National Insurance and National Assistance Benefits

Part of the debate – in the House of Commons at 12:00 am on 13th March 1962.

Alert me about debates like this

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby 12:00 am, 13th March 1962

I beg to move, That this House deplores the lack of any action by Her Majesty's Government to grant increases to old people, widows and others on National Insurance benefits and National Assistance to compensate for higher prices and to ensure their fair share of the national income. A short while ago my hon. Friend the Member for Lincoln (Mr. Taverne) served on the Government a preliminary notice to quit, and I feel sure that that will be confirmed in the results of by-elections to follow.

This Motion deals with one of the causes of the Government's present unpopularity, their failure in social policy. Right hon. and hon. Gentlemen may go into the Lobby to vote against this Motion, but many of their supporters would not, and there is a growing feeling amongst the people of Great Britain that we are not caring for the aged, the sick, and the helpless as much as we should, despite present difficulties.

The Minister of Pensions and National Insurance has held his present office for a long time, very nearly eight years. He is not only the best Minister of Pensions and National Insurance that we have, but within the recollection of many hon. Members he is the only Minister we have ever had. This places upon him a very special responsibility. Although we do not under-rate his achievements or his abilities, he must either break through our present stagnant system of social security or resign, because it has become a system of discretionary grants on a colossal scale. It is the weaknesses of the present position of social security that we wish to debate this afternoon.

In recent months the old people, the widows, the sick and the needy have made few claims upon the time of the House. We had a small Bill before Christmas, containing some very important concessions and one thoroughly bad Clause, to take away the family allowance from about 50,000 families in respect of their apprentice sons. We have not debated the main issues this Session. They have been crowded out by the economic crisis, the clamp down, the pay pause, and the clumsy antics of the Government in relation to wage negotiation and arbitration.

Within a few weeks the first phase of the pay pause is to come to an end. A Government White Paper has already described what the Government believe should be the next step. On 9th April we are to have the Budget. We have tabled this Motion because there is no sign whatever that welfare of the aged, the widows, and the poorest in the community will be taken care of in forthcoming pressures upon our modestly expanding resources. We have seen no guiding light for them.

When the Minister has been questioned recently about the intentions of the Government, he has made evasive answers and taken cover by recalling that the last increases were given as recently as last April. That is perfectly true. It will be within the recollection of the House that just before Christmas, 1960, we passed a Measure to increase National Insurance benefits by 7s. 6d. in the case of a single person to 57s. 6d. a week and by 12s. 6d. in the case of a married couple to 92s. 6d. a week. Regulations improving National Assistance scales were passed at much the same time. These increases raised the benefits, as the Minister never tires of saying, to the highest level in real terms yet reached. He also stressed that these increases were given as recently as last year.

To many old people, April of last year is a long time ago, because their condition has been worsening ever since. The National Assistance increases given last April were 5s. in the case of a married couple to 90s. a week, exclusive of the rent allowance, and in the case of a single person 3s. 6d., raising the scale to 53s. 6d., also exclusive of the rent allowance.

In the autumn of 1959, National Assistance scales were increased when National Insurance benefits were not increased at the same time. It is only fair to say that there were, therefore, two increases in National Assistance, one in September, 1959, and the next in April, 1961. During the past ten years National Insurance benefits have been improved at approximately three-yearly intervals. National Assistance scales have been increased at one-or two-yearly intervals, those in 1955 and 1959 being coincidentally within the few months of a General Election. The increases over the past ten years have been in 1952, 1955, 1956, 1958, 1959 and 1961. After all that, these scales are manifestly still too low.

The Motion deplores the lack of action to improve both sets of benefits now or in the very near future. Our aim is to satisfy the Government and the House generally that, notwithstanding past increases and the complacent Answers that the Minister has given recently, the scales, both of National Assistance and National Insurance, are too low, and have failed to fulfil the purpose which they have in our scheme of social security.

