HC S [National Insurance and National Assitance Benefits]
|Document type:||public statement|
|Document kind:||House of Commons Speech|
|Venue:||House of Commons|
|Source:||Hansard HC [655/1156-70]|
|Editorial comments:||1652-35. MT was speaking on an Opposition motion.|
|Themes:||Social security and welfare, Taxation|
The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Mrs. Margaret Thatcher)
I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
"noting with approval the substantial improvements in the value and standard of National Insurance and other social security benefits which have been made since 1951, and in particular that these were raised to a new high level as recently as last April, expresses its confidence that Her Majesty's Government will continue to secure that the recipients of these benefits share in the rising standards of the nation."
The hon. Member for Sowerby (Mr. Houghton) was, perhaps, expecting [ J. Boyd-Carpenter] the Minister to rise at this stage. It is rather salutary that if one has been in office in the same position for six years one has to listen to so many of one's own speeches quoted back. I must remember that in what I might say today. My right hon. Friend will, of course, be winding up the debate. The hon. Member for Sowerby has done a great deal of homework. Although he seems to despise statistics, he gave a volley of them. I shall try to reply to some of them and try to follow some of his arguments, and I trust that I shall provide one or two answers.
I want to start by comparisons with the cost-of-living index, to go on to comparisons with average earnings and from there to discuss the cost to the community as a whole of the provision which it makes for old people through retirement pensions and for the needy through National Assistance. It seems to me that, for a speech of criticism, the hon. Member's speech turned out to be a speech of quite high commendation of my right hon. Friend, although I doubt whether that was altogether the intention.
I should like to start with a comparison with the cost-of-living figures. I take as a starting point for retirement pensions the obvious date, which is the date of the inception of the improved rates in 1946. For National Assistance the figures are different because, as the hon. Member is aware, that scheme started in 1948.
I take, first, retirement pensions. Had the pension increased with the cost of living, 26s. in October, 1946, would now be 46s. 10d. as against the 57s. 6d. which 1157it is. The 42s. for a married couple in October, 1946, would now be 75s. 8d. as against the 92s. 6d. it is. That is over the whole period since 1946. If I were to take the period during which the Conservative Government have been in office—and I take the period beginning with October, 1951, immediately after the last increase by the last Socialist Government—the corresponding figures show that had we increased the 1951 pension to keep pace with the cost of living, the pension would now be worth 42s. to a single person and 69s. 11d. to a married couple, as against the 57s. 6d. and 92s. 6d. which we are paying. This means that during the present Government's term of office the pension has increased in real value by 15s. 6d. for a single person and 22s. 7d. for a married couple.
The hon. Member for Sowerby gave a large number of price increases, but he did not calculate any of them from the date when the last benefit rise came into operation. They dated from the proposals made by my right hon. Friend, although the base line which the hon. Member was using was not the date of the previous proposals but the date of the previous increases. Therefore, he has made an artificial selection by comparing like with unlike.
Since April, 1961, the retail price index has risen by 3.7 per cent. for all items and by 2.5 per cent. for the food components of the index. I agree that the retirement pension would be restored to its April, 1961, value by an increase of 3s. 5d. for a married couple and 2s. 2d. for a single person. On the National Assistance comparisons, relating them to the cost of living, between July, 1948, and April, 1961, the ordinary scale rate for a single person has risen from 24s to 53s. 6d., which is an increase in cash terms of 123 per cent.—I am using Mr. Lynes's booklet—and the rate for a married couple has risen from 40s. in July, 1948, to 90s. in April, 1961, an increase of 125 per cent. in cash terms.
Over the period, July, 1948, to January, 1962—and I take the latest possible figure, to take the worst possible case against myself—retail prices rose by 67 per cent. Therefore, there has been a very real increase in National Assistance and I find it difficult to understand why the hon. Member for Sowerby found it difficult to discover the bonus. 1158
The assertion is made by the hon. Member that the rise in the cost of living is greater for poorer people than that shown by the index. That is certainly not true since the introduction of the 1956 index, which, of course, was a revised one. I should like to give one or two figures. Since 1956, food has risen in price less and fuel and light more than the general index. The ordinary retail price index has risen as a whole to 117.5 from the base line of 100 in January, 1956, when it came into operation, but food items have not risen by anything like as much. The food index now stands at 110.7. But fuel and light have gone up more than the average, to 130.6.
