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Rates Of Basic Scheme Benefits

Volume 888: debated on Wednesday 12 March 1975

The text on this page has been created from Hansard archive content, it may contain typographical errors.

Lords amendment : No. 1, in page 2, line 17, leave out from "substituted" to "paragraphs" in line 23 and insert "" £20 "and at the end there shall be inserted:

" With effect from such day as may be prescribed in the week containing 6th April in a year mentioned in the first column below, this subsection shall have effect with the substitution for "£20" of the amount specified in relation to that year in the second column below—

1977"£" "
(4) In'".

7.58 p.m.

The Minister of State, Department of Health and Social Security
(Mr. Brian O'Malley)

I beg to move, That this House does agree with the Lords in the said amendment.

I understand that it will be for the convenience of the House to discuss at the same time Lords Amendment No. 3.

These amendments deal with the vexed subject of the earnings rule on which we have had vigorous and controversial debates in recent weeks. I think that this evening we may have reached tranquillity, because I cannot believe that the Opposition would be able so to contort themselves as to do anything but agree with the recommendation that we should accept the amendment made in another place.

The amendment puts into proper form the relaxation of the earnings rule which was agreed to when the Bill was reported back to the House from Standing Committee. It clarifies the wording of subsection (3). We are doing nothing new. All that we are doing is to put into proper legal form the intention of the House expressed in the vote some weeks ago. I understand the difficulty of drafting amendments in proper legal language. There were serious defects in the drafting of the amendment which was made then.

8.0 p.m.

The Government do not propose to reopen the argument about whether the changes proposed, and now embodied in the Bill, are justifiable in present economic circumstances. The Bill, as amended, will achieve the objectives of the original amendment. The earnings limit below which retirement pensions are not affected will be increased from £13 to £20 from April this year ; to £35 from April 1976 ; and to £50 from April 1977. That was clearly the wish of the House. I ask the House, in making a judgment on that statement, to look back at the Divisions when we last considered the subject.

When the Bill went to the other place it referred to the earnings limit being changed

"in the year following the coming into force of the said Act of 1973"—

the Social Security Act. But there is no single date on which that Act comes into force. The important contribution provisions of the Act will come into force next month, but other provisions have been in force since various dates from July 1973. The Bill, as amended in the other place, leaves no room for doubt about when the various phases of relaxation of the earnings rule should come into operation.

Another important consideration is that the Bill would have left a void after the £50 earnings limit had operated for one year. Some hon. Members might say that that is the situation they wish, although the House decisively rejected an amendment which would have had the effect of bringing the earnings rule to an end even in the year 1980.

It is relevant to consider the reservations expressed by the hon. Member for Wells (Mr. Boscawen) in Standing Committee, where he frankly recognised the economic and financial difficulties of the country. He believes, as I believe, that there is a case to be made for a progressive relaxation of the earnings rule as financial resources become available, but at no time did the Opposition Front Bench take the view that it would be economically desirable to abolish the earnings rule completely as from 1978.

It was clearly not the intention of the House that there should be a void. It would have led to odd consequences and disadvantages for prospective pensioners. I said in Committee more than once that the retirement condition and the earnings rule ran hand in hand, and that if the earnings rule were removed the retirement condition would automatically need removal as well.

If hon. Members did not accept the amendment made in another place, there would be odd consequences which they may not have had the opportunity to consider. Those consequences arise largely because the amendment derives from the drafting of the existing legislation. If there were no earnings limit, it would no longer be possible for a person to be treated as retired if his future earnings were expected to be below the amount of that limit, as happens now. Instead, he would have to satisfy the remaining parts of the retirement condition and show that the work he intended to do would be only "occasional "or

" inconsiderable in extent "


"otherwise not inconsistent with retirement "

That would bear most hardly on the low earner. It would be particularly inequitable at a time when existing pensioners were being completely freed from any earnings limit.

The Bill, as amended, will allow the £50 earnings limit to continue after its introduction in April 1977 until amended under the regulation-making powers which already exist. But, for technical reasons, these powers could not be used to provide for an earnings limit if none already existed.

