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Old-Age Pensions (Estimated Cost Of Extension)

Volume 389: debated on Wednesday 19 May 1943

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asked the Chancellor of the Exchequer whether he will give an estimate of the additional cost of paying Old Age Pensions of 30s., with no conditions and without regard to insurance eligibility, to all men over 65 and all women over 60 years of age or, alternatively, to all persons of either sex over 60 years of age; and what the additional cost would represent expressed as a rate of contribution spread equally over the whole working population, including the Armed Forces, and as a rate of Income Tax, respectively?

To pay pensions of 30s. a week to all men of 65 and all women of 60 with no conditions and without regard to insurance qualifications would cost about £450,000,000 a year, and to pay such pensions to all persons of 60 (men and women alike) would cost £530,000,000. Existing services (old age pensions, including pensions to widows of 60 and over, supplementary pensions, &c.), now cost about £150,000,000 a year. The additional cost of the former arrangement would therefore be £300,000,000 a year and of the latter £380,000,000. The position in regard to contributions under the existing scheme would also be affected. If uninsured persons were to be given old age pensions on the same footing as the insured, it would be impossible to collect old age pension contributions from insured persons only. Either the whole population of working age would have to contribute, or there would be no contributions. In order to arrive therefore at the amount which would have to be found by contributions if the new Arrangements were to be contributory or by taxation if they were to be non-contributory, it is necessary to add the contributions for old age pensions under the existing scheme which would in any case be discontinued. These amount to about £30,000,000. The sums to be found by contribution or taxation would thus be £330,000,000 if the pension ages were 65 for men and 60 for women, and £410,000,000 if the pension age were 60 for both sexes.As regards the cost in contributions, £330,000,000, spread over all persons of 16 and upwards and under pension age, including members of the Armed Forces, but excluding housewives not gainfully occupied would be equivalent to about 5s. 6d. per head a week, and £410,000,000 similarly spread (except of course that men would only pay up to 60 instead of up to 65 if their pension age were reduced to 60) would be equivalent to about 7s. od. per head a week. These figures relate to the present time, and would increase with the growing weight of the population of pension age. Moreover, since contributions could not be levied from those who are unemployed, they would have to be increased if the level of employment declined. As regards Income Tax, 1s. on the standard rate of tax may be regarded as equivalent to an annual revenue of about £100,000,000. This figure is related to the present taxable national income, and would rise or fall with any increase or decrease in the taxable national income. It cannot, however, be assumed that the rate of Income Tax can be indefinitely increased without affecting the yield. While, therefore, the costs I have given are equivalent to about 3s. 3d. and 4s. 1d. on the Income Tax, it must not be assumed that it would be practicable to raise the present standard rate of tax by these amounts, or that to do so would result in increasing the revenue by £330,000,000 or £410,000,000.

asked the Chancellor of the Exchequer whether he will give an estimate of the saving in the cost of paying Old Age Pensions of 30s. to all men over 65 and all women over 60 years of age or alternatively, to all persons of either sex over 60 years of age, if the pensions were made conditional on retirement from gainful occupation?

The numbers of persons of pension age who remain at work under present conditions cannot be regarded as any guide to the numbers who would remain at work if they knew that they would get no pension as long as they went on working, but 30s. a week if they gave up work. The matter is therefore one for conjecture, but clearly 30s. a week would be a very strong inducement to give up work, and it seems likely that with that rate of pension the effect of the retirement condition would be much more to reduce the number of elderly people at work than to reduce the numbers qualified for Old Age Pensions. This result would be more likely if the present pension ages were retained than if they were reduced, and in this event the retirement condition would not result in any substantial saving. If the pension age for men were reduced to 60, there might be a substantial number of men who would remain at work after that age, despite the inducement to retire. By way of illustration rather than forecast, it may be said that if half the men between 60 and 65 remained at work, the retirement condition would reduce by about £40,000,000 a year the cost of pensioning men at 30s. a week from the age of 60.