The hon. Member for Sowerby mentioned Mr. Lynes's booklet and he will find there that Mr. Lynes gives a weighted index. I believe that it is related to Professor Allen's index of the corresponding amounts spent on food, fuel and light, and he says that the pension couple spend about four times as much on food as on fuel and light and that the single pensioner spends about 2½ times as much.
Therefore, if we give those figures the appropriate weightings, bearing in mind that food has risen in price very much less than the index as a whole, and fuel and light a little more, there is no reason to think that the cost of living for old folk is materially different from that reflected in the present index. I stress this point particularly because it was not brought out in Mr. Lynes's booklet, which I have examined very carefully indeed.
I come now to average earnings. I will not make any comparison with wage rates, because that is not a material comparison. Wage rates have lagged behind pension rates. Wage rates do not seem to be significant in this context. The average male earnings are the significant ones for this debate. I take, first, National Insurance benefits. Taking the period from 1951 to 1961, there has been an increase in average earnings of 85 per cent., and this is to be compared with an increase in pension rates of 92 per cent. for the single pensioner and 85 per cent. for the married couple. Thus, during the period of Conservative stewardship, the pension benefit rates have kept in line with, or 1159have risen by as much as, average male earnings. That is significant.
I take, next, National Assistance scales. The National Assistance scale rate has risen by the amount I gave, and average male earnings in industry have risen from £6 14s. to £15 6s. 10d., an increase of 129 per cent. during the relevant period for National Assistance. This is to be compared with the increases of 123 per cent. and 125 per cent. in the National Assistance scale rates for the single person and married couple respectively. There is little material difference between the 129 per cent. for average earnings and the 125 per cent. for the scale rate for the married couple.
The hon. Gentleman made various disparaging remarks about the consumption of food in pensioner households, and referred to a survey which is unknown to me and which I have not seen. The survey which I shall quote is one which has built up a reputation over the years, the National Food Survey. Its findings are directly at variance with what the hon. Gentleman told the House. The National Food Survey studies the food intake of pensioner households, pensioner households being defined as households in which the household income in wholly or mainly derived from retirement pensions, non-contributory old-age pension, or, in the case of a widow over 60, a widow's pension—in each case with or without supplementation from the National Assistance Board. The survey is carried out once a quarter.
For the pensioner group, standards of nutrition generally appear to have risen significantly during recent years. The latest available figures show that, in the six months April to September, 1961, average expenditure per head on food by pensioner households was 29s. 11d. a week. Average expenditure per head by all households in the same six months was 31s. a week. The difference between expenditure in pensioner households and expenditure in ordinary households was only 1s. 1d. per head per week. This seems to be totally at variance with the impression given by the hon. Gentleman.
Having made a favourable comparison with both the cost of living and average earnings, I come now to an aspect not considered by the hon. Gentleman, the cost to the community as a whole of the 1160provision made by the present Government, continuing the previous policy, to show that it has been an increasing cost. When I took out the figures to make the comparison with average earnings, I should not have been surprised if the result had shown that pension benefits had lagged behind average earnings for the simple reason that, although we have had an increase in the working population, that increase has to cater not only for increased benefits for the same number of pensioners, but for increased benefits for a considerably greater number of pensioners.
In 1946, there were six members of the working population for every pensioner. In 1956, there were only five members of the working population for every pensioner. In 1961, there were only four members of the working population for every pensioner. The figures for the advance in the working population which I am using are those published monthly in the Ministry of Labour Gazette. Thus, every person working has to provide not only the increased pensions per person, but has to provide for more persons. It is commendable that, in face of that situation, pension rates have risen as much as average earnings.
In the financial year 1951–52, which is when we came back into office, the annual cost of retirement pensions was £275 million. In the financial year 1958–59, it was £617 million, more than double. This year, it will be £787 million. This seems to indicate not a stagnant social security system, but a very vigorous one.