The power conferred by the amendment which we moved in the other place, to prescribe a day in a particular week— the first week of the income tax year— from which the second and third stages of the relaxation of the earnings rule are to be brought in, will simply enable us to get over the technical difficulties, arising out of the pay days that there are for different benefits, which might otherwise have prevented the relaxation from reaching all the beneficiaries concerned in the same week.

On the first occasion, in April of this year, there are obvious reasons for ensuring, as the amendment does, that the relaxed rule will start to operate at the same time as the increased rates provided by the Bill will become payable— that is, from the beginning of the next financial year. That is clearly what hon. Members had in mind when the Bill was before us earlier.

The amendment with which I am asking the House to concur thus tidies up subsection (3) and removes the ambiguities which were in the Bill when it left us. Therefore, I hope that the amendment will commend itself to the House.

Amendment No. 3 is beneficial. It extends to wives residing with industrial injuries disablement pensioners who are entitled to unemployability supplement the relaxed earnings rule which is provided under subsection (3) of Clause 1 for the wives of retirement and invalidity pensioners.

It is desirable that the wives of unemployability supplement beneficiaries under the industrial injuries scheme should continue to be treated in the same way as the wives of invalidity pensioners under the national insurance scheme.

The amendments arise, as the Minister said, from the proceedings in the House a short time ago when the Government suffered a notable defeat on the earnings rule. The consequence was a worthwhile relaxation in the earnings rule for retirement pensioners and the wives of invalidity pensioners.

One of the things which the Government are now doing, which we welcome, is to put right an oversight in the previous proceedings, by extending the relaxation to the wives of industrial injuries disablement pensioners who are entitled to unemployability supplement.

I accept that it is the Government's intention in Amendment No. 1 to tidy up the wording of the amendment drafted by my hon. Friend the Member for Kensington (Sir B. Rhys Williams), which was carried against the Government. Lord Wells-Pestell said on behalf of the Government in the other place:
" I want to make it perfectly clear…that this Amendment is not designed in any way to reverse or to modify the clear intention of those who supported the relaxation."— [Official Report, House of Lords, 27th February 1975 Vol. 357, c. 998.]
I accept the Government's good faith in that they were trying to tidy up the drafting to give effect to what they believed the House intended. Unlike, for instance, the other defeat which they suffered on the question of disabled housewives, they are trying to go back on the decision of this House and in practice avoid the consequences of the defeat they suffered on that occasion. It was the genuine belief of Lord Wells-Pestell that he was simply meeting the case of what had been carried in this House.

There is certainly no need for me to go over the general case for the relaxation of the earnings rule. It was accepted in the House on a previous occasion that it was a very much resented and unfair rule in the way in which it bore on retirement pensioners and that a relaxation of it, moving towards virtual abolition, was a very important encouragement to retired people who want and need to keep themselves in some sort of worthwhile work.

However, I should like to look at the tidying up which is being carried out. because the Minister has made it clear— and the amendment makes it clear— that the amendment is designed to ease the rule to £50 a week by 1977. That, I accept, is what the House believed it had carried on the previous occasion. On that occasion we moved another amendment to abolish the earnings rule completely, which was defeated because the Labour Members who had supported the Opposition on the first Division did not support us on the second.

But what have we actually carried, and why is it that the Government are anxious to tidy up what was carried against them in the House? Lord Wells-Pestell drew attention to the most important unexpected consequence of what we had done when he said :
"The technicality to which I referred at Second Reading was in relation to what was to happen after 1977. As the clause came from the other place "—
meaning this House—
" it would have meant that the earnings rule would have finished completely at that period."
The noble Lord spelled it out even more clearly when he said:
" As drafted, the Bill provides for no earnings limit once the £50 limit has been in operation for a year. The sponsors of the Amendment to the original Bill clearly did not intend the earnings rule to disappear in 1978 ; if they bad so intended, there would have been little point in their voting for the subsequent Amendment to abolish the earnings rule by 1980 or in their resisting the later Government Amendment at Report stage in another place to delete this provision from the Bill. Nevertheless, the Bill as it stands would mean that once the £50 had applied for a year there would be no figure by reference to which the earnings rule could operate. This would not only produce a result not intended when the provision was passed in another place, but would also have a very odd effect on the retirement condition."—[Official Report, House of Lords, 27th February 1975 ; Vol. 357, c. 997–9.]

