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1964 Dec 3 Th
Margaret Thatcher

HC Committee [National Insurance Bill] (Balniel Amendment)

Document type:public statement
Document kind:House of Commons Committee
Venue:House of Commons
Source:Hansard HC [703/764-84]
Journalist:-
Editorial comments:MT spoke at cc782-84, 1700-?1705. For easier understanding the whole debate on the amendment is included.
Importance ranking:Minor
Word count:7128
Themes:Social security and welfare
764

Clause 1.

—(Amendments as to contributions and benefits under Insurance Act. 1963 c. 7. 1959 c. 47.)

Lord Balniel (Hertford)

I beg to move Amendment No. 1, in page 2, line 2, at the end to insert: (3) In section 6 (1) of the National Insurance Act 1959 (which provides for increases in retirement pensions for contributions paid after pensionable age) for the words "one shilling" where they first occur there shall be substituted the words "one shilling and sixpence" and for the word "sixpence" where it last occurs there shall be substituted the words "one shilling". 765

This Amendment is designed to increase the increments which a person can earn by postponing his retirement after pensionable age and by continuing to pay contributions while at work. The concept of earning increments on one's pension through continuing at work after pensionable age and paying contributions every week has been an integral part of our National Insurance scheme since its inception. It was an integral part of the Beveridge Report and it was an integral part of the first of the post-war National Insurance Acts.

During the period preceding the National Insurance Act, 1959, a person who continued in employment after pensionable age earned for himself an increment of 1s. 6d. on his pension for every 25 contributions which he made. At that time, there were frequent complaints that this period of 25 weeks was excessive. A man often had to retire for reasons of ill-health after, say, 23 or 24 weeks had passed, and he felt, with a certain amount of justification, that, after such a long period had passed, he was entitled to an increment. In fact, he received nothing, and it was often felt that he had been cheated out of the increment for which he had paid over a period and that all his effort had been wasted.

In 1959, a change was, therefore, made and the increment was earned after 12 weeks instead of after 25 weeks. The situation today stems from what was then laid down in 1959. For every 12 contributions paid a person who has postponed his retirement earns for himself an additional 1s. a week on his retirement pension when he ultimately takes it. There are similar provisions for a married person. A married person earns on behalf of his wife, provided that she is over 60 years of age—I know that this is a feature of the scheme which the Chancellor of the Duchy of Lancaster dislikes intensely—an additional 6d. a week on the pension after he has made 12 contributions.

As the Committee knows, there is a limit on the number of increments which can be earned on one's pension. One cannot go on earning increments after reaching 70 years of age. Expressing a personal opinion, I hope that the right hon. Lady, when she institutes her review of the whole structure of National Insurance, will look again at this limitation 766on the earning of increments after 70 years of age. I do not myself see the logic of encouraging a man to continue in employment and earn increments on his pension up to the age of 70, but removing that encouragement immediately he attains 70 years of age. I regard this as one of the features which could be looked at in the general review of the scheme.

As a result of this limitation on the amount of increment on can earn, the position since 1959 has been that the absolute maximum increment which can be earned by a single person is 21s. a week on the pension and by a married person 31s. 6d. At the time when these increments were fixed by the National Insurance Act, 1959, the flat-rate pension for a single person was 50s. Under this Bill, the flat-rate pension for a single pension will be raised from 67s. 6d. to 80s. a week, an increase of 60 per cent. over the flat-rate pension for a single person in 1959.

While there has been this increase of 60 per cent. in the flat rate for a single person, the Bill makes no attempt to increase the increments, leaving them exactly where they were fixed under the 1959 Act. Exactly the same is true for a married person. In 1959, the flat rate pension for a married person was 80s. a week. It is now being raised from 109s. to 130s., and this is an increase of 62 per cent. over the 1959 figure. There is no provision in the Bill for increasing the increment in a way commensurate with the increase in the flat-rate pension.

Thus, as a result of a sequence of increases in the flat-rate pension, the increase made in 1961, the increase made in 1963, and the present increase being made by the Bill, the increments which a man can earn have become a steadily diminishing proportion of the flat-rate pension, and, not only that, but their actual value in real terms has been steadily eroded by the rise in the cost of living. Moreover, the whole Committee expects that, as a result of the inflationary twist which has been given to the economy in the past few weeks, there will be a further substantial rise in the cost of living during the coming year.