Next, I project forward on the current rates of benefit. At present, as the House knows, there are rather more than 5½ million retirement pensioners. In 1971, there will be nearly 7 million to cater for, and in 1981 there will be nearly 8 million. On the present rates, therefore, the cost to the community of footing the bill for the increasing number of pensioners will be £1,000 million in 1971 and £1,200 million in 1981.
Once again, this is not a stagnant system, and my right hon. Friend has not been evasive in the actual benefits which he has delivered on this remarkably high level.
The hon. Lady will, of course, agree that the cost has to 1161be taken in relation to the growth in the national income. Presumably, if we are to double our standard of life in twenty-five years, we can cater for double the number of pensioners or, on the other hand, double their standard of life.
I entirely agree. The hon. Gentleman gave figures of net disposable income. I have some figures here, but I had discarded them as rather academic. Perhaps my right hon. Friend will bring them in his reply, to the debate, or, as is more likely, will give a far more cogent reply to the hon. Gentleman.
It is quite clear that expenditure on the elderly section of the population will impose a heavy and increasing load on the future working population. If, since 1951, rates of pension had been increased in line with rising prices, the total cost of retirement pensions this year would not be £787 million, as it is, but only £580 million: the difference of £200 million represents the extent to which the pensioners' share in the national income has risen in the last decade.
For reasons which hon. Members will know it does not have the same significance to give the numbers on National Assistance, because they vary according to how the rates of retirement benefits move as compared with the National Assistance scale rates. However, I will give these figures in respect of the provision made by the community in cash terms. In the first complete year of National Assistance, we provided £49 million from the Exchequer for the needy. In 1950–51, this amount had risen to £61 million. In 1960–61, £172 million was provided in National Assistance. That is a measure of the increasing care for the needy given by the community.
Total expenditure per head of population on the social services rose from £30 in 1950 to £62 in 1960, according to an Answer given by my hon. Friend [Sir E. Boyle] the Financial Secretary to the Treasury. All these figures show that the community has made considerable advances in real terms of caring for these people.
I come now to a heading which I call the adequacy of the basic retirement pension and National Assistance scale rates. The question is often asked whether anyone can be expected to live on the retirement pension of 57s. 6d. or 1162on the National Assistance scale of 53s. 6d. The obvious answer is that no one is expected to, because there are other resources available. Of the 5½ million pensioners today, many have private resources or are members of occupational pension schemes and are receiving benefits from them. Also, 1¼ million pensioners have earned increments to the basic pension by deferred retirement, a very valuable part of the National Insurance Scheme to which, I think, too little attention is given.
The figures are rather complicated. I do not think that they have been given before, so I thought that hon. Members might be rather interested to hear an analysis of the increments being received by the 1¼ million pensioners who get them. Of the 1¼ million, 160,000 receive increments of 15s. and over; 293,000 receive increments varying from 10s. to 14s. 6d.; 319,000, increments varying from 5s. to 9s.; and 480,000, increments of varying amounts up to 4s. 6d. An increasing number in future will also have graduated additions to their pensions.
I recently visited Newcastle-upon-Tyne, where our central offices are situated. I was very interested indeed in one particular item of information which they gave me, and which may surprise the House almost as much as it surprised me. We tend to talk about a basic pension rate, but I was told that at present there are approaching 150 different rates of retirement pensions in payment, the majority being above the basic level. This is because of incremented pensions, graduated additions pensions and other reasons, but 150 different rates represents a colossal administrative problem when it comes to a change in the rates.
I turn from the retirement pensions to National Assistance. The scale rate of 53s. 6d. is only part of the help available from the National Assistance Board. My main comment about Mr. Lynes's booklet is that to take the scale rate on its own is to found the result of one's thesis on a false hypothesis, because the scale rate is only part of the assistance available. Hon. Members know, roughly, how the calculation goes. We assess a person's need, first, by taking the scale rate and adding to it the amount, or the proportion of the mount, paid in rent by the applicant 1163for assistance, and we set against that figure of need the available resources.