8.15 p.m.

What emerges from that is this. One thing that we must concede— as I think my hon. Friend the Member for Kensington would concede— is that we did not realise that we had, in fact, abolished the earnings rule when we carried that amendment. Certainly the noble Lord who spoke for the Government and the Minister who has spoken today are quite correct. We did not realise the extent of the success that we had achieved, and we believed that it was necessary to go on to try to carry the second amendment. At that stage the Minister of State did not realise that what he had lost carried with it the consequences of the abolition of the earnings rule. But where the noble Lord and the Minister, if they tried to follow that line, would be wrong is in thinking that those of us on the Opposition side of the House who voted in both Divisions on that occasion intended to try to bring the earnings rule completely to an end.

It is our firm commitment to move towards total abolition of the rule. The Government's argument is that the votes on the previous occasion showed that this was not really the intention. Of course, it was the Labour Members who helped the Conservative Party to defeat the Government on the first amendment who did not vote in the second Division. They are not present now to say why they did not vote then. Possibly if they were present they might say that they decided to vote once against their Government on a three-line Whip and that that was enough for one evening. Perhaps recalling an occasion when dogs and licences were referred to at a party meeting, they decided that they had better not push very much further. I suspect that many of them thought that by what they had carried they produced a consequence that by 1977 the Government would have to abolish the rule anyway and that they could not go any further.

However, the Government are coming back now realising that on the first occasion we had abolished the rule. Now they are trying to reduce what we achieved to a mere easing of the rule, which will be little in advance of inflation at the present rate in 1977.

We are taking this opportunity of demonstrating that we voted for both amendments on the previous occasion with the consequence of the abolition of the earnings rule. It was our intention to press upon the Government the abolition of the rule. It is the firm commitment of the Conservative Party to move towards the disappearance of the earnings rule from our retirement pension scheme. As the Minister will recall from our speeches in the prolonged debates, we accepted that as a consequence the retirement conditon had to go and we were moving towards a better old-age pension system.

The problems to which the Minister has referred, which would give some detailed difficulty in the abolition of the earnings rule if nothing more were done by 1978, could easily be put right by 1978 so that the earnings rule and the retirement rule could vanish together.

What change has taken place between the speech of the hon. Member for Wells (Mr. Boscawen) in Committee and the hon. Gentleman's speech on Report? What further change has taken place for the hon. Gentleman to undermine completely and dissent from his hon. Friend's remark? The hon. Member for Wells is on record as saying in Committee

" I could not recommend to my hon. Friends in the light of the exising economic circumstances that we go as far as Amendment No. 4 "—
that is the amendment which was eventually carried—
" We cannot ignore the effect and the cost of what is involved, virtually straight away for the first £20 and again next year with the next £35."— [Official Report, Standing Committee B, 5th December 1974 ; c. 62.]
Now the hon. Gentleman is wanting to go even further. What has changed so that he is now completely dissenting from the remarks of his hon. Friend the Member for Wells and making him look very silly?

Not at all. I am drawing the Minister into going back into the arguments that he used so unsuccessfully three or four weeks ago when he resisted this amendment. We debated those remarks then. They are taken from one portion of our Committee proceedings. It was then followed by a vote for the two amendments on the Floor of the House subsequently. The Minister will recall clearly the proceedings then, and that there was, indeed, a majority of the Committee who clearly disagreed with the Government. There was a period of delay and open discussion in the Committee before we agreed on which amendments we wanted to carry. But within half an hour of that remark being made, a clear majority of the Committee rejected the Minister's remarks about the amendments and carried both amendments. He was unable to use either that argument or any other to persuade the House to change its mind on Report. It is no good the Minister using the one debating point he had on the last occasion. He has lost that. The amendment shows the extent of what he has lost.

