Orders of the Day — NATIONAL INSURANCE (No. 2) BILL

Part of the debate – in the House of Commons at 12:00 am on 17th June 1969.

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Photo of Mr William Worsley Mr William Worsley , Chelsea 12:00 am, 17th June 1969

I am glad that the Secretary of State has been able to join us again to wind up the debate—partly because the House always welcomes his speeches and hears them with attention and partly because many of us are looking forward to hearing him retract the words which he used in describing my right hon. Friend's scheme some years ago as a "Tory swindle". If he does not withdraw those words, he is himself ten times condemned.

Also—I say this in no critical spirit, because the right hon. Gentleman has, I imagine, been busy on those matters to which my hon. Friend the Member for Liverpool, Garston (Mr. Fortescue) elliptically referred a moment ago—he has missed a great deal of this debate and I hope that he will study very carefully what has been said.

We have had an interesting debate, which has run, as it was bound to do, extremely wide, and has in many ways been a preliminary first canter over the course—for this autumn's major event.

We on this side are not dividing against the Bill, for two reasons. The first is that we realise that pensioners must get some relief after the massive price rises under the Government; and these pension rises—as the right hon. Gentleman has been frank enough to admit—will not do more than the bare minimum, and not enough for his hon. Friend the Member for Manchester, Gorton (Mr. Marks).

I hope that this answers the question of the hon. Member for Rowley Regis and Tipton (Mr. Archer). We support an increase of this kind. We regard it as inevitable and necessary. Also, we have made it clear as a party and it was repeated in what I might call our midterm manifesto last autumn. I will quote only one paragraph: Old-age pensions, sickness, unemployment, widowhood and industrial injuries benefits are paid in return for insurance contributions. There is no question of introducing a means test for them. That is our party policy, and has been made clear many times.

The second reason that we are not dividing tonight is because we all accept that contributions must move from flat-rate to graduated, although, on that general principle and within it, there are qualifications which the Government have not made on this occasion. But, at the same time, when the right hon. Gentleman studies the report of the debate, and from the lement which he has heard, he will be in no doubt about the extent of the criticism from this side, first, of the actual handling of this particular affair.

It was characteristically chivalrous of the right hon. Gentleman to allow his right hon. Friend the Chancellor of the Exchequer to take the credit for the announcement of the increases in the Budget. This was charming, but it would have been better if the right hon. Gentleman had sent along the Bill as well. On the final day of the Budget debate, the Chancellor seemed to think that would be ungentlemanly to be too curious about where this money was coming from. We had to go on asking and we put down a censure Motion before we discovered the total cost, and it was even a month after that before we discovered how the Bill would be worked out. There has never been a precedent in the whole of the National Insurance Scheme for an increase being announced without the method of paying it being announced at the same time. I challenge the right hon. Gentleman to produce such a precedent. I do not believe that he can. I have no doubt that the muddle into which Government business has fallen is a main reason for this event, but it is extremely important that this should not be a precedent to be followed in future.

We have had, as we always have in these debates, a very full discussion about the phrase "the contributory principle".

The basic element in the contributory principle is the simple proposition that the finance of the State pension scheme is kept wholly separate from the general body of Government finance. This is the separation which Sir Paul Chambers would wish to abolish—[Interruption.]—and I was not sure whether some voices below the Gangway on this side of the House would also go that far.

One must draw a distinction between that proposition and the proposition that anybody in the House seriously thinks that the National Insurance Scheme is actuarially sound. It does not follow that because one accepts that this is not an actuarially sound scheme that one wishes to throw overboard the whole contributory principle. This principle, which establishes that money contributed for pensions goes only on pensions, is a concept which must be preserved at all costs. If one muddles this money up with the general sum of Government finance one will cause, first, a serious financial muddle within Government finance and, secondly, a crisis of confidence among those who have contributed in the past and expect to receive pensions.

There is, therefore, this important distinction to be made. What we have is a "pay as you go" scheme. The money that is contributed today does not go into a pension for one's old age, but into a pension that is paid to somebody else today. That is what "pay as you go" means, but it does not follow from this that the contributory principle is not of the greatest importance.

If it is that important, it is so because there is, in the public mind, a sense of relationship between the cost of pensions It is, therefore, essential that when the Government wish to increase the pension scheme they should state the cost at the same time. If they do not do this they are themselves attacking the contributory principle.