When we say that these benefits are too low we mean that they are too low to meet the reasonable needs of the people to whom they are given. They do not give people enough to eat or to wear, or the small luxuries that go to make life less dreary and drab. The recent evidence of the Survey of Family Expenditure suggests that old people are now spending less on fuel and food—the two necessities of their existence—which suggests that they are going without. They cannot afford even the standards which they had previously.

But the pragmatic and human test which many of us apply, which would convince most people in the country of the inadequacy of these benefits, is not enough for the Government. They always try to prove the adequacy of the benefits and express satisfaction with them by statistical rather than practical evidence. Therefore, I must try to meet the Government on the ground of their own choosing in order to make our case.

The first thing to note is that from 1959 in the case of National Assistance, and from 1960, in the case of National Insurance, the Government promised to do more than merely maintain the real value of these social benefits. They made a promise during the election, and it was repeated when the Minister moved the Second Reading of the National Insurance Bill on 15th November, 1960, that the Government wished to do more than maintain the real value of the benefits and to give them a share in the increasing national prosperity.

That is the new and very important factor in our consideration of the adequacy of these benefits. Admittedly, however, it lacks precision. I shall come to that a little later. We do not really know what a share of the increasing national prosperity means. We have not had much experience of it either—only once in connection with National Insurance benefits and twice in connection with National Assistance. We have to get closer to what makes the Minister tick when he is considering these matters, in the light of the promise that social security beneficiaries shall have more than the restitution of the fall in the purchasing power of their benefits but shall have, in addition, a share in the increasing national prosperity.

The nearest I can get to what the Minister considers in interpreting and applying that promise is the Answer he gave to a Question tabled by my hon. Friend the Member for Salford, East (Mr. Frank Allaun) on 14th November, 1960. He said: The factors which have to be borne in mind in proposing legislation for the improvement of National Insurance benefits include changes in the cost of living, the standards enjoyed by other sections of the population, what level of contributions would be reasonable and the state and prospects of the national economy."—[OFFICIAL REPORT, 14th November, 1960; Vol. 1630, c. 18.] He then said that some of these considerations were very clearly set out in certain paragraphs of the Phillips Committee's Report.

The next day the Minister introduced his proposals to improve the National Insurance benefits, and, after referring to previous increases, he said: … this particular body of proposals is in some ways distinct and different from those three preceding ones. It is different because this is a series of proposals not in any appreciable measure designed to compensate pensioners and others for a diminution in their pensions owing to rising prices. On the contrary, it is a series of proposals in substantial measure to increase the real standard of those provisions … to a far greater extent than the three preceding measures. The Minister then said that the cost-of-living retail price index has increased only 2 points since the National Insurance benefits had been previously increased. He said: The 1958 improvements have in overwhelming measure retained their value, and these proposals are, therefore, built as a further advance in standards on that foundation."—[OFFICIAL REPORT, 15th November, 1960; Vol. 630, c. 220.] To show how good were the Minister's proposals and how far they overshot all the usual "traffic lights", the Minister applied three tests. First, the retail price index. He told the House on 15th November, 1960, that it had risen by 2 points since the previous increases in January, 1958. That was the cost of living factor—2 points. In looking at incomes of other members of the community the Minister said that wage rates had increased 6 per cent. since the previous increases. Although it was not mentioned by the Minister, the then Parliamentary Secretary who wound up the debate for the Government referred to the fact that average earnings had increased by 11½ per cent., as distinct from the figure of 6 per cent. for wages.

The Minister gave another figure, a new one, that of disposable incomes. He said that this figure had risen by 9½ per cent. since the previous increases in January 1958. So there we have a cost of living increase of 2 points and a wages increase of 6 per cent., with average earnings 11 per cent. up and disposable incomes 9½ per cent. up. The pension increases proposed then were 15 per cent. higher for a single person and 16 per cent. higher for a married couple. We see that in 1960 the Minister was proposing increases going well beyond the amount needed to preserve the value of pensions in real terms. As the right hon. Gentleman said, it was a real advance and it was indeed, in part at any rate, a fulfilment of the election pledge.