In calculating the available resources, we disregard quite a number of capital assets and a considerable amount of income. The difference between these two figures is the basic National Assistance supplement, and to that is then added the appropriate discretionary allowances. The number of discretionary allowances has greatly increased since the inception of the scheme. At the end of 1961, two-thirds of retirement pensioners receiving National Assistance supplements were receiving discretionary allowances averaging 7s. 10d. In the calculation of need, rent is taken into account in full in 99 per cent. of the cases in which there is a rent liability.
The disregards for National Assistance were very substantially raised in 1959 by substituting 30s. for 20s. in the disregard of industrial injury and war disability pensions, and by substituting 15s. for 10s. 6d. in that of superannuation payments, while the disregards of earnings went up from 20s. to 30s., plus half the next 20s. The limit of capital assets above which assistance is not payable was increased from £400 to £600. It is interesting to note that at the end of 1960 over 200,000 retirement pensioners who were receiving assistance had some other income, and that about 450,000 of them had capital assets, over and above the value of owner-occupied houses, of £62½ million. Therefore, we are not altogether dealing with people absolutely on the poverty line, in the old sense of the term, for which I am profoundly thankful.
The hon. Gentleman has mentioned Mr. Lynes's essay quite extensively, and I have been through it myself. It is an essay, not a survey, but it is a very interesting and well-argued paper which, incidentally, confirms that the increase in assistance levels has done more than merely compensate for price increases. I think that some of the propositions in it are rather debatable. The hon. Gentleman talked, in particular, of the low-price indices—I believe that he was referring to them—which are mentioned in the calculations on page 36. Having been through it academically, as a person very interested in statistics, I find this one of the most difficult paragraphs to follow, and the best advice I have 1164received has not been able to follow it, because it is entirely based on a "smoking household". If we include people who smoke cigarettes, it artificially inflates the price index.
It is ironical that the hon. Gentleman has taken the basic figure for a "smoking household", because only one-third of the pensioners in receipt of National Assistance actually had tobacco tokens and used them. It would have been much more appropriate to have taken it the other way round. I mention this because if we go back to table 5, on page 31—I hope that I am convincing the hon. Gentleman, even if he is not altogether following me since I have studied it very carefully—it shows an increase in the low income indices between July, 1957, and July, 1958, for single pensioners and pensioner couples, in the first instance, of 9 points, and, in the second instance, of 6 points. The comparable figure in the low price index for widowed mothers, who never had the tobacco tokens, remained stable.
Therefore, the hon. Gentleman has chosen that very part of the report which I have found extremely difficult to follow, though I have tried to follow all its calculations. Apart from that, I think it is a very interesting report and one which we shall consider carefully.
The second point I should like to make about it is that, when one compares assistance levels with average earnings levels, to get the comparison in proper perspective one should look at the level of assistance for a family group. The hon. Gentleman has been comparing assistance for pensioners with the average earnings of a family group. It would be better to compare assistance for a similar family to that which is taken in connection with average earnings. If we take a moderately-sized family of a man and wife and three children, the present assistance rates total £7 10s. If we add 28s., for rent, that is the average rent figure added by the Assistance Board for unemployed persons receiving assistance, the total is nearly £9 a week. There must be many wage earners with three children whose "take home" pay is not very much above this level.
The hon. Gentleman also referred to the Cole Survey, again a most interesting document. He referred, it seemed to 1165me, in somewhat disparaging terms to the National Assistance supplement and the discretionary allowance. I would, therefore, point out that on page 97 of the very document which he has quoted, Mrs. Cole had this to say on the work of the National Assistance Board as a result of her findings:
"The overwhelming impression which we gained from the people who were actually receiving National Assistance was one of satisfaction with the way the system was administered".
She went on to quote this:
"‘I've told all that to my Assistance man: he looks after me, why do you want to know it all?’ said one old lady at the beginning of an interview. ‘We can manage on what we've got now. The Assistance is very good to us’, said two sisters 78 and 75 living entirely on Assistance, since they had never been employed."
I want to ask the hon. Lady not to use the term "disparaging". Criticism is not necessarily disparagement. I do not think that I was disparaging.
Sir Richard Pilkington (Poole)
The begging bowl.