We should preserve this principle for the simple reason that it restricts the demand on the National Insurance Fund to what is reasonable in a politically sensitive area. If we do anything to blur this distinction, as the Government have done, we will be setting a serious precedent. We are, therefore, critical of the Government in this respect.

The debate has ranged wide. I was particularly sorry to miss—I had to leave the Chamber at the time—the speech of my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams), but I assure him that I shall study the OFFICIAL REPORT of his speech with interest because, as the hon. Member for Cornwall, North (Mr. Pardoe) said, my hon. Friend's remarks are always stimulating. I will keep my remarks within bounds and will range less wide than some hon. Members, for I wish to relate my comments as closely to the Bill as possible.

Before coming to the details of the Bill, however, I must comment on the muddle into which national insurance finance has got. It is clear, not only from the Government Actuary's Report but from past reports, that the Government have consistently got their sums wrong in respect of national insurance finance since they came to office. That must evoke in our minds the greatest concern.

Last year we had the Public Expenditure and Receipts Act, the contents of which were as bizarre as the Measure's name. We had an increase in contributions without any increase in benefits. This followed not long after the 1965 increase, which, again, was a bigger increase in contributions than in the benefits then demanded. Then we had a raid on the Reserve Fund of the National Insurance Scheme. In the debates of last year we did not have a warning from the Government that yet another increase was just around the corner, in addition to the amount needed to increase benefits.

I am not suggesting that the Government Actuary has been making mistakes in his predictions. I am sure that he has not. Nevertheless, the fact remains that the Government, with all the advantages of his advice, have been unable to estimate correctly from year to year how the finances of the fund will work out.

I accept, of course, what the Minister said, that relatively small movements make relatively large differences. How- ever, I draw two conclusions from this. The first is that all the figures in the White Paper, Command 3883, are now out of date, almost before the ink on them is dry, and that the assumptions on which they are based are also out of date. The second—and this is the nub of the matter—is that it has been shown that the Government, with all their resources and reliance on the Actuary, cannot foretell the movement of national insurance finance in detail more than a year or two ahead.

Does it not follow that we should not lay on future generations burdens the extent of which we cannot determine? Command 3883 commits our children to enormous and precise burdens linked to the concept of the average wage, a concept which, in itself, may look very different in 20 years' time. We are committing them to burdens for which, as my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said, we are making no precise provision.

These burdens, if the precedent of the last year or two is anything to go by, will increase enormously in weight. They may prove insupportable but—this follows what my hon. Friend the Member for Garston said—they may also prove unnecessary because we do not know anything about the society in which our children will live, except that whatever it is like it will be widely and enormously different from our own. The lesson I draw for the future from the terrifying miscalculations of today is that we should be a little more modest in our projections for the future and let future generations decide much more how they want the scheme to be expanded, if they so decide and believe such expansion is needed.

I come to the matter of the Bill, the exact method which the Government have chosen to meet the current deficit. It is by confession a stop-gap and when the party opposite leaves office shortly, as it will, it will leave in operation a scheme confessedly in a muddle and on the Statute Book pie in the sky. Even accepting the Government's decision to put a third of this cost on to flat-rate and two-thirds on to graduated, it is both characteristic and alarming to see what actually has been done. The Government have put on to the £18–£30 bracket a graduated contribution without the right to opt out. My right hon. Friend the Member for Kingston-upon-Thames rightly made this area of the Bill the main burden of his speech.

The Government are creating an ungainly system of a sandwich of which the lowest slice is the flat rate with no contracting-out, the top slice is graduated with no contracting-out, and the jam in the middle is subject to the contracting-out provisions of the 1961 Act. The important point in this context is that, taking the scheme as a whole, the contracted-out element is very much less proportionately than it was after my right hon. Friend had introduced his scheme which became operative in 1961. In 1961, for instance, the proportionate key figure contribution of a contracted out individual and one who had not contracted out was 79·9 per cent. From November, that proportion will be, in the case of a £15 a week man, 88 per cent. and, for a £30 a week man, 84 per cent. In other words, the Government have whittled away the rôle of the contracted out element of the occupational schemes in the provisions of pensions.

This is a very alarming precedent, not only because of the right hon. Gentleman's record and what he said on this subject in the past about his general hostility towards the occupational schemes—[HON. MEMBERS: "Oh!"] Yes, indeed.