For our part, we are delighted to find how much we have achieved and we shall reinforce our commitment to move towards total abolition of the rule and not allow the Government to believe that they are getting away with a toning down to an easing of the rule in the coming years.

The Minister gave no indication about what the Government's intentions are. Never does he give any commitment about the abolition of the rule— except when it is hedged about with so many qualifications that it clearly comes within the dim and distant future. He is clearly trying to divert the House away from abolition and just to ease it to the lowest amount that he is able to carry in the House.

The Minister has referred to cost. We are about to attempt to reject this Lord's amendment because we prefer the consequences which flow from my hon. Friend's amendment. Therefore, I shall deal with cost because otherwise, were we to be successful on this occasion, we would risk the Chancellor of the Exchequer charging in once more, leaping to his feet in the style of a bold and somewhat over-excited rhinoceros, and ranting to us about the figures involved and the enormity of what we have done— taking his defeat with the extremely bad grace and style he did on the last occasion.

In another place it has been stated that the figures involved are: for 1975–76 £45 million, 1976–77 £85 million, 1977–78 £110 million. Those are the Government's estimates. All that cost falls on the National Insurance Fund, which is grossly in surplus at present because of the graduated contributions from ever-inflating salaries and wages. Indeed, the Exchequer contribution from the Chancellor's own revenues to the cost of this is exceeded by the tax revenue he is likely to get back. There is, of course, a net cost to public funds even against the National Insurance Fund.

We challenged the Government on those figures in Committee and in debate on Report. When the Treasury Minister defended the figures he made a pathetic attempt to explain the background to them. He was unable to justify them to the full satisfaction of hon. Members on both sides of the House. Those figures rise to £110 million in 1978.

On the last occasion we discussed this matter—when the Chancellor got excited about the £110 million— the very next day the Government brought forward the Prices Bill authorising £1,000 million to be spent on indiscriminate food subsidies. By chance, we find ourselves following the Prices Bill today. It is absolute humbug for the Government to lecture us on priorities. Their expenditure is spendthrift and indiscriminate in some directions and fairly miserly in this direction. We do not regret what we did before and we shall do it again if we get the opportunity.

We wish to persuade the House to reject the Lords Amendment so that the Bill will remain as we carried it in this House a few weeks ago.

I should like to correct the hon. Gentleman on one point. He quoted the figures of £45 million, £85 million and £110 million as being the cost to the National Insurance Fund. I hope he will accept that that is not the case and that he is incorrect. The figures he quoted are figures less tax, and the effect on the National Insurance Fund is shown by the higher figures of £60 million, £110 million and £145 million.

The £110 million is the net cost in terms of public expenditure to the National Insurance Fund less the tax returned. The final global figure is £110 million, the bulk of which will fall on the National Insurance Fund.

The £60 million, £110 million and £145 million fall on the National Insurance Fund. It is true that there will be clawback through the tax system, but that does not assist the National Insurance Fund and, therefore, we have to use the higher figure in estimating the cost on that fund.

I do not wish to speak at length, because this is a matter which has been picked over extensively.

Two points need to be made. I am rather surprised that the Minister of State has raised the cost argument again. Indeed, in his last intervention he sought to go over a lot of dry detail. I am sure that he is speaking in good faith, according to his lights ; but his lights seem to be a quivering lantern held before him by the blindest elements in the Treasury. He wants to know why my hon. Friends were convinced that they should support my amendment.

I shall put the argument to him which I am sure he will wish to use when explaining to a wider audience why the Government decided to maintain the amendment in the spirit of the Committee's amendment. It cannot cost the nation more to encourage people to go into productive work than to keep them in idleness, probably running down their savings and contributing nothing.