The Minister has made no proposals since to increase benefits and we can only judge in present circumstances what a share of the increasing national prosperity should be now. How much is it? There is no index for a share in the increasing national prosperity. It could be a full share or a proportionate share. It could be something less. But one thing we can agree on is that it must be something more than merely compensation for the fall in the value of benefits. It must be better than that—unless, of course, the Minister intends to say that there is no increase in national prosperity and, therefore, there is no share-out, not even for National Assistance and National Insurance beneficiaries.

I now leave 1960, and turn to what the Minister had to say in 1962. On 12th February, the hon. Member for Plymouth, Devonport (Miss Vickers) asked how far the White Paper on incomes Command Paper 1626, paragraph 7—which rather discounted changes in the cost of living as grounds for wage increases—would affect the basis on which increases were to be given to retirement pensions. The Minister replied by referring his hon. Friend to the Answer which he had given to my hon. Friend the Member for Salford, East on 14th November, 1960—the very same Answer that I quoted a few minutes ago.

In answer to supplementary questions the Minister stuck to the 1960 formula which he said, at the time and since, was a considered statement. That was his brief and he was not going beyond it. Very well. We must now look at the 1960 formula, reiterated in February, 1962, as applicable to our consideration of the level of benefits today.

Of the factors defined by the Minister in 1960, two related to the standard of benefits, one to the contribution and one to the state and prospects of the national economy. Of the two which related to the level of benefits, the first was changes in the cost of living and the second the standard enjoyed by other sections of the population. So we must apply an up-to-date test to both of those. The index of retail prices has risen from 112 points to 117 points since January last year. It has gone up 5 points as against the 2-point rise at the time the Minister proposed quite substantial increases in National Insurance benefits in 1960.

In reply to written Questions from my hon. Friend the Member for Wallsend (Mr. McKay) and my hon. Friend the Member for Kilmarnock (Mr. Ross) the Minister said that on cost of living grounds alone we should need to increase benefits and National Assistance scales by 4s. a week for a married couple. There is, however, a growing volume of evidence, based on practical field research, to show that the actual cost of living of low income households, especially old people, is higher than the index of retail prices. The latest contributions to contemporary thought on this subject are to be found in two most valuable and recently published social studies. "National Assistance and National Prosperity", by Mr. Tony Lynes, and, "The Economic Circumstances of Old People", by Mrs. Cole and John Utting.

I invite all hon. Members who are interested in these social problems to read those two studies, which are most revealing. Mr. Lynes shows convincingly that the difference between the pattern of spending in low income households and other households requires different weightings in the retail price index. On his showing, the index for single pensioners as at April last year would have been no less than 28 points higher, and for married pensioners 16 paints higher, than the Ministry of Labour figure. Obviously, I cannot detain the House by investigating that proposition, but it is not to be brushed aside and it is closely argued in the study to which I have referred.

There is a considerable weight of evidence behind it in the practical survey undertaken by Mrs. Cole as to how old people really live and on what they spend their money and what they cannot have. We can all understand that the necessities of life, like fuel and food, take a much larger bite out of the income of the average pensioner than from the household budget of the population as a whole, whose spending habits are reflected in the retail price index.

Now, apparently, we are to have television, and even weekend trips in the motor car, brought into the retail price index. That will take the index further away still from the realities of life for the people with these low incomes.

I now come to the second test of the adequacy of the level of benefits, and that is the standard enjoyed by other sections of the population. When higher benefits were last proposed in November, 1960, wage rates had risen by 6 per cent. and average earnings by 11½ per cent. since the previous increase of January, 1958. Now, since November, 1960, when the Minister proposed the increases which became effective from April, 1961, wage rates have risen again by 6 per cent. and average earnings have risen again, not quite 11½ per cent. but 11 per cent.