By the Bill, the Government are to make a substantial increase, which we all 767welcome, in the flat-rate pension for single and married persons, but I should have expected them to regard as one of the priorities on which to concentrate attention the need to restore the relative value of the increments to the value fixed by the 1959 Act instead of allowing it to fall, as will occur under the Bill.

The increments not having been increased, my understanding is that a man must now live to at least 90 before he will even get a full return on the contributions which he has made. The right hon. Lady will be able to correct me if my amateur mathematics are incorrect.

Mr. A. E. Hunter (Feltham)

Could the noble Lord tell me when the increments were last increased?

Lord Balniel

If the hon. Gentleman had listened to a word of my speech, he would realise that I have said on several occasions that the increments were increased by the National Insurance Act, 1959, and I am suggesting that the time has come for a further increase to be made.

Mr. Hunter

Why did not the last Government increase them before now? We appealed to them to do so.

Lord Balniel

Will the hon. Gentleman do me the courtesy of listening to my speech?

The Amendment is deliberately framed as an exceedingly modest one, and I am putting it to the Minister in the genuine hope that she will find it possible to accept our very moderate proposal. We are proposing no more than to restore the relative value of the increments as determined by the 1959 Act. In 1959, the 1s. which could be earned after 12 contributions was 2 per cent. of the 50s. pension fixed under that Act. We propose by the Amendment that this increment should be increased to 1s. 6d. for a single person. This will be marginally less than 2 per cent. of the new 80s. pension for a single person.

In 1959, the 1s. 6d. increment for a married person was marginally less than 2 per cent. of the 80s. pension for a married person. We propose by the Amendment a 2s. increment for a married person, and this would be marginally less than 2 per cent. of the new 130s. pension. The right hon. Lady, who has studied the Amendment, will have rea768lised that we have placed a greater degree of emphasis on helping the married person. This is in conformity with the policies which were pursued by the late Administration, of giving additional help to dependents.

The absolute maximum increment which would be earned by a single person under the Amendment is 31s. 6d. and the absolute maximum increment for a married person would be 52s. 6d. The cost of this Amendment in the short term would be slight, but in the long term it would be a significant factor. I wish to thank the right hon. Lady for her courtesy in so promptly replying to a question of mine which sought to ascertain the cost which would be involved by this Amendment. The cost of increasing the increments as proposed for a single person would be about £250,000 during the next financial year and, in the long term, over a five-year period, it would rise to £25 million. The cost of increasing the increments for a married man would be £50,000 during the next financial year rising to £4 million in 1970–1971.

I quite accept that there is an argument against increasing the increments. Professor Cairncross, in his minority Report to the Phillips Committee, actually proposed the abolition of the increments, but in doing so he put forward alternative suggestions which involved abolition of the retirement condition altogether and abolition of the earnings rule. Those who dislike the increments as a feature of the National Insurance Scheme say, with a certain amount of justification, that the increments do not provide much incentive for a person to stay on at work after he has reached pensionable age.

This certainly was the view of the Phillips Committee in 1959. In paragraph 201 of its Report it said:

"A small prospective increase in the pension later on, though welcome when it comes, can seldom affect the decision".

That is the decision whether or not to retire. I quite accept that the decision which a man or woman makes on reaching the age of 65 or 60 whether to retire or not is primarily governed by that person's health, by the habits of his life-time, by the sharp drop in income which follows on retirement, and by such intangible factors as the happiness and contentment which he gets from continuing at work. 769

The dominating factor, quite clearly, is not the increments. None the less, they are a factor which is taken into account. I quite accept that the increments are not the dominating factor in the decision whether to retire or not, but I—and certainly the last Administration—felt that the structure of National Insurance should be framed so as to give some encouragement to people who wish to go on working to continue to do so. We feel that our social policies should be directed, not, of course, towards forcing a man to continue at work after his strength or health has failed, but to encourage those who wish to continue in employment to do so. Certainly, we should not discourage people who want to continue in employment from doing so.

