NATIONAL INSURANCE

(EARNINGS)

The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Mrs. Margaret Thatcher)

I beg to move.

That the National Insurance (Earnings) Regulations, 1963, a draft of which was laid before this House on 19th March, be approved.

The draft Regulations were laid and submitted by Niall Macphersonmy right hon. Friend under powers conferred upon him by Section 2 of the National Insurance Act, 1956. They have been approved in the usual way by the National Insurance Advisory Committee in the terms contained in the House of Commons Paper No. 163 which accompanies the present Regulations. The purpose of the Regulations is to raise the amounts which can be earned without abatement of benefit by those in receipt of the National Insurance benefits which are subject to the earnings rule.

I have six brief points to make. My first point concerns the numbers affected by the operation of the earnings rules. The data which we have on this point come from a survey conducted in July, 1961. Of the 5½ million retirement [column 1228]pensioners who were then receiving benefit, 1,300,000 came within the scope of the earnings rules. Of that 1,300,000, some 52,000 had their benefits reduced by the operation of the earnings rules. There were 321,000 widow beneficiaries, of whom some 54,000 had their benefits reduced by the operation of the then earnings limit. There were then 148,000 widowed mothers in receipt of widowed mother's allowance, of whom 21,000 had the personal part of the allowance reduced by the operation of the earnings rule.

My second point concerns the proposed new limits. The draft Regulations propose to increase the present limit for retirement pensioners and widow pensioners from £3 10s. to £4 5s. and the existing limit for widowed mother's allowance from £5 to £6.

These figures have been derived in the following way. It is now just over three years since the last increase in earnings limits was effected. In that three-year period, average earnings of both men and women workers have risen considerably. The relevant figures show that during that period, the average earnings for men have increased by 21 per cent. and for women by 17½ per cent.

Applying those percentages to the existing earnings limit would warrant an increase in the £3 10s. limit of 14s. 6d. and applying the figure for women's average earnings to the £5 limit, it would warrant an increase of 17s. 6d. These increases which I have given have been rounded up to the nearest 5s., producing the present draft proposals of an increase of 15s. up to £4 5s. and of £1 up to £6 for the new limits.

My third point concerns the proposed operative date. Subject to the agreement of the House, we propose to bring the Regulations into force as from 27th May this year. This is the same date as the increases in benefits of the rate of 17 to 18 per cent. are due to take effect. This will be for both the convenience of beneficiaries and in the interest of sensible administration.

My fourth point concerns the cost of the Regulations. In a full year, this will amount to a charge of £1¾ million on the National Insurance Fund. My fifth point concerns the scale adjustments made immediately above the earnings limits. No changes are proposed in the [column 1229]present rate of scale adjustments. That is to say, the first £1 above the new earnings limits will be treated in exactly the same way as the first £1 is treated above the existing earnings limit. Thus, for every extra shilling earned, the pension will be reduced by 6d. No change is proposed in this scale of adjustment.

My sixth point concerns the limit of the powers conferred upon my right hon. Friend. This is the third time that he has exercised the powers conferred by the Act. He is limited to altering the earnings rules and he cannot, by virtue of the power contained in the Act, make any fundamental change in the nature of those rules. I trust that these welcome easements in the earnings rule will find favour in the House and that the House will think fit to approve the Regulations.

Mr. G. R. Mitchison (Kettering)

We are all indebted to the Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance for her clear and succinct statement of a number of points of which I lost count. I have a great deal of sympathy with widows, for two reasons. The first is that they are widows and the second is that they are called upon in this modern age to understand the Regulations about their own pensions. That is too much to expect of these ladies.

As the hon. Lady has pointed out, we are considering something which is strictly within the limits of the Minister's statutory powers. The Report of the National Insurance Advisory Committee, some of which the hon. Lady summarised for our benefit, points out, first, that as in all other cases when the Minister has exercised these powers, the Advisory Committee has had a considerable number of critical representations about them, and secondly, that it has accepted them as a reasonable adjustment taking account of the upward movements in earnings over the last three and a half years.

To deal with that last point first, my trouble about these matters is that nowadays earnings—and prices, too, for that matter—move rapidly. Apparently what we are considering are the figures for October, 1962, because those are the figures which the Advisory Committee mentioned in its Report. [column 1230]

But since then a number of things have happened—a very hard winter, for instance—and we have just been listening to the debate on the Budget, the aim of which is expansion without inflation. I do not know quite what is to happen to the earnings figures in the coming months. Now we are, perhaps necessarily if we are to do it this way, some six months or so behind the last statistics. Of course, as long as we go on trying to adjust the figures to earnings, then the statistical deficiency of our arrangement results in our always having to be six months behind the true figures because so far—indeed, ever since the Government have been in power and, if they like to say so, before that—the tendency has always been upwards. Notwithstanding the caution of expansion without inflation in the Budget, I wish that we were able either to do this in some different way or somehow or other to get more up-to-date statistics.