That was a condemnation, not a disparagement.
The hon. Member underestimates the effect of his own words. I am sitting opposite him, and I would have called them disparaging.
There is not time to go into the Cole Survey too deeply. The only other comment I would make is that its definition of income—which definition is used to support sweeping statements about old people alleged to be living close to the poverty line, entitled to National Assistance and not getting it—was drawn to ignore all benefits in kind, such as rent-free accommodation and the value of living with a relative. On page 95, the Report points out that two-thirds of those people who Mrs. Cole suggested were entitled to but not receiving National Assistance were keeping house with someone else.
On that same page, she points out:
"Possibly, then, the units in our sample entitled to but not receiving allowances were rather better off than those already receiving them."
As a practical test of the efficiency of Mrs. Cole's conclusions, we noted that she interviewed just over 1,000 people. 1166Her survey is the result of an analysis of 400 units, but she interviewed just over 1,000 people. The interviewers went armed with forms from the National Assistance Board and left them where they thought there was a prima facie case for receiving assistance. They did not leave them otherwise.
Of the 1,000 people whom they interviewed originally, they left these forms with 58. Only 21 of the forms were used and, of those, 18 were awarded an allowance. In other words, 2 per cent. of the people interviewed were ultimately awarded a National Assistance allowance. These figures do not compare very favourably with the conclusion drawn by the survey as a whole.
I knew that someone would mention Surtax payers. If it is possible—if hon. Members will listen to me—I want to try to put the Surtax relief, with the amounts payable from 1st January next year, in a slightly different light. It is very easy to make disparaging remarks about relief to Surtax payers—and I do not think that the hon. Member for Sowerby will refute that some of his remarks have been disparaging. It is a pity that his party has chosen to adopt the line that those who get on and make extra earnings by their own efforts must be publicly decried and milked as often as possible. That is a matter for him and not for me.
My point is that these people, who number fewer than 400,000 have contributed heavily to the Exchequer and, consequently, to our social security system. [ Selwyn Lloyd] The Chancellor of the Exchequer has gone into his annual vow of silence and, therefore, the latest available figures I can get are those which have already been published, for 1959–60. It is noteworthy that these people—numbering fewer than 400,000—in 1959–60 contributed to the Exchequer, in Income Tax and Surtax, £735 million. The figures for the previous years are, respectively, £712 million; £655 million; £633 million; £608 million; £583 million; £536 million; £541 million; £531 million; £489 million and £475 million. Their contribution of £735 million is a very powerful one indeed to the Welfare State.
I suggest that it is against this background that the reduction in Surtax should be considered. Even if the 1167amount paid by Surtax payers has not risen in the two years in respect of which figures are yet to be published—which I doubt—it means that after the relief of £83 million, Surtax payers, on the lowest possible estimate, will still be paying £650 million to the Welfare State, through the Exchequer, which my right hon. Friend and I are very pleased about, because we rely upon heavy in-goings to the Exchequer for financing some of the schemes.
At one stage the hon. Member compared our scheme with the Swedish one, and later with those of other Common Market countries. He frankly admitted that the latest comparable figures are totally out of date, because they relate to 1957. In fact, no up-to-date ones exist. Comparisons between our scheme and those of European countries or any other countries are notoriously difficult to make, for reasons which are not difficult to see. For a start, when there are many unemployed people a higher demand is imposed upon social security. It is very ironical that having fewer unemployed, and, therefore, paying less in unemployment benefits, counts against one.
Secondly, there are different structures of populations. Different working populations have to support different numbers of retirement pensioners. It is right to point out that most European countries have a fairly high number of retirement pensions, but that the rate of increase varies considerably, as against ours. Therefore, comparisons should be used very sparingly. Most serious commentators on the schemes agree about that.
A general fact worth pointing out is that a country which has a high standard of living spends proportionately less on its social security schemes. As my hon. Friend the Member for Stroud (Mr. Kershaw) kindly pointed out, Denmark and Sweden—countries with a high standard of living—spend broadly the same proportion as does the United Kingdom on social security benefits. Countries like Australia, Canada, Israel, Norway, Switzerland, and the United States of America, spend less. In France, the high amount is due to the very high rate of family allowances, which is an unusual policy but 1168happens to be well suited to the requirements of that country.
