||Mr. Hamish Gray.|
|Walker, Rt. Hn. Peter (Worcester)||Wood, Rt. Hn. Richard|
|Wall, Patrick||Woodhouse, Hn. Christopher|
|Allaun, Frank (Salford, E.)||Gourlay, Harry||Milne, Edward|
|Allen, Scholefield||Grant, George (Morpeth)||Mitchell, R. C. (S'hampton, Itchen)|
|Archer, Peter (Rowley Regis)||Grant, John D. (Islington, E.)||Molloy, William|
|Ashton, Joe||Grimond, Rt. Hn. J.||Morgan, Elystan (Cardiganshire)|
|Atkinson, Norman||Hamilton, James (Bothwell)||Morris, Alfred (Wythenshawe)|
|Bagier, Goldon A. T.||Hamilton, William (Fife, W.)||Morris, Charles R. (Openshaw)|
|Barnett, Guy (Greenwich)||Hamling, William||Morris, Rt. Hn. John (Aberavon)|
|Baxter, William||Hannan, William (G'gow, Maryhill)||Moyle, Roland|
|Bennett, James (Glasgow, Bridgeton)||Hardy, Peter||Mulley, Rt. Hn. Frederick|
|Bidwell, Sydney||Harper, Joseph||Murray, Ronald King|
|Bishop, E. S.||Harrison, Walter (Wakefield)||Oakes, Gordon|
|Blenkinsop, Arthur||Hart, Rt. Hn. Judith||O'Halloran, Michael|
|Booth, Albert||Hattersley, Roy||O'Malley, Brian|
|Bradley, Tom||Heffer, Eric S.||Orbach, Maurice|
|Brown, Robert C. (N'c'tle-u-Tyne, W.)||Horam, John||Orme, Stanley|
|Brown, Hugh D. (G'gow, Provan)||Houghton, Rt. Hn. Douglas||Oswald, Thomas|
|Brown, Ronald (Shoreditch & F'bury)||Hughes, Mark (Durham)||Padley, Walter|
|Buchan, Norman||Hughes, Robert (Aberdeen, N.)||Palmer, Arthur|
|Buchanan, Richard (G'gow, Sp'burn)||Hughes, Roy (Newport)||Pardoe, John|
|Campbell, L (Dunbartonshire, W.)||Irvine, Rt. Hn. Sir Arthur (Edge Hill)||Parry, Robert (Liverpool, Exchange)|
|Carmichael, Neil||Janner, Greville||Peart, Rt. Hn. Fred|
|Carter, Ray (Birmingh'm, Northfield)||Jeger, Mrs. Lena||Perry, Ernest G.|
|Carter-Jones, Lewis (Eccles)||Jenkins, Hugh (Putney)||Prentice, Rt. Hn. Reg.|
|Castle, Rt. Hn. Barbara||Jenkins, Rt. Hn. Roy (Stechford)||Price, J. T. (Westhoughton)|
|Clark, David (Colne Valley)||John, Brynmor||Price, William (Rugby)|
|Cocks, Michael (Bristol, S.)||Johnson, Carol (Lewisham, S.)||Probert, Arthur|
|Cohen, Stanley||Johnson, James (K'ston-on-Hull, W.)||Reed, D. (Sedgefield)|
|Coleman, Donald||Jones, Barry (Flint, E.)||Roberts, Albert (Normanton)|
|Concannon, J. D.||Jones, Dan (Burnley)||Roberts, Rt. Hn. Goronwy (Caernarvon)|
|Corbet, Mrs. Freda||Jones, Gwynoro (Carmarthen)||Robertson, John (Paisley)|
|Cox, Thomas (Wandsworth, C.)||Jones, T. Alec (Rhondda, W.)||Roderick, Caerwyn E. (Brc'n&R'dnor)|
|Crawshaw, Richard||Judd, Frank||Rodgers, William (Stockton-on-Tees)|
|Crosland, Rt. Hn. Anthony||Kaufman, Gerald||Roper, John|