We are, of course, considering what the figures ought to be under the present arrangements and, as the Advisory Committee explained, this is merely an adjustment because of the rise in earnings. But one wonders whether this is the right way of dealing with the figures themselves. We could get a different results if we looked at the figures from an up-to-date point of view.

If, for instance, we were prepared to consider the earnings in question over a rather wider period of time than at present, then we might arrive at different figures, and the system of averaging earnings, which has been suggested from time to time, is for that reason relevant to the right figure which we might wish to select under the present system.

I mention the matter because it seems to me that one of the main practical difficulties affecting this business of limiting the earning of wages is that when one limits them one must limit them in relation to earnings for such a short period, notwithstanding factors such as seasonal earnings, which have been mentioned time and time again, certainly in debate and in some of the reports of the Advisory Committee. The point is relevant and no doubt the Minister is tied now simply to suggesting the figures in these draft Regulations. But when he is doing so, should he not also consider the possibility of spreading it over a wider period, which would mean giving better justice to many of the people [column 1231]concerned and arriving at a figure which might not necessarily be the same as that which he asks us to accept now?

In the Report of the Advisory Committee I find at the end a sentence which seems to occur at the end of all reports on this matter by the Committee. It relates to one member of the Committee who consistently dissents. He is easily identifiable because there is a reference here to a report on the question of the earnings limit for benefit, and that report contains a dissenting note from Professor Titmus who is still a member of the Committee and by a lady who is not longer a member. It is, therefore, perfectly clear who the dissenting member is. His opinion on matters of this sort must surely carry considerable weight. All I want to say about what he said in dissenting on that occasion and has repeated by way of dissent in each successive report on this matter, including the present, is that he put into words more eloquent than mine the confusion about wives and widows, and particularly widows.

Surely we are all sufficiently interested in our own constituents and constituency affairs to know how exceedingly difficult it is in practice to find out what a widow is entitled to and, having found it out, to justify it as between one widow and another. I cannot go into it all tonight, of course, but it makes one wonder whether a system and a Statutory Instrument which has that result are the right way of dealing with the matter. So far as this Instrument goes, a considerable change could be made if a somewhat more astronomical figure were suggested as the limit of the earnings. That was raised in one of our debates on this very matter when what is now the 1963 Act was before the House.

It was raised again in the very interesting debate on 25th January, 1963, on a Bill introduced by my hon. Friend the Member for Brixton (Mr. Lipton) which related exactly to this matter. I believe that we are approaching the time when the right view of this is that expressed in the course of that debate by my hon. Friend the Member for Sowerby (Mr. Houghton), who described [column 1232]a widow's benefit as compensation for the loss of the husband's earnings. He said:

“That is what the widow's benefit is for; it is a replacement, inadequate though it may be, of the earnings of the husband.” —[Official Report, 25th January, 1963; Vol. 670, c. 520.]

If the widow's benefit were regarded in that light, the figures we have to consider today might be different and somewhat larger.

Meanwhile, since this is an increase, and an increase on the present system, we can hardly in a debate on a single Statutory Instrument go any wider than I have done, or consider the broader question of whether these provisions taken generally are still up to date and are still adequate. It is our opinion on this side of the House that the whole of this matter needs reconsideration. I repeat that I cannot go into it today, and I end by asking for the sympathy of the House in this respect.

For a short period I used to devote some attention to the divine confusion which science investigates. I am now, I suppose, partly called upon to investigate the human confusion of the provisions which we make for the elderly and the widows. I find it just as difficult and in some ways the language is even more obscure. I cordially sympathise with the widows who have to try to understand these things and I point out that the complication of these Regulations and the constant changes called for by the system under which they are made and the fact that the changes are continually a little out of date are just the sort of things which makes people, many of them of advanced years and having lost their earning husband, pretty sore about the whole business. They do not understand that and they draw comparisons, often justified comparisons, between one and another and they resent the whole business. It is not a good foundation for legislation that that should be the case.

Question put and agreed to.

Resolved.

That the National Insurance (Earnings) Regulations, 1963, a draft of which was laid before this House on 19th March, be approved.