THE EARNINGS RULE
A PARADOX of social policy is that the Beveridge
A
report was so simple in its intention and the National Insurance Acts are so complicated in their administra- tion. The latest example of this complexity is the 'earnings rule' on which the National Insurance Advisory Committee has just reported; it is an example worthy of consideration because the legal niceties conceal a minor scandal.
Under the old-age pension schemes, until 1948, men over sixty-five (sixty for women) got a pension regardless of their circumstances. After 1948 the old-age pension was changed into a 'retirement benefit'; before you can draw it, even though you have paid for it, you have to retire and you are now only allowed to earn £2 a week without your pension falling shilling for shilling with your earnings. The majority of the Advisory Committee now recommend that this limit be raised to £2 10s., with a complicated sliding scale of penalties for earning. '11'1 grounds for this retirement principle are laid down in !tic Beveridge Report. The first is financial. The present Nil ment pensions cost more than people paid in, and so sorts of devices are used to keep them fiom being paid 01 The best, from this point of view, is the retirement provisi,°1/' because manifestly if pebple are earning they are not starvs: The second reason for the restriction, implicit in the '4911: tion, is a sort of social, psychological point. It was thotfi to be bad for people to work when they might retire and uaf for them to get two sources of income that world raise the,, standard of living above that of earners in lower age-gro!, Reasonable though these secondary social objections III seem, they atie in fact based upon hidden assumptions Wl1 are either false or quite contrary to most other social Pol'e)rt Their falsity can be seen partly from their effects. There a, 1,340,000 people affected, of whom the majority are Wo111m; and many of whom are widows under sixty. They are, ther.: fore, most of them capable of work—certainly of part-tin; work. This work would be of great value to the economY its present state (in conditions of unemployment, of coats; old-age pensions would have to be raised to boost demand' Medical evidence suggests that adequate work would be bene,hc ficial for many of the pensioners. Financial reasons for ti 'earnings rule' have therefore to be very strong in order, stand against the arguments for its abolition from ecolleill need and mental and physical health. The argument for a retirement provision as a qualificatIo for receiving benefit, seen clearly, is a financial one. Even this respect it is illogical. It does not apply to those ev seventy, nor does it apply to those who receive incomes frcietIll sources other than earnings—dividends or profits. It is eV' lent to a tax on work. The majority say it would cost a substantial figure to Pool full pensions to those still at work; figures of over £70,0 io have been suggested. These figures ignore the receiPtseo, income tax and indirect taxes from the earnings of the ,Pd sioners; they ignore the reduction in demands on the Natl°05, Assistance Board which would result from the greater P.00 perity of these people; they ignore the benefit to the Olio of more people at work. It is arguable that the net cost n, the ,Exchequer of abolishing the 'earnings rule would be lid But economics is not all. There is an additional arglie from equity against the earnings rule. Here is a scheme v'i.„,r3 is supposed to be insurance. Most superannuation schewo allow you to earn when you retire; but not the Welfare State, itself. It refuses because of a probably misguided eeorl°40 argument. But even if the argument were correct, it is viii09 remembering that this generation of pensioners is a generacii reared in adversity, schooled in depression. Their unea";,c, incomes are low because they never earned enough to_saffr They have to face a high-cost retirement with low-cost ings to prepare them for it. cor The scheme proposed by the majority is illogical and ,foit plex. Instead of accepting the verdict of the majority, tiler:4 —and, still more foolishly, trying to write it into what originally a Private Member's Bill—the Minister wou'ltet, well advised to listen to the minority on his conitolo although they are 'only academics and not big trade ,lc bosses. They point out that any modification of the selos will be complicated and expensive to administer; that Id poor people, already worried by advancing years, di ,eio, problems to face when life should in fact be easier for t" ty their terms of reference do not allow them to say °atoll country is impoverishing itself for the sake of an lade principle based upon bad accounting.
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