I quote from paragraph 201 of the Phillips Committee's Report. Referring to the increments, it said:

"They may have little effect as an incentive to postpone retirement but they are a well known feature of the National Insurance Scheme and if they were removed or materially reduced"—

Those are significant words—

"We should expect the public reaction to this change to be seriously unfavourable to the success of the steps now being taken to facilitate and promote voluntary postponement of retirement."

The Government are not reducing this in actual terms, except that it is being reduced in real terms through the rise in the cost of living, but it is this reduction which is actually occurring in practice——

The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Mr. Norman Pentland

The noble Lord keeps referring to the rise in the cost of living. Would he tell us what increase in the cost of living is taking place at present?

Lord Balniel

If the hon. Gentleman thinks that the rise in petrol tax will not have any effect on the cost of living, he is living in the dream world in which the entire Government seem to be seeking shelter.

Mr. Pentland

The noble Lord is trying to build a case on increases in the cost of living, or expected increases in the cost of living. Will he present any evidence as to the percentage increase he 770expects, or which he thinks is now present?

Lord Balniel

There certainly has been an increase in the cost of living since these increments were last fixed.

Mr. Michael Foot (Ebbw Vale)

Under the noble Lord's Government.

Lord Balniel

The hon. Member is entitled to interrupt, but if he thinks that this is a proper field in which to make party political points that is his opinion.

Mr. Charles Loughlin (Gloucestershire, West)

The noble Lord's Government were in office for 13 years.

Lord Balniel

The hon. Gentleman asked me to say whether there has been a rise in the cost of living. If the Government proceed in the manner in which they have proceeded so far, a sharp twist to the inflationary spiral is an absolute certainty for the country.

Mr. Michael Foot

All that the noble Lord was asked by my hon. Friend the Parliamentary Secretary was a simple question: what was the percentage of increase expected? It was a perfectly simple question. He does not need to "go off the deep end" about it.

Dame Irene Ward (Tynemouth)

Is the hon. Member opposite aware that in so far as the ——

The Chairman

Order. We cannot have these three-cornered questions. If the hon. Lady wishes to ask a question of her own Front Bench she may do so, but we cannot have three-cornered discussions.

Lord Balniel

The Amendment proposes to compensate for the rise in the cost of living which has occurred since 1959—the rise which the right hon. Lady herself referred to in her memorandum presented to Parliament recently. I am not Professor Balogh or Mr. Kaldor. Obviously, I cannot prognosticate what the rise in the cost of living will be, but I think it reasonable for us to try to help these pensioners to have increments which will help to compensate for the rise which has occurred since 1959 and try to insulate them against a future rise in the cost of living.

These increments have not been increased in the last three successive 771National Insurance Acts. They have been materially reduced as a proportion of the pension received by retirement pensioners. They have also been materially reduced in real purchasing power as a result of the rise in the cost of living. People will say, "What is the point of my continuing to work and to pay substantially increased contributions under the Bill when the increments are not increased commensurately?"

There increments have also been reduced as a proportion of average earnings in the country. Average earnings in 1959, when the increments were last fixed, were 261s. 10d. Today, they are 352s. 5d. One has a general picture which has developed under successive insurance Measures and the present Insurance Bill. Contributions have gone up and the increments from a smaller proportion of the pension, a smaller proportion of average earnings, and they have been reduced in actual earning power.

There is another very significant argument for increasing the increments. When the Report was written, in 1959, the Phillips Committee thought that the trend towards earlier retirement had been halted and actually reversed. While the Report was being written, the Government Actuary was also writing his second quinquennial Report. The Government Actuary at that time assumed that 45 per cent. of all men in this country would retire immediately they reached the age of 65.

In the last few days we have been presented with the third quinquennial Report of the Government Actuary. This shows that that assumption made in 1959 was a false one. The Government Actuary, in 1959, assumed that 45 per cent. of men would take up the pension immediately on reaching the age of 65. In fact, in 1959 the proportion was 47 per cent. In 1960, it was 45 per cent.; in 1962, 53 per cent.; and in 1963 54 per cent. So the trend during the last five years, as shown by the Government Actuary, has been towards people steadily retiring earlier and earlier.