If the Minister will lift his eyes to the national picture and take his mind from purely departmental considerations he will realise that it is in the national interest to encourage people to continue working if they are capable of doing so after retirement. This argument is so simple that I am surprised that it has not reached the Minister. I hope that he will reflect on it in future.

Unfortunately, there has to be a future with the earnings rule because we have not had a commitment from the Government benches about the eventual abolition of the rule. The Government have had their opportunity. They have not only failed to seize it ; they have actually rejected it. This is a matter of surprise and disappointment to me. I drafted two amendments which were tabled in Committee. One was a talking point: it dealt with the timetable of gradual abolition. The other was the one I expected the Government to accept. suggesting total abolition in 1980.

That date is beyond any conceivable General Election date, and I thought that the Government's calculations would be that it would be easier to accept abolition then, when it did not oblige them to do anything in the immediate future. than a phased withdrawal of the rule beginning at once. I have had to give a great deal of thought to try to understand why the Government, and Labour Members generally, preferred the timetable which led only to raising the limit to £50 a week and did not wish to commit themselves to total abolition.

I am sorry to sound a jarring note here, but it is necessary to interpret the Government's mind. They are not sincerely dedicated to abolishing the earnings rule altogether. They prefer to leave it at a cut-off point somewhere in the neighbourhood of the national average wage, so that the better-paid and professional people will still incur the earnings rule after the age of 60 in the case of women and 65 in the case of men, as a sort of new kind of surtax.

This fits in with the thinking of Labour Members. I regret this bitterly, because it is all part of the class war mentality which is ruining the country, for which the Labour Party are largely to blame. In the way they have handled this issue we see the whole thing again in an unpleasant manifestation. The public will not realise the implications of this until the earnings rule rises to £50 ; but then if the Government have their way it will stay there. That has been made clear. This is deeply regrettable and we must protest about it.

I warn Labour Members that the campaign will go on and their thinking will have to be exposed to the public. This is not only because it is bitterly unfair and wrong but because while it remains it seems that we cannot readily move towards a unisex basis for the flat-rate pension or to the ideal of the optional retirement age, which is obviously the most humane way of dealing with the fact that not everyone is ready to retire at 60 in the case of women and 65 in the case of men.

This Procrustean bed of a fixed retirement age is something which must be

Division No. 144.]AYES[8.28 p.m.
Allaun, FrankHamilton, W. W. (Central Fife)Phipps, Dr Colin
Anderson, DonaldHarper, JosephPrescott, John
Armstrong, ErnestHarrison, Walter (Wakefield)Roderick, Caerwyn
Atkinson, NormanHunter, AdamRodgers, George (Chorley)
Bates, AlfJackson, Colin (Brighouse)Rooker, J. W.
Bean, R. E.Janner, GrevilleRoper, John
Bishop, E. S.Jones, Alec (Rhondda)Rose, Paul B.
Blenkinsop, ArthurKerr, RussellSheldon, Robert (Ashton-u-Lyne)
Boardman, H.Leadbitter, TedShort, Mrs Renée (Wolv NE)
Boothroyd, Miss BettyLoyden, EddieSilverman, Julius
Brown, Hugh D. (Provan)Lyons, Edward (Bradford W)Skinner, Dennis
Brown, Robert C. (Newcastle W)McElhone, FrankSmall, William
Campbell, IanMackenzie, GregorSmith, John (N Lanarkshire)
Canavan, DennisMcMillan, Tom (Glasgow C)Spriggs, Leslie
Clemilson, IvorMcNamara KevinStewart, Rt Hon M. (Fulham)
Coleman, DonaldMadden, MaxStoddart, David
Daly-ell, TarnMagee BryanSwain, Thomas
Deakins, EricMaguire, Frank (Fermanagh)Taylor, Mrs Ann (Bolton W)
Dempsey, JamesMarks, KennethThomas. Ron (Bristol NW)
Doig, PeterMarshall, Dr Edmund (Goole)Thome, Stan (Preston South)
Dormand, J. D.Mellish, Rt Hon RobertTinn, James
Duffy, A. E. P.Millan, BruceUrwin, T. W.
Eadie, AlexMiller, Mrs Millie (Ilford N)Walnwright, Edwin (Dearne V)
Ellis, John (Brigg & Scun)Morris, Alfred (Wythenshawe)Walker, Terry (Kingswood)
Evans, loan (Aberdare)Morris, Charles R. (Openshaw)Weetch, Ken
Evans, John (Newton)Moyle, RolandWeitzman, David
Ewing, Harry (Stirling)Murray, Rt Hon Ronald KingWhite, Frank R. (Bury)
Faulds, AndrewNewens. StanleyWhite, James (Pollok)
Fernyhough, Rt Hon E.Noble, MikeWilson, Alexander (Hamilton)
Fitch, Alan (Wigan)O'Halloran, MichaelWise, Mrs Audrey
George, BruceO'Malley, Rt Hon BrianWoodall, Alec
Gould, BryanOrme, Rt Hon StanleyYoung, David (Bolton E)
Gourlay, HarryOvenden, John
Graham, TedPalmer, ArthurTELLERS FOR THE AYES:
Grant. George (Morpeth)Pavitt, LaurieMr. James A. Dunn and Mr. Michael Cocks.
Grocott, BrucePendry, Tom
Hamilton, James (Bothwell)