The hon. Member quoted the Swedish figures as being very favourable as compared with ours. I am not certain how my figures compare with his, but according to the latest information available to me the basic pension in Sweden is £190 per annum single and £300 per annum married—payable only from the age of 67 for men and women alike. The United Kingdom is one of the few countries which pays retirement benefits, or any other benefits, on a weekly basis. Many other countries pay them on a monthly basis and some on a quarterly basis, so that they have nothing like the same administrative costs. If the hon. Member is quoting comparable figures he should point out the different age at which persons become entitled to benefits in the various countries.
I was quoting the schemes of Germany, Belgium and Sweden to show that they have a built-in provision for automatic adjustment. I was not attempting to show whether or not those schemes were better than ours.
The hon. Member may now feel happier that, even without a built-in automatic adjustment, we have kept pace, under a Conservative Government, with the rise in average wage earnings which I quoted.
I turn to the West German scheme, which the hon. Member quoted very favourably as having this built-in adjustment. It is paid on a monthly and not weekly basis, which makes a considerable difference. We cannot properly ignore the contribution provisions of the West German scheme. Again, it is not easy to compare. I will give two different comparisons. Under the West German scheme, which is run on a different basis, contributions are paid not only for pensions and other National Insurance benefits, but for health services as well. It makes comparisons very difficult.
What I have tried to do is to compare what would happen to our contribution rates if we shifted over entirely to the West German system. Difficult as it has been, I have attempted to isolate the pension factor. The first analogy would involve the shifting over to the German system of financing social security, which 1169depends heavily on contributions. It is financed by a contribution of 12¾ per cent. from the employee's earnings and 15¾ per cent. by the employer—a total of 28½ per cent.
For the £9 a week worker in this country, this would work out at a contribution of approximately 22s. 9d. a week, instead of the present 10s. 7d., while the employer's contribution would be about 28s. 4d. as against 8s. 7d. at present. It would mean a total weekly stamp for the £9 a week worker of 51s. 1d., as opposed to the present 19s. 2d.
Then there is the case of the £15 a week worker not contracted out of the graduated scheme. His flat rate and maximum graduated contribution would be 38s. 3d. a week instead of 15s. 8d., while the employer's contribution would be 47s. 3d. instead of 13s. 8d. This would be a total weekly contribution of 85s. 6d. compared with the present 29s. 4d. That is what is involved in shifting over entirely to the West German scheme of financing.
If we try to isolate the pension component, we still find that the contribution rates are very much higher than the existing ones in this country. The pension contribution in West Germany is 7 per cent. of earnings up to £964 per annum, both for employer and employee. To an employee in this country earning £9 a week, this would mean a contribution of 12s. 7d. a week, while the employer would also pay 12s. 7d. That is for pension only, and it is more than our existing contribution of 10s. 7d. from the employee—which goes not only to pensions, but to sickness, unemployment, and industrial injuries benefits, and to the National Health Service—and 8s. 7d. from the employer for people not contracted out.
For the person earning £15 a week or more, the contribution for retirement pension only would be 21s. per week for each side compared with the present contribution of 12s. 9d. from the employee and 9s. 10d. from the employer to cover all contingencies. These are the maximum graduated contributions.
Mr. William Ross (Kilmarnock)
There is something wrong with the hon. Lady's figures, which are very complicated. My calculation is that the contribution would be 15s. 8d. from the employee.1170
I will have my calculation checked and let the hon. Gentleman know whether my figures are correct.
I do not wish to detain the House for long. I hope that I have said enough to convince right hon. and hon. Members that not only have pensions risen more than the rise in the cost of living, but that they have risen in proportion to the average male earnings and that the community has made an increasing contribution—a contribution which is likely to go on increasing—for the benefit of the retirement pensioner and those in need. As it is less than one year since the last benefit increase came into operation, we have, of course, no proposal at the moment for a further increase in benefits. For the reasons I have given, I have the greatest confidence in commending the Amendment.