The arguments for increasing the increments are twofold. There are the humanitarian arguments and the economic arguments. To my mind, the humanitarian arguments are the dominating ones in reaching a decision 772on this matter, but, of course, economic arguments are not totally insignificant. The economic arguments are that the country needs all the people, of whatever age, who are fit, willing and anxious to continue in work, to do so. The greater the number of elderly persons who continue in employment, the smaller the burden which is borne by the rest of the community.

Consequently, one can place greater emphasis on helping those in greatest need, the elderly, the chronic sick, widowed mothers and those receiving other benefits directed specifically to those in need. I believe that it is widely agreed in the Committee that all people who are fit, anxious and able to continue at work in their own interests should be encouraged to do so. To continue in employment is for elderly people often a very important emotional and psychological need. They feel a sense of satisfaction in maintaining their independence. They maintain a higher standard of life.

Mr. Thomas Swain (Derbyshire, North-East)

Would the noble Lord agree that one of the main reasons why, over the last 13 years, people have stayed at work beyond the age of 65 was that the miserable pensions doled out by the Tories were not sufficient to live on?

Lord Balniel

I am sure that the marked drop in income which follows retirement is a factor. It would be folly to pretend that it was not. But it is also true that people are retiring early partly because of the failure of successive insurance schemes to increase increments as they should be increased. It is very important for elderly persons that they should be able, and encouraged, to continue at work to maintain this sense of independence and self-respect which many of them believe to flow directly from continuing employment.

Several Hon. Members

rose——

The Chairman

I hope that we shall not have too many interruptions. There are many Amendments with which to deal and this is only the first.

Lord Balniel

Our social policies ought positively to encourage people to continue in employment if they feel inclined to do so. I regret that one of 773the features of the present Bill is that the increments are of steadily diminishing importance. The Amendment is designed modestly to restore the increments to the relative value at which they were fixed in 1959.

Mr. A. E. Hunter

I want the basic pension eventually to be so increased that a person can retire at a proper standard of living. The noble Lord the Member for Hertford (Lord Balniel) wants to encourage people not to retire so that that can save the Government money. That is not the policy of the Labour Party. If the Labour Government stay in power long enough, I am confident that we will eventually get a proper basic pension for the man at 65 and the woman at 60. At the same time, if someone is fit and wants to continue work, then the increment should be increased.

The noble Lord said that the last time it was increased was in 1959, which means that the last Government did nothing for five years. With a change of Government, hon. Members opposite now come forward with this policy. I am in favour of increasing the increments and I know that my right hon. Friend will bear in mind the desirability of doing so. However, we want to be honest in politics and not press for one thing in opposition and then do something different when in power. For five years the last Government did nothing to increase these increments. I am in favour of increasing them and I hope that my right hon. Friend will consider the matter.

Lieut.-commander S. L. C. Maydon (Wells)

I support the Amendment. The right hon. Lady has introduced a Bill with which we are all very much in sympathy. However, she has left a number of gaps in it and it is our object to try to fill one of them. Although benefits are to go up generously, the right hon. Lady is proposing to leave the level of the increments precisely as they have been for some time. She is giving the man who defers his retirement a very bad bargain and the State an unwarrantably good bargain.

Let us consider the case of a single man forgoing his pension for the full span of time from 65 to 70. That is roughly 774260 contribution weeks and the maximum increment which he can earn on the present scale is 21s., that is to say, those 260 contribution weeks divided into blocks of twelve. However, during that time, if the scales of benefit proposed in the Bill are introduced, he will forgo 260 payments of £4 a week, a total of £1,040. He will also pay at the standard rate of contribution on his own account 13s. 8d. a week on the new scales, a total over the five years of £177 13s. 4d.

We have also to consider the employer's contribution—because this is money which the State is obtaining one way or another—and, at 26s. 7d. a week, that will give a total of both types of contribution over the five years of £345 11s. 8d. The single man who defers his retirement for the full five years will, therefore, make the State better of by £1,385 11s. 8d. Before he breaks even on that bargain, he will have to live until he is more than 95.

Mr. Cyril Bence (Dunbartonshire, East)

This has been going on for years.

Lieut.-Commander Maydon

I am well aware of this. If the hon. Gentleman will turn up Hansard for 3rd February, 1956, he will see that I then made a speech on these lines. I should like to tell him that then, with a Conservative Government, the figures were nothing like so unfavourable as it is proposed to make them under a Socialist Government. What is more, in 1959 something was done to put the matter right, not enough, but something. The hon. Gentleman should be more careful about sorting out his facts before intervening.

