Earnings Rule

Oral Answers to Questions — Social Services – in the House of Commons at 12:00 am on 22nd January 1974.

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Photo of Mr Tim Fortescue Mr Tim Fortescue , Liverpool, Garston 12:00 am, 22nd January 1974

asked the Secretary of State for Social Services how he calculates the figure of £130 million given as the cost to the taxpayer of abolishing the earnings rule ; and whether he has calculated the additional amount likely to be collected in income tax in the event of the abolition of the rule.

Photo of Mr Paul Dean Mr Paul Dean , Somerset North

The cost to the National Insurance Fund, including the loss of contribution income, is estimated to be about £135 million a year. The cost would arise mainly from paying pensions to over 200,000 people who, together with their wives, are not yet drawing pension because they still have regular and substantial earnings. Allowance is made for savings on sickness and unemployment benefit which would no longer be paid. On the basis that the pension would be taxed if paid in full on top of earnings the amount likely to be collected in income tax would be about £35 million.

Photo of Mr Tim Fortescue Mr Tim Fortescue , Liverpool, Garston

I regret that I heard very little of that reply, but has my hon. Friend taken into account the income tax not paid by pensioners working for undeclared cash because of the earnings rule? Will he bring his sense of social justice to bear on the indefensible anomaly maintained by successive Governments, whereby pensioners with investment income of any size are not subject to the earnings rule whereas pensioners with earned income are liable to have their pensions reduced?

Photo of Mr Paul Dean Mr Paul Dean , Somerset North

The Government are sympathetic to improving the earnings rule, which has already been improved on two occasions since they came to power. I cannot commit my right hon. Friend or the party to this, but I assure my hon. Friend that his point will be borne in mind along with a great many others.

Photo of Sir Brandon Rhys Williams Sir Brandon Rhys Williams , Kensington South

Does my hon. Friend agree that it is wrong that when a man has earned a pension by a lifetime's record of contributions he should lose his entitlement to it because he is continuing to contribute to the wealth of the nation by remaining at work?

Photo of Mr Paul Dean Mr Paul Dean , Somerset North

My hon. Friend knows that part of the contract in the National Insurance Scheme is receipt of pension for people who are not working. Were we to pay pensions to people who are able to go on working—to their credit—full time it would mean less for the very old, the disabled and the widows.

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

asked the Secretary of State for Social Services whether he will facilitate staged retirement by, among other measures, reducing the age at which the earnings rule ceases to apply and also by making more flexible the age at which people wishing to do so may draw their national insurance pensions at the time of the annual pension review.

Photo of Mr William Worsley Mr William Worsley , Chelsea

asked the Secretary of State for Social Services what encouragement his Department is giving to the concept of staged retirement ; and whether he will make a statement.

Photo of Mr Paul Dean Mr Paul Dean , Somerset North

The present arrangements already allow some flexibility in how an individual arranges his retirement. Any changes of the kind my hon. Friends have in mind, in so far as they would involve reducing the minimum pension age or the age at which the earnings rule ceased to apply, would need large resources, and I am bound to say they do not seem to me to command first priority.

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

Will my hon. Friend bear in mind the very different demands of different occupations, let alone the very different health patterns of individuals, of which the present system takes so little account? Will he try hard to make the system fit the individual rather than the individual fit the system.

Photo of Mr Paul Dean Mr Paul Dean , Somerset North

I understand my hon. Friend's point. I think she will agree that the invalidity benefit which is now available within the National Insurance Scheme is a direct response to the need for a long-term benefit for those who have to give up work owing to ill-health before normal retirement age.

Photo of Mr William Worsley Mr William Worsley , Chelsea

I agree that progress in this direction could not be fast. Does my hon. Friend accept that there should be some acceptance by the Government that such a concept should be part of the Government's pension policy?

Photo of Mr Paul Dean Mr Paul Dean , Somerset North

I can assure my hon. Friend that that will be considered. Indeed, there is some move in this direction with the extra 25p for the over 80s. I think that my hon. Friend will agree that occupational pensions schemes will fulfil a valuable function, in that they can be much more flexible about the age of retirement than is possible with a large State scheme covering many millions of people.