THE NEW LOOK IN PENSIONS
By NICHOLAS DAVENPORT
MR. RICHARD CROSSMAN and his colleagues are to be congratulated on bringing domestic politics down to earth. So much of the debating at Westminster is about unreal issues—national- isation or denationalisation, for example—that it is refreshing to have a Labour Party committee propounding a national superannuation scheme which makes everyone think in real economic terms. Assuming that the care of retired people of sixty-five or more is a proper charge on the working population, it is of fundamental importance to see that a State superannuation scheme is economically sound and financially honest. Mr. Crossman's committee produces a technical report from a subcommittee under the chairmanship of Professor Richard Titmuss to show that the economic and financial issues have been honestly faced. Mr. Crossman himself frankly told a television audience on Monday night that his scheme was only feasible in an expanding economy with rising productivity. This gives a new and more attractive slant to Labour Party politics. Instead of wasting so much energy on dividing the national cake in equal slices the party can now concentrate on increasing its size. And this cannot be done without bringing home the facts of economic life to both workers and managements.
Here are the fundamental economic facts about this superannuation scheme which very properly makes both contributions and pensions vary with earnings. If a worker pays 3 per cent. of his wages into the national superannuation fund he is for- going that amount of expenditure on immediate consumption for a future benefit on retirement; in other words, he is being made, forcibly, to save. If he tries to offset this by asking for a 3 per cent. rise in wages he is merely provoking an inflation of prices and destroying the soundness of the scheme. If the employer is to contribute 5 per cent. of the worker's wages to the national fund it is equally foolish of him to try to offset this by raising prices. Both he and the worker must meet the extra cost of superannuation by raising productivity, the benefit of which will be allowed to accrue, I imagine, partly to wages and partly to profits (and partly, I hope, to the con- sumer). The fact that Mr. Crossman and his technical advisers contemplate that the surplus of the national superannuation fund will be `boldly invested,' that is, in equity shares of industrial companies, implies that productivity will, in fact, be raised by increased industrial investment. This is one of the most attractive features of the scheme.
* * * Here in passing I must make objection to the proposal in the scheme to make the pension `inflation-proof' after the pensioner has begun to receive it. The raising of productivity is the only sound way to beat inflation and we should stand or fall on it. But if an inflation of prices is brought about through external forces the Government should come to the rescue of the pensioner by a 'national assistance' grant. In other words, the cost of the relief should fall on the Budget and not on the superannuation fund. The Govern- ment is already a contributor to the scheme, paying in 2 per cent. of average community earn- ings, and it seems far better that the budgetary provision should be increased occasionally to protect pensioners in the lowest grades (say £3 to £5 a week)' against an inflation of prices than that the whole scheme should be thrown out of balance. Besides, if there is an inflation the Chan- cellor, as an anti-inflationary precaution, will be raising taxes in any case in order to withdraw purchasing power from the mass of taxpayers, and it is a matter of simple arithmetic that he should raise rather more in order to hand over a little of it to the very hard-pressed pensioners. I beg Mr. Crossman to consider an amendment to his scheme on these lines.
* * The future battle between the parties will no doubt be joined over the question whether national superannuation should be made univer- sally compulsory. Under the present scheme the individual is free to contract out under his own private insurance provided it allows for complete transferability. The Crossman committee pro- poses that everyone on retirement should draw (I) the flat-rate pension of the present National Insurance (thus integrating the new scheme with the old) and (2) a graded pension coming either from a private occupational scheme or from the new national superannuation. But the extreme Left of the party at the coming Labour Party Con- ference will probably not want to be so lenient to private enterprise and will cast acquisitive eyes upon the funds of the private insurance com- panies. Whatever the final result of that political battle I feel sure myself that some co-ordination of the investment policies of the private insurance funds and of the State superannuation fund will be necessary. * * *
Many details of the scheme are debatable, but. I rejoice that it will make for increased national savings which (to quote the report) will 'reduce the amount of our resources spent on immediate consumption, thereby freeing further resources for capital investment.' What a refreshing change to have self-denial preached as an election slogan !
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