l
DOCUMENT IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T Y S
COPY
C ( 7 5 ) 138
2 December
NO
GOVERNMENT
31
1975
CABINET
RETIREMENT
PENSIONS EARNINGS
RULE
M e m o r a n d u m b y the C h a n c e l l o r of t h e E x c h e q u e r a n d t h e S e c r e t a r y of State for Social
Services 1.
T h e e a r n i n g s r u l e l i m i t s t h e a m o u n t of e a r n i n g s w h i c h w i l l b e
r e g a r d e d a s consistent with " r e t i r e m e n t " and hence the amount a p e n s i o n e r
c a n e a r n b e f o r e s t a r t i n g to l o s e b e n e f i t .
It a p p l i e s o n l y t o t h o s e u n d e r
a g e 70 f o r m e n , 65 f o r w o m e n .
2.
In t h e l a s t S e s s i o n ,
an a m e n d m e n t to the uprating B i l l w a s f o r c e d
on
u s , r a i s i n g the e a r n i n g s r u l e l i m i t f r o m the l e v e l of £13 a w e e k to £ 2 0 in
A p r i l t h i s y e a r , £ 3 5 i n A p r i l 1976 and £ 5 0 i n A p r i l 1977.
We fought the
a m e n d m e n t b o t h i n C o m m i t t e e a n d o n Report^, b u t i n t h e f i n a l v o t e (on
2 9 J a n u a r y ) n i n e of o u r b a c k b e n c h e r s s i d e d w i t h t h e O p p o s i t i o n , ,
We have
said c o n s i s t e n t l y and r e p e a t e d l y that the r e s u l t i n g e x p e n d i t u r e i s l o w priority,
b e c a u s e it b e n e f i t s o n l y the y o u n g e r p e n s i o n e r s a b l e to e a r n quite s u b s t a n ­
tial amounts.
THE
3.
PROBLEM
T h e i s s u e for Cabinet i s w h e t h e r to i n t r o d u c e
immediately
l e g i s l a t i o n to r e s c i n d the i n c r e a s e to £ 3 5 due next A p r i l
We have already
i m p l e m e n t e d the i n c r e a s e t o £ 2 0 , and that i s i r r e t r i e v a b l e .
It m i g h t b e
n e c e s s a r y to go as high as £26 next April, to get the Bill through.
B u t if
we can l i m i t the r i s e to £ 2 4 - which would b e m o r e than enough to m a t c h
the m o v e m e n t of e a r n i n g s s i n c e the £ 2 0 l i m i t c a m e in - w e w i l l s a v e
£ 5 0 m i l l i o n in 1 9 7 6 - 7 7 , £100 m i l l i o n in 1977-78, £ 6 5 m i l l i o n in 1978-79 and
£50 million in 1979-80.
W e badly need t h e s e s a v i n g s , w h i c h are a m o n g the
l e a s t d a m a g i n g of a l l o u r o p t i o n s o n s o c i a l s e c u r i t y , a n d w e a r e a t p r e s e n t
c o u n t i n g t h e m t o w a r d s the £ 3 , 750 m i l l i o n t a r g e t .
If w e a r e t o s e c u r e t h e m ,
we m u s t introduce a short B i l l at o n c e .
e
4.
F o r the future we would offer a c o m m i t m e n t to i n c r e a s e
the
earnings
l i m i t e a c h y e a r f r o m the 1977 uprating o n w a r d s .
( T o i n c r e a s e it at t h e
1976 u p r a t i n g w o u l d m e a n t w o i n c r e a s e s w i t h i n the y e a r and would eat into
the s a v i n g s w h i c h a r e t h e o b j e c t o f t h e e x e r c i s e ; and t o r a i s e t h e e a r n i n g s
l i m i t in A p r i l 1977, s e p a r a t e l y f r o m the benefit uprating, would involve
u n n e c e s s a r y staff c o s t s , )
This c o m m i t m e n t would have considerable
p r e s e n t a t i o n a l and p o l i t i c a l v a l u e .
5.
If w e m i s s t h e o p p o r t u n i t y of l e g i s l a t i n g n o w , a l l o w t h e i n c r e a s e t o
£ 3 5 t o go t h r o u g h , a n d r e s c i n d o n l y t h e i n c r e a s e t o £ 5 0 d u e i n A p r i l 1977,
we w i l l b e s a c r i f i c i n g a b o u t £ 5 0 m i l l i o n a y e a r of p o t e n t i a l s a v i n g s w h i c h
w e , a s a G o v e r n m e n t , w i l l h a v e t o find f r o m e x p e n d i t u r e that w e o u r s e l v e s
would p r o b a b l y r e g a r d a s having h i g h e r p r i o r i t y .
The E c o n o m i c P o l i c y
C o m m i t t e e a g r e e d that w e should go for i m m e d i a t e legislation,,
In v i e w of
i t s p o l i t i c a l s e n s i t i v i t y , h o w e v e r , and t h e f a c t t h a t t h e r e w i l l b e d i f f i c u l t y i n
fitting in a B i l l , the L o r d P r e s i d e n t s u g g e s t e d that the i s s u e s h o u l d be
brought to the Cabinet: c o l l e a g u e s will have s e e n his letter to the
C h a n c e l l o r of t h e E x c h e q u e r of 2 7 N o v e m b e r , a n d the C h a n c e l l o r of the
E x c h e q u e r ^ m i n u t e t o t h e P r i m e M i n i s t e r of 28 N o v e m b e r ,
LEGISLATIVE REQUIREMENTS
6.