|Cunningham, G. (Islington, S.W.)||Kelley, Richard||Ross, Rt. Hn. William (Kilmarnock)|
|Cunningham, Dr. J. A. (Whitehaven)||Kerr, Russell||Rowlands, Ted|
|Dalyell, Tam||Kinnock, Neil||Sandelson, Neville|
|Davidson, Arthur||Lambie, David||Short, Mrs. Renée (W'hampton, N.E.)|
|Davies, Denzil (Llanelly)||Lamborn, Harry||Silkin, Hn. S. C. (Dulwich)|
|Davies, G. Elfed (Rhondda, E.)||Lamond, James||Sillars, James|
|Davies, Ifor (Gower)||Latham, Arthur||Silverman, Julius|
|Davis, Clinton (Hackney, C.)||Lawson, George||Small, William|
|Davis, Terry (Bromsgrove)||Leadbitter, Ted||Smith, John (Lanarkshire, N.)|
|Deakins, Eric||Leonard, Dick||Spearing, Nigel|
|de Freitas, Rt. Hn. Sir Geoffrey||Lestor, Miss Joan||Spriggs, Leslie|
|Delargy, Hugh||Lewis, Ron (Carlisle)||Stallard, A. W.|
|Dell, Rt. Hn. Edmund||Lipton, Marcus||Stewart, Donald (Western Isles)|
|Dempsey, James||Lomas, Kenneth||Stoddart, David (Swindon)|
|Doig, Peter||Loughlin, Charles||Stonehouse, Rt. Hn. John|
|Dormand, J. D.||Lyons, Edward (Bradford, E.)||Strang, Gavin|
|Douglas, Dick (Stirlingshire, E.)||Mabon, Dr. J. Dickson||Summerskill, Hn. Dr. Shirley|
|Douglas Mann, Bruce||McBride, Neil||Thomas, Rt. Hn. George (Cardiff, W.)|
|Duffy, A. E. P.||McCartney, Hugh||Urwin, T. W.|
|Dunn James A.||McElhone, Frank||Varley, Eric G.|
|Dunnett, Jack||McGuire, Michael||Wainwright, Edwin|
|Eadie, Alex||Mackie, John||Walker, Harold (Doncaster)|
|Edelman, Maurice||Mackintosh, John P.||Wallace, George|
|Edwards, Robert (Bilston)||McMillan, Tom (Glasgow, C.)||Watkins, David|
|Edwards, William (Merioneth)||McNamara, J. Kevin||Wellbeloved, James|
|Ellis, Tom||Mahon, Simon (Bootle)||White, James (Glasgow, Pollok)|
|Evans Fred||Mallalieu, J. P. W. (Huddersfield, E.)||Whitehead, Phillip|
|Ewing Harry||Marks Kenneth||Williams, Alan (Swansea, W.)|
|Fernyhough, Rt. Hn. E.||Marsden, F.||Williams, W. T. (Warrington)|
|Marshall, Dr. Edmund||Wilson, Alexander (Hamilton)|
|Fisher, Mrs. Doris (B'ham, Ladywood)||Mason, Rt. Hn. Roy||Wilson, Rt. Hn. Harold (Huyton)|
|Fitch, Alan (Wigan)||Meacher, Michael||Wilson, William (Coventry, S.)|
|Fletcher, Raymond (Ilkeston)||Mellish, Rt. Hn. Robert||Woof, Robert|
|Forrester, John||Mendelson, John|
|Freeson, Reginald||Mikardo, Ian||TELLERS FOR THE NOES:|
|Galpern, Sir Myer||Millan, Bruce||Mr. Tom Pendry and|
|Ginsburg, David (Dewsbury)||Miller, Dr. M. S.||Mr. John Golding.|
§ Question accordingly agreed to.377
§ Bill read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bill).