With the new proposed benefits for himself and his wife, assuming that she is of pensionable age, too, the married man will get £6 10s. a week. If that is forgone for five years, that gives a total of £1,690. The contributions will be the same, assuming that only the man is contributing, and the State will, therefore, benefit to the tune of £2,035 11s. 8d. As a married man he will get an additional increment on account of his wife and will not have to live quite so long as the single man to break even—only until he is just over 94, assuming that his wife is alive, too. If she predeceases him, he will have to live longer to break even. 775

Our proposal would go some little way to improving this state of affairs for the single man and would go further for the married couple. I commend the Amendment to the right hon. Lady. If she cannot give a definite answer this afternoon, I hope that she will look at these figures, which I believe to be tolerably correct. I am not all that accurate in my arithmetic, but I do not think that my figures are all that wrong and I hope that the right hon. Lady will give the Amendment serious and sympathetic consideration.

Mr. Eric Lubbock (Orpington)

Can the hon. and gallant Gentleman tell the Committee how long the single man and the married man respectively would have to live in order to get back their contributions if the increments were raised to the levels proposed?

Lieut.-Commander Maydon

Yes. We propose that for the single person it should be 31s. 6d. instead of 21s. As that is adding an extra half, in simple terms it would take about two-thirds of the time. The same applies to the married man. If an extra half is added to the incremental benefit, the time taken to break even on the figures I have quoted would be roughly two-thirds of the time now taken.

Mr. Pentland

I am aware that many arguments can be used in an attempt to justify increases in increments. We have all been aware of that for many years. The noble Lord the Member for Hertford (Lord Balniel) referred to some of them on which I shall touch as I go along. In her speech on Second Reading last Wednesday, the hon. Lady the Member for Finchley (Mrs. Thatcher) advanced two arguments for increasing the rates of increments. Today, the noble Lord has more or less filled in the pattern of what the hon. Lady would expect her arguments would achieve.

First, it is clear that while increments have always been related to the amount of pension forgone, increment rates have not been increased since 1959, although pension rates have gone up on three occasions since then. The hon. Lady and the noble Lord will be aware that increments do not, and were never intended to, provide a full actuarial 776return for the extra contributions paid and the extra benefits forgone during the deferment of retirement. I understand from my study of this subject in the short time that I have been at the Ministry that all Governments in the past have followed the concept laid down in the Beveridge Report.

Paragraph 246 of the Beveridge Report says:

"The increases for postponement after minimum pensionable age are designed to give the individual some, though not all, of the saving in pension expenditure resulting through his postponement and are related, therefore, to the amount of the basic pension which is postponed."

If we are to discard the concept of Beveridge—and the Amendment would probably lead us to that conclusion—and accept that a full actuarial return should be given, there would be no ultimate saving to the National Insurance Fund by the postponement of retirement. As a consequence, the whole purpose of helping to provide a higher rate of benefit for those who had ceased work would be destroyed.

I know that comparisons and examples can be given about the percentage the prevailing maximum increment rate is of the pension rate, but too much weight should not be given to those comparisons, because the rate has fluctuated so much since 1948. Everyone in the Committee is aware of that, and that increment rates have never been increment rates have never been increased as frequently as pension rates. Indeed, since 1948 there has been little connection at all between the timing of an increase in benefit rates and an increase in increment rates.

I think that I am right in saying that the two increases coincided on only one occasion, and that was in 1951. The benefit increases made by previous Conservative Governments in 1952, 1955, 1958, and 1961 were not accompanied by increases in increment rates. The 1959 increment increase which was referred to by the hon. Gentleman was made independently of other benefit changes at that time.

The second point which the hon. Lady deployed in her speech on Second Reading, and it was deployed by the hon. Gentleman today, was that an increase in increment rates was needed to give an extra incentive to defer retirement. This was one of the main planks of his 777argument. I would accept at once, as would my right hon. and hon. Friends on this side of the Committee, that increments provide extra income for the later years of life when it is most likely to be helpful to retirement pensioners, but, here again, I do not think that the incentive argument should be over stated, and it was not, or at least not too much, by the hon. Gentleman.