W e h a v e e x a m i n e d t h e p o s s i b i l i t y of m a k i n g the n e c e s s a r y a m e n d e
rre n t t o t h e S o c i a l S e c u r i t y A c t i n a B i l l a l r e a d y i n t h e l e g i s l a t i v e
p r o g r a m m e , but h a v e found that t h e r e i s no B i l l w h i c h w o u l d b e s u i t a b l e .
A s e p a r a t e B i l l w i l l t h e r e f o r e b e n e e d e d , a n d t i m e w i l l h a v e t o b e found f o r
it f o r w h i c h a t p r e s e n t t h e r e i s n o p r o v i s i o n .
The B i l l w i l l , h o w e v e r , be
short and c a n b e r e a d y f o r i m m e d i a t e i n t r o d u c t i o n .
It w i l l n e e d t o b e g i v e n
an e x c e p t i o n a l d e g r e e of p r i o r i t y - S e c o n d R e a d i n g b e f o r e C h r i s t m a s and
R o y a l A s s e n t n o t l a t e r t h a n 19 F e b r u a r y 1 9 7 6 .
The r e a s o n i s that people
who w i s h t o r e t i r e a f t e r 6 A p r i l 1976 m u s t r e c e i v e r e a s o n a b l e n o t i c e of t h e
a m o u n t of e a r n i n g s w h i c h c a n b e r e g a r d e d a s c o n s i s t e n t w i t h " r e t i r e m e n t " .
POLITICAL FEASIBILITY
7.
T h e p o l i t i c a l f e a s i b i l i t y w i l l of c o u r s e n e e d t o b e w e i g h e d b y o u r
c o l l e a g u e s a n d i n p a r t i c u l a r w e s h a l l n e e d t o h a v e t h e a p p r a i s a l of t h e
L e a d e r s of b o t h H o u s e s a n d of t h e C h i e f W h i p s .
T h e S e c r e t a r y of S t a t e f o r
S o c i a l S e r v i c e s c o n s i d e r s t h a t t h e c h a n c e s of g e t t i n g t h e B i l l t h r o u g h i n t i m e
may b e s l i m u n l e s s she c a n s h o w that the e f f e c t in its f i r s t y e a r of
operation would b e to d i v e r t the s a v i n g s for u s e for a m o r e u r g e n t s o c i a l
purpose.
S h e w o u l d t h e r e f o r e w i s h t o b e a b l e t o a n n o u n c e t h e u s e of a n
extra £ 5 0 m i l l i o n , in 1976-77 only, e l s e w h e r e in h e r programme,,
The
C h a n c e l l o r of t h e E x c h e q u e r w i s h e s , h o w e v e r , t o m a k e u s e of t h e
£ 5 0 m i l l i o n of s a v i n g s i n 1 9 7 6 - 7 7 to k e e p d o w n t h e b o r r o w i n g r e q u i r e m e n t i n
that y e a r ; a l s o h e d o e s n o t s e e h o w i t w o u l d b e p o s s i b l e t o d i v e r t
£ 5 0 m i l l i o n to a n o t h e r p u r p o s e i n 1976-77 a l o n e without i n c u r r i n g a
continuing c o m m i t m e n t for later y e a r s .
2 8.
A l t h o u g h w e w e r e t w i c e d e f e a t e d o n t h e e a r n i n g s r u l e a t t h e t u r n of
t h e y e a r , the s i t u a t i o n n o w h a s c h a n g e d
Our o w n s u p p o r t e r s s h o u l d k n o w
t h a t p u b l i c e x p e n d i t u r e h a s t o be r e i n e d b a c k .
T h e y h a v e a l r e a d y w o n the
s u b s t a n t i a l i n c r e a s e i n the eai*nings r u l e w h i c h w a s i m p l e m e n t e d t h i s y e a r ;
w e w o u l d b e i n c r e a s i n g t h i s y e a r ' s l i m i t of £ 2 0 i n l i n e w i t h t h e m o v e m e n t
of e a r n i n g s s i n c e it w a s i n t r o d u c e d a n d , f r o m t h e 1977 u p r a t i n g o n w a r d s ,
we would be committing o u r s e l v e s t o further i n c r e a s e s i n line with
earnings.
The r o w o v e r our introducing the i n c o m e t a x age a l l o w a n c e ,
w h o s e a p p a r e n t c o s t w a s c o m p a r e d w i t h t h a t of r e l a x i n g t h e e a r n i n g s r u l e ,
has now died down.
T h e O p p o s i t i o n a r e p r e s s i n g i n s i s t e n t l y f o r c u t s , and
w o u l d b e put o n t h e s p o t b y a c o n c r e t e p r o p o s a l f o r o n e ,
0
CONCLUSION
9.
W e a s k o u r c o l l e a g u e s to a g r e e that we should introduce a s h o r t Bill
at once to r e s c i n d the i n c r e a s e in the e a r n i n g s l i m i t f r o m £ 2 0 to £ 3 5 which
i s d u e i n A p r i l 1 9 7 6 , t o s u b s t i t u t e a n i n c r e a s e t o £ 2 4 ( o r a t m o s t to £ 2 6 )
a n d t o c o m m i t u s t o r a i s i n g t h e e a r n i n g s l i m i t , f r o m t h e 1977 u p r a t i u g , in
l i n e w i t h t h e m o v e m e n t of e a r n i n g s .
D W H
B A G
Treasury
Chambers
2 D e c e m b e r 1975
3