SECRET
V
154
IS DOCUMENT IS T H E P R O P E R T Y OF H E R BRITANNIC M A J E S T Y ^ GOVERNMENT)
C(66) 65
COPY NO.
27th A p r i l , 1966
CABINET
MINISTRY OF SOCIAL S E C U R I T Y B I L L
M e m o r a n d u m by t h e M i n i s t e r ox P e n s i o n s
and N a t i o n a l I n s u r a n c e
I a m now r e a d y to i n t r o d u c e a B i l l (the M i n i s t r y of S o c i a l
S e c u r i t y B i l l ) giving effect to m y p r o p o s a l s f o r r e m o d e l l i n g n a t i o n a l
a s s i s t a n c e which w e r e s u m m a r i s e d in C. (65) 176 and a p p r o v e d by t h e
C a b i n e t (C. C. (65) 70th C o n c l u s i o n s , M i n u t e 2).
If, a s t h e C a b i n e t
a g r e e d , t h e s e p r o p o s a l s - affecting m o r e t h a n two m i l l i o n p e o p l e ­
a r e to b e b r o u g h t i n t o o p e r a t i o n in t h e a u t u m n of t h i s y e a r , it i s '
e s s e n t i a l t h a t t h e B i l l r e c e i v e s R o y a l A s s e n t b e f o r e the s u m m e r
recess.
I u n d e r s t a n d t h a t t h i s c a n b e g u a r a n t e e d if t h e B i l l i s
p u b l i s h e d no l a t e r t h a n 2nd M a y , for S e c o n d R e a d i n g on 10th M a y ,
a l t h o u g h the C h a n c e l l o r of t h e E x c h e q u e r v/ould p r e f e r it not t o be
i n t r o d u c e d b e f o r e t h e m i d d l e of M a y .
I should not o b j e c t t o t h i s
p r o v i d e d R o y a l A s s e n t could s t i l l b e g u a r a n t e e d b e f o r e t h e s u m m e r
recess.
No s u c h g u a r a n t e e i s a t p r e s e n t a v a i l a b l e with a l a t e r d a t e
of i n t r o d u c t i o n .
I m u s t t h e r e f o r e s e e k u r g e n t d e c i s i o n s on two
a s p e c t s of m y p r o p o s a l s which t h e C h a n c e l l o r q u e s t i o n s .
I comment
on t h e s e b e l o w .
The l o n g - t e r m addition
2.
T h e f i r s t i s m y p r o p o s a l for t h e l o n g - t e r m a d d i t i o n (to t h e
o r d i n a r y s c a l e r a t e s ) for t h e old and for o t h e r s ( a p a r t f r o m t h e
u n e m p l o y e d ) who h a v e b e e n on n a t i o n a l a s s i s t a n c e o r n o n - c o n t r i b u t o r y
b e n e f i t f o r two y e a r s , to t a k e t h e p l a c e of s m a l l e r d i s c r e t i o n a r y
additions.
T h i s i s a m a j o r f e a t u r e of t h e s c h e m e .
My o r i g i n a l
p r o p o s a l , a s a p p r o v e d , w a s to s e t t h i s a d d i t i o n at a l e v e l of 7 s . 6d.
b u t in e x i s t i n g c a s e s t o e n s u r e t h a t no m o r e t h a n 4 s . 6d. of t h i s was
s e t off a g a i n s t c u r r e n t d i s c r e t i o n a r y a d d i t i o n s , so t h a t a l l g a i n e d at
l e a s t 3a, f r o m it.
It h a s s i n c e b e e n p o s s i b l e t o e x a m i n e t h e i n c i d e n c e
of d i s c r e t i o n a r y a d d i t i o n s i n m o r e d e t a i l , and in t h e l i g h t of t h i s I h a v e
m o d i f i e d m y o r i g i n a l p r o p o s a l s in a way w h i c h I a m s u r e m a k e s t h e m
e v e n m o r e a t t r a c t i v e at no m o r e c o s t and a t a s l i g h t i n i t i a l s a v i n g .
I n s t e a d of s e t t i n g t h e a d d i t i o n a t 7 s . 6d. with a 3 s . c o n c e s s i o n for
e x i s t i n g c a s e s , I p r o p o s e t h a t t h e l o n g - t e r m a d d i t i o n should b e 9 s .
with n o c o n c e s s i o n .
T h i s will b e f a i r e r and i t will e n a b l e u s t o
d i s p e n s e a t t h e o u t s e t with d i s c r e t i o n a r y a d d i t i o n s f o r t h e g r e a t
m a j o r i t y of our old p e o p l e r e c e i v i n g a s s i s t a n c e .
T h u s we c a n go
m u c h further in implementing our intention to m a k e d i s c r e t i o n a r y
a d d i t i o n s , and t h e e n q u i r i e s t h a t n e c e s s a r i l y go v/ith t h e m , r e a l l y
exceptional.
-1­
The b a s i c r a t e s
3.