The hon. Gentleman referred to the Phillips Committee, which, he claimed, reported in 1959. Actually, that Committee reported in 1954. There was another Committee which also reported in 1954 and I am sure that the hon. Lady, with her knowledge of the Department, is aware of that Report. The inquiry was conducted by the Ministry of Pensions in 1953. It was an inquiry into the reasons for retiring or continuing at work, and it was found that fewer than 1 per cent. of men who stayed on at work after reaching the minimum pension age gave increments as the main reason for doing so.

As the hon. Gentleman said, men are attracted to work by financial considerations. It depends on the jobs available, on the salary or wage which the individual can earn, and on the man's ability to continue in work when he has reached retiring age. Another important factor, of course, is the opportunity to work, and this can very considerably from one part of the country to another. In Durham, it is extremely difficult for a man over 65 to continue in work, even though he may have the ability to do so, because of the unemployment problem. I accept that this state of affairs is not as prevalent in the Midlands or in the South as it is further North. However, there are these differences.

My hon. Friend the Member for Derbyshire, North-East (Mr. Swain) was correct when he intervened during the speech of the hon. Gentleman. I do not believe that when a man is nearing 65 he wants to continue working because he likes doing so. He may be interested in, and enjoy, his job but the vast majority of those who work in heavy industries continue to do so because in their view, and in the view of this side of the Committee, the pension is not sufficient for them to live on. The real answer to all these problems which face the retirement pensioner when he is reaching retirement age 778is to provide him with a substantial pension during the years of his retirement This is exactly what we on this side of the Committee hope to bring forward in the years ahead.

The Amendment raises other complications to which I could refer if hon. Members desired me to do so, but I must make it clear, to save the time of the Committee, that the Government do not consider that this is the appropriate time to increase these increments. We believe that any change at this stage might complicate the wider task of reconstructing the benefit and contribution structure of the whole scheme, and the merging of existing rates into any new scheme which the Government may bring forward.

We see great dangers here, in the light of any new scheme which we may bring forward in the future. But, having said that, I must point out that we will continue to keep these rates under sympathetic consideration. Hon. Gentlemen opposite should make no mistake about that. We have by no means closed our minds to the importance of increment rates.

Mr. A. P. Costain (Folkestone and Hythe)

To assist us to assess this, could the hon. Gentleman say when such legislation is likely to be brought in?

Mr. Pentland

Not at this stage. If the hon. Gentleman is patient, it will come along in due course.

Lord Balniel

I appreciate that the hon. Gentleman may not be able to say when further legislation will be brought in. One of his main arguments against accepting the Amendment is that it will complicate the future structure which is being considered by the review. Can he tell us when he expects to know the result of the review?

Mr. Pentland

I could not do that, as the hon. Gentleman knows full well. This is a complicated business, and I am sure that anyone who has served in the Ministry knows that this is a terrific job. The point is that we are embarking on an investigation into the whole structure. After giving consideration to the matter, we have found that the increment question has complications if one takes the whole structure of the scheme into consideration.

The Committee knows that there are other methods by which one can improve 779the increments. I am not saying that this will be done. I am saying that if there were any alteration of the flat-rate provision it would probably be preferable to effect an improvement by altering the number of contributions which earn 1s., as has been done in the past. We could do it this way, rather than by altering the value of the increment earned for every twelve contributions.

I do not want to deceive the Committee. These thoughts are running through our minds. I am not saying that this will be done immediately. I am only trying to impress on the Committee that there are other methods which we could use, without delving into the complicated one suggested in the Amendment. These are matters for the Government to decide, but, in the meantime, I repeat that we will give this our full consideration.

We cannot accept the Amendment, for the reasons which I have given, and for many more which I could give. If the Amendment is not withdrawn, I invite the Committee to reject it in the Division Lobby.

Lieut.-Commander Maydon

There are two questions arising out of the answer which the hon. Gentleman has just given. He claimed, quite rightly, that these increments in the past had not normally been increased at the time when there had been increases in the standard rates, but does he not recognise that there comes a time when the standard rates of benefit get widely out of step with the increments, and that something must be done? We are trying to impress upon him and his right hon. Friend that this is such a time.