Much the same increases have occurred in bath wage rates and average earnings since 1960 as were taken by the Minister as the test of the increases he proposed in November, 1960. The average earnings of an adult man in October, 1961, were £15 6s. 10d. a week. The pension for a single person has steadily fallen as a proportion of average earnings from more than one-quarter in 1946 to less than one-fifth today. Imagine a pension for a single person of less than one-fifth of the average earnings of the adult male worker in the country today. The married pension rate has fallen from well over one-third to distinctly less than one-third of average earnings. There is no striking evidence there of pensioners getting a share of rising incomes.

The end of the pay pause will bring further wage increases to a larger number of workers. The Chancellor's guiding Light will certainly lead to an increase of 2½ to 3 per cent., at least in wage levels, fairly generally. How do the old, widows and others among the poor and helpless get their share of increased production and a higher national income? They have no trade union, no joint industrial council, no arbitration board; they rely on the Government and upon this House for protection and fair treatment.

In 1960, in connection with pensions, and in 1959, in relation to National Assistance, the Government gave us the understanding that a share of the national prosperity was to be the keynote of all future action by the Government. We are now looking for a tangible sign that that pledge will be consistently, and without fail, kept in the months to come. As I have said, at present there is no index for it, no sliding scale, no review date, no accepted criteria for automatic adjustment as in West Germany, for instance. There is no appeal, no guarantee against a neglectful, a weak or even a mean Government, and some guarantee should be put there.

Since 1957, in West Germany the pension is no longer determined by the actual contributions paid, but is calculated by an advisory commission applying a formula to take into account rises in earnings by men still at work in the pensioner's former vocation or profess- sion. A corresponding percentage is added as pension. In 1960, receipts for the pension fund from contributions amounted to just over £1,000 million, to which the taxpayers were called upon to pay over £500 million to enable the new dynamic pension scheme to be met, more than double the Exchequer contribution in this country this year.

Something on these lines is the only way to make sure that the pensioner does not get left behind. In Sweden and Belgium there are methods of tying the level of benefit to a pension cost-of-living index. In Sweden, there are cost-of-living increments. At present, the total of the cost-of-living increments amounts to £37 12s. a year on top of the basic national pension for a single old-age pensioner of £140 a year. We are out of date. The static pension scheme is a thing of the past.

Summing up the test of the 1960 criteria so far, we find this: in 1960, the cost of living was up by 2 points and in 1962 by 5 points. Wage rates in 1960 were 6 per cent. up and in 1962 6 per cent. up. Average earnings in 1960 were 11½ per cent. up and in 1962, 11 per cent. up. The remaining test for the level of benefits was disposable incomes, which, in 1960, the Minister said had risen by 9½ per cent. Unfortunately, I cannot give the comparative figures for 1962 owing to the lack of published information for 1961, but there is no reason to believe that the rise in disposable incomes since November, 1960, has been at any lower rate than it was between January, 1958, and November, 1960. Therefore, comparing the position today with that taken by the Minister in November, 1960, when framing his proposals to increase pensions by 7s. 6d. and 12s. 6d. a week, respectively, we find that the retail price index has risen more than twice as much, and wage rates and earnings just about the same.

On the basis of these factors, augmented for an undefined share in increasing prosperity, the Minister increased pensions by 15 per cent. in 1960. Why is he not proposing to do the same today? That is a question which I think it is fair to put to the Minister in the light of the evidence of comparisons which I have given. I assume that he will not do that judging by the terms of the Amendment to our Motion. What, then, is preventing him? What is in the way of the Minister proposing increases comparable with those of 1960 in the light of comparable statistical evidence? It may be that the Minister is inhibited by the other two factors which he mentioned in 1960. Those, the House will remember, were: what contribution would be reasonable? And the state and the prospects of the national economy.

We on this side fully accept that higher benefits mean higher contributions for the three parties in our contributory scheme—employees, employers and the State. The Minister has shown amazing resourcefulness in getting workers and their employers to pay more so that the State should pay less. In the graduated pension scheme he opened the most enterprising "bucket shop" in Britain today. He diminished the cumulative obligations of the Exchequer by robbing the graduated contributions to pay for flat rate benefits.