Arnold, TomFookes, Miss JanetMayhew, Patrick
Atkins, Rt Hon H. (Spelthorne)Fowler, Norman (Sutton C'f'd)Miller, Hal (Bromsgrovs)
Bain, Mrs MargaretGilmour, Rt Hon Ian (Chesham)Miscampbell, Norman
Benyon, W.Gray, HamishMoate, Roger
Berry, Hon AnthonyGrylls MichaelMolyneaux, James
Body, RichardHamilton, Michael (Salisbury)Montgomery, Fergus
Boscawen, Hon. RobertHannam, JohnMorrison, Charles (Devizes)
Brittan, LeonHawkins, PaulNelson, Anthony
Brotherton, MichaelHenderson, DouglasNeubert, Michael
Buchanan-Smith, AlickHicks, RobertNewton, Tony
Budgen, NickHiggins, Terence L.Page, Rt Hon R. Graham (Crosby)
Clark, Alan (Plymouth, Sutton)Howells, Geraint (Cardigan)Penhaligon, David
Clarke, Kenneth (Rushcliffe)Hutchison, Michael ClarkPowell, Rt Hon J. Enoch
Cope, JohnJames, DavidRees-Davies, W. R
Crowder, F. P.Kilfedder, JamesReid, George
Dean, Paul (N Somerset)King, Evelyn (South Dorset)Renton, Tim (Mid-Sussex)
Douglas-Hamilton, Lord JamesKnight, Mrs JillRoss, Stephen (Isle of Wight)
Dunlop, JohnKnox, DavidSainsbury, Tim
Evans, Gwynlor (Carmarthen)Lane, DavidShepherd, Colin
Ewing, Mrs Winifred (Moray)Lawrence, IvanSims, Roger
Fairgrieve, RussellLe Marchant, SpencerSpeed, Keith
Fisher, Sir NigelMacmillan, Rt Hon M. (Farnham)Stokes, John
Fletcher-Cooke, CharlesMates, MichaelStradling Thomas, J.

changed. I hope that the Government are bending their mind to it. They have not shown any evidence that they are. There is room for fresh thinking. The Government have not begun it. Parliament will have to return to this subject.

Question put, 'That this House doth agree with the Lords in the said amendment —

The House divided : Ayes 106, Noes 77.

Taylor, Teddy (Cathcart)Weatherill, BernardTELLERS FOR THE NOES:
Tebbit, NormanWelsh, AndrewMr. Richard Luce and Mr. Fred Silvester.
Thomas, Dafydd (Merioneth)Winterton, Nicholas
Thomas. Rt Hon P. (Hendon S)Young, Sir G. (Ealing, Acton)

Question accordingly agreed to.