On his second point, he quoted the 1953 Report as saying that of those who were interviewed a very small percentage claimed that the increment for deferred retirement had any influence in making them defer their retirement. Would he not recognise that if the increments had been rather more generous, a greater percentage might have given a favourable answer?

Mr. Pentland

I cannot accept that. I have said that, in our view, this is not the time. Between 1959 and 1964 his Government had the opportunity to put this matter right had they wanted to. We say that this is not the time. The hon. 780and gallant Gentleman was in the Department. Perhaps the hon. and gallant Gentleman would remind me of his second point?

Lieut.-Commander Maydon

It was about the small percentage who claim that the increment had no influence in making them defer retirement.

Mr. Pentland

This is hypothetical. The hon. and gallant Gentleman's guess is as good as mine. All I was pointing out is that this was an extensive inquiry by the Ministry of Pensions into the reasons for retiring or continuing at work and it resulted in only 1 per cent. of the people approached saying that the increment rates were an attraction.

Mr. Bernard Taylor (Mansfield)

From the speeches that we have heard from the benches opposite two things emerge. The hon. and gallant Member for Wells (Lieut-Commander Maydon), who was a Parliamentary Secretary in the last Administration, made out his case on an actuarial basis. The noble Lord the Member for Hertford (Lord Balniel) based his case on very different reasons. I do not dispute the hon. and gallant Gentleman's figures. I am sure that they must be correct, but this matter has gone on since 5th July, 1948, and during that time we have had 13 years of Conservative Government. It comes with some cynicism and ill-grace for the hon. and gallant Gentleman to advance now the argument on an actuarial basis which he has put forward for an increase in the increments.

Lieut.-Commander Maydon

If the hon. Gentleman had been here, and had listened to my reply to an intervention by one of his hon. Friends, he would know that I answered that point. It was on 3rd February, 1956, that I produced precisely the same arguments. The figures were different, but the arguments were the same, and I am glad to say that three years later the Conservative Government took heed of what I said and made a considerable improvement.

Mr. Taylor

May I say to the hon. and gallant Gentleman that I have been here all the time and listened both to his speech and that of the noble Lord the Member for Hertford. I heard what he said to my hon. Friend the Member for Dunbartonshire, East (Mr. Bence), 781but the fact remains that men over 65 and women over 60 who decide and have the opportunity to stay at work—I shall come to that in a moment—are entitled to increments. All that he said about the actuarial basis has continued since 1948 and 13 years of that period have been under a Conservative Administration. As I sat here I came to the conclusion that it comes with some cynicism and illgrace from the hon. and gallant Gentleman.

In considering the actuarial question, I am relying on the promise of my right hon. Friend, given during the Second Reading. I am also reminded of the speech that my right hon. Friend the Chancellor of the Duchy of Lancaster made during the debate on the Gracious Speech. He said that this Measure was a rescue operation. It was to meet need where it was most sorely felt, My right hon. Friend the Minister made the same comment. Both intimated that this is only a short-term Measure, that the whole structure of National Insurance will be reviewed, and that at a not too distant date we shall have the proposals before us.

I turn for a moment to the speech of the noble Lord the Member for Hertford and ask him a question which I tried to put to him in an intervention. He seemed to base his case entirely on the supposition that if the increments were increased it would be an inducement to people to go on working. The point that I want to make—my hon. Friend the Parliamentary Secretary made it as well—is that in these days of mechanisation and automation in industry people arriving at the age of 65, however willing and desirous they may be of continuing to work, have no option.

In the industry which I know best there is compulsory retirement at 65. I would say to the noble Lord that the argument which he adduced for an increase in increments is a very weak one, because the pattern of behaviour in retirement, over which the people themselves have no control, has considerably changed.

I hope that my right hon. Friend the Minister, in rejecting this Amendment will look at the question of increments 782in the light of changing circumstances in industry with regard to retirement and will come forward with some constructive proposals when the time arrives.

Mr. Costain

I want to intervene for only a few moments because I was so disappointed with the reply of the Parliamentary Secretary. My appreciation of the Amendment, which I thought was most reasonable and very well proposed by my hon. Friend the Member for Hertford (Lord Balniel), is based on the fact that the pension scheme itself, if taken to its conclusion, is a pension scheme payable at 70 with the option to retire at 65 should people so desire.