I p r o p o s e to l i m i t t h e i n c r e a s e in t h e b a s i c r a t e s t o t h e a m o u n t
n e c e s s a r y t o m e e t the i n c r e a s e in t h e c o s t of l i v i n g s i n c e t h e p r e s e n t
r a t e s w e r e i n t r o d u c e d in M a r c h , 1965.
This will m e a n 5 s . a week
m o r e f o r a s i n g l e h o u s e h o l d e r , and 7 s . 6d. a w e e k for a m a r r i e d
couple.
The guaranteed income 1evel
4.
T a k i n g t o g e t h e r t h e b a s i c s c a l e r a t e a s i n c r e a s e d by 5 s . for
a s i n g l e h o u s e h o l d e r f r o m 7 6 s . t o 8 1 s . a w e e k with a l o n g - t e r m a d d i t i o n
of 9 s . , we s h a l l a c h i e v e an i n c o m e l e v e l for our old p e o p l e a n d o t h e r
l o n g - t e r m c a s e s on t h e n e w b e n e f i t of £ 4 . 1 0 s . a w e e k f o r t h e s i n g l e
h o u s e h o l d e r , r e n t , of c o u r s e , b e i n g a l l o w e d in a d d i t i o n .
The
a t t r a c t i o n of t h i s s p e a k s for i t s e l C
Since the new benefit will
i n e v i t a b l y b e r e g a r d e d a s a s u b s t i t u t e f o r i n c o m e g u a r a n t e e , and
s i n c e a m a j o r o b j e c t of t h e n e w s c h e m e i s to a t t r a c t n e e d y p e o p l e
who h a v e not s o f a r a p p l i e d , t h e i m p o r t a n c e of l a u n c h i n g i t with a
s i n g l e r a t e w h i c h l o o k s b o t h r o u n d a n d a s g e n e r o u s a s we c a n m a k e
it n e e d s n o e m p h a s i s .
5.
The Chancellor would, I u n d e r s t a n d , p r e f e r the l o n g - t e r m
a d d i t i o n t o s t a y a t 7 s . 6d. with n o c o n c e s s i o n to e x i s t i n g c a s e s .
T h e r a t e would t h e n b e £ 4 . 8 s . 6d,
T h i s would s a v e £ 6 m i l l i o n in
a full y e a r b u t , a s m y c o l l e a g u e s w i l l b e a w a r e , t h e t o t a l c o s t of m y
p r o p o s a l s , £ 6 5 m i l l i o n in a full y e a r , c a n in f a c t b e a c c o m m o d a t e d
within m y a p p r o v e d p r o g r a m m e of e x p e n d i t u r e u n d e r t h e N a t i o n a l
P l a n on t h e b a s i s t h a t t h e r e s h o u l d b e s o m e l i m i t a t i o n of e x p e n d i t u r e
on t h e n e x t g e n e r a l u p r a t i n g .
It h a s a l r e a d y b e e n d e c i d e d t h a t I
should l i m i t t h e u p r a t i n g d u e in m i d - 1 9 6 7 by a b o u t I s . f o r t h i s p u r p o s e .
S o m e s u c h r e d u c t i o n would, of c o u r s e , s t i l l b e n e c e s s a r y e v e n with
t h e s a v i n g of £ 6 m i l l i o n .
The d i s r e g a r d s
6.
I u n d e r s t a n d t h a t t h e C h a n c e l l o r i s c o n c e r n e d b e c a u s e in s o m e
c a s e s t h e c o m b i n a t i o n of t h e s c a l e r a t e s , r e n t , t h e l o n g - t e r m a d d i t i o n ,
and d i s r e g a r d s will b r i n g t h e c l a i m a n t s ' i n c o m e a b o v e t h e old a g e t a x
e x e m p t i o n l i m i t s and he would l i k e t h e d i s r e g a r d s t o be r e d u c e d .
I
m u s t r e m i n d m y colleagues that the Social S e r v i c e s C o m m i t t e e spent
two full m e e t i n g s on the d i s r e g a r d s w h e n t h e y w e r e c o n s i d e r i n g I n c o m e
G u a r a n t e e , d u r i n g which t h e o r i g i n a l p r o p o s a l s w e r e s u b s t a n t i a l l y
modified.
In t h e a n n e x t o m y m e m o r a n d u m t o t h e S o c i a l S e r v i c e s
C o m m i t t e e S. S. (65) 20 I w a s c a r e f u l t o p u t b e f o r e t h e C o m m i t t e e a full
e x p o s i t i o n of t h e i n c o m e t a x p r o b l e m i n t h i s c o n n e c t i o n .
The principal
m o d i f i c a t i o n s m a d e b y t h e C o m m i t t e e w e r e t o add t o the d i s r e g a r d of
d i s a b i l i t y p e n s i o n s a n d e a r n i n g s o r i g i n a l l y p r o p o s e d a d i s r e g a r d of
£ 1 a w e e k of o t h e r i n c o m e , i n c l u d i n g s u p e r a n n v i a t i o n , but n o t t h e
m a i n n a t i o n a l i n s u r a n c e p e n s i o n s e t c . , and m a i n t e n a n c e p a y m e n t s ;
and to b e m o r e g e n e r o u s a b o u t c a p i t a l f o r p e o p l e without d i s r e g a r d e d
income.