The Parliamentary Secretary, as a good trade unionist, has always taken the view, on which I support him, that the rate for the job is the proper pay, but I think that in this case, if we do not increase increments between 65 and 70, we are taking advantage of the person who wishes to work after 65.

That I very much resent. The argument whether a man or woman should work on after this period is almost irrelevant. I have talked to a number of pensioners in my constituency, and many of them say that they would like to work on after the age of 65 because they cannot bear being in the house when the "old woman" is cleaning it out. Some of them are very grateful for being able to get away. But that is no reason why we should underpay them for the job.

The argument that these increments should not rise on every occasion when there is an increase in pensions can easily be shot down. When we are dealing with marginal fractions, those fractions come into their own only when there have been a number of increases which catch up with the fractions. I believe that after the Conservative Government have given many pension increases this is the occasion when the increment should rise. This is a chance for the Labour Government to catch up with their conscience. This is a chance for the Labour government to catch up with their conscience. This is an opportunity for them to do the right thing. If they reject the Amendment they will be doing the wrong thing.

Mrs. Margaret Thatcher (Finchley)

When [ N. Pentland] the Parliamentary Secretary was replying I took the view at first that he was not in favour of the increment 783system at all. I was, therefore, somewhat relieved when he said later that he would give the matter sympathetic consideration. The increment system is an essential part of the National Insurance Scheme.

I can put the case quite simply, in the way in which it was put in the Beveridge Report, from which the Parliamentary Secretary quoted. Paragraph 246 says, in referring to increases for postponement after reaching minimum pensionable age, that ‘the increases for increments

"are related therefore, to the amount of the basic pension which is postponed."

The hon. Gentleman quoted that as being some compensation, although not all, for the amount of benefit which is forgone. In other words, if a man goes on working after he could have retired, and, therefore, goes on paying contributions, he gets an increased pension when he retires. That increased pension does not make up for what he did not draw earlier, although it is considerably greater than the basic rate.

If, therefore, we accept that the increments are related to the amount of the basic pension which is postponed, the longer the period that has elapsed since the increments were put up the more urgent it is that they should be put up. I accept that the basic rates have been increased only twice since the inception of the scheme—once in 1951 and once in 1959—because the compensation has been changed less often than the basic rate, for reasons to which my hon. Friend has referred.

There have been other changes in increments, the last of which was as recently as 1961, when changes were made in incremental provisions for wives and widows. I rest my case on the principle enunciated in the Beveridge Report and repeated by the hon. Member, that increments are related to the amount of the basic pension which is postponed. This is the third rise in basic pensions since increments were changed, and it is time that we had some increase in the amount of increment. I therefore 784ask the Committee to accept the Amendment.

The Minister of Pensions and National Insurance (Miss Margaret Herbison)

The hon. Lady is now quite clearly making the case that every time there is an increase in pensions——

Mrs. Thatcher

No.

Miss Herbison

Perhaps the hon. Lady will allow me to take up her points one by one. She quoted from the Beveridge Report, as did my hon. Friend the Parliamentary Secretary, to the effect that there should be some relationship between the increments and the amount of pension forgone. But what she was really saying, in logic—although she may not think she was saying it—was that every time there is an increase in the basic pension there must be an increase in the increments.

If that is the case my hon. Friend the Member for Mansfield (Mr. Bernard Taylor) was quite right to say that we have had 13 years of Tory rule and that from 1951 right up till 1959, in spite of various increases in the basic rate of pension, there was no increase at all in the increments. In 1959 an increase at all in the increments. In 1959 an increase was given. There have been two increases under the previous Administration since 1959.

Again, I come back to the logic of the hon. Lady's case. According to her there should have been an increase in the increments in 1961 and 1963, but no increase was given. I stress, as my hon. Friend has stressed, that we decided that this was not the time to make an increase in the increment. My hon. Friend made it quite clear that in the general review of all social security provisions which is to take place this matter will receive serious consideration. I hope that when we go to the Division Lobbies, as it looks as if we shall, the Amendment will be overwhelmingly defeated.

Question put, That those words be there inserted:—

The Committee divided: Ayes 169, Noes 207.