T h e s e two go t o g e t h e r ; t h e e x t r a c a p i t a l of £ 5 00 a l l o w e d
t o t h e m a n without a d i s r e g a r d w o u l d , a t 6 5 , buy a n a n n u i t y of 2 0 s . a
w e e k , w h i c h would b e d i s r e g a r d e d .
Thus t h e r e is equitable t r e a t m e n t
a s b e t w e e n s a v i n g for old a g e by i n v e s t m e n t , a n d by c o n t r i b u t i n g t o a
s u p e r a n n u a t i o n fund.
7.
W h e n I w a s c o m m i s s i o n e d by t h e C a b i n e t to r e m o d e l n a t i o n a l
a s s i s t a n c e i n c o r p o r a t i n g a s m a n y f e a t u r e s of I n c o m e G u a r a n t e e a s
p o s s i b l e , I naturally included t h e s e d i s r e g a r d s in my proposals to the
Social S e r v i c e s Committee and they w e r e t h e r e accepted.
The
p r o p o s a l t o r a t i o n a l i s e and m o d e r n i s e t h e d i s r e g a r d s w a s i n c l u d e d
in m y m e m o r a n d u m on n o n - c o n t r i b u t o r y b e n e f i t s (C. (65) 176) and it
will be r e c a l l e d that t h e s e p r o p o s a l s w e r e welcomed.
Anything l e s s
t h a n t h e s e d i s r e g a r d s would in m y j u d g m e n t b e p o l i t i c a l l y u n a c c e p t a b l e ,
b o t h to o u r own b a c k - b e n c h e r s a n d i n t h e c o u n t r y a t l a r g e .
We found
it i m p o s s i b l e , i n f r a m i n g I n c o m e G u a r a n t e e , a g a i n s t the b a c k g r o u n d of
e x i s t i n g n a t i o n a l a s s i s t a n c e d i s r e g a r d s t o t a k e a s e v e r e l i n e ; and by
t h e s a m e t o k e n , we could not t a k e a s e v e r e l i n e in r e m o d e l l i n g
national assistance.
T h e p r o p o s e d d i s r e g a r d s do l i t t l e m o r e t h a n
r e s t o r e t h e v a l u e of the e x i s t i n g d i s r e g a r d s e s t a b l i s h e d by t h e
p r e v i o u s a d m i n i s t r a t i o n a s l o n g a g o a s 1959, and for s o m e p e o p l e
indeed a r e l e s s favourable.
8.
A s f o r t a x a t i o n , a n u m b e r of a s s i s t a n c e r e c i p i e n t s a r e a l r e a d y
a b o v e t h e t a x e x e m p t i o n l i m i t and t h e Inland R e v e n u e d e a l with t h i s
a d m i n i s t r a t i v e l y by i g n o r i n g s u c h p a y m e n t s .
A d m i t t e d l y ray p r o p o s a l s
t e n d t o a g g r a v a t e t h i s p r o b l e m b u t it c a n n o t p o s s i b l y b e s o l v e d by
manipulating the d i s r e g a r d s .
A s o l u t i o n could only b e found by
introducing a l s o some completely new provision limiting payments for
r e n t so a s t o k e e p within t h e t a x e x e m p t i o n l i m i t a n d , e v e n if t h i s
could be w o r k e d out in t i m e , it would d e s t r o y w h a t h a s a l w a y s b e e n a
f u n d a m e n t a l f e a t u r e of m e a n s - t e s t e d b e n e f i t , n a m e l y t h a t r e a s o n a b l e
r e n t i s m e t in full.
Summary
9.
l
I s e e k the Cabinet s a g r e e m e n t that ­
(i) t h e M i n i s t r y of S o c i a l S e c u r i t y B i l l should be i n t r o d u c e d i n
t i m e to e n s u r e R o y a l i i s s e n t b e f o r e t h e s u m m e r r e c e s s ;
(ii) t h e l o n g - t e r m a d d i t i o n s h o u l d b e 9 s . a w e e k , m a k i n g a
g u a r a n t e e d i n c o m e l e v e l , a f t e r p a y m e n t of r e n t , of £ 4 . 1 0 s .
a w e e k f o r old p e o p l e l i v i n g a l o n e ;
(iii) t h e n e w b e n e f i t s should b e e x e m p t f r o m i n c o m e t a x ;
(iv) t h e p r o p o s a l s for d i s r e g a r d s of i n c o m e and c a p i t a l a t p r e s e n t e m b o d i e d in t h e B i l l s h o u l d r e m a i n u n c h a n g e d . M.H.
M i n i s t r y of P e n s i o n s a n d N a t i o n a l I n s u r a n c e , W. C, 2.
26th A